Japan’s current-account woes continue with the surplus shrinking more than expected by economists due to soaring imports before the April sales-tax hike, a three-percent bump higher to eight percent.
The Ministry of Finance reported that the surplus shrank to only ¥116.4 billion, lower than the general forecast concensus of ¥347.7 billion. There was a ¥782.9 billion deficit on a seasonally-adjusted basis, the largest since 1996.
Takeshi Minami, chief economist at Norinchukin Research Institute Co., believes that the ever-shrinking current-account, which is taking a toll on the yen, will begin to recover. Minami forecasts that the higher tax will dampen consumer spending, thus limiting imports. The weak yen will not be enough to boost exports, though.
Imports shot up 23 percent year-over-year with exports only gaining 6.2 percent.
Tsutomu Saito, an economist at the Daiwa Institute of Research, believes that the Japanese government could be in trouble if the current-account does not recover. “In such a case, foreigners will require risk premiums on Japanese government bonds and long-term yields will rise,” said Saito.
On a separate, unsettling note, the Ministry of Finance reported that Japan’s national debt hit ¥1.025 quadtrillion. Government bonds increased by over ¥38.8 trillion, year-over-year. The Bank of Japan told the Fed “anything you can do, I can do better.”