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Japan current account surplus widens, oil slide may aid capex plans

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Japan posted a current account surplus for the 11th straight month in May as lower oil prices narrowed the trade deficit,  suggesting companies have more leeway to increase investment as the costs to power their plants and factories drop.

The current account surplus stood at 1.88 trillion yen  ($15.36 billion), against a median forecast for a 1.54 trillion yen surplus, Ministry of Finance data showed on Wednesday.

“Companies should have more money on hand to spend because energy costs are lower, which may be a factor behind robust capital expenditure plans,” said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

“The export situation needs to be watched in case it turns out that overseas demand is not as strong as we thought.”

The Current account data also showed exports in May fell from the same period a year earlier for the first time in 27 months.

The decline was very slight and contradicts more closely-watched customs cleared data which showed exports rose in May, but some economists are worried that Greece’s debt crisis could undermine the euro zone economy and hit Japanese shipments.

Japan’s economy is expected to have slowed in the second quarter as firms use up inventories built up in the previous quarter.

However, there are signs of a rebound in the second half, with the recent Bank of Japan’s closely watched “tankan” survey showing big companies plan to increase capital expenditure at the fastest pace in a decade.

Wednesday’s data showed imports tumbled an annual 10.3 percent in May as oil prices were down by almost half from the same period a year ago.     Exports fell an annual 0.1 percent, the first decline in 27 months, data showed.

The current account surplus also got a boost as the income balance rose 38.0 percent on-year due to higher earnings on overseas investments.

A collapse in oil prices last year prompted the Bank of Japan to push back the timeframe for meeting its 2 percent inflation target to the first half of fiscal 2016 from sometime around fiscal 2015.

Policymakers have generally welcomed this decline because it would make energy costs for Japanese companies and households cheaper, and in turn boost domestic demand.        ($1 = 122.4300 yen)


[“source – financialexpress.com”]
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