The Recommendable Economic Policies to Improve the Trade Conflict between the U.S.A.and Japan

In 1988, the Japanese export was 259.8 billion dollars and the import was 164.7 billion dollars. The excess export was 95.1 billion dollars. On the other hand, the U.S. export was 321.8 billion dollars and the import was 441.6 billion dollars. Then, the U.S. trade deficit was 119.8 billion dollars and the U.S. trade deficit to Japan was 52.1 billion dollars. In 1987, the U.S. trade deficit to Japan was 56.3 billion dollars. Therefore, the U.S. trade deficit to Japan is gradually decreasing, but the percentage to Japan is gradually increasing on the contrary. The U.S. economists claim to improve the U.S.-Japan trade imbalance against Japan. Many economists expected that an increase of yen would improve the U.S.-Japan trade imbalance. But, in spite of increasing of Japanese yen, the U.S. trade deficit to Japan did not decrease contrary to their expectations. Some economists explains that it is because of the J curve effects. In this paper, we are going to analyze the effects of change of exchange rate and the effects of monetary and fiscal policies on improving of the U.S.-Japan trade imbalance