Japan’s Trade Surplus Dips Unexpectedly

Japan’s current account surplus unexpectedly narrowed in June, government figures showed today.

Meanwhile, the yen weakened on speculation the Bank of Japan may decide to inject more money into the market to spur the economy. Central bank policymakers meet today and Tuesday.

The current account surplus narrowed to $3 billion, seasonally adjusted, in June, from $5.4 billion in May, the Ministry of Finance said. Economists had expected a $7-billion surplus.

The surprise was a drop in the trade surplus to $4 billion. Exports dropped 5% and imports declined 4%. A report last month showed the trade surplus more than doubled in June from an eight-year low in May as imports tumbled.

The unexpected decline suggests the current account surplus will keep shrinking as exports to the U.S. and Asia fall and imports drop.

“The surplus will continue to decline over perhaps the next six months as exports fall faster than imports,” said Yasukazu Shimizu, an economist at Aozora Bank Ltd.

The current account data suggested falling exports will continue to weigh on industrial output and capital spending, an area that was a beacon of hope during a tentative recovery in Japan last year.

In early trading today, Japan’s Nikkei 225 stock average fell 2.3% on lowered corporate profit forecasts. Earlier it had slumped to its lowest intraday level in 16 years.

The yen fell to 122.30 per dollar from 122.01 yen in late New York trading Friday. It also weakened to 109.15 per euro from 108.97 in New York. The currency dropped 0.4% in the last two days against both the dollar and euro.

On Friday, the International Monetary Fund said the world’s second-largest economy is expected to contract 0.2% this year rather than grow by 0.5% as forecast earlier. The IMF said the BOJ should raise its target for current account reserves, or commercial bank reserve deposits, by buying government bonds, the report said.