Japan’s Economy Soars with Highest Ever Current Account Surplus

• Japan recorded a historic current account surplus of 29.26 trillion yen in 2024, driven by foreign investments, a weak yen, and reduced trade deficit.
• The primary income, reflecting earnings from overseas investments, rose by 11.3% to reach 40.21 trillion yen.
• Despite a goods trade deficit, exports rose by 4.5% due to demand for semiconductor-making equipment and vehicles.
• The record surplus is a testament to Japan’s robust economic performance and strategic foreign investments, but diversification and domestic market strengthening are crucial for future growth.

Japan’s economic landscape witnessed a significant milestone in 2024, with the country recording a current account surplus of 29.26 trillion yen, the highest in its history. This remarkable achievement was primarily driven by the country’s unprecedented returns on foreign investments, a weak yen, and a reduction in the trade deficit, according to government data released on Monday.

The current account balance, a broad measure of international trade, saw a 29.5% increase from the previous year. This marks the second consecutive year of growth and the highest level since comparable data was first recorded in 1985, as reported by the Finance Ministry.

A key contributor to this surplus was the primary income, which is a reflection of Japan’s earnings from overseas investments. In 2024, the primary income rose by 11.3% from the previous year to reach 40.21 trillion yen.

The Role of the Yen and Foreign Investments

The depreciation of the yen played a significant role in boosting Japan’s primary income. The value of returns from foreign direct investments by domestic companies and overseas dividend income was inflated due to the yen’s depreciation. In 2024, the yen averaged 151.48 against the U.S. dollar, which was 7.8% weaker than the previous year.

Despite the overall surplus, Japan’s goods trade registered a deficit of 3.90 trillion yen, a decrease of 40% from the previous year. However, exports saw a rise of 4.5% to 104.87 trillion yen, driven by robust demand for semiconductor-making equipment and vehicles.

On the other hand, imports also saw an increase of 1.8% to 108.77 trillion yen. This was primarily due to increased shipments of personal computers and nonferrous metals. However, the growth was somewhat offset by a decrease in the value of coal and energy purchases due to falling prices.

Tourism and the Services Trade Deficit

The services trade deficit also saw a reduction of 10.3% to 2.62 trillion yen, largely due to an expansion of the travel surplus, which stood at a record 5.90 trillion yen. The weakening yen attracted a record 36.87 million foreign tourists to Japan in 2024. The surplus in the travel balance indicates that spending by foreign visitors in Japan exceeded the amount spent by Japan residents overseas.

In December alone, Japan recorded a 1.08 trillion yen current account surplus, a 17.8% increase from the previous year. This record-breaking surplus is reminiscent of Japan’s economic boom in the 1980s when the country also saw significant current account surpluses. However, the context is different now, with the global economy being more interconnected and Japan’s economy being more diversified.

In conclusion, Japan’s record current account surplus in 2024 is a testament to the country’s robust economic performance and strategic foreign investments. The weak yen, coupled with high returns from overseas investments and a decrease in the trade deficit, has contributed to this historic achievement. However, it is crucial for Japan to continue diversifying its economy and strengthening its domestic market to maintain this positive trend in the future. This is not an opinion but a factual analysis based on the data provided.