Charles Jannuzi wrote: ...
>> Moreover, US investment in >>Korea and the US's own >>manufacturing more
>> than met the Japanese >>challenge in RAM (though the >>disastrously
> > high yen from 1994 had more to >>do with this than anything--and
>> don't kid yourself, the high yen >>was US policy).
Yen/USdollar exchange rates
>I'd be much interested in your >take (and Dennis') on Halevi and
>Lucarelli, "Japan's Stagnationist >Crises"
>http://www.monthlyreview.org/0202halevi.htm >in the current (February)
>Monthly Review. They are in >enthusiastic agreement with you >on this
>point, to wit: "The devaluation of >the U.S. dollar in the wake of the
>Plaza Accords was a deliberate >instrument for furthering the
>unilateralist U.S. strategy of >opening up markets for U.S. >corporations
>and its main target was Japan."
I think I've seen that article at a glance, but will look at more closely later.
Well, it's not stagflation, it's not simply stagnation. It's stagdeflation.
A whole bunch of decisions and policies stemmed from when the US and Japan met over the period of about a decade in 'bilateral' trade talks. Among them:
1. the yen would go as high as it had to in order to balance trade. One Clintonite (I believe an underling of the totally ignorant Mickey Kantor) even said, hey, if it has to go 1 yen to 1 dollar, we're for it (that would put a new spin on the Nikkei index being numerically about the same as the current Dow).
2. Japan should recycle much of its huge surpluses with the US on -construction of infrastructure (and christ, we still haven't seen the end of that);
-defense spending (people forget that the US has been, among other things, developing a new generation fighter plane with the Japanese, too--though Japan still makes its own Mitsubishi battle tanks instead of buying US crap).
3. Japan's government WOULD NOT attempt to spearhead a push into processor chip or OS development--with the open standards, real time project Tron OS being cited as another 'trade impediment'. They did give the world its only viable high definition TV, though.
Let's see, what are the results.
No, Japan never did balance trade with the US (which rests mostly on the value of automobile and automobile parts). There was some globalization of automobile manufacturing. The Japanese brought US parts makers up to their standards (circa early 90s anyway). Toyota showed GM how to build a Saturn. Mazda showed Ford how to build a Ford. Mitsubishi helped keep Chrysler in business until Daimler got them both (Mitsubishi was barred from taking over Chrysler because Iacocca was a 'Jap hater'). GM has almost a controlling interests in Suzuki and Fuji Heavy Industries (which makes Subaru).
Microsoft (and Intel, too, since their chip development was for DOS/V) destroyed most software development in Japan, including Ichitaro by Just System, which marketed an Asian language software suite far superior to anything MS has put out (but MS stuff came preinstalled--you know, the same sort of deals they worked out everywhere else). It's not all MS's fault. NEC wrongly bet it could hold out with its own proprietary OS, then later morphed it into a superior DOS/Windows product (if you ran it on NEC hardware), then later dumped a few billion into Packard-Bell in the US, etc. etc.
But the high yen made commodities (which Japan imports in amounts beyond most people's comprehension) cheap and contributed to deflation. A McD's burger costs less in Tokyo than London or NY. US companies couldn't sell their autos--though Japanese buy a lot of expensive and durable European cars.
And, while prices came down and hurt the profitability in the actually very competitive domestic economy (more than anything why Daiei, the Walmart of Japan, is bankrupt), Japanese exporters lost competitiveness with Korea, Taiwan, and then, of course China (which runs huge trade surpluses with Japan).
I'm not sure what current US policy is about the yen, but the trade deficit is still, apparently, quite a sensitive issue. It's only a matter of time before we see some old industry corportists and Nate's old industry unions converging for another round of Jap-bashing (though one hopes that some of them now understand China and Japan are separate cultures) .
It's not an issue that the Japanese are going to get aggressive about, though some wonder if the WTO will protect them from US unilateral protectionism.
When Bush II first started out, some of them in that admin. agreed the the yen could--at least short term--go down. But now the imperium is pretty firm: Japan can not export its way out of a recession (would hurt US interests in E. and SE Asia, for one thing) and the yen must stay above purchasing power parity (a term they don't like to refer to, btw, since it shows the yen to be overvalued). Also, the US insists that the current prime minister must carry out structural reforms.
This last part is interesting. Like how in the hell is he going to do that? By dictate? By legislation? I thought it wasn't the role of government to do anything but enforce fair trade. But there you go again, the US talks the free trade talk, but actually does anything but.
I'll make some predictions here and now:
-I think the US will make negative rhetoric out of obvious efforts by Japan to cheapen the yen, but will let it hold where it's at now (still overvalued). But if it goes beyond 140, they'll say, hey, you are using a cheap yen to stall on reforms. Jump now, boy!
-They'll push Japan on 'banking reform', which is a rather complex set of symptoms confused with the cause.
I predict more banks will go under and perhaps disappear. I also predict that the vultures of finance will make a killing off of the buying and selling of the assets (loan portfolios) forcibly stripped from these 'bankrupt' banks--which makes you wonder just how bad many of these loans were.
Certainly, many aren't as bad as some analysts say, but these analysts work for companies that want to move into the buying and selling of these assets, and they want to snap them up at huge discount. In some cases, the Japanese government took the very worst of the loans, paid the holding companies to take the good loans, and then these companies made a killing off the whole deal. I'm still pissed off about what US Prudential did to former Kyoei Insurance assets, since it cost me 5000 dollars when they took over Kyoei (after they helped to run it into the ground with all their bullshit analysis and consultation--for example, their advice that Kyoei should demutualize).
Three years ago I said it makes no sense stripping banks of all their assets and all potential for future profitability. The real problem, I said, was the deflating economy, not the bad and barely paying loan portfolios. Of course, you have to remember, that a lot of foreign expert analysis is actually linked to the interests of western banks which, if you got into their heads, you would find not only want their Japanese competitors gone from E. Asia but would also like a huge chunk of corporate banking in Japan as well. So realize their analysis about the 'bad loans' is tied up with their interests, none of them altogether that concerned about small and medium businesses in Japan (but it is such businesses already in place that would really be an engine for immediate future growth and restructuring, not the boob in office taking orders from the US).
Heck, I'll make a bolder prediction here and now. Now that Tanaka has been fired from her post as foreign affairs ministry, I predict she'll be someone's candidate for prime minister and will kick the current fake out of office. Don't get me wrong, I don't hate Koizumi because he isn't the reformer he claims to be. I hate him because I believe he is a danger. He's not just a fake. He's a genuine fake. He actually believes things like: putting a cap on bank deposit insurance will force Japanese to put their savings into equities, and this is good. He actually believes selling off the postal system will improve postal services (never mind that, besides rather high costs, no one complains about the postal service, or that most Japanese want to keep postal savings and insurance since they don't trust the private companies).
Charles Jannuzi