The Japanese economy released its current account report which showed an unexpected and bigger than expected surplus in the month of July, after the nation’s export (which the main pillar of the growth) increased and surpassed imports, due to improvement in global demand, which encouraged the companies’ investment to expand.
Japan's current account surplus widened to 1675.9 billion yen in July, which compared with a previous surplus of 1047.1 billion yen during June, while it came better than analysts' estimates of 1534.6 billion yen.
Moreover, the Japanese adjusted current account total rose to 1463.6 billion yen in July, while the actual reading came better than the previous reading 1362.1 billion yen, where the analysts' forecast estimated the index will reach 1362.9 billion yen.
Japanese trade balance index for July which rose 916.1 billion yen, following an increasing 769 billion yen during June, while the anticipations referred to 865 billion yen.
The economic recovery in Japan witnessed an increasing from its deepest postwar recession, which has relied on trade, while the advance in overseas shipments indicated that support remains intact. Also slowing overseas economies especially the U.S. and China along with an advance in the yen to a 15-year high against its major counterpart the dollar, reflecting that the Japanese economy will falter in the second half of the year.
While a stronger yen drives the nation’s exports of goods to be more expansive for overseas importers, which is prompting some manufacturers to move production abroad to reduce currency risk.
The economy expanded 0.1% at the slowest pace in three quarter, and the moderating growth in Japan, pressuring BOJ to ease monetary policy to spur expansion and stamp out deflation as the nation’s public debt.
Moreover, the Bank increased its credit program to 20 trillion yen ($232 billion) during March, and in June unveiled a 3.0 trillion yen plan that encouraged short-term loans. The BOJ is unlikely to ease policy any time soon, it will “naturally consider what it can do” if the global economy stagnates and the yen’s gains accelerate.
On the other hand, the Japanese economy also released today the Machinery orders for July, where the index roses by 8.8% compared with the pervious reading 1.6%, while the actual reading is beating analysts expectation that referred to 2.0%.
On an annual basis; the Machine Orders Index for July rose by 15.9%, compared with previous of -2.2% while forecasts was leading to 8.1%.
According to today’s report, companies increase in spending was reflected by growing profits and the sales, facing the threat by the Yen’s gains, which is the main reason behind Japanese monetary policy that led by Mr. Shirakawa to announce yesterday that BOJ monetary policy committee decision about the borrowing cost remained unchanged, where they kept the benchmark rate near zero at 0.10% during the month of September in order to support the economy’s recovery as the bank gauges the risk the Yen’s advance, and they left credit program unchanged.
The analysts indicate that an increasing risk of firms becoming more cautious about new investment, because of uncertainties about global demand, as well as due to adverse impacts from yen appreciation and stagnant stock prices.
The Japanese government plans to increase its estimate for this year's growth 1.5%, after the economy expanded 0.4% during second quarter of the year, the slowest pace in three quarters, as global demand retreated, while the report showed that capital spending fell at the slowest pace since 2007.
