This report analyzes the potential for increased economic relations between Japan and the Soviet Union, and the importance of such a relationship to each country, by examining both the economic and the political factors influencing trade and investment. Historically, economic relations between the two countries have been limited. Chances for improvement seem to depend on Japan's willingness to invest in the development of resources in Siberia and the Soviet Far East, which in turn hinges on the resolution of long-standing territorial disputes. Perhaps of more immediate value would be Japan's ability to help the Soviet Union respond to demands for consumer goods and improve manufacturing efficiency and quality control. Obstacles in these areas include the Soviet Union's difficulties in paying for Japanese goods and technology and constraints resulting from Japan's acceptance of U.S. leadership in mandating East-West trade. The author concludes that improved economic relations between the Soviet Union and Japan are most likely to be realized gradually on a long-term basis.