Text: Distinguished Research Fellow, Waseda UniversityDing Anping
As a traditional export country, Japan has frequently experienced deficits in recent years. Japan's deficit in fiscal 2022 (April 2022 – March 2023) hit a record high since comparable records began. The first half of fiscal 2023 (April-September 2023)** deficit was 27,184 trillion yen, which is Japan's fifth consecutive semi-annual deficit. The Federal Reserve's continuous interest rate hikes have led to the continuation of the yen exchange rate, and the high level of import costs in Japan under the Russia-Ukraine conflict has led to a surge in Japan's import costs. Japan has a small land area and poor natural resources, and relies on imports for its main raw materials and fuels, including oil. This paper excavates, sorts out and analyzes the experience and lessons of Japan's foreign trade development, in order to have a clearer understanding and grasp of the great changes that the world is facing in a century.
Foreign trade country
During the post-war recovery period, as an island country with a serious shortage of resources, Japan**, with the assistance of the United States, established a development strategy of "foreign trade country". Japan's foreign trade is protected and nurtured at the national level, and this strategy is also known as "two-pronged", that is, Japan imports large quantities of raw materials from overseas, processes them into products in Japan, and then exports large quantities overseas. With the help of U.S. aid funds to Japan and "special needs" order support, Japanese factories are running at full capacity, day and night. At the same time, the United States opened its arms to Japan and opened its domestic market to Japan, and Japanese goods poured into the United States in large quantities. Japan's economy miraculously soared from the ruins of the defeat of World War II and entered a 30-year period of rapid development.
Japan joined the General Agreement on Tariffs and Trade in 1955 and lifted import controls in 1958, and foreign trade has become increasingly important in Japan's national economy. The Ministry of International Trade and Industry (later renamed the Ministry of Economy, Trade and Industry) is the main department responsible for management in Japan, and is responsible for the overall management of various economic and industrial sectors and the formulation of policies.
The Ministry of Economy, Trade and Industry firmly seized the opportunity of U.S. assistance in the ruins of the post-war period, flexibly adjusted its policies and strategies in the subsequent friction between Japan and the United States, and worked with the subordinate Japan Revitalization Organization to make a global layout and fully support Japanese companies to go abroad, which contributed to the smooth flow of Japanese goods overseas, and set off a whirlwind of "Made in Japan" around the world. In order to promote foreign trade, Japan has made great efforts to establish a mechanism for domestic and global government agencies, Japanese foreign trade enterprises, and product industry associations to jointly deal with friction at a large cost in Japan and around the world. The tentacles of the Ministry of Economy, Trade and Industry, the Ministry of Finance, the Bank of Japan, and the Japan Promotion Agency have penetrated into major cities and ports around the world.
Japan's first promotion organization has made a great contribution
Japan External Trade Organization (JETRO) is a Japan ** funded establishment in 1958 (then known as the Japan ** Promotion Association), dedicated to promoting ** and investment ** institutions, under the Japanese Ministry of Economy, Trade and Industry, in 2003 changed its name to Japan ** Promotion Organization.
Jetro has 48 offices in Japan and 74 offices in 54 countries outside of Japan, totaling more than 120 offices. With the aim of comprehensively revitalizing Japan**, JETRO supports small and medium-sized enterprises and the agricultural, forestry, fishery and food industries to expand overseas, and attracts outstanding overseas companies to invest in Japan, while helping large Japanese companies and general trading companies expand overseas**.
In order to help Japanese companies integrate into the global ecosystem as quickly as possible, JETRO has set up about 10 "Global Acceleration Centers" around the world to support Japanese startups to expand their business in Japan and local startups to enter Japan. In overseas markets, where strong demand and economic cooperation are showing good prospects for development, JETRO serves as the secretariat of the "Association of New Exporters", which is composed of ** and private support organizations, and provides thoughtful services according to the needs of each company. At the same time, we support Japanese companies in expanding their overseas business by utilizing international human resources, utilizing cross-border e-commerce, developing frontier markets, utilizing intellectual property rights, and promoting the appeal of Japan.
We provide the necessary information for Japanese companies to expand overseas through investment consulting, introduction of local real-time conditions by overseas offices, and seminars on overseas market development skills, and provide seamless support services for Japanese companies from business planning to overseas export and investment. In addition, Jetro actively contributes to the optimization of the business environment and policies for Japanese companies by actively advising on Japanese and overseas companies.
Japan and the United States "love and kill each other".
The gradual expansion of Japanese exports threatens the interests of the United States. The friction between Japan and the United States began with the textile industry, and then gradually upgraded to the steel, automobile, electrical appliances, semiconductor and other industries. In 1979, Japan's surplus with the United States reached 13 trillion yen, which reached 94 trillion yen. In the face of the continuous export of Japanese products, the United States exerted strong pressure, and Japan responded flexibly, issuing the "Maekawa Report" and "New Maekawa Report" in a timely manner, advocating to expand domestic demand, transform the industrial structure, expand imports, and accelerate the road of financial liberalization and internationalization.
Japan's economy has changed from a foreign trade-led economy to a domestic demand-led economy, and has made great efforts to improve independent innovation and intellectual property rights, continuously improve product performance, reduce production costs, and meet consumers' growing requirements for quality of life and quality of life. Under strong pressure from the United States, in order to ease friction and gradually lower barriers, Japan reduced tariffs by 20% on 1,853 imported products in 1986 and 1,004 imported goods in 1990. It is worth mentioning that in the face of the influx of foreign goods, Japan timely encourages domestic enterprises to survive the fittest in the competition, introduces tax and credit support policies, supports domestic excellent enterprises, introduces an exit mechanism, and eliminates inferior enterprises.
At the same time, in order to avoid the risk of U.S. barriers, Japan encourages Japanese companies to invest in the United States to set up factories, produce in American factories and then sell them in the United States. Japan** provides tax incentives for overseas investment and has established a comprehensive overseas investment insurance system. According to Japan's official statistics, Japan's direct investment in the United States has grown by leaps and bounds, from 13$200 million increased to $51.9 billion in 2017, an increase of 39.9 billion3 times.
The main purpose of Japanese companies going overseas is to seek opportunities to deeply participate in the local market, in addition, to re-export**. In the process of going overseas, the overseas production and sales rate of Japanese companies has been on the rise. Today, when we study and summarize the lessons of Japan's "lost 30 years", we should not ignore the valuable experience of Japanese companies in flexibly going overseas in those years. In the face of the tough pressure of the United States, Japan calmly adopted a response strategy, using the cheap land and labor of developing countries to divert Japan's export capacity to a third country and then export to Europe and the United States. It is through soaring overseas revenues that Japan has sustained its overall economic growth. However, in the late stage of the Cold War, the United States gradually established its superiority, intensified its protectionism against its own products, and suppressed the upgrading and transformation of Japan's high-end industries in an all-round way, which is one of the main reasons for the stagnation of the Japanese economy. As allies of the "Japan-US alliance," it can be seen that Japan and the United States "love and kill each other."
The gains and losses of the "black letter return" plan
Japan's "Capital Recycling ProGRM" program is a successful measure taken in the 80s of the 20th century to promote Japanese companies to go overseas, with a total amount of 65 billion US dollars, mainly including ** development assistance (ODA) and commercial yen loans. In the five years from 1987 to 1991, Japan took out a part of the funds from its international surplus (in black) as preferential loans, and with the help of international and domestic development financial institutions such as the World Bank, the International Monetary Organization, the Export-Import Bank of Japan, and Japan Overseas Cooperation **, it supported the reconstruction and construction of developing countries in three phases in the form of loans at preferential interest rates and the issuance of yen bonds, which not only eased the friction between Japan and the United States, but also effectively supported the infrastructure development of developing countries. It has established a friendly international image of Japan and opened up new ways for Japanese products to be exported to the markets of third countries.
In the process of implementing the plan, there are additional conditions, stipulating that the loan must be used to purchase Japanese-made products and equipment in the construction process of infrastructure projects, thus effectively driving the export of Japanese products and equipment, helping Japanese enterprises to form a transnational industrial chain in the market of developing countries, and laying a solid foundation for the internationalization of the yen and the localized application of Japanese products and equipment and the creation of a new model of international production capacity.
However, because the business environment of developing countries is completely different from that of developed countries, this vigorous plan has also encountered the dilemma of adaptation and even political risks in some developing countries. In addition, although the interest rate of the "black letter return" loan is relatively favorable, it is a low-interest or interest-free loan, but the borrower needs to bear the hidden risk of exchange rate fluctuations, and in addition to the crimes committed by Japan against China and other developing countries in Southeast Asia during the war years, the implementation of this plan has not achieved the expected effect in improving Japan's historical image and establishing goodwill relations. As Japan's economy is in decline and fiscal continuity is weak, the program is gradually entering a low ebb after repayment is due.
The brilliance and bottleneck of technological innovation
In the early post-war period, Japan's export products were mostly "fake and shoddy", with low added value, a high degree of substitution, and a lack of competitiveness in the world. In the 70s of the 20th century, Japan launched a new strategy of "science and technology", focusing on supporting the production and export of clean energy, life sciences, electronics, new materials and other industries, and upgrading industries with large energy consumption. The improvement of R&D technology of Japanese enterprises has achieved the gradual transformation of "Made in Japan" products from low-end to high-end.
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Article**丨Tsinghua Financial Review, February 2024, Issue 123
This article is edited by Wang Mao
Editor-in-charge丨Ding Kaiyan.
Proofreading丨Lan Yinfan.
Preliminary trial丨Xu Lanying.
Final Review丨Zhang Wei
review of past articles -