How does interest earned affect a country's Balance of Payments and GDP?

Question

For example, Japan and holds US government bonds. When they receive interest on these bonds, how does it affect their BOP? (I think it is considered a credit and the current account will increase.) If that is the case, I believe it increases GDP. Thoughts?

Answer 1

It is considered as a debit in the American BOP and a credit in the Japanese BOP. Interest income earned by US citizen increase US GDP, since it is used to calculate the National Income which is equal to National Product or GNP. The other factors of National income are rental income of persons and personal rental income.