Japan's Current Account Balance Improves Sharply In June

Japan's Current Account increased sharply, outpacing expectations, in June to 1,799 billion yen from 1, 016 billion Yen in May.  It was moreover,  the fifth successive month of increase and the year over year change is now above the year ago figure for the first time since November, 2007.  The first chart shows the current account and its major components--Goods and Services, Income and Current Transfers. (The Chart shows the data in 100 millions of Yen, while the table below and text figures are in billions of Yen.)

The balance of Trade in Goods and Services accounted for the largest part of the June increase in the current account balance.  The positive balance on goods increased by 333 billion Yen while the negative balance on services decreased by 172 billion Yen, resulting in a 505 billion yen improvement in the balance on Goods and Services.

The balance on Income has become more important than the balance on Goods in the Current Account Balance since the second quarter of 2005 as can be seen in the second chart.  This reflects the growth of Japan's net international investment position as Japans direct and portfolio investments abroad have generally exceeded foreign direct and portfolio investments in Japan.  The third chart shows Japan's net international investment position. The June increase in Income was 200 billion yen, smaller than the goods contribution, but the actual balance of 1,219 billion Yen remains well above the goods balance of 735 billion Yen.  The decline in the income balance of 244 billion Yen from a year ago is due largely to the decline in returns on portfolio investments.

Finally, the negative balance on current transfers declined in June by 78 billion yen, also contributing to the improvement of the current account balance.