The Finance Ministry said in a preliminary report that the surplus in the current account, a wide gauge of international trade, logged a year-on-year decrease of 12.4 percent in the fiscal year that ended in March.
The largest reason behind the drop in Japan's current account lies in the country's tumbling goods trade surplus which stood at 706.8 billion yen, down 84.4 percent due to slower growth in exports, according to the report.
The drop in the current account surplus was also the result of higher oil prices.
In March alone, the current account surplus stood at 2.85 trillion yen, according to the Finance Ministry.
The world economic situation affected Japan's exports, which was reflected in the latest 10-percent drop in the current account surplus in March compared to a year earlier.
Reflecting returns made on investments abroad, the primary income booked a surplus of 2.06 trillion yen, the ministry also said in its report.
In the last fiscal year, exports amounted to 80.32 trillion yen, up 2.6 percent. However, the increase was down from 10.6 percent the previous year.
Imports grew by 8.0 percent to reach 79.61 trillion yen, due to a rise in prices of commodities including crude oil and liquefied natural gas.
The primary income account grew 3.9 percent from the previous year, logging a surplus of 21.07 trillion yen.
Among other key components, the travel surplus increased 23.3 percent compared to a year earlier to reach 2.49 trillion yen as the number of foreign travelers to Japan hit a record 31.63 million in fiscal 2018.
Japan's current account surplus is one of the broadest measure of its trade with the rest of the world.
The data is keenly eyed by the Bank of Japan (BOJ) and the Finance Ministry ahead of new potential policy changes or monetary easing or tapering measures.
In Japan, the current account surplus increases the nation's net foreign assets by the corresponding amount, and a current account deficit does the opposite.
Both the Japanese government's and private payments are included in the calculation and it is called the current account because goods and services are generally consumed in the current period. (1 U.S. dollar equals 109.7 Japanese yen)