Cranes load containers on a cargo ship at a pier in Tokyo. Japan recorded a current account surplus for the fourth straight month in May, government data showed yesterday.

Dow Jones/Tokyo

Japan marked a current account surplus for the fourth straight month in May, suggesting a smaller trade shortfall may allay concerns about further current account deficits.

A run of monthly current account deficits late last year and earlier this year raised concerns about the possibility of the balance falling into the red for good. Yet yesterday’s data showed Japan’s trade deficit, the main factor weighing on the current account, shrank while income on overseas investments was strong.

The ¥522.8bn ($5.13bn) surplus in the current account, the broadest measure of Japan’s trade with the world, was 7.7% smaller than in the same month a year ago. But it was larger than the ¥442.5bn surplus forecast by economists surveyed by The Wall Street Journal and the Nikkei.

Japan has sustained yearly current account surpluses for the past 30 years due to strong demand for Japanese goods overseas and sizable overseas investments. But the monthly deficits from late last year caused concern about the future direction of the current account.

Some economists worry that a sustained deficit would force Japan to rely on capital from overseas to finance its debts, pushing up bond yields as overseas investors demand a premium. That could also make financing the nation’s public debt-now over twice the size of Japan’s economy – difficult.

A string of trade deficits has been pushing the broader current-account deficit into the red in recent months. Japan has imported more goods than it exported for the last 11 months amid demand for more imported energy and goods produced overseas ahead of an April sales tax increase.

That has run counter to economists’ expectations that a weakening yen against the dollar since Prime Minister Shinzo Abe took office would help exports.

Yet yesterday’s data showed that the trade deficit shrank, while income on investments from overseas was strong. Goldman Sachs economist Yuriko Tanaka noted that the smaller trade deficit was mostly due to lower imports rather than stronger exports.

“The impact of imports falling a degree after rush demand ahead of the (April) sales tax increase is big,” she said.

The May trade deficit was ¥675.9bn, down 16.9% on year. Japan’s primary income account, which includes dividend and interest income on overseas investments, had a ¥1.48tn surplus in May, the fifth straight month over ¥1tn.

Finance Minister Taro Aso told reporters yesterday it would be necessary to pay attention to foreign-exchange rates, petroleum prices and interest rates with respect to the current account.

The current account measures trade in goods, services, tourism and investment. It is calculated by determining the difference between Japan’s income from foreign sources against payments on foreign obligations, and excludes net capital investment.