While part of the recent increase in the Japanese trade surplus can be attributed to the Japanese recession, the surplus has widened despite the appreciation of the yen and enactment of policies to open Japanese markets. We review the trade surplus issue in the light of theories of trade and current account adjustment. We evaluate the potential for exchange appreciation and Japanese fiscal policy to reduce the imbalance, estimating their effects using simulations of the NIRA-LINK model of the US-Japan-world economy. The simulations show that moderate use of macropolicies would not be sufficient to eliminate the trade imbalance.
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Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number
199404.
Find related papers by JEL classification: F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications
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