Why have Japanese exports increased so dramatically over the past few years? A conspiracy by Japan, Inc.? No; simply the result of a large oil import bill and a high savings rate. The excess of exports over imports equals the excess of domestic production over domestic spending. If spending is lower than income, as it is in Japan, the surplus of goods and services not absorbed at home will be exchanged for claims abroad.

Even a large rise in its oil import bill will not affect Japan's trade balance once markets have fully adjusted. To be sure, higher oil prices will affect the mix of spending by the Japanese. They will spend more on oil and less on other goods. And in the short run, it's most likely that their trade balance will decline.

But if the Japanese maintain their production and savings rates, as they have tended to do, the domestic goods they no longer buy will be available for export. And either by directly lowering their prices or because market forces will depreciate the yen in the face of an oversupply of Japanese products, Japanese producers will find buyers abroad.

The cheapness of Japanese products has alarmed their competitors. Many point out the large trade surplus between Japan and other developed nations and ignore the corresponding deficit between Japan and the oil-exporting nations. To change this imbalance, they call on the Japanese to remove the non-tariff barriers that impede foreign sales to Japan. Such steps are well worth taking, but it's important to understand the full implications of more exports to Japan. In the short run, more Japanese imports will cause a decline in Japan's trade balance. But if the Japanese buy more foreign goods and leave the overall ratio of their spending to income unchanged, they will free up domestic goods for sale abroad. Everything else being equal, the yen will decline, and Japanese exports will rise.

The ratio of Japanese exports to GNP is unusually low. By keeping their markets closed, the Japanese are keeping all those TV sets, steel and automobiles for themselves. A more open Japanese economy will be good news for foreign exporters and consumers. But for steel producers, automobile makers and other manufacturers in foreign markets (who aren't likely to derive much benefit from access to Japanese markets) it will mean more competition from abroad.

If the Japanese are going to import more, they're also going to export more. If we want more cheap Japanese exports let's encourage the Japanese to open up their market. But if it's a smaller Japanese trade surplus we're after, we need to encourage them to increase their domestic spending.

The writer is a research associate at the Brookings Institution. OP/ED

Robert Z. Lawrence: And If They Do Import More?

Why have Japanese exports increased so dramatically over the past few years? A conspiracy by Japan, Inc.? No; simply the result of a large oil import bill and a high savings rate. The excess of exports over imports equals the excess of domestic production over domestic spending. If spending is lower than income, as it is in Japan, the surplus of goods and services not absorbed at home will be exchanged for claims abroad.

Even a large rise in its oil import bill will not affect Japan's trade balance once markets have fully adjusted. To be sure, higher oil prices will affect the mix of spending by the Japanese. They will spend more on oil and less on other goods. And in the short run, it's most likely that their trade balance will decline.

But if the Japanese maintain their production and savings rates, as they have tended to do, the domestic goods they no longer buy will be available for export. And either by directly lowering their prices or because market forces will depreciate the yen in the face of an oversupply of Japanese products, Japanese producers will find buyers abroad.

The cheapness of Japanese products has alarmed their competitors. Many point out the large trade surplus between Japan and other developed nations and ignore the corresponding deficit between Japan and the oil-exporting nations. To change this imbalance, they call on the Japanese to remove the non-tariff barriers that impede foreign sales to Japan. Such steps are well worth taking, but it's important to understand the full implications of more exports to Japan. In the short run, more Japanese imports will cause a decline in Japan's trade balance. But if the Japanese buy more foreign goods and leave the overall ratio of their spending to income unchanged, they will free up domestic goods for sale abroad. Everything else being equal, the yen will decline, and Japanese exports will rise.

The ratio of Japanese exports to GNP is unusually low. By keeping their markets closed, the Japanese are keeping all those TV sets, steel and automobiles for themselves. A more open Japanese economy will be good news for foreign exporters and consumers. But for steel producers, automobile makers and other manufacturers in foreign markets (who aren't likely to derive much benefit from access to Japanese markets) it will mean more competition from abroad.

If the Japanese are going to import more, they're also going to export more. If we want more cheap Japanese exports let's encourage the Japanese to open up their market. But if it's a smaller Japanese trade surplus we're after, we need to encourage them to increase their domestic spending.