Bangladesh Bank Training Academy Journal

Abstract

The last two decades (the 90s and 00s) are considered as lost decade in Japan due to the persistent stagnancy in the economic activities. This sluggishness in economic activities proliferated when the global economic crisis hit in 2008. The current Abe government, therefore, introduces 'three arrows' policies to stimulate the economy from this stagnant situation when they came to the power. For this reason, Japanese yen depreciates a lot in recent years to support the government policies. Hence, this paper aims to evaluate the impact of yen devaluation on the BOP movements during the period 1998 to 2016 using OLS and VAR model. The estimated results reveal that exchange rate is not the main factor in determining the BOP movements in Japan. Japan is an industrialist country, so many economic factors from both inside and outside of the country are vital to determine the BOP rather than just the exchange rate.