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The Rise of China and the Japanese Economy: Evidence from Macro and Firm-level Micro Data

Author

Listed:
  • Shin-ichi Fukuda

    (University of Tokyo)

  • Munehisa Kasuya

    (Bank of Japan)

Abstract
After prolonged recessions, the Japanese economy finally recovered in the first half of the 2000s, and recorded sustained growth until summer 2007. The purpose of this paper is to examine, from both macro and micro perspectives, the role of international trade with China in the recovery of Japanese firms in the 2000s. Using aggregated data, VAR suggests that the increased exports to China had a strong positive impact on Japanese manufacturing production but had an insignificant impact on small firms and non-manufacturing production during the last decade. It also shows that the increased imports from China had no significant impact on Japanese production. However, using firm-level data, we find that various connections with China improved the performance of small and medium size manufacturing firms and those in wholesale and retail industries. At the micro level, imports from China improved growth of sales in manufacturing firms and both profits and growth of sales in wholesale and retail firms in the early 2000s. Exports to China, which had no significant impact in the early 2000s, came to improve both profits and growth of sales of Japanese firms after the mid 2000s. However, not all connections with China had beneficial impacts on the small and medium size firms. The micro findings suggest that the increased dependence on China had highly heterogeneous impacts on Japanese firms in the 2000s.

Suggested Citation

  • Shin-ichi Fukuda & Munehisa Kasuya, 2010. "The Rise of China and the Japanese Economy: Evidence from Macro and Firm-level Micro Data," Bank of Japan Working Paper Series 10-E-1, Bank of Japan.
    • Handle: RePEc:boj:bojwps:10-e-1
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    References listed on IDEAS

    as
    1. Bayoumi, Tamim, 2001. "The morning after: explaining the slowdown in Japanese growth in the 1990s," Journal of International Economics, Elsevier, vol. 53(2), pages 241-259, April.
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    6. Shin-ichi Fukuda, 2010. "The Rise of China and the Sustained Recovery of Japan," Chapters, in: Takatoshi Ito & Chin Hee Hahn (ed.), The Rise of China and Structural Changes in Korea and Asia, chapter 9, Edward Elgar Publishing.
    7. Elena Ianchovichina & Terrie Walmsley, 2005. "Impact of China's WTO Accession on East Asia," Contemporary Economic Policy, Western Economic Association International, vol. 23(2), pages 261-277, April.
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    Cited by:

    1. Kumano, Yusuke & Muto, Ichiro & Nakano, Akihiro, 2014. "What explains the recent fluctuations in Japan’s output? A structural factor analysis of Japan’s industrial production," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 135-153.

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    More about this item

    Keywords

    exports; China; Japan's recovery; complementarities;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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