Japan logs biggest current account deficit since 2014 as oil import costs surge

Japan posted a current account deficit of 1.19 trillion yen (S$14 billion) in January. PHOTO: AFP

TOKYO (REUTERS) - Japan recorded its largest current account deficit since the start of 2014 in January as a jump in oil import costs offset gains in investment incomes, with continuing uncertainty due to the Ukraine crisis and Covid-19 pandemic.

The current account data highlighted the dependence of Japan's resource-deficient economy on imports of commodities and raw materials, which caused trade deficit to widen amid slowing demand from its largest trading partner, China.

Japan, the world's No. 3 economy, posted a current account deficit of 1.19 trillion yen (S$14 billion) in January, the data showed, versus economists' median estimate of a 880 billion yen deficit in a Reuters poll.

It was the second straight month of deficit after slowing demand from China before the Chinese New Year holidays put a drag on Japan's recovery from Covid-19-induced doldrums. It also marked the second-largest deficit under comparable data going back to 1985.

Surging fuel costs drove up the value of imports by 39.9 per cent in January from a year earlier, outpacing a 15.2 per cent rise in exports.

A weak yen also inflated the cost of imports, helping to lead to a trade deficit.

While the weak currency helped increase yen-denominated profits from overseas, the boost to export volumes was not as great as previously due to an ongoing shift of exporters' production abroad, analysts say.

Adding to the decline in Japan's purchasing power, the data also showed sharp declines in foreign tourist arrivals, reducing the travel account to a surplus of just 12.3 billion yen. The services deficit came to 737.9 billion yen, the data showed.

Follow The Straits Times' live coverage on the Ukraine crisis here.

Join ST's Telegram channel and get the latest breaking news delivered to you.