Dollar and Yen: Resolving Economic Conflict between the United States and Japan, vol 1

Ronald McKinnon and Kenichi Ohno ()
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Kenichi Ohno: National Graduate Institute for Policy Studies

in MIT Press Books from The MIT Press

Abstract: From the mid-1950s to the early 1990s, Japan grew faster than any other major industrial economy, displacing the United States in dominance of worldwide manufacturing markets. In the 1970s and 1980s, many books appeared linking the apparent decline of the United States in the world economy to "unfair" Japanese practices that closed the Japanese market to a wide range of foreign goods. Dollar and Yen analyzes the friction between the United States and Japan from the viewpoint of exchange rate economics. The authors argue against the prevailing view that the trade imbalance should be corrected by dollar depreciation, saying that adjustment through the exchange rate is both ineffective and costly. Stepping outside the traditional dichotomy between international trade and international finance, they link the yen's tremendous appreciation from 1971 to mid-1995 to mercantile pressure from the United States arising from trade tensions between the two countries. Although sometimes resisted by the Bank of Japan, this yen appreciation nevertheless forced unwanted deflation on the Japanese economy after 1985--resulting in two major recessions (endaka fukyos). The authors argue for relaxing commercial tensions between the two countries, and for limiting future economic downturns, by combining a commercial compact for mutual trade liberalization with a monetary accord for stabilizing the yen-dollar exchange rate.

Keywords: exchange rates; international trade; United States; Japan (search for similar items in EconPapers)
JEL-codes: F10 F31 N70 (search for similar items in EconPapers)
Date: 1997
Edition: 1
ISBN: 0-262-13335-0
References: Add references at CitEc
Citations: View citations in EconPapers (104)

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