Japan's current account surplus widened in May, but inbound spending continued to decline year on year, while foreign investors sold Japanese equities and bonds heavily in June.
AI summary card
Japan's current account surplus widened in May, but inbound spending continued to decline year on year, while foreign investors sold Japanese equities and bonds heavily in June.
Goldman Sachs noted that Japan recorded a +¥4.0 trillion current account surplus in May, broadly in line with its forecast, but tourism revenue declined year on year and foreign investors turned into large net sellers of Japanese securities, making the capital-flow signal cautious.
- Japan's current account surplus was +¥4.0 trillion in May, up from +¥3.3 trillion in May 2025.
- Travel receipts related to inbound spending were ¥764.9 billion, down 11.2% year on year and declining year on year for the second consecutive month.
- Foreign investors were net sellers of approximately ¥3.0 trillion of Japanese equities and approximately ¥2.5 trillion of Japanese medium- to long-term bonds in June.
- Overall capital outflows under the portfolio investment category were approximately ¥9.7 trillion in June, a clear weakening from the approximately ¥2.9 trillion inflow in May.
Report interpretation
Overview
This report reviews Japan's balance of payments data for May and international securities transaction data for June. The key conclusion is that the current account surplus remained strong, supported mainly by an improvement in the trade balance and a sustained high primary income surplus; however, inbound spending declined year on year for the second consecutive month, while foreign investors recorded large net selling of both Japanese equities and bonds in June, indicating marginal pressure on tourism revenue and securities capital flows.
Core views
Goldman Sachs believes Japan's current account performance was solid in May, with the seasonally unadjusted surplus reaching +¥4.0 trillion, up 19.5% year on year and in line with Goldman Sachs' forecast. However, travel receipts declined 11.2% year on year, with visitors from mainland China still falling sharply, providing important context for the weakness in inbound spending. In terms of capital flows, foreign investors shifted from buying to net selling Japanese equities in June and recorded their first net selling of Japanese medium- to long-term bonds in nine months, resulting in significant capital outflows under portfolio investment.
Analysis framework
The report is based on Japan's Ministry of Finance balance of payments and international securities transaction data. It separately analyzes the current account, trade balance, travel receipts under services, primary income, and changes in net buying and selling of equities and medium- to long-term bonds by domestic and foreign investors, assessing macroeconomic trends through year-on-year, month-on-month, and seasonally adjusted measures.
Methodology notes
Current account, trade balance, services balance, and primary income
By decomposing the main components of Japan's current account, the analysis determines whether the surplus is driven by an improving trade balance, tourism service revenue, or returns on overseas assets.
Domestic investors' overseas securities investment and foreign investors' inward securities investment
Net buying and selling amounts of equities and medium- to long-term bonds are used to assess the direction and strength of capital flows into or out of Japanese assets.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Japanese equitiesForeign investors were large net sellers in June
- Strengths
- The current account surplus and corporate overseas earnings continue to provide macroeconomic fundamental support.
- Weaknesses
- Foreign investors recorded approximately ¥3.0 trillion in net selling in June, with capital flows weakening from net buying in May.
- Comparison
- Foreign investors were net buyers of approximately +¥2.9 trillion of Japanese equities in May, before switching to -¥3.0 trillion in June.
- Risks
- Continued foreign outflows could suppress market risk appetite and valuations.
- Japanese medium- to long-term bondsFirst net selling by foreign investors in nine months
- Strengths
- Japan continues to have a sizable current account surplus and a strong domestic funding base.
- Weaknesses
- Foreign investors recorded approximately ¥2.5 trillion in net selling in June, indicating weaker overseas demand.
- Comparison
- June marked the first net selling of Japanese medium- to long-term bonds by foreign investors in nine months.
- Risks
- Foreign selling pressure could intensify bond-market volatility and affect yield pricing.
- Overseas bondsJapanese domestic investors remained generally net buyers, more clearly excluding bank accounts
- Strengths
- Trust banks and pension-related accounts continued to be net buyers of overseas bonds in June.
- Weaknesses
- Bank-account flows were highly volatile, while life insurers and investment trusts turned into net sellers in June.
- Comparison
- Domestic investors were net buyers of approximately +¥3.1 trillion of overseas medium- to long-term bonds in May, while June showed an apparent small net sale of -¥18.0 billion; excluding bank accounts, the figure was net buying of +¥2.0 trillion.
- Risks
- Divergent behavior among investor types could result in significant monthly volatility in the data.
- Inbound tourism and consumption-related assetsTravel receipts declined year on year for the second consecutive month
- Strengths
- Visitors from South Korea, Taiwan, Singapore, the United States, and the United Kingdom continued to increase year on year.
- Weaknesses
- Visitors from mainland China fell 60.4% year on year, while total visitors to Japan declined 3.6% year on year.
- Comparison
- May travel receipts were ¥764.9 billion, below ¥862.0 billion in the same period last year.
- Risks
- If recovery in major source markets falls short of expectations, tourism consumption's contribution to the services balance could continue to weaken.
Key data
- May seasonally unadjusted current account balance+¥4.0 trillionAbove +¥3.3 trillion in May 2025, up 19.5% year on year and in line with Goldman Sachs' forecast of +¥4.0 trillion.
- May seasonally adjusted current account balance+¥3.1 trillionBelow +¥4.2 trillion in April.
- May trade balance+¥6.9 billionShifted from a deficit of -¥497.1 billion in May 2025 to a small surplus, with exports up 14.7% year on year and imports up 8.1%.
- May travel receipts¥764.9 billionDown 11.2% year on year, declining year on year for the second consecutive month.
- Visitors to Japan in MayDown 3.6% year on yearVisitors from mainland China fell 60.4% year on year, while visitors from South Korea, Taiwan, Singapore, the United States, and the United Kingdom increased year on year.
- May primary income surplus+¥4.3 trillionSlightly above +¥4.2 trillion in the same period last year, as dividend and bond interest income from securities investments increased.
- Seasonally adjusted current account surplus as a share of GDP from April to May6.5% annualizedAbove 5.8% from January to March.
- Foreign investors' net selling of Japanese equities in June-¥3.0 trillionThe first net selling in three months, compared with net buying of +¥2.9 trillion in May.
- Foreign investors' net selling of Japanese medium- to long-term bonds in June-¥2.5 trillionThe first net selling in nine months.
- Overall portfolio investment capital flows in June¥9.7 trillion outflowCompared with a ¥2.9 trillion inflow in May, representing a clear reversal in direction.
Impact & implications
For investors, Japan's external balance fundamentals remain supported by a current account surplus, but weakening tourism revenue and concentrated foreign selling of Japanese equities and bonds could undermine confidence in Japan's near-term market liquidity. If foreign selling persists, it could pressure Japanese equity valuations, bond yields, and yen-related trades; a recovery in inbound spending could partially offset fluctuations in external demand and capital flows.
Risks
- A continued year-on-year decline in inbound spending could weaken the momentum of improvement in Japan's services balance.
- The sharp decline in visitors from mainland China indicates an uneven recovery across source markets.
- Foreign investors' simultaneous net selling of Japanese equities and medium- to long-term bonds could amplify short-term volatility in Japanese assets.
- Tensions in the Middle East could affect the earnings of overseas subsidiaries and the repatriation of direct investment income to parent companies.
- High volatility in bank-account securities transactions could distort monthly readings of cross-border capital flows.
What to watch
- Whether travel receipts return to year-on-year growth in subsequent months.
- Whether the number of visitors from mainland China stabilizes and recovers.
- Whether foreign investors' net buying and selling of Japanese equities and medium- to long-term bonds continues the selling trend seen in June.
- Whether the primary income surplus can remain elevated, particularly direct investment income and profits remitted by overseas subsidiaries.
- Whether the seasonally adjusted current account surplus as a share of GDP remains above the levels recorded in previous quarters.