ave Japan's trade concessions resulted in more U.S. exports? One premise of the more results-oriented trade policy toward Japan now being pursued is that past concessions have not caused U.S. exports to Japan to rise. The only success story seems to be that of semiconductors in which a specific goal of 20 percent of the Japanese market was set and attained.

Japan's global current account surplus is expected to reach $150 billion in 1993, up substantially from a modest $36 billion in 1990. The movement of Japan's current account surplus in this period is, perhaps, more dramatic as a share of GDP, going from a substantial 3.6 percent in 1987, down to a modest 1.2 percent in 1990, and up again to about 3.1 percent in 1992. Japan's growing surplus is criticized as a consequence of that country's barriers to trade, and as a drag on the economic recovery of the world economy.

Japan's banking sector currently is carrying between $400 billion and $800 billion in non-performing loans that threaten the solvency of certain financial institutions and weaken the Japanese financial system. This problem is of interest to the United States because the stability of Japan's banking system affects the health of that nation's economy, its rate of economic growth, and international capital flows. This, in turn, may affect American exports to, imports from, and investments in Japan. It also has affected Japanese investments in the United States and may affect the resolution of issues being negotiated or recently agreed to with that nation under the Framework Talks.

Japan's uncertain political transition began in July 1993, when the conservative Liberal Democratic Party (LDP) -- in power since 1955 -- was replaced by a fragile multiparty coalition. Under Prime Minister Morihiro Hosokawa, the coalition faced turmoil in April 1994, when Hosokawa resigned abruptly amid a personal financial scandal. Then-deputy prime minister/foreign minister Tsutomu Hata succeeded, but only at the head of a minority government as the Social Democratic Party (SDP), a key coalition partner, quit the coalition. Though beset by its own internal squabbles, the LDP remained the single largest party in Japan's bicameral Diet, or parliament. In late June, Hata was forced to resign under threat of an LDP-led no-confidence motion.

Japan's political uncertainty continues as it has since July 1993, when the conservative Liberal Democratic Party (LDP) -- in power since 1955 -- was replaced by a fragile multiparty coalition. Under Prime Minister Morihiro Hosokawa, the coalition faced turmoil in April 1994, when he resigned amid a personal financial scandal. Then-deputy prime minister/foreign minister Tsutomu Hata succeeded, but only at the head of a minority government as the Social Democratic Party (SDP), a key coalition partner, quit the coalition. Though beset by its own internal squabbles, the LDP remained the single largest party in Japan's bicameral Diet, or parliament. In late June, Hata was forced to resign under threat of an LDP-led no-confidence motion.

Japan,s rise as a leading economic power has been attributed to many factors. Increasingly, attention has focused on Japan,s ability to apply innovative technologies to develop new products. Technology development and applications are at the core of a system in which the government and the private sector facilitate industrial policies and practices. Japanese research and development efforts increasingly stress what one Japanese policymaker calls the "fusion" solution, or combining advances in different technologies to generate new products and innovations.

Japan-U.S. relations are more uncertain and subject to greater strain today than at any time since World War II. Longstanding military allies and increasingly interdependent economic partners, Japan and the United States have worked closely together to build a strong, multifaceted relationship based on democratic values and interests in world stability and development. But Japan today is our foremost economic and technological competitor. The Cold War thaw, discord in U.S.-Japanese relations over the Iraq-Kuwait crisis of 1990-1991, a protracted U.S. recession, and exigencies of U.S. election-year politics raised new questions about the appropriate U.S. policy toward this Asian ally.

This report describes recent changes in U.S. burdensharing relationships with NATO, Japan and South Korea and, in the process, identifies some implications for U.S. foreign policy.