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To: Ron Bower who wrote (2004)	7/18/1998 11:43:00 PM
From: H. Lee Grove 2	Respond to of 2951

Ron, I don't visit this thread on a regular basis, but do pop in once in a while when I'm in the international section. It's an interesting point you bring up. My first thoughts are: 1) With the yen losing purchasing power as compared to the pegged rmb, perhaps material importation from China has slackened, thus causing surpluses in China. I don't know what types and quantities of materials Japan imports from China, so that is pure speculation. 2)If, in fact, surpluses are occuring in China, perhaps material prices are decreasing--an echoing sort of currency devaluation--and thus the U.S. manufacturers are taking advantage of the prices to increase inventories. This could account for the increased deficit. 3)As for the decreasing imports from Japan, that one I'm having trouble coming up with an even wildy speculative rationalization. But, I'm willing to try most anything once. The reason would, of course, be more transparent if we had some sort of breakdown on %age changes in types of imports. I'll venture a guess and say that whatever those categories of goods are that account for most of the decrease, they must be similar to those of countries where there has been a more severe currency devaluation relative to the $. Perhaps we are importing more form those countries in place of whatever it is we import from Japan.... This would lead me to think that something not very processed--not the final product--would be the items we are looking for, since I don't see demand for final products(of the quality that Japan supplies) changing drastically month to month. Or, it could simply be that $value of imports fell while actual quantities increased--though not as much as in my hypothetical material imports from China. I don't know. Really just thinking out loud. But that's why I'm here, to consider what those of you that post here regularly have to say, and to attempt to make sense of things... Lee

To: Ron Bower who wrote (2004)	7/19/1998 12:27:00 AM
From: Tom	Read Replies (2) \| Respond to of 2951

Ron: A few circumstances come to mind, not least among them would be what has been remarked recently as a shift in what goods China is providing for export. As I recall, the shift involved a notable rise in the export of machinery -- a sector that may currently be out of the cycle for Japanese exporters. I don't follow it well enough to say for certain, though I could probably find reason for U.S. industry's absence in any substantial manner from the capital equipment market. Heavier types of equipment...the types normally associated with Hitachi, Komatsu, Misubishi, et al. Without looking, I'll just say that I received the impression that the machinery being exported from China is not of the substance of the Japanese equipment, yet is none-the-less a sector that has experienced some "notable" growth. Maybe I should not designate it a shift, per se, as it appears the production of other Chinese goods for export has not been affected. One more item... Though many participants here quite possibly know better than I, I also believe that Japan is changing some product emphases. I recall reading a special issue of the IEEE's Spectrum magazine several years back that devoted a great deal of print to Japan's national agenda on product research and development. It, and some evidence in the interim, leads me to conclude that Japanese technology is not at a loss for direction. Yes, me too...FWIW.