– Macroeconomic stability is essential for economic development. In the case of
Japan, the management of foreign currencies and the balance of payments was
the centrepiece, and very tight control had to be implemented. Today’s LDCs
have more opportunities than Japan for introducing borrowing from abroad as
well as gaining support from the international community. This allows
considerably larger deficits in trade and current accounts. On the other hand, they
sometimes face the risk of fast-moving capital, speculative attacks, and the lack
of coordination between internal and external financial markets, all of which can
generate difficulties.