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March/April 1991, 
Vol. 73, No. 2
Posted 1991-03-01

Trade Imbalances and Economic Theory: The Case for a U.S.-Japan Trade Deficit

by Alison Butler

Alison Butler examines the possible causes of this bilateral trade deficit. She analyzes whether this deficit is a natural implication of Japanese and U.S. macro and microeconomic policies or, in fact, results from unfair Japanese trade practices. She finds that much of the trade imbalance is due to the composition of trade in the two countries as well as their savings and investment behavior.