NO. 30 &emdash; August 8, 1997


Feature Article


Japan's international creditor position, which first drew attention in the 1980s when it became the world's largest, continues to grow despite the deterioration in that country's economic performance in the 1990s. America's role as the world's largest debtor also still is expanding, notwithstanding its much-praised economic record in the mid-1990s. These opposite positions give Japan and the United States different perspectives on the formation of international economic policy. To date, however, they have not had the effect predicted a decade ago of transferring to Tokyo significant leverage over the world financial system. In fact, one measure of dominance &emdash; the role of the yen in international trade and finance &emdash; arguably has diminished in recent years.

The greatest impact over time of Japan's steady accumulation of net assets abroad is likely to come in the form of effects on the value of the yen and, as a consequence, on trade flows. Income from foreign assets indirectly could cause Japan to have a trade deficit within a decade, other factors equal. This result has been slow in arriving because the structure of Japan's offshore assets implies relatively low rates of return.

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Weekly Review

Yen Shows Renewed Weakness by Douglas Ostrom

Where is Mr. Yen? That question was being asked in Japan in early August as the Japanese currency once again showed signs of falling against the dollar. From an average of ¥115.2=$1.00 in July, the yen dropped to around the ¥119 level in the early days of August, with few signs that policymakers in Tokyo or other major world capitals stood ready to intervene. Absent a reversal, the yen could end up weaker in August than in any month since April, when it averaged ¥125.5=$1.00.


Changes Sparking Next Stage Of Japan's Venture Capital Sector by Jon Choy

According to a recent survey by Nihon Keizai Shimbun, 98 of Japan's private venture capital firms pumped ¥231.8 billion ($2.3 billion at ¥100=$1.00) into domestic venture enterprises in FY 1996 (ended March 31, 1997) &emdash; 50.8 percent more money than the year before. The number of start-ups receiving funding from the survey group also soared, climbing 64.1 percent to 3,017 companies. Perhaps most encouraging, the Nikkei study showed that Japanese venture capitalists were more focused on investing in firms less than five years old &emdash; the ¥13.7 billion ($137 million) logged in FY 1996 was double the previous year's level &emdash; and providing greater managerial support to the start-ups they nurture financially.


Despite U.S. High Tech Resurgence, Report Cites Importance Of Bilateral Ties by Eric Altbach

This country has made great strides toward restoring competitiveness in high technology industries that were under siege in the late 1980s, when Japan appeared to be about to surge ahead. Nonetheless, policymakers in Washington must recognize the need for continued public and private investment in research and development and pay close attention to the U.S.-Japan relationship in science and technology. That is the bottom line of a report released July 28 by the National Research Council, the operating arm of the National Academy of Sciences, which has a congressional mandate to advise the government on scientific and technical matters.



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