This study empirically examines the changes in external imbalances from the Meiji period to the present period, focusing on the internal and external constraints. Domestic and external constraints played different roles depending on their time of occurrence. The domestic constraints were primarily influenced by World War II and external constraints by the ceiling of the balance of payments under a fixed exchange rate from the 1950s to 1960s. However, the domestic savings rate predicted using optimal growth theory suggests that it will fall to a level that is similar to the domestic investment rate by around 2040 and that it will face domestic fund restrictions again.
