Sectoral Price Movements under the Yen Appreciation

This paper analyzes the movements of tradable goods prices in Japan. The import price indices and the export price indices are matched with the domestic wholesale price indices at the most detailed level available for Japan, and the pricing behavior in the yen appreciation period (1985–1995) is examined. In the import-side analysis, we investigate how far the price movements under currency appreciation deviate from the law of one price. We find that internal–external price differentials have surprisingly expanded for most of the products since 1985. For a number of commodities, the import prices do not decline as far as the exchange rate appreciates, and the domestic wholesale prices do not decrease as far as the import prices decline. Although the expanded price gaps cannot necessarily be interpreted as a result of deliberate trade barriers, they suggest that some sort of handicap is imposed on imported goods and the large fraction of rent generated by the yen appreciation is intercepted in the middle. In the export-side analysis, the relationship between the globalization of firms' activities and export pass-through is investigated. Our cross-sectional regression analysis indicates that the export path-through rates tend to be low when the value added ratios of foreign production of Japanese firms are high. Low export pass-through under currency appreciation is often interpreted as a result of firms' attempts to keep their foreign market share, but the globalization of firms' activities may be another important factor in lowering the pass-through.J. Japan Int. Econ.,December 1997,11(4), pp. 611–641. Department of Economics, Keio University, 2-15-45 Mita, Minato-ku, Tokyo 108, Japan.     

Pandemic (COVID‐19) Policy,Regional Cooperation and the Emerging Global Production Network†

In this paper, we explore the possible policy responses to the COVID‐19 pandemic shock as well as the related economic (financial crisis) shocks on trade and global value chains (GVC) in East Asia. We find that regional policy coordination is critical to mitigate and isolate the pandemic shock. It is important to identify the pandemic events early to flatten the pandemic curve at the national and regional level. This supports a recent study by the World Bank (2020), which highlights the importance of early mitigation policies during the pandemic shock. The cost of the pandemic and economic shocks will increase significantly when several countries in the region experience the pandemic shock concurrently. In this case, flattening the regional pandemic curve becomes important. The results also indicate the need for greater coordination in East Asia to mitigate the pending economic shock in terms of unemployment, corporate bankruptcy and financial market fragility. The paper also highlights that the stability of the GVC network is critical during the pandemic in terms of hedging the risk of disruptions to the procurement of critical medical and health products as well as maintaining service linkages to manufacturing, such as the logistics sector. Regional policy coordination and the stability of GVC will be valuable in the post‐pandemic recovery of the region.     

Value Chain Connectivity in Indonesia: The Evolution of Unbundlings

This paper applies the conceptual framework of ‘unbundling’, proposed by Baldwin (2016), to assess the value chain connectivity in Indonesia. Indonesia is a geographically large country, and three different levels of unbundling co-exist. The first unbundling aligns with the industry-wise international division of labour in plantation agriculture, mining, and labour-intensive industries; the second aligns with where the task-wise international division of labour dominates mainly in machinery industries; and the third aligns with where face-to-face costs are reduced by the digital economy. We argue that the further upgrading of unbundling and the more effective use of advanced piecemeal technologies among different levels of unbundling will enable Indonesia to achieve rapid and equitable economic development. Overcoming distance is key for effectively using the mechanics of unbundling. We propose that three key elements are be promoted: enhancement of connectivity, development of the service sector, and improvement of the policy environment.     

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.     

THE EMERGENCE OF THE MIDDLE CLASSES AND POLITICAL CHANGE IN THE PHILIPPINES

This article provides a study of the middle classes in the Philippines. First, the process of their emergence was examined in relation to that of Philippine industrialization, which started in the 1930s but from the 1960s progressed slowly and was accompanied by the expansion of the tertiary industries and informal sector. Then, the composition and characteristics of the middle classes, including their relatively small population size, distinctness from the lower classes, and internal diversity were analyzed. Finally, based on the data of the middle‐class‐centered organizations formed during the anti‐Marcos struggle, their political aspects were discussed, with emphasis placed on the new pattern of political participation which appeared after the Aquino assassination.     

The political economy of preferential trade arrangements: The case of Japan

ABSTRACT

Support for open trade regimes varies. We analyze Japanese survey data on individuals' preferences for TPP, unilateral import liberalization, and East Asian economic integration, and compare factors influencing policy preferences. First, despite the massive negative campaigns against TPP, 42.8% of individuals support Japan’s participation in TPP, vs. 21.1% against. Second, economic factors do matter for an individual in determining his/her policy preference over TPP. Third, noneconomic factors such as gender, age, access to accurate information, and attachment to hometown also feature as determinants. Fourth, although preferences over TPP and other policy options are positively correlated, some factors decrease TPP support but do not undermine support for two other less-politicized policy options: lack of access to accurate information and some industry and regional TPP-specific factors. Criticism impacts negatively on FTA policy preferences. Finally, we discuss economic policy implications for relationships between China, Japan, and Korea.

Abbreviations: FTA: Free trade agreement; JA: Japan agricultural cooperative; TPP: Trans-Pacific partnership agreement.     

Foreign-owned versus Domestically-owned Firms: Economic Performance in Japan

This paper utilizes micro‐panel data for firms located in Japan and examines differences in corporate performance between foreign‐owned and domestically‐owned firms in the 1990s. We find that foreign‐owned firms not only reflect superior static characteristics, but also achieve faster growth. Moreover, foreign investors appear to invest in firms that may not be immediately profitable, but those that are potentially the most profitable in the future. There is also no evidence that foreign investor is “foot‐loose.” These imply that foreign investors bring useful firm‐specific assets into the Japanese market, which may work as an effective catalyst for necessary structural reform.     

Subcontracting and the Performance of Small and Medium Firms in Japan

This paper provides an empirical analysis of the choices made by Japanese firms with respect to subcontracting status, that is, whether to take in work as subcontractor, to outsource work to subcontractors, to do both or to do neither. It shows that the probability of working as a subcontractor, a choice made by many small firms in Japan, is negatively related to size, foreign sales and technological capability. Furthermore, profits do not appear to be higher for subcontracting firms; indeed, they are highest for the group that does not get involved in any type of subcontracting, whether as a supplier or as an outsourcer.