Japan's current account woes throw spotlight on economic risks

Mon Feb 10, 2014 2:13am EST
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By Stanley White

TOKYO (Reuters) - Japan posted its smallest current account surplus on record last year, throwing the spotlight back on Tokyo's ability to service its huge debt and exposing a danger point in an economy starting to find its feet after years of underperformance.

The world's third-biggest economy sped past many of its Group of seven counterparts in 2013 spurred by an aggressive mix of fiscal and monetary expansionary policies.

But a deteriorating external position has cast a shadow on the recovery as policy makers worry that the economy may falter if exports do not regain momentum.

"The government doesn't seem to be placing much emphasis on fiscal discipline," said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

"This makes the combination of rising debt and a weak current account balance an uncomfortable prospect."

The Ministry of Finance data on Monday also showed the current account balance for December slid to the largest deficit on record as exporters have failed to reap the benefits of a weak currency.

At the same time the energy import bill has risen sharply as Japan's nuclear power plants are idled following the Fukushima nuclear accident three years ago.

For 2013, Japan's current account recorded a 3.3 trillion yen surplus, the data showed. This was the smallest surplus in comparable data available from 1985.   Continued...

A "Don't Walk" traffic signal is seen in front of the national flag hoisted on the headquarters of Bank of Japan in Tokyo February 8, 2012. REUTERS/Kim Kyung-Hoon