Japan Posts First Current Account Deficit in 17 Months as Dividend Payments Surge

Japan recorded a current account deficit in June for the first time in 17 months, as rising dividend payments to overseas investors and higher oil import costs weighed on the country’s external balance.

The current account posted a deficit of 92.3 billion yen ($584.51 million) in June, according to data released by Japan’s Ministry of Finance on Monday. The result was significantly weaker than the median forecast of economists surveyed by Reuters, who had expected a surplus of 1.51 trillion yen.

Japan had recorded a current account surplus of 1.28 trillion yen in the same month a year earlier.

One of the main factors behind the June current account deficit was a sharp decline in Japan’s primary income surplus, which covers earnings from overseas securities investments and direct investments.

The net primary income balance fell 74% to 380 billion yen. Increased foreign investment in Japanese markets resulted in Japanese companies making larger dividend payments to overseas investors, reducing a source of income that typically plays a major role in Japan’s current account surplus.

Japan’s trade balance also came under pressure during the month. Rising oil import costs pushed the country into a trade deficit, adding to the factors that dragged the overall current account balance into negative territory.

Despite the unexpected June deficit, Japan’s external finances remained strong during the first six months of the year.

Japan’s current account surplus for the first half climbed 22.5% from a year earlier to a record 17.4 trillion yen. The increase was supported by an improved trade balance and strong Japanese exports.

Semiconductor exports were a particularly important contributor to the trade surplus, benefiting from growing global demand for chips used in artificial intelligence data centers.

The first-half figures indicate that Japan continues to benefit from strong technology-related exports even as higher energy import costs and growing dividend payments to foreign investors create pressure on its monthly current account balance.

The June figures highlight how shifts in overseas investment, corporate dividend flows, energy prices and semiconductor demand can significantly influence Japan’s current account, one of the key indicators of the country’s economic relationship with the rest of the world.