Asia, Japan and the internationalization of effective demand

Abstract

This paper examines the implications of Japanese relations with the growing economies of East and South East Asia. It is shown that, in macroeconomic terms, these relations are characterized by persistent and expanding current account surpluses in favour of Japan. Indeed East and South East Asia is becoming the area with which Tokyo obtains the largest current account surplus. The implications of these surpluses for the area are examined. In particular, it is argued that Japan’s persistent surpluses constitute an implicit factor of stagnation. Drawing on the analysis of Keynes and Kalecki, it is the contention of this paper that unless Japan and the rest of Asia maintain surpluses with the rest of the world, especially the USA, then the region will experience real anti-Keynesian tendencies. This view is contrasted with the orthodox view, as manifested in a recent OECD report, according to which Japan’s surpluses not only do not represent a problem, but also aid development elsewhere by providing much needed capital to countries where it is supposed to be scarce.