The current account surplus shrank 19.5 percent in May from a year earlier to 1.38 trillion, yen the Finance Ministry said Wednesday.
Soaring imports caused by higher oil prices led to a sharp fall in the trade surplus, the ministry said.
The current account balance -- the broadest gauge of trade in goods and services -- is the difference between a nation's income from foreign sources and foreign obligations payable, excluding net capital investment.
The surplus in trade in goods and services plunged 66.2 percent to 295.8 billion, yen pulled down by a 57.4 percent decline in the surplus in merchandise trade, a preliminary report by the ministry shows.
The surplus in merchandise trade fell for the seventh straight month to 474.3 billion yen as the pace of growth in imports outpaced that in exports.
Exports edged up 1.7 percent to 4.58 trillion, yen rising for the 18th month in a row, on firm exports of steel, motors and vessels.
Imports soared 21.2 percent to 4.10 trillion, yen climbing for the 15th month, supported by jumps in prices of crude oil and petroleum products.
The deficit in services trade decreased 25.2 percent from a year earlier to 178.5 billion, yen for the fourth straight monthly decline.
"The decrease in the deficit was partly attributable to the fact that the number of Japanese travelers to China was not as large as expected in May, despite the Golden Week holidays, affected by massive anti-Japanese rallies in the country" in April, a ministry official said.