Japan's current account swung to a much bigger than expected deficit in November after the nation's trade gap hit a 10-month high, adding to a string of poor data and firming up the case for more stimulus to help the stuttering economy.
The 222.4 billion yen ($2.52 billion) deficit reported by the Finance Ministry on Friday marked the first shortfall in 10 months and far exceeded economists' median forecast of 3.5 billion gap.
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Analysts had expected the deficit to be just one-off and the account - the measure of the nation's trade, income and transfer flows - to return to surplus in coming months with exports and investment income expected to benefit from recovering global economy and a weaker yen.
But the wide gap cast some doubt on such predictions and will add to the pressure on the Bank of Japan to continue policy easing even after the central bank delivered its third shot of monetary stimulus in four months in December.
Prime Minister Shinzo Abe, who campaigned on a blend of hefty budget spending and monetary stimulus to end two decades of stagnation and long spells of low-grade deflation, turned up the heat again on Friday.
Abe, who has pushed the BOJ to adopt a 2 percent inflation target, twice its current goal, said in an interview with the Nikkei business daily that the target should be short-term as a long-term goal would be meaningless. He also said the central bank should consider maximising employment as a policy goal, which would act as a further incentive to boost monetary stimulus.
Abe's government, on its part, is expected to approve a 13.1 trillion yen extra budget to help pull the economy out of its fourth recession since 2000.
Many analysts expect exports will pick up gradually along with the global economic recovery, helped by the yen's weakening as a result of BOJ easing and Abe's promises of more expansionary fiscal and monetary policy.
"In the short term there could be more deficits like this. But Japan's exports to the United States and China should start to pick up as these two economies have bottomed out," said Norio Miyagawa, senior economist at Mizuho Securities Research & Consulting Co.
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"The argument that Japan can rely on a current account surplus and savings in the household sector to fund its public debt is starting to weaken."
The yen, which hit a 2-1/2 year low on expectations of further BOJ easing, eased further after the data.
Japan logged its largest deficit in January last year under comparable data available since 1985 as a shift away from nuclear power after the March 2011 earthquake and tsunami, with its subsequent nuclear crisis, boosted fossil fuel imports.
The November shortfall was Japan's sixth monthly deficit, with all of the past five gaps recorded in January when trade slows down due to holiday season.
The income from Japan's extensive holdings of overseas assets suggest little immediate risk that the current account could stay in deficit but any delay in recovery in China and the United States, and a worsening of Europe's debt crisis, could further sap demand for Japanese goods.
Under intense pressure from Abe, the BOJ is likely adopt a 2 percent inflation target at its Jan. 21-22 rate review, double its current goal, and issue a statement with the government pledging to pursue bold monetary easing steps, sources with knowledge of BOJ thinking told Reuters