Corporate saving sustains Japan's external surplus, Ueda says
Bank of Japan (BoJ) Governor Kazuo Ueda attributes Japan's persistent current account surplus to corporate saving and overseas investment. At the International Monetary Fund's Michel Camdessus lecture in Washington, he linked that pattern to prolonged post-bubble balance sheet repair.
From exports to overseas earnings
Japan's current account surplus generally ranged from 2 to 4 percent of GDP for roughly four decades, Ueda said.
The goods surplus peaked above 4 percent in the mid-1980s before becoming a deficit; primary income now exceeds 6 percent.
Britain's foreign investment income approached 8 percent of national income around 1900.
Japan's post-bubble firms cut investment and repaid debt, becoming net savers in the late 1990s.
Their saving offset declining household saving and fiscal deficits.
Domestic investment and borrowing recovered around 2011-2012, but saving stayed high.
Since 2012, outward direct investment has surpassed portfolio outflows.
Its returns exceeded 8 percent for much of the post-adjustment period; reinvested foreign earnings count as income and fresh investment.
Labor scarcity brings investment home
Ueda challenged explanations based solely on labor scarcity: the output gap was almost continuously negative in 1993-2012, with unemployment averaging well above 3 percent.
Aging instead weakened domestic demand expectations.
The BoJ's 2024 survey found over 70 percent of firms invested more actively at home in 2023-2024, chiefly to address labor shortages.
Fixed investment now exceeds its early-1990s peak.
Recent bank lending growth exceeds 5 percent, its fastest in three decades apart from government-supported lending in 2020.
Trade no longer tells all
Ueda's account places corporate investment incentives at the center of external adjustment.
He said household dissaving and stronger domestic investment could narrow the saving-investment gap.
But Japan's large foreign asset stock and higher overseas returns mean primary income remains an enduring source of its surplus.