The Magazine


Jul 6, 1998, Vol. 3, No. 42 • By DAVID M. SMICK
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True, other parts of the Pacific Rim might find this policy temporarily uncomfortable, perhaps even frightening. The Chinese have voiced concerns, although it is not clear why; China does not compete directly with Japan, and Japanese recovery is absolutely essential to China's economic success. The Europeans might also be less than thrilled given their concern with payments problems for their troubled banks in South Korea and Indonesia in particular. But from the standpoint of the future of the United States and Japan, at a time when Japanese trade deficits with America are ballooning, Rubin's instincts were right on the mark. Too bad everyone flinched. President Clinton may now have a much less eventful trip to China, with no messy and embarrassing global market complications. But one gets the feeling that an opportunity has been lost. There is indeed a cost to conflict avoidance.

Bob Rubin was no doubt embarrassed to be praised for the intervention, because he understands quite well what is going on in Japan. Indeed, he probably understands better than many Japanese advocates of the status quo would like him to.

David M. Smick is founder of Johnson Smick International, which advises large global financial institutions, and editor/publisher of the International Economy magazine.