The deteriorating external position is also bound to put the
spotlight back on Japan's ability to service its huge debt, which at
over twice the size of its economy is the worst in the
The Ministry of Finance data on Monday also showed the current
account balance for December slid to the largest deficit on record
as exporters have failed to reap the benefits of a weak currency.
Many policy makers expected a falling yen would push up exports and
support the economy but lackluster external demand and declining
competitiveness have hampered the trade sector.
After stagnating for decades, the government's aggressive fiscal and
monetary stimulus policies over the past year have seen the economy
Still, the uneven recovery may prompt officials to consider other
options to keep economic growth on track, some analysts say.
"Gains in exports are weaker than I expected, reflecting declining
competitiveness," said Hiroaki Muto, senior economist at Sumitomo
Mitsui Asset Management Co.
"The current account can remain in surplus, but the surplus will be
small. This is an economic headwind that could place pressure on the
government and the Bank of Japan to respond."
For 2013, Japan's current account recorded a 3.3 trillion yen
surplus, the data showed. This was the smallest surplus in
comparable data available from 1985.
Last year imports rose 15.4 percent versus a 9.0 percent gain in
exports, the data showed.
In December, the current account deficit stood at 638.6 billion yen
($6.25 billion), against a median forecast for 707.7 billion yen.
The yen has fallen around 23 percent versus the dollar since late
2012 as Prime Minister Shinzo Abe's government embarked on a bold
plan to end 15 years of deflation with expanded quantitative easing
from the Bank of Japan.
[to top of second column]
Many in the government also expected the yen's fall to boost
exports, but this has largely failed to materialize as Japanese
companies are producing more goods outside of the country.
Japanese companies have also been losing market share to rivals from
South Korea and other countries.
Years of fiscal stimulus to revive a stagnant economy and surging
social welfare costs for a rapidly ageing population have led to
Japan running a record 1,000 trillion yen ($10 trillion) in public
The deteriorating current account balance has re-focused attention
on the debt pile and on Japan's ability to service it.
The increased debt-servicing cost forced Abe to go ahead with a
scheduled two-stage sales tax hike from April this year, which is
seen as a necessary first step in fixing Japan's tattered finances.
The economy is likely to boom until March as consumers rush to beat
the sales tax hike, and many analysts agree with the BOJ's view that
the pain from the higher tax will be temporary.
However, weak exports could mean that the rebound is slower than
some economists anticipate.
($1 = 102.2150 Japanese yen)
(Reporting by Stanley White; editing by Shri Navaratnam)
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