Japan’s Foreign Assets and Liabilities: Implications for the External Accounts

By Mariana Colacelli, Deepali Gautam, Cyril Rebillard

February 5, 2021

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Mariana Colacelli, Deepali Gautam, and Cyril Rebillard. Japan’s Foreign Assets and Liabilities: Implications for the External Accounts, (USA: International Monetary Fund, 2021) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The composition of Japan’s current account balance has changed over time, with an increasing income balance primarily reflecting a growing net foreign asset position and higher corporate saving. A comparison of Japan’s income balance with peer countries highlights: (i) relatively high yields on FDI assets, and (ii) very low FDI liabilities in Japan. Panel estimation is used to derive separate exchange rate elasticities for income credit and debit, with novel accounting that disentangles the mechanical from the economic response to exchange rate fluctuations. Despite the changing composition of Japan’s current account balance, its response to exchange rate movements still operates mostly through the traditional trade channel, with a small but reinforcing contribution from the income balance.

Subject: Credit, Current account balance, Income, Real effective exchange rates, Trade balance

Keywords: Balance response, Current Account, Debit channel, Exchange Rate Elasticity, Income Account, Income Balance, Income credit, Japan, NFA, Property income, WP

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/026
Stock No:

WPIEA2021026
ISBN:

9781513568270
ISSN:

1018-5941

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