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Eastern Europe and the Former Soviet Union

Japan's experience with communist countries was quite limited in the decades immediately after the war. In the 1980s, however, its patterns of interaction with China and the Soviet Union diverged sharply, its relations with China growing quickly, those with the Soviet Union stagnating. Other communist areas, such as Eastern Europe, continue to be only minor trade and investment partners for Japan.

Exports to Eastern Europe and communist countries in Asia totaled US$9.8 billion in 1990, or 3.4 percent of Japan's exports. Imports from these countries totaled nearly US$17 billion, yielding a US$7.2 billion deficit. Imports from the Soviet Union declined during the first half of the 1980s, from nearly US$1.9 billion to less than US$1.5 billion, and then recovered to almost US$3.4 billion by 1990, representing modest growth for the entire period. Imports from China, however, nearly tripled in this time, from just over US$4.3 billion in 1980 to nearly US$12.1 billion in 1990. Export trade followed a similar pattern: exports to the Soviet Union stagnated and then grew modestly, to over US$3.1 billion in 1988, before declining to US$2.6 billion in 1990. Those to China, however, expanded rapidly, from nearly US$5.1 billion in 1980 to just under US$9.5 billion in 1988, before falling to US$6.1 billion in 1990.

China and Japan have geographic proximity, extensive cultural ties, and a long history of commercial relations. However, Japan's trade relationship with China was severely constrained in the 1950s and 1960s because of its support for the United States policy of containment. Japanese business did not expand such commercial relations significantly until the United States-China rapprochement in the early 1970s and Japan's subsequent establishment of diplomatic relations with China (see Relations with China , ch. 7). Japan recognized the Beijing government in 1972. After Mao Zedong's death in 1976, China pursued economic contacts with the West, and trade with Japan expanded rapidly. The new relationship was reinforced by the signing of a long-term trade agreement in 1978. In 1980 Japan granted China reduced tariff treatment under the Generalized System of Preferences.

Investment in China also expanded once relations improved in the 1970s. Japanese data show some US$2 billion of cumulative direct investment in China by 1988, and Japanese investment in China continues to grow significantly in the 1990s. China also became the largest single recipient of foreign aid from Japan during the 1980s and into the 1990s.

Commercial relations with the Soviet Union also paralleled strategic developments. Japan was very interested in Siberian raw materials in the early 1970s as prices were rising and détente persisted. The challenges to détente, especially the invasion of Afghanistan in 1979, and falling raw material prices put strong constraints on Japan's trade and investment relations with the Soviet Union. Only after Soviet policy began to change under Mikhail Gorbachev's leadership, beginning in 1985, did Japanese trade resume its growth.

Further complicating economic relations with the Soviet Union was the dispute over four small northern islands occupied by the Soviet Union toward the end of World War II. No progress had taken place on this issue during four decades of intermittent negotiations (see Relations with Russia , ch. 7).

Japan's trade was also constrained by the Coordinating Committee for Multilateral Export Controls (CoCom), which controlled exports of strategic high technology. In 1987 the United States discovered that Toshiba Machine Tool had shipped machine tools on the restricted list to the Soviet Union, tools used to manufacture quieter submarine propellers. Although the Japanese government moved reluctantly to punish Toshiba (and the United States imposed sanctions on Toshiba exports to the United States in response), the final outcome was stronger surveillance and punishment for CoCom violations in Japan.

Japanese investment loans and trade credits went mainly to Siberian resource development. But this development never expanded as originally expected. Soviet interest in revitalizing the economy in the late 1980s suggested that future Japanese investment would be concentrated in the western regions of the Soviet Union rather than in Siberia.

Japan's trade and investment relations with East European countries and with communist countries in Asia were limited. In 1990 exports to Eastern Europe were only slightly more than US$1 billion, and imports were approximately US$1.6 billion. Economic problems within Eastern Europe as the nations grappled with moving toward market-oriented economies continued to limit trade with Japan. Trade with Asian communist countries was even less significant. The Democratic Republic of Korea (North Korea) is geographically close to Japan, but that nation's default on its trade debt in the 1960s, combined with the political tension between it and the Republic of Korea (South Korea) keeps North Korean trade with Japan at a minimum.

Data as of January 1994

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