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The current account surplus fell nearly 64 per cent in August, versus forecasts expecting an 18 per cent gain. The unadjusted balance in the month was ¥161.5 billion, against forecasts at ¥520 billion and down from ¥577.3 billion in July. Within the data, trade of goods and services was in deficit of more than ¥1 trillion for a second consecutive month, while income fell to ¥1.253 trillion from ¥1.794 trillion a month before. The share of Japanese households with no financial assets rose to a record as falling incomes forced people to dig into their savings, highlighting the potential for widening disparities under Abenomics.
The proportion reached 31 percent, according to a Bank of Japan survey released in Tokyo yesterday; up from 26 percent a year earlier and the highest since the poll began in 1963. The BOJ surveyed 8,000 households of two or more people aged 20 years or older from June 14 through July 23. Prime Minister Shinzo Abe needs to convince companies to drive up workers’ pay, so that he can sustain an economic recovery jump-started by fiscal and monetary stimulus and maintain public support. Already facing declines in wages, households will be hit in April by a consumption-tax increase intended to shore up Japan’s finances. The most worrisome data came in the form of the GDP release which showed that Gross domestic product rose at an annualized 1.9 percent, down from 3.8 percent the previous quarter, with the gain relying on government spending and an accumulation of inventories, the Cabinet Office reported in Tokyo. A widening trade gap lopped off 1.8 percentage point from growth. Corporate investment increased 0.7 percent, down from 4.4 percent.
Prime Minister Abe had instructed the finance ministry and the Bank of Japan to prepare a stimulus program to offset the increase in sales tax due shortly. To succeed Japan needs to see businesses invest more money and increase workers’ wages. It is a difficult scenario balancing a sharp sword without cutting yourself.