＠~lbl込§
D工s
cuss工ON PAPER NO. 114
US ‑ Japan Economic Problems
byShinichi 工chimura
May, 1982《．

。

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, JapanThe Cen七er for Sou七heas七 Asian S七udies
Kyo七o Universi七Y

cuss工ON PAPER NO. 114
D工s
US ‑ Japan Economic Problems
byShinichi 工chimura
May, 1982

No七e: This discussion paper is duplica七ed for priva七e circula七ion
and should no七 be quo七ed or referred 七o in publica七ions．
wi七hou七 permission of 七he au七ho七

US ‑ Japan Economic Problems

Shinichi Ichimura
Kyo七o University

In七oduction
To the bes七 of my knowledge, the cu工工 entproblems in the areas of tradeand defense are very well summarized in Mr. John H.Holdridge s prepared工］ . I find myself in basic agreement wi七h him
S七aternent on March 1, 1982 ［in evalua七ing 七he current situation between US and Japan and recommending
certain directions and i
r
n
p
l
e
r
n
e
n七ing speed of policies. The climate ofJapanese argurnen七 and domestic politics surrounding those issues seems tobe adequately conveyed to the House of Represen七atives Subcomrni七七ees by
excellent testimonies like those of Prof.G.L. Cur七is and others quo七ed at
the end of this repor七.

Historic evolution of US‑Japan relations areinterestingly swnrnarized by Arnbassader U. Alexis Johnson from the view‑
poin七 of an US diplomat. If these s七atemen七s are well understood by the
Parliament members and the general public, reasonable solution of theeconomic problems between the US and Japan does not seem to be too diffi‑
cult. 工n reali七y,however, much of the heat wi七h the US‑Japan rela七ionscomes from the misunders七anding and the poli七ical implications of the eco‑nomic issues as well as the differen七 S七yles of approaches in the twocountries to resolve such conflicts. 工n 七his repor
七 工 sum up firs
七 thecommon interests and values of bo七h countries which unite them inspi七e oftheir obv工ous differences in social and cul七ural backgどounds.
Then I analyze the problem areas in 七he US‑Japan relations. On thebases of 七he analyses, I lastly offer my opinions on the resolution ofcurrent and.future conflicts be七ween 七he US and Japan.

‑ 2 ‑

1. Japan as No. 2 in Western Alliance

No doubt, US, Wes七ernEurope, Canada and Japan collabora七ed in 仕1
eOECD, the annual Summi七 mee七ings and some issue‑specific interna七ional
conferences. Through 七hese mee七ings US and Japan must have come 七o realize
七heir 七remendous influence in economic affairs as 七he 七wo largest economic

powers in 七he world. Especially the shif七 of Japan sown image from a。

regiona工 ec nomic power to a global power as one of allies in 七he Wes七ern
A工liance seems 七o have 七akenplacein 七he recent few years. There is

still some uncer七ain七y 七o wha七 extent one can ex
七rapolate this lates
七 七rendinto 七he fu七ure. 工f, however, one could assume 七ha
七 社1
e 七rendpersis七S

・in七O 七he rest of 80 s and 七he 90 s，七his migh七 imply that Japan had 七akens七eps 七oward No.2 in Wes七ern Alliance. One can no七 daub七 吐1
a七 Japan is
one of leading members of indus七rialized, democratic countries in 七he world
now, but 七he ques七ion is wren Japan willbe ready 七0 七ake a leading role in
七he sphere of in
七erna
七ional politics, including military affairs.

UnlessJapan plays acer七ain political role appropria七e to her own economic power,
which may be economically and poli七ica
工ly cos七ly, she is likely 七o be cri七−
icized as remaining a sheer beneficiary and no七 sharing 七he responsibilityof supporting and shaping 七he free woどld system. 工n other words, the prob‑
lem facing Japan now is to find the bes七 passage from contemporary Japan as
an exclusively economic power tofu
七ure Japan as No.2・
in Western Alliance.
There are some circles of in七ellec七uals, journalis七S , and poli七iciansin Japan who try 七o assign Japan a task which does no七 require an alliancewi七h Wes七ern countries, while benefi七ing from the free associa七ion and七rade wi
七h them, inspi七e of her enormous economic power.

offer an indirect criticism on such posi七ions.

This report will

‑ 3‑

2
. Basic Common In七.
eres七s and Values for Cooperation
The basic common interes七s and values which combine bo七h countries
may be 七he following:(
1) The geo‑poli七ical position of Japan and the US in Asia and thePacific, facing the Chinese con七inent, the Sovie七 Union s Siberia,and Asiatic Balkan, Sou七heas七 Asia. The presence of the US in
Asia as the dorninan七 m工litary power gave Japan 七he ideal oppotunity
七o reconstruc
七 and rapidly develop its economy without causing any、

serious tens工on vis a vis O七her new na七ions in Asia as well as
being harassed by the threa七 of the Sovie七 Union. The friendly
relationships that have gradually developed across the Pacific and七he economic a
chievernen七 七hroughou七 七hepos七war years set a modelstage in which peace, securi七Y and developrnen七 can bring about tothe welfa工e of war‑devasta七edpoor Asian countries.
(2) The highly in七egrated economic interdependence makes not only theforeign trade between the two ‑ amounting to 60 billion dallars
in 1981 ‑ essential 七o the prosperity of two giant economies but
also indispensable to the developmen七 of the world economy, espe‑
cially the neighboring LDC s.
(
3) The dedicationtoせ1
e same democra七ic values of goverrunent, freedomof expression and association and 七he guarantee of .
fundamental
human righ七s. This is a unique fac七or in engendering Japan salliance with the West， despi七e its location in 七he Far East.
The poli七ical culture in Asia is so fundamentally different from
七heWest‑European or Anglosaxon tradition 七hat the success of Japanin accep七ing the Western democratic values and ins七i七U七ions mustbe truely precious in offer工ng the world the Japan model in eco‑nomic, social and political development.

‑4 ‑

(
4
) The increasing irnpor七ance of mu七ual coopera
七ion in science and
七echnology in
七erchange.

In 七he near future, if no七 now, boせ1

coun七ries will lead 七he world in many of scien七ific and 七echno‑
logical research and applica七ions. According 七o UN data in 78
and Science and Technology Agency s 工ndica七0どs of Science andTechnology, 1981，七he number of scien七ists and engineers andR & D expendi七ure are 七he following:
白Table l: R & D Expendi七ure and Personnel
Expenditure for R & D (7
9)

Sc工en七lS七s & Engineersus541 (Thousand)54.3 billions$

Japan

399

18.6

France

66

10.2

Ge口n
any

104

15.l

．

(
5
) The mutual permeation and apprecia七ion of cultural interchange
be七ween Eas七 and West. Not only Japan has en七husias七icallyappreciated and successfully in七egra七ed the western and American
cul七uどe but also an increasing number of US ci七izens have come toapprecia七e Japanese cul七uどe and begun to accep七 i七 as a par七 ofmodern American culture in a melting po七. This is very importan七
if we unders七and that the basic conflicts be七ween 七he US and Japan
can only be resolved by overcoming 七he cul七ure conflicts through．
mutual appreciation of diffeど en七 cul七ures and personal con七ac七−−1111lili 11
1
1
1HV

.
d
ヲ

This aspect has gradually shiftedfrom one way to 七wo‑way traffic across
七he Pacific.

One symbolic fac七 is tha七

七he US citizens staying in Japan have

QU

4ゐbeen exceeded by 七he Japanese staying

‑5‑in the US in 1970. The la
七七er are almos七 60,000 n
ow, and i七 has
become almos七 a daily event 七o mee七 Japanese and encounter Japanese
七hings a七 leas
七 in big ci
七
工 es in the US.

The mu七ual benefi七 derived from foreign 七rade and security arrange‑
ment based on 七he US‑Japan Security Treaty are 七oo obvious to men七ion here.
工七

had be七七er be emphasized, however, tha七 七he economic benefi七 is indeed

positive. Al七hough the economic cornpeti七ion gets so seどious a七 七imes
七ha
七 s
ome irri七a七edpeople 七end 七o forge七 七he benefi七，

par七icularly when

faced with sluggish growth, i七 mus七 be regarded always as a game of posi‑
七
工 ve sum.

The benefi七 of 七he US‑Japan growth really spread over Eas七 andSoutheast Asian coun七ries. From 七he US perspec七ives，七he benefi七 ofmain‑
七aining forces and bases in Japanand having七he expenses paid by Japanese

governmen七 must be great. The security guaranteed for 七he Japanese na七ionby the rnili七ary presence of US forces in Japan is essen七ial to Japanesenational securi七y. These benefits are so great that i七 is inconceivable
七o expect any serious de
七eriora七ion of US‑Japan relations in 七he contem‑, however, a major deteriora七ion 七ookplace foど
porary woどld si七ua七ion． 工 f
any reason, エ七 would demand enormously more resources for bo七h coun七ries
七o maintain 七he standard of living wi七hou
七 七he benefi
七 of free trade andalso quickly des七abilize the economic and political order in East andSoutheast Asia. 工n 七his sense Japan as a good paど七百er of 七he US in 七hewestern Pacific is a stabilizing force．
工ndeed，七he US‑Japanpar
七nership in Asia seems 七0 have been acceptedby almos七 all Asian countr工es, including China, as an ideally‑balanced
suppoど七七o the region by two powers wi七h 七he greatest political and eco‑nomic influence. Asian nations hardly need a hegemony by one or 七he otherand at the same 七ime expec七 七o match 七hem to 七he potential 七jireat of China

‑6 ‑and the Sovie七 Union. The remarkable developm
en七 of Gang of Four" inAsia and O七her Sou七heas七 Asian coun七ries is a brigh七 aspec七 of o七herwise
gloomy Nor七h‑Sou七h problems and may open up an ou七let for our difficul七
dealing wi七h 七he Third World.
←

The synergetic involvement of 七he US and Japan in East and Sou
七heastAsia does no七 seem to have induced European countries 七o revive theirinteres七s in 七his region. Wes七 Geどmany shows some influence in Indonesia,
and France in 工ndochina.Bu七 七he土r influences are very l土mi七ed so far.
WO
The good balance iロ Economic sphere may be seen by 七he following 七.
七ables:Table 2: The US and Japan s‑
Share in ASEAN Trade, 1977

工ndonesia Malaysia Philippines Sing
apore Thailand

Exports Japan

40.2も

21.1も

23.2も

9.
5毛

25.8も

27.7

15.6

35.3

15.5

工0.
0

Impor七s Japan

27.1

21.3

24.
9

17.5

32.4

U.S.

12.5

12.6

20.
5

12.
6

13.
4

U.
S.

Table 3
: Foreign Capita! k竺1坦l~竺七ed in AS~旦~＿C_o里竺望竺旦E

七0

1977

(million dollars)
工ndonesis* Malaysia Philippines安 Singapore Th
ailandTo七al$5,294

手 416

Japan

39.0毛

U.S.

19.2

564

$1,
699

23.4も

25.
3も

15.
3毛

34.6も

18.
7

33.
l

33.0

6
‑
15.

手

手

171

Source: JETRO, Whi七e Papers on External Trade, 1978
sed on permission figures.
* These two coun七ries figures are ba

‑ 7‑

3. Problem Areas: Trade and Defense
The par七nership is not wi七houtoccasional strains. Earlier in pos七−e Japanese side, par七icularly agains七
war years, s七rains were more on せ1
七ish
七he US military presence on Japanese soil which was exploited by lef

m and utopian pacifists ー 七hose who could only live post‑
s
i
n
a
c
i
r
e
n
r
.
.
>
anti‑lwar years on 七he bas工S of theiど war七ime anguish. In recent year, however,s七工 ains are ￡el七 on the US side. They are caused by the unexpec七ed successof Japanese industri缶

rather七hanmalicious rivalry. The trade frictions

seem 七o have aggrava七ed the sentimen七 of some circles in the US agains七s free riding or cheap riding for defense despi七e i七S enoロnous
Japan'
economic power. Thus Trade and Defense are problem areas.
The trade conflic七s appear as follows:e co田 nodity 七どade balance be七ween 七he US and Japan is always(1) Thseriously unfavorable for the US.
) Although 亡he US curren七 balance of payments have been fovorable,2(
工ng.
s narrow
七he gap i

y composition is changing
odit
The comm

toward less income elastic items, so 七hat unless the Japanese
rate of grow七h remains subs七an七工 ally above the US rate, thisimbalance seems to persis七．
) Japan has reduced the custom duties substantially so 廿1a七 its
3(tariffs are lower on the average than most EC coun七ries, But
the so‑called non‑tariff barriers are prevalent, and 七he entry
どY
七
七S are far more difficul七 than 七he en
くein七0 七he Japanese marlhe second larges七 eco‑
七 tt. 工七 may imply tha
くeinto the US marlnomic power is still unwilling to carry its share of the burdenn supportjngthe free trade and free capital movemen七 sys七em.
.
lEach of 七hese problems will be discussed further in la七er seC七ions.

‑8‑

As for defense area, Japan has accep七ed in principle to assume
primary responsibili七y for its local defense, par七icularly air defense
ヨndprotec
七ionof i
七s sea‑lanes up to 1,000 miles in coopera
七ionwi七h:heUS forces in the wes七ernPacific area. The problems seem 七o be 七hefollowing:(1) Do we join
七ly have enough司 pabili
七ies 七o achieve the objec
七ives?

工f not, we mus七 七ake 七he appropria
七e s
七eps 七o prepare ourselves.

The speed wi七h which 七he Japanese governmen七 wishes 七o make pro‑
gress may not match 七he one that the US governmen七 wishes Japan七o do.

exchange of(2) Joint planning, joint exercises, cos七ー sharing,‑
military 七echnologies must proceed as smoothly as possible anda七 七he highest level of 七heir technicalities. There is muchto be desired.
(3) Economic sanc七ions 国 1
d other me白 百 七o keep our comprehensivebalance of power agains七 the Sovie七 Union as favorable as
七aken in good coordination not only be
七−possible mus七 be underween the US and Japan bu七 also join七ly with all Wes七ern allies.
This is by no means easy.
(
4) Japanese ODA mus七 be increased． 工n spite of a large defici七
and zero grow七h budge七， the expendi
七ure for defense and inte
ど−
na七ional coopera七ion has been increased. Foreign aid cannot be
a subs七i七U七e for defense in 七he s七rict sense, bu七 i七 is an
impoど七antmeans of buying the trust of many new nations withJapan and seems an importan七 step for her to recognize her
global どole no七 only as an economic power but also as a poli七ical,
if no七 mili七ary, power in the world. She is now finding a way

‑9 ‑ofcontributing 七o peace and S七abili七Y by aiding Turkey, Sudan,
Egypt and Jamaica as well as 七he ROK. Such policies cer七ainly
supplemen七 七he US policies and support 七he US s posi七ion ininterna七ional politics. To explain such policies 七o the public
may be a w工se steptoeducate the Japanese public opinions ormass media.
(
5) For 七he sake of national securi七Y, s七rategic stockpiles of oil
and food are highly desirable. The Japanese gover四 nen七 can doa lot more, even if she can no七 do as much as the US goveどnmen七
wishes Japan 七o do. Even these are no七 done mainly due 七o 七hebudge七 constraints now.
These problems rela七ed to defense will no七 be discussed in thisrepor七 bu七 delegated 七o 七he nex七 repor七．

4. TradeConflicts: The Peril Poin七SII
The
工e i
sno doub七 that the curren七 s七rains between the US and Japanaどe 七he psychological irrita七ion ra七her 七han 七he true economic conflicts
which will persist foralong time. 工t is 七ruethatthere are some genuine
issues which both goveど nments must try 七o and can solve. The reduc七ion
or elimination of non‑tariff barriers is such an example. Bu七 there aresome issues also which cannot be resolved so easily for good reasons.
ProteC七ion of some agricultural products to some exten七 is such an example.
七ain conflict occurs be
七ween one country and ano
七her,
Whenever aceri七 occurs in 七he unfavo工able social or poli七ical circums七ance. After
studying the Tanaka riots in Thailand and Indonesia, I discovered 七ha七
if Japan s share in capi七al inves七men七 exceeds abou七 30宅 of all foreign
investmen七，七hen 七he indigenous capital and overseas Chinese capital‑ 10 ‑

e peどi工 Pつin七
join七ly arouse nationalis七ic an七agonisrn. 工 called i七 廿1。
−。

s， 七here are some sensi七ive aどeas where the psych
工n the case f 七he u。。

logical irri七a七i n f US workers or poli七ical leaders becomes par七icu‑
chy.
ユ
。1
lar工Y 七Such peril points may be expressed in 七he following five indexes.
) The unemployment ra七e exceeds 7‑9も．
1() Japanese share in the US maどket exceeds 15‑20も．
2() The share of expor七 in Japanese production approaches 50も．
3(
) One or two politically influencial en七erprises are seriously
4(
affec七ed.
) Compe七1七ion involves s七rategically impor七an七 indus七ries.
5(
The firs七 fac七Oど is an index of recession. Unexployrnent, inflation,. can be used as an index. Most of conflic七S
produc七ion index, GDP e七cwere observed in 1976‑77 and 1980‑82, when 七he ratio of unemployrnen七 七olabor force exceeded 7‑9も ． 工n the first case，七he issues were color TV,
Iron & S七eel, whereas in 七he second case the issues were abou七 au七omobiles,
工C and Tele‑communication sys七ems. Even if 七he balance of 七rade withJapan was unfavorable， 七he 七rade conflic七s did no七 necessarily occur
unless serious recession se七 in.

工n fac七 七he US balance of merchandise

trade has been almost always unfavorable, as is shown in Table 4, buttradeconflicts were serious only in the above‑mentioned years.
ayrnen七s have been generally favoどable,
七 七he current balance of pBuas 七he las七 column of Table 4 shows. The US commodi七Y 七rade is largely
offse七 by 七he large amoun七 of services and transfers, whereas 七he samei七ems are greatly nega七ive. This problem is not always recognized even
七ion. The overall balance ofamong exper七s. Table 5 shows this inforrna

payments are posi七ive for 七he US in 80 and 81 and negative for Japan

‑ 11 ‑

Table 4: US Merchandise Trade and Balance with Japan and 七he World(million US宇）
BOP wi七h
world

Export

工mpor
七

BOT

1973

8,313

9,676

‑1,363

911

7,140

1974

10,67012,338‑1,659‑5,343

2,124

工975

9,563

11,268‑1,705

9,047

18,2801976

10,145

15,504‑5,359‑9,306

4,384

1977

10,522

工8,623‑8,101‑30,873‑14,068

工97812,88524,458‑11,573‑33,759‑14,259

1979

17,581

26,248‑8,667‑39,469

‑705

1980

20,79030,701‑9,911‑27,350

118

Table 5: Services & Tど ansfers, 1973‑80

BOT wi七h
world(million US$)

Japan

us

Ger
立1
any

FranceUK

1973‑3,824

6,229‑9,970‑1,295

3,747

1974

‑6,1297,467‑10,390‑1,547

4,610

工975

‑5,7109,233‑11,740‑1,003

3,657

1976

‑6,207

13,690‑11,270‑1,294

5,121

1977

‑6,393

16,805‑14,150

273

3,619

1978

‑8,062

19,500‑13,810

3,074

4,390

1979

‑10,599

28,681‑19,710

3,122

3,995

1980

‑12,871

27,472‑20,960

in 80 and 81.

由

3,662

工n 1982, however, this may be reversed. The US criticism

on Japan s bilateral balance of trade with the US can hardly be justified.
Never七heless, the irri七a七ion of US industries has its own logic.
The US colored 'I
V Pro七ec七ion Commit七ee was formed, when the marke七
share of Japanese TV jumped from 15.7も in 1975 to 30.1も in 1976. The US
steel industry appealed 七0 七he cour七 as dumping, when the market shareof EC‑Japan expor七 reached 17.8毛 in 1977. The US automobile companies

‑ 12 ‑

made a coalli七ionwi七h UAW, when Japanese share exceeded 16.6も in 1979.
Mr. K. Kawarnata, Chairman of Nissan Motor Co. remarked tha七 16.5も may
be about the maximum allowance that 七he US 七o Japanese automakeど s. 工t
is no七 clear if 七his is really so. 工t remains to be seen wha七 happens,
if the ceiling se七 at 1.68 million can be removed af七er several yearsof adjus切 entperiod.
If 七he share of expor七s approaches to 50も， the argurnen七 for demand‑ing 七o inves七 abroad becomes forceful. Mr. Frasec of UAW criticizedJapanese indus七ど ialis七S on his recen七 visi七 七o Tok
yo by saying tha七 Japanis expor七ing unemploymen七 if it direc七s its produc七ion exclusively 七oexports. All 七hese arguments have no.justifiable ground since 七hey do no七
consider the benefi七 七o consumeどs. But it is one of 七he peril poin七s
which can persuade the public.
工n any countr
y producers are politically more influencial 七hanconsumers. Unless some influencial producers aどe bea七en, Japanese
expor七s do no七 cause any social or political concerns. Examples are:
VTR, Mo七or‑cycles, Desk calcula七ors, camera or wa七ches. Bu七 once Bethle‑
hem loses, or Zenith lays off one quar七er of its emplo
yees, Japaneseiron and steel expor七s have 七o be res七rained. Many Japanese TV producers
七hen began 七he produc
七ion in 七he U
S.
工七is expec七ed now 七hat 七he highly technology‑intensive industries

like LS工， computers, bio‑technology may become very compe
七i七ive between
Japan and the US. 工n 七his area， 七he US defense expendi七ure may be making
significan七 con七ribu七ions 七0 七he R & Din the field, whereas M工TI in
Japan in suppor七ing similar fron七 R & D. We must find some way of achiev‑
ing

cooperation before ge七七 ing in七O conflicts with each O七her.

‑ 13 ‑

5
. Trade Conflicts: Produc七ivi七Y Gap and Grow七h Gap
The entry of Japanese indus七ries into the areas, long considered
the US preserve, has caused a serious concern abou七 七he fu七ure divisionof labor between 七he US and Japan. Table 6 shows the commodi七Y compo‑
sition of US trade with Japan by major ca七egory.

Table 6
: US Merchandise Trade and Balance wi七h Japan
by Commodi七Z Grou:e, 1979 & 80
(billion$, fas)
US Impor七s

US Expor七s

Balance1979 1980

1979 1980

1979 1980

26.2 30.7

17.6 20.8‑8.6 ‑9.9

Food, Feeds, Beverages

0.2

0.3

4.7

5.4

4.5

5.1

工ndus七. Supplies & Materials

5.3

5.9

7.7

9.5

2.4

3.6

Cap. Goods ex. Auto.

5.7

6.6

3.5

4.1

‑2.2 ‑2.5

Au七omotive Vehicles

9.3 11.4

0.2

0.2‑9.l ‑11.2

Consumer Goods

5.6

6.2

1
.0

1
.2

‑4.6 ‑5.0

Other

0.2

0.3

0.4

0.4

0.2

To七al

0.1

工n t
e
r
n
s of more specific commodities, i七 is known 七ha七 七he expoど七

items are: soybeans, maize, logs, wheat, cotton, rawhide, scrap metal anda江 planes, wheどeas 七he impor七 items are: au七omotive vehicles, iron & s七eel
products, radio receivers, mo七orcycles, tape‑recorders, cameras, metal
fas七eners, TV, office machines, me七al cu七七 ing machine tools and culcu‑
lators. One may ge七 七he imp
どession tha
七 the US is almost like a planta‑
七ion suppl
ying Japan wi七h raw ma七erials and buying back high‑technology， because agriculture ismanufac七ures. The impression is not qui七e righ七technologically advanced and some expor七s are airplanes and O七her very
high technology products.

‑ 14 ‑A more important problem here is 七hat these agricul七ural commodities
have low income elas七ici七ies and low price elasticities. As the relative
prices of such produc七S 七end 七o deterioどa七e, an increasing quan七ity of
US exports of prirnaどy produc七s are going 七o be required for 七he same
quanti七y of imports of sophisticated rnanufac七ured goods from Japan in
the lα1g run. Unless， 七herefore, the grow七h ra七e of 七he Japanese economy
always remains considerably higher than tha七 of 七he US economy, the 七radebalance would 七end 七o move in favor of Japan.

In 七his connec七ion i七 ishighly desirable 七o permit 七he expor七 of Alaskan oil to Japan. A key
七o overcome this imbalance in the long run is, however，七o shif七 七hecommodity composition of US expor七s toward higher value‑added manufac‑
tured goods. This implies to improve 七he compe七ition capaci七ies of US、

manufacturing industど ies vis a vis J
a
p
a
:
F
l
.

This does no七 seem to be veryeasy.
A surpど ising fac七 is 七hat Japanese workers are equipped wi七h more
and more capi七al goods or machines peど head 七han the US workers a七 七hepresen七 time.

Look a七 Table 7.

Table 7: Gどoss Capi七al Formation per Capi七a, 1980

r
ea
pゐ
七
．
L

U
戸

NC

P
pa

七o GDP

GCF per
capitaもof GCFus

11,536

18.l

2,056

Japan

8,902

32.0

2,848

Moreover, the higher percentage of Gross Capital Formation in Japan 七han
七ha
七 in the US is in the form of priva
七e capital formation.

There is no

doub七 that the Japanese manufacturers asa whole will be more productive
in 七he future as well as now.

‑ 15 ‑

This does no七 necessarily lead 七o more serious 七rade conflicts, if
the wages in the US can remain self‑res七rain七 and infla七ion does no七 getout of hand. As we argued above, i七 is the general recession which. The balance of payrnen七 canbe resolved sooneど
causes the trade conflic七s
or la七er by 七he flexible̲exchange ra七e between the coun七ries like the US
and Japan. To run 七he national economy on 七he sound 七rack is 七he mos七irnpoど七an七 thing・6. Non‑Economic Consideど ations
There seem to be some addi七ional consideどa七ions tha七 we mus七 keep
in mind in our effor七 七o resolve the conflic七s be七ween 七he US and Japan.
(
1) Ati七uidal difference: The Japanese leaders and officials 七end
七o respond onl
y to 七he US request a七 七he bare minimum level.

工f i七 is repeated, resenむnen七 accumulates, perhaps in bo七h

coun七ries. Japan views i七self as a scape‑goat for domes七ic
problems or politics of US indus七ries, whereas many Americans
view Japan as the cause of 七heir rnisfor七unesand remember
infanuny a七 七he Peaどl Haどbor. Some such expressions are
r
n
p
o
r七ant
remarked by a number of people nowadays. Wha七 is ihere is to start nego七iations ea
ど工Y, try hard to compromisevery soon, implemen七 policies quickly with adequate public
relations.
(2) Pro七ection of Japanese Agriculture: While it is almos七 im‑
possible now 七o jus七ifymos七 non‑tariff barriers (standard,， associations exclusive agreements e
tc.),
procedures, perrni七

it must be admitted 七hat the presen七 level of self‑supply offood around 45も is almost 七he minimum level for na七ional‑ 16 ‑

economic security. Nego七iations wi七h 七he US can be concluded
only by compromises.

七工

is no七 wise to comple七ely libeどalize

l produc七s.
どa
七he trade of agricultu

This must be understandable.
七s
七e experfor any considera) Regional Considerations： 工n 七he US some regions are particulaどly
3(affec七ed. Japanese economic federa七ions and governmen七 may wellconsider 七he appropriate coun七eど measures like investmen七 in
七ending loans.
七he nearby areas or ex

The same kind of po七icies

are undeど七 aken in ordeど 七o promo七e 七he reloca七ion of indus七ど工 es
inside Japan. The s七a七es of Ohio, Michigan, Pennsylvania or
California could cer七ainly absoどb some new indus七ries fromJapan.
) Japanes Indus七rial Policy 七o be ど econsideど ed: As 工 argued ([7],4(panese governmen七七ど ied to develop all kinds of] ) 七he Ja
8[manufac七uring indus七ries by adap七ing one‑se七− ism," mainly to
reduce 七he imports. This resul七ed in 七he extremely low ra七ioof imports of manufactured goods. So far this policy was veどysuccessful, but now Japan mus七 give up a number of labor‑in七ensive
industries to N工C s or LDC s and even some technology‑in七ensive
indutど ies to the US, Canada and otheど countries according to
七age.
七he principles of comparative advanThis is 七he way 七oco‑prosperi七y.

7. Policy Recommendations
工n these circums七ances, what kind of policy‑mix should be recommended?

Ceteどis Paribus 七he unforable balance of paymen七s should make Yen revalued
or dollars devalued, bu七 due to 七he high ra七e of interes七 in the US, the‑ 17 ‑

Yen/dollar ra七e remains as high as 230 Yen/dollar. There are several
policy‑mix alterna七ives 七o overcome this kind of economic condi七ions.
They may be listed here and will be evalua七ed la七er.
(
1) On the one hand the Bank of Japan should tigh七en 七he supplyof money and thereby raise 七he ra七e of interes七， while a七 七hesame 七ime the Japanese government increase 七he fiscal ex‑pendi七ure and more 七han cornpensa七e 七he deflationary effect oftigh七 moneypolicy. On 七he O七her hand 七he US governrnen七 shouldtake the reversed policy‑mix. This will narrow 七he in七eres七どate gap and reverse 七he direc
七ion of capi
七al m
overnen七．

(
2) The expor七 du七ies may be imposed on Japanese expor七s, whereas
the impor七s may be subsidized Oど 七he irnpoど七 duties ma
y be
reduced as much as possible.
(
3) The quan七itative con七rol may be imposed upon 七he expor七 ofsome specific commodities in ques七ion by bila七eral nego‑tiations. This is certainly a rnodera七e form of pro七ectionisrn.

The degどee of marlくe
七 in
七erven七ion is 七he highes七 in (3
) and thelowes七 in （工） bu
七 七he immediate effec
七 is also in the orde
ど of (
3),(2)
and (1). There are, however, serious pどoblerns in (2
) and (
3) in 七helong‑run. Al七hough these policy‑mix may be able 七o improve the USbalance of payrnen七 wi七h Japan in 七he shor七 run，七hey will no七 solve
the fundarnen七alproblems, so 七ha七 七he controls regarded.as eme芋gency
counter‑measures are likely to persis七 and 七he same kind of problems
will reappear with O七her commodi七ies or wi七h the same commodi七ies indifferent ways. As the result， 七he misallocation of resources is un‑
avoidable bo七h in the US and Japan. This is precisely wha七 mus七 be‑ 18 ‑

avoided to どevitalize 七he world economy, especially 七he industどialized,
democratic countries'economies.
The first or七hodoxprescrip七ion (1) does not have such defects
bu七 has several o七her difficulties:(a) It requiど es the widening difici七 in Japanese budget which isalready suffering from very serious shor七age of revenue. The
resis七ance to 七ax increase is very s七rong in 七he midst of
governmen七 adminis七ration reform a七 七hemoment (1982, Spring).
(b) Under 七he ciどcums七ance 七his policy‑mix will Cどowd ou七 七hepriva七e capi七al forma七ion no七 only in the sho
ど七 run bu
七 alsoin 七he long run. This will reduce 七he produc七ive capi七al
foどmation and decrease 七he efficiency of the Japanese economy.
(c) The Japanese Minis七どy of Finance is con七rolling the in七er‑
national finance. For ins七ance 七he finance of Yen 七o overseas
corpoどa七ions has been stric七ly con七rolled un七i1 May 15, 1982.
The res七ric七ions on Japanese commercial banks' loans are s七i11
quan七i七a七ively con七rolled. Were i七 no七 for such res七ど ic七ions,
七he raising funds in 七he Tokyo marl
屯etby foreign governmen七

and businesses would be much easieど.

The US ra七e of interes七

can come down more easily

For these reasons，七he above men七ioned three policy‑mix all havesome difficulties to remedy 七he curren七 situa七ion in a quick way. One
should not expec七 七he hi七− and‑run kindof effect now. Wha七 ought

七o be done is:．
(
1) Take all feasible measures to open up the Japanese marke七(
2) Be prepared for slow economic grow七h until the US economy picks

‑ 19 ‑

up and wai七 until 七he ra七e of interest in the US comes down.
Hasty measures to lower interest rates like those taken inGermany and the Ne七heどland eaどly May do no七 seem 七o be
warどanted in Japan now.
(3
) Promote the governmen七 adminis七
ど ation reform so 七hat efficiencyof the public sec七or may be main七ained in Japan. This is thearea in which all 七he western democどa七ic coun七ries failed in
the past. Japan s
h
:
:
:
>
u
l
dlearn 七o be wise by the folly ofothers and demonstra七e a lesson for the success for 七hefollowers.

References

1. John H. Holdridge， Prepared Sta七emen七，

Subcorrunittee on Asian andPacific Affairs, ~larch 1, 1982
2. Congressional Research Service， Japan‑US Tどade Relations，January, 1982
3
. Gerald L. Cuど七is, Pどepared Statemen七， S
u
b
c
o
r
n
r
n
i七
七ee on Asian andPacific Affairs, March 17, 1982
4
. U. Alexis Johnson, Prepared Sta七emen七，Pacific Affairs, March 3, 1982

Subcommi七七ee on Asian and5. F. J. West Jr., "US‑Japanese Defense Cooperation and US Policy，March 1
, 1982
6. W. Brock， Gatt and the Trade Crisis， European Managemen七 Forum,
Davos, Swi七zerland, February l, 1982
7.S. Ichimura， Japan and Southeas七 Asia， A
s
:
h
̲
a
n Survey, July, 1980
8.s
. 工chimura， Moving Up the Market， CSEAS No. 113, April 1982
9. Y
. Komor工， American Side on Trade Conflicts， （ in Japanese)
Chuo‑Koron, May, 1982