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

Japan’s Foreign Assets and Liabilities: Implications for the External Accounts
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Volume/Issue: Volume 2021 Issue 026
Publication date: February 2021
ISBN: 9781513568270
$18.00
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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Exports and Imports , Economics- Macroeconomics , Money and Monetary Policy , NFA , Japan , Current Account , Income Account , Income Balance , Exchange Rate Elasticity , WP , income credit , balance response , debit channel , property income

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.