The relationship between the exchange rate and Japanese economy has become more important since the currency system shifted to the floating exchange-rate regime in 1973. As Obstfeld (2002) describes, it is still the main issue of Open Economy Macroeconomics whether the exchange rate could adjust the other macroeconomic variables, especially the current account. Using a structural VAR analysis, this paper argues that the exchange rate has played a key role in the adjustment of the current account, even after the collapse of the economic bubble in 1990.