I visited Japan in late March, and on the way over was seated next to a CEO of a Japanese software company.

We had a very interesting conversation: Basically after talking about the usual platitudes, I asked him about how he viewed the present state of the US economy given China, the housing market, and Japan's last 3 (5)decades of economic alliance with the USA.

Here's what I got out of the conversation.

1) While Japan is exporting more to China than the US in the official markets, the overall US-Japan trade is still greater. The reason this does not show in official statistics is that a large chunk of defense related manufacturing by Japan for the US is concealed.

2) Japan has completely committed to being the US' partner. This means that even should hyperinflation occur, Japanese companies would build factories in the US to prop up US incomes. He also believes China would do this but on this point I disagree.

3) In addition to the economic commitment, Japan is also relying on the US to serve as a military balance against the numerically superior (and soon economically larger, in absolute terms) China.

4) A weak yen is not an issue for Japan, while import prices rise - the Japanese currency account surplus means that the real effects can be delayed or concealed for a very long time.

All in all, a very interesting conversation.