POLI 243 Chapter 23: Power, Money, and Trade
Chapter 23
Japan International Monetary policy
April 5, 2016
Questions:
1. What attributes to Japan's economic troubles in the 90s?
2. Is the Japanese central bank considered very independent?
3. What led to the policy change in 1987, according to Kamikawa?
4. Interpret the monetary relations from the 80s to the 90s with the systemic, domestic, and
bureaucratic politics approaches.
Summary:
• US trade deficit in the 1980s due to tight monetary policies leading to high levels of
deflation
o Rising foreign debt – defeating stagflation with foreign finances
o Central bank wants high exchange rates, treasury worries about growing deficit
• US treasury looks for foreign capital by altering tax laws – the FED tightens domsestic
monetary supply
• Large banks seem most likely to lobby the Fed/treasury
o Mixed portfolio buffered them from exchange rate shocks – turned exchange
fluctuations into profit
• 1988 trade act included bills legislating foreign exchange market intervention and import
duties
o Gives Congress power ot review the Treasury's exchange rate policy ever 6
months
o Protectionism subsides in the US
• Treasury multi-lateral approach: deal with the trade imbalance directly, while convincing
other countries it could preempt the threat of protectionism.
o Issue of central bank goals (institutional independence) over price stability and
economic growth
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