UPDATE 1-Japan Nov current account swings into hefty deficit

Thu Jan 10, 2013 7:34pm EST

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* Current account deficit 222.4 bln yen vs forecast 3.5 bln
gap
    * Analysts see Nov deficit as temporary
    * BOJ under intense pressure to ease to help economy

    By Kaori Kaneko
    TOKYO, Jan 11 (Reuters) - Japan's current account swung to a
much bigger than expected deficit in November after the nation's
trade gap hit a 10-month high, adding to a string of poor data
and firming up the case for more stimulus to help the stuttering
econonomy.
    The 222.4 billion yen ($2.52 billion) deficit reported by
the Finance Ministry on Friday marked the first shortfall in 10
months and far exceeded economists' median forecast of 3.5
billion gap.
    Analysts had expected the deficit to be just one-off and the
account - the measure of the nation's trade, income and transfer
flows - to return to surplus in coming months with exports and
investment income expected to benefit from recovering global
economy and a weaker yen.
    But the wide gap cast some doubt on such predictions and
will add to the pressure on the Bank of Japan to continue policy
easing even after the central bank delivered its third shot of
monetary stimulus in four months in December.
    Prime Minister Shinzo Abe, who campaigned on a blend of
hefty budget spending and monetary stimulus to end two decades
of stagnation and long spells of low-grade deflation, turned up
the heat again on Friday.
    Abe, who has pushed the BOJ to adopt a 2 percent inflation
target, twice its current goal, said in an interview with the
Nikkei business daily that the target should be short-term as a
long-term goal would be meaningless. He also said the central
bank should consider maximising employment as a policy goal,
which would act as a further incentive to boost monetary
stimulus. 
    Abe's government, on its part, is expected to approve a 13.1
trillion yen extra budget to help pull the economy out of its
fourth recession since 2000.
    Many analysts expect exports will pick up gradually along
with the global economic recovery, helped by the yen's weakening
as a result of BOJ easing and Abe's promises of more
expansionary fiscal and monetary policy.
    "In the short term there could be more deficits like this.
But Japan's exports to the United States and China should start
to pick up as these two economies have bottomed out," said Norio
Miyagawa, senior economist at Mizuho Securities Research &
Consulting Co.
    "The argument that Japan can rely on a current account
surplus and savings in the household sector to fund its public
debt is starting to weaken." 

    
    The yen, which hit a 2-1/2 year low on expectations
of further BOJ easing, eased further after the data.
    Japan logged its largest deficit in January last year under
comparable data available since 1985 as a shift away from
nuclear power after the March 2011 earthquake and tsunami, with
its subsequent nuclear crisis, boosted fossil fuel imports.
    The November shortfall was Japan's sixth monthly deficit,
with all of the past five gaps recorded in January when trade 
slows down due to holiday season.
    The income from Japan's extensive holdings of overseas
assets suggest little immediate risk that the current account
could stay in deficit but any delay in recovery in China and the
United States, and a worsening of Europe's debt crisis, could
further sap demand for Japanese goods.
    Under intense pressure from Abe, the BOJ is likely adopt a 2
percent inflation target at its Jan. 21-22 rate review, double
its current goal, and issue a statement with the government
pledging to pursue bold monetary easing steps, sources with
knowledge of BOJ thinking told Reuters.
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