Japan WT/TPR/S/243 
 Page 1 
 
 
I. ECONOMIC ENVIRONMENT 
(1) MAIN ECONOMIC DEVELOPMENTS  
1. Following weak growth during the 1990s, which w as termed as the "lost decade", real GDP in 
Japan grew at an average annual rate of approxi mately 1.8% between 2002 and 2007.  This was the 
longest period of expansion in Japan's post-war hist ory, albeit at a relatively slow rate.  Growth was 
driven mainly by exports, which grew at an averag e annual rate of over 10% during the same period.  
However, in the aftermath of the global economic  crisis, exports declined by approximately 25% 
in 2009.  Against this background, real GDP contracted by 1.2% in 2008 and 5.2% in 2009 (Table I.1).  A resurgence in export demand in late 2009 and 2010, especially for capital goods from 
Asia, bolstered economic growth, with real GDP estimated to grow by 2.8% in 2010.
1  However, the 
recovery is fragile and susceptible to s hocks in the global economic environment.2 
Table I.1 
Selected macroeconom ic indicators, 2005-09 
(¥ trillion and %) 
 2005 2006 2007 2008 2009 
 (% change, unless otherwise indicated) 
National accounts      
Real GDP 1.9 2.0 2.4 -1.2 -5.2a 
Real domestic demand 1.7 1.2 1.3 -1.3 -3.8a 
Private consumption 1.3 1.5 1.6 -0.7 -1.0a 
Government consumption 1.6 0.4 1.5 0.3 1.7a 
Gross fixed investment 3.1 0.5 -1.2 -2.6 -14.4a 
Real exports of goods and services 7.0 9.7 8.4 1.6 -24.0a 
Real imports of goods and services 5.8 4.2 1.6 0.9 -17.0a 
Exports of goods and services (% of GDP)b 14.3 16.1 17.6 17.5 12.5a 
Imports of goods and services (% of GDP)b 12.9 14.9 15.9 17.4 12.2a 
Employment 0.4 0.4 0.5 -0.4 -1.6 
Unemployment rate (annual average) 4.4 4.1 3.9 4.0 5.1 
Household disposable income (% change)   0.9 1.1 -0.1 -0.2 .. 
Prices and interest rates       
Consumer prices (CPI)  (% change)  -0.3 0.3 0.0 1.4 -1.4 
GDP deflator (% change)  -1.2 -0.9 -0.7 -0.8 -1.0a 
Basic discount rate and basic loan  rate (%) 0.1  0.4 0.75 0.3 0.3 
Exchange rate (annual average, ¥ per US$) 110.2 116.3 117.8 103.3 93.5 
 (Per cent of GDP) 
Fiscal balancec      
Revenue  29.4 30.7 31.0 31.5 29.5 
Expenditure  34.2 34.7 33.4 35.6 39.8 
Balance -4.8 -4.0 -2.4 -4.1 -10.3 
Primary balance -4.0 -3.4 -1.8 -3.2 -9.1 
    Excluding social security -3.5 -2.6 -0.8 -2.3 -7.8 
Government debt, gross 191.6 191.3 187.7 194.7 217.7 
Saving and investment       
National saving (gross) 26.8  26.9  27.3 25.0 .. 
Domestic investment (gross) 23.6  23.8  23.7 23.6 .. 
Table I.1 (cont'd) 
                                                      
1 IMF online information.  Viewed at:  http://w ww.imf.org/external/pubs/ ft/weo/2010/02/weodata/ 
index.aspx [14.12.2010].  
2 For example, the Government's monthly economic report highlights these points.  The Cabinet Office 
online information.  Viewed at:  http://www5.cao.go. jp/keizai3/2010/1019getsurei/main.pdf [25.10.2010]. WT/TPR/S/243 Trade Policy Review 
Page 2 
 
 
 2005 2006 2007 2008 2009 
 (¥ trillion, unless otherwise indicated) 
Current account balance      
Current account 18.3 19.8 24.8 16.4 13.3 
Current account (% of GDP) 3.7 3.9 4.8 3.2 3.3 
    Goods balance 10.3 9.5 12.3 4.0 4.0 
    Services balance -2.6 -2.1 -2.5 -2.1 -1.9 
    Income balance 11.4 13.7 16.3 15.8 12.3 
    Net transfer balance -0.8 -1.2 -1.4 -1.4 -1.2 
Capital and financia l account balance -14.0 -12.5 -22.5 -18.4 -12.6  
Financial account -13.5 -11.9 -22.1 -17.8 -12.2 
Capital account -0.5 -0.6 -0.5 -0.6 -0.5 
Changes in reserve assets -2.5 -3.7 -4.3 -3.2 -2.5 
Statistical discrepancy -1.8 -3.7 2.0 5.2 1.9 
.. Not available. 
a Third quarter, annual rate. 
b Percentage of distributi on in annual nominal GDP. 
c International Monetary F und, Country Report No. 10/211. 
Source:  Information provided by the Japa nese authorities;  and IMF (2010), Country Report No. 10/211, Japan:  2010 
Article IV Consultation — Staff Report;  Public Information Notice on the Executive Board Discussion.  Viewed 
at:  http://www.imf.org/ext ernal/pubs/ft/scr/2010/cr10211.pdf. 
2. To be able to sustain growth in the medium  to longer term, domestic demand will need to 
pick up and drive growth.3  To achieve this the Japanese economy will need to undergo structural 
reforms inter alia  to improve productivity in the services sector (which is much lower than in 
manufacturing), reform the labour market, and reform taxation. 
(2) MACROECONOMIC POLICIES  
3. In response to the financial crisis, the Govern ment has launched four stimulus packages since 
August 2008.  These were instrumental in containi ng further deterioration of GDP.  The packages 
have totalled approximately 4.7% of GDP;  signi ficantly higher than the average in other OECD 
countries that have implemented stimulus packages.   Increased spending, amounting to 4.2% of GDP, 
constituted the bulk of the stimulus package.  In comparison, tax measures were responsible for only 
0.5% of GDP.  Consequently, expenditure rose from 33.7% of GDP in 2007 to 39.8% in 2009, while total revenue declined from 31% of GDP to 29.5%.  As a result, the fiscal deficit rose to over 10% of 
GDP in 2009. Other than the stimulus package (a temporary expenditure due  to prevailing economic 
conditions), expenditure growth has been driven by  pension and healthcare-related spending.  Outlays 
under these heads are expected to continue to ri se due to Japan's rapidly aging population.  
4. The stimulus packages as a whole have focused on increasing domestic demand through, inter 
alia:  financial sector measures (Chapter IV(4)(ii))
4;  the extension of the environmentally friendly 
vehicle subsidy scheme (Chapter III(3)(ii));  and su pporting the labour market (section (3)).  As part 
of the stimulus package, the Government announced  a fixed payment of ¥12,000 for individuals aged 
between 19 and 64, and ¥20,000 for all others, as well as a temporary reduction in tolls.  
5. With respect to monetary policy, the Bank of Japan (BOJ) maintained an accommodative 
stance during the period under review so as to stimulate domestic demand.5  The accommodative 
                                                      
3 According to the OECD, domestic demand grew at less than 1% during the expansion. 
4 Transfers to public financial ins titutions amounted to 0.7% of GDP. 
5 At the beginning of October 2010, the BOJ decided to implement "comprehensive monetary easing".  
BOJ online information.  Viewed at:  http://www.boj.or.jp /en/type/release/adhoc10/k101005.pdf [16.12.2010].     Japan WT/TPR/S/243 
 Page 3 
 
 
monetary policy was enabled by the deflationary environment in Japan, which persisted during the 
review period due to considerable slack in the eco nomy.  However, the pace of deflation declined.  
After declining to -2.5% in October 2009, general CPI was -0.6% in September 2010 as growth in the 
economy picked up. 
6. The nominal exchange rate of the yen ag ainst the U.S. dollar appreciated between 
September 2008 and November 2010 (from ¥109 per U.S. dollar to ¥81), perhaps owing partly to the 
unwinding of the yen "carry trade."  The apprecia tion in the exchange rate is likely to erode the 
international competitiveness of Japanese exports, unl ess it can be at least matched by productivity 
improvements in the export sectors.. 
(3) STRUCTURAL POLICIES  
7. The fiscal stimulus package is not a viable ave nue to sustain growth in the medium to longer 
term, especially when considered against the back drop of Japan's public debt, which is over 200% of 
GDP at present6, and the fiscal deficit.  According to the OE CD, to be able to sustain growth in the 
future, the Japanese economy will need to under go far-reaching structural changes focused on 
improving productivity, especially in the services sector, through increased competition and further 
deregulation, as well as reducing the cost of doing bu siness so that the sector attracts more investment 
(both foreign and domestic).  Domestic demand will n eed to be stimulated.  To do so the Government 
will need to address the duality in the labour mark et between regular and non-regular workers, which 
has resulted in depressed incomes.7  The Government also recogni zes the need to increase revenue 
through comprehensive tax reforms.  However, the p ace of trade-related structural reforms, such as 
trade liberalization (particularly in agriculture and certain services), appears to have been slow during 
the period under review. 
(i) Services sector 
8. The services sector, which accounts for abou t 80% of Japan's GDP and 78% of its 
employment, is characterized by weak labour pr oductivity growth (Table I.2).  Between 2002 and 
2005, annual labour productivity growth was 1.8%  for services, compared with 7.5% in 
manufacturing.  Productivity growth in the ma nufacturing sector has been high as international 
competition has driven increases in efficiency.   
9. The services sector has been relatively she ltered from competition (both domestic and 
international).8  The key element to boosting productivity in services is raising competition, which 
would involve further deregulation especially in  wholesale and retail and in healthcare services.9  
Increased foreign competition would also benef it the economy.  To achieve the latter, domestic 
regulations on setting up a business, especially with resp ect to time taken and costs incurred, could be 
improved and regulatory reform accelerated.10  It is also important to reduce barriers to trade in 
                                                      
6 Most of Japan's public debt is held domestically. 
7 The share of non-regular workers in the work force was 33.4% in 2007, 34.1% in 2008, and 33.7% 
in 2009.  These workers are paid significantly less than regular employees. 
8 The import penetration rate for services and the shar e of foreign affiliates in total service turnover was 
among the lowest in the OECD. 
9 With regard to the wholesale and retail sector, the opacity and unpredictability of the Large-scale 
Retail Store Location Law and the City Planning Law, act as barriers to entry.  In the healthcare industry, 
hospitals and insurance companies are non-profit entities.  Additionally, the Government controls all prices in 
the sector and also determines the number of medical students. 
10 According to World Bank (2010), Japan ranked 91st out of 183 countries, w ith respect to the ease of 
setting up a business in 2010. WT/TPR/S/243 Trade Policy Review 
Page 4 
 
 
services either on a multilateral or unilateral basis.11  FDI restrictions and product market regulations 
that discourage investment could also to be eased.  Other factors that may inhibit investment are the 
relatively high corporate tax in Japan and the sev ere restrictions on bringing in foreign workers. 
Table I.2 
Shares of GDP and employment by sector, 2006-09 
(Yen and %) 
  2006 2007 2008 2009 
Share of GDP (%)     
Agriculture, forestry and fishing 1.5 1.4 1.5 .. 
Mining 0.1 0.1 0.1 .. 
Manufacturing 21.2 21.2 19.9 .. 
Services 80.6 80.4 80.5 .. 
   Construction 6.3 6.10 6.1 .. 
   Electricity, gas and water 2.3 2.0 1.8 .. 
   Wholesale and retail trade 13.4 13.6 13.8 .. 
    Finance and insurance 6.9 6.7 5.8 .. 
    Real estate 11.9 11.9 12.2 .. 
    Transport and communication 6.6 6.6 6.7 .. 
    Business activities 9.0 9.2 9.4 .. 
    Community and social activities 5.5 5.6 5.7 .. 
    Personal activities 7.3 7.3 7.4 .. 
    Government 9.3 9.3 9.5 .. 
    Non-profit services for households 2.1 2.1 2.1 .. 
Import tax and other -4.3 -4.1 -4.0 .. 
Statistical discrepancy 0.8 1.2 1.9 .. 
Total (¥ trillion) 507.4 515.5 505.1 .. 
Share of employment (%)     
Agriculture, forestry and fishing 5.0 5.1 5.0 .. 
Mining 0.1 0.1 0.1 .. 
Manufacturing 17.4 17.3 17.1 .. 
Services 77.5 77.5 77.8 .. 
   Construction 8.6 8.4 8.2 .. 
   Electricity, gas and water 0.7 0.7 0.7 .. 
   Wholesale and retail trade 16.7 16.7 16.6 .. 
    Finance and insurance 2.8 2.8 2.9 .. 
    Real estate 1.5 1.5 1.5 .. 
    Transport and communication 5.8 5.8 5.7 .. 
    Government 5.3 5.2 5.2 .. 
 Producers of private non-profit services to households 1.9 1.9 1.9 .. 
    Other 34.4 34.6 35.2 .. 
Total (¥  million) 64.2 64.5 64.1 .. 
.. Not available. 
Source: Cabinet Office online information.  Viewed at:  http ://www.esri.cao.go.jp/en/sna/ h20-kaku/22annual-report-e.html. 
                                                      
11 Trade barriers to the delivery of services would include restrictive regulations. Japan WT/TPR/S/243 
 Page 5 
 
 
10. Competition policy could also be upgraded:  ex ceptions to the Anti-Monopoly Act (AMA) for 
service industries as well as special treatment for SM Es (which are a dominant force in the services 
sector), could be withdrawn or scaled back.   
11. An important engine of growth globally h as been information and communication technology 
(ICT) services.  Japan has been an  exception in this regard;  reas ons cited for Japan's lacklustre 
performance include the lack of financing availa ble and the dearth of venture capitalists.   
(ii) Labour market 
12. With the aim of increasing domestic demand, reform of the labour market needs to be 
considered.  The share of non-regular workers ro se from 20% in 1990 to 34% in 2008.  As these non-
regular workers are paid substantially less than  regular workers, their increase has resulted in 
downward pressure on wages and thus domestic consumption.12  In addition, the rising share of non-
regular workers has negative implications for potenti al growth.  Regular workers, because of the long-
term nature of their employment, receive firm-based training as firms perceive this to be a worthwhile investment.  The training increases their efficiency and productivity.  On the other hand, non-regular 
workers receive less firm-based training, which has negative productivity implications for the 
individuals and the economy as a whole. 
13. The authorities realize the need to reform the labour market, and it is a focus area in the 
stimulus package.  Specific measures include: in creasing subsidies for employment adjustment;  
implementing measures that will support re-employm ent and develop vocationa l skills;  creating new 
jobs;  measures to protect dispatched workers, fo reign workers, and temporary workers; measures to 
prevent withdrawal of job offers;  creating jobs  and providing employment support in priority 
business sectors;  establishing a trampoline-type second safety net that provides poor and needy job applicants with an opportunity to rebound
13;  and strengthening the functions of the employment 
insurance system.  
14. Another area of concern is Japan's shrinking labo ur force due to its aging population.  In this 
regard, easing restrictions on immigration of fore ign workers, especially in sectors facing acute 
shortages of workers, would help to alleviat e the problem and may also increase productivity.  
(iii) Tax reform 
15. Japan's persistently low tax to GDP ratio has r esulted in public debt being more than twice 
GDP.  In addition, the statutory corporate tax rate14 in Japan is the highest in the OECD and the 
region, and less than 50% of personal income is taxe d.  To increase revenues, the Government would 
need to implement comprehensive tax reforms, which would include broadening the tax base and 
finding the right mix of direct and indirect taxes.  According to the IMF and the OECD15, tax reform 
would involve gradually raising th e consumption tax rate from the present 5%.  Furthermore, with a 
view to increasing investment in the economy, the statutory corporate tax rate could be reduced and the tax base broadened with fewer exemptions and deductibles.  More broadly based taxes with lower 
rates generally tend to improve economic efficiency  and reduce the propensity of tax avoidance and 
                                                     
 
12 Part-time workers, who make up 66% of the non-r egular workforce, earn 40% of the earnings of 
fulltime workers. 
13 This includes providing free vocational training and guaranteeing the individuals' livelihood during 
the training period;  providing loans to the unemployed so that they are able to rebound;  and providing a 
housing allowance to those who lost their homes due to being unemployed. 
14 The combined rate of national and local corporate tax rates. 
15 IMF (2010);  and OECD (2009). WT/TPR/S/243 Trade Policy Review 
Page 6 
 
 
evasion.  Collection could be improved and the local tax structure simplified;  there are currently 
23 different taxes. 
(2) DEVELOPMENTS IN TRADE AND FOREIGN DIRECT INVESTMENT  
16. Japan's current account surplu s decreased from US$210 billion in 2007 (4.8% of GDP) to 
US$142 billion in 2009 (3.3% of GDP), reflecting a narrowing of the gap between gross national 
savings and gross domestic investment (Table I.3).  This decline mainly reflects the sharp fall in the 
trade account.  The trade surplus was more than halved between 2007 and 2009 due to the impact of 
the global economic crisis.   
Table I.3 
Balance of payments, 2006-10 
(US$ billion) 
  2006 2007 2008 2009 2010 
Current account balance 170.52 210.49 156.63 142.19 .. 
    Goods balance 81.30 104.75 38.13 43.63 .. 
        Exports 615.81 678.09 746.47 545.28 .. 
        Imports 534.51 573.34 708.34 501.65 .. 
    Services balance -18.26 -21.25 -20.79 -20.38 .. 
        Credit 117.30 129.12 148.76 128.34 .. 
             Transportation 37.65 42.02 46.84 31.61 .. 
             Travel 8.47 9.35 10.82 10.33 .. 
             Other 71.18 77.75 91.10 86.40 .. 
        Debit 135.56 150.37 169.54 148.72 .. 
             Transportation  42.84 49.04 53.95 40.56 .. 
             Travel 26.88 26.51 27.90 25.20 .. 
             Other 65.84 74.82 87.69 82.96 .. 
    Income balance 118.16 138.50 152.34 131.34 .. 
        Credit 165.80 199.46 212.10 175.22 .. 
             Compensation of employees 0.15 0.12 0.18 0.17 .. 
             Investment income 165.65 199.34 211.92 175.05 .. 
        Debit 47.65 60.96 59.76 43.88 .. 
             Compensation of employees, debit 0.18 0.18 0.20 0.21 .. 
             Investment income, debit 47.47 60.78 59.56 43.67 .. 
    Current transfers -10.68 -11.51 -13.04 -12.40 .. 
        Credit 6.18 6.77 9.10 9.52 .. 
        Debit 16.87 18.28 22.15 21.91 .. 
Capital and fina ncial account -139.08 -227.79 -208.97 -162.06 .. 
Capital account -4.76 -4.03 -5.47 -4.99 .. 
     Credit 0.75 0.69 0.63 1.11 .. 
        Capital transfers 0.42 0.20 0.20 0.20 .. 
        Non produced non financial assets, credit 0.33 0.49 0.43 0.91 .. 
     Debit -5.51 -4.72 -6.10 -6.10 .. 
        Capital transfers -4.43 -3.05 -4.01 -2.76 .. 
        Non produced non financial assets, credit -1.08 -1.68 -2.08 -3.33 .. 
Financial account -134.32 -223.76 -203.50 -157.07 .. 
    Direct investment -56.95 -51.31 -106.27 -62.79 .. 
        Direct investment abroad -50.17 -73.49 -130.82 -74.62 .. 
        Direct investment in Japan -6.78 22.18 24.55 11.83 .. 
    Portfolio investment 127.52 73.13 -292.60 -216.50 .. 
        Assets -71.04 -123.45 -189.64 -160.25 .. 
        Liabilities 198.56 196.58 -102. 96 -56.26 .. 
Table I.3 (cont'd) Japan WT/TPR/S/243 
 Page 7 
 
 
  2006 2007 2008 2009 2010 
    Financial derivatives 2.46 2.80 24.79 10.55 .. 
        Assets 143.48 188.50 271.95 333.85 .. 
        Liabilities - 141.03 -185.71 - 247.16 -323.30 .. 
    Other investment -175.36 -211.86 201.45 138.59 .. 
        Assets -86.24 -260.78 139.46 202.75 .. 
        Liabilities -89.12 48.92 61. 99 -64.15 .. 
    Reserve assets -31.98 -36.52 -30.88 -26.92 .. 
Net errors and omissions -31.44 17.30 52.34 19.87 .. 
.. Not available. 
Source: IMF, Balance of Payments (CD-ROM). 
17. In 2009, the share of exports of goods and ser vices in GDP was 12.5% (17.5% in 2008), while 
the share of imports was 12.2% (17.4% in 2008).16  Since 2007, the shares of exports and imports in 
GDP have declined considerably, due to the global economic crisis.  Japan continues to be the world's 
fourth largest exporter (counting the European Un ion as one) and importer of goods.  The deficit in 
services trade has been declining sin ce 2007, albeit at a slow pace, due  to lower transport and travel 
payments brought about by the global financial cr isis.  The deficit was US$20.4 billion in 2009 (or 
1.9% of GDP).  Trade in services as a proportion of  GDP was 5.5% in 2009, considerably lower than 
in 2007 (6.4%).  
(i) Composition of merchandise trade 
18. Manufactures continue to dominate Japan's exports, accounting for 87.5% of total 
merchandise exports in 2009, compared with 89. 7% in 2007 (Chart I.1).  During 2007-09, machinery 
and transport equipment remained Japan's most important merchandise export, accounting for 58.2% 
of total exports of goods in 2009 (Table AI.1).  The shares of most manufactures declined as the 
global economic crisis took hold.  However, iron and steel, chemicals, power generating machines, 
and other transport equipment, such as ships and boa ts, showed an increase.  Data show that exports 
have picked up considerably in the first half of 2010 as the global economy recovers. 
19. The share of manufactures in total merchandi se imports increased from 50.5% in 2007, to 
51.7% in 2009.17  Machinery and transport equipment remained the most important component, 
accounting for 23% of total imports in 2009 (down from 24.2% in 2007).  Imports of chemicals and clothing increased.  The share of primary imports  declined, to 46.2% in 2009 (from 47.7% in 2007), 
due largely to a fall in imports of fuel and other mined commodities, which could partly be attributed 
to lower international commodity prices (Table AI.2).  
(ii) Direction of merchandise trade 
20. Between 2007 and 2009, China overtook the United States as Japan's largest export market, 
attracting 18.9% of total exports in 2009 (Chart I.2).  Asia as a whole increased significantly as an export destination and helped to bo ost APEC's share slightly, to 74.8% (from 74.3%).  In contrast, the 
shares of both the United States and EU(27) declin ed, owing mainly to the global economic crisis. 
China's share has increased at a st eady rate since 2005 (Table AI.3). 
                                                     
 
16 Based on the most recent data available. 
17 Imports of manufactures had declined to 44.7% of GDP in 2008 as the recession manifested itself in 
Japan and economic activity slowed down. WT/TPR/S/243 Trade Policy Review 
Page 8 
 
 
Chart I.1
Composition of merchandise trade, 2007 and 2009
2007 2009
(a)    Exports (f.o.b.)
Other consumer
goods
8.3
Manufactures
89.7
Total:   US$714.3 billion Total:  US$580.7 billion
(b)    Imports (c.i.f.)
Chemicals
7.3Transport
  equip.
4.1
Manufactures
50.5Office machines &
 telecom.  equip.    11.2Other electrical
machines
 3.9
Non-electrical 
machinery    5.0Textiles &  clothing
     4.9
Other mining
8.8
Fuels
27.8Non-electrical
machinery  4.6Other  2.0Other electrical 
machines  3.8Office machines & 
telecommunication equip.
13.6
Other semi-manuf.   
4.9Transport 
equip.
3.3
Chemicals
8.8Manufactures
51.7Office machines &
telecom. equip.  11.2
Total:   US$622.2 billion Total:   US$552.0 billion Per cent
Manufactures
87.5Other transport 
equipment
6.8
Other electrical
 machines
6.4 Iron & steel 
5.4Other electrical 
machines
6.2
Other consumer
 goods   9.2
Other  1.8Mining  4.4
Office machines & 
telecommunication equip.
14.4Automotive products
22.2
Other  6.7
Other semi-
manufactures
4.7Non-electrical 
machinery
13.6Agriculture 1.4
Iron & steel
4.8
Source :  UNSD, Comtrade database (SITC Rev.3).Other  consumer
 goods  8.9
Mining
33.9Other consumer
 goods
8.7 Automotive products
17.8
Other semi-
manufactures
4.2Non-electrical
machinery
15.0
Other semi-manuf.
5.2Mining  3.7Agriculture  1.1
Agriculture
12.3Agriculture
11.1
Mining
36.6Chemicals 
9.1Chemicals 
10.6Other  5.5
        Textiles & clothing 
5.9
Other mining
6.3
Fuels
27.6Other transport 
equipment
5.4
 Japan WT/TPR/S/243 
 Page 9 
 
 
Chart I.2
Direction of merchandise trade, 2007 and 2009
2007 2009
(a)    Exports (f.o.b.)
Other Asia  
9.4Asia
50.6
Total:   US$714.3 billion Total:  US$580.7 billion
(b)    Imports (c.i.f.)
Other
5.4Indonesia
4.3
EU27
10.5United Arab 
Emirates 
5.2
United States
11.6EU27
10.7United Arab
 Emirates
4.1Other Asia
11.8
United States
11.0
Total:   US$622.2 billion Total:   US$552.0 billionPer cent
Asia
56.8
Other Asia  
10.6Middle East
3.7China
15.3
Other Middle East
7.4Korea, Rep. of
4.0Korea, Rep. of
4.4United States
20.4Chinese Taipei
6.3
Indonesia
4.0United States
16.4
Source :  UNSD, Comtrade database.China
22.2EU27
12.5Middle East   
3.7
Asia
51.5Asia
48.9China
20.6
Other
5.0Hong Kong, China
5.5
EU27
14.8Hong Kong, China
5.4China
18.9
Other America
6.7
Chinese Taipei  3.3Chinese Taipei  3.2
Australia
5.0Other America
6.1Korea, Rep. of
8.1Korea, Rep. of   
7.6
Other America
5.3Other America
5.0Australia
6.3
Other Asia
11.5Thailand  3.6
Singapore  3.1Chinese Taipei
6.3
Singapore  3.6 Thailand  3.8
Saudi Arabia  
5.7Saudi Arabia 
5.3  Other Middle East
7.4
Middle East
18.3Middle East
16.8Other
3.9Other
4.4
 WT/TPR/S/243 Trade Policy Review 
Page 10 
 
 
21. China's share in Japan's merchandise imports in creased to 22.2% in 2009 (20.6% in 2007),  
consolidating China's position as Japan's largest tradi ng partner.  As with exports, the share of goods 
imported by Japan from Asia increased, although no t as much as exports.  The share of imports from 
the EU(27) also showed a slight increase.  On th e other hand, imports from the United States and the 
Middle-East declined (Table AI.4).  The latter was seemingly due to lower international crude oil 
prices.18  
(iii) Foreign direct investment 
22. Japan’s inward FDI remains substantially lowe r than outward FDI, and low compared with 
other developed economies.19  In 2009, FDI inflows declined substantially compared with the 
previous two years.  In 2009, FDI inflows amounted to US$12 billion, down from US$24 billion 
in 2008 and US$22 billion in 2007.  Japan's outward FDI also declined considerably, to US$75 billion 
in 2009, from US$128 billion in 2008.  The stock of inward FDI rose to 3.9% of GDP in 2009, from 3% of GDP in 2007, and the stock of outward FDI rose to 14.6% of GDP from 12.4% of GDP.  
23. The EU is the largest investor in Japan.  In  2009 it was responsible for over 75% of inward 
FDI into Japan, while the United States accounted for over 15%.  The largest recipient of FDI was the 
finance and insurance sector followed by  the electrical machinery industry. 
24. The EU, Cayman Islands, the United States, Austra lia, and China were the major recipients of 
Japanese investment in 2009.  The main industries/ sectors invested in were finance and insurance, 
food, wholesale and retail trade, chemic als and pharmaceuticals, and mining. 
                                                     
 
18 The average price of the OPEC basket of oil was US$95/barrel in 2008, which declined to 
US$61/barrel in 2009. 
19 According to UNCTAD (2010), FDI inflows into Japan in 2009 amounted to US$12 billion, while 
those into the United States and the European Union were US$130 billion and US$362 billion, respectively.  
Inflows into China amounted to US$95 billion.