surplus with the United States, according to Bergsten and Noland. This is because Japan imports large amounts from Saudi Arabia, Australia and Brazil, and exports to North America, Europe and the rest of Asia to pay for these imports. To this end, a trade surplus would be expected between the United States and Japan.
Attention has also been focused on the difference between the savings rates of Japan and America. There is an analogy which can be drawn between a country's savings and investments and its merchandise exports. Just as countries which produce more than they can consume export the surplus, so countries which do not consume their current income are able to export it in the form of capital outflow and goods. Countries that have high rates of savings tend to have account surpluses; countries that have low savings rates tend to have account deficits.
Savings and investing is done by three sectors in any economy: the household sector, the business sector, and the public sector. When considering the savings patterns for Japan and the United States, it is important to recognize that the two countries report these three sectors differently. Japan reports savings for each of the three sectors (the household and business sector combined make up the private sector). The United States reports its government expenditures as current consumption.
Despite these differences, Japan maintains rates of savings and investment approximately equal to double those of the United States. Because of its low savings rate, the United States depends on foreign savings to finance its investments; because of its high savings rate, Japan is in a position to supply capital to other countries. The changes in the savings rate since World War II are marked. Prior to World War II, the United States ranked second in its savings rate (behind Germany) among 10 industrialized nations, while Japan was seventh, above Norway and Denmark. Japan an...