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Why Does This Country Called Japan Continue to Earn Money? From Trade to Dividends and Interest, Patents, and Tourist Revenue

3, 01. 2015

   The current account balance for 2014, which shows the balance of payments in goods and services to overseas countries, was in the black, but in comparison to last year shows a reduction of 18.8% to 2.6266 trillion yen, which is the lowest since the closest comparable year of 1985. This is made clear by the volume of trade figures released by the Ministry of Finance on February 9th, 2015.

   The main cause of this is a widening deficit in balance of trade due to a swell in imports, such as in fuel, which continues to hover at a high level. However, with earnings on investments overseas through dividends and interest on overseas subsidiaries owned by Japanese firms, or "first generation income balance" in the black and supplementing the trade deficit, it seems that changes in Japan's balance-of-payments structure are set to continue.

Smallest Ever Deficit in Travel Balance of Payments

   Japan's current account balance could be said to be an index showing the overall earning power of the Japanese economy. The current account surplus is currently only a tenth of what it was 7 years ago, in 2007, when it peaked at 24.949 trillion yen. In contrast to that period, in 2014 imports grew to nearly 19 trillion yen, and the trade deficit bulged to 10.3637 trillion yen, a growth of 18.1% on the previous year. This is not merely a trade deficit in the buying and selling of goods; the "service balance", covering overseas remittances and money used during travel, showed a 3.932 trillion yen deficit in 2014. However, this deficit is in fact 385.4 billion yen less than the previous year. The number of overseas visitors to Japan has increased by 29.4% since last year, reaching the biggest ever total of 13.41 million visitors; this has the effect of making the travel balance of payments - subtracting the amount of money used by Japanese citizens overseas from the amount of money used by overseas visitors in Japan - its lowest ever, at a 125.1 billion yen deficit, which represents a fall of 529.4 billion yen.

Largest Ever Year for "Fees on Intellectual Property Rights, etc." Such As Patent Fees

   The government has set as a target an increase in overseas visitors to 20 million by the year 2020. At that pace, the travel balance-of-payments for 2015 has the potential to pass into surplus. Another area within services balance-of-payments, "fees on intellectual property rights, etc." meaning patent fees and so on earned by Japanese firms from overseas enterprises, has this year managed to reach a surplus of 1.6948 trillion yen, which is the biggest in history.

   However, what would really go a long way towards bring the balance-of-payments across services and trade into surplus from deficit would be a surplus in first generation income balance. Here, in 2014, the figure was recorded as being 18.712 trillion yen, an increase of 1.5957 trillion yen (9.7%) from the previous year, making it the biggest ever. Dividend payments and so forth from overseas subsidiaries was 4.21 trillion yen, a 4.7 magnitude increase over the past 10 years. Amongst securities investments and related activities, interest revenue on bond certificates had grown by around 600 billion yen higher than last year at 8.979 trillion yen, and receipts from dividends on shares grew to 3.4 time what they were 10 years ago, at 2.8723 trillion yen. High growth rates overseas are appearing in the form of dividend on investments. Otherwise, second generation income balance, which records, for instance, endowments and gifts, showed a deficit of 1.9877 trillion yen.


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