Working Paper: NBER ID: w1962
Authors: Paul Krugman
Abstract: This paper argues that Japan's export growth is likely to slow sharply over the next few years, perhaps to zero. For the past dozen years Japan's export volume has gown much more rapidly than her domestic production. This divergence was made necessary primarily by rising oil prices, and secondarily by a shift into current account surplus. Now both these factors are running in reverse. If Japan's export growth does slow sharply, the mechanism will be a very strong yen -- probably above 140. The paper argues that it is Japan's export growth rather than static trade structure that is the main cause of trade tension, so these developments should lead to a considerable reduction in trade friction.
Keywords: Japan; US trade relations; export growth; trade friction
JEL Codes: F1; F3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Japan's export growth (F14) | US-Japan trade tensions (F14) |
| slowing of export growth (F14) | reduced trade friction (F19) |
| strong yen (F31) | slowing of export growth (F14) |
| declining oil prices and depreciating dollar (F31) | slowing of export growth (F14) |
| overvalued dollar and high savings rate (F31) | Japan's trade surplus (F14) |