ABSTRACT
Whether the perennial economic negotiations between the United States and Japan are advertised as a "Structural Impediments Initiative" as in the 1980s, or as a "Strategic Trade Policy" initiative as in the present, the accompanying dialogue follows a similarly ritualistic pattern. According to the ritual, the Americans begin and conclude by vigorously asserting that the fundamental problem is Japan's closed markets, and the obvious remedy is to open them. The American stance in the standard ritual is irrelevant because, while Japan's domestic markets are demonstrably less permeable than markets elsewhere, the US current account deficit—covering both merchandise and services trade with Japan as well as with the rest of the world—does not result from that fact. The excess of Japan's domestic savings over its domestic investment is the mirror image of the US shortfall of savings over its domestic investment, and this excess is the fundamental source of Japan's chronic export surpluses.
