An examination of U.S. trade deficits and capital flows shows a stark contrast: Japan reinvests more than its trade surplus into U.S. securities, stabilizing American markets, while China fails to recycle its surplus and instead withdraws capital. This reality must be firmly conveyed in U.S.–Japan economic dialogue.

2017-04-23
What follows is a continuation of the previous chapter.
It is irrational for the Trump administration to place excessive weight on China, given the interests of the U.S. economy.
The graph shows capital inflows and outflows by combining the U.S. trade deficit in goods with purchases of U.S. Treasury bonds and other securities by foreign countries.
As the world’s largest debtor nation, the United States depends on capital inflows from abroad.
Even if the trade deficit is large, if the counterpart country recycles that amount through investment in U.S. securities, the American financial market remains stable.
At a glance, it is clear that Japan invests more funds into the U.S. securities market than the value of its trade surplus with the United States.
By contrast, China does not recycle its trade surplus with the United States through securities investment.
Last year, in addition to a trade surplus of 350 billion dollars, China sold 130 billion dollars’ worth of securities.
Japan is the anchor of U.S. financial markets, while China is little more than a naval mine.
Japan’s representative in the economic dialogue, Tarō Asō, who also serves as Minister of Finance, should firmly drive this point home to the American side.