General Introduction

The nature of Japan’s trade frictions with the outside world, particularly with the EC and the USA, is rather complicated since there is no single or simple way of explaining them. From an economic point of view, at least two ‘scenarios’ can be entertained. The first is concerned with the mere existence of trade imbalances which is too simplistic an explanation since economists have long recognised a ‘balance of payments stages theorem’ which depicts that countries are bound to experience trade surpluses during particular phases in the development of their economies; these aspects are dealt with in Chapter 3. The second scenario digs deeper below the surface and considers a multiplicity of factors which might explain the tension, such as the particular characteristics of the Japanese market, the differences between the Japanese and other members of the OECD, etc.; this scenario is tackled in Chapter 4. There is a third scenario which is purely political, but since this book is basically concerned with economic arguments or political arguments based on economic factors, there is no place for a whole chapter on pure politics; therefore, I will discuss this scenario briefly in this Introduction. However, Chapter 7 is devoted to a comprehensive analysis of neo-protectionism, with a whole section on its political economy foundations; political economy is what the book is all about.