By Tetsushi Kajimoto

TOKYO (Reuters) – Japan recorded its largest current account deficit since the start of 2014 in January as a jump in oil import costs offset gains in investment incomes, with continuing uncertainty due to the Ukraine crisis and COVID-19 pandemic.

The current account data highlighted the dependence of Japan’s resource-deficient economy on imports of commodities and raw materials, which caused trade deficit to widen amid slowing demand from its largest trading partner China.

Japan, the world’s No. 3 economy, posted a current account deficit of 1.1887 trillion yen ($10.31 billion) in January, the data showed, versus economists’ median estimate of a 880 billion yen deficit in a Reuters poll.

It was the second straight month of deficit after slowing demand from China before the Lunar New Year holidays put a drag on Japan’s recovery from COVID-19-induced doldrums. It also marked the second largest deficit under comparable data going back to 1985.

Surging fuel costs drove up the value of imports by 39.9% in January from a year earlier, outpacing a 15.2% rise in exports.

A weak yen also inflated the cost of imports, helping to lead to a trade deficit.

While the weak currency helped increase yen-denominated profits from overseas, the boost to export volumes was not as great as previously due to an ongoing shift of exporters’ production abroad, analysts say.

Underscoring changes in Japan’s economic structure, a steady rise in returns from Japanese direct and portfolio investment overseas helped offset the trade deficit, bringing Japan’s primary income surplus to 1.289 trillion yen in January.

Adding to the decline in Japan’s purchasing power, the data also showed sharp declines in foreign tourist arrivals, reducing the travel account to a surplus of just 12.3 billion yen. The services deficit came to 737.9 billion yen, the data showed.

($1 = 115.3300 yen)