Japan's economic relations with the United States

1. Last Week: Japan-US Political Relations
•Structure: highly constrained by the
bilateral alliance in the post-war period –
having to align with its sole ally during the bi-
polar structure of the Cold War.
•Agency: forged close political ties at the
elite level with US bureaucrats and policy-
makers – participating (logistically) in US-led
wars, but also seizing opportunities to
normalize relations with communist powers.
•Norms: close adherence to bilateralism –
countered to a degree by domestic strength
of anti-militarism.

2. Unit 5
Japan’s Economic
Relations with the
United States
Prof. Glenn Hook

3. Aim
• To apply the concepts and theoretical approach
introduced to Japan’s economic relations with the
United States.

4. Objectives
1. To introduce Japan’s economic development and
identify the relative importance of structure, agency and
norms in explaining the US-Japan economic
relationship;
2. To introduce how structure, agency and norms can be
applied to the issue of trade imbalance between the US
and Japan;
3. To employ structure, agency and norms to discuss trade
conflicts, capital flows and investment, and economic
agreements in the US-Japan bilateral relationship.

5. Main stages of Japan’s
economic development
• Global economic ascent of Japan (1950s to 1990s);
• Economic downturn (1990s to early 21st Century);
• Temporary upturn (2004);
• Continued stagnation up to (2007);
• Substantial downturn caused by global economic crisis
and triple disaster (2008-2012);
• “Abenomics” early in his second term in office, PM Abe
pushes through a huge stimulus package in an effort to
kick-start the economy – weakening the yen and boosting
exports (2013).

6. US-Japan Bilateral Economic Relationship:
Structure, Agency and Norms
• Structure: dominated by the US economy with an
increasing trend of multilateralism (APEC, WTO, etc.);
• Agency:
• economic ministries and agencies (MITI/METI, MOF,
MOFA);
• pro-US prime ministers and big businesses;
• Norms: Developmentalism; Economism; Bilateralism/
Multilateralism.

7. US-Japan Trade Relationship:
Structure, Agency and Norms
• Trade relations:
• Exports;
• Imports;
• Trade imbalance;

8. Power of the Yen
Source: Wikimedia Commons
Old One
Yen silver
convertible
note

9. Steep Appreciation of Yen (1997-2012)
Source: United States Federal Reserve Bank of New York
The Yen has weakened considerably in 2013 as a result of “Abenomics” - $1/¥93

10. Japan’s trade surplus –v– the US
From 2009 Japan’s trade surplus-v-the US has risen year-on-year (US$40 billion 2011)
Sources: Office of the United States Trade Representative / Japan Ministry of Finance

11. US-Japan Trade Conflicts:
Structure Agency and Norms
• Automobiles:
Situation: cause of Japanese
trade surplus –v– US
Japan’s response: appealed to a
multilateral institution, the
WTO;
Outcome: Japan appealed to the
international norms of
multilateralism to supplement
bilateralism or to offset the US
power/pressure.
Honda Accord Meets Its Makers

12. • Semi-conductors:
Situation: lack US access to
Japanese market
Japan’s response: to expand
foreign access to the home
market in semi-conductors
Conflict Resurfaced: set-up a
multilateral forum for dealing
with future disputes in this
sector.
US-Japan Trade Conflicts:
Structure Agency and Norms

13. • Steel:
Situation: Japanese opposition to US
anti-dumping measures/tariffs
Japan’s response: brought a petition
to the WTO under the dispute
settlement mechanism;
Outcome: The US lifted the tariffs;
Japan has dealt with a major
bilateral economic conflict through
multilateral mechanisms;
US-Japan Trade Conflicts:
Structure Agency and Norms

14. • Beef:
Situation: Japanese ban on US beef
Japan’s response: centering around the
standard to be adopted in regard to the
Japanese consumer’s exposure to risk;
Outcome: Japan banned all US beef
imports in 2003. Japan resumed
buying beef in 2006 after a bilateral
trade agreement setting new safety
standards;
US-Japan Trade Conflicts:
Structure Agency and Norms

15. Reasons for the change in US-Japan
bilateral trade conflicts
• The change in the alliance relationship following the Gulf War and
the greater willingness of Japan to cooperate with the US;
• The change in the relative strengths of the two economies;
• The establishment of mechanisms for dialogue between the two
sides: (from Structural Impediments Initiative to US-Japan Economic
Partnership for Growth, 2001);
• An Abe-led LDP seen as, essentially, pro-alliance, but ongoing fiscal
pressures could lead to future trade conflicts – uncertainty due to the
TPP in both camps.

16. Capital flows and investment relations
• Creation of large trade surpluses (1971-1991)
• Rapid appreciation of the Yen (1985-2012) –
countered by Abenomics (2013)
• Globalized manufacturing base
• Inability of Japan to transfer financial power into
political power.
• Opening up of financial markets – to allow access
from US and other foreign actors.
• JETRO encouragement of foreign investments

17. Japan and the US in regional
projects and free trade agreements
• Possibility of FTA or TPP as Japan seeks to keep
competitive edge in Asia-Pacific region
• Japanese endorsement of NAFTA – allowing access
to cheaper Mexican labour markets
• Active participation in APEC
• Maintenance of developmental and economist
norms

18. Conclusion
• Japan changed from a devastated economy through a
second-tier economy, to a challenger to the US economic
dominance;
• Case studies demonstrate US dominance and pressure in the
trade disputes;
• In the Post-Cold War period, Japan has learned to use the
multilateral institutions to seek a solution more favorable to its
national interests.