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Will Japan's Current Account Turn to Deficit?

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Author Info

  • F. Gerard Adams
  • Byron Gangnes

    () (Department of Economics, University of Hawaii at Manoa)

Abstract

The Japanese current account has been in surplus since 1981, ranging from 1% to more than 4% of GDP. In this paper, we review the macroeconomic forces that have driven the surplus and describe likely changes in the first part of the next century. In coming years, structural change in Japan's economy-population aging, the globalization of production, and financial market reforms-will alter the underlying determinants of the surplus. While the net effect of these forces is difficult to predict, the most likely outcome is a gradual closing of the current account gap. We use large-model simulation analysis to evaluate the potential for specific developments to alter the current account, and we assess their likely impact on the Japanese economy.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/010.pdf
File Function: First version, 2000
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Bibliographic Info

Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200010.

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Length: 35 pages
Date of creation: 2000
Date of revision:
Publication status: Published in Magnus Blomström, Byron Gangnes and Sumner La Croix, eds., Japan’s New Economy: Continuity and Change in the 21st Century, Oxford University Press, 2000.
Handle: RePEc:hai:wpaper:200010

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Keywords: Japanese current account; forecast;

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References

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  1. Paul R. Masson & Ralph W. Tryon, 1990. "Macroeconomic Effects Of Projected Population Aging In Industrial Countries," IMF Working Papers 90/5, International Monetary Fund.
  2. Razin, A., 1993. "The Dynamic-Optimizing Approach to the Current Account: Theory and Evidence," Papers 2-93, Tel Aviv - the Sackler Institute of Economic Studies.
  3. Paul R. Krugman, 1998. "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 137-206.
  4. Kouri, Pentti J K, 1976. " The Exchange Rate and the Balance of Payments in the Short Run and in the Long Run: A Monetary Approach," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 280-304.
  5. Horioka, Charles Yuji, 1995. "Is Japan's Household Saving Rate Really High?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 41(4), pages 373-97, December.
  6. Steven A. Symansky & Peter S. Heller, 1997. "Implications for Savings of Aging in the Asian 'Tigers'," IMF Working Papers 97/136, International Monetary Fund.
  7. Byron Gangnes & F. Gerard Adams, 1994. "Japan's Persistent Trade Surplus: Policies for Adjustment," Working Papers 199404, University of Hawaii at Manoa, Department of Economics.
  8. Alan J. Auerbach & Laurence J. Kotlikoff & Robert P. Hagemann & Giuseppe Nicoletti, 1989. "The Economic Dynamics of an Ageing Population: The Case of Four OECD Countries," OECD Economics Department Working Papers 62, OECD Publishing.
  9. Obstfeld, Maurice, 1981. "Macroeconomic Policy, Exchange-Rate Dynamics, and Optimal Asset Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1142-61, December.
  10. Maddison, A., 1991. "A Long Run Perspective on Saving," Papers 443, Groningen State, Institute of Economic Research-.
  11. F. Gerard Adams & Peter A. Prazmowski, 2003. "Why are saving rates in East Asia so high? Reviving the life cycle hypothesis," Empirical Economics, Springer, vol. 28(2), pages 275-289, 04.
  12. Takatoshi Ito & Michael Melvin, . "The Political Economy of Japan's Big Bang," Working Papers 2132866, Department of Economics, W. P. Carey School of Business, Arizona State University.
  13. Taniuchi, Mitsuru, 1997. "Recent developments in Japan's financial sector: Bad loans and financial deregulation," Journal of Asian Economics, Elsevier, vol. 8(2), pages 225-244.
  14. Matthew Higgins & Jeffrey G. Williamson, 1996. "Asian Demography and Foreign Capital Dependence," NBER Working Papers 5560, National Bureau of Economic Research, Inc.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Why New Zealand’s current account deficit will begin to fall
    by Matt Nolan in TVHE on 2009-01-13 02:00:41

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