Japan as a World Economic Power

This article examines whether Japan's economic success will last or will be short-lived. The first half analyzes the reasons for the relative decline of the United States from such perspectives as changes in the competitiveness of major industries in the United States and Japan, the mismanagement of macroeconomic policy under the Reagan administration, and the overvaluation of the dollar in the mid-1980s. Therein lie a number of lessons for Japan, a new economic power, in charting its future course of action. The second half discusses Japan's tasks from now on. Its once large current-account surplus has begun to decline, and it is no longer feasible to concentrate only on augmenting domestic demand. First, Japan must be more concerned with the balance between domestic demand and current-account surplus, so as to fulfill its international responsibilities through overseas economic cooperation. Second, the considerable size of Japan's current-account surplus makes all the more necessary some kind of rules or philosophy, acceptable internationally, to serve as a guide in reallocating some of the surplus by region and purpose.