ABSTRACT
Natural market forces will correct much of the trade imbalance that threatens the US-Japanese bilateral relationship. A singular and simplistic focus on the bilateral merchandise trade imbalance is detrimental to overall good relations. Problems of structural adjustment as well as exchange rate fluctuations should be addressed through a coordinated bilateral approach. Probably the most complex issue in the US-Japanese relationship is how to coordinate policy responses to cyclical economic problems. In the case of Japanese-American relations, the process of structural adjustment will benefit consumers through the creation of better products at lower prices and will open new export markets to domestic producers. Japanese producers will lose some protection but they will gain from the benefits of cooperation in research, development, and procurement programs. The economic relations between Japan and the United States are important to the health of the international economic system that neither country can allow sectoral problems to undermine the essential strength and stability of the partnership.
