Economic relations: aid, trade and market access

H1 History - syllabus 8838, 2027

What this lesson teaches

  • I can judge which factors shaped China's and Japan's relations with the superpowers.

    Syllabus 8838, Theme II, Learning Outcomes. evaluate the factors that shaped China's and Japan's relations with the superpowers during the Cold War

Make a guess

From the late 1960s Japan sold far more to the USA than it bought. How do you think this affected relations?

  1. It had no effect, because trade and politics stayed apart.
  2. It caused serious trade friction, though the alliance held.
  3. It ended the alliance between Japan and the USA.
Show the answer

It caused serious trade friction, though the alliance held.

Disputes over textiles, steel, cars and electronics grew, and the 1971 Nixon shocks hit Japan hard.

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.

Real examples to use

Korean War orders, 1950 to 1953

US special procurement in Japan reached about 2.4 billion dollars by 1953, helping restart Japan's factories.

Car export limits, 1981

From April 1981 Japan agreed to keep car exports to the USA to 1.68 million a year. Japanese firms then built factories in the USA.

Plaza Accord, 22 September 1985

The yen rose from about 237 to the dollar in September 1985 to about 155 a year later, making Japanese exports dearer.

Worked example: Economic status as a factor

How did Japan's economic status shape its relations with the USA?

  1. Early: dependence on US aid and markets tied Japan closely to the USA.
  2. Later: Japan's success created trade friction and US resentment.
  3. Pressure: the USA used currency and trade agreements to change Japanese behaviour.
  4. 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?

  1. Nixon announced his China visit without consulting Japan and ended gold convertibility.
  2. Nixon banned Japanese imports.
  3. Nixon withdrew US troops from Japan and handed Okinawa to China.
Show the answer

Nixon announced his China visit without consulting Japan and ended gold convertibility.

Right. Both decisions hit Japan without warning.

The Wise Otter

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