"A surge in domestic demand ahead of the sales-tax hike is adding to the deficit, a trend that is expected to continue through March. Temporary factors are playing a large role in pushing the deficit wider."
- Takeshi Minami, chief economist at Norinchukin Research Institut
Current account deficit of the world's third biggest economy expanded to a record in December amid soaring imports, adding to Prime Minister Shinzo Abe's challenges as he attempts to boost a recovery in Japan. According to the Ministry of Finance, the 638.6 billion yen shortfall exceeded November's gap of 592.8 billion yen. This was largely driven by the Japanese Yen's depreciation and increased demand for foreign energy due to nuclear plants closures, which dragged on the economy that is expected to shrink after the sales tax hike in April. For the whole year of 2013, Japan posted a current account surplus of 3.3 trillion yen, which is the smallest in record.
Meanwhile, Japan's economy watchers' assessment of current situation and expectations weakened last month. The index, which reflects assessment of the current economic conditions declined more than expected to 54.7 in January from 55.7 a month earlier. Likewise, the outlook index dropped to 49 from 54.7 in December.
Also, another report showed that confidence among Japanese households declined for a second consecutive month in the beginning of 2014. The seasonally adjusted consumer confidence index fell to 40.5 in January compared to 41.3 in December last year.
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