Japan Current Account: Updated Feb. 15, 2025.

Japan logs record current account surplus for 2nd year in 2025

Article source: https://mainichi.jp/english/articles/20260209/p2g/00m/0bu/021000c

Ideas

There are some positives and negatives to why Japan's current account surplus is at a record level for the second straight year. The main reason is at a record again is most likely because of the weak Japanese yen, which allows higher returns on foreign investments and higher prices for Japanese company exports sold in foreign markets.

And there is a negative too such as a weak Japanese yen causes import prices for the Japanese domestic market to be higher than normal, meaning importers and wholesalers have to pay more for products they bring into Japan, and of course they often pass-on their increase costs to the next in the supposed supply chain which might be the final retail customer.

So for the Bank of Japan, which has to sort all of this they have to decide which is best for the Japanese economy, a weak Japanese yen, which increases the current account and at the same time helps Japanese investors in foreign markets and helps large Japanese export companies like Toyota as the weak yen increases their selling price in foreign market or does the Bank of Japan think the domestic economy should be more important and has to deal with the increase in import prices which effects the average Japanese consumer with higher prices.

Japan's current account is like the government's bank account as they use it of course for government spending including a host of budget increases needed to keep the economy moving in the right direction.

The challenge of problem is an increase in the current account should lead to an appreciation in a country's currency, but that for some reason has not happened in Japan or not for a very long time as Japan's currency continues to remain weak.

So what is really going on with both the current account and with Japan's currency situation, as are they really connected or is it only textbook ideas that connect them and is there other real-world situations taking place that has kept Japanese currency weak while Japan's current account is seeing record levels.

Its important to reflect on the idea that Japanese investors are now trading in overseas markets as they are not as loyal to their own country and its the same globally as investors, globally, these days, are looking outward.

And its the same with companies too, as they are not as loyal and maybe never have been and they will invest in any stable economy that can gives them the return they are looking for too just as investors are.

The goods trade, which seemed to take a plunge  of 76.8 percent, while not good, its still not a major problem, as exports increased 2.5 percent but the US tariff situation might have had something to do with the decrease.

And it seems Japan is creeping slowly back into the semiconductor market race as for a long time it was almost completely out of it with both South Korea and Taiwan taking most of the market share.

Japanese food too seems to be making a concerted effort too as their seems to be a continued race these days between South Korea and Japan related to which food is now more popular in foreign markets as both seem to be seeing increases in overseas food shipments.

Unfortunately, Japan seems to be way behind in the services trade area including software, which it seems Japan as all but given up developing any software in its home country.

As such they continue to pay significant royalties to the US and maybe even India these days as again Japan is a hardware focused manufacturing economy and doesn't seem to want to invest in software and or there just aren't any real software drivers in the economy that is making any kind of difference.

Japan seems to have created a new economic driver, which might have started back during the era of the late Prime Minister Abe, when Japan seemed to open up its economy and country to more foreign tourists, and especially to more Asian tourists to come to Japan and spend their money, which now is at record levels.

While foreign tourism might not exactly help boost the economy as much as domestic consumer spending its no doubt helping with economic growth as domestic consumer spending by Japanese households, recently, just hasn't been where it should be for a country which is considered the 4th or 5th largest economy in the world at this time.

Japanese travelers are at a disadvantage as they have to deal with weak Japanese yen which means if they travel to the US, the EU, or even other Asian countries their purchasing power is much less which means they have to spend more, which of course it could be an incentive to not travel overseas.

A drop in the current account for one month should not be that big of challenge as the December holiday period, globally, might have reduced a lot of economic activity as many countries and economies have holidays during the December period.

And at the same time, as the US is one of Japan largest trade partners, again the US tariff situation might have had some affect on the decrease in Japan's current account.

And lets not forget about China too which is one of Japan's largest trade partners and the latest spat between the two governments might have significantly spilled over in to the business and trade arena which might have affected Japan's current account.

The latest spat between the two countries might take some time to resolve as now, for example is the Chinese New Year period and Japan, unfortunately is only ranked 10th in destinations for Chinese tourists when at one time it might been close to being the number one destination for Chinese tourists.

As a result, Japan potentially is going to lose a lot of spending by Chinese tourists, as they have become big spenders as more and more Chinese tourists enter the middle class or even the upper middle class in China and want to travel to overseas places these days.

Have a nice day!

Japan Current Account: Updated Oct. 10, 2025.

Japan current account surplus down 5% in Aug. on lower investment returns

Article source: https://mainichi.jp/english/articles/20251008/p2g/00m/0bu/012000c

Ideas

Current account information is rarely published in most newspapers in the US but it seems to be in the news in Japan a lot as Japan is a major export economy and the current account is very important for the Japanese economy.

An economies current account is like a country's bank account as exports put money into the account and imports take money out of the account.

A 4.8 percent decrease in the current might not be much or it might be a lot depending on how a country uses its current account. If the current account is used for government funding then it might a major decrease.

But as the article suggests Japan's current account situation is still in good shape because usually exports are more than imports for Japan and as such more yen is going into the account that leaving the account.

There are always going to be months of up and months of down related to export increasing or decreasing and foreign investments too increasing or decreasing each month.

Again, there are always going to be periods of good returns with primary income and periods of less than good returns and primary income. 

The tariff situation might have had something to do with less primary income as the Japanese auto sector in the US might have seen reduction in profits or sales.

And then there is the idea that August is usually one of the slowest months in the US and the European Union as its still a major vacation period in both places.

Japan is still a major good trade economy as exports are very important for Japan and of course cars are the major export along with car parts products.

And of course Japan exports many other product globally to many different countries these days.

Japan also imports a lot of crude oil, as Japan is a resource-poor country which means it has to import much of what it needs and as such what happens with the Japanese yen can play havoc with import into Japan. 

For example as the Japanese currency is weak compared to the Euro and the US dollar it causes imports to be more expensive in Japan. 

A decrease of 0.4 percent is better than expected as the tariff situation was expected to decrease exports even more.

The services trade deficit can be attributed to the record number of foreign tourists entering Japan as maybe the weak Japanese yen has been a motivating factor to travel to Japan as the weak yen gives foreign tourist more purchasing power which means they can spend more.

Japanese tourists wanting to travel abroad face a strong Japanese yen which means they have less purchasing power in many countries around the world.

Back around 2010 the Japanese government began to liberalize tourism as a major industry, and increased the number of countries that could travel to Japan without a visa and could stay for up to 3 months. 

The motivation behind the liberalizing of tourism was to improve the Japanese economy as the economy had become somewhat stagnant and needed some kind of stimulus from the outside.

As such foreign tourism in Japan might be close to being considered a major driver of the Japanese economy, but it still has a long way to go compared to foreign tourists in Spain or France.

Have a nice day!