Question

What is the United States investment in Japans international Business structure like, and how has the US strengthened or weakened their place in international business?

Answer 1

SOLUTION :

The United States and Japan are the two largest national economies in the world. The United States is the world's largest deficit and debtor country. Japan is the world's largest surplus and creditor country. The exchange rate between the dollar and yen has fluctuated violently, strengthening from 360:1 as recently as 1971 to 80:1 in early 1995 before weakening again to about 130:1 at present. Trade frictions over the past thirty years, leading to such extreme measures as America's import surcharge in 1971 and Japan's acceptance of "voluntary export restraints" in a wide range of industries in the 1980s, have threatened the stability of the global trading system. Hence the course of economic relations between the United States and Japan plays a critical role in the world economy as well as a central role in overall relations between the two countries.Japan's international economic relations in the first three decades after World War II were shaped largely by two factors: a relative lack of domestic raw materials and a determination to catch up with the industrial nations of the West. Its exports have consisted exclusively of manufactured goods, and raw materials have represented a large share of its imports. The country's sense of dependency and vulnerability has also been strong because of its lack of raw materials. Japan's determination to catch up with the West encouraged policies to move away from simple labor-intensive exports toward more sophisticated export products (from textiles in the 1950s to automobiles and consumer electronics in the 1980s) and to pursue protectionist policies to limit foreign competition for domestic industries.Through most of the postwar period foreign investment was not a significant part of Japan's external economic relations. Both domestic and foreign investments were carefully controlled by government regulations, which kept the investment flows small. These controls applied to direct investment in the creation of subsidiaries under the control of a parent company, portfolio investment, and lending. Controls were motivated by the desire to prevent foreigners (mainly Americans) from gaining ownership of the economy when Japan was in a weak position after World War II, and by concerns over the balance of payments deficits.