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Japan's current account surplus shrinks to 5-year low as exports plunge

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08/11/2020 | 12:40am EDT
A man works among imported cars covered with a white cloth in a port in Yokohama

Japan posted its smallest current account surplus in more than five years in June, Ministry of Finance data showed on Tuesday, mainly due to a slump in exports, highlighting the heavy hit to external demand from the coronavirus pandemic.

The current account surplus was 167.5 billion yen ($1.58 billion), the smallest monthly surplus since January 2015, a finance ministry official said.

That compared with a median forecast for a 110 billion yen surplus and a 1.177 trillion yen surplus in May. The current account balance has maintained a run of uninterrupted monthly surpluses for six years.

Exports plunged 25.7% in June from a year ago, hit hard by falling shipments of cars and car parts to the United States, the data showed. That was slightly smaller than a 28.9% annual decline in May.

Imports shed an annual 14.4%, following a 27.7% annual fall in May. As a result, the trade deficit in June widened to 157.7 billion yen.

A 99.9% drop in foreign tourists due to immigration restrictions imposed over the health crisis sent the travel account to a 157.7 billion yen deficit in June, the data showed.

Weakening overseas demand has raised worries of a prolonged downturn for the world's third-largest economy, with some analysts seeing the impact from the COVID-19 crisis on corporate and household sentiment lasting into next year.

A Reuters poll showed analysts expect gross domestic product data, due to be released on Monday, to show the economy shrank an annualised 27.2% in the second quarter.

Japan's economic activity has picked up in recent months after the government lifted a coronavirus-related state of emergency at the end of May. But the virus has made a worrying revival, especially in highly populated areas.

($1 = 106.0900 yen)

By Daniel Leussink

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