All of this supports even more economic activity. One reason inflation is very moderate is that as the dollar remains strong, the price of imports into America has not gone up. America's Secretary of the Treasury, Robert Rubin, often says that a strong dollar is welcome, but the Japanese government is slow to change policies, understanding that America does not necessarily dislike a strong dollar and weak yen. However, the reason Rubin makes this kind of statement is that US capital markets are supported by money flowing in from Japan. On the negative side, the United States has an import surplus.
Trade balance is in large deficit.
At present the American economy is in good shape, so this is not a problem, but the following two things could happen. First, we could see the emergence of protectionism. The American car industry is already angry about the increase in Japanese car imports caused by the weak yen. Because of the influence of the Democrat Richard Gephart and other protectionists, at the end of last year President Clinton was unable to obtain the authority from Congress to negotiate trade agreements. The expansion of protectionism could have a bad impact on the world.