The two preeminent economies of the world – those of Japan and the United States – are headed on a collision course. The bilateral trade imbalance between the two countries is at a record level and is receiving increasing attention from government officials, business leaders, and the general public. In spite of the perceived importance of the problem, its causes and consequences are still not fully understood. Although there is agreement on some of the more general causes, there is substantial disagreement as to the seriousness of this problem and the likely nature of its resolution. Furthermore, as Japan and the United States become increasingly interdependent, the severity of the problem is likely to escalate.

What happens to Japan – U.S. trade relations and trade imbalances over the next few years will be of critical importance. At stake is nothing less than the future prosperity of the world economy, for adverse economic effects on Japan and the United States can generally be expected to harm each and every country with which these two economic superpowers do business.

This collection of essays evaluates the important issues just mentioned from the perspectives of leading economists in the areas of macroeconomics, international trade, and Japan – U.S. business and economic issues. The book is divided into three sections: Part I focuses on the importance of U.S. macroeconomic policy for the trade imbalance, Part II on the microeconomic causes of the problem, and Part III on Japan's role in the trade imbalance and what actions it is likely to take to help alleviate this problem.