The Enigma of Japanese Capital Flows in the 1980s

  • Richard A. Werner


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


Current Account Capital Flow Foreign Asset Current Account Surplus Capital Outflow 
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© Richard A. Werner 2005

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  • Richard A. Werner

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