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2018 | OriginalPaper | Chapter

2. Overview of Japanese International Trade and Globalization of Japanese Firms

Author : Eiichi Tomiura

Published in: Cross-Border Outsourcing and Boundaries of Japanese Firms

Publisher: Springer Singapore

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Abstract

This chapter reviews the evolution of Japan’s trade with foreign countries and the globalization of Japanese firms. This review is not intended to be chronological or exhaustive, but selective to motivate our discussion on cross-border outsourcing by Japanese firms in the main body of this book.

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previous chapter Introduction

next chapter Measures of Cross-Border Outsourcing

According to the World Bank database on the structure of outputs, the share of manufacturing in GDP of Japan and Germany was 21 and 23%, respectively, in 2016, in the latest data available at the time of writing this book, and was 22% in both countries more than a decade ago in 2005.

We should be cautious when comparing these two graphs. Exports and imports recorded under trade statistics of Fig. 2.1 comprise trade in goods captured at the customs. On the other hand, exports and imports in GDP comprise all trade categories, including trade in services as captured in the balance of payments.

From a technical perspective, it is not easy to calculate the import shares of industries. Classification systems for manufacturing census, which we use to derive domestic shipment data, and custom clearance statistics, which we use to derive import data, markedly differ in many countries, including Japan. Figure 2.3 uses the integrated classification prepared in JIP database.

Japan is one of the largest importers of agricultural products. Despite the various import restriction measures on several major agricultural products, such as rice, the employment share of this sector continues to shrink down to around 3%.

Baldwin (2016) also points out that developing countries, involved in global value chains, unilaterally liberalized trade to boost their exports.

For example, according to Miroudot et al. (2009), inputs represented 56% of goods trade and 73% of service trade in 2006.

We focus on this secular change in the case of Japan, but we must also note that Japan’s domestic value-added share remains high compared to other OECD countries, especially deeply integrated European countries, and a resource-dependent country like Russia.

We draw data from OECD-STAN database exactly as in the previous table and graph.

The next chapter will discuss advantages and limitations of SOBA for studying cross-border outsourcing.

Increasing offshore production does not suggest that all the offshore affiliates would run successfully. According to SOBA, around 2–3% of offshore affiliates of Japanese multinationals are closed every year. In 2015, as many as 724 affiliates were closed across the world, of which 278 affiliates were closed in China alone. This suggests active entry/exit dynamics and reallocation of production across affiliates. Refer to Chap. 4 for the definition of closure/exit in this survey.

Export shown in this graph is exactly the same as in Fig. 2.1. Annual trade figures in both graphs are in calendar years (from January to December), while offshore production data are recorded in the Japanese fiscal calendar (from April to March).

All the plants with 10 or more employees are covered by these data collected from the manufacturing census. As extremely small-sized plants with less than 10 employees are quite unlikely to export or invest directly abroad and produce negligible volume of outputs, we omit them from this comparison. If we include plants with four or more employees, 7.4 million workers were employed in Japan in 2014; however, even based on this broader coverage, we observe a sizable decline in the number of workers from the peak of 11.4 million in 1991.

The sum of purchases from other Japanese affiliates and purchases from local firms does not coincide with the purchases within the host country; this is because some of the inputs are purchased from offshore affiliates located in the same host country but owned by firms headquartered in third countries.

Another note we should add at this point is that the high share of intra-firm trade referred to in this section is in comparison with the exports or imports of offshore subsidiaries. We intentionally avoid calculating the share in Japan’s total trade (as recorded in trade statistics), as the limited coverage of SOBA inevitably leads to an underestimation of the intra-firm trade share of the Japanese trade.

From the SOBA source, we validate a similar observation in terms of the number of affiliates. According to the most recent survey available at the time of this study, 31% of Japanese offshore affiliates were located in China alone in 2015. The share of North America (13%) was less than that of ASEAN (18%).

We review changes during the period 2006–2015 by including Hong Kong in China.

Investment in equipment by foreign affiliates is expressed in percentages, using data from SOBA.

Title: Overview of Japanese International Trade and Globalization of Japanese Firms
Author: Eiichi Tomiura
Publisher: Springer Singapore
Book: Cross-Border Outsourcing and Boundaries of Japanese Firms
Print ISBN: 978-981-13-0034-9

Electronic ISBN: 978-981-13-0035-6

Copyright Year: 2018
DOI: https://doi.org/10.1007/978-981-13-0035-6_2