Japan's JPY592.8 bln November current account deficit is the largest on record. It is the second consecutive deficit after a string of 8 surpluses that followed a string of three deficits, going back to late 2012. Before then, Japan consistently reported surpluses, leaving aside the occasional fluke.
Japan has been running trade deficits fairly regularly since the earthquake, tsunami and nuclear accident in 2011. The weaker yen (and better global growth) may be helping exports, but it boosts the costs of Japanese imports. In fact, pace of deterioration of the trade balance has accelerated recently. The three month average shortfall (of the balance of payments measure) stands at JPY1.078 trillion compared with the 12-month average deficit of JPY833.
However, mostly, the trade deficit has been offset by the surplus Japan records on investment income. This balance, part of the current account, includes coupon payments and dividends generated by overseas investments. It also includes licensing fees and royalties too. The problem is that those flows are very seasonal.
As this Great Graphic from Bloomberg shows the monthly (columns) change in investment income balance every month for the past 10 years (rows). The investment income balance is weakest in Q4 and strongest in Q1. April and June are poor months, while May and July are strong. This suggests Japan may have recorded another current account deficit in December, before swinging back to surplus here in Q1.
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