|Lebedeva Irina, Japan in East Asia: economic aspects|
Institute of Oriental Studies, Russian Academy of Sciences
In rapidly changing world economic architecture Japan continues to occupy the position of a great industrial power, preserving a colossal complex of manufacturing industries on its national territory. At the same time Japanese manufacturing companies, being more and more involved in the processes of globalization of world economy, expand year to year the potential of their overseas production bases. By the end of 2011, the accumulative volume of Japanese direct overseas investment in manufacturing has reached $358.9 billion and the number of overseas affiliates has exceeded 13.5 thousand. The production volume of overseas affiliates is now about 17-18 % of the total production volume of Japanese manufacturing enterprises (national and overseas) and is equal to the volume of Japanese exports.
The main overseas production bases of Japanese companies are located in North America, Europe and East Asia. While production bases in North America and Europe integrate more and more in national economies of the respective countries and become more and more autonomous from national Japanese manufacturing, in East Asia we can watch the different processes: namely, the deepening of the division of labor between Japan and East Asia's countries, the forming of close production cooperation between Japanese and East - Asian enterprises, first of all - in machinery industries. How far that process has been gone, we can judge by the volumes and product structure of exports and imports between Japan and these countries.
In 1990-s - 2010-s the growth rates of Japan's trade with East Asia were nearly twice as high the rates of her trade with other regions. And as a result, in 2011 the share of East Asia in Japan's exports reached 52.8% ($433 billion), and in her imports - 41.5% ($354.2 billion).
The distinctive features of Japanese exports to East Asia are as follows.
Nearly 60 % of Japanese exports consist of machinery products, first of all - investment goods (machines, motors, equipment, parts, components, etc.). East Asia absorbs about half of total Japanese exports of these products.
East Asia is also the major consumer of semi-manufactured goods of various kinds. The share of the region in Japanese exports of these products is about 3/4, and the share of semi-manufactured goods in the total value of Japanese exports to East Asia is more than 35%.
Among investment goods the exports of intermediate products (parts, components, etc.) are increasing by the highest rates. For example, in 1998-2008 the volumes of Japanese deliveries of parts and components to ASEAN and NIEs more than doubled, and to China - had increased in 4.8 times. East Asia absorbs now the major part of Japanese exports of these products (for example, the region's share in Japanese exports of IT parts and components is about 80 %).
As to Japan's imports from East Asia, more than 40% of them consist of machinery and equipment, and the share of East Asia in total Japanese imports of these products exceeds 70 % (in imports of electrical machinery's products it is nearing 90%).
About 1/3 of Japanese imports of machinery products from East Asia are intermediate investment goods - parts, components, etc. - for assembling industries of Japanese manufacturing. The volumes of deliveries of these products are growing year to year: for example, in 1998-2008 the imports of parts and components from China had increased in 5.5 times. As to IT parts, the share of East Asia in Japanese imports is about 85-90%.
East Asia's countries became for Japan the main supplier of consumer goods, produced by machinery industries, first of all, electrical appliances and home electronics (with the share in Japanese imports more than 90%). The major part (80-90 %) of Japanese imports of everyday consumer goods, textile, clothes, toys etc. comes from that region too.
Thus, the product structure of Japan's exports to East Asia, as well as the structure of her imports from the region, reflects the rapid development of the processes of division of labor and production cooperation between Japanese and East - Asian enterprises, first of all - in machinery industries. And the fact that Japanese home market, which for a long time had been closed for foreign commodities due to the existence of formal and informal barriers of various kinds, is more and more opening the door for East Asia's countries, indicates that these processes have reached a significant progress.
Of course, in these processes the partners play not only different, but unequal roles. As a whole, Japan, leaning on its industrial and technological power, occupies the "upper floors", producing the most complicated, high-tech final goods and parts and components with high value-added. East Asia's countries are specialized mainly on the production of relatively simple kinds of machinery, equipment and consumer goods and parts and components with not high value-added. But technological level of Asian enterprises is rapidly rising, and as a result - contours of the division of labor between Japan and East Asia are changing. The most vivid example is the electrical machinery.
As JETRO specialists point out, the trade between Japan and East Asia in electrical equipment category is a typical case of vertical pattern of trade. In this case partner countries import goods of differing quality from the same industry category, and there is a high unit price differential between exports and imports. (In horizontal pattern countries import and export goods, belonging to the same industry category, but distinguished by design, brand, etc., and in this case there is a low unit price differential between exports and imports). However, while for many products in the IT components category Japanese export unit prices are higher, for many products in the IT final products category Japanese import (East Asia's export) unit prices are higher.
The background for rapid development of trade between Japan and East Asia, for deepening of the division of labor and production cooperation between them was created by direct investment of Japanese manufacturing companies. By the end of 2011 the accumulative volume of Japanese direct investment in East Asia reached nearly $120 billion (in China - $48.0 billion, ASEAN - $42.8 billion, NIEs - $ 28.8billion). The number of Japanese affiliates in East Asia is about 9.5 thousand, including 3.8 - in China, 2.8 - in ASEAN, 2.9 - in NIEs. These enterprises provide with a work about 2.2 million people, and their share in the total value of production of Japanese overseas affiliates is about 45 %. By our calculation, the production potential of East-Asian affiliates is equal of 10-11% of the potential of national Japanese manufacturing. If we recall how great the last is, we could easy imagine the scales of the processes, which take place now in East Asia.
The industrial structure of East-Asian affiliates is rather diverse, but the main industry is machinery. The share of machinery complex in the accumulated volume of Japanese direct investment in East Asia is about 60 %, in the total sales of affiliates - 80 % (90% - in China, 55% - in NIEs, 80% - in ASEAN). About 45% of the products of East-Asian affiliates export to Japan and other countries (in electrical machinery export share is more than 70 %).
For a long time one of the most difficult problems, which Japanese companies faced with in East Asia, was the low quality of parts, components and materials, supplied by local enterprises. At the same time in the most of East-Asian countries there were special requirements concerning the share of local production in supplying of foreign-affiliated enterprises with parts, components and materials. (For example, in ASEAN countries this share was set at the level not less than 40 %). This problem was resolved mainly due to the coming to East Asia small and medium-sized Japanese enterprises, produce different intermediate products. In accordance with the results of JETRO survey, in last years the share of local procurements in supplying of assembling enterprises of Japanese companies reached 51.5% in China (with the share of Japanese affiliates about 40 %) and 43% in ASEAN ( with the share of Japanese affiliates about 50 %).
Among small and medium-sized Japanese enterprises, operating in East Asia, there are not only subcontractors of large companies, but independent firms as well, which came here aiming to launch new or to expand existing businesses. Noteworthy, that among more than 8 thousand overseas affiliates of small and medium-sized Japanese firms about 6.8 thousand (85%) are located in East Asia. This fact also reflects the development and deepening of the system of the division of labor and production cooperation between Japan and East Asia.
In last years this system is entering a new stage - the stage of building a system of the optimal production location over the whole East Asian region with the allowance for the competitive advantages of every country. The objective preconditions for the development of this process were created as a result of the conclusion of a number of multilateral and bilateral FT and EP agreements between Asian countries. These agreements create a new, more favorable environment for the development and deepening of economic ties between Asian enterprises, for concentration of certain productions in the certain countries, for the development of inter-industry and intra- industry cooperation, and as a result - for the reduction of production costs and strengthening of competitive ability of Asian enterprises.
There are a lot of cases, which confirm, that the moves to the creation of a new system of the division of labor in East Asia have begun. Japanese companies close down their enterprises in some countries and launch business in others, the production of certain parts and components as well as final goods is concentrated at the particular enterprises, the volumes of deliveries of parts and components from Japan to some countries are rising, to others - are cutting, the positions of Asian countries in Japan's exports and imports are changing, etc.
As "competitive advantages" are not static category, but dynamic one, the forming of a new system of division of labor in East Asia will be a process of continuous changes, continuous movements and will involve new and new countries. As to the nearest future, it's quite clear, that China will remain the priority direction of Japanese investment in East Asia (Chinese affiliates have absorbed 40% of Japanese direct investment in East Asia and produce about half of total production of East-Asian affiliates). But realizing well the risks of strong economic dependence on China (as recent tensions between Japan and China over Senkaku islands show) and facing here with different problems (a shortage of qualified managers and technicians, problems with protection of intellectual property rights, increasing labor costs, tax issues etc.), Japanese companies try to expand their activities in Southeast Asia (including such countries, as Vietnam and Cambodia). Not casually that while the volume of Japanese direct investment (flow) in Southeast Asia's countries in 2011 increased by 120%, in China - by 75%.
 Chyokusetsu tooshi (shisan) dzandaka (gyooshyubetsu chiikibetsu). www.boj.or.jp/en/statistics/; Tsushyoo hakushyo, 2010, p.171; Trends in Overseas Subsidiaries.METI. June 2009, p.1.
 2011 JETRO Global Trade and Investment Report, p.118, 119.
JETRO White Paper on International Trade and Foreign Direct Investment.2007, p.60-61, 81.
 Chyokusetsu tooshi (shisan) dzandaka (gyooshyubetsu chiikibetsu). www.boj.or.jp/en/statistics/; Tsushyoo hakushyo, 2010, p.176; Trends in Overseas Subsidiaries. METI, June 2009, p.1-2.
 Trends in Overseas Subsidiaries. METI. June 2009 , p.5-6, 10-11,12.
 Meidai shyoogaku ronsoo. 2001, vol.83, N 3, p.160.
 Dzaiadzia Nikkei kigyoo-no keiei dzittai chyoosa. JETRO. 2009, March, p. 13-14.
 Kaigai tenkai-no djookyoo. METI. 2010, p. 146.
 2012 JETRO Global Trade and Investment Report, p.21.
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