JPY: A sound investment – Commerzbank

Japan's current account surplus remained solid in March. At JPY 3.7 trillion, this was slightly lower than in February. However, when calculated over the last twelve months, a new all-time high of JPY 30.4 trillion was reached, Commerzbank's FX analyst Volkmar Baur notes.

Safe havens such as the JPY are not in demand

"Once again, the current account surplus was not driven by foreign trade. Although a small surplus was generated in the goods and services sector, primary income accounted for the lion's share at JPY 3.9 trillion, contributing over 100% to the current account balance (secondary income, on the other hand, was negative). Income from direct investment appears to have risen particularly strongly due to the dividend season."

"Overall, the trends of the last two to three years are continuing. Although the foreign trade balance has improved slightly, it remains clearly negative on a twelve-month basis. Therefore, the current account surplus continues to be driven by capital income from foreign investments. As a significant proportion of these foreign assets are likely to be invested in US dollars, Japan's current account balance - and consequently the Japanese yen - is subject to a considerable degree of dependence on the performance of the US economy."

"In this sense, yesterday was probably a good day for the JPY in the long term, as the tariff pause will certainly prevent damage to the US economy. However, yesterday's market movements show that safe havens such as the JPY are not in demand when capital markets are performing well. Consequently, USD/JPY rose above 148 at one point."