Research Briefing | Nov 30, 2021

Japan transforming from a goods to a capital exporter

Japan: Transforming from a goods to a capital exporter

Japan has been a country with a persistent current account surplus since the 1980s. By breaking down the current account balance, though, we can see that primary income – mostly consisting of income from foreign investments – replaced the goods trade as the main source of the surplus in the mid-2000s. In this sense, we can argue that Japan today has become an exporter of capital, rather than a goods exporter.

What you will learn:

  • Japan’s primary income-led current account surplus is unique among major economies, according to our analysis. For most countries, the current account surplus/deficit is usually driven by the goods trade balance.
  • Net-positive primary income is generated by both Japan’s portfolio investments and direct investments. With the importance of the latter increasing, reinforced by a surge in assets and a higher rate of return, we see primary income continuing to sustain Japan’s current account surplus.
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