A prominent feature of Japan's capitalism consists of families of companies called keiretsu that are linked by crossholdings of stock shares, intra-group financing, and certain coordinating mechanisms. Two types of keiretsu exist: large horizontally organized industrial conglomerates, such as Mitsubishi, Mitsui, and Sumitomo, and vertically integrated manufacturers, such as Toyota, Nippon Steel, and Matsushita Electric. They have become a contentious issue in U.S. trade negotiations with Japan for several reasons.

Japan's politics and government are undergoing a historic transition. The 38-year one-party rule of the Liberal Democratic Party (LDP) came to an end on July 18, 1993, when the party was voted out of power, even as it remained the single largest party in the lower house of Japan's bicameral Diet, or parliament. Seven non-communist parties, with little in common save their shared interest in dethroning the LDP, formed a shaky coalition.

In the uncertain security environment of the post-Cold War world, the Clinton Administration has expressed interest in proposals that would create forums for regional security consultations in East Asia.

While the United States accords most-favored-nation (nondiscriminatory) treatment to many foreign countries on the basis of bilateral trade treaties or agreements, and to many more by virtue of being a signatory of the General Agreement on Tariffs and Trade, MFN treatment is applied mostly as a matter of statutory policy generally to all trading partners except those whose MFN status has been suspended by specific legislation. Virtually all suspensions have been carried out under the mandate of the Trade Agreements Extension Act of 1951.

Americans disagree as to whether or not China poses a serious security concern for U.S. interests in peace and security in Asia and the Pacific. Many point to rising Chinese defense capabilities and assertive rhetoric to warn of Chinese military- backed expansion. Others judge that the main danger comes from China's weakness. They argue that the possibility of an emerging breakdown in government authority in China could prompt regional disorder and refugee flows seriously undermining Asian stability. Still others see the Chinese "threat" as grossly exaggerated. They stress that Beijing leaders are in control of the country and see their interests best served by accommodation to their richer and generally better armed neighbors.