Japan Posts 16th Straight Current Account Surplus at 3.9 Trillion Yen
# current account# trade balance# primary income# yen# balance of payments
Key Points
- May current account surplus 3.97 trillion yen, 16th straight
- Surplus driven by income from overseas investments
- Trade itself is no longer the main foreign-currency earner
- Overseas income underpins the yen's long-term fundamentals
- Japan shifting from trading nation to investing nation
Analysis
Japan's current account posted a 3.9 trillion yen surplus in May, the 16th straight month in the black. But how Japan earns that surplus has changed. The current account has two parts: the trade balance, and primary income from Japan's vast overseas investments. The engine is no longer exports. It is income-dividends and interest flowing back from decades of overseas assets-while a weak yen is offset by pricey energy imports and offshored manufacturing. Japan is shifting from a trading nation to an investing nation that collects rent from abroad. For the yen, a persistent surplus is a long-term floor. To judge the yen, watch monthly primary income and energy import costs, not just interest-rate differentials.