Japan v. U.S.? Trump Is So Eighties On Trade

Japan's trade surplus with the U.S. is mostly not about protectionism or aggressive Japanese policy — it's about macroeconomics.

A Toyota plant in Kentucky in 2008
A Toyota plant in Kentucky in 2008
Noah Smith

TOKYO — On his recent trip to Japan, President Donald Trump sounded more like a 1980s trade negotiator than a 2010s statesman. He urged Japan to invest more in the U.S., buy more military equipment and import more liquefied natural gas, and generally pressed for other measures that he thinks will reduce his country's trade deficit with its main Pacific ally.

But Trump is focusing on the wrong things. Japan's trade surplus with the U.S. is mostly not about protectionism or aggressive Japanese policy — it's about macroeconomics. And it might not need to be remedied.

The bilateral trade deficit is certainly real. Japan continues to export much more to the U.S. than it imports:

Why does this deficit exist? In the past, Japan was a very protectionist nation. In the 1980s, Japanese bureaucracies got very creative with reasons not to allow foreign products into the nation — the classic example involved banning foreign skis because they were supposedly unsuited to the country's unique snow.

But much has changed since the 1980s. First, Japan's government gradually realized that restrictions like this were likely to harm Japanese companies. Maintaining different standards than the rest of the world tends to keep Japan, Inc. penned up within the small Japanese market — a danger known as "Galapagos Syndrome." That realization, plus a series of successful trade talks with the U.S. in the 1990s, made Japan much more open to American products. Nowadays, for example, Japanese people vastly prefer American iPhones to domestic brands — this would probably be inconceivable in the 1980s.

Japan-U.S. trade has also changed a lot. As many commentators were quick to point out when Trump called for more Japanese factories in the U.S., this shift has already mostly happened. Japan is the second largest source of U.S. foreign direct investment after the UK, pumping hundreds of billions of dollars a year into the economy and employing huge numbers of American workers. Most of the Japanese brand cars sold in the U.S. are made in North America. Some of that is in Mexico, but much — for Nissan, around three quarters — is made in the U.S. According to, the Toyota Camry is the most U.S.-made car.

When the U.S. fails to do the same in Japan, it pumps up the trade deficit.

There are some areas where further trade negotiations might open up the Japanese market a bit more. Some non-tariff barriers do still exist — for example, in the way that Japan approves cars for import. Additional efforts to harmonize product standards would be beneficial. And Japan should drop many of its trade barriers in agriculture — the last area where the country is actively protectionist — and replace them with a system of subsidies like those used in the U.S. But these measures are unlikely to solve the issue of the bilateral trade deficit.

The real reason for the persistent deficit is probably macroeconomic. A basic fact of international trade is that a trade deficit has to be matched with a current account deficit — in other words, if the U.S. buys more goods and services from Japan than vice versa, it must pay with I.O.U."s. Financial assets are the I.O.U."s — that's why a trade deficit can just as easily be seen as an imbalance of financial investment. When Japan buys U.S. bonds, stocks, or car factories, and the U.S. fails to do the same in Japan, it pumps up the trade deficit.

Japan's government has been a big buyer of U.S. bonds, sustaining its purchases of Treasuries even as China has sold some of its own holdings. Should the U.S. demand that Japan sell off some of these holdings? That would probably reduce the bilateral trade deficit: The yen would strengthen against the dollar, prompting Japanese people to buy more cheap U.S.-made goods and discouraging Americans from purchasing expensive Japanese ones.

But Japan dumping U.S. bonds could also lead to higher interest rates in the U.S. If the Federal Reserve were unwilling to step up and fill the gap by easing monetary policy — and there are signs that the Fed is dead set on tightening — that could slow the U.S. economic recovery.

A far better strategy for reducing trade deficits would be to get the Fed to hold off on its tightening plans. Monetary easing would put pressure on the dollar to depreciate, not just against the yen but against many other currencies as well. Since there's little sign of inflation, this also seems like a safe move. If that doesn't solve the bilateral trade deficit, encouraging American companies to do more direct investment in Japan would be an additional measure.

In other words, Trump and his team need to recognize that the 1980s are over. Japan is a good trade partner, an important ally, and a key source of investment into the U.S. Monetary easing, rather than aggressive jawboning, is the best approach to the imbalances that remain.

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How Thailand's Lèse-Majesté Law Is Used To Stifle All Protest

Once meant to protect the royal family, the century-old law has become a tool for the military-led government in Bangkok to stamp out all dissent. A new report outlines the abuses.

Pro-Democracy protest at The Criminal Court in Bangkok, Thailand

Laura Valentina Cortés Sierra

"We need to reform the institution of the monarchy in Thailand. It is the root of the problem." Those words, from Thai student activist Juthatip Sirikan, are a clear expression of the growing youth-led movement that is challenging the legitimacy of the government and demanding deep political changes in the Southeast Asian nation. Yet those very same words could also send Sirikan to jail.

Thailand's Criminal Code 'Lèse-Majesté' Article 112 imposes jail terms for defaming, insulting, or threatening the monarchy, with sentences of three to 15 years. This law has been present in Thai politics since 1908, though applied sparingly, only when direct verbal or written attacks against members of the royal family.

But after the May 2014 military coup d'état, Thailand experienced the first wave of lèse-majesté arrests, prosecutions, and detentions of at least 127 individuals arrested in a much wider interpretation of the law.

The recent report 'Second Wave: The Return of Lèse-Majesté in Thailand', documents how the Thai government has "used and abused Article 112 of the Criminal Code to target pro-democracy activists and protesters in relation to their online political expression and participation in peaceful pro-democracy demonstrations."

Criticism of any 'royal project'

The investigation shows 124 individuals, including at least eight minors, have been charged with lèse-majesté between November 2020 and August 2021. Nineteen of them served jail time. The new wave of charges is cited as a response to the rising pro-democracy protests across Thailand over the past year.

Juthatip Sirikan explains that the law is now being applied in such a broad way that people are not allowed to question government budgets and expenditure if they have any relationship with the royal family, which stifles criticism of the most basic government decision-making since there are an estimated 5,000 ongoing "royal" projects. "Article 112 of lèse-majesté could be the key (factor) in Thailand's political problems" the young activist argues.

In 2020 the Move Forward opposition party questioned royal spending paid by government departments, including nearly 3 billion baht (89,874,174 USD) from the Defense Ministry and Thai police for royal security, and 7 billion baht budgeted for royal development projects, as well as 38 planes and helicopters for the monarchy. Previously, on June 16, 2018, it was revealed that Thailand's Crown Property Bureau transferred its entire portfolio to the new King Maha Vajiralongkorn.

photo of graffiti of 112 crossed out on sidewalk

Protestors In Bangkok Call For Political Prisoner Release

Peerapon Boonyakiat/SOPA Images via ZUMA Wire

Freedom of speech at stake

"Article 112 shuts down all freedom of speech in this country", says Sirikan. "Even the political parties fear to touch the subject, so it blocks most things. This country cannot move anywhere if we still have this law."

The student activist herself was charged with lèse-majesté in September 2020, after simply citing a list of public documents that refer to royal family expenditure. Sirikan comes from a family that has faced the consequences of decades of political repression. Her grandfather, Tiang Sirikhan was a journalist and politician who openly protested against Thailand's involvement in World War II. He was accused of being a Communist and abducted in 1952. According to Sirikhan's family, he was killed by the state.

The new report was conducted by The International Federation for Human Rights (FIDH), Thai Lawyer for Human Rights (TLHR), and Internet Law Reform Dialogue (iLaw). It accuses Thai authorities of an increasingly broad interpretation of Article 112, to the point of "absurdity," including charges against people for criticizing the government's COVID-19 vaccine management, wearing crop tops, insulting the previous monarch, or quoting a United Nations statement about Article 112.

Juthatip Sirikan speaks in front of democracy monument.

Shift to social media

While in the past the Article was only used against people who spoke about the royals, it's now being used as an alibi for more general political repression — which has also spurred more open campaigning to abolish it. Sirikan recounts recent cases of police charging people for spreading paint near the picture of the king during a protest, or even just for having a picture of the king as phone wallpaper.

The more than a century-old law is now largely playing out online, where much of today's protest takes place in Thailand. Sirikan says people are willing to go further on social media to expose information such as how the king intervenes in politics and the monarchy's accumulation of wealth, information the mainstream media rarely reports on them.

Not surprisingly, however, social media is heavily monitored and the military is involved in Intelligence operations and cyber attacks against human rights defenders and critics of any kind. In October 2020, Twitter took down 926 accounts, linked to the army and the government, which promoted themselves and attacked political opposition, and this June, Google removed two Maps with pictures, names, and addresses, of more than 400 people who were accused of insulting the Thai monarchy. "They are trying to control the internet as well," Sirikan says. "They are trying to censor every content that they find a threat".

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