Because the United States purchases more cars, stereos, and other goods from Japan than Japan purchases from the United States, it is often said that the United States has a "trade deficit" with Japan. Does this mean that the U.S. balance of payments is running a deficit? How would you more accurately characterize the effect that trade with Japan has on the balance of payments?
The balance of payments must, by definition, balance (neither a deficit nor a surplus). If we import more goods from Japan (and other countries) than we export to those countries, we will run a current account deficit, which must be balanced by a capital account surplus.
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