Basic points about Japan's economy and trading patterns
- Japan is a major economic power in the world.
- Until recently the Japanese economy was growing very quickly.
Much of this growth was the result of increases in worker
productivity. This higher productivity was due mainly to:
increased capital (machines, etc.) per worker, advance in
technology, a highly educated and skilled labor force, supportive
government policies and a good world trade environment. However,
Japan's miracle economy of the 1960s and 1970s may be a thing of
the past as the nation copes with problems of lower growth.
- Economic growth has raised the standard of living of the
Japanese people to that of the United States and higher. Income is
more evenly distributed in Japan than in the United States.
- Like the United States, Japan's economy has moved from
manufacturing towards services. Its companies have successfully
used the countries of Southeast Asia as pools of low cost labor.
The change to a more service economy also shows changing tastes of
- Japan is densely populated--it is the eighth most populated
nation in the world.
- The amount of land in Japan suitable for agriculture is
insufficient to produce enough food for Japan's large population.
As a result, Japan imports most of its food from other countries.
- Japan lacks many raw materials needed for industry and energy,
such as oil, coal, iron ore, copper, aluminum and wood. Japan must
import most of these goods.
- In order to pay for these imports, Japan must export a variety
of manufactured goods to other countries. Major Japanese exports
include electronic equipment and cars.
- Trade with other countries (international trade) is therefore
very important to Japan.
- The goods that Japan has exported have changed over time, from
agricultural products to manufactured goods, textiles, steel, and
cars. Japan is no longer competitive in agriculture because it has
little farmland. Today simple manufacturing is too expensive
because of the high wages paid to Japanese workers. Japan is also
less competitive in energy intensive industries such as
petrochemicals and aluminum since the country has few domestic
- Japan purchases oil from the Middle East. Since the price of
oil rose in 1973, Japan has spent more money on oil than any other
imported product. Middle Eastern countries cannot use all of the
products Japan needs to sell or trade for the oil it uses, so
Japan must sell its products elsewhere.
- When a country sells more to one nation than it buys from it,
the trade between the two countries (bilateral trade) is not
balanced. In a world where many countries trade with each other,
it is natural for countries to run bilateral trade deficits with
some countries and bilateral trade surpluses with others. This is
because trade encourages nations to specialize in the production
of the things they produce well and to import those things they
can not produce as well as some other country.
- The more specialized a nation becomes the more likely it is to
run a trade deficit with the nations that supply the inputs (oil
and raw materials in Japan's case), and to run trade surpluses
with countries that buy the final products. This pattern holds
particularly well for Japan. Japan buys coal and other raw
materials from Australia and uses these resources to make high
technology items. It can not sell enough of its finished products
to Australians to pay for the raw materials it buys from them. So,
it runs a trade deficit with Australia, which it pays for by
running trade surpluses with other nations, for example, France.
- Japan and the United States are very important trading
partners. However, there is an imbalance in their trade. This is
part of the pattern mentioned above. Japan is using its trade
surpluses with the United States to pay for its trade deficits
with the OPEC (Organization of Petroleum Exporting Nations)
Contemporary Japan: A Teaching Workbook
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