ABSTRACT
During every year since 1980 Japan has run a current account surplus, and during the 1990s, these surpluses averaged about $100 billion per year. The reason for the surplus is straightforward: the Japanese save 30 percent of GDP, compared to 16 percent in the United States, and only 20 percent on average for the G-7 countries other than Japan. As a mature and highly industrialized country, it would be difficult for Japan to invest 30 percent of GDP in the domestic economy, so a huge and chronic current account surplus results. During the Japanese recession of 1998-9, investment in Japan was far from buoyant, but the savings rate has remained very high, so the current account surplus exceeds $100 billion per year. Complaints by the United States and other industrialized countries about Japanese protectionism as the reason for the surplus are simply wrong: as long as Japan saves such an enormous percentage of GDP, and cannot find profitable investment projects in the domestic economy to absorb that savings flow, a large current account surplus must result.
