During the NAKASONE Government period of the mid-1980s Japan ran a substantial balance of payments surplus with the outside world. What had come to be regarded overseas as the 'unbalanced' character of Japanese trade ushered in a period of trade disputes between Japan and the United States (see UNITED STATES, RELATIONS WITH).
Amidst growing disquiet about the health of the Japan-US economic relationship, Nakasone set up the Advisory Group on Economic Structural Adjustment for International Harmony (Kokusai kyōchō no tame no keizai kōzō chōsei kenkyūkai). It began its work in October 1985 under the chairmanship of Maekawa Haruo, a former Governor of the Bank of Japan, and issued its report (known as the Maekawa Report) in April 1986.
The Report described as a 'crisis situation' the fact that over a considerable period Japan had been running a balance of payments surplus averaging 3.6 per cent of GNP. To remedy this, it recommended a shift to domestic demand and away from exports as the principal engine of economic growth. This could be achieved, first, by accelerating house building and moving as quickly as possible to a five-day working week, so as to increase domestic demand. Second, a contribution could also be made by phasing down coal mining and rationalising agriculture to make it more efficient. The Report recommended increasing imports of agricultural products, apart from staple foods, and also of manufactured goods. Another recommendation was for fundamental reform of the taxation system, including abolition of the maruyū system of untaxed savings much favoured by small businesses as a means of reducing their tax bills.
The Report also recommended increased foreign investment (both into and out of Japan), promotion of exchange rate stability at rates reflecting real values, liberalisation of financial and capital markets, and more favourable treatment of developing countries, particularly in respect of access for their exports to the Japanese market.
An immediate result of the Maekawa Report was that Government set up mechanisms having the aim of gradually reducing the balance of payments surplus. A propaganda campaign was launched urging people to buy imported goods, and Japanese companies were encouraged to invest overseas. This latter aim was facilitated by the strengthening of the yen following the Plaza Accords of September 1985, but a rapid rise in Japanese overseas investment created its own problems, with US resentment over Japanese purchases of some high-profile US companies.
Generally speaking, the recommendations of the Maekawa Report remained unfulfilled. The agricultural lobby was too powerful to permit the kinds of rationalisation of agriculture recommended, except to some extent in the very long term. Attempts to encourage increased imports of manufactured goods fell foul of myriad hidden obstacles put in place by manufacturing interests, often with the connivance of Government ministries and politicians. The same could be said of the