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Home > Research and Studies > Bank of Japan Working Paper Series, Review Series, and Research Laboratory Series > Bank of Japan Working Paper Series 2010 > The Rise of China and the Japanese Economy: Evidence from Macro and Firm-level Micro Data
: Evidence from Macro and Firm-level Micro Data
Shin-ichi Fukuda *1
Munehisa Kasuya *2
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After prolonged recessions, the Japanese economy finally recovered in the first half of the 2000s, and recorded sustained growth until summer 2007. The purpose of this paper is to examine, from both macro and micro perspectives, the role of international trade with China in the recovery of Japanese firms in the 2000s. Using aggregated data, VAR suggests that the increased exports to China had a strong positive impact on Japanese manufacturing production but had an insignificant impact on small firms and non-manufacturing production during the last decade. It also shows that the increased imports from China had no significant impact on Japanese production. However, using firm-level data, we find that various connections with China improved the performance of small and medium size manufacturing firms and those in wholesale and retail industries. At the micro level, imports from China improved growth of sales in manufacturing firms and both profits and growth of sales in wholesale and retail firms in the early 2000s. Exports to China, which had no significant impact in the early 2000s, came to improve both profits and growth of sales of Japanese firms after the mid 2000s. However, not all connections with China had beneficial impacts on the small and medium size firms. The micro findings suggest that the increased dependence on China had highly heterogeneous impacts on Japanese firms in the 2000s.
exports, China, Japan's recovery, complementarities
F10, F31, O53
Earlier versions of this paper were presented at the ISR conference and at the CARF-BOJ conference. We would like to thank Eiichi Tomiura, Yukie Sakuragawa, and other participants at the conferences for their helpful comments. We also appreciate constructive suggestions from staffs at Research Department of BOJ.
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