Changes in Japan's Export and Import Structures *
May 30, 2002
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* The views expressed herein are those of the authors, and do not necessarily represent the views of the Bank of Japan or of the Research and Statistics Department. Kazuto Masuda of the Research and Statistics Department took responsibility for the wording of Chapter 3(3), and provided complete cooperation with the preparation of this entire paper, especially with Chapter 4 and the Appendix. Many other Bank of Japan staff provided assistance and advice during the preparation of this paper. In particular, the authors would like to thank Nobuyasu Atago, Kei Kawakami, Junichi Kishi, Yutaka Soejima and Akira Takahashi for their invaluable contributions. Regardless, the authors take full responsibility for any errors that may appear herein. i Economic Research Division, Research and Statistics Department, Bank of Japan
ii Economic Research Division, Research and Statistics Department, Bank of Japan
iii Economic Research Division, Research and Statistics Department, Bank of Japan
iv Economic Research Division, Research and Statistics Department, Bank of Japan
- Export trends have been an important factor during Japan's present economic adjustment period, and the structures of Japanese exports, together with the imports, have been changing substantially in recent years. The changes in the country's export and import structures during the 1990s can be characterized by the following three key developments: (1) the weight of IT-related goods has been rising in both real exports and imports; (2) real imports of consumer goods from East Asia has been increasing; and (3) the US remains Japan's largest trading partner as a single country.
- The backgrounds to these developments include both macroeconomic and microeconomic changes, especially (1) the globalization of the world economy and (2) the advance of modularization and global fragmentation in trade goods production processes.
- The ongoing changes in Japan's trade structure are typified by the developments in the industries of IT-related goods, consumer goods, and motor vehicles and related goods. First, in the IT-related goods industry, Japanese producers have been decreasing their level of export specialization as an overall trend, but the conditions vary by the category of goods. For finished goods, East Asian and other countries have now obtained production technologies that are almost equivalent to those in Japan as a result of direct investment and other transnational alliances, and the comparative advantages of domestically produced Japanese IT-related finished goods are being lost. As a result, IT-related goods firms are specializing less in exports, or are even specializing in imports in some cases. For IT-related parts, the comparative advantages of domestic and foreign production vary by category, but overall IT-related parts firms are decreasing their level of export specialization. In contrast, for capital goods, domestic production retains comparative advantages, and exports of IT-related capital goods seem to exceed imports greatly.
- In the consumer goods industry, for textile products and household appliances, for example, production by comparatively low-skilled workers is possible, and technology transfer is also relatively easy. Consequently, the international division of labor is advancing via means such as direct investment and consigned production, and on the whole, the comparative advantages of domestic production are being lost and Japanese firms are specializing in imports, primarily because of the differential between domestic and overseas labor costs.
- In the motor vehicles and related goods industry, Japanese automobile manufacturers still retain comparative advantages in small and medium-sized vehicle production under the circumstances whereby i) the domestic market is extremely competitive, ii) the preferences for goods vary by country, and iii) trade friction became an international problem during the 1980s. Even though the production of certain standardized parts is becoming divided between domestic and overseas production bases, the overall production process of Japanese automakers has not moved to a stage of global division of labor. Nevertheless, Japanese automobile firms are producing models with strong local demand at their overseas production bases, while entire production processes are being transferred altogether.
- While the changes in Japan's trade structure are diverse and vary by industry, the following overall trends can be identified. With the spurt in IT-related goods trade, (1) real exports are sensitively reflecting the overseas demand for IT-related goods, and (2) the simultaneous correlation of real exports and imports is rising. Additionally, (3) the IT-related goods trade is further strengthening ties linking the Japanese, East Asian and US economies.
- In consumer goods, imports from East Asia, particularly from China, are remarkably increasing. Simultaneously, the penetration of imported consumer goods supply into the Japanese market is rising. This expansion of imported consumer goods has resulted in substantial declines in the prices of consumer goods on the Japanese market.
- Given these developments, advancing a smooth reallocation of management resources is essential for the Japanese manufacturing sector to achieve future growth. Also, because existing technologies are becoming shared worldwide with the passage of time, for example, through direct investment, the cost of labor differential will be the decisive factor for goods produced using such technologies. Thus, the creation of new technologies that produce higher value added and of new business models that generate higher profitability will be critical for the future prosperity of Japan's manufacturing industry. Furthermore, from the perspective of the overall growth of the Japanese economy, another key issue will be the extent to which the productivity of the nonmanufacturing sector, which holds the larger share in the production factor allocation, can be improved.