The main drivers of the yen depreciation that took place in 2022 includes factors such as the interest rate differential between Japan and the United States as well as the rapid expansion of Japan’s trade deficit. Although the trade deficit has decreased in 2023, the exchange rate remains at a depreciated level. In this article, we examined the structural changes in Japan’s current account balance using data from 1996 onwards.
In recent years, the presence of “reinvestment earnings”, which are not likely to be converted to yen, has increased in the primary income balance, and the structure of the current account surplus has changed to one where it is less likely to lead to an appreciation in the yen.
Written by Yuko Iizuka, Economist, Asset Management One Co., Ltd