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Tuesday, Feb. 14, 2006

Foreign income exceeds trade

More assets abroad may enhance economic resilience


Staff writer

Japan's income account surplus exceeded its trade surplus in 2005 for the first time since records started being taken in 1985, which means the country earned more from sales of assets than it did from sales of goods to the rest of the world, the Finance Ministry said Monday.

This was because overseas securities continued to reap gains while the trade surplus was trimmed by higher crude oil prices, the ministry said in a preliminary report on Japan's current account balance.

The income account balance, which covers income from investments in foreign securities, earnings of Japanese companies' overseas units and payments by foreign employers in Japan, rose 22.5 percent to a record 11.36 trillion yen.

Meanwhile, the trade surplus dropped 25.4 percent to 10.35 trillion yen, marking the first decline in four years.

The current account balance -- the broadest gauge of trade in goods and services -- is the difference between a nation's income from foreign sources and its foreign liabilities, excluding net capital investment.

Economists in the past have warned that developed economies will run increasing trade deficits. History shows aging populations selling their assets to younger populations in exchange for goods, they say.

Japan has long been an exception, confounding macroeconomists and historians, but Monday's data hint the tide may at last be turning.

The nation's current account surplus in 2005 shrank a smaller than expected 3.1 percent from the year before to 18.05 trillion yen, marking the first decline in four years, the ministry said.

For the year, Japan exported 62.63 trillion yen in goods, up 7.4 percent from the previous year. But the trade surplus narrowed because the value of imports grew at a faster pace, rising 17.8 percent to 52.28 trillion yen.

Throughout the year, the trade surplus has been under downward pressure from high oil prices, which inflate the value of crude oil imports, the Finance Ministry said.

"Trade remains strong," a ministry official said.

For December, the current account surplus rose 8.6 percent year-on-year to 1.75 trillion yen for the fourth straight rise.

Exports in December rose 18.7 percent to 6.08 trillion yen. But imports rose at an even faster 30.4 percent pace to 5.02 trillion yen, for a 1.06 trillion yen trade surplus, down 16.7 percent from the previous year.

Meanwhile, Japan's overseas assets earned an income surplus of 918 billion yen in December, up 38.1 percent from the previous year, the 17th straight month of gains.

"Japan is keeping more assets abroad, which means more resilience for the economy, which has been vulnerable to exchange rate fluctuations," said Takehiro Sato, an economist and executive director at Morgan Stanley Japan Ltd.

The current account measures the value of trade in goods, services, tourism and investment.



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