The US and Japan
YASUHIRO NAKASONE, Japan's prime minister, was in Washington last week. It was as important a foreign visit as there could well be. He was there to try to help steer the Japanese-American relationship through a difficult passage. The problem for both host, Ronald Reagan, and guest was how to manage one of the worst trade imbalances in all history without damaging a relationship which has become prime to both and must be preserved.Skip to next paragraph
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The seriousness of the imbalance is indicated by a simple statistic. Two years ago one US dollar could buy 250 Japanese yen. Last week it could buy fewer than 140. The flow of trade between the two countries is so badly out of balance that the condition cannot be allowed to continue. It must be adjusted or the United States could end up owing to Japan more money than even the vast US economy could sustain.
But, and this is what makes the problem really difficult, the US and Japan are by now so dependent on each other that the adjustment must be achieved by mutually acceptable methods. It dare not be done by arbitrary action by either side because that could dangerously undermine the relationship of the two countries.
Just how important is the relationship?
Take a moment to study the following quotations from an article in the current issue of Foreign Affairs magazine by J. Fred Bergsten, director of the Institute for International Economics and former assistant secretary of the treasury (US) for international affairs:
``... The United States and Japan are the two largest economies in the world and have the two most important currencies. They share by far the largest two-way trade of any trading pair. ... They are now the two largest shareholders in the World Banks.... Japan depends heavily on American markets for its economic growth, and on the United States for its national security. America depends heavily on Japanese financing for its trade and budget deficits.''
Add that Japan is the anchor of America's military and political position in Asia and is essential to the survival of the three-cornered political and trading system which unites Western Europe, North America, and much of Asia and balances off the Soviet Union with its own rival system of alliances and associates.
There are only four major economies in the world - the US, Western Europe, Japan, and the Soviet Union. Others are peripheral to one or another of the four. So long as three of those four are associated together the US has nothing to fear from the Soviets in any area except the military. The bulk of the world is associated with the US.
But the defection of either Western Europe or Japan from the three-cornered relationship could alter the balance of power in the world to America's disadvantage. Preserving that relationship is just as important in today's world as preserving the union of American states was back in the days from Andrew Jackson to Abraham Lincoln.
Perhaps it is difficult for people born in today's world to recognize how unusual is the shape of this world of 1967 and how important is the relationship of this very modern element in it - today's Japan.
I grew up in a world in which there was only one superpower - Great Britain. There were two other almost-superpowers, France and Germany. There were three secondary powers, Russia, Austria-Hungary, and Japan. The world was largely run from Western Europe. Anything the British, French, and Germans could agree on, could happen. Real power was in their hands. The world, in effect, belonged to three. But the bulk of it was British.
Forty years ago Britain was still a superpower. Russia was a question mark. Japan was a disaster.
The builders of the post-war world could never have foreseen in 1945 the shape it would take. We can see today that Japan is so successful, so industrious, so wealthy that it is vital to the survival of the community in which the US lives, moves, and has its being.