Competition with Imports from Low- and Lower-Middle-Income Countries and its Impact on the Growth of Japanese Companies: Empirical Analysis Based on Micro-Data of the "Basic Survey of Japanese Business Structure and Activities"

Author Name ITO Keiko  (Lecturer, School of Economics, Senshu University)
Creation Date/NO. September 2005 05-J-028
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Since the 1990s, Japan's trade structure has drastically changed, with the trade of machinery with China and ASEAN countries marking a particularly significant increase. The proportion of imports from low-wage Asian countries in Japan's total imports, in terms of value, is increasing for almost all manufacturing sectors but most conspicuously in the machinery industry. To examine the impact of such imports from low-wage countries - those defined as low-income and lower-middle-income countries - on the growth of domestic companies, this paper analyzes determinants of the growth of employment and sales on the company level in the latter half of the 1990s, using micro-data of the government's Basic Survey of Japanese Business Structure and Activities. Analysis results show that the growth rates for sales and employment tend to be small in industries exposed to fierce competition from cheap imports from low- and lower-middle income countries. At the same time, however, it has been found that even within the industries exposed to fierce competition, the negative impact of cheap imports has been kept relatively small for certain companies, namely companies boasting high productivity, those having established an efficient production network of overseas affiliates for vertical division of work, and those actively engaged in research and development.

Meanwhile, companies relying heavily on suppliers in other Asian countries are adversely affected in terms of employment but no statistically meaningful negative impact is observed in sales growth. The fact that a sizable downward impact is observed in employment while sales remain hardly affected may indicate the possibility that imports from other Asian countries are resulting in productivity improvement.