RIETI Report May 2013

Japan's Manufacturing Employment Falling below 10 Million: A lesson from the U.S. reshoring experience

The hollowing out of the Japanese manufacturing industry shows no signs of hitting bottom as the number of workers employed in the manufacturing sector fell below 10 million for the first time in 51 years last December. The Abe administration's economic policies are geared toward ending deflation and achieving domestic demand expansion accompanied by wage increases. Although higher wages is certainly important, a more important test for these policies is whether the resulting rise in prices will stimulate a boost in supply and lead to an increase in labor demand to generate new employment. In the May issue of the RIETI Report, we present Faculty Fellow Nobuaki Hamaguchi's column "Japan's Manufacturing Employment Falling below 10 Million: A lesson from the U.S. reshoring experience."

Hamaguchi breaks down the changes in employment in the manufacturing and service sectors over the five years between 2007 and 2012 in the core and periphery regions of Japan and discusses the trends and the decline of the manufacturing sector in particular. To restore the manufacturing sector, he looks to the "reshoring" experience of the United States, which has seen the return of manufacturing jobs back from overseas. Hamaguchi highlights the impact of reshoring on the United States and its potential application to Japan, but points out the differences in the economic and fiscal situations between the two countries and provides suggestions for Japan to overcome the hollowing out of the manufacturing industry. The message is clear: Japan must overcome the challenges with costs, demand, and approaches to markets, and the government and industries must work together and forge a common vision for a balanced economic renaissance in post-deflation Japan so as to create jobs in the local regions.

This month's featured article

Japan's Manufacturing Employment Falling below 10 Million: A lesson from the U.S. reshoring experience

HAMAGUCHI NobuakiFaculty Fellow, RIETI

The hollowing out of the Japanese manufacturing industry shows no signs of hitting bottom. For the first time in 51 years, the number of workers employed in the manufacturing sector fell below 10 million in December 2012. The economic policies of the government of Prime Minister Shinzo Abe are geared toward ending deflation, thereby achieving domestic demand expansion accompanied by wage increases. It is certainly important to increase wages for workers. However, a more important test for the policies is whether the resulting rise in prices will stimulate a boost in supply, hence an increase in labor demand to generate new employment.

To read the full text
http://www.rieti.go.jp/en/papers/contribution/hamaguchi/02.html

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