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QuestionWhat is the balance of payments?
The balance of payments (BOP) is a statistical statement that systematically captures and summarizes various transactions between one economy and the rest of the world -- such as those of goods, services, and securities -- and the flow of settlement funds associated with these transactions. 1 In other words, the BOP statistics can be considered as an account book of a country, in that international transactions, including exports and imports of goods as well as receipts and payments of funds, are recorded.
The BOP statistics are compiled in accordance with some institutional frameworks. First, under the agreement with the International Monetary Fund (IMF) (Link to an external website), member countries are required to provide information on their BOP statistics. 2 Second, in view of ensuring the quality of statistics requested by the IMF, each member country has a legally binding reporting system. In Japan, the Foreign Exchange and Foreign Trade Act stipulates that the Minister of Finance compile statistics and report them to the Cabinet on a regular basis. Entrusted by the Minister of Finance, the Bank aggregates various data submitted by firms and individuals, and compiles the BOP statistics.
- As for statistics related to the BOP, the Bank also compiles and releases statistics regarding positions data, such as the international investment position (IIP), which records the value and composition of external financial assets and liabilities.
- The provisions of Article 8 of the Articles of Agreement of the IMF set out the general obligations of member countries. One of the obligations requires members to provide information the IMF deems necessary for its activities, including (1) the BOP statistics, (2) official reserve assets, (3) national income, and (4) foreign exchange rates.