Japan current account surplus slumps after quake

Japan's current account surplus tumbled in March from a year earlier as exports fell and imports rose following a devastating earthquake and tsunami, and the surplus could shrink further as power shortages make it difficult for exporters to restore production to levels seen before the disaster.
Bank lending fell in the year to April at the slowest rate in 17 months as some companies sought extra funds at the start of the new fiscal year, which came after the earthquake that struck the north-east on March 11. Economics Minister Kaoru Yosano said the quake is expected to shave 1 percentage point off GDP in the current fiscal year that began in April, but expressed confidence that damage to output can be overcome.
"The Japanese economy has begun to demonstrate its resilience. We believe the impact on production to be smaller than previously thought. Supply chains are recovering faster than expected," Yosano told a news conference on Thursday. There is a chance that Japan has already fallen into recession, and recovery later this year could be hampered if power shortages prevent auto and electronics makers from ramping up exports. Lingering doubt about the outlook could build the case for more monetary policy easing to bolster sentiment.
The Bank of Japan, however, feels monetary policy cannot solve supply side problems and so may stand pat unless a spike in the yen severely hurts sentiment or supply constraints cause a slump in consumption. Adding to concerns, separate data showed Japan's trade balance had already swung into a deficit in the first three weeks of April as exports plunged, suggesting it is set to log a deficit for the full month.
"Exports are weak and we are importing things that we weren't able to make domestically," said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities. Japan's current account surplus fell 34.3 percent in March from a year earlier, Ministry of Finance data showed on Thursday, compared with the median forecast for a 31.3 percent annual decline in a Reuters poll of economists.
The surplus stood at 1.679 trillion yen ($20.7 billion), less than the median forecast of 1.754 trillion yen. Exports fell 1.4 percent from a year earlier, while imports jumped 16.6 percent. In the April 1-20 period, exports fell 12.7 percent from a year earlier - the biggest drop since October 2009 when the economy was reeling from the global financial crisis - resulting in a trade deficit of 786.8 billion yen, separate Ministry of Finance data showed.