Economic data from Japan raise concerns on recovery
TOKYO - Agence France-Presse
People stand in front of an electronic stock board at a securities firm in Tokyo. AP photoJapan posted a set of weak economic figures yesterday, underscoring fears about a recovery for the world’s third-largest economy amid turmoil in Europe, a key export market.
Official data showed that the surplus in Japan’s current account, the broadest measure of trade with the rest of the world, plunged 62.6 percent to 215.1 billion yen ($2.7 billion) in May from a year earlier.
That was well below the 511 billion yen surplus expected by economists, according to Dow Jones Newswires, with separate data pointing to weakness in new investment by corporate Japan.
“A surplus in the current account shrank substantially due to an expansion in its trade and service deficit as well as a contraction in investment income surplus from a year earlier,” the ministry said.
The current account, which measures trade in goods, services, tourism and investment income, is calculated by determining the difference between Japan’s income from foreign sources against payments on foreign obligations and excludes net capital investment.
Japan has seen its energy bills skyrocket after turning to pricey fossil fuel alternatives following the shutdown of its nuclear reactors in the wake of last year’s atomic crisis at the Fukushima Daiichi plant. A plan to restart two reactors has been approved, but concerns remain about how the country will boost its power mix.
Separate data yesterday showed the country’s core machinery orders dropped 14.8 percent in May from the previous month, pointing to weakness in new investment by corporate Japan.
The fall was much steeper than a 2.6 percent decline expected by economists. Machinery orders are seen as a leading indicator of corporate capital spending and are watched for movements that may reflect the outlook for the broader economy.
The data contrasted with the Bank of Japan’s quarterly Tankan business sentiment survey released a week ago, which showed that confidence among large Japanese manufacturers improved in the quarter ended June, with expectations of a pickup in capital spending.
Mari Iwashita, chief market economist at SMBC Nikko Securities, said the machinery orders data were weak but added that the “the results are unlikely to change the recovery momentum in capital investment plans led by large manufacturers, as shown in the June Tankan report.”
Last month, the central bank held off fresh easing measures, holding key interest rates steady at between zero and 0.1 percent and leaving unchanged a 70 trillion yen ($885 billion) asset purchase program.
That bucked expectations that the Bank of Japan would usher in fresh easing measures.