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External Adjustments under Increasing Integration: Japanese Perspective

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  • Eiji Ogawa

    () (Graduate School of Commerce and Management, Hitotsubashi University)

  • Kentaro Iwatsubo

    () (Graduate School of Economics, Kobe University)

Abstract

This paper is to investigate how much realignment of currencies is needed for adjustments to the current account imbalances of Japan compared with those of East Asia as a whole, given the productions networks in East Asia. The analyses show that the large realignments of the Japanese yen and other East Asian currencies would be needed if the adjustments are completed with only exchange rates. We also find that the degree of the exchange rate adjustments of East Asia as a whole is smaller than that of Japan only. Moreover, we investigate why the adjustment becomes more difficult if we rely only on the exchange rates in Japan. We find that Japanese outward FDI has increased independently with the exchange rate and that a ratio of income account to current account has increased due to the FDI. The findings imply that the Japanese economy has an increasing structural part of the Japanese current account which does not respond to the exchange rate movement.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Eiji Ogawa & Kentaro Iwatsubo, 2009. "External Adjustments under Increasing Integration: Japanese Perspective," Discussion Papers 0830, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:0830
    as

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    File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2008/0830.pdf
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    References listed on IDEAS

    as
    1. Ahmed, Shaghil & Rogers, John H., 1995. "Government budget deficits and trade deficits Are present value constraints satisfied in long-term data?," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 351-374, November.
    2. Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange Rate Pass-Through into Import Prices: A Macro or Micro Phenomenon?," NBER Working Papers 8934, National Bureau of Economic Research, Inc.
    3. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November.
    4. Ogawa, Eiji & Kudo, Takeshi, 2007. "Asymmetric responses of East Asian currencies to the US dollar depreciation for reducing the US current account deficits," Journal of Asian Economics, Elsevier, vol. 18(1), pages 175-194, February.
    5. Matsubayashi, Yoichi, 2006. "Structural and cyclical movements of the current account in Japan: An alternative measure," Japan and the World Economy, Elsevier, vol. 18(4), pages 545-567, December.
    6. Craig R. Parsons & Kiyotaka Sato, 2006. "Exchange Rate Pass-through and Currency Invoicing: Implications for Monetary Integration in East Asia," The World Economy, Wiley Blackwell, vol. 29(12), pages 1759-1788, December.
    7. Catherine L. Mann, 2002. "Perspectives on the U.S. Current Account Deficit and Sustainability," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 131-152, Summer.
    8. Matsubayashi, Yoichi, 2005. "Are US current account deficits unsustainable?: Testing for the private and government intertemporal budget constraints," Japan and the World Economy, Elsevier, vol. 17(2), pages 223-237, April.
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