The Japan-United States-Latin American triangle: The political economy of Japanese financial flows to Latin America

Japan has become a major creditor and supplier of capital during the 1980s, while the United States has been transformed into a debtor nation. As a result, Japan's actions now have a major impact on the supply of public goods in the world economy. Hegemonic stability theory would predict Japan's increased role in supplying those public goods. I argue rather that the factors which influence the external behavior of Japanese public and private sectors arise from Japan's bilateral relationship with the United States, domestic interaction between the Japanese private sector and the government, and the pressures within transnational creditor coalition of banks.;The research focuses on the dynamics of the Japan-U.S.-Latin American financial triangle and the factors that influenced Japan's public and private financial flows to the indebted Latin American region during the period 1975-1991. Employing both quantitative and qualitative methods, the empirical analyses measure how much influence international (Japan's stake in the world economy, and Japanese economic and political interest in Latin America), domestic (interaction between the government and banks in Japan, the influence of other private actors, and budget and political constraints), and transnational (U.S.-Japanese bilateral relations, and inter-bank relations) factors have on Japanese public and private financial flows.;The results demonstrate that: (i) the U.S.-Japan bilateral relationship has induced Japanese capital flows to Latin America, especially at times when Japan had a large trade surplus with the United States. (ii) Japanese banks pressure on the government, and the government pressure on banks resulted in increased flows to large debtors in Latin America, and (iii) the transnational coalition among banks has increased the impact of banks on the Japanese government decisions. Consequently, a strong collaboration between the United States and Japan was achieved. This has reduced the chance of a debtors' coalition in Latin America.