Japan's current account surplus shrank the most since 2008

The weak yen and rising commodity prices caused Japan's trade balance to fall into deficit, which in turn provoked a decline in the current account in the first half of 2022. It’s estimated to be the largest decline since the global financial crisis of 2008 and the second largest since 1985.

The Ministry of Finance released current account surplus status data on Wednesday. According to it, the current account surplus more than halved for the period from April to September 2022 in comparison with the figures for the same period last year. Thus, the surplus dropped 58.6% to 4.8458 trillion yen ($33.36 billion).

The last time such low numbers could be seen was in 2014, when high oil prices caused a negative trade balance for Japan.

The fall in the yen against the dollar benefited the primary income surplus as foreign investment income increased. Japan reported a record primary income surplus of 18.2332 trillion yen. Another reason for such figures is that Japanese companies were able to increase their profits due to rising global commodity prices. 

It’s becoming clear that at the moment the main source of income for Japan is money received from foreign investments.

It’s generally believed that a surplus represents Japan's import strength, thus showing the reliability of the yen as a currency. Recently, however, the balance has fallen into deficit several times.

The weakening of the yen isn’t always good for the Japanese economy. Imports have become more expensive and exports bring less profit. Export growth caused by the weak national currency won’t be too strong, since many companies' production is already located in other countries.