The current account surplus in 2006 widened 8.7 percent to 19.84 trillion yen from the previous year for the highest reading since 1985, when comparable data became available, the Finance Ministry said Wednesday.

The growth was attributed to the fact that the income surplus more than offset the shrinking trade surplus, which was severely hit by higher crude oil prices, the ministry said in a preliminary report.

The merchandise trade surplus narrowed 8.5 percent to 9.46 trillion yen, for the second straight year of decline.

Exports and imports both hit record highs, but growth in imports exceeded the rise in exports.

Exports climbed 14.3 percent to 71.62 trillion yen on brisk demand for automobiles in the United States, but imports rose 18.9 percent to 62.16 trillion yen on higher crude oil prices during the year.

Imports of crude oil rose 30.7 percent to 2.7 trillion yen.

Income surplus -- the net income from Japanese investment overseas -- rose 20.8 percent to a record 13.75 trillion yen because of increasing interest income and stock dividends.

It was the second straight year for the income surplus to exceed the trade surplus, a government official said, reflecting that Japan's economy is relying more on earnings from overseas investments than on exports, which has long been considered a key driver of Japanese economic expansion.

Many economists also anticipate the income account surplus to continue to be the driving force behind the current account surplus.

The current account surplus in December contracted 5.0 percent to 1.78 trillion yen from the previous year, after Japanese companies earned robust profits and paid dividends abroad thanks to the nation's longest postwar economic expansion. It was the first fall in six months.

The December income surplus shrank 9 percent to 845 billion yen, for the second straight month of decline.

The merchandise trade surplus, however, rose 15.2 percent to 1.22 trillion yen.

Information from Kyodo added