Recent Balance of Payments Developments in Japan: Is the Current Account Surplus Structural or Temporary?

Abstract

Reflecting the synergistic effects of trade volume adjustment occasioned by the yen’s appreciation, domestic demand expansion and structural change in Japan’s economy, Japan’s current account surplus steadily contracted to $35.8 billion in 1990 after peaking in 1987. However, the surplus has rapidly increased again since 1991 and it reached a new peak of $117.6 billion in 1992 (3.3 per cent in terms of percentage of GNP). Such a recent surge in Japan’s current account surplus is provoking a serious problem. For Japan, one solution may be the recovery of domestic demand. Also, the effort to eliminate trade barriers in order to help to draw more imports must and will continue.

An earlier version of this chapter was presented as a paper at the First Conference on the Contemporary Japanese Economy on 25–26 March 1993 at Macquarie University, Sydney. Views expressed herein are of the authors and not necessarily those of the Bank of Japan.