Asia-Pacific News

Japan current account surplus narrows in August but beats expectations

Is Japan's current account surplus sustainable?

Japan's current account balance narrowed in August but remained in the black for a second straight month, buoyed by income from overseas investments.

The unadjusted current account surplus narrowed to 287.1 billion yen in August from a surplus of 416.7 billion yen in July. However, that was above expectations for a surplus of 198 billion yen in a Reuters poll.

"[We] expect the weak trend in Japan's current account to continue, reflecting the persistent trade deficit," Harumi Taguchi, principal economist at IHS Global Insight said in a note.

Japan's current account surplus was up 82.7 percent on year, while the surplus in the primary income component, or income balance, was up 20.6 percent on year.

"The uptrend in the primary income is likely to continue because increasing overseas operation is likely to increase receipts of direct investment. Growth for net portfolio investment asset turned to increase in April 2014 and strengthened over 2 trillion yen per month, and this will contribute to the uptrend in the primary income," Taguchi added.

"The government is planning to review investment policy to increase the income of government pension investment fund under its revised growth strategy," Taguchi said. "This could increase investment in foreign assets over the medium term."