Japan Runs Record Current Account Surplus In 2024 On Foreign Investment Returns

Tokyo: According to data from the finance ministry released on Monday, Japan's current account surplus surged to an all-time high last year, aided by a weaker yen that enhanced returns on overseas investments, effectively offsetting a trade deficit. In 2024, the current account surplus reached 29.3 trillion yen ($192.67 billion), marking the highest level since comparable records were accessible in 1985. It indicated a 29.5 per cent rise compared to the year before. The main source of income from securities and direct investments abroad continued to be the largest factor, achieving a historic surplus of 40.2 trillion yen, as Japanese businesses seek expansion overseas, including buying foreign companies.

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Japan's surplus hits record high

The trade deficit decreased by 40 per cent to 3.9 trillion yen due to strong exports of cars and semiconductor manufacturing equipment, along with reduced energy import expenses. The travel surplus increased to 5.9 trillion yen, showcasing the booming inbound tourism. In December, Japan's current account surplus was 1.08 trillion yen, a decrease from the prior month's 3.35 trillion yen. The country's current account surplus was previously viewed as an indication of strong exports and a foundation of trust in the safe-haven yen. However, the composition has transformed in the past ten years, as trade is no longer yielding a surplus because of a rise in energy import costs and a growth in offshore production by Japanese firms.

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Currently, Japan balances its trade deficit with a strong primary income surplus, which consists of interest payments and dividends from foreign investments. Nonetheless, most of this income generated internationally is reinvested overseas rather than being exchanged for yen and sent back home, which experts suggest could be contributing to the weakness of the Japanese currency. "There’s no justification for repatriation since foreign investments produce better returns than domestic ones," stated Takeshi Minami, chief economist at the Norinchukin Research Institute. Japan is currently under pressure from the United States, its main export market, to reduce its $68.5 billion yearly trade surplus, a request President Donald Trump issued during Prime Minister Shigeru Ishiba's initial White House visit on Friday.