Japan's current account surplus to narrow to 3.2% of 2019 GDP

Export growth is expected to drop 1.2% this year.

Japan’s current account surplus is projected to narrow to 3.2% of GDP in 2019 and 3.0% in 2020, from 3.5% in 2018, as export growth is expected to contract 1.2% this year, Fitch Solutions reported.

Japan was reported to have maintained a current account surplus due to its income surplus growing to 3.8% of GDP in 2018 from 2.0% in 2004. This trend is expected to continue as long as it maintains the negative interest rates adopted by the Bank of Japan.

However, goods account surplus has been shrinking since 2007 and is expected to continue in light of heightened trade tensions.The US and China are the country’s largest trading partners, receiving 18% and 20% of the country’s exports respectively.

In addition, the consumer boycott of Japanese products in South Korea could affect the country’s current account, as South Korea account for about 7% of Japan’s exports.

Meanwhile, its service account has flipped into surplus during the first half of 2019, attributed to the 800% growth in tourist arrivals. The country has posted a record increase in international travellers for every month this year, with the number of international travellers to Japan climbing 5.6% YoY to 3 million in July.

Chinese citizens in particular represented 35.1% of total tourists in Japan, from 20% in 2012, surpassing the ratio of South Korean tourists, which fell to 18.8% from 25.4.

The upcoming Tokyo Summer Olympics is also expected to bring a 25% jump in the number of visitors to 40 million in 2020 from 2018.