ANALYSIS: Smart Investment Key To Maintaining Current-Account Surplus

TOKYO (Nikkei)--With its current-account surplus falling to a record low 4.7 trillion yen in 2012, generating income overseas from intellectual properties and investment has gained urgency for Japan.

The country fell into a trade deficit in 2011, and the trade balance remained in the red to the tune of 5.8 trillion yen in 2012. The slowing global economy has weighed on Japanese exports, while spending on imported liquified natural gas and other fossil fuels has soared since the Fukushima nuclear disaster nearly two years ago.

While Japan achieved its post-war economic growth by expanding exports, the country is now at a crossroads where it needs to draw up a strategy to become a "mature creditor nation" that maintains a current-account surplus with patent and licensing fees and investment incomes.

Propelled by the strong yen, Japanese firms are expanding overseas, buying up foreign businesses. But their returns on overseas investments will likely come under scrutiny.

According to the Institute for International Trade and Investment, Japan's return on direct foreign investments was a low 6.1%, compared with 10.8% for the U.S., 8.9% for the U.K. and Germany's 6.9%.

The U.K. has remained in a current-account deficit since the 1980s, but its investment balance remains in the black. Japan needs to borrow from the U.K. playbook and make wise overseas investments.

(The Nikkei, Feb. 20 morning edition)

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