BOJ Governor speaks at the IMF: corporate net saving and outward direct investment sustain the surplusHow Japan keeps a surplus with money it receives from overseas
On November 7, 2026 the Bank of Japan released the Japanese translation of a speech given by Governor Kazuo Ueda on November 6 at the IMF's Michel Camdessus Central Banking Lecture. Japan's current account moved between deficit and surplus until the early 1980s, but for roughly the past 40 years it has run a surplus broadly in the range of 2 to 4 percent of GDP. The speech explains that this surplus has been sustained not by households or the government but by the corporate sector, which turned into a net saver.
Key points
- The composition of the current account has changed greatly. In the mid-1980s the trade surplus exceeded 4 percent of GDP, but it later declined and turned into a deficit. Meanwhile the primary income surplus, which was close to zero at that time, has grown to more than 6 percent of GDP, and net income from overseas investment is now the main component of the surplus
- Household net saving was the main component of the current account surplus until the mid-1990s, but it declined substantially over the following 30 years as the population aged. In the government sector, fiscal deficits continued to widen
- The surplus nevertheless did not disappear, because of the behavior of the non-financial corporate sector. After the investment boom around 1990, the corporate investment rate fell for 20 years while the saving rate rose; in the late 1990s firms shifted from net borrowers to substantial net savers and have remained so since
- Since 2012, outward direct investment has exceeded portfolio investment and has become the main component of Japan's capital outflows. The rate of return on outward direct investment stayed above 8 percent in many periods after the balance-sheet adjustment phase ended
- In a survey of firms conducted by the Bank of Japan in 2024, the reason cited most often for weak domestic investment since the mid-1990s was a structural decline in growth expectations. In the 1990s and 2000s, pressure to reduce debt and repair balance sheets was dominant; in the 2010s, firms cited accumulating cash and deposits as a buffer and overseas mergers and acquisitions
What to do in practice
- Put into words how your own capital expenditure decisions assume domestic growth, and compare that with the overall corporate-sector trend described in the speech
- Review whether the profits of your overseas subsidiaries are retained locally or sent back to Japan. The speech explains that retained earnings are still classified as part of Japanese firms' saving in the statistics, and that reinvested amounts are recorded as new outward direct investment
The Governor of the Bank of Japan gave a speech at an overseas conference on November 6, and the Japanese text was released on November 7. Long ago, Japan received more money by selling goods abroad than it paid out. Today there are years when buying and selling goods is not enough on its own, but Japan receives a lot of interest and dividends from companies it has built overseas and from foreign shares and bonds, so overall it still receives more than it pays. The speech says it is companies, by saving money and investing it abroad, that have increased those receipts.
- Mid-1980sThe surplus from selling goods was large and became a focus of international discussion
- Late 1990sCompanies changed from borrowers of money into savers of money
- From 2012Investment that builds companies overseas became the main form of money flowing out
- NowInterest and dividends received from overseas are the pillar of the surplus
Points
- Long ago, Japan received more money from selling goods abroad than it paid out
- Today, the interest and dividends it receives from companies built overseas and from foreign shares and bonds are larger
- The speech says that it was companies, not households or the government, that saved money and invested it abroad
What the words mean
- Current account
- The difference between what a country receives from abroad and what it pays abroad
- Primary income balance
- The net amount of interest, dividends and similar income received from investment abroad
- Outward direct investment
- Investment that builds companies or factories overseas, or buys overseas companies
- Bank of Japan: Bank of Japan, Speech by Governor Ueda, "Japan's Current Account Surplus and Changes in Corporate Behavior" (IMF)
- Bank of Japan: Bank of Japan, Japanese translation of the speech "Japan's Current Account Surplus and Changes in Corporate Behavior"
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