Entry Regulations, Tax Distortions and the Bipolarized Market: The Japanese Retail Sector

Recently the Japanese retail sector has received growing attention in both academic research [(Krugman (1992), Miwa and Nishimura (1991)] and in international negotiations. In fact, the Japanese distribution system was one of the main issues in the Structural Impediment Initiative negotiation between the United States and Japan. Trade negotiators of the United States argued that the Japanese distribution system was very different from theirs and many other countries’, and they blamed this difference for its inefficiency and closeness to imports. However, there is a deeper question academics must resolve — what exactly has caused the Japanese retail sector to be so different?