Japan has piled up record trade deficits month after month, thanks to Abenomics.

The Yen is down about 26% from the 2011 high, but contrary to expectations, the Yen decline did not sufficiently boost exports. However, the value of imports soared, primarily due to rising energy costs.

The saving grace is that although Japan had a trade deficit, investment gains more than offset the difference.

That’s about to change. The Wall Street Journal reports Japan Current Account Surplus Smallest on Record.

Japan posted its smallest current account surplus on record in the fiscal year that ended in March as structural changes in the economy undermine Prime Minister Shinzo Abe’s efforts to achieve growth through exports.

The ¥789.9 billion ($7.76 billion) surplus in the broadest measure of a nation’s trade with the rest of the world was sharply lower than the ¥4.2 trillion surplus registered a year earlier, data from the Ministry of Finance showed Monday. Until recently, the country routinely produced a surplus in excess of ¥10 trillion a year.

When Mr. Abe came to power 17 months ago, he introduced an inflation target and called for aggressive monetary easing. That helped weaken the yen’s export-crippling strength. But to his surprise, exports have yet to catch fire. So far the weaker yen has merely made imports more expensive at a time when the nation is more reliant on fossil fuel from other countries.

A current account deficit means a nation is spending more than it earns from trade and investment. A country that builds up liabilities with foreign creditors through chronic current account deficits could face funding problems if investors decide to withdraw their financing.

BNP Paribas predicts Japan will record an annual current account deficit next year, while Credit Suisse thinks it will happen after 2017.

Having largely giving up on achieving a balanced budget, Japan’s current goal is to stabilize the debt situation by 2020, mainly through sales tax increases, around the current debt-to-gross domestic product ratio of 240%. But according to a government panel report released on April 28, even that won’t be enough to bring the situation completely under control beyond 2020, as baby boomers reach 75, an age associated with a huge increase in medical and elderly care expenses, much of which are funded by the central government.

Mike “Mish” Shedlock