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Recent Issues in Capital Flows-- Trends in Capital Inflows to Japan & Asia and Challenges Ahead --

July 8, 2020
Financial Markets Department

While international capital transactions can improve economic welfare through the efficient allocation of resources across borders, they can also lead to the destabilization of an economy due to sudden reversals of capital flows. Nevertheless, empirical analyses have shown mixed results depending on the countries and transactions on which the analyses have focused, which highlights that there are different effects depending on the type and contents of the capital transaction. This report introduces recent issues in capital flows and summarizes developments in capital inflows to Asia including Japan. From that perspective, in the medium to long term, Japan will continue to face the challenges in attracting inward FDI and maximizing spillover effects for economic growth, while emerging Asian nations need to develop domestic financial markets and manage the impact of excessive volatility of inward portfolio investments.


Bank of Japan Review is published by the Bank of Japan to explain recent economic and financial topics for a wide range of readers. This report, 2020-E-4, is a translation of the original Japanese version, 2020-J-6, published in July 2020.

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