Japan''s current account surplus shrank sharply to a 15-year low in 2011, and while foreign investments are covering a declining trade position for now there are growing questions over how long Tokyo will be able to fund its huge public debt domestically.
The current account balance, a broad measure of trade and other flows, logged a surplus of 9.6289 trillion yen ($125 billion) in 2011, down 44 percent from the previous year - its biggest fall on record. The decline was heralded by data in January that showed Japan posted its first trade deficit since 1980 last year, after a devastating earthquake last March hurt exports and increased its reliance on fuel imports due to nuclear plant shutdowns.
But Tokyo''s massive foreign investments delivered a hefty 14 trillion yen in income in 2011, producing an external surplus equal to about 2 percent of nominal gross domestic product. "It is hard to consider that Japan will become a deficit country in the current account in the medium term," said Tatsushi Shikano, a senior economist at Mitsubishi UFJ Morgan Stanley Securities in Japan.
"But there is a risk if the yen sharply appreciates and the nation loses global competitiveness, the timing to become a deficit country may come sooner than expected." In December, the current account surplus tumbled 75 percent from a year earlier, a 10th straight monthly fall that roughly matched the median market forecast, data from the Ministry of Finance showed. The December surplus stood at 303.5 billion yen ($3.95 billion), against a median forecast for 336.9 billion yen.
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