Japan posts record current-account surplus in first half, but household spending slumps

Japan's current-account surplus hit a record high in the first half of this year, driven by rising dividends from overseas investments and a drop in crude oil imports amid instability in the Middle East. At the same time, the current account swung to a deficit in June for the first time in 17 months and household spending fell sharply, painting a mixed picture of the Japanese economy.

Japan's Ministry of Finance released preliminary balance-of-payments data Monday showing the country posted a current-account surplus of 17.43 trillion yen ($110 billion) in the first half of the year, reflecting trade in goods and services as well as investment flows with the rest of the world.

The surplus was up 22.5 percent from the same period a year earlier and marked the largest first-half figure since comparable records began in 1985.

The trade balance — exports minus imports — also posted a surplus of 742.1 billion yen.

Analysts attributed the improvement to strong exports led by semiconductors and a decline in crude oil imports stemming from Middle East tensions.

The primary income account, which tracks interest and dividends from overseas investments, recorded a surplus of 20.49 trillion yen, also a first-half record, as Japanese companies expanded their global footprint and investment returns including dividends increased.

The services account, however, posted a deficit of 1.82 trillion yen in the first half, weighed down by a drop in Chinese visitors to Japan amid political tensions between the two countries.

The current-account data released Monday also showed that June's balance swung to a deficit of 92.3 billion yen, the first negative reading in about 17 months.

That marked a sharp deterioration from May's surplus of 3.97 trillion yen in the space of a single month.

Analysts said the June deficit reflected a trade shortfall of 135.2 billion yen as well as a narrowing of the primary income surplus, as dividend payments to foreign investors increased.

Meanwhile, data from Japan's Ministry of Internal Affairs and Communications showed that real household spending by workers' households fell 5.8 percent in June from a year earlier, marking a fourth consecutive month of decline after stripping out the effects of price changes.

The drop was the steepest since January 2024, a span of two years and five months.

The Nikkei newspaper noted that the divergence between spending and income was striking, given that real income for workers' households rose 2.0 percent — a sixth consecutive month of gains.

Analysts said households appeared to be saving more in anticipation of a sharp rise in prices, with Middle East instability fueling concerns about future inflation.

A Bank of Japan survey found that 55.0 percent of respondents said their financial situation had become less comfortable, far outpacing the 4.8 percent who said it had improved.