Yes, we agree on most of the major points. And of course, we can only speculate about events in the future.
My own guess is based on the observation that imports don't actually seem to track exchange rates. For instance, our purchases from Japan seem to have very little correspondence with the yen / dollar rate. In fact, in some of the years where the yen was at its strongest, there were record imports. Here are the values from 1991 through 2004:
| Year | Number of yen needed to buy one dollar | Imports from Japan to the U.S. in millions of dollars |
|---|---|---|
| 1991 | 125.25 | 91,510 |
| 1992 | 124.65 | 97,413.7 |
| 1993 | 111.89 | 107,246.4 |
| 1994 | 99.83 | 119,155.8 |
| 1995 | 102.91 | 123,479.3 |
| 1996 | 115.98 | 115,187.1 |
| 1997 | 129.92 | 121,663.3 |
| 1998 | 115.20 | 121,845.1 |
| 1999 | 102.08 | 130,863.8 |
| 2000 | 114.90 | 146,479.4 |
| 2001 | 131.47 | 126,473.1 |
| 2002 | 119.37 | 121,428.6 |
| 2003 | 106.97 | 118,036.6 |
| 2004 | 103.78 | 129,594.7 |
Notice the progress from 1991 to 1995, the yen grew quite strong (only needing 99.8 yen in 1994 to purchase $1), yet imports from Japan increased markedly.
Yet from 1995 to 1997, the yen grew weaker, and imports held steady.
Again, from 1997 to 1999, the yen grew strong and imports increased.
1999 to 2001 saw the yen grow weak, and imports did indeed hit a peak in 2000, but then imports were weaker in 2001 despite a far weaker yen.
From 2001 to 2004, the yen became quite strong, and indeed imports generally dropped from 2001 to 2003, but then note 2004, where the yen was at its strongest (only taking 103 yen to buy $1), yet imports from Japan were at their highest in the 2001-2004 period.
Now, one would think that since Japanese goods are generally competitive in price with other countries and with our own that there would be more price influence from exchange rates. Yet that does not seem to hold.
This however is not true for China, which has a major advantage in prices with markedly cheaper goods than any of its major competitors. I personally guess that China has a lot of pricing power, and that we will continue to buy increasing amounts of goods from them even if there is a mild appreciation in the yuan.
But it's just a guess. It could certainly be wrong, and the future has a way of surprising us all at times.
My own feeling is that our imports tend to track the strength of our economy. If our economy is steaming forward, as it started to do a bit of in 2004, then I think we tend to see more imports. While that doesn't correspond perfectly with our imports from Japan (failing with the 1991-1993 years where we were in a weak economic period but imports from Japan grew strongly), it does seem to make for a somewhat stronger correspondence in my opinion.
I thought I'd check to see what the dollar converted to in yen, given the exchange rate, which might make more evident the 'real' impact of exchange rates was on Japan, and then compare the rates of exchange to the trade in dollars and yen (divided exchange by 100, multiplied yen by 100, and divided dollar by 10 to get a close enough number to watch the tracking). If you do that you can see a definite relation to the exchange rate and sales. I don't know exactly what it shows, though. It seems like it shows that as the rate dropped imports picked up, and from there, whenever the rate rose to a level that it crossed the line with dollar imports, the rate dropped. That seems odd, unless there is manipulation going on--and of course, there is.