By Tetsushi Kajimoto

TOKYO, (Reuters) – Japan’s largest current account deficit in 2014 was recorded in January. A jump in oil import prices offset gains in investment income. There is also uncertainty from the ongoing Ukraine crisis and the COVID-19 pandemic.

According to the current account data, Japan’s dependence on foreign imports of raw materials and commodities has led to an increase in trade deficit.

Japan is the third largest economy in the world. In January it posted a current account deficit at 1.1887 trillion yen (or 10.31 billion dollars). This compares to the 880 billion yen economists had estimated in a Reuters poll.

The deficit was second in a row and it was also the largest since 1985.

In January, the price of fuel rose by 39.9% compared to a year ago. This was in addition to a 15.2% increase in exports.

Japan’s trade gap with China also widened in January. China’s exports to China slowed prior the Lunar New Year holiday, while China imports surged because of stocking demand.

Takashi Miwa chief economist at Nomura Securities said, “Given such an inexorable factor and a substantial investment income surplus,” that Japan’s imbalance of payments will likely swing toward deficit, but not soon.”

Japan has a steady, hefty income from past investments in overseas securities and direct investment. These have taken over trade in the last few years as its main source of current account surplus.

An analyst says that although a weaker yen did help inflate the import cost, it didn’t have the same impact on export volumes as before. This was because of an ongoing shift in production by foreign exporters.

The trade deficit was offset by a steady increase in the returns of Japanese portfolio and direct investment abroad. This led to Japan’s surplus in primary income at 1.289 trillion Japanese yen in January.

Also, the data showed a decline in international tourist arrivals. This reduced the travel account surplus to just 12.3 million yen. According to data, there was a deficit of 737.9 trillion yen in services.

($1 = 115.3300 yen)