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Explanation of "Balance of Payments Related Statistics (Data Based on the BPM6)"

June 2021
Bank of Japan
International Department

Basic Information

Compilation section:
Balance of Payments Division, International Department, Bank of Japan

The balance of payments (BOP) related statistics are compiled by the Bank, which is entrusted by the Minister of Finance under the Foreign Exchange and Foreign Trade Act (referred to as the "Foreign Exchange Act" hereafter).

Method of release: Bank of Japan website

The BOP related statistics are jointly released by the Bank and the Ministry of Finance (MOF). For a list of the statistics as well as information on access to data and the release schedule, see the Balance of Payments Related Statistics page.

Contents

I. Definition

The Balance of Payments (BOP) is a statistical statement that systematically summarizes Japan's economic transactions with the rest of the world during a period. Transactions between residents and nonresidents are recorded under the following accounts according to their nature: (1) the current account for transactions in goods, services, and income, as well as current transfers; (2) the financial account for transactions involving increases/decreases in external financial assets and liabilities; and (3) the capital account for transactions in nonproduced nonfinancial assets and capital transfers.

The main source data are reports submitted under the Foreign Exchange Act, including reports on payments and receipts (referred to as payment reports hereafter).

II. Methodologies

A. Accounting Principles

Japan's BOP statistics are compiled in accordance with the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) published by the International Monetary Fund (IMF) in 2008. The IMF requires member countries to provide information on their BOP statistics under the provisions of Article 8, Section 5 of the Articles of Agreement of the International Monetary Fund.BPM6 establishes the standard international rules for the compilation of BOP statistics and provides guidelines on the reporting format to the IMF.

The major accounting principles are described below.

1. Residence

The concept of residence does not reflect nationality or legal criteria, but is based on a transactor's center of predominant economic interest. That is,BPM6 treats an institutional unit as resident in an economic territory when there exists, within the territory, some location on which or from which the unit engages in economic activities on a significant scale over a long period of time. With regard to the location, in principle, the "actual or intended location for one year or more" is used as an operational definition.

Japan's BOP statistics are compiled primarily by employing source data derived from reports submitted under the Foreign Exchange Act. The Foreign Exchange Act provides definitions of a resident and a nonresident, and the "notification of the Ministry of Finance regarding the interpretation and application of the Foreign Exchange Act and ordinances" further establishes residency criteria (see table below).

notification of the Ministry of Finance regarding the interpretation and application of the Foreign Exchange Act and ordinances
  Definitions under the Foreign Exchange Act Residency criteria established in the MOF notification (examples)
Resident
  • A natural person having his/her domicile or residence in Japan
  • A juridical person having its principal office in Japan
    -- Branch offices or other offices in Japan of a nonresident are deemed to be resident
For persons:
  • A Japanese national, in principle
  • A foreign national working at an office in Japan or staying in Japan for six months or more
For juridical persons and other entities:
  • A branch office or other office in Japan of a foreign juridical person or other entity
  • A Japanese embassy or consulate overseas
Nonresident
  • A natural person or a juridical person other than a resident
For persons:
  • A foreign national, in principle
  • A Japanese national working at an office abroad, staying abroad for two years or more, or having left Japan with the intention to stay abroad for two years or more
For juridical persons and other entities:
  • A branch office or other office abroad of a Japanese juridical person or other entity
  • A foreign embassy or consulate in Japan, an international organization, the United States Forces Japan

2. Double-entry system

The BOP statistics are compiled applying the double-entry system, in which each transaction is recorded as consisting of two entries, a credit entry and a debit entry, of equal value. In principle, the sum of all credit entries equals the sum of all debit entries.

Exports of goods and services, receipts of income, decreases in assets, and increases in liabilities are recorded as credits, while imports of goods and services, payments of income, increases in assets, and decreases in liabilities are recorded as debits. For example, when a resident sells goods to a nonresident in return for cash, the exports are recorded as credit and the increase in cash (financial assets) is recorded as debit.

3. Valuation

In principle, a transaction is valued at its transaction price.

4. Time of recording

In principle, a transaction is recorded using the accrual basis.

5. Currency conversion

Japan's BOP statistics are compiled and disseminated in yen terms. Foreign-currency denominated transactions are, in principle, converted into yen at the prevailing foreign exchange market rate. The exchange rates used for conversion are either of the following.

a. When a reporter reports a foreign-currency denominated transaction in yen terms

When a reporter reports a foreign-currency denominated transaction in yen terms, the exchange rate used for conversion is stipulated under Article 35 of the "ministerial ordinance concerning reporting of foreign exchange transactions, etc." Specifically, depending on the type of transaction, the transaction is to be converted (1) at the exchange rate prevailing on the day of the transaction, action, or payment to be reported, or the last day of that month, or (2) at the exchange rate posted by the Bank as stipulated by the Minister of Finance (ministerial ordinance rate).

b. When the Bank converts a transaction denominated in a foreign currency into yen in compiling the statistics

When the Bank converts a transaction denominated in a foreign currency into yen, the exchange rate used for conversion is the exchange rate prevailing in the corresponding month.

B. Components

The components of Japan's BOP statistics are based onBPM6. That is to say, while the "standard components" inBPM6 provide the basis for Japan's BOP statistics, various additions are made to facilitate analysis and research. For example, net values (balances) are provided for the main components, and some components are broken down into more detailed items. For details of the items released, see Components and Structure on the Balance of Payments Related Statistics page.

1. Structure of Japan's BOP statistics (overview)

  1. Current account
    • 1.A Goods and services
      • 1.A.a Goods
      • 1.A.b Services
    • 1.B Primary income
    • 1.C Secondary income
  2. Capital account
  3. Financial account
    • 3.A Direct investment
    • 3.B Portfolio investment
    • 3.C Financial derivatives (other than reserves)
    • 3.D Other investment
    • 3.E Reserve assets

2. Methodologies by item

See Japan's Balance of Payments Statistics: Overview of Methodologies by Item [PDF 411KB].

C. Breakdown by Partner Economy

The BOP data broken down by the economy of the counterparty (partner economy) are disseminated as the Regional BOP. In principle, data by partner economy are broken down as follows:

Regional Breakdown
  Exports/credits Imports/debits
Current account Goods Economy of final destination Economy of origin
Services
Primary income
Secondary income
Economy of the transactor Economy of the transactor
Capital account
Regional Breakdown
  Assets Liabilities
Financial account Direct investment
Financial derivatives (other than reserves)
Other investment
Economy of the debtor Economy of the creditor
Portfolio investment Economy of the transactor

For the list of partner economies and regional classification, see the Balance of Payments Related Statistics page.

D. Seasonal Adjustment

For major current account items, seasonally adjusted data and the seasonal adjustment factors using the U.S. Census Bureau's X-12-ARIMA method are disseminated. For details, see Notices of Changes on the Balance of Payments Related Statistics page posted when seasonally adjusted data are revised.

III. Other Related Statistics

A. International Transactions in Securities (based on reports from designated major investors)

The International Transactions in Securities (based on reports from designated major investors) are statistics on cross-border transactions in securities that are compiled with an emphasis on timeliness and cover only major financial institutions designated by the Minister of Finance in advance. Weekly and monthly figures are disseminated by the MOF. For both portfolio investment assets and liabilities, figures for acquisitions, dispositions, and net acquisitions are disseminated by instrument: equity and investment fund shares, long-term debt securities, and short-term debt securities.

B. International Investment Position of Japan (IIP)

The IIP is a statistical statement that shows at a point in time the value and composition of financial assets of residents that are claims on nonresidents (external assets) and liabilities of residents to nonresidents (external liabilities). The IIP is compiled in accordance with BPM6. The IIP is divided into assets and liabilities and the difference between them is the net position. Items are classified following the same principles as the financial account of the BOP and are divided into the following functional categories for both the asset and liability side: direct investment, portfolio investment, financial derivatives (other than reserves), and other investment; furthermore, for the asset side they also contain reserve assets.

1. Valuation methods and source data

BPM6 indicates that positions of shares and other equity, debt securities, and financial derivatives should be recorded at market or market-equivalent value and positions of loans, deposits, and trade credit and advances should be recorded at nominal value (that is, the outstanding amount which the debtor owes to the creditor). The source data and valuation methods for the IIP are as follows. Note that positions at quarter-end are in principle estimated by reflecting flows as well as fluctuations in exchange rates and other market prices since the end of the previous quarter.

For direct investment, the enterprise's own funds at book value, that is, the values recorded in the books of the direct investment enterprise (DIE), are employed for the valuation of "equity other than reinvestment of earnings" and "reinvestment of earnings," regardless of whether the DIE is listed or unlisted. The source data are reports on investment positions submitted by companies and the payment reports. For reference, market value estimates of the direct investment position (for which the book values of major listed enterprises are replaced by their market values, which are estimated based on their market capitalization using stock market prices) are compiled and disseminated.

Items under portfolio investment and financial derivatives (other than reserves) are in principle recorded at their current value (that is, the market or market-equivalent value), mainly based on reports on investment positions submitted by financial institutions.

Source data for the valuation of other investment items are much in common with those for the BOP. In Japan, loans and other debt positions are valued at nominal value excluding accrued interest.

Data for reserve assets are from the MOF.

2. Changes in the IIP by factor

Factors that account for changes in the IIP are classified as follows: (a) transactions; (b) exchange rate changes; and (c) other changes.

a. Transactions

Changes in the IIP as a result of transactions refer to changes in financial assets and liabilities arising from transactions between residents and nonresidents and correspond to the financial account in the BOP for the relevant period.

b. Exchange rate changes

While in the case of the IIP exchange rates at the end of the period are employed for the conversion of foreign currency-denominated items, exchange rates at the time of transaction are used in the case of the BOP. Therefore, if exchange rates at the time of transaction and at the end of the period differ, flow data in the BOP and the corresponding changes in positions in the IIP for the same asset will not be the same. Moreover, even for items in which no transactions took place, positions may change as a result of exchange rate changes, since exchange rates at the end of each period are used for conversion.

c. Other changes

(1) Changes in market prices

The IIP is in principle compiled by revaluating external financial assets and liabilities at market value at the end of the period. Therefore, as with the case of exchange rates, changes in market prices, such as stock and bond prices, partly account for the changes in positions.

(2) Other volume changes

Other volume changes are changes in positions due neither to transactions nor to revaluation. A concrete example is write-offs arising from debtors' bankruptcy. (By contrast, debt forgiveness is treated as a transaction and is therefore not included in other volume changes.) Changes in positions due to changes in residence of parties concerned are also included. For example, if a resident holding deposits with a foreign financial institution moves overseas and becomes a nonresident, Japan's financial assets will decrease. Moreover, reclassification affects specific items, although it does not affect the total international investment position. For example, an increase in the holdings of a foreign company's equity by an investor could lead to such holdings being reclassified from portfolio investment to direct investment.

In Japan, the contribution of other changes is derived as follows. First, from the changes in positions from the previous period, the contribution of transactions to such changes is removed. Then, the contribution of exchange rate changes to the figure thus obtained is estimated. Lastly, the residual is treated as the contribution of other changes.

C. Gross External Debt Position of Japan

The Gross External Debt Position of Japan (External Debt) systematically summarizes, at a given time, the value and breakdown of gross debt liabilities of residents to nonresidents on a market value basis. The statistics are compiled and disseminated on a quarterly basis, and data are broken down by sector, by maturity, and by debt instrument. Compared to the liability side of the IIP, the External Debt has the following characteristics: (1) only debt instruments that require the payment of principal and/or interest at some point in the future are covered, and thus equity and investment fund shares and financial derivatives are excluded; (2) information with different dimensions from the IIP, including the external debt burden and liquidity by sector, is provided.

D. External Assets and Liabilities of Banks, etc.

The External Assets and Liabilities of Banks, etc. covers the external assets and liabilities of resident banks in Japan (Japanese banks and branches of foreign banks in Japan) as aggregated from their balance sheets (reports on assets and liabilities positions submitted by banks and others). The statistics are broken down into assets and liabilities, which are further cross-classified by maturity (long-term/short-term) and currency of denomination (foreign currency/yen).

Inquiries

Balance of Payments Statistics Group, Balance of Payments Division, International Department

E-mail : boj-bop@boj.or.jp