Japan current account surplus shrinks sharply as trade deficits bite

TOKYO (Reuters) – Japan‘s current account surplus fell sharply in December after a record rise the prior month, finance ministry data showed on Wednesday, highlighting the impact of persistent trade deficits and a weak yen on the country’s once-solid balance of payments.

The current account surplus stood at 33.4 billion yen ($255.51 million) in December, down steeply from a surplus of 1.8 trillion yen the previous month that was driven by income gains from securities investments and hefty Japanese investments overseas.

The latest figure also undershot economists median estimates for 98.4 billion yen surplus in a Reuters poll.

Japans current account surpluses have long been regarded as a sign of export might and a source of confidence in the safe-haven yen, but the account has occasionally fallen into the red on a monthly basis in recent years partly as a weaker yen has boosted the costs of imports.

The primary income surplus, which includes direct investments, and interest payments and dividends from past investments overseas, hit 1.8 trillion yen, making it the largest amount for the month of December since comparable data became available in 1985.

For the whole of 2022, the current account surplus fell the most on record — by 10.1 trillion yen from the previous year — to reach 11.4 trillion yen. A weak yen and rises in energy prices took their toll, resulting in record trade deficits, although this shortfall was offset by a record amount of primary income gains.

Some analysts worry that a dwindling current account surplus could put further downward pressure on the Japanese yen over coming quarters. The yen is down nearly 20% against the dollar so far this year.

($1 = 132.2500 yen)