The ministry of higher education, science and innovation of the republic of uzbekistan

Table 1.
Summary Balance of Payments of Japan, 1980-89
(In billions of U.S. dollars)

Japan’s role as an international financial intermediary is highlighted in Table 1 which provides data on that nation’s external balance sheet during the 1980s. As the table shows, by the end of 1989 Japanese residents had accumulated net external assets of more than $290 billion, up from an average of about $30 billion in the first half of the decade. Reflecting its intermediary function, the predominance (almost 60 percent) of Japan’s foreign claims were long-term while over 60 percent of the nation’s liabilities were on the balance sheets of its banks and were short-term. Also note—in line with the Kindleberger-Lindert (1978, p. 265) view that the “short-term liabilities [of an international banking center] come to be a multiple of official reserves”—the ratio of Japan’s short-term liabilities to official reserves rose from an average of about five in the first half of the 1980s, to about 12 by the end of the decade.

Japan, however, departs from the traditional model assigned to international financial intermediaries in an important respect. In contrast to the earlier cases of the United Kingdom and the United States, which borrowed short and lent long primarily in their own currencies, commercial banks in Japan have been involved chiefly in maturity transformation of external funds, borrowing short-term funds overseas in foreign currencies (mostly U.S. dollars) and investing funds in long-term instruments overseas denominated in foreign currencies. Specifically, banks as well as some nonfinancial corporations, have capitalized on their good credit-standings in the international capital market to profit from the yield curve structure, borrowing short-term funds to acquire long-term bonds overseas.
As reported in Table 2, external lending by Japanese banks increased during the 1980s, but the share of yen-denominated lending though rising remained less than one-third of the total.