NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Is the Japan Problem Over?

Paul Krugman

NBER Working Paper No. 1962
Issued in June 1986
NBER Program(s):   ITI   IFM

This paper argues that Japan's export growth is likely to slow sharply over the next few years, perhaps to zero. For the past dozen years Japan's export volume has gown much more rapidly than her domestic production. This divergence was made necessary primarily by rising oil prices, and secondarily by a shift into current account surplus. Now both these factors are running in reverse. If Japan's export growth does slow sharply, the mechanism will be a very strong yen -- probably above 140. The paper argues that it is Japan's export growth rather than static trade structure that is the main cause of trade tension, so these developments should lead to a considerable reduction in trade friction.

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Document Object Identifier (DOI): 10.3386/w1962

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