The USA helped Japan recover and opened its market, but Japan's success led to serious trade friction from the 1970s.
The USA gave Japan aid, technology and access to the American market. The Korean War brought large US military orders, which boosted Japan's recovery. A fixed exchange rate of 360 yen to the dollar helped Japanese exports.
Japan's economy grew rapidly in the 1950s and 1960s. By the late 1960s, it ran trade surpluses with the USA, first in textiles and then in steel, cars and electronics.
In 1971 came the "Nixon shocks". Nixon announced his visit to China without consulting Tokyo, and ended the dollar's convertibility into gold, which pushed the yen up and hurt Japanese exporters.
Friction peaked in the 1980s. Japan agreed to limit car exports to the USA from 1981, and the 1985 Plaza Accord drove the yen sharply higher. A 1986 agreement covered semiconductors. Americans complained that Japan's own market was closed, while Japan argued that US weaknesses were to blame.
- Korean War orders
- Boosted Japan's recovery from 1950.
- Nixon shocks
- 1971: China visit announced; end of gold convertibility.
- Car export limits
- From 1981.
- Plaza Accord
- 1985: yen rises sharply.
Worked example: Economic status as a factor
How did Japan's economic status shape its relations with the USA?
- Early: dependence on US aid and markets tied Japan closely to the USA.
- Later: Japan's success created trade friction and US resentment.
- Pressure: the USA used currency and trade agreements to change Japanese behaviour.
- But security interests kept both sides committed to the alliance.
Watch out for this
Trade friction caused Japan and the USA to end their alliance.
Trade disputes were serious, but both sides kept the security alliance. Economic friction coexisted with strategic cooperation.
Check your understanding
Why did the 1971 "Nixon shocks" upset Japan?
- Nixon announced his China visit without consulting Japan and ended gold convertibility.
- Nixon withdrew all US troops from Japan.
- Nixon banned Japanese imports.