Summary

  • BOJ Governor Kazuo Ueda said Japan’s large current-account surplus is unlikely to shrink easily through exchange-rate and trade policies.
  • He said Japan’s current-account surplus persists because income from Japanese companies’ overseas investments continues to flow in.
  • Ueda said the large income generated by Japan’s vast overseas assets makes it difficult to correct the current-account surplus structure even through increased investment in the US.

Forecast Trend Report by Period

Bank of Japan Governor Kazuo Ueda said publicly that Japan’s large current-account surplus is unlikely to shrink easily through “external adjustment” measures such as exchange-rate and trade policies.

Speaking at the Michel Camdessus Central Banking Lecture at the International Monetary Fund headquarters in Washington, D.C., on November 6, Ueda explained the reasons behind Japan’s current-account surplus. Last year’s speaker was former Bank of Korea Governor Rhee Chang-yong.

Ueda said a series of measures pursued since the 1980s to reduce Japan’s trade surplus with the US appeared to work for a time, but ultimately failed. Exchange-rate and trade policies did not change the underlying trend.

He said the persistence of the current-account surplus stemmed from Japanese companies’ overseas investments. “After the bubble burst, Japanese companies have remained large net savers, and income generated from assets Japan has invested abroad has continued to flow in,” Ueda said.

Ueda also said the recent increase in automation investment driven by Japan’s aging population would help narrow the gap between savings and investment at home, but that a major shift in the current account would be difficult. That is because income from Japan’s vast overseas assets remains large. While Ueda did not specifically mention recent US pressure on Japan to expand investment in America during the lecture, his remarks were interpreted as underscoring how difficult it would be to correct Japan’s current-account surplus structure even through greater investment in the US.

Washington — Lee Sang-eun, correspondent, Hankyung.com [email protected]

Korea Economic Daily