American-Japanese Trade and Exchange Analysis

Japan and China each account for around 9% of U.S. international trade. Americans have historically had a large trade deficit with Japan, as American consumers highly value many Japanese electronic products.

Japanese-American exchange rate and international trade data for 2002 and 2003 is located on the bottom of this article. The column JPN YEN indicates how many Japanese Yen can be purchased with 1 U.S. Dollar. An increase in this number represents a strengthened (apperciated) U.S. Dollar, and a decrease in this number represents a weakened (depreciated) one. The column JPN DEF indicates the size of the trade balance the U.S. has with Japan. All the numbers in that column are negative, indicating that the United States has a trade deficit with Japan. The numbers are in millions of U.S. Dollars, so -6436.60 across from Oct-03 indicates that U.S. trade deficit with Japan was 6.4 billion dollars for the month of October 2003.

The U.S. Dollar has depreciated significantly against the Japanese Yen for the last 2 years, with 1 U.S. Dollar buying 132 yen at the beginning of 2002 but only 109 yen in October 2003, a drop of 17.5%. During this time the trade deficit has become larger, with the third largest trade deficit in the last 22 months occuring in the last month of the sample. Interestingly the correlation between movements in the exchange rates and movements in the trade balance is zero, indicating that there is no relationship between changes in the two. I'm not sure what this data is telling us. One interesting thing to note is that the largest trade deficit in this sample occured during December. This is likely because consumers increase their expenditure on Japanese made gifts around Christmas.

Like the Canadian-American data, the Japanese-American data tells us little about why the U.S. trade deficit remains so large. While the U.S. Dollar has fallen considerably against the Japanese Yen, the trade deficit continues to grow larger, which is contrary to our intitution. Perhaps China, like Mexico, can shed some light on the situation. To learn more about American-Japanese Trade you'll want to read these articles:

LINKS

• Economic Council of Advisors - U.S. Trade Policy With Japan
• Industry Week - Mixed Blessing in Japan

Next Section: Chinese-American Trade and the Chinese-American Exchange Rate

LIST OF SECTIONS

• Section 1: The Trade Deficit and Exchange Rates
• Section 2: Canadian-American Trade and the Canadian-American Exchange Rate
• Section 3: Mexican-American Trade and the Mexican-American Exchange Rate
• Section 4: Japanese-American Trade and the Japanese-American Exchange Rate
• Section 5: Chinese-American Trade and the Chinese-American Exchange Rate
• Section 6: Conclusion