The forces of expansion The famous fixed exchange rate of ¥360 = $1 was set in April 1949 in the aftermath of war and in the midst of the establishment of a workable international trading and payments system. At this time the rate probably overvalued the yen, and the years 1946-55 witnessed large trade deficits, peaking at -794 $ million in 1953. The financial effects of this were to an extent offset by US aid and special procurement orders for the Korean War. This fixed exchange rate appears to have been one of the several factors taken as 'given' byJapanese public policy, which henceforth focused on reducing costs and imports. From the mid-1960s, increasing technological transfers and efficiency, and the great improvement in the trade balance, made it obvious that the 360 exchange rate was now an undervaluation: the trade balance grew significantly in 1964-5, and then enormously in 1970-1, so that in 1973 it reached $8,971 million.