February 7, 2023

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Japan Posts Current Account Deficit in October as Economy Continues to Slow By Investing.com

©Reuters.

By Ambar Warrick

Investing.com– Japan posted an unexpected current account deficit in October, data showed Thursday as sluggish exports, rising import prices and pressures from high inflation weighed on the country’s economy.

The country posted a profit of 64 billion yen ($1 = 136.37 yen) compared to a surplus of 909 billion yen the previous month.

The drop follows earlier data that showed the country expanded in October, rising more than 50% year-on-year as fuel imports remained expensive.

A deep devaluation of the country was the main reason for the more expensive imports, with currency losses also including the rising inflation in the country. Headlines hit a 40-year high in October and the trend is widely expected to continue for the foreseeable future.

The yen has been one of the worst performing Asian currencies this year as a widening gap between local and US interest rates prompted mass selling. While the currency gained some ground over the past month, it is still down almost 20% over the year.

Japan also trended lower this year as overseas demand for goods slowed amid growing fears of a global recession in 2023.

Japan’s economy was unexpectedly countered as a post-COVID boom by high inflation and deteriorating retail sentiment.

But Thursday’s data showed that Japan’s third-quarter contraction was a little weaker than originally expected. The revision shows that the Japanese economy contracted an annualized 0.8% in the third quarter, compared to an initial estimate of 1.1%.

The revision was primarily driven by strong quarterly performance, which grew at the fastest pace in four years.

An energy shortage led to higher spending on Japan’s electricity grid, while the country’s extremely low interest rates kept the real estate market attractive.

Still, Thursday’s data showed both and remained weak, likely pointing to near-term headwinds for the Japanese economy.