Source: Global Times.
According to the Ministry of Finance of China, the first meeting of the China-United States Economic Working Group was held by video on 24 October, during which the two sides communicated on the issues of the two countries and the global macroeconomic situation and policies and bilateral economic relations. According to the external analysis, the establishment of the Working Group marked the first time since 2018 that China and the United States had resumed regular economic dialogue and sent a signal of further improvement in their relations. Trade conflicts erupted between China and the United States, and some often compared them to those between Japan and the United States decades ago. The book Prosperity and Stagnation — Japan's Economic Development and Transformation — discussed in depth the trade war between Japan and the United States that began in the 1950s. One of the authors of the book, the Director of Economics Studies at the University College of Tokyo, Japan, and Professor Yoo-Yo, in his recent interview with the Global Times, focused on how Japan-United States had resolved a large number of trade conflicts and presented its views through an analysis of the “lost 20 years” of Japan's economy.
Japan’s Lessons from the American Trade War
Globe Times: The Japanese-American trade war lasted from the 1950s to the first decade of the twenty-first century and covered a wide range of areas such as textiles, steel, television, machine beds, cars and semiconductors. The United States had seen Japan as the “first enemy” and had been in a state of compromise, but had also accumulated considerable experience in trade negotiations with the United States. What are the most important lessons learned by Japan?
Star-Yo-Yo: Japan-United States Trade War did take a long time, but Japan and the United States have learned how to resolve economic disputes. I believe that the key is to establish strong channels of communication between the two sides through multiple negotiations on many structural issues involving Japan and the United States. The development of the World Trade Organization dispute settlement mechanism, as well as the confidence of Japan and the United States in it, also played a key role.
Globe Times: There is a view that when the Japanese-American semiconductor trade conflict occurred in the 1980s and 1990s, Japan had mastered the technology in key areas of the chip industry, while some of China ' s current key technologies in the semiconductor sector remained hostage. What, in your opinion, would be the end result of the United States blockade of China in key areas such as chips?
YUSUSUSUS: In fact, I think that the current technological dynamics in Central America are similar to those in Japan in the 1980s. Japan was able to catch up with advanced technology in the United States, as was China today. The large volume of United States imports from Japan at that time was one of the major causes of trade conflicts in some industries in Japan and the United States. I think the same is true of the American-Chinese conflict.
Moreover, there is no trade war. Both countries will fail in war, and a successful settlement of trade disputes will benefit both countries.
Globe Times: With regard to trade wars in the chip field, in the 1990s, the United States learned a very important lesson that setting quantitative targets (i.e. the semiconductor agreement between the United States and Japan requires that the market share of semiconductors produced by foreign firms reach a certain percentage in Japan — the editor’s note) was a very effective tool for opening up the Japanese market. And Japan has learned the lesson from the Japan-United States Semiconductor Agreement that it will never agree to any quantitative goals. Do you think that the United States will copy this experience into the trade war against China?
Starring Yue: The quantitative target is a tool for the United States to try to open up the Japanese market. In the negotiations with Japan's semiconductor, an important goal for the United States was to open its own market to foreign (not just United States) manufacturers. In the current dispute with China, however, the United States appears to be interested in opening up Chinese markets rather than in restricting China ' s access to United States markets and technology.
Globe Times: With regard to the Japanese-American trade war, there is a detail in The Prosperity and Stagnation book: Japan encourages imports in order to ease pressure from the United States. In 1985, Prime Minister Kensaku Nakaagan advised every Japanese citizen to buy $100 worth of imported goods, which could reduce the Japanese-American trade surplus by $12 billion, and even to buy imported tie and wine for that purpose. What do you think about that?
Mr. Star-Yo: In fact, I doubt the validity of the practice of Zhonghong-hong. Encouraging Japanese consumers to buy more foreign products would not significantly reduce the trade surplus. Pressure from abroad can help Japan’s economy if it translates into encouraging Japanese policymakers to promote beneficial economic reforms, such as deregulation of the retail sector or increased protection of intellectual property rights.
"Twenty lost years," a serious mistake by Japan.
Globe Times: The view was expressed that the economic policy package introduced by then Prime Minister Shinzo Abe of Japan in 2013 ended the “lost 20 years” of the Japanese economy (approximately 1992-2012). It was also analysed that the Japanese economy had not emerged from a long period of downturn and was experiencing “thirty lost” or more. What trends do you think will emerge in the economic development of Japan over the next decade?
The “Abenomics” ended the “lost 20 years” because it (especially the expansionary monetary policy) eventually pulled Japan's economy out of deflation. Although inflation remains low, Japan has at least not been deflationary. However, even after deflation had ended, Japan ' s economic growth remained weak. The growth strategy of Abenomics sought to increase the potential growth rate of the Japanese economy, but it was less effective than its demand-side policies.
The next decade of the Japanese economy depended on Japan ' s eventual transformation of its traditional economic system, which was working well at the stage of catching up with the gap with the developed economies but was no longer working.
Globe Times: What was Japan's worst economic policy mistake in the lost 20 years?
Mr. Star: It's hard to determine a single policy error. We have considered many of the “if” issues of economic policy in the “lost two decades” and believe that more sustained expansionary macroeconomic policies would be helpful. It was also a serious mistake for Japan to allow the Zombie Enterprises to continue to operate without a serious business restructuring.
Globe Times: Japan tried to build Japan's Silicon Valley at the beginning of the last century. Why has it not been successful?
Starring Yue: Silicon Valley's success is not just a result of industrial convergence. Financing support for Silicon Valley ecosystems, labour mobility, creative creation and dissemination, and entrepreneurship are very different from the system that supported rapid economic growth in Japan in the 1950s and 1970s. Japan has not been able to upgrade its system to accommodate innovation-based economic growth, which is essential for developed economies.
"The Chinese economy is not destined to follow Japan's old path."
Globe Times: Is there a similarity between China's current economic development situation and that of Japan at some point?
Mr. Star: I think China has ended the phase of economic growth. China now needed an economic system that was suitable for growth based on innovation, which Japan had failed to do.
Globe Times: There's a saying in the Western media that China is following Japan's old path, an ageing population, a war with the United States, and a slowdown in economic growth, all of which Japan has experienced. In your opinion, will China also follow the Japanese trajectory and eventually reach the same end point as the Japanese economy at present?
Yung Yue: Indeed, China is going through many of Japan's previous experiences. But this similarity does not mean that the Chinese economy will be caught in the long-term stagnation we have seen in the Japanese economy.
The Chinese economy is not destined to follow Japan’s old path. China will not experience the “lost decades” of the Japanese economy. This also depends in part on the economic policy chosen by China.