UPDATE 1-Japan current account surplus improves in May, outlook dim

Mon Jul 7, 2014 8:20pm EDT

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* C/A balance +522.8 bln yen in May vs f'cast +403.6 bln yen
    * Trade deficit narrows as imports decline
    * Exports slow in worrying sign on external demand

    By Stanley White
    TOKYO, July 8 (Reuters) - Japan's current account logged a
higher-than-expected surplus in May, government data showed on
Tuesday, as the trade deficit narrowed due to a decline in
imports.
    But the improvement in the current account surplus could be
temporary as export growth slowed in May, a sign that firms
shifting manufacturing capacity overseas has made it difficult
for exports to grow rapidly.  
    The current account data also highlighted the need to
stimulate domestic demand and the services sector as exports are
no longer enough to drive economic growth.
    The surplus was 522.8 billion yen ($5.14 billion), more than
the median forecast for a 403.6 billion yen surplus. It was the
fourth consecutive month of surpluses, the finance ministry
said.
    In April, the surplus was 187.4 billion yen.
    Exports rose 2.0 percent in May from a year ago, slower than
a 6.2 percent annual gain in April.
    Imports fell an annual 0.4 percent, following a 6.6 percent
annual increase in April. As a result, the trade deficit in May
narrowed to 675.9 billion yen.
    The income surplus was 1.5 trillion yen in May, down 3.2
percent from the same period a year earlier, due to a decline in
earnings from overseas subsidiaries of Japanese firms.
    Analysts expect the economy to contract in the second
quarter after an increase in the sales tax, with a Reuters poll
conducted in June projecting a 1.2 percent quarterly drop.
    The economy is expected to grow 0.6 percent in the current
quarter, however, as consumer spending recovers from the tax
hike and as government stimulus spending supports domestic
demand.
($1 = 101.7900 Japanese Yen)

 (Editing by Eric Meijer)
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