UPDATE 1-Japan current account swings to deficit as overseas earnings fall

Thu Aug 7, 2014 8:20pm EDT

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(Adds details on imports, exports and BOJ)
    * C/A balance -399.1 bln yen in June vs f'cast -324.3 bln
yen
    * Income surplus tumbles as overseas earnings fall
    * Trade deficit widens somewhat as imports accelerate

    By Stanley White
    TOKYO, Aug 8 (Reuters) - Japan's current account swung to a
deficit in June for the first time in five months due to a slump
in earnings from overseas investments, but exports accelerated
in an encouraging sign that external demand is improving.
    The current account deficit was 399.1 billion yen ($3.91
billion), more than the median estimate for a 324.3 billion yen
deficit as the income surplus, which measures profits from
investment abroad, fell 37.7 percent from a year ago.
    The Bank of Japan is sure to debate its rosy forecasts that
exports will pick up and offset a temporary slowdown in domestic
demand at a policy meeting ending later Friday as recent data on
exports and industrial output have been weaker than expected.
    Exports rose 4.4 percent in June from a year ago, versus a
2.0 percent annual gain in May, the current account data showed.
    Imports jumped an annual 13.9 percent, following a 0.4
percent annual increase in May. As a result, the trade deficit
in June widened slightly to 767.7 billion yen.
    The income surplus was 418.2 billion yen in June, down 37.7
percent from the same period a year earlier, the current account
data showed. In May the income surplus fell an annual 3.2
percent.
    The BOJ is set to maintain its massive asset purchases and
its optimistic view on the economic outlook at the meeting
ending Friday.
    Some BOJ policymakers may propose offering a bleaker view on
exports and output than last month, given the recent gloomy data
that cast doubt on its projection that the economy will fairly
quickly ride out the pain from a sales tax hike in April.
 
    A Reuters poll showed analysts expect gross domestic product
data, due to be released on Aug. 13, to show the economy shrank
at an annualised 7.1 percent in the second quarter.
    Some private-sector analysts say such a big contraction in
the second quarter may mean economic growth in the current
business year will far undershoot the BOJ's current projection
of an 1.0 percent increase.

(1 US dollar = 102.1300 Japanese yen)

 (Editing by Eric Meijer)
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