Japan's Balance of Payments for 1999
May 31, 2000
Bank of Japan
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Summary
A. Overall Trends 1
In the balance of payments for 1999, the current account surplus registered 12.2 trillion yen, while the capital and financial account showed a net outflow of 5.6 trillion yen, down sharply from a net outflow of 17.3 trillion yen in 1998 which primarily reflected movements in the financial account. The net increase in reserve assets marked 8.8 trillion yen, the largest expansion ever.
B. The Current Account
The current account surplus declined for the first time since 1996, falling 22.7 percent from the previous year. This was largely due to the substantial decrease in the surpluses of the trade balance and the income balance.
The value of exports slipped 6.3 percent from the previous year, reflecting the yen's appreciation. Exports to Asia, however, rebounded and increased slightly due to the growth in exports of capital goods and parts related to electronics and information technology (IT).
The value of imports also declined by 3.5 percent year on year. However, the volume of imports, in particular those from Asia, surged 9.6 percent from the previous year. This reflected (1) higher domestic production and sales of IT-related products, and (2) a greater penetration of imported goods in the domestic markets facilitated by Japanese manufacturers' shifting of production bases overseas.
The income surplus shrank for the first time since 1994. This was partly due to (1) the decrease in the surplus in direct investment income prompted by the worsening profits of the overseas subsidiaries and branches of Japanese corporations, and (2) the narrowed surplus in portfolio investment income resulting from erosion of income value by the yen's appreciation, as well as the deficit registered in interest rate swaps.
C. The Capital and Financial Account
Investment in Japanese equities by nonresidents registered net purchases of 11.4 trillion yen, while inward direct investment by foreign corporations showed a net inflow of 1.4 trillion yen, both marking a record high. The former was buoyed by such favorable factors as expectations of economic recovery in Japan, as well as rising stock prices in the United States and Europe. The boost in inward direct investment reflected the global industrial reorganization.
Other investment recorded a net inflow of 2.8 trillion yen; this compares with a 7.0 trillion yen outflow registered in 1998. The inflow mainly reflected repayment of funds that had been lent to Japanese banks' overseas branches through interoffice accounts. The funds were transferred to Japanese banks' domestic offices against the background of banks' efforts to reduce their overseas assets and improvements in overseas branches' foreign-currency funding conditions.
1 Figures in this article are preliminary.
