U.S. State Department Geographic Bureaus: East Asia and Pacific Bureau

U.S.-Japan Economic Relations

Fact sheet released by the Bureau of East Asian and Pacific Affairs,
U.S. Department of State, July 28, 1997.

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The United States and Japan are the two largest economies in the world, comprising about 30% of global output. Japan is a major market for many U.S. manufactured goods, including chemicals, pharmaceuticals, photo supplies, commercial aircraft, plastics and medical and scientific supplies. Japan is the largest foreign market for United States agricultural products.

The U.S.-Japan bilateral economic relationship is strong, mature, and increasingly interdependent, based on enormous flows of trade, investment and finance. The relationship is firmly rooted in the shared interest and responsibility of the U.S. and Japan to promote global growth, open markets, and a vital world trading system.

The United States' economic policy toward Japan aims to increase access to Japan's markets, to stimulate demand-led growth in the Japanese economy, and to thereby raise the standard of living in both the U.S. and Japan. This policy is pursued under the U.S.-Japan "Framework for a New Economic Partnership," which addresses sectoral, structural and macroeconomic issues in the U.S.-Japan bilateral economic relationship. In addition to close bilateral economic ties, the U.S. and Japan cooperate closely in multilateral fora such as the World Trade Organization, the World Bank, the International Monetary Fund, and the Asia-Pacific Economic Cooperation forum (APEC).

The United States and Japan have over the last decade signed numerous bilateral agreements to open Japan's markets in a wide variety of sectors, including computers, beef, citrus, manufactured tobacco products, paper and semiconductors. These agreements have resulted in some encouraging trends: between 1986 and 1996, U.S. exports to Japan increased dramatically, rising from $27 billion to $68 billion. In certain sectors, U.S. firms have gained a significant or even dominant share in the Japanese market. As part of the GATT Uruguay Round agreement, Japan agreed in 1993 to open its rice market and to cut or eliminate quotas on a wide range of other goods.

There are considerable investment flows between the United States and Japan, and many American companies have found Japan to be a profitable market. However, American firms continue to encounter a range of formal and informal barriers to investment in Japan, and Japan hosts a far smaller share of global foreign direct investment than any of its industrialized counterparts. Japanese direct investment in the United States, mostly in manufacturing, real estate and finance, rose dramatically in the 1980s, then leveled off somewhat in the 1990s.

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