1990 Reports

The controversy over Japan's low manufactured imports

Lincoln, Edward J.

Relative to other industrial countries, Japan continues to have very low levels of manufactured imports, a distinctive feature that has not been affected substantially by the high value of the yen since 1985. This aspect of Japan has been widely known by economists, but there is still substantial disagreement over the causes of the low level of imports. Can it be ascribed to implicitly protectionist behavior, or can it be explained by standard economic variables? As with most social science questions, the answer is probably a combination of many factors, none of which provides a complete explanation by themselves. This paper reviews the evidence on Japan for both the low level of imports and the low level of intra-industry trade, another pattern of trade which is very substantial for virtually all industrial nations except Japan. A variety of explanations have been offered by economists, political scientists, and business scholars, and these explanations are explored here. A final topic which cannot be ignored is the impact of the rising yen since 1985 and how it is changing Japanese behavior.