The Role of Competitiveness in Japan’s Export Performance, 1954-58
Author: P. R. Narvekar
Publication Date:
01 Jan 1960
eISBN:
9781451968798
Language:
English
Keywords:
SP; bottom; price change; Japan; export; commodity group; Japan's export; exports of manufacture; dependence ratio; world trade; Exports; Competition; Trade balance
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JAPAN ACHIEVED a spectacular increase in exports during the four-year period 1954-57. From $1,275 million in 1953, total exports increased to $2,858 million in 1957, or by 124 per cent. In volume terms, the gain was slightly larger, 132 per cent, as the unit value of exports declined somewhat. Shipments of manufactured goods,1 of which Japan is among the leading world exporters and which constituted about 87 per cent2 of total Japanese exports, increased by 143 per cent. This increase was the largest among the major trading nations of the world. During the same period, exports of manufactures from the Federal Republic of Germany increased by 104 per cent, from the United States by 51 per cent,3 and from the United Kingdom by 31 per cent. It will be argued later that the larger expansion of Japanese exports cannot, to any great extent, be viewed as merely evidence of the recovery of Japan’s prewar position in world trade.

Abstract

JAPAN ACHIEVED a spectacular increase in exports during the four-year period 1954-57. From $1,275 million in 1953, total exports increased to $2,858 million in 1957, or by 124 per cent. In volume terms, the gain was slightly larger, 132 per cent, as the unit value of exports declined somewhat. Shipments of manufactured goods,1 of which Japan is among the leading world exporters and which constituted about 87 per cent2 of total Japanese exports, increased by 143 per cent. This increase was the largest among the major trading nations of the world. During the same period, exports of manufactures from the Federal Republic of Germany increased by 104 per cent, from the United States by 51 per cent,3 and from the United Kingdom by 31 per cent. It will be argued later that the larger expansion of Japanese exports cannot, to any great extent, be viewed as merely evidence of the recovery of Japan’s prewar position in world trade.

The Export Expansion

JAPAN ACHIEVED a spectacular increase in exports during the four-year period 1954-57. From $1,275 million in 1953, total exports increased to $2,858 million in 1957, or by 124 per cent. In volume terms, the gain was slightly larger, 132 per cent, as the unit value of exports declined somewhat. Shipments of manufactured goods,1 of which Japan is among the leading world exporters and which constituted about 87 per cent2 of total Japanese exports, increased by 143 per cent. This increase was the largest among the major trading nations of the world. During the same period, exports of manufactures from the Federal Republic of Germany increased by 104 per cent, from the United States by 51 per cent,3 and from the United Kingdom by 31 per cent. It will be argued later that the larger expansion of Japanese exports cannot, to any great extent, be viewed as merely evidence of the recovery of Japan’s prewar position in world trade.

In 1953, Japan’s total exports paid for only 61 per cent of its imports; in balancing foreign payments, special government receipts4 played an important role, being equal to about two thirds of the value of exports. By 1957, exports had taken over a much larger share of the burden of external payments; in that year they covered 88 per cent of imports. On the other hand, the significance of special government receipts declined, as they were only a sixth of the value of exports.

The increase in Japan’s exports was the initial factor in the acceleration of the domestic economic expansion that began about the end of 1954. In gauging its importance, the “expansionary impulse” may be defined crudely as the sum of changes in investment expenditures and exports of goods and services, consumption expenditures being treated as a passive demand factor. In 1954, the aggregate expansionary impulse was negative, but merchandise exports increased substantially. While exports continued to increase in the following years, domestic investment demand also began to increase, and by the final stages of the boom—the first half of 1957—the portion of the expansionary impulse provided by the increase in exports declined to 5 per cent. Over the entire period of 3½ years, 1954 to the first half of 1957, this proportion was one fifth. The importance of exports as an expansionary factor was greater than indicated by this proportion, however, because they also provided a stimulus to investment demand. Moreover, by directly supporting the external payments position, they kept in abeyance the operation of the most important constraint on domestic demand expansion; as long as the external payments position was comfortable, the domestic financial authorities did not consider it necessary to take action to check the demand expansion.

In the present note, an attempt is made to ascertain the extent to which the increase in Japanese exports of manufactures during 1954-57 reflected a genuine increase in their competitiveness in world markets and the extent to which this competitiveness was affected by the development of the domestic boom. The statistical analysis used for this purpose is also extended to the year 1958, when the growth of Japan’s exports virtually ceased.

Competitiveness

Competitiveness, while being quite precise conceptually, has always defied exact measurement. Statistics on the unit value of exports, the most commonly used indicator of price competitiveness, are usually too aggregative to be truly meaningful, even when classified into four or five commodity groups. If the commodity composition of the exports of two countries is different, then the fact that export prices are affected directly by demand conditions always leaves open the possibility that different movements in the export price indices of the two countries reflect differential changes in the foreign demand for different commodities rather than changes in competitiveness. Thus, for example, the larger importance of textiles in the exports of Japan than in the exports of other industrial countries, and the much smaller increase in world trade in textiles than in other manufactured goods during 1954-57, were perhaps partly responsible for the disparate changes in the unit value of Japan’s exports of manufactures and those of its competitors during that period.

Efficiency wage costs, the other indicator of price competitiveness, are affected by demand conditions only indirectly. On the other hand, they refer obviously to the cost of only one factor of production, although, of course, this cost is normally the largest single element in total production costs. In any event, a comparison of efficiency wage costs in Japan with such costs in other industrial countries is of limited usefulness because in Japan, to a much greater extent than in other industrial countries, wage payments are not a full measure of total labor costs; unfortunately, however, little information is available on the precise relative importance of nonwage labor costs in Japan and the changes in these costs over time.

Whatever the efficacy of the unit value of exports or efficiency wage costs as indices of price competitiveness, they clearly afford little indication of such other dimensions of competitiveness as the quality of the goods, the quality of the various services associated with their sale, including the availability and cost of credit, or the time interval between orders and delivery dates. In total competitiveness, these elements can be as important as price elements. However, it is difficult, if not impossible, to measure them with quantitative precision.

In this note, therefore, a roundabout procedure is followed in attempting to determine the extent to which the expansion in Japan’s exports during 1954-57 was associated with changes in their competitiveness. Since changes in exports are obviously affected not only by their competitiveness but also by foreign demand conditions, an attempt is made to eliminate from Japan’s total export expansion the portion attributable to those demand factors which are amenable to quantitative treatment. Thus, the effect on Japan’s exports of changes in the size and pattern of world trade is eliminated, and the residual portion of the expansion is considered to be the result of increased competitiveness of Japan’s exports. This portion, of course, includes the effects of all conceivable elements of competitiveness, and it is impossible to determine, on the basis of this approach, the elements in which improvement actually occurred. Moreover, it might also include the effects of certain other factors which cannot be considered elements of competitiveness, as, for example, changes in the degree of discrimination (or preference) applied to Japanese goods in the import control policies of different countries. However, no evaluation of such factors is attempted in this paper.

Statistical Procedure

The impact of changes in foreign demand on Japan’s exports of manufactures is ascertained by three successive steps.5 First, the amount by which Japan’s exports would have increased, if Japan had shared proportionately in total world trade in manufactures, is calculated; here, world trade is assumed to have grown uniformly for all commodities and markets.6

Second, the effect of the differential commodity pattern of world trade expansion is determined by calculating the amounts by which Japan’s exports of each commodity group would have increased if each group had increased by the same percentage as world exports of the respective commodity group, and then deducting from the total of these amounts the total of the amounts by which each group would have increased if it had increased by the same percentage as total world exports. The result would be positive if world demand expansion were more than proportionate in the commodities in which Japan specialized in the base year; if it were less than proportionate, the result would be negative.

Finally, the effect of the differential market pattern of world trade is determined by calculating the amounts by which Japan’s exports of each commodity group would have increased if Japan had just maintained its share in each market for that commodity group, and deducting from their total the total of the amounts by which each group would have increased if it had expanded by the same percentage as world trade in the respective commodity group. The result would be positive if demand7 increased more than proportionately in the markets in which Japan specialized in the base year.

The sum of the amounts derived by these three steps is deducted from the total increase in exports, and the remainder is assumed to be the effect of the increased competitiveness of Japanese exports; for the sake of brevity, this amount will be referred to below as the “competitiveness effect.”

The calculations are based on 3 commodity groups—“chemicals” (SITC group 5), “machinery and transport equipment” (group 7), and “other manufactures” (groups 6 and 8)—and on 15 market country groups.8 The classification of all manufactures into only 3 commodity groups is admittedly unsatisfactory; in particular, the third group includes such diverse items as textiles, and metals and their manufactures. A more detailed commodity classification might have been obtained without great difficulty; however, the task of determining from the available statistics the directional pattern—which is readily available for the 3 commodity groups mentioned above—for a larger number of such groups would have been unmanageable.

Results

Demand factors, competitiveness, and export expansion, 1954-57

The results of the detailed calculations, which are summarized briefly in Table 1, indicate that the increase of $1,493 million, or 143 per cent, in Japan’s exports of manufactures from 1953 to 1957 was far greater than could be explained by the increase in the value of world trade during that period. The pattern of the increase in world trade, from the standpoint of commodity composition and market structure taken together, was in fact unfavorable to Japan. Nearly three fourths of the increase in Japan’s exports can be ascribed to their increased competitiveness.

Table 1.

Summary Statistical Analysis of Changes in Japan’s Exports of Manufactures, 1953 to 1957 and 1957 to 19581

(In millions of U.S. dollars)

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Based on data from United Nations, Monthly Bulletin of Statistics, February 1960. Plus sign indicates increase; minus sign indicates decrease. In the source, the total of Japan’s exports to the various market groups listed sometimes differs from Japan’s total exports; however, these differences are slight—the largest being $3 million for “other manufactures”—and they are included in items 5(d) and 7(d).

These figures relate to the effect on Japan’s exports resulting from the fact that the increase in world trade for the three commodity groups listed was faster or slower than average; they do not relate to changes in the commodity composition within each of the three groups.

(1) Effect of increase in world trade. The period 1954-57 was one of expanding world trade; the annual rate of increase in each of the four years was higher than in any other year since 1948, with the exception of the Korean boom year, 1951. The increase in the entire period was 42 per cent. If Japan had shared only proportionately in this expansion of world trade, its exports would have increased by $441 million. Actually, the increase in Japan’s exports was more than three times the increase in world exports. Japan’s share in world trade in manufactures increased from 2.90 per cent in 1953 to 4.96 per cent in 1957, and as an exporter of manufactures Japan moved from eighth to sixth place.9

(2) Effect of commodity pattern of world trade expansion. The hypothetical increase of $441 million mentioned above overstates to some extent the benefit accruing to Japanese exports from the expansion of world trade, for it assumes that the expansion occurred uniformly in different groups and markets. The pattern of world trade expansion was, in fact, such that Japan, with its original commodity and market pattern, could not derive full benefit from it. From the standpoint of commodity composition, this means that Japan was specializing in that commodity group—“other manufactures”—in which the expansion of world demand was least marked. On the one hand, as a result of Japan’s traditional specialization in textiles, the group, ‘other manufactures”—in which textiles are included—was twice as important in Japan’s exports as in world exports, while the other two groups—chemicals and machinery and transport equipment—were only about half as important. On the other hand, world trade in “other manufactures” increased by only 35 per cent during 1954-57, whereas that in the other two groups increased by 50 or 60 per cent. The opportunities for Japanese exports were reduced to the extent of $35 million by this unfavorable pattern of world trade expansion.

Certain additional data on the commodity pattern aspect are summarized in Table 2. These details cannot be woven into the general scheme of this note, partly because the directional pattern of these exports is not available and partly because they relate only to the 11 major exporters of manufactures.10 Nevertheless, they indicate in greater detail the relation between the pattern of Japan’s export specialization in 1953 and the commodity pattern of world trade expansion in the four following years. The pattern of world trade expansion was clearly unfavorable to Japan principally because of Japan’s specialization in textiles; also contributing to that result was the relative unimportance in Japan’s exports of chemicals and of electrical and other machinery, commodities in which world trade increased by as much as or more than average. The manner in which the commodity specialization of Japan’s exports had changed by 1957 is discussed in (4), below.

Table 2.

Commodity Specialization in Japan’s Exports, 1953 and 1957, and the Commodity Pattern of World Trade Growth, 1954-571

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Based on data from Board of Trade Journal (London), September 4, 1959. World trade and exports here refer to exports of manufactures from the following 11 major exporters: the United States, the United Kingdom, the Federal Republic of Germany, Belgium-Luxembourg, France, Italy and Trieste, the Netherlands, Sweden, Switzerland, Canada, and Japan.

Column 2 divided by column 1. It is important to bear in mind that what is significant for the present purpose is not the commodity composition of Japan’s exports per se but this composition relative to that of world exports.

Based on 1957 data for world exports and Japanese exports.

(3) Effect of market pattern of world trade expansion. The loss to Japan from the commodity pattern of world trade expansion was offset in part by a gain from its market pattern. This gain arose entirely in exports of machinery and transport equipment. Table 3 shows Japan’s relative (i.e., relative to that of the world as a whole) dependence on various markets in respect of the three major export commodity groups in 1953, and the percentage rates of growth of these various markets during 1954-57. Japan’s position was slightly unfavorable in respect of its exports of “other manufactures” and chemicals. The relative dependence of “other manufactures” on the Far Eastern countries outside the sterling area11 was very high, but the growth of these markets was far below average. The European market was the fastest growing, but its relative importance was small for Japan. In chemicals, Europe and Latin America were prominent among the regions where the expansion of demand was most marked, but these markets were relatively unimportant for Japan. The loss incurred from the unfavorable market pattern of the world trade in these two groups was, however, more than offset by machinery and transport equipment. Here, too, Japan benefited less than proportionately from the growth of the European markets because of its low dependence on these markets; also, high dependence on the Far Eastern countries outside the sterling area redounded to Japan’s disadvantage. But this disadvantage was less than that for the “other manufactures” group, since, when compared with the average for all markets, the rate of growth for machinery and transport equipment was not so slow as the rate of growth for “other manufactures.” Furthermore, the effects of these unfavorable conditions were outweighed by the rapid growth of two markets which were important to Japan, North America, and the Latin American dollar countries.12 Moreover, Japan’s exports of all commodity groups benefited greatly from the rapid growth of the independent Far Eastern sterling area countries; these countries figured much more prominently in Japan’s exports than in world exports.

Table 3.

Market Dependence Ratios of Japan’s Exports, 1953 and 1957, and the Market Pattern of World Trade Growth, 1954-571

(In millions of U.S. dollars)

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Based on data from United Nations, Monthly Bulletin of Statistics, February 1960.

The ratio of the percentage share of a given market in Japan’s exports to the percentage share of that market in world exports.

Includes Japanese exports of ships to Liberia. See text, footnote 12.

Spain, Finland, and Yugoslavia.

Excluding Japan.

The gain to Japan from the favorable market pattern of world trade expansion was $23 million.

(4) Effect of increased competitiveness. The net increase in Japanese exports attributable to changes in world trade can thus be placed at $429 million, or about 29 per cent of the actual increase; the rest, $1,065 million or 71 per cent, is, according to our definition, attributable to the increased competitiveness of Japanese exports. It is, of course, obvious that these figures would have been different had more detailed commodity statistics been used. It seems, however, that the present results are, if anything, an underestimate of the portion of the export expansion attributable to competitiveness. For Japan’s high dependence on textiles is hidden by merging them with other commodities in “other manufactures,” trade in which was growing more rapidly than the trade in textiles; the loss due to the commodity pattern of world trade expansion is thus understated. On the side of market pattern, the degree of detail used in the classification appears adequate, especially since it distinguishes fairly clearly between the developed and the less developed countries.

The proportion attributable to competitiveness was 73 per cent for “other manufactures,” 72 per cent for machinery and transport equipment, and 44 per cent for chemicals. Japan increased its share of world trade in all three commodity groups—from 4 per cent to 6.7 per cent in “other manufactures,” from 1.5 per cent to 3.3 per cent in machinery and transport equipment, and from 1.9 per cent to 2.4 per cent in chemicals. Also, it increased its share in the majority of market groups, the most pronounced changes for chemicals being in China (Mainland); for machinery and transport equipment, in North America, Latin American non-dollar countries, and the independent Far Eastern sterling area countries; and for “other manufactures,” in North America, continental Western Europe, the overseas sterling area, and China (Mainland).

As observed earlier, the portion of the export expansion attributable to increased competitiveness is the joint result of all the various factors entering into that concept. Unfortunately, it is not possible to separate the effects of the individual factors. Moreover, the “competitiveness effect” may also include the effect of certain factors which have not been allowed for in our calculations but are not factors in competitiveness.

To some extent, the increase in Japanese exports reflected the postwar recovery of Japan’s economy. However, the importance of this should not be exaggerated. It is true that in 1953 Japan’s participation in world trade was much less than in 1938. However, the subsequent recovery was not, to any large extent, an automatic process whereby Japan’s traditional exports were again absorbed by its traditional markets. The pattern of Japanese exports in 1957 was markedly different from that before the war. The proportion of metals and manufactures and machinery and transport equipment—the “hardware ratio”—was considerably higher, and the proportion of textiles lower. Also, North America and Southeast Asia took much larger shares of Japan’s exports, whereas the Far East took a much smaller share.

Evidence corroborative of the improved competitiveness of Japanese exports is seen in indices of the unit value of exports of manufactures. The index for Japan declined by about 2 per cent from 1953 to 1957; in the same period, a composite index of 12 principal exporters of manufactures rose by 7 per cent.13 Japan’s export prices relative to those of its competitors thus declined by about 8 per cent.

Relatively early delivery dates were also an important factor in Japan’s competitiveness, at least until the end of 1955. Excess plant capacity was rather widespread in Japanese manufacturing industry during 1954-55, so that the interval between order and delivery dates could be kept short. On the other hand, in some of Japan’s competitor countries, there was a considerable lengthening of order books in this period. It has been suggested, for example, that in the British boom of 1954-55 the lengthening of order books was a more important feature than increases either in the price level or in the levels of economic activity.14 Japan’s competitiveness in this regard was especially evident in shipbuilding. After European shipyards were fully occupied by the worldwide shipbuilding boom, demand turned toward Japanese shipyards; these could offer much quicker deliveries, although their products were not always cheaper. In 1956, Japan emerged as the world’s leading shipbuilder, and its exports of ships spearheaded its total export expansion in that year.

The domestic boom and competitiveness

As stated earlier, the export expansion that began in 1954 provided the initial impetus to the acceleration of domestic economic activity in Japan that started about the end of that year. In the following two and a half years, a growing domestic demand was compounded with export demand. The demand expansion in 1955 took place without much disturbance to stability; but in 1956, domestic prices increased, order books lengthened, and bottlenecks emerged in some sectors of the economy. Imports also increased, and in the first half of 1957 there was a sharp drop in exchange reserves. In the middle of 1957, the authorities took financial measures to check the demand expansion, and there began a downward adjustment of the economy to which the altered tone of the world market also contributed.

In considering the impact of the domestic boom on the competitiveness of Japanese exports, attention may be focused on a comparison of the two years 1955 and 1956 because they differed markedly in the degree of monetary stability attending the demand expansion. In 1956, unlike 1955, the Japanese economy was fully stretched and resources were being intensively utilized. It must be remembered, of course, that Japan was not alone in experiencing boom conditions in 1956. Competitiveness is obviously a relative matter; while the unit value of Japanese exports in 1956 was 4 per cent higher than in the previous year, the unit value of exports of its main competitors also increased by the same percentage, so that Japan’s relative position with regard to price competitiveness remained unchanged. Order books lengthened in Japan; but if the position in the United Kingdom described earlier was at all typical of that in other Western European countries, the lengthening of order books in Japan’s competitor countries was also considerable. Nevertheless, it appears that any gain in competitiveness made by Japan in 1956 could not have been very large.

The “competitiveness effect” decreased from 61 per cent in 1955 to 39 per cent in 1956 (Table 4). Although thus reduced, the magnitude of the “effect” in 1956 was still substantial, especially since the export expansion in that year was, in percentage terms, as large as in 1955, and, in absolute terms, larger. Since the “competitiveness effect” as defined is a result of increased competitiveness, the mere maintenance of a competitive position yielding an “effect” of zero, these figures suggest that the competitiveness of Japan’s exports increased substantially in 1956.

Table 4.

Increase in Japan’s Exports of Manufactures and the Proportion Attributable to Increased Competitiveness, 1955 and 1956

(In millions of U.S. dollars)

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Based on data from United Nations, Monthly Bulletin of Statistics, February 1960.

However, if the “competitiveness effect” is considered separately for the two largest commodity groups, the relatively high percentage for the total “competitiveness effect” in 1956 is seen to have been due to an increase from 58 to 72 in the percentage for machinery and transport equipment. On the other hand, the percentage decreased, as would have been expected from a priori reasoning, for “other manufactures”; having been as high as 62 per cent in 1955, it became a small negative figure in 1956. However, one obvious characteristic of the goods in the former group vitiates annual comparisons of the kind that are here being made. Certain types of machinery and transport equipment are delivered several months, even a year or more, after orders for them are placed. The large increase in the exports of ships in 1956, which formed the major part of the increase in the exports of the category machinery and transport equipment in that year, was in response to orders placed in 1955 or even 1954. It was based on the competitiveness of Japan’s export terms at that time, and did not reflect conditions in 1956. The negative “competitiveness effect” shown for “other manufactures” in 1956, on the other hand, reflects some reduction in their competitiveness, and is probably a better indicator of the effect of the domestic boom on the competitiveness of Japan’s exports.

Competitiveness during the domestic and international recession, 1957-58

After the rapid expansion of 1954-57, Japanese exports of manufactures declined slightly in 1958.15 This year was conspicuously different from the years which preceded it. Reflecting the recession of 1957-58 and the decline of prices of primary products, which reduced the import-purchasing capacity of primary producing countries, world trade decreased in 1958, whereas it had increased in each of the preceding four years. The downward adjustment of the Japanese economy which commenced with the adoption of a disinflationary program in the middle of 1957 was more severe than the adjustment in most of Japan’s competitors other than the United States. Also, a feature of the recessionary developments in Japan was a substantial fall in prices, including the prices of export goods. The unit value of Japanese exports of manufactures was about 7 per cent lower in 1958 than in 1957, while the composite index for the 12 principal exporters of manufactures was unchanged.

As Table 1 shows, Japan was particularly hard hit by the reduction in world trade in 1958 as both the commodity and the market pattern of this reduction were unfavorable to Japan. The reduction occurred entirely in “other manufactures,” the commodity group in which growth was least marked during the period of expansion, and in which Japan specialized. Just as in the earlier years this specialization prevented Japan from deriving full benefit from the expansion of world trade, so in 1958 it aggravated Japan’s loss from the contraction of world trade.

The 1958 experience was similar to that of earlier years in that the commodity pattern of world trade developments was unfavorable to Japan, but it was different in respect of the market pattern. In the earlier years, the loss to Japan from the unfavorable commodity pattern was offset to some extent by a gain from the market pattern. However, in 1958, the market pattern also was unfavorable to Japan. In that year, the demand for “other manufactures” in the independent Far Eastern sterling area countries and for “other manufactures” and machinery and transport equipment in the Far Eastern countries outside the sterling area declined much more than demand in the world as a whole, reflecting chiefly the effects of the fall in prices of primary products.

These changes in world trade would by themselves have resulted in a reduction of $138 million in Japan’s exports of manufactures in 1958. In fact, the reduction was only $15 million. The residual amount of $123 million can be attributed, in accordance with our definition, to the improved competitiveness of Japanese exports. As a result of this improvement, the decline in Japan’s exports was proportionately less than the decline in total world exports; its share in the total increased slightly from 4.96 per cent in 1957 to 5.02 per cent in 1958, and it moved to the fifth place among exporters of manufactures.16 In world trade in machinery and transport equipment, Japan’s share declined from 3.3 per cent to 3.2 per cent, but in trade in chemicals it increased from 2.4 per cent to 2.6 per cent, and in “other manufactures,” from 6.7 per cent to 7.0 per cent. In respect of the last commodity group, Japan’s share in the North American market increased from 9.3 per cent to 11.5 per cent.

Export pattern at end of period

It is of interest to consider whether Japan is now in a better position than it was in 1953 to take advantage of a further expansion of world trade. For this purpose, it is preferable to draw the dividing line at the end of 1957 rather than at the end of 1958, because the pattern of world trade growth during 1954-57 seems closer to the long-run trends than that during 1954-58. With the addition of 1958, metals and their manufactures appear among the lagging commodities, whereas, in the long run, trade in these products as a group has been growing somewhat faster than total world trade; also, the 1958 figures exaggerate the extent to which textile exports lag behind other commodities. Japan’s commodity and market specialization in 1957 therefore provides a better basis for the analysis of future prospects, if it can be assumed that the pattern of world trade expansion will be much the same as during 1954-57.

On the whole, Japan’s position in 1957 appears to have been no better than in 1953. Table 2 shows that Japan’s specialization in textiles, the slowest growing export commodity group, actually increased between 1953 and 1957; the share of textiles in Japanese exports declined, but their share in world exports declined even more. Also, the degree of Japan’s specialization in two other commodity groups—chemicals, and metals and their manufactures—which were expanding faster than the average, declined. The principal favorable development was in respect of transport equipment, for which the demand expansion was the most rapid; whereas in 1953 this group formed a smaller percentage of Japanese exports than of world exports, in 1957 the position was reversed. The effect of this favorable development is, however, likely to be only just large enough to offset the effects of the unfavorable developments.

There has been little change since 1953 in the market pattern. The relative importance to Japan of the European market, which for all groups of commodities is among the most rapidly growing, continues to be small (Table 3). The importance of the independent Far Eastern sterling countries, which constitute another rapidly growing market, has declined for chemicals and “other manufactures,” although it has increased slightly for machinery and transport equipment. Japan’s relative dependence on the Far Eastern countries outside the sterling area, a slowly growing market, especially for “other manufactures,” has declined, but remains very high. Dependence on China (Mainland) has increased; although this market has expanded rapidly for machinery and transport equipment and “other manufactures,” its prospects are, for obvious reasons, rather uncertain.

APPENDIX

1. Meaning of letters in the equations below:

r: percentage increase during 1954-57 in world exports of all manufactures to all countries other than Japan

X: Japan’s total exports of manufactures in 1953

X′: Japan’s total exports of manufactures in 1957

Subscript i(i = 1, 2, 3): each category of manufactures

Subscript j(j = 1,2,…..,15): each different market

Thus, e.g., Xi and Xij represent Japan’s exports in 1953 of commodity group i to all markets and to market j, respectively. Similarly, ri and rij represent percentage increases during 1954-57 in world exports of commodity group i to all markets and to market j, respectively.

2. The effects of the increase in total world trade in manufactures on Japan’s exports is

Σi=13rXi=rX(1)

3. The effect of the commodity composition of the increase in world trade in manufactures on Japan’s exports is

Σi=13(riXi−rXi)=Σi=13riXi−rX(2)

4. The effect of the market pattern of the increase in world trade in manufactures on Japan’s exports is

(Σj=115r1jX1j−r1X1)+(Σj=115r2jX2j−r2X2)+(Σj=115r3jX3j−r3X3)=Σi=13Σj=115rijXij−Σi=13riXi(3)

5. The effect of the increase in world trade in manufactures on Japan’s exports, allowance being made for the commodity composition and market pattern of this increase, is (1) + (2) + (3), or

rX+Σi=13riXi−rX+Σi=13Σj=115rijXij−Σi=13riXi=Σi=13Σj=115rijXij(4)

6. The effect of the increased competitiveness of Japan’s exports is

(X′−X)−Σi=13Σj=115rijXij(5)

The corresponding amount for commodity group i is

(X′i−Xi)−Σj=115rijXij(5a)
*

Mr. Narvekar, economist in the Far Eastern Division, is a graduate of Bombay University and of Columbia University.

1

Manufactured goods are defined as those included in Sections 5-8 of the UN Standard International Trade Classification (SITC). As such, they do not include processed foods, processed fats and oils, and petroleum products.

2

Average for the years 1953-57. The percentage increased each year, from 83 in 1953 to 89 in 1957.

3

Excluding Special Category exports; if these were included, the increase would be much smaller.

4

These accrue principally as reimbursements for the cost of supporting the UN Korea forces stationed in Japan, from sales to the UN forces under the special procurement program, and from U.S. expenditures for the maintenance of its forces in Japan since the Peace Treaty. The amount of these receipts was at a peak of $803 million in 1953, but declined to $449 million in 1957.

5

The general procedure for separating the effect of demand factors was first suggested by H. Tyszynski; see “World Trade in Manufactured Commodities, 1899-1950,” Manchester School of Economic and Social Studies, Vol. XIX, No. 3 (September 1951), pp. 272-304. For a mathematical presentation of all three steps, see Appendix.

6

Throughout the following, the words “exports” and “trade” refer to exports of, and trade in, manufactured goods, unless otherwise stated. World trade is measured from the export side and excludes exports to Japan.

7

Corresponding to the definition of world trade as total world exports, demand from a given market is measured by world exports to it.

8

These are (1) North America, (2) Latin American dollar countries, (3) Latin American non-dollar countries, (4) continental Western Europe, (5) dependencies of continental Western Europe, (6) other Europe, (7) Eastern Europe, (8) Middle Eastern countries outside the sterling area, (9) the United Kingdom, Iceland, and Ireland, (10) Australia, New Zealand, the Union of South Africa, and the Federation of Rhodesia and Nyasaland, (11) independent Far Eastern sterling area countries, (12) Middle Eastern sterling area countries, (13) other sterling area countries, (14) China (Mainland), and (15) other Far East.

9

In 1957, Japan ranked after the United States, the United Kingdom, the Federal Republic of Germany, France, and Belgium-Luxembourg.

10

See footnote 1 to Table 2.

11

Includes China (Taiwan), Cambodia, Laos, Viet-Nam, Indonesia, the Philippines, and Thailand.

12

The regional classification of the source material excludes Japanese exports of ships to Liberia. Since there is reason to believe that these were purchased, in fact, by U.S.-owned companies, they have been included in “North America.”

13

Based on data from United Nations, Monthly Bulletin of Statistics. The 12 countries are those listed in footnote 1 of Table 2, and India. A comparison of this composite index with that of Japan is not fully appropriate because the former includes Japan; in the absence of knowledge regarding the relative weights, Japan cannot be separated from the composite index. Nevertheless, the error should not be significant, since Japan’s weight is not likely to be large enough for changes in Japan’s prices to affect the composite index significantly.

14

R. F. Harrod, “The British Boom, 1954-55,” Economic Journal, Vol. 66 (1956), pp. 1-16.

15

However, because of an increase in exports of processed foods and beverages (not included in manufactures as defined above), Japan’s total exports increased slightly in 1958.

16

In 1958, Japan ranked after the United States, the United Kingdom, the Federal Republic of Germany, and France.

Same Series

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Cover IMF Staff Papers
IMF Staff papers: Volume 8 No. 1
Author: International Monetary Fund. Research Dept.
Volume/Issue:
Volume 1960: Issue 002
Publisher:
International Monetary Fund
ISBN:
9781451968798
ISSN:
1020-7635
Pages:
162
DOI:
https://doi.org/10.5089/9781451968798.024