Displaced Capital and Japanese Economic Growth

Implicit in many theories of Japan's macroeconomic malaise is the displacement of financial capital. It underpins the widely held view that physical investment has been retarded by the disruptive effects of nonperforming loans on financial intermediation. This paper recognizes that the displacement of capital also has real dimensions. It develops the view that the reemployment of displaced capital can compromise growth, perhaps to the point of perpetuating a recession. This may help to explain Japan's prolonged period of stagnation. J. Japan. Int. Econ., June 2000, 14(2), pp. 105–120. Reserve Bank of Australia, 65 Martin Place, Sydney NSW 2000, Australia; and Goldman Sachs Asia, 68th Floor, Cheung Kong Centre, 2 Queen's Road, Central, Hong Kong, China. Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E22, O16.     

Institutional Investors,Trade Linkage,Macroeconomic Similarities,and Contagion of the Thai Crisis

This paper empirically investigates the presence of contagion effects and their causes in the 1997 Southeast Asian crisis. Our empirical results indicate that the Thai crisis was transmitted to neighboring Southeast Asian countries through contagion. They also suggest that the international investors' institutional practice of securing sufficient liquidity and trade linkage were important in spreading the contagion, but the financial integration channel was not important. In addition, the similar macroeconomic conditions of the Southeast Asian countries, such as large capital inflows, large accumulation of current account deficit, and high level of external debt prior to the onset of the Thai crisis, were also responsible for the contagion. J. Japan. Int. Econ., June 2001, 15(2), pp. 199–224. Department of Ecnomics, Korea University, 5-1 Anam-dong, Songbuk-ku, Seoul 136-701, Republic of Korea; and School of Economics, Kookmin University, 861-1 Chongnung-dong, Songbuk-ku, Seoul 136-702, Republic of Korea. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: F30, F31.     

Measuring the Liquidity Effect: The Case of Japan

In this paper, we measure the liquidity effect in Japan, complementing the work done by F. Hayashi (2001, Int. Econ. Rev.42, 287–316) and compare it to the liquidity effect in the United States. Since institutional features are similar across these two countries, we apply J. Hamilton's (1997, Amer. Econ. Rev.87, 80–97; 1998, Carnegie-Rochester Conf. Ser. Public Pol. 49, 1–44) methodology to estimate the liquidity effect for each day of the maintenance period. Detailed daily data supplied by the Bank of Japan enable us to obtain more accurate estimates for Japan. Our key findings, which are not found in F. Hayashi (2001, Int. Econ. Rev.42, 287–316) are as follows: (1) On the final day of a reserve maintenance period, both countries show the strongest evidence of the liquidity effect, and (2) in both countries the liquidity effect tends to be larger and more statistically significant toward the end of the period. J. Japan. Int. Econ., September 2002, 16(3), pp. 289–316. Ministry of Economy, Trade and Industry, 1-3-1 Kasumigaseki, Chiyoda-ku, Tokyo 100-8901, Japan. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: E43, E44, E52.     

Effects of the Bank of Japan's intervention on yen/dollar exchange rate volatility

This paper examines the effects of the Bank of Japan's (BOJ) intervention on the volatility as well as the level of the yen/dollar exchange rate. Specifically, the conventional GARCH model proposed by Bollerslev [Bollerslev, T., 1986. Generalized autoregressive conditional heteroskedasticity. J. Econometrics 31, 307–327] and the component GARCH model proposed by Engle and Lee [Engle, R.F., Lee, G.G.J., 1999. A long-run and short-run component model of stock return volatility. In: Engle, R., White, H. (Eds.), Cointegration, Causality and Forecasting. Oxford Univ. Press, Oxford, UK, pp. 475–497], where the volatility consists of short-run and long-run components, are estimated using the BOJ's and the Federal Reserve system's (Fed's) official intervention data. Results based on the component GARCH model provide new evidence on the effects of the BOJ's intervention on the volatility of the yen/dollar exchange rate. The BOJ's intervention only reduces the short-run volatility component from the late 1990s to 2003, while it does not have an impact on volatility (both the short- and long-run volatilities) at all in the early 1990s. The stabilizing effect of the BOJ's intervention in the late 1990s and the first few years of the 2000s is not enhanced by the Fed's coordinated intervention. J. Japanese Int. Economies 20 (1) (2006) 99–111.     

Determinants of Trade Credit in the Japanese Manufacturing Sector

This paper examines the determinants of trade credit in Japanese manufacturing companies. The empirical analysis presents evidence that the volume of trade credit is influenced not only by transactional factors but also by financial positions. The empirical test reveals that firms' future business prospects affect the volume of trade credit. Notably, for small firms whose liquidity is constrained, nontransactional factors such as an increase in cash flow reduce the need for trade credit. This paper also finds that trade payables act as a complement to bank loans. The quantitative relationship between trade payables and bank loans suggests that when monetary policy works in the financial markets, it also influences the trade-related credit markets. J. Japan. Int. Econ., June 2001, 15(2), pp. 160–177. Department of Economics, Fukushima University, 1 Kanayagawa, Fukushima-shi, Fukushima 960-1296, Japan. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: E52, G32.     

PROBLEMS IN EXPANDING JAPAN'S IMPORTS OF MANUFACTURES FROM DEVELOPING ECONOMIES: A SURVEY*

The Japanese economy is now the second largest market economy, with a large trade surplus. And yet, Japan's imports of manufactures have long been very low relative to its GNP, when compared with other industrial countries; its ratio of manufactured imports to GNP was in the range of 2.1–2.7% in the 1980-87 period, as compared with 8.5–10.3% for the industrial countries as a whole or 4.7-7.2% for the United States. The share of developing economies in total imports of manufactures in Japan is about the same as, if not higher than, those for most other industrial countries. If Japan's ratio of manufactured imports to GNP were to rise in the future to approach closer to those of other industrial countries, Japan's imports of manufactures from developing economies could be two to three times what they are today, even if Japan's GNP does not increase at all and the share of developing economies in Japan's manufactured imports does not increase. This paper is an attempt to probe the potential of the Japanese market for imports of manufactures from developing economies in terms of rising ratio of such imports to GNP. The paper explores the reasons why Japan's ratio is exceptionally low, on the basis of existing literature. (a) Japan's ratio of manufactured imports to GNP has remained exceptionally low compared with those for other industrial countries. (b) Japan's ratio of manufactured imports from developing economies to GNP has remained distinctly low despite the recent surge in such imports. (c) If a part of the reason for the low ratio for Japan was a market access problem as often alleged, the problem is not with formal import barriers such as tariffs and formal non-tariff barriers because these barriers in Japan are no higher than in other industrial countries. As for informal import barriers, evidence found indicates that: (i) Administrative guidance and flexibly managed competition policy, which in the past had considerable effects of limiting imports, appear to have declined-in importance, but they still have import-limiting effects in certain areas. (ii) Market access difficulties involving import procedures, product standards, testing and certification requirements, which were enormous in the past, may have also decreased in severity over the last decade, but problems in these areas persist. (iii) There are aspects of the Japanese distribution system and practice that seem to make foreign access to the Japanese market significantly more difficult than the access by Japanese exporters to the markets in other industrial countries. Distribution in Japan suffers from overregulation. (iv) Users of manufactured products in Japan are sensitive to quality, perhaps more so, on the average, than in other industrial countries. Does the recent upsurge in Japan's imports of manufactures suggest that the traditional import behavior of Japan is changing? Japan's manufactured imports measured in yen increased by 18 and 27 percent in 1987 and 1988, respectively, and those coming from developing economies increased even more rapidly. There is also some evidence that price and income elasticities of demand for manufactured imports may have increased recently. These are encouraging, but it remains to be seen whether the trends will continue far enough into the future to bring Japan's import behavior more into line with those of other industrial countries. If they do, implications for the market prospects of manufactured exports from developing economies could be far-reaching. Outstanding questions are: (i) How much of the recent increase in manufactured imports is attributable to the appreciation of the yen (price effect)? How much is attributable to the increase in income or industrial output (income effect)? How much is attributable to removal of formal and informal import barriers effected so far (structural change)? Has consumer taste changed? (ii) Why have Latin American countries not been successful in promoting their exports of manufactures to Japan, when Asian exporters have been so successful? (iii) Up until now, the share of developing economies in Japan's manufactured imports has not been particularly low compared with those for other industrial countries, but is this share likely to fall or rise in the future? (iv) What is the likely impact of recently increased direct investment (DFI) by Japanese manufacturers in developing economies on the imports of their products into Japan?     

International Knowledge Spillovers and Technology Imports: Evidence from Japanese Chemical and Electric Equipment Industries

This paper clarifies the role of licensed technology imports by investigating data from over 200 Japanese firms in the chemical and electric equipment industries. The results from various estimation methods suggest that licensed technology imports encourage licensees' innovation, since they enhance foreign knowledge inflow. Moreover, the size of this effect depends on the industry and on firm-specific characteristics such as the technological level. Technology imports tend to have the greatest impact when substitute domestic knowledge is less developed than in foreign countries. The significance of technology imports also varies within each industry according to a firm's R&D capability. J. Japan. Int. Econ., September 2001, 15(3), pp. 271–297. Graduate School of Decision Science and Technology, Tokyo Institute of Technology, 2-12-1 Ōokayama, Meguro-ku, Tokyo, Japan 152-8550. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: O31, O34, F29.     

东道国基础设施质量对中国进出口贸易的影响——基于“一带一路”沿线51个国家的实证分析

基础设施建设是经济社会发展的重要支撑,对国家经贸关系进一步发展具有桥梁作用。基于“一带一路”沿线51个国家2011—2019年面板数据,构建拓展引力模型实证分析东道国基础设施质量分别对中国进口与出口的影响。研究发现：东道国基础设施质量会显著促进中国的进口与出口贸易,但对中国进口贸易促进作用强于出口,且东道国GDP增长促进了中国进口与出口贸易增加,其对中国进口贸易促进作用大于出口;而东道国与中国的地理距离对中国进口贸易限制作用大于出口,东道国与中国为邻国、与中国具有共同语言及签订自由贸易协定会推动中国对其进出口贸易增长。在此基础上,提出促进中国与沿线国家进出口贸易的对策建议。     

Determinants of Taiwan's Trade Liberalization: The Case of a Newly Industrialized Country

This paper attempts to account for the success of policy reform in Taiwan's trade liberalization through an investigation of the periods 1986–92, and 1992–95. The objective is to undertake an empirical examination of Haggard et al.'s (The political feasibility of adjustment in developing countries. Development Centre of the OECD, OECD, Paris, 1995) strategies for minimizing the political costs involved in implementing policy reforms. Empirical evidence supports the Haggard et al. arguments, that is, indirect compensation is used to facilitate the implementation of trade liberalization for downstream industries, while the speed of trade liberalization within certain specific industries is comparatively slow. Furthermore, in a democratic regime, the pressure brought to bear by well-organized domestic interest groups, along with the pressure from international interest groups, can strongly influence the pattern of trade liberalization policies.     

Exchange-Rate Strategies in the Competition for Attracting Foreign Direct Investment

Building on the needs for long-term capital inflows in developing countries, this paper reconsiders the choice of an exchange-rate regime by integrating the determinants of multinational firms' locations. The trade-off between price competitiveness and a stable nominal exchange rate is modeled. Empirical results show that exchange-rate volatility is detrimental to foreign direct investment (FDI) and that its impact compares with that of misalignments. One policy implication is that the building of currency blocks could be a way of increasing FDI to emerging countries as a whole. The frontiers of monetary areas would then be strongly influenced by geography, as FDI is. J. Japan. Int. Econ., June 2001, 15(2), pp. 178–198. University of Paris X-Nanterre (THEMA) and CEPII, 200 avenue de la République F-92000 Nanterre, France, CEPII and TEAM, 9 rue Georges Pitard F-75015 Paris, France, (University of Amiens (CRIISEA), CEPII and TEAM, 9 rue Georges Pitard F-75015 Paris, France). Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: F21, F23, F31, F33.     

Fear of Floating: Korea's Exchange Rate Policy after the Crisis

The purpose of this paper is to explore the question of whether a free floating exchange rate regime is a viable option for Korea. This paper divides the sample period into three subperiods: pre-crisis, crisis, and post-crisis. We then analyze the causal relationships among both levels and volatility of three financial variables: exchange rates, interest rates, and stock prices. By using Granger causality tests and variance decomposition, our empirical results show that causal relations among the three variables are weak during the post-crisis period, and furthermore, shocks in other financial markets do not have a significant contribution to explain the variations of each variable's forecast errors. Based on these empirical findings, we infer that the Korean government, having adopted the de jure freely floating exchange rate regime, is still fearful of floating for various reasons. J. Japan. Int. Econ., June 2001, 15(2), pp. 225–251. Department of Economics, Korea University, Seoul, Korea; Korea Institute for International Economic Policy, Seoul, Korea. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: F3, F4.     

Detecting currency manipulation: An application of a state-space model with Markov switching

Following an idea of Milton Friedman's “plucking model,” we propose to use a state-space model with Markov switching as an auxiliary tool for detecting currency manipulation. Without imposing any a priori restrictions, our model tests if fluctuations of a country's exchange rate are symmetric or if there exists a time-varying support level or resistance level of exchange rate. Using weekly and monthly data of countries on the “monitoring list” of the US Treasury as of April 2017, we find that exchange rates of China, South Korea, Switzerland, and Taiwan rarely fall below their time-varying trends, but are plucked upward from time to time by transitory shocks, suggesting that the FX (foreign exchange) authorities of these countries may have been intervening more actively against appreciation shocks. Our sub-sample analysis reveals that our model accurately captures the period of Switzerland's minimum exchange rate policy with probability of one and Japan's exchange rate rarely falls below its trend after implementing Abenomics. We discuss the difficulties of detecting FX intervention along with the relative advantage of our approach.     

Trade Costs,Trade Balances and Current Accounts: An Application of Gravity to Multilateral Trade

In this paper we test the well-known hypothesis of Obstfeld and Rogoff (NBER Macroeconomics Annual 7777:339–390, 2000) that trade costs are the key to explaining the so-called Feldstein–Horioka puzzle. Our approach has a number of novel features. First, we focus on the interrelationship between trade costs, the trade account and the Feldstein–Horioka puzzle. Second, we use the gravity model to estimate the effect of trade costs on bilateral trade and, third, we show how bilateral trade can be used to draw inferences about desired trade balances and desired intertemporal trade. Our econometric results provide strong support for the Obstfeld and Rogoff hypothesis and we are also able to reconcile our results with the so-called home bias puzzle.

Nonprofit/for-profit status and earning differentials in the Japanese at-home elderly care industry: Evidence from micro-level data on home helpers and staff nurses

In April 2000, Japan embarked on a reform of its health care market. Along with the introduction of a long-term care insurance scheme, the government for the first time allowed for-profit operators to compete head-on with non-profit operators in the provision of at-home care services. Taking advantage of a unique and rich micro-level survey, this study is the first to examine wage differentials between the nonprofit and the for-profit sectors in Japan's nursing care industry, concentrating on home helpers and staff nurses. Controlling for nonrandom unobserved selection biases, our results show that a nonprofit wage premium exists. This finding supports the hypothesis that nonprofit providers operate under non-distributional constraints. J. Japanese Int. Economies 21 (1) (2007) 106–120.     

Part-time workers doing full-time work in Japan

This paper is concerned with the phenomenon of part-time workers performing similar types of jobs to full-time workers in the same workplace. We use data from Japan's Survey on Diversified Types of Employment to answer two questions. First, why are firms increasingly employing part-time workers in jobs traditionally offered to full-time workers? Second, what are the characteristics of the workers taking these jobs? As for the former, it is primarily service sector firms using this new work relationship. Interestingly, there is evidence that manufacturing firms are outsourcing in lieu of hiring domestic part-time workers. On a positive note, we find evidence that part-time workers are screened by firms for full-time jobs. As to the second question, the workers are primarily professionals working long hours. As an aside, based on our data we find no evidence that part-time workers are more likely to be involuntarily employed in full-time jobs than in non full-time jobs. J. Japanese Int. Economies 21 (4) (2007) 435–454.     

The Competitive Impact of International Trade: The Case of Import Liberalization of the Japanese Oil Product Market

This paper analyzes the competitive impact of the recent import liberalization of the Japanese oil product market. In response to the import liberalization in March 1996, not only did the market price of gasoline decline sharply but also its domestic production kept rising and did not decline relative to imports. Moreover, its price fell substantially before the actual liberalization of the import. This paper demonstrates both theoretically and empirically that the theory of implicit cartel can explain such features of the impact of import liberalization very well. The paper also identifies the significantly positive welfare impact of such liberalization due to the expansion of supply in a market with a large tax wedge between price and cost and, possibly more importantly, due to the transformation of competitive conduct from unproductive investment for cartel-rent shifting into price cuts. J. Japan. Int. Econ., December 1999, 13(4), pp. 397–423. Hitotsubashi University; and Keio University. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: L40, F12, K21.     

Input Trade Liberalization and the Export Duration of Products: Evidence from China

This paper introduces a quasi‐natural experimental framework into trade policy evaluation and reassesses China's trade liberalization through the survival of export products. We use propensity score matching and China's dual trade system to design a quasi‐natural experiment based on Chinese industrial enterprises, customs import and export, and tariff data over the period of 2000–2006; we then use survival analysis to study the impacts of China's trade liberalization on the export duration of manufacturing firms’ products. We find that the substantial reduction in import tariffs after China's accession to the World Trade Organization enhances the export duration of firm products, indicating that trade liberalization ameliorates the survival of export products. The promotion effects of tariff reduction on export duration are obviously stronger for core products than for noncore products.     

Impacts of the Rise of China on Developing Country Trade: Evidence from North Africa*

Abstract: Despite the global financial and economic crisis, China has continued to experience strong export‐driven growth and, indeed, became the world's largest exporting country in 2009. This rise of China in international markets presents African countries with growing competition in their home and export markets, but also with new opportunities. This paper focuses on the impacts of these developments on countries in North Africa, which are directly affected by the prominence of Chinese manufacturing. In particular, the analysis addresses two policy questions: First, is competition from China leading to substantial displacement of resources that incur significant adjustment costs while moving to new activities, or are there opportunities to exploit finer patterns of specialization that entail less disruption? And second, will policies that mitigate the impact of competition from China limit the longer‐term capacity to exploit new opportunities in the global market? The findings from the empirical analysis suggest that policy makers can support North African producers in the increasingly fierce competition with China by reviewing the regulatory and incentives environment, reducing trade logistics costs, and broadening trade promotion efforts to non‐traditional markets.     

Horizontal transfer,vertical promotion,and evolution of firm organization

This paper investigates interactions among horizontal transfers, promotions across ranks, and creation and destruction of jobs inside a large Japanese manufacturing firm. In this sample firm, we find that job creation and destruction accounts for the majority of horizontal transfers of employees within the firm. This is in sharp contrast to a popular perception that employees move according to a well-defined career path in a stable organization with an internal labor market. Instead, we find that units and jobs are constantly created and destroyed at this firm and that individual career paths are far more dynamic and state and path dependent than the popular perception would suggest.The econometric analysis on determinants of promotion policy confirm these findings, as well as predictions based on the multi-skilling model of human capital. First of all, transfers to functionally similar units which enable employees to acquire multiple skills do enhance promotion probability. On the other hand, transfers to functionally or geographically different units are often detrimental to the promotion prospect, especially those that occur at earlier stages of an employee's career. In general, an employee's career at this firm is significantly influenced by the success or failure of particular units and, in particular, we find that the promotion probability for some types of employees is significantly higher for those transferred from sections that had been eliminated, and also for those transferred into newly created sections. J. Japanese Int. Economies 20 (1) (2006) 20–49.     

Money on the road to empire: Japan's adoption of gold monometallism, 1873–971

In the macro‐economic literature, Japan has at several times been treated as a canonical example of why countries joined the gold standard. On the one hand, the country has been linked to the argument that there exists a relationship between the gold standard and lowered borrowing costs; on the other hand, it has been discussed as motivated by a desire to expand its trade with gold standard countries. This article argues against both strands in the literature, and argues for a third interpretation. It demonstrates that the specificities of Japan's gold standard reveal a concern with ‘original sin’, or the impossibility of raising foreign loans in Japan's own currency, and explains that there were grave costs to gold standard adoption.