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US Response to Japanese Economic Challenge

Volume XXIII – Number 1

Stephen D. Cohen

Abstract: The United States’ response to Japan’s steadily rising economic power can be described as both inept and brilliant. By conventional commercial measures, the United States has been on the receiving end of a one-way onslaught of Japanese export success in the area of manufacturing goods, resulting in the near disappearance of some domestic production and reduced market shares for the remaining domestic producers in their home market. By many economic measures, the United States has responded intelligently to Japan’s exaggerated export zeal; Americans are exchanging depreciating paper money (dollars) for real economic resources, produced by Japan, that contribute directly to Americans’ material standard of living. The Japanese, by virtue of their enormous trade surplus, have little alternative than to return the dollars back to the United States as a supplement to our inadequate savings. There can be no definitive, remedial measures until there is a definitive consensus on the nature of the problem. Weakness in economic policies and better performances by American industrial firms must take top priority. The first order of business is for Washington to agree on measures to reduce the federal deficit and to encourage more savings. The tax code should be altered to discourage consumption and encourage capital formation. Corporations need to update and improve their tactics, strategies, and priorities if they are going to compete without the benefit of import barriers and a depreciating dollar. A new technological revolution is brewing, and there is no guarantee that US companies will be at its forefront. Computer-integrated manufacturing and other advances in information processing can offset much of the cost of relatively expensive American labor. If American companies do not match Japan’s long-term commitment to perfecting such major new technologies as super-conductivity, our future industrial competitiveness may be severely affected.

Keywords: Japan, Trade Deficit, Japanese Exports

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