By the end of the first world war, military exports to the Allies help Japan move from debtor to creditor nation.
A series of treaties on China with other major powers attempt to maintain good relations while protecting Japan's influence in China, an important source of raw materials and markets.
Global depression and tariffs hurt trade with the West, leading Japan to look to Asia for trade possibilities. Japan devalues the yen to help exports, sparking boycotts abroad but boosting exports for most of the Depression. But by 1937 ongoing depression abroad and falling production cause a drop in exports. Import bans cause a vicious cycle of falling production, exports, and imports.
Japan responds to a trade embargo with a military push into the Dutch East Indies in search of oil and other raw materials. The so-called Greater East Asia Coprosperity Sphere attempts to achieve political and economic integration of Asia under Japanese leadership.
During the war, 82 percent of Japan's ships and many factories have been destroyed, hampering postwar trade. Most of the production infrastructure is oriented toward satisfying military demand rather than consumer or other peacetime goods. Imports are initially limited to essential food and raw materials through the careful allocation of scarce foreign exchange.
The U.S.-implemented Dodge Plan helps international trade recover, putting an end to high inflation and price controls, and fixing exchange rates at a rate that gives Japan a competitive edge.
Central planning is rejected, although policies focus on increasing exports and moving to higher-value goods. Guided by the Ministry of International Trade and Industry (MITI), the export economy thrives in an increasingly open world, while tariffs and quotas protect domestic producers and deal with trade deficits. Foreign currency controls restrict imports, notably cars, until the late '50s.
In response to foreign pressure, a five-year plan for trade liberalization reduces the long list of restricted imports, though cars, some electronics, and many other goods remain restricted. In addition, less formal but effective restrictions remain a source of conflict with the United States, and some farm goods are officially protected through the 1980s.
To conform to IMF standards, Japan pledges not to restrict trade to improve its balance of payments and to end tax-free export earnings. Exports grow 17 percent annually in the 1960s, and after 1965 periodic trade deficits are no longer a problem. Higher-quality cars and electronics reach new markets, while at fixed exchange rates, exports became more competitive due to productivity gains.
Trade deficits caused by the rise in oil prices lead to a renewed push to increase exports. Merchandise exports rise 21 percent over the decade, though imports rise as well, so no huge surpluses result. The new round of oil shocks in 1979 lead to brief trade deficits again.
The '80s are marked by trade disputes and tensions over high Japanese investment abroad. These tensions transforms MITI, which now advises voluntary restraint on steel, TV, and car exports, going so far as to open an import-promotion office. Huge trade surpluses lead to U.S. calls for yen revaluation and open markets. Restrictions on imports fall, but nontariff barriers remain an issue.
Rising demand for imports eases some trade frictions and builds domestic pressure to reduce barriers in a country that has always prioritized producers over consumers. But huge surpluses and conflicts continue, particularly with the U.S., which classifies Japan as an unfair trading nation in 1989 and holds talks to reduce structural impediments such as distribution and investment practices.
The trade balance declines annually in the 1990s, hurt first by increasing competition from Asian countries and then by a regional and global economic slowdown. U.S. talks continue to include demands on the Japanese to open their markets to goods and retailers, but the talks also now include efforts to support the Japanese economy, unthinkable a decade before.
Japan depends on exports for some economic good news; when the dollar loses value in 2002, the government is suspected of intervening to keep Japanese exports competitive. The slowdown in the U.S. and the world economy, however, puts a damper on export growth.
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