Japan

LEVEL AND COMMODITY COMPOSITION OF TRADE

JT-60 critical plasma equipment used in nuclear fusion testing
Courtesy Embassy of Japan, Washington

Exports

Japanese exports grew rapidly in the 1960s and 1970s, but growth slowed considerably during the 1980s. Over these decades, both the composition and the reputation of products from Japan changed profoundly.

Because of the success of certain exports, Japan is often viewed as a heavily export-dependent nation. As a percentage of GNP, however, the country exports less than many other major trading countries of the world. In 1991, for example, it exported 9.3 percent of its GNP compared with 14.9 percent for Italy, 18.2 percent for France, 18.2 percent for Britain, 22.1 percent for Canada, 24.8 percent for Germany, and 47.0 percent for the Netherlands. The United States exported a smaller share of its GNP at 7.4 percent. Japan was, therefore, less dependent on foreign trade than many other industrialized countries of the world. In certain industries, however, export dependence was high. In 1991, for example, just under half of all automobiles produced in Japan were exported.

The growth of Japanese exports during the 1960s and 1970s was truly phenomenal. Beginning in 1960 at US$4.1 billion, merchandise exports grew at an average annual rate of 16.9 percent in the 1960s and at an average annual rate of 21 percent in the 1970s. From 1981 to 1988, however, export growth averaged 11.3 percent per year, about one-half the level of the 1970s. By 1990 merchandise exports reached US$286.9 billion (see table 25, Appendix).

The growth in exports can be viewed in terms of both pull and push factors. The pull came from increasing demand for Japanese products as the United States and other foreign markets grew and as trade barriers in major market countries were reduced. Another pull factor was the price competitiveness of Japanese products. From 1960 to 1970, Japan's export price index increased by only 4 percent, reflecting the high rate of productivity growth in the manufacturing industries producing export products. Inflation was higher in the 1970s, but export prices were still only 45 percent higher in 1980 than in 1970 (growing at an average annual rate of less than 4 percent), considerably lower than world inflation. The 1980s began with another short burst of inflation because of oil price increases in 1979, but by 1988 Japanese export prices were actually 23 percent lower than in 1980, offsetting much of the price increase of the 1980s. This record enhanced the international price competitiveness of Japanese products.

During the 1950s, Japanese export products had a reputation for poor quality. However, this image changed dramatically during the 1970s. Japanese steel, ships, watches, television receivers, automobiles, semiconductors, and many other goods developed a reputation for being manufactured to high standards and under strict quality control. The Japanese were the acknowledged world leaders for quality and design in the 1980s for some of these products. This rise in product quality also increased demand for Japanese exports.

The push behind Japan's exports came from manufacturers. Many recognized that to reach efficient levels of production they needed to adopt a global approach. Manufacturers concentrated on the domestic market (often protected from foreign products) until they reached internationally competitive levels and domestic markets were saturated. Often helped by the large general trading companies, manufacturers aggressively attacked foreign markets when they felt able to compete globally. This push factor partially accounted for the extraordinarily high level of export growth in the 1970s, when the domestic economy slowed; increasing exports was a way for manufacturers to continue expanding despite the more sluggish domestic market.

Exports included a wide variety of products, virtually all of which were processed to some degree (see table 26; table 27, Appendix). After the war, the composition of exports shifted through technological progression. Primary products, light manufactures, and crude items, which predominated during the 1950s, were gradually eclipsed by heavy industrial goods, complex machinery and equipment, and consumer durables, which required large capital investments and advanced technology to produce. This process was illustrated vividly in the case of textiles, which composed more than 30 percent of Japanese exports in 1960, but less than 3 percent by 1988. Iron and steel products, which had grown rapidly in the 1960s to become nearly 15 percent of exports by 1970, declined to less than 6 percent of exports by 1988. Over the same period, however, exports of motor vehicles rose from under 2 percent to over 18 percent of the total. In 1991 Japan's major exports were motor vehicles, office machinery, scientific and optical equipment, and semiconductors and other electronic components.

Data as of January 1994

Japan - TABLE OF CONTENTS