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Japan-U.S. Trade

April 26, 1993

It is a sign of continuing economic illiteracy that Japan bashers (April 12) continue to rail against the surplus in Japanese trade vis-a-vis the U.S., without noting that this is the other side of the coin of the deficit on the Japanese capital account, whereby Japan exports a part of its savings to the rest of the world, in particular the U.S. There is a quick way for the U.S.-Japan trade imbalance to be reversed. The Japanese could ban all capital exports to the U.S. This would balance U.S.-Japanese trade but also lead to an immediate U.S. debt crisis which would dwarf that experienced by most Latin American countries in the 1980s. Is this what the Clinton Administration's incipient Japan-bashing hopes to achieve?

DEEPAK LAL

James Coleman Professor of International

Development Studies, UCLA

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