Japan's Current Account Balance in H1 Hits Lowest in 8 Years... Down 63.1% YoY

[Image source=AP Yonhap News]

[Asia Economy Reporter Lee Ji-eun] Japan's current account surplus for the first half of this year has recorded its lowest level in eight years. This decline is attributed to the sharp rise in global energy prices following Russia's invasion of Ukraine, combined with the weakening of the yen in the foreign exchange market.

On the 8th, Japan's Ministry of Finance announced that the current account surplus for the first half of this year decreased by 63.1% compared to the same period last year, amounting to 3.5057 trillion yen (approximately 33.3836 trillion won). This is the lowest level in eight years since 2014. In June, the current account recorded a deficit of 132.4 billion yen, returning to a deficit after five months.

The decrease in the current account surplus for this half-year period is the second largest drop after the 7.1454 trillion yen decline during the Lehman Brothers crisis in 2008.

The main factor is analyzed to be the deterioration of the trade balance due to the surge in energy prices. According to the Ministry of Finance, Japan's trade balance for the first half of this year recorded a deficit of 5.6888 trillion yen. In the first half of last year, it had recorded a surplus of 2.2823 trillion yen.

Exports increased by 18.2% year-on-year to 46.4079 trillion yen, supported by strong performance in steel, semiconductors, and other electronic components, but imports rose by 40.8% to 52.0767 trillion yen during the same period, resulting in a deficit.

However, with raw material prices beginning to decline from July, the current account is expected to improve going forward. Bloomberg economist Masujima Yuki predicted, "International oil prices, which fluctuated above $140 per barrel at the beginning of the year, have fallen below $100, slowing the rise in raw material prices, so Japan's trade deficit is expected to decrease from July."