A bilateral trade agreement: Whilst the initial US list of demands is expected tobe heavy, below, the gains for Japan from improving its relatively poor servicesector labour productivity are so large that a win-win situation is possible.
The US-Japan bilateral auto sector trade deficit is equal to 70% of the totaltrade deficit, and is unlikely to diminish over any reasonable time horizon. Weexpect the US to insist on more US auto plants.
The total bilateral deficit could be reduced substantially through energy exportsto Japan, “and there are many high-paying American jobs that would be createdin our energy industries as a result” (Navarro & Ross, September 2016, Fig.7).
The Yen: Nonetheless, our conclusion is that Japan is about to endure aprotracted period of US pressure aiming to increase the value of the Yen versusthe US$.