The Enigma of Japanese Capital Flows in the 1980s

Abstract

Another major ‘anomaly’ that economic theories had not been able to explain concerns Japanese capital flows in the 1980s and early 1990s. While capital flows are determined independently of the current account, balance of payments equilibrium implies that capital outflows counter-balance current account surpluses. These may either take the form of ‘autonomous’ capital flows (traditionally classified as long-term capital flows) or ‘accommodating’ capital flows (the short-term inter-bank capital flows). During the 1970s, the autonomous long-term capital outflows roughly matched the current account surplus (Figure 9.1).1 KeywordsCurrent AccountCapital FlowForeign AssetCurrent Account SurplusCapital OutflowThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.