Japan's current account balance swung to its largest deficit on record in January, with the income surplus tumbling about a third from a year earlier, adding more weight to an already falling yen.
The first deficit in 13 years came as the global financial crisis dried up demand for Japanese exports and, combined with a strong yen at the time, shrank the profits from overseas investments, including subsidiaries of its major manufacturers.
The yen has slipped 11 per cent since hitting a 13-year peak against the dollar in January as Japan's economy grapples with diving exports and its worst recession in the postwar era.
The contraction in Japan's main export markets is pushing industrial giants such as Toyota and Sony deep into the red, prompting job and production cuts and setting the economy on course for its longest recession in modern times.
Japan's current account balance fell to a deficit of 172.8 billion yen ($1.8 billion) in January, government data showed.
It was the first deficit since January 1996 and much deeper than the 15.3 billion yen median forecast from analysts polled by Reuters.
The income surplus slipped 31.5 per cent from a year earlier, due to lower interest rates and dividend payments from overseas. A stronger yen in January also reduced the value of income from overseas investments, a finance ministry official said.
Only 10 months ago, Japan enjoyed a record income monthly surplus of 1.96 trillion yen thanks to large dividend and interest payments.
Other data today showed bank lending rose last month from a year earlier while commercial paper issuance fell, although less than in January, reflecting a slight easing in gummed up financial markets that have forced companies to borrow from banks.
While there may be some signs of easing tension in the country's credit markets, declining export and income revenues will weigh on the economy for months to come.
The current account helped the dollar rise about half a yen to 98.39 yen while Tokyo's benchmark Nikkei stock average fell 0.8 per cent as fears for the future of General Motors took their toll on Japanese rivals.
Japan's income surplus shrank 31.5 per cent in January from a year earlier due to lower interest rates and dividend payments from overseas.
With Japanese share prices hovering just above 26-year lows and the country's key export industries suffering from an unprecedented downturn due to the global slump, the government and the central bank are under pressure to boost domestic consumption and spur corporate lending.
The balance of outstanding loans held by Japanese banks rose 3.5 per cent in February from a year earlier, after a 3.6 per cent increase the previous month.
Outstanding Japanese commercial paper held by banks fell 6.1 pe rcent in February from a year earlier after a 10.1 per cent drop in January.
Reuters