On May 12, the Ministry of Finance released preliminary figures for Japan’s 2024 balance of international payments. The trade balance—exports minus imports—showed a deficit of ¥4.048 trillion, and the services balance recorded a shortfall of ¥2.5767 trillion. In contrast, the primary income account, which includes dividends and interest from overseas investments, posted a surplus of ¥41.7114 trillion. Overall, the current account surplus reached a record-breaking ¥30.3771 trillion, a 116.1% increase from the previous year.

One major driver behind this surplus was inbound tourism, boosted by the weak yen. Revenue from nearly 39 million foreign visitors (up 134.7% from the previous year) amounted to ¥8.8805 trillion, while expenditures by outbound Japanese travelers were limited to ¥2.194 trillion. This resulted in a travel balance surplus of ¥6.6864 trillion, up 158% from the previous year, significantly reducing the services deficit. This illustrates Japan’s growing reliance on "earning through tourism." The weak yen also bolstered returns on foreign direct investments, expanding the primary income surplus for the fourth consecutive year to ¥41.7114 trillion—further evidence of “Japan earning overseas.”

The current account numbers reflect the structural shifts we’re sensing in the Japanese economy. Yet, there is one concerning trend. In 2020, during the COVID-19 pandemic, we surveyed corporate planning executives from listed companies on their vision for Japan’s post-pandemic economic growth. The most supported future of Japan was that of a “science and technology-oriented nation driven by R&D” and a “cultural, content, and software powerhouse”—in other words, a nation that generates value through intellectual property.

In contrast to this vision, Japan’s income from intellectual property rights stood at ¥7.9495 trillion, with a surplus of ¥3.3739 trillion—both lower than tourism earnings and a decline from the previous year (97.6% of FY2023 levels).　

In March 2024, the Japan Science and Technology Agency (JST) held an emergency symposium warning of the decline in Japan's research capabilities. The discussion began with a fact: while Japan produces many papers, very few are among the top 10% most cited. Low citation rates were found to correlate with weak patent performance, ultimately pointing to a lag in research themes themselves. The symposium concluded that Japan’s excessive reliance on competitive research grants has become problematic, and proposed that Japan should allocate public funds for basic research at a level five times that of competitive funding, similar to leading global universities.

To avoid overdependence on inbound tourism and to build a more self-sustaining future, Japan must urgently reconsider its national approach to investing in fundamental research.

This Week’s Focus, May 4 – May 15
Takashi Mizukoshi, the President