April 7, 2017 / 9:53 AM / 7 months ago

Japan set for strong Feb current account surplus; Trump a worry

TOKYO (Reuters) - Japan is expected to report a solid current account surplus for February next week, helped by higher income from overseas investment and as exports pick up the pace after a Lunar New Year slowdown, a Reuters poll showed.

FILE PHOTO: A man runs past the Bank of Japan (BOJ) building in Tokyo, Japan, July 29, 2016. REUTERS/Kim Kyung-Hoon/File Photo

The current account report will also be joined by February data on core machinery orders, which are seen rebounding after the previous month’s slide, the poll showed.

However, fears the U.S. administration will impose protectionist trade measures remains a big risk to the outlook for Japan’s export-reliant economy.

The current surplus likely stood at 2.6156 trillion yen ($23.64 billion) in February, the 32nd straight month in the black and the largest amount since March 2016, following a 65.5 billion yen surplus in January, the poll of 12 analysts found.

“Exports to Asia rebounded and imports slowed in February which boosted the trade surplus. Also surplus of overseas income balance likely expanded,” said Miho Takase, economist at Mizuho Research Institute.

“The global economic recovery will support Japan’s trade surplus such as its IT related shipments to China.”

Japan’s trade and current account surpluses against the United States have taken on critical importance especially as U.S. President Donald Trump has accused Japan of weakening the yen currency to boost its exports.

Trump won the presidency with promises to put America first by renegotiating bilateral trade agreements to bring jobs back to the United States, which has raised concerns that global trade could suffer as a result.

Nonetheless, in what appears to be a shift in emphasis, the Trump administration is touting a new term, “currency misalignment,” because it is more significant than “manipulation” as a cause of trade deficits.

The U.S. last year set out three criteria for identifying manipulation among major trading partners: a “material” global current account surplus, a “significant” bilateral trade surplus with the U.S., and persistent one-way intervention in foreign exchange markets.

The underlying uncertainty on Trump’s trade policies, however, remain a constant among analysts surveyed by Reuters.

On core machinery orders, a highly volatile data series regarded as a leading indicator of capital spending, the poll predicted a rebound of 2.7 percent in February from the previous month following a 3.2 percent fall in January.

From a year ago, core orders, which exclude those for ships and electrical equipment, is seen up 0.8 percent in February, after a 8.2 percent slide in the previous month.

Takeshi Minami, chief economist at Norinchukin Research Institute, said an exports recovery is a welcome sign for capital spending but added worries about U.S. economic policies pose risks.

“There are uncertainties for the outlook for firms’ investment due to worries about the Trump administration’s policies.”

Reporting by Kaori Kaneko; Editing by Shri Navaratnam

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