(c) JETRO Japan Economic Monthly, November 2005
Economic Indexes (1)
Economic Indexes (1)
Reversals Seen in Income Balance and Trade Surplus
Japanese Economy Division
Japan’s income surplus in the first half
Fig. 1 Income Balance Trends
of fiscal 2005 (April to September) stood
160
at US$52.2 billion, up US$10 billion from
140
a year earlier, according to a preliminary
120
(US$ billion)
Income balance
Trade balance
100
report issued by the Ministry of Finance
80
and Bank of Japan on November 14. This
60
was the first time the income surplus has
40
exceeded the nation’s trade surplus, which
Income balance > trade balance
20
fell US$21.4 billion to US$45.3 billion
0
1990
(Fig. 1).
93
96
99
2002
2005 (4-9)
Note: Bank of Japan official rates are used for exchange rate calculations.
Sources: Bank of Japan and Ministry of Finance
The income balance is the amount paid
to other countries subtracted from earnings produced by direct and portfolio investments.
While corporate and individual investments have boosted the surplus in recent years,
increased import costs due to higher oil prices have depressed the trade surplus.
Portfolio investment earnings came to US$38.7 billion, up US$5.9 billion, and direct investment
profits totaled US$11.6 billion, an increase of US$4.4 billion.
Increases in dividend and interest receipts from foreign securities have fueled portfolio profit
growth. Earnings (receipts) from the U.S. rose US$4.3 billion to US$20.7 billion. The U.S.
accounted for 42.5% of total portfolio investment income. One reason for strong Japanese
investment in the U.S. was the differences in Japanese and U.S. interest rates (Fig. 2).
Direct investment profits came primarily from overseas subsidiaries, especially in the fields of
automotives and electrical machinery. Direct foreign investments in both industries has been
relatively active since 2000, including 145 investments in transport equipment and 113 in electrical
equipment in 2004, placing them first and second among all industries (Fig. 3). Expanded earnings
reflect the success of these investments.
Fig. 3 Trends in Foreign Investments
Fig. 2 Foreign Portfolio Investment and Japan-U.S. Interest Rate Trends
Transport
equipment
Electrical
machinery
Chemicals
180
90
(Number of investments)
(US$ billion)
(%)
160
Difference between Japanese and U.S.
interest rates (monthly average): right
axis
80
Machinery
140
70
Steel/nonferrous metals
Food
3
120
60
Textiles
100
50
U.S.
Lumber/pulp
80
40
Germany
60
30
France
20
40
UK
20
10
0
2
05/01
02
03
04
05
Note 1: Bank of Japan official rates are used for exchange rate calculations
2: Foreign portfolio investment data is as of September 2005.
Sources: Ministry of Finance and Thompson Financial
06
07
08
09
10
11
0
1998
Source: Ministry of Finance
99
2000
2001
2002
2003
2004