Working Paper: NBER ID: w2111
Authors: Ryuzo Sato; John A. Rizzo
Abstract: With the mounting U.S. trade deficit, much attention has centered on the role of U.S. macroeconomic policy and economic structure as contributing factors. This paper contends that the economic structure and policies of Japan have also done much to contribute to the trade imbalance. Institutional features of Japan's macroeconomy and industrial structure which have promoted her large trade surplus are discussed and industrial policies evaluated. Given the nature and magnitude of the role played by Japan in causing the bilateral trade imbalance, the next question the paper addresses is how Japan might best act to alleviate this imbalance. This section of the paper examines fiscal, monetary and other policy initiatives Japan might take to reduce the trade imbalance. The evidence stresses the desirability of expanding Japan's services industries, particularly leisure-related services.
Keywords: trade imbalance; Japan; US trade policy; economic structure
JEL Codes: F10; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Japan's high savings rate (D14) | trade surplus (F14) |
| weak domestic demand (F49) | trade surplus (F14) |
| government action (or inaction) (H84) | trade imbalance (F14) |
| Japan's macroeconomic policies (E65) | trade imbalance (F14) |
| reluctance to expand domestic demand (F52) | trade surplus (F14) |