Historical Dictionary of United States-Japan ... - Bakumatsu Films

NOMURA–GREW CONVERSATIONS • 191
NIXON SHOCK. The Nixon shock is the fact that on 15 August 1971,
President Richard Nixon announced cessation of conversion of dollars
to gold. This was a major change in the framework of international
finance.
Since the late 1960s, because of skyrocketing war expenses for the
Vietnam War and of the implementation of the “Great Society,” the
United States suffered from economic overheating: a fiscal deficit,
acceleration of inflation, and an expansion of the trade deficit. President
Nixon needed more and more fiscal expenditure in order to continue
the Vietnam War and maintain domestic employment. In order
to overcome these difficulties, he abandoned the fixed exchange rate
regime and shifted to a floating exchange rate regime.
In order to adjust exchange rate, in December 1971, a financial
ministerial meeting was held at the Smithsonian Institution in Washington,
D.C. The exchange rate from yen to dollars was highly appreciated
from 360 yen to 308 yen to the dollar, an appreciation of
16.88 percent. Combined with the Oil Shock in 1973, that is, the Organization
of Petroleum Exporting Countries (OPEC) unilaterally
raising crude oil prices and the shock this policy gave to the international
economy, the Japanese economy experienced “the worst economic
depression in postwar history” and recorded negative growth
for the first time since the war.
NOMURA–GREW CONVERSATIONS. The administration of President
Franklin D. Roosevelt in July 1939 announced its intention to
abrogate the U.S.–Japan Treaty of Commerce and Navigation. A
blunt response to Japan’s widening of its sphere of military activities
in the China Incident, it meant that the United States would be in a
position from January 1940 to impose trade sanctions on Japan. Aware
of Japan’s dependence on trade with the United States, Japanese Foreign
Minister Kichisaburō Nomura in November–December 1939
entered conversations with American Ambassador Joseph Grew with
an eye to laying the foundations for a new treaty of commerce.
Having assumed the foreign minister’s post at the behest of Prime
Minister Nobuyuki Abe in September 1939—at virtually the same
time that World War II began in Europe—Nomura warned his cabinet
colleagues of the necessity of conciliating the United States. To
this end, he sought their commitment to a policy of respecting China’s