The data released by the Japanese Ministry of Finance on Monday showed that due to the depreciation of the yen driving the growth of overseas investment returns, Japan's current account surplus in 2024 reached a historic high, easily offsetting the impact of the trade deficit.

Data Overview: Surplus hits a historic high of 29.3 trillion yen

The total current account surplus of Japan reached 29.3 trillion yen (approximately 192.67 billion US dollars), the highest level since comparable data became available in 1985, with a significant year-on-year increase of 29.5%.

Primary income surplus: Securities and overseas direct investment returns were the main driving forces, achieving a record high surplus of 40.2 trillion yen. This is mainly due to Japanese companies actively seeking growth overseas, including mergers and acquisitions of foreign companies.

Narrowing trade deficit: The trade deficit narrowed by 40% to 3.9 trillion yen, mainly due to strong exports of automobiles and chip manufacturing equipment, as well as a decrease in energy import costs.

Tourism surplus increase: The tourism industry's surplus reached 5.9 trillion yen, reflecting the booming development of domestic tourism demand.

Economic structural transformation: Trade is no longer the core of surplus

Once upon a time, Japan's current account surplus was seen as an important symbol of its export competitiveness and the yen's safe haven nature. However, in the past decade, this pattern has undergone significant changes:

The rising cost of energy imports and the overseas transfer of Japanese manufacturing have led to trade surplus no longer being the main source. On the contrary, Japan compensates for its trade deficit by generating primary income surplus, including interest payments and dividends.

There is no reason to repatriate overseas earnings back to China, as the return on investment from overseas is much higher than that from domestic investments, "said Nanwu Zhi, Chief Economist of Nomura Agriculture, Forestry and Investment Research Institute

It is worth noting that most of the overseas income has not been converted into Japanese yen and remitted back to Japan, but continues to be reinvested overseas, which may to some extent lead to the continued weakness of the yen.

US trade pressure reappears

As Japan's largest export market, the United States is demanding that it reduce its annual trade surplus of $68.5 billion. In the first White House meeting between Prime Minister Shigeru Ishiba and US President Trump last Friday, Trump reiterated this demand.

The changes in Japan's current account surplus highlight the transformation of its economic structure. The shift from relying on exports to relying more on overseas investment returns demonstrates the achievements of Japanese companies' global layout.

However, this also brings new challenges, including the long-term weakness of the yen and continued pressure from trading partners. In the future, how Japan balances its trade surplus with its global investment strategy will directly affect its economic resilience and competitiveness.