JAPAN’S current account surplus shrank sharply to a 15-year low last year, and while foreign investments are covering a declining trade position for now, there are growing questions over how long Tokyo will be able to fund its huge public debt domestically.

The current account balance, a broad measure of trade and other flows, logged a surplus of 9.6289 trillion yen (US$125 billion) last year, down 44 percent from the previous year, its biggest fall on record.

The decline was heralded by data last month that showed Japan posted its first trade deficit since 1980 last year, after a devastating earthquake last March hurt exports and increased its reliance on fuel imports due to nuclear plant shutdowns.

But Tokyo’s massive foreign investments delivered a hefty 14 trillion yen in income last month, producing an external surplus equal to about 2 percent of nominal GDP.

“It is hard to consider that Japan will become a deficit country in the current account in the medium term,” said Tatsushi Shikano, a senior economist at Mitsubishi UFJ Morgan Stanley Securities in Japan.

“But there is a risk if the yen sharply appreciates and the nation loses global competitiveness, the timing to become a deficit country may come sooner than expected.”

In December, the current account surplus tumbled 75 percent from a year earlier, a 10th straight monthly fall that roughly matched the median market forecast, Japan’s Ministry of Finance said.

A rapidly aging population, the yen’s strength hitting on exports, and rising fuel imports as only three of the country’s 54 nuclear reactors are in operation point to pressures on trade accounts and a diminishing external surplus.(SD-Agencies)

The income from Japan’s huge investments abroad means few see an immediate risk of a current account deficit, but the shifting trade position means some think it could happen later this decade.

“There could be a current account deficit by 2015 if the oil price keeps rising toward US$150 per barrel, with a slightly higher yen level,” said Nomura Securities analysts Yujiro Goto and Jens Nordvig in a research report.

The December surplus stood at 303.5 billion yen, against a median forecast for 336.9 billion yen.