This article contains a letter of the author (Chih Kwan Chen, dated March 21, 2004) to Japan Times with regard to the AP report about the splash of "Golgo 13", a long running Japanese adult comic script, made in Japan. The recent plot of the comic script portrades the currency market manipulation of Japanese Government to destroy the value of Yen against US Dollar as a conspiracy of US White House, not to help Japanese economy but to sustain US economic prosperity.

Dear Editor:

       From your report about the Japanese manga, "Golgo 13", seems it has caused quite a splash on the financial circle. Contrary to the ridicules from some economists, the view expressed in the manga is mostly accurate except some minor misunderstandings and misrepresentations. The so called US conspiracy to let Japan manipulate the currency market and deliberately destroy the value of Yen vs. US Dollar, is not originated by the current Bush administration, but has started during the Clinton administration with former Treasury Secretary Rubin as the mastermind. Of course, there is no need of any secret agents at all to achieve this conspiracy. He just muttered the magic phrase of "strong dollar policy" and passed the word to Japanese MOF bureaucrats that US does not mind if Japan artificially destroy the value of Yen and boost Dollar by currency manipulation. It is MOF bureaucrats who have weaved the rope and have hung Japanese economy in their own hands; that is why I call the economic policy of Japan since the middle of 1995 as "harakiri economic policy". Now Japan is caught in the net weaved by itself and has no choice but to continue to manipulate the currency market with whatever amount of money necessary just to postpone the final reckoning in the form of a worldwide depression. Another misunderstanding of the manga is to attribute the loss of jobs in USA as one of the motivation for this coordinated currency manipulation. The problem of job outsourcing in USA is just the side effect of the currency manipulation, or we may say the price needed to pay if a society wants to grow by running trade deficits. The job outsourcing problem has subjected economists, who have argued for globalization and now must defend the job outsourcing as desirable, to wide spread public ridicule;the problem is rapidly becoming a threat with the potential to sink Bush administration.

       The reason why MOF bureacrats of Japan are destroying the value of Yen is quite obvious. Modern economic text books all say that trade surplus will boost economic growth and trade deficit hurts economic performance. MOF bureaucrats want to jump start stagnated Japanese economy after the burst of Japanese boom in the first half of 1990's. Thus they follow the advice of modern economic text books and try to boost Japan's trade surplus; the only way to increase Japan's trade surplus is to manipulate the currency market and deliberately destroy the value of Yen. Then why Secretary Rubin did what he did, the so called conspiracy in the manga? Because Secretary Rubin is very smart and he must have noticed that the modern economics has made a fatal error in describing the effect of trade balance on economic performance. For matured economic entities like USA and Japan, trade deficits boost consumption and trade surplus hurts comsumer spending; just opposite to what the modern economics text books say.

      In the spring of 1998 I have written an article (in Japanese, published on a Japanese weekly financial magazine, Weekly Diamond, March 28, 1998, page 94), pointing out that it is Japan's currency manipulation that has triggered Asian Economic Crisis, pushed Japan into a prolonged economic down turn and on the other hand has created a huge consumption boom in USA. A longer paper (in English) is written in Dec. 1998, detailing how the modern economics has made the fatal mistake in describing the effect of trade balance on economic growth. The latter paper also gives step-by-step account of how Japan's currency manipulation has pushed Japan into the economic quagmire, how Asian economic crisis was triggered, and how US economic growth is boosted by the runaway trade deficit. The paper further predicted the (now history) burst of US bubble in the middle of 2000, based on the observation that US trade deficit was going to shrink around that time due to the sharp drop of Dollar started in the summer of 1998 (yes, sharp currency movements leads the corresponding trade balance adjustment by two or more years). The latter paper was posted on my personal webpage ( for nearly 4 years and have attracted about 10,000 readers; the paper is also quoted by, a favorite website of worldwide gold bugs. My personal webpage was dismantled after prodigy is absorbed by yahoo! and the paper is now reposted on my website as Article No.1.

       On my above quoted website you will find other articles, comments and projections of how the global economy will fare (currently the projections are mostly about US economy). Article No. 2 is a detailed proof how US economic booms and busts since the globalization are closely related to the expansion and the shrinkage of trade deficit. Article No.4 uses a simplifying ficticious gold standard to show how the purchasing power is transfered from a matured trade surplus economic entity "Japan" to another matured trade deficit economic entity "USA".

       The foolish currency manipulation and the suicidal economic policy is not the sole domain of Japan, but applies equally to other Asian countries like Taiwan. The recent prolonged economic malaise of Taiwan is exactly the same phenomena as in Japan, which we may call it "Japan syndrome". As has been pointed out in my articles Japan did not grow from trade surplus. During the dynamic economic growth years of 1950's and 1960's Japanese international trades were more or less balance. It is only when Japan is possesed by trade surplus, then it has digged its own grave. The situation of Taiwan was different. Taiwan started as an underdeveloped society with a lot of untapped skillfull labors. When Japanese capital and knowhow flooded in and combined with Taiwan's low cost and high quality labor to produce goods to be shipped to USA, enormous amount of purchaing power is released from hybernation. A significant portion of this newly released purchasing power was exported to USA in the form of trade surplus of Taiwan, but a sizable portion of this newly created purchasing power was retained in Taiwan and propelled Taiwan rapidly up the economic ladder. It is only when this underutilized labor source is exhausted, further trade surplus then pushes Taiwan into the above mentioned Japan syndrome. During the Japan syndrome, unemployment will increase, and after a while a temporary third-world like condition will be created with certain amount of idled labor resource. It is under this temperal lull economic growth can be boosted by the expanding export, but such condition will quickly disappear and the painful Japan syndrome will return soon. This is exactly the current economic situation of Japan and Taiwan.

       China is in the early stage of Taiwan's experience. With still huge underutilized labor sources, China can grow for quite a while from expanding exports. Of course, the ability of China to continue this growth path depends on how long Japan and Taiwan are willing to subject to this Japan syndrome, equivalent to cutting off own limbs one by one to feed the US appetite of "borrow and spend", by supplying China with capital and knowhow to produce goods to be exported to USA. If Japan and Taiwan walk away from the currency market manipulation and the foolish desire to run trade surplus, then US Dollar will collapse, US trade deficit will shrink rapidly, US consumption will plunge, and export industries of Asia will be wiped out. To rebuild US manufacturing industry from the current sorry state and run a balancedtrade with litterally free currency market, and for Asian countries to build up a healthy service sector to balance their trade and grow on its own effort (not from the easy way of low cost labor and foreign investment) will take time. Until this balance is regained, the world economy will be in a condition called "depression". Thus the painless path for the world is to request Japan and Taiwan to continue to suffer this painful Japan syndrome, whereas USA continues to borrow and spend with ever increasing trade deficit and the acceleration of job outflow; that is, USA will gradually approach a phase called "jobless but prosperous society". This seemingly contradictary final phase is, of course, totally beyond the dream of economists who are dogmatically bound to the proven failed modern economics (with regard to the effect of trade balance). The possibility of such a society may be called "the magic of trade deficit". How such a society will work is depicted in a sarcastic dramatization in Article No.7, with a title of  "Globalization Utopia", posted on my website.

                      Chih Kwan Chen