Introduction

The U.S.–Japan “trade problem” is acute. The media in the United States constantly report on Japan's failure to open its markets and on the invisible and inscrutable trade barriers that successfully keep imports out of Japan despite low tariffs. Japan Inc. is the issue.

This chapter is concerned with three aspects of the problem: (1) its origins; (2) the validity of the complaints against Japan; and (3) some policy options for Japan in light of these complaints.

Japan's long-run trade problem

The first point to note is that Japan has always had problems with its trade relations, principally with respect to its exports. During the 1930s, for example, Japan faced serious complaints and extensive trade discrimination directed at its exports. The resulting policies were similar to the voluntary export restraints (VERs) that are placed on its exports today. Although the trade barriers prior to 1932 were directed at trade in general – in part because of the world depression and in part because of attempts by developing countries to restrict imports in general – after 1932 (especially during 1934 and 1935), one country after another resorted to high tariffs and import quotas, and even VERs, directed specifically against Japan (Uyeda, 1936).

This problem persisted despite Japan's trade deficits with many of the countries that practiced such discrimination. The problem was precipitated largely by Japan's rapidly expanding market penetration in several sectors, which reflected Japan's rapid growth and high import dependence.