{
  "title": "Japan’s Foreign Assets and Liabilities: Implications for the External Accounts",
  "publication": "IMF Working Papers, February 5, 2021",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2021/02/06/japans-foreign-assets-and-liabilities-implications-for-the-external-accounts-50058",
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  "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.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Authors: Mariana Colacelli, Deepali Gautam, Cyril Rebillard\n- Date: February 5, 2021\n- Core summary:\n  - 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.\n  - 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.\n  - 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.\n  - 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."
    },
    {
      "heading": "Key findings and empirical results",
      "content": "- Composition and drivers:\n  - Increasing income balance driven primarily by:\n    - growing net foreign asset (NFA) position\n    - higher corporate saving\n- Cross-country comparison:\n  - Japan exhibits relatively high yields on FDI assets.\n  - Japan exhibits very low FDI liabilities.\n- Exchange rate response:\n  - Separate exchange rate elasticities estimated for income credit and income debit using panel estimation.\n  - Novel accounting approach distinguishes:\n    - the mechanical response to exchange rate fluctuations, and\n    - the economic response to exchange rate fluctuations.\n  - Overall external-account response to exchange rate movements remains dominated by the trade channel.\n  - Income balance contributes a small but reinforcing effect to the response."
    },
    {
      "heading": "Methods and scope",
      "content": "- Empirical approach:\n  - Panel estimation to obtain distinct exchange rate elasticities for income credit and income debit.\n  - Novel accounting decomposition separating mechanical vs economic exchange rate effects.\n- Subjects and keywords covered:\n  - Credit, Current account balance, Income, Real effective exchange rates, Trade balance\n  - Keywords: balance response, Current Account, debit channel, Exchange Rate Elasticity, Income Account, Income Balance, income credit, Japan, NFA, property income, WP\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2021/02/06/japans-foreign-assets-and-liabilities-implications-for-the-external-accounts-50058"
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    "Authors: Mariana Colacelli, Deepali Gautam, Cyril Rebillard",
    "Published: February 5, 2021",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513568270.001",
    "Authors: Mariana Colacelli, Deepali Gautam, Cyril Rebillard",
    "Date: February 5, 2021",
    "Core summary:",
    "Composition and drivers:",
    "Cross-country comparison:",
    "Exchange rate response:",
    "Empirical approach:",
    "Subjects and keywords covered:",
    "**Working Paper**"
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