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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.
|1||Introduction: The Syndrome of the Ever-Higher Yen||1|
|2||Policy Causes and Postwar Origins of Japan-U.S. Economic Conflict: Differential Productivity Growth and the Saving Shortage in the United States||21|
|3||Exchange-Rate Fluctuations and Their Consequences: Price Diffusion and Endaka Fukyo||51|
|4||Balancing International Competitiveness in the Longer Run: Wage Adjustment versus Yen Appreciation||73|
|5||The Transfer Problem and Macroeconomic Fluctuations: Endaka Fukyo, Bubbles, and Credit Crunches||93|
|6||The Exchange Rate and the Trade Balance in Theory: Insular versus Open Economies||125|
|7||The Exchange Rate and the Japan-U.S. Trade Balance in Practice: A Critique of the Modern Elasticities Approach||143|
|8||Monetary and Exchange-Rate Regimes, Inflation Persistence, and the Volatility of Long-term Interest Rates||163|
|9||Price Deflation and Purchasing Power Parity: A Causality Analysis of Yen Appreciation and Japanese Monetary Policy||177|
|10||Overcoming the Syndrome: Toward a U.S.-Japan Commercial Compact and Monetary Accord||205|
|11||Is the Syndrome Over? The Fall of the Yen, 1995-96, and Its Implications for the Transition||223|