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Japan has risen to great prominence in the financial world in the space of very few years. One rough-and-ready indicator of this is the sharp jump in Japan's share in portfolio capital movements. In the late 1970s, Japan accounted for about 15% of total outflows from the larger industrial countries, well below that of the United States and the European Community. In the first half of the 1980s, however, the United States had been overtaken and, in the second half, Japanese outflows exceeded those of the United States and Europe combined. Only in 1990 did a sharp fall occur.

Behind this remarkable trend lay two key features. The first was the emergence of Japan as the major exporter of capital. With savings well in excess of domestic investment for much of the period, there was a heavy flow of Japanese funds overseas, the cumulative current account surplus during the second half of the 1980s amounting to over …