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

41 Pages Posted: 9 Mar 2021

See all articles by Mariana Colacelli

Mariana Colacelli

International Monetary Fund (IMF)

Deepali Gautam

International Monetary Fund (IMF)

Cyril Rebillard

International Monetary Fund (IMF)

Date Written: February 1, 2021

Abstract

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.

JEL Classification: E21, F21, F32, F36, F41, G15, O16, E25, F14, E50, F31

Suggested Citation

Colacelli, Mariana and Gautam, Deepali and Rebillard, Cyril, Japan's Foreign Assets and Liabilities: Implications for the External Accounts (February 1, 2021). Available at SSRN: https://ssrn.com/abstract=3799618 or http://dx.doi.org/10.2139/ssrn.3799618

Mariana Colacelli (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Deepali Gautam

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Cyril Rebillard

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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