This book examines the role of United States macroeconomic policy in the large and growing trade imbalance between Japan and the United States. To a substantial extent, it traces the causes of the current dilemma to failed U.S. macroeconomic policies. However, a careful examination of Japan's role in the bilateral trade imbalance reveals that Japan has exacerbated the problem in a variety of ways. Policy analyses, as well as econometric forecasts of the U.S. macroeconomy, are included.