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Japan’s current account surplus dropped 29.4 percent in October from a year earlier to 376.9 billion yen, the government said on Monday.

The surplus in the balance of international payments, one of the widest gauges of trade for a country, fell for the second straight month, according to a preliminary report released by the Finance Ministry.

Among key components, the balance of goods trade marked a deficit of 450.3 billion yen.

The yen traded in a relatively tight range against the dollar this week, even though the US currency was buffeted by concerns over the “fiscal cliff” – mandatory tax hikes and budget cuts that are expected to damage the US economic recovery. The yen started the week trading at 81.78, but appreciated rapidly to 82.48, after news that there was still no progress in talks between US leaders to avoid the “fiscal cliff”.

Financial turmoil in Europe, a strong yen that has weakened exports and a painful diplomatic row with major trade partner China have harmed Japan’s economy, dousing hopes of a firm recovery after the 2011 quake-tsunami disaster.

Some economists warn the current quarter is likely to see another contraction, meaning two successive quarters of negative growth that equate to a technical recession.

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On Monday, official data confirmed earlier figures that showed Japan’s economy shrank 0.9 per cent in the July-September quarter, or down 3.5 per cent on an annualised basis.

Revised figures from the Cabinet Office also showed the nation’s growth in the previous quarter was essentially flat, further underscoring recession fears.

USD/JPY remains choppy and holds just below a 78.6% Fibonacci retracement resistance level in the 82.65 price zone, having little reaction to Cabinet office data that showed Japan’s economy contracted for a second quarter in Q3; the market currently exchanges around 82.50. “I am looking to see 83 the a run to 85” comments Economist Shayne Heffernan, he added that  support levels at 82.25, 82.00 and the mentioned 81.80. Rallies may find resistance at 82.60, 82.85 and 83.10.

Last month, Tokyo approved $US10.7 billion ($A10.25 billion) in fresh spending to help boost the limp economy, more than double a package announced in October.

The new package was announced as the nation prepares for December 16 elections which are expected to see Prime Minister Yoshihiko Noda and his Democratic Party of Japan defeated by the main opposition Liberal Democratic Party led by Shinzo Abe.

Abe has vowed to spend heavily on public works and pressure the Bank of Japan into launching aggressive monetary easing measures to boost growth if his party wins the election.

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