What a Relief! Plan Decided to Ease Poor Country Debts the Story of How Japan Blew Its Trade Surplus with the US and Other Mysteries of International Finance

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Over the last decade, Japan has had a trade surplus with the United States of about $500 billion. In the same period, Japan's losses on its investments in the US have been approximately the same - $500 billion.

"Amazing," says economist C. Fred Bergsten, who made the rough calculation of Japan's losses.

What it means, in a sense, is that Americans as a group got a free gift of about a half trillion dollars of Toyota Camrys, Sony TVs, Panasonic VCRs, and lots of other Japanese imports. This is just one hint of the importance of international finance and economics to people around the world, though their eyes may quickly glaze over at talk of special drawing rights, quotas, and financing gaps. The latter three are in the news as the International Monetary Fund and the World Bank prepare to start their joint annual meeting in Washington tomorrow. Mr. Bergsten, who is director of the Institute for International Economics, a think tank based here, admits his estimate of Japanese losses may be off by tens of billions. But, he adds, it does indicate that those huge annual Japanese trade surpluses - prompting so many flights of trade negotiators across the Pacific and so much worry about American competitiveness - "were frittered away by lousy financial investments." Of course, there remains the question of distribution of the gains and losses involved in these Japanese-American transactions. The American who bought a Honda Accord paid good dollars for it. The Detroit autoworker who was laid off because of Japanese car imports may well have suffered loss of pay. But the owners of Rockefeller Center and various Hawaiian properties made a killing when they sold to Japanese investors, and the Japanese investors took severe hits when they sold these assets years later at a lower price. Many Japanese investors suffered huge losses in the entertainment industry, California real estate, and elsewhere. The controversy attracting the most attention at the IMF-World Bank gathering has been financing of a debt-relief program for the world's poorest nations. The cost of relief sought for about 20 countries is between $5.6 billion and $7.7 billion, spread over several years. These countries, including Burundi, Mozambique, Nicaragua, and Sudan, have per capita incomes of less than $865 a year. They also have large amounts of "official" debt - that is, loans from governments of rich nations or from multilateral institutions like the World Bank and the IMF. "Small potatoes," says Bergsten of the $6 billion or so in debt relief. …