This research presents an in depth discussion and analysis on U.S. Japanese foreign trade. It is divided into two parts. The first hypothesis states that the appreciation of the dollar in the early eighties is positively correlated with the U.S. trade deficit, especially with Japan. The second hypothesis states that Friedrich Von Hayek's Theory of Social Order applies to the development of capitalism in that country. This can also be divided into two parts, a) this generation of Japanese consumes, saves, and invests differently than previous generations, and b) Japanese consumption and investment patterns follow U.S. consumption and investment patterns with a lag.

During the Korean War, US-Japan relations changed dramatically from the occupation status into one of a security partnership in Asia. When North Korea invaded South Korea, Washington perceived Japan as the ultimate target. Washington immediately intervened in the Korean peninsula to protect the South on behalf of Japanese security. Japanese security was the most important objective of American policy regarding the Korean War, a reality to which historians have not given legitimate attention. While fighting in Korea, Washington decided to conclude an early peace treaty with Japan to initiate Japanese rearmament. The issue of Japanese rearmament was a focal point in the Japanese peace negotiation. Washington pressed Japan to rearm rapidly, but Tokyo stubbornly opposed. Under pressure from Washington, the Japanese government established the National Police Reserve and had to expand its military forces during the war. When the Korean War ceased in July 1953, Japanese armed forces numbered about 180,000 men. The Korean War also brought a fundamental change to Japanese economic and diplomatic relations in Asia. With a trade embargo on China following the unexpected Chinese intervention in Korea, Washington wanted to forbid Sino-Japanese trade completely. In addition, Washington pressed Tokyo to recognize the Nationalist regime in Taiwan …