Japan current account deficit widens to record, Q4 growth slows

TOKYO (REUTERS) - Japan posted a record current account deficit in January and fourth quarter growth was revised down, heightening fears of a deepening economic slowdown amid soft exports and an expected chill in demand from an increase in the sales tax.

The current account deficit widened to a record 1.589 trillion yen (S$19.5 billion), more than the median estimate for a 1.4 trillion yen deficit in an ominous sign that shipments could continue to lag due to weak demand from Asia.

In the fourth quarter of last year Japan's economy grew less than initially reported due to slower business investment and consumption, revised data showed, adding to concerns that activity in the private sector lacks momentum.

The economy is expected to perk up in the current quarter as consumers bring forward purchases before a tax hike in April, but some analysts worry that underlying growth is not robust and that more steps to bolster activity may be necessary.

"Exports are weak because the global economy is not doing as well as expected," said Norio Miyagawa, senior economist at Mizuho Securities Research & Consulting Co.

"There are signs that the underlying trend for private consumption is not that strong. There are still a lot of doubts about the economy after the tax increase."

Exports rose 16.7 per cent in January from a year earlier, according to the current account data. That was much slower than a 30.3 per cent annual increase in imports.

Japan's economy grew 0.2 per cent in October-December from the previous quarter, government data showed on Monday, revised down from a preliminary 0.3 per cent rise due to weakness in capital spending.

The figure compared with economists' median forecast for a 0.3 per cent expansion.

The disapointing growth numbers and slower exports come amid growing concerns that a government-led campaign to revive the world's third-largest economy may be in danger of faltering.

Bank of Japan officials have said they expect a recovery in exports to offset some of the volatility caused by the sales tax hike, but chronic trade deficits cast doubt on this scenario.

The sales tax is set to be increased to 8 per cent from 5 per cent in April.

The BOJ is expected to keep policy uncharged at a two-day meeting ending Tuesday as consumer prices remain on track to meet the central bank's 2 per cent inflation target.

However, concerns about a military standoff in Ukraine and sluggish exports to Asian countries cloud the outlook.

The revised gross domestic product figure translated into annualised growth of 0.7 per cent in real, price-adjusted terms, against an initial reading of 1.0 per cent. Economists had forecast annualised growth of 1.0 per cent.

Capital spending rose 0.8 per cent in the fourth quarter, well below an initial reading of 1.3 per cent, the revised GDP data showed.

Private consumption rose 0.4 per cent during the quarter, slower than the preliminary estimate of 0.5 per cent growth.

Japan's industrial output and consumer spending rose sharply in January, according to separate data, in a sign consumers are frontloading demand before the sales tax rises to 8 per cent from 5 per cent on April 1.

This spurt should ensure that growth accelerates in the first quarter.

Most economists expect gross domestic product to shrink rapidly in the second quarter as consumer spending falls and then rebound in the third quarter.