Liberalization of Japan's Foreign Exchange Controls and Structural Changes in the Balance of Payments

The interdependence of the Japanese economy with the world economy can be seen in Japan's balance of payments and major structural changes in the post-war years. Extremely strict foreign exchange controls were introduced after the Second World War but they have gradually been deregulated since. As a result, Japan's exchange control system is now almost fully liberalized. This paper will review post-war structural changes in the balance of payments, focusing on capital flows, by contrasting such changes with the liberalization of foreign exchange controls. Certain implications of these changes will also be discussed.