Japanese macroeconomics defied standard Western economic laws

Evidence

Overall the Japanese economy has not operated in the way the supposedly universal laws of Western economics dictate. The easy assumption by Western economists in the 1980s that devaluing the dollar would reduce the Japanese trade surplus proved false. While the Plaza agreement of 1985 rectified the American trade deficit with Europe, it had little effect on the deficit with Japan. As the yen appreciated to less than one hundred to the dollar, the Japanese trade surplus remained high and even increased. The Japanese were thus able to sustain both a strong currency and a trade surplus. Western economic thinking tends to posit a negative trade-off between unemployment and inflation, with an unemployment rate significantly less than 5 percent thought to trigger inflationary pressures. Yet for years Japan had unemployment averaging less than 3 percent and inflation averaging 1.5 percent. By the 1990s both American and Japanese economists had come to recognize and to conceptualize the basic differences in these two economic systems. Japan’s uniquely low level of manufactured imports, one careful study concluded, “cannot be explained through standard economic factors.” “The Japanese economy does not follow Western logic,” another analyst argued, “whatever Western forecasters say, for the simple reason that it is not a Western free-market economy. The Japanese…have invented a type of economics that behaves in ways that confound the predictive powers of Western observers.” — Samuel P. Huntington, The Clash of Civilizations and the…, 606 (#corroborates, via linked claim)

Categorization

• XREF: connects to: Japan refutes the theory that manufacturing declines with economic maturity — Alex Callinicos, Against Postmodernism: A Marxist…, 466; Japan invented quantitative easing and the West copied it — Yanis Varoufakis, Technofeudalism: What Killed Capitalism, 965; Japan’s economy defied Western economic predictions about currency, inflation, and unemployment — Samuel P. Huntington, The Clash of Civilizations and the…, 606 (+5 more)

Broader Connections

• Japan’s economy defied Western economic predictions about currency, inflation, and unemployment #corroborates (0.97) — Samuel P. Huntington, The Clash of Civilizations and the…, 606