Social and Behavioral Sciences Commons^™

U.S. Current Account Debate With Japan Then, With China Now, Hiro Ito

Economics Faculty Publications and Presentations

This paper examines two U.S. current account deficit episodes, one in the 1980s and the other in the current 2000s, in which Japan and China, respectively, are the current account surplus countries that are criticized for contributing to the deficits. In both periods, U.S. policy makers pointed out the underdeveloped and closed financial markets of the current account surplus countries and advocated for these countries to fix the deficiencies, a position akin to the current “saving glut” argument. In both episodes, the current account surplus countries have criticized the United States for its low saving, especially public saving (the “Twin …