Japan’s Foreign Economic Policy Strategies and Economic Performance

Armstrong, Shiro; Drysdale, Peter

The economic rise of Japan in the 1980s was underpinned by a commitment to catching up through domestic reform and accommodated externally within the framework of the postwar multilateral institutions like the GATT/WTO. Regional cooperative processes like APEC later complemented that framework, encouraging unilateral reform across the region. Following the bursting of the asset bubble in the early 1990s and the onset of the Asian Financial Crisis, Japan turned from reliance on the multilateral system to policies based on preferential bilateralism in trade policy to secure its regional trading interests. Japan’s bilateral trade agreements have been largely ineffective in supporting the kind of deep-seated reform to regulatory institutions and competition policies needed to sustain long-term productivity growth. The evidence suggests that Japanese productivity has underperformed against its peers in the industrial world and Asia. Instead of using foreign economic policy as an instrument of domestic reform and productivity enhancement, Japan has used bilateral deals largely as political and strategic tools. Re-establishing a link between Japan’s domestic reform agenda and its economic diplomacy is important for structural reform and national
economic success, as is a more sure-footed engagement with China.



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More About This Work

Academic Units
Center on Japanese Economy and Business
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Center on Japanese Economy and Business Working Papers, 340
Published Here
November 5, 2014