On June 23, 1997, Japanese Prime Minister Ryutaro Hashimoto spooked Wall Street. At a Columbia University luncheon, he appeared to warn that the Japanese might sell U.S. Treasury bills unless the United States helped stabilize exchange rates. The Dow Jones Industrial Average fell 192 points.
a. Why might the stock market have fallen on such a remark? Trace the causal links.
b. How much substance is there to the possibility that the Japanese might sell off their U.S. investments? Explain.