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.
Why an ageing population doesn’t mean soaring inflation
What’s the future for inflation? Joachim Nagel, the new president of Germany's central bank, believes the rapidly ageing global population will play a key role – ramping up pressure on prices in the medium term. While we agree slowing labour supply will stifle output growth, in his recent discussion Nagel failed to fully consider the demand side of the argument.Find Out More
Surging global food prices could drive eurozone core inflation higher
Along with energy prices, global food prices have emerged as a key driver of the eurozone's current inflationary surge. Like other advanced economies, eurozone countries tend to be less exposed to global food price fluctuations. But if persistent and combined with strong demand, high food prices could result in a higher pass-through to core inflation.Find Out More