Japan’s Current Account surplus grew more than economists expected in March, printing at 1.48 trillion yen from 1.12 trillion in the previous month as compared to forecasts for a 1.21 trillion result. In annual terms, the surplus shrank -48.8% from a year before, the smallest drop in 5 months. Still, exports tumbled -46.5% in the 12 months from March 2008 on continued weakness in demand for the island nation’s cars and electronics. Looking ahead, the road back promises to be a long one: the International Monetary Fund (IMF) has forecast that the world economy will contract by -1.3% this year while global trade volume (including both goods and services) will shrink by a whopping -11%; further, expectations for the recovery in 2010 are noticeably muted, calling for output to expand 1.9% and trade volume to add just 0.6%. This means that even if we assume that Japan has seen the bottom in overseas sales, firms will need to contend with substantially lower output levels for some time to come. The manufacturing sector employs over 27% of Japan’s labor force, implying that the jobless rate is likely to remain high for the time being to keep a lid on a robust recovery in consumption and overall economic growth.
