2011 JETRO Global Trade and Investment Report
International Business as a Catalyst forJapan’s Reconstruction

Japan External Trade Organization (JETRO)
Overseas Research Department

2011 JETRO Global Trade and Investment Report

Written and published by:
INTERNATIONAL ECONOMIC RESEARCH DIVISIONOVERSEAS RESEARCH DEPARTMENT
JAPAN EXTERNAL TRADE ORGANIZATION (JETRO)ARK MORI BUILDING 6F, 12-32 AKASAKA 1-CHOME, MINATO-KU, TOKYO
107-6006 JAPANTEL: +81-3-3582-5177
FAX: +81-3-3582-5309
E-mail: ORI@jetro.go.jp

Copyright © 2011 JETRO. All rights reserved.

Preface
We herewith deliver the “2011 JETRO Global Trade and Investment Report.”
When we look back over the past year’s world economy, trade and investment, the world economy has steadily recovered from the damage caused by the financial crisis that began in 2008 in
the U.S., with emerging countries centering on Asia leading the recovery. However, the world
economy is still faced with issues such as the soaring prices in the international commodity market and sovereign risks becoming evident in Southern European countries, and the situation
continues where a sense of uncertainty remains. In addition, the Great East Japan Earthquakethat occurred on March 11, 2011 caused tremendous damage to the Japanese economy, and has
also exerted influence on the overseas economy through the supply chains stretching in Japanand abroad. Although there have been steady efforts toward reconstruction in Japan following theearthquake, as can be seen in the recovery of domestic supply chains achieved at an earlier stage
than expected, we are still facing an unpredictable situation with concerns remaining over “Japan
passing” and the hollowing-out of domestic industry.
While achieving reconstruction in the disaster-afflicted areas and resolving the nuclear plant
accident are priority challenges for Japan, a growth strategy that covers the rebuilding of both
domestic and overseas businesses is required from a medium- to long-term perspective, in orderto ensure successful reconstruction.
Given such a situation, in this report, Chapter I, “The World Economy, Trade and Direct Investment” analyzes world trade and investment trends in 2010 and thereafter in light of the situation
following the earthquake, and searches for future implications. Chapter II, “World Trade Rules
under the New Economic Environment,” deals with the latest trends of WTO and FTA as wellas the trends of an Economic Partnership Agreement (EPA) between Japan and the EU and theTrans-Pacific Partnership (TPP) Agreement, which have been drawing attention in recent years.
Chapter III, “International Business for Disaster Recovery,” analyzes the impact of the Great East
Japan Earthquake on the overseas business of Japanese companies, and discusses Japan’s strengththat should be reacknowledged precisely during the reconstruction process, including the perspective of enhancing Japan’s locational competitiveness. In addition, in light of the importanceof overseas business for Japanese companies that remains unchanged even after the earthquake,many cases of Japanese companies that are steadily achieving results in international business bytaking Japan’s advantage to the fullest are incorporated in the chapter. We sincerely hope that thisreport will be a useful reference for those making efforts toward reconstruction through global
business development.
Information such as Japan’s and global statistics on trade and direct investment is regularly
updated on JETRO’s website. We hope you will also find these useful.
Please note that this is a provisional translation from Japanese.
August, 2011
Japan External Trade Organization (JETRO)i

INDEX
Preface
I The World Economy, Trade and Direct Investment............................................................................. 1
1. Current Issues of the World Economy. .................................................................................................. 1(1) Bipolarization and multipolarization of the world economy. ......................................................................1(2) Impact of rising inflationary pressure on the economies of various countries and regions. ...................1(3) The global imbalance expands again. ..............................................................................................................4(4) Problems and risks confronting the world economy.....................................................................................5[Column I - 1] The earthquake demonstrated the close linkage between Japan and the Asian economies......7
2. Trade of the World and Japan................................................................................................................. 8(1) World trade in 2010 posts strong growth.......................................................................................................8(2) Asia’s production networks draw tighter around China............................................................................. 11(3) World trade in the first quarter of 2011 shows steady growth....................................................................13(4) Transportation posts strong growth in trade in services............................................................................ 14(5) Japan’s trade in 2010 significantly increased in 2010............................................................................................ 14[Column I - 2] The Asian production network from the perspective of “value-added trade”. ...................15
3. Direct Investment of the World and Japan & Cross-Border M&As. .................................................. 23(1) Global foreign direct investment dips 4.4% in 2010. .................................................................................. 23(2) Global cross-border M&As up by 27.8%...................................................................................................... 26(3) Japan’s outward FDI showing recovery. ........................................................................................................ 31(4) Asian countries active in inward FDI in Japan.............................................................................................35[Column I - 3] Overseas divisions underpin an earnings recovery for Japanese companies..................... 36[Column I - 4] Acquisition of land by foreign capital and international rules............................................. 42
II World Trade Rules under the New Economic Environment.......................................................... 43
1. WTO Rules: Significance and Issues.................................................................................................... 43(1) The prospects of the Doha Round and the role of the WTO..................................................................... 43[Column II - 1] The WTO Doha Round – aiming to reduce tariffs on environmental goods................... 44(2) Trends and arguments of WTO disputes concerning subsidies................................................................ 45[Column II - 2] Developed nations flocking to assist exports to emerging nations. ....................................47(3) The future of WTO rules – A closer look at disciplinary rules for export restrictions ..........................51
2. Overview of FTAs around the World................................................................................................... 56(1) FTA networks around the world. .................................................................................................................. 56(2) Trends surrounding Japan’s FTAs................................................................................................................. 56(3) Cross-regional FTA initiatives in Asia and Oceania................................................................................... 60(4) South Korea advances FTAs with large trade partners. ............................................................................. 63(5) Utilization status of ASEAN+1 FTAs............................................................................................................ 66[Column II - 3] How do countries take advantage of FTAs in their exports to the U.S.. ............................70
III International Business for Disaster Recovery............................................................................... 71
1. The Great East Japan Earthquake Influences on Goods Flow. ........................................................... 71(1) The Japanese economy as seen by post-disaster economic indicators.......................................................71(2) Tohoku and Kanto corporations support global industry. .........................................................................71(3) Goods flow through trade.............................................................................................................................. 73(4) Supply networks restored first........................................................................................................................76ii

2. Reaffirming Japan’s Strengths in Reconstruction Process.................................................................. 78(1) Japanese strengths that attracted attention following the disaster. ...........................................................78(2) Local production and development capacity that generate high-quality products. ................................78(3) Further advances expected in Japan’s energy conservation and other environmental technologies....81(4) Common challenge of creating societies resilient to natural disasters..................................................... 82(5) Exploiting Japan’s strengths as a nation with advanced aging experience. ............................................. 84(6) Japan’s strengths attract direct investment from abroad. .......................................................................... 86(7) The flow of people awaited to revitalize........................................................................................................ 88
3. Contribute to Reconstruction through Expanding Overseas Business with Japan’s Strengths. ...... 88(1) Unchanged priority - capturing overseas demands especially in emerging countries. ......................... 88(2) Developing sales channels using product development and on-site production capacity..................... 90[Column III - 1] Construction materials and interior-related companies that received active businessinquiries at exhibitions after the disaster . ........................................................................... 94(3) Continued strong interest in Japan’s energy conservation technologies.................................................. 94(4) High quality Japanese products reaching people in the BOP. .................................................................. 96(5) Current situation of the Asian senior market and Japanese firm’s approach.......................................... 97(6) Services industry continues overseas expansion .......................................................................................102(7) All-out effort to revitalize and enhance the Japan Brand........................................................................ 104
IV International Business as a Catalyst for Japan’s Reconstruction (Conclusion).......................... 107
Appendix
World and Japan’s Statistics of Trade and Investment
Annotation I: Product category definitions
Annotation II: Estimates of world trade value in 2010
Annotation III: Estimates of global direct investment value in 2010

109
109
109

Table 1 GDP growth rate and contribution rate by country and region
Table 2 World export matrix (2010)
Table 3 World trade by country and region
Table 4 World exports by product (2010)
Table 5 World imports by product (2010)
Table 6 FDI of major economies (net flows; balance-of-payments basis)
Table 7 World cross-border M&As (by target and acquirer country and region)
Table 8 World cross-border M&As (by industry)
Table 9 Japanese trade by country and region
Table 10 Japan’s exports by products (2010)
Table 11 Japan’s imports by products (2010)
Table 12 Japan’s outward/inward foreign direct investment by country and region(net flows; balance-of-payments basis)
Table 13 Japan’s outward/inward foreign direct investment by industry(net flows; balance-of-payments basis)
Table 14 Japan’s outward/inward foreign direct investment position by country and region
Table 15 Worldwide FTA list (202 agreements)

110
110
111
112
113
114
115
116
117
118
119

iii

120
121
122
123

Explanatory Notes
1. Abbreviations of publications and publishing organizations(1) IFS: International Financial Statistics (IMF)(2) DOTS: Direction of Trade Statistics (IMF)(3) WEO (D) : World Economic Outlook (Database) (IMF)(4) BOP: Balance of Payments Statistics (IMF)
2. Figures (As follows, unless otherwise indicated.)(1) In text, figures and tables, “year” indicates the period January-December, and “fiscal year” indicatesthe period April-March.
(2) In tables, figures for “foreign currency reserves” and “outstanding outward debt” are year-end figures.
“Foreign currency reserves” exclude gold.
(3) Figures for “rate of growth” are year-on-year figures. In figures and tables, “-” indicates lack of results,“0” indicates figures of less than a unit, and “n.a.” indicates that figures are unclear or unavailable.
(4) Because figures are rounded, there may be discrepancies in total.
3. Country and region classifications (As follows, unless otherwise indicated.)(1) ASEAN (Association of Southeast Asian Nations) : Indonesia, Singapore, Thailand, the Philippines,
Malaysia, Brunei, Vietnam, Laos, Myanmar, Cambodia(2) ASEAN 4: Indonesia, Thailand, the Philippines, Malaysia(3) Hong Kong and Taiwan are treated as independent economies.
(4) EU27: EU15 (Austria, Belgium, Denmark, Germany, Greece, Finland, France, Ireland, Italy,
Luxembourg, Portugal, Spain, Sweden, Netherlands, UK), plus 12 new members (10 countries which
acceded in 2004 (Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland,
Slovakia, Slovenia) and 2 countries which acceded in 2007 (Romania, Bulgaria))(5) EU member candidates: Croatia, Macedonia, Turkey(6) EFTA (European Free Trade Association) : Liechtenstein, Norway, Switzerland, Iceland(7) NAFTA (North American Free Trade Agreement) : U.S., Canada, Mexico(8) BRICs: Brazil, Russia, India, China
4. Base point in time
As a general rule, the base point in time is at the end of June 2011 unless mentioned otherwise.

iv

I The World Economy, Trade and Direct Investment
other developing countries, though the worst is now behindthem (see Figure I-1).

1. Current Issues of the World Economy(1) Bipolarization and multipolarization of the world
economyDownside risk lingeringThough the world economy as a whole has been on apath of recovery since 2010, the pace of recovery is varied
not only between developed and developing countries (Note 1)
but also among developing countries. According to an April
2011 estimate by the International Monetary Fund (IMF),
the world’s real gross domestic product (GDP) growth (ona purchasing power parity [PPP] basis) was 5.0% in 2010, a
significant recovery from 2009 when it was weighed down
0.5% by the financial crisis that originated in the UnitedStates, and the world economy is projected to grow at a ratein the mid-4% range in both 2011 and 2012.
Developed countries returned to positive growth of 3.0%
in 2010 from negative growth in 2009, and are expected topost growth in the mid-2% range in 2011 onward, all but recovering the growth pace before the financial crisis. While
the United States is reverting back to its potential growthrate, personal consumption, which accounts for about 70%
of GDP, has yet to see a full-fledged expansion due to a
combination of a delay in the job recovery, sluggish housing prices and balance sheet adjustment in the household
sector. In Europe, while Germany and France are showing
steady growth, helped by brisk exports on the weak euro,
overall downside risk is lingering, with UK still in the midstof balance sheet adjustment in the household sector andsovereign risk (the government debt crisis) coming to thefore particularly in Southern European countries.
The economic growth for developing countries accelerated to 7.3% in 2010 from 2.7% in 2009, and is projected tostay in the mid-6% range in 2011 onward. In particular, China, India and other emerging countries in Asia are expected
to post high economic growth. The IMF estimates that their
growth is likely to surpass that of developing countries as awhole in 2011 and onward, with the region steadily enhancing its presence in the world economy. Against the backdropof rising international commodity prices, the Middle Eastand North Africa as well as Latin American countries arealso expected to post solid growth. By contrast, countries
in Central and Eastern Europe, some of which are now being supported by international institutions after incurring
severe damage in the financial crisis, are somewhat lagging(2) Impact of rising inflationary pressure on theeconomies of various countries and regions
Soaring international commodity prices and theirimpactOver the period from 2008 to 2009, the governments
and central banks of major countries took measures forlarge-scale fiscal spending and monetary easing to mitigate the damage of the global financial crisis to their real
economies. While these measures were effective, to a certain extent, in staving off the sharp economic slowdown,
they created excess liquidity in some countries and regions
by providing more funds than their economies needed. In
conjunction with the weaker dollar, sluggish performanceof conventional financial assets (stocks and bonds, etc.)
and expectations of stronger demand in emerging countries, these surplus funds poured into commodity markets
to cause soaring prices of such commodities as precious
metals, crude oil and grains. Gold continued to reach new
all-time high prices in 2011, topping US$1,500 per ounce inApril. Crude oil prices rose above US$100 in March 2011 forthe first time in about two and a half years and remainedin a high price range thereafter. Rising commodity market
prices have then spread to grains, including wheat, soybeans and corn.
At the end of April 2011, the Thomson Reuters/Jefferies CRB Index, a comprehensive indicator of internationalcommodity markets, stood over 80% higher than the low ofMarch 2009, and remains at high levels after calming down
somewhat over May and June (see Figure I-2).
Higher commodity markets increase inflationary pressure in many countries through higher import prices.
Particularly damaging to people’s living are rises in foodprices, and the damage is particularly serious in developing
countries with the higher Engel’s coefficient (see Figure I-3).
The impact of higher food prices, cited as one of the reasons
behind massive pro-democracy street demonstrations seenin North Africa and the Middle East, increases the risk ofamplifying social unrest.
Rises in commodity prices influence the economies ofvarious countries and regions through changes in terms oftrade of each country and region (see Figure I-4). Countries
that import resources see their terms of trade deteriorate
due to rising import prices, resulting in the partial outflow
of real national income, while exporting countries get higher
income thanks to improved terms of trade associated withhigher export prices. Countries that export primary commodities such as crude oil and grains are benefiting fromsharply increasing trade profit, while developed countries
and developing countries in Asia are seeing an expansion in
their trade losses. Consequently, real national income has

In this report, unless otherwise specified, pursuant to the examples of the
IMF and “World Economic Trend” of the Cabinet Office, “developed countries” indicates the 34 countries/regions so defined by the IMF, “developing
countries” countries/regions other than developed countries, and “emerging countries” those countries with high economic growth, particularly
countries participating in the G20 such as China and India.

1

1

I

Figure I – 1 Trends of GDP growth and contribution by country and region
2008

U.S.
EU27
Euro Zone
UK
Japan
East Asia
China
South Korea
ASEAN
ThailandSingapore
Malaysia
Vietnam
India
Australia
New ZealandCentral and South America
BrazilCentral and Eastern Europe
RussiaMiddle East andNorthern Africa
Sub-Saharan Africa
South Africa
World
Reference
Developed Countries
Developing Countries
ASEAN + 6
BRICS
(Including South Africa)
BRICs(Excluding South Africa)

2009

2010

2011 (Estimate)(%)
2012 (Estimate)

2.8
1.8
1.6
1.7
1.4
8.0
9.6
4.5
5.4
4.0
5.2
5.5
6.3
8.2
3.0
0.9
4.7
4.5
3.7
4.8

0.5
0.4
0.2
0.0
0.1
1.7
1.3
0.1
0.2
0.0
0.0
0.0
0.0
0.5
0.0
0.0
0.4
0.1
0.1
0.1

2.9
2.1
1.8
2.3
2.1
8.0
9.5
4.2
5.6
4.5
4.4
5.2
6.8
7.8
3.5
4.1
4.2
4.1
4.0
4.5

0.6
0.4
0.3
0.1
0.1
1.8
1.4
0.1
0.2
0.0
0.0
0.0
0.0
0.4
0.0
0.0
0.4
0.1
0.1
0.1

Growth rate Contribution Growth rate Contribution Growth rate Contribution Growth rate Contribution Growth rate Contribution

0.0
0.7
0.4
-0.1
-1.2
7.0
9.6
2.3
4.4
2.5
1.5
4.7
6.3
6.2
2.6
-0.2
4.3
5.2
3.2
5.2

0.0
0.2
0.1
-0.0
-0.1
1.3
1.1
0.0
0.2
0.0
0.0
0.0
0.0
0.3
0.0
0.0
0.4
0.1
0.1
0.2

-2.6
-4.1
-4.1
-4.9
-6.3
5.8
9.2
0.2
1.4
-2.3
-0.8
-1.7
5.3
6.8
1.3
-2.1
-1.7
-0.6
-3.6
-7.8

-0.5
-0.9
-0.6
-0.2
-0.4
1.1
1.1
0.0
0.1
-0.0
-0.0
-0.0
0.0
0.3
0.0
0.0
-0.1
0.0
-0.1
-0.3

2.8
1.8
1.7
1.3
3.9
9.3
10.3
6.1
7.5
7.8
14.5
7.2
6.8
10.4
2.7
1.5
6.1
7.5
4.2
4.0

0.6
0.4
0.3
0.0
0.2
1.9
1.3
0.1
0.3
0.1
0.1
0.0
0.0
0.5
0.0
0.0
0.5
0.2
0.1
0.1

5.1

0.2

1.8

0.1

3.8

0.2

4.1

0.2

4.2

0.2

5.6
3.6
2.9

0.1
0.0
2.9

2.8
-1.7
-0.5

0.1
-0.0
-0.5

5.0
2.8
5.0

0.1
0.0
5.0

5.5
3.5
4.4

0.1
0.0
4.4

5.9
3.8
4.5

0.1
0.0
4.5

0.2
6.1
5.2

0.1
2.7
1.5

-3.4
2.7
3.6

-1.8
1.2
1.1

3.0
7.3
8.2

1.6
3.4
2.6

2.4
6.5
6.8

1.2
3.1
2.2

2.6
6.5
6.9

1.3
3.2
2.3

7.5

1.7

4.8

1.1

9.0

2.2

8.0

2.1

7.8

2.1

7.6

1.7

5.0

1.1

9.2

2.2

8.1

2.0

8.0

2.1

Notes: (1) The IMF calculates GDP growth rate using purchasing power parity (PPP).
(2) Contributions by country and region are calculated using the weighted PPP for 2009.
(3) East Asia refers to China, South Korea, Hong Kong, Taiwan and ASEAN.
(4) ASEAN+6 refers to ASEAN, Japan, China, South Korea, India, Australia and New Zealand.
(5) Figures may differ from elsewhere in this presentation due to revisions and differences in original statistics.
(6) The definitions of developed and developing countries follow the World Economic Outlook (IMF).
Source: WEO (IMF).

Figure I – 2 Trends of international commodity markets(Thomson Reuters/Jeeries CRB Index)

decreased in importing countries, yielding anegative impact on personal consumption andcapital spending, while
higher income is leading
to more active investment and consumption
in exporting countries.
This transfer of income
from consuming countries of primary commodities to exporting
countries results in differences in economic
growth.
Looking at the structure of income fromoverseas,
meanwhile,developed
industrial
countries and regions
such as Japan, Germany
and Taiwan offset thedeterioration in termsof trade by exports andnet receipts from overseas (mainly income
from direct investment
and securities investment), while countries
such as South Korea
and Thailand are highly
dependent on exports(see Figure I-5). If commodity prices continue
to rise significantly go-

Figure I – 3 The Engel’s coefficient for major countries and therate of increase in CPI
Rates of Increase in Consumer Prices (2010/%)（January 2008=100)
220.0

16.0

200.0

14.0

180.0

12.0

160.0

Developed countries
Developing countries

10.0

140.0

8.0

120.0

6.0

100.0

4.0

80.0

2.0

60.0

0.0

40.0

1

0

0
8/

04

07

10

1

0

0
9/

04

07

10

1

1

0
0/

04

07

10

1

1

0
1/

04

-2.0

(Month/Year)

Total

Non-energy

EnergyGrainsIndustrial materials

Precious metals

-

4.0
0.0

10.0

20.0

30.0

40.0

50.0

60.0

(The Engel’s Coefficient)(The proportion of consumption expenditure spent on food, average for 2000 - 2010, %)Soft commodities

Note: The classification of developed countries and developing countries follows WEO standards.
Sources: WEO (IMF), International Marketing Data and Statistics 2011
(Euromonitor International).

Note: Soft commodities are coffee, cocoa and sugar.
Source: Thomson Reuters.

2

I The World Economy, Trade and Direct Investment

ance of cross-border lending of BIS reporting banks (on adirect transaction basis) reached around US$37 trillion in
March 2008, but then declined and stood at US$30 trillion
at the end of 2010, just about 80% of the peak level, indicating that credits provided through international financial
markets have yet to recover to the pre-financial crisis level.
The breakdown of credit recipients show that while credits
given to developed countries remained sluggish, centeringon those to the United States and Europe, credits to developing countries, except those in Europe, are displaying an
increasingly strong trend, with credits outstanding to Asiaand Oceania, China, Central and South America, the Middle East and Africa all standing at all-time highs at the endof 2010 (see Figure I-6).
The inflow of funds into developing countries is also conspicuous in terms of direct investment and securities investment as well as bank lending. According to the IMF, direct
investment in developing countries (on balance of payments
basis, net and flow) increased sharply to US$371.1 billion(up US$123.4 billion over 2009) and securities investment to
US$162.2 billion (up US$41.9 billion over 2009). Asia saw anaccelerated inflow of direct investment (up US$108.5 billion
year on year to US$175.3 billion), while Central and SouthAmerica experienced a sharp rise in securities investment(up US$36.9 billion year on year to US$71.5 billion). In addition to primary investment, cited as another factor for the
inflow of funds into developing countries is the back-flow ofinvestment in the United States and other developed countries made by developing countries using their accumulated
foreign currencies in association with the re-expansion of
global imbalances described later.

Figure I – 4 Trends of terms of trade of major countries/regions(January 2005＝100）
160

250

150
140

200

130
120

150

110
100

100

90
80

50

70
60

05

/0

1
04
07
1
06 0
/0
1
04
07
1
07 0
/0
1
04
07
1
08 0
/0
1
04
07
1
09 0
/0
1
04
07
1
10 0
/0
1
04
07
1
11 0
/0
1
04

0
(Year/Month)

World
Japan

U.S.
South Korea

China
Euro zone
Fuel exporting countries (RHS)

Note: The classification of regions follows WEO standards.
Sources: IFS (IMF) and materials of the State Statistical Bureau of China.

ing forward, many countries will find that securing income
from overseas through the promotion of exports and investment is the key to maintaining their economic growth.
Convergence of international money into developing
countries
The excess liquidity generated in some countries andregions poured into international commodity markets andalso led to an inflow of funds into developing countries
through international financial markets. According to dataof the Bank for International Settlements (BIS), the bal-

Figure I – 5 Trading gains and the structure of income from overseas of major countries (2000 base, share of GDP)U.S.
Net exports Net receipts from overseas Trading gains (losses)
1990s
-1.2
0.4
-0.7
2000s
-4.6
0.8
0.0
Latest year (Note (3))
-2.6
1.0
-1.4
Germany
1990s
-0.3
-0.2
1.1
2000s
4.5
0.5
0.1
Latest year (Note (3))
4.3
1.4
0.4
Japan
1990s
0.8
1.0
0.6
2000s
2.9
2.3
-1.9
Latest year (Note (3))
4.9
2.5
-3.9
[Reference] Taiwan [2006 base]
1990s
-8.3
1.8
9.4
2000s
4.3
2.6
1.5
Latest year (Note (3))
15.2
2.8
-6.9
[Reference] China [2005 base] (Note (4))
1990s
1.7
-0.1
0.0
2000s
5.2
-0.3
0.0
Latest year (Note (3))
3.8
0.7
0.4

Total
-1.5
-3.8
-2.9
0.5
5.0
6.1
2.4
3.3
3.5
2.9
8.4
11.1
1.6
-

UK
Net exports Net receipts from overseas Trading gains (losses)
-0.4
-0.7
-0.8
-4.7
1.2
0.5
-9.4
2.1
0.4
France
0.7
0.6
0.3
-0.9
0.9
0.5
-3.2
0.8
0.9
South Korea
-4.2
-0.6
7.5
7.0
0.1
-3.5
14.1
0.5
-7.3
[Reference] Thailand [2005 base]
-9.7
-1.8
-0.2
4.4
-3.9
0.1
10.0
-5.0
0.1
[Reference] India [2005 base]
-2.4
-1.1
-0.1
-2.9
-0.7
-0.0
-4.6
-0.5
0.0

(%)
Total
-1.8
-3.0
-6.9
1.6
0.5
-1.4
2.8
3.6
7.3
-11.7
0.6
5.1
-3.5
-3.6
-5.1

Notes: (1) Trading gains (or losses) show relative changes in income from overseas associated in changes of terms of trade from the base year, not absolute levels of
income. Therefore, it should be noted that they are not suitable for intertemporal comparison or simple comparison between countries/regions having
different base years.
(2) Figures for the 1990s and 2000s are the averages for the respective periods covered.
(3) The latest year is 2009 for the United States, UK, Germany, France, South Korea, Thailand, China and India, and 2010 for Japan and Taiwan.
(4) Since the latest figure for net receipts from overseas for China is for 2007, it does not show the sum for the 2000s.
Sources: Annual National Accounts (OECD) for U.S., UK, Germany, France and South Korea.
Japan: National Economic Accounting (Economic and Social Research Institute, Cabinet Office).
Taiwan: Republic of China National Income Statistics (Statistical Bureau, Executive Yuan).
	Thailand, China and India: Asia Development Bank statistics (net receipts from overseas) and National Accounts Main Aggregate Table (United Nations).

3

IFigure I – 6 Trends in cross-border bank lending (by country)(1) Developed countries/regions(2) Developing countries/regions and offshore financial centers(US$ trillion)(US$ trillion)

35.0
30.0
25.0

8.0

U.S.
EuropeJapan
OthersOffshore financial centers
Latin America/the Caribbean
EuropeChina
Asia/Oceania (excluding China)
Middle East/Africa

7.0
6.0
5.0

20.0

4.0
15.0

3.0

10.0

2.0

5.0
0.0

1.0
0.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2002
03
04
05
06
07
08
09
10

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2002
03
04
05
06
07
08
09
10

(Qaurter/Year)(Qaurter/Year)

Source: Consolidated banking statistics (BIS).

These flows of funds into developing countries remain
as a risk to be kept under watch as they increase inflationarypressure and, when exceeding a certain scale, distort the allocation of resources in fund-recipient countries, and could
also give a tremendous impact on their real economies
through the generation and ensuing bursting of bubbles.
In fact, according to a survey by the Organization for Economic Cooperation and Development (OECD), out of 268
cases of excessive fund inflows in the past, about 60% saw
an abrupt halt to the inflow of funds and 10% experienced
either a financial crisis or a currency crisis.

surpluses of Asian countries started shrinking through decreasing U.S.-bound exports, putting a halt to the expansionof the global imbalance. However, the U.S. current accountdeficit began to widen again since the third quarter of 2009(see Figure I-7). But the factors behind the widening U.S.
deficit are entirely different from those before the financial crisis. This time around, the deficit is stemming fromthe shortage of funds in the government sector, while thehousehold sector, which used to be cash-strapped, switched
to a surplus of funds, presenting a structure completely different from the pre-financial crisis years (see Figure I-8).

(3) The global imbalance expands again
The imbalance narrowed until 2009
The prolonged economic sluggishness in the UnitedStates and other developed countries and expanding demand in emerging countries have also altered the global
balance of payments structure. Before the financial crisis,
emerging countries, mainly Asian countries and oil exporters in the Middle East, expanded exports to accommodate
robust consumption demand of developed countries, andthey invested foreign currencies earned on their exports
in the United States. This structure had come to stay andthe trend of its expansion became more evident particularly since the mid-2000s. This is generally referred to as theglobal imbalance (the imbalance in the world’s balance of
payments). While some people argued that the global imbalance is sustainable as the rate of return on investmentin the United States stays high and funds flow into developing countries stably, not a few others warned that it is adestabilizing factor for the world economy as the imbalance
beyond a certain level is unsustainable and substantial adjustments of exchange rates and asset prices would be inevitable over time.
Following the weakening of domestic demand, particularly personal consumption, in the United States after thefinancial crisis, the U.S. current account deficit narrowed,
with the ratio of the deficit to GDP declining to 2.4% in
the second quarter of 2009 from the peak of 6.4% in thethird quarter of 2006. At the same time, the current accountFigure I – 7 Trends of current accounts of major countries/regions(US$ billion)
2,500
2,000
1,500
1,000
500
0
-500
-1,000-1,5002000 01

02

03

04

05

06

07

08

09

10

11 12 13 14 15 16 (Year)(F) (F) (F) (F) (F) (F)Other developing countries (80 countries)
Fuel-exporting countries (27 countries)
Commodity (non-fuel)-exporting countries (20 countries)
Asian developing countries (23 countries)
Asian NIEs (four countries/regions)Japan
Developed countries (28 countries, excluding U.S., Asian NIEs and Japan)
U.S.

Notes: (1) Th e classification of developed countries and developing countries
follows WEO standards.
(2) Asian NIEs are South Korea, Hong Kong, Taiwan and Singapore.
(3) (Est.): estimate(4) D eveloping countries in Asia exclude four countries that belong
to fuel-exporting countries and commodity (non-fuel)-exporting
countries.
Source: WEO (IMF).

4

I The World Economy, Trade and Direct Investment

serious, it could have a huge impact on the actual economies of Asia through rises in long-term U.S. interest rates
and declines in U.S. Treasury bond prices.

Figure I – 8 Trends of fund surplus/shortage in the U.S.
(% of nominal GDP)
12.0

Fund surplus(4) Problems and risks confronting the world
economyThe world economy slows downSome of recent economic indicators of major countries
are showing peaking-out or decelerating trends (see FigureI-10). In developed countries in particular, while corporate
earnings are in the recovery phase, severe employment conditions are keeping personal consumption from beginningto show signs of perking up in earnest. Furthermore, theglobal trend of rising prices is prodding central banks ofmany countries and regions, centering on developing countries and resource-rich countries, into tightening credit policy. The European Central Bank (ECB) also moved towardtightening in April 2011 (see Figure I-11). Furthermore, theU.S. Federal Reserve Board decided to put an end to an additional round of quantitative easing (QE2), launched in
November 2010, in June 2011.
In Europe, where sovereign risks have come under the
spotlight, mainly in Southern European countries, as a result of massive fiscal spending to prop up economic activi-

7.0
2.0
-3.0
-8.0
-13.0

Fund shortage
-18.0

2000

01

02

Household

03

04

05

06

Non-financial busineses

07

08

09

Government

10(Year)

Overseas

Source: “ Flow of Funds Accounts of the United States” (Federal Reserve
Board).

The growing presence and risk of Asian money
Meanwhile, the presence of Asian countries and regions is beginning to steadily increase in terms of financing the U.S. current account deficit. Investment from Asiaand Oceania accounted for 32.9% of the total investment in
the United States (direct investment, securities investment
and other investments) of US$1,244.8 billion in 2010, with
China contributing 9.0%, Taiwan 2.9% and Singapore 2.7%,
respectively.
The trend of the rising Asian presence becomes evenclearer in the medium- and long-term perspective. Amongthe total amount of investment in the United States, the ratio of China increased from 8.3% in 2000-2005 to 19.0% in
2006-2010, and the combined share of Asian NIEs (South
Korea, Hong Kong, Taiwan and Singapore) and India
reached 26.4% (see Figure I-9). It may be possible to argue
that the widening U.S. current account deficit is being financed smoothly by Asia. But it needs to be noted that if
concerns over the sustainability of U.S. federal debt become

Figure I – 10 Leading economic indicators of major countries/regions(Year on year, %)
30
20
10
0
-10
-20

Japan

U.S.

EU

China

India

Brazil

05

/0

1
04
07
06 10
/0
1
04
07
07 10
/0
1
04
07
08 10
/0
1
04
07
09 10
/0
1
04
07
10 10
/0
1
04
07
11 10
/0
1
04

-30

Figure I – 9 Inward direct investment in the U.S. by region (netflows, cumulative total for each period)(%)
100

Figure I – 11 Trends of policy interest rates of major countries/regions
Others14.0Euro zone

18.5
10.4

3

2

1

Euro zone

Australia

India (Repo rate)

Brazil (RHS)

04

10

/0
1

U.S. (Cap rate)

11

Japan

07

04

/0
1

10

10

7.0
2006–201007

10.0
2000–2005

0

04

0

/0
1

19.0

8.3

4

2

/0
1

5.0

6.9

6

4

Japan

10

20

1.5
1.6

3.8
3.3

8

5

China

08

10.1

0

6

09

12.4

30

10

16.7

10

7

Other Asia/Oceania
Asian NIEs

50

12

8

Middle East/Africa
26.5

(%)
14

9

Latin America

70

40

(%)
10

UK

07

24.6

80

60

Source: Composite leading indicator (OECD).

04

90(Year/Month)(Year/Month)

Note: The amount of investment is the sum of direct investment, securities
investment and other investment.
Source: U.S. International Transactions (U.S. Department of Commerce).

China(1-year deposit rate)

Sources: Materials provided by the central banks of countries/regions.

5Ities in the wake of the financial crisis, Greece, Ireland andPortugal successively sought assistance from the IMF andthe European Union (EU) in and after May 2010, further
heightening pressure for fiscal reconstruction. The shift
to the tightening of both monetary and fiscal policies at atime when the economy is decelerating gives rise to concern over even greater downward pressure on the economy.
Furthermore, inflationary pressure stemming from risinginternational commodity prices, unless swept away, could
increase the risk of stagflation. Mr. Olivier Blanchard, the
IMF’s Economic Counsellor, pointed out that while developed countries are unlikely to face the stagflation seen in
the 1970s because of their lower dependence on crude oiland the beneficial effects of monetary policy, developing
countries may find themselves in a severer situation thandeveloped countries due to higher Engel’s coefficients andalso because the effectiveness of monetary policy is not secured sufficiently relative to developed countries. The IMF,
in the revised World Economic Outlook released in June
2011, revised down the world’s real economic growth for2011 by 0.1 percentage point to 4.3% from the 4.4% estimated in April 2011.

Through “projects to promote the siting of high-valueadded facilities in Japan and promote Japan’s position as an‘Asian base’” and other initiatives, the Japanese governmenthas been stepping up efforts to ensure sustainable growthof the Japanese economy by maintaining and strengthening high-value-added business bases in Japan through thepromotion of activities to attract and accumulate highvalue-added functions conforming to Japan’s strengths. For
the revitalization of the Japanese economy going forward,
it is crucial to further strengthen location competitiveness,maintain and expand employment opportunities, and realize the enhancement of productivity.
On the other hand, with Japan being confronted withthe population decline ahead of other countries, it is truethat the rebuilding of the domestic economy alone offers
only limited prospects for medium- and long-term growth.
Moreover, the Japanese economy itself has yet to fully breakaway from the oversupply structure, and had a deflationary
gap equivalent to about 3.8% of GDP, or about 20 trillion
yen, as estimated by the Cabinet Office, in the first quarterof 2011. Considering this, it will become more important
than before, not only in corporate strategies but also for theJapanese economy as a whole, to bring in the dynamismof emerging countries with high economic growth in Asiaand other regions by further accelerating the globalization of both trade and investment. Taking in the growthof overseas markets through such overseas strategies andby effectively utilizing assets held within Japan should help
mitigate deflationary pressure through the elimination of
the oversupply structure.
The Great East Japan Earthquake has subjected not only
the directly devastated Tohoku region but also the entire
Japanese economy to an ordeal by damaging supply chainsand disrupting the supply of electric power. However, inmodern times, Japan has a history of having overcome natural disasters and crises countless times. Indeed, following
the latest earthquake, the severed supply chains began to berestored much sooner than expected, impressing the entire
world anew with the underlying strength of Japan’s industrial infrastructure.
Will Japan get through the latest earthquake and establish the basis for medium- and long-term growth? This
will depend on whether Japan can develop the next growthstrategy which sees through the post-reconstruction period
by leveraging its experiences with the past disasters anddrawing lessons from the latest earthquake.

Japan should establish the basis for growth byovercoming the earthquake
As the world economy got back on a recovery trajectory
since 2009, the Japanese economy was also about to markthe beginning of the recovery process, albeit at a moderate pace, but that process was hampered by the severe damage caused by the Great East Japan Earthquake on March
11, 2011. Japan’s real GDP in January-March 2011 dwindled at an annual rate of 3.5%, posting negative growth
for the second consecutive quarter. The IMF also revised
Japan’s growth estimate for 2011 sharply downward from
1.4% in April to negative growth of 0.7% in June. Furthermore, Japan’s exports in April-May 2011 (denominated inyen) plunged 11.4% from the same period of 2010, and thetrade balance for May 2011 suffered a deficit of 853.7 billion
yen, the first substantial trade deficit in two years and fourmonths since January 2009. However, the Japanese economy is moving steadily toward a recovery from the earthquake, with exports in May 2011 (seasonally adjusted) posting a rise of 2.5% over the preceding month to show signsof bottoming out and the industrial production index in thesame month recovered to over 90% of the pre-earthquake
level in February. However, no optimism is warranted going
forward, as concerns over “Japan abandoning” moves andthe hollowing out of Japanese industry linger on, with theearthquake prompting some Japanese companies to accelerate the shift overseas and the persistently strong yen since
before the earthquake.
The first and foremost task for Japan is to reconstruct
earthquake-afflicted areas and to restore control over the
nuclear power plants. In order to put Japan’s post-earthquake revival on a firmer basis from the medium- and longterm perspective, Japan also needs to develop a growthstrategy that includes restructuring of not only domestic
businesses but also overseas businesses.
6

I The World Economy, Trade and Direct Investment

Column I − 1
IThe earthquake demonstrated the close linkage between Japan and the Asian economies
The computation of the trade intensity index (exports
and imports) (Note 1) and the “direct investment intensity index” (Note 2) to measure the strong trade and investment linkages between Japan and Asia relative to the whole worldshows that the trade intensity index is greater than 1 for both
exports and imports (see Figure 1). The index shows highfigures not only for the member states of the ASEAN where
production bases of Japanese manufacturers have been accumulated but also for South Korea, Taiwan and China where
local companies procure large quantities of intermediate
goods from Japan. The intensity index of inward direct investment from Japan is greater than 1 in almost all countries
and regions (see Figure 2).
Overall, this suggests that Asian countries and regions
have been affected significantly by the earthquake in Japan
relative to other regions because their trade and direct investment structures are highly dependent on Japan.

The Great East Japan Earthquake of March 11, 2011, affected not only the Japanese economy but also the Asian
economies to a certain extent, but it also drew renewed attention to the close linkage between Japan and the Asian
economies. Take a look at the interdependency between Japan and Asian countries and regions in terms of trade andinvestment. In trade, while exports to Japan of Asian countries and regions account for between around 4% and 15% of
their total exports, the share of imports from Japan in their
total imports ranges from 7% to over 20%, with imports byHong Kong, Taiwan and Thailand reaching levels in excess
of 10% of GDP. Looking into direct investments as well, theratio of direct investment from Japan to the total balance of
direct investment goes into double figures in many countries
and regions, with direct investment from Japan reachingaround 10% of GDP in Hong Kong, Thailand and Singapore(see Table 1).

Table 1 Japan’s trade and investment relationships with countries/regions in Asia, Europe and North America(US$ million, %)Trade (2010)
Balance of direct investment (2009)% of GDP(Trade/investment with Japan)
To Japan
To World
In Japan
In World
Exports (Share) Imports (Share) Exports Imports Outward (Share) Inward (Share) Outward Inward Exports Imports Outward Inward
120,262 (7.6) 176,304 (12.6) 1,578,444 1,393,909
197 (0.1)
55,087 (10.4) 353,056 530,057
2.0
3.0
0.0
0.9
China
28,176 (6.0)
64,296 (15.1) 466,384 425,212
2,563 (2.1)
27,091 (23.0) 120,441 117,732
2.8
6.4
0.3
2.7
South Korea
16,552 (4.1)
42,963 (9.7) 401,023 442,035
2,658 (0.4)
20,940 (2.5) 721,462 830,920
7.4
19.1
1.3
9.3
Hong Kong
16,958 (6.5)
52,115 (20.7) 262,017 251,794
2,001 (10.4)
9,356 (23.7)
19,22339,499
3.9
12.1
0.5
2.2
Taiwan16,416 (4.7)
24,455 (7.9) 352,076 310,973 10,641 (8.6)
32,404 (9.5) 123,365 339,787
7.4
11.0
5.8
14.6
Singapore
20,417 (10.5)
38,306 (20.8) 195,297 184,519-30 (-0.2)
37,277 (33.5)
18,891 111,109
6.4
12.0
-0.0
11.7
Thailand
20,640 (10.4)
20,729 (12.6) 198,941 164,847
216 (0.3)
9,544 (12.1)
80,488 78,838
8.7
8.7
0.1
4.0
Malaysia
25,782 (16.3)
16,966 (12.5) 157,779 135,663
12 (0.2)
11,111 (10.3)
6,941 108,220
3.6
2.4
0.0
1.6
Indonesia
7,826 (15.2)
6,747 (12.3)
51,432 54,721
60 (8.3)
2,885 (35.5)
721
8,117
3.9
3.3
0.0
1.4
Philippines
60,486 (4.7) 120,545 (6.3) 1,278,263 1,913,160 103,643 (3.0) 264,208 (11.4) 3,508,142 2,319,585
0.4
0.8
0.7
1.8
U.S.
56,987 (3.2)
85,655 (4.3) 1,786,650 1,990,454 72,571 (0.8) 167,759 (2.1) 8,987,125 7,992,431
0.3
0.5
0.4
1.0
EU
Note: Figures for the balance of both outward and inward direct investment are, in principle, those of reporting countries/regions in IMF materials.
When they are not available, figures reported by Japan or investment partner countries are used (shown in Italics).
Sources: Trade statistics of countries/regions and “Coordinated Direct Investment Survey,” WEO (IMF).

Figure 1 Japan’s trade intensity index with countries/
regions in Asia, Europe and North America

Figure 2 Japan’s direct investment intensity index withcountries/regions in Asia, Europe and North America

Trade intensity index (Imports, 2010)
4.5
4.0

Direct investment intensity index (Inward, 2009)
10.0

TaiwanChina
Malaysia
Hong Kong

2.0

Philippines

1.0
0.5

5.0
4.0

Malaysia

2.0

Indonesia
Hong Kong
EU

3.0 China
1.0

EU
0.0

South Korea

6.0

Indonesia

Singapore
U.S.

1.5

0.0

7.0

South Korea

2.5

1.0

2.0

Philippines

8.0

3.5
3.0

Thailand

9.0

Thailand

0.0

3.0
4.0
5.0
Trade intensity index (Exports, 2010)

-1.0

U.S.

0.0

1.0

2.0

3.0

TaiwanSingapore

4.0
5.0
6.0
7.0
8.0
9.0
10.0
Direct investment intensity index (Outward, 2009)

Source: DOT (IMF) and trade statistics of Taiwan.

Source: “Coordinated Direct Investment Survey” (IMF).

The trade intensity index of country i and country j = (the amountof exports from country i to country j / the total amount of exports
by country i) / (the total amount of exports from the world to country j / the total amount of exports by the world). An index value ofabove 1.0 is interpreted to mean a strong trade linkage between thetwo countries.

In this column, the direct investment intensity index is defined as
the index obtained by replacing exports in Note 1 by the balance ofoutward direct investment and imports by the balance of inward direct investment. Direct investment by the world as a whole is the sumof the amounts of investment reported by individual countries in the
IMF document shown in Figure 1.

1

2

7

Figure I – 13 Long term trends in world trade (Export)(1949-2010)

2. Trade of the World and Japan(Growth rate, %)(Exports value US$1 billion)
18,000(1) World trade in 2010 posts strong growth
In world trade (merchandise trade, nominal exports)
in 2010, exports surged 22.2% year on year to US$15,049.5
billion, partly in reaction to the sharpest decrease since1949 recorded in 2009 (see Figure I-12). The increase was
the second largest in the past 30 years, next only to the
expansion seen in 2004 amid the global economic boom
(see Figure I-13). Imports also rose 21.1% year on year to
US$15,469.6 billion.
The growth rate of trade can be broken down into theprice factor (import and export price indices) and the volume factor (import and export volume indices, real imports
and exports). In 2010, export prices increased 5.7% andimport prices 6.5% (both dollar based, IMF), both showing only moderate rises apparently because manufactured
products saw almost no price rises.
On the other hand, prices of primary commodities
soared by 26.1%. Commodity prices, which had followed anuninterrupted uptrend since 2002, plunged in 2009 in theaftermath of the global financial crisis, but turned up again
in 2010. On top of higher energy and metal prices on firming demand, prices of food and agricultural raw materials
shot up from mid-2010 due to unseasonable weather (seeFigure I - 14).
Real exports, from which the effect of price fluctuations
is excluded, grew 16.5%, exceeding the growth of 13.4% in2004 to register the largest increase since 23.0% in 1979.
Real exports began to rise in June 2009 and surpassed thepre-financial crisis peak level of April 2008, though thegrowth slowed down in the second half of 2010.
To take a look at export and import patterns by majorcountry, Figure I-15 and Figure I–16 show trends of export
and import volumes against the base of August 2008 before
the Lehman Shock. The volume of imports by the UnitedStates, the world’s largest importer, began to trend down

50.0

16,00040.0

14,00030.0

12,00020.0

10,000

10.0

8,000

0.0

6,000
4,000

-10.0

2,000

-20.0
-30.0

19
49
19
52
19
55
19
58
19
61
19
64
19
67
19
70
19
73
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
20
06
20
09
20
10

0

Export value

Export growth rate (nominal)(Year)

Export growth rate (real)

Source: IFS (IMF).

Figure I – 14 Growth rate of commodity price indices(YoY basis)2006 2007 2008 2009
All primary commodities
20.8
11.8
27.6 -30.0
Non-fuel commodities
23.2
14.1
7.5 -15.7
Food
10.5
15.2
23.3 -14.7
Beverages
8.4
13.8
23.3
1.6
Agricultural raw materials
8.8
5.0-0.8 -17.0
Metals
56.2
17.4-7.8 -19.2
Energy19.4
10.5
40.1 -36.8

(%)
2010
26.1
26.4
11.5
14.1
33.2
48.2
25.9

Source: IFS (IMF).

from November 2008, bottomed out in May 2009 and exceeded the pre-financial crisis level finally in June 2010. In
the second half of 2010, however, the growth of import volume slowed and dipped below the pre-crisis level in somemonths. U.S. exports, meanwhile, hit bottom in March
2009, but rose above the pre-crisis level by December 2010.
Exports by China started decreasing in November 2008
due to decreasing imports by the United States, and reachedbottom in February 2009. Chinese exports recovered andstayed comfortably above pre-crisis levels only after February 2010.
The volume of imports by China, just as its exports,
began to decline from November 2008 as imports of intermediate goods and raw materials
Figure I – 12 World trade indices
dropped, but bottomed out in January 2009
Unit
2006 2007 2008 2009 2010
and recovered the pre-crisis level as early as byWorld merchandise trade, export basis US$ billion 12,107 13,829 16,030 12,379 15,050
percent change (nominal)
%
16.0
14.2
15.9 -22.8
22.2
June 2009. As China is taking steps to stimulate
percent change (real)
%
11.6
5.8
5.5 -12.1
16.5
the economy, as seen in its policy to encourage
percent change (price)
%
4.4
8.4
10.4 -10.7
5.7
Chinese consumers to purchase automobiles
World merchandise trade, import basis US$ billion 12,261 14,131 16,310 12,530 15,470
percent change (nominal)
%
14.8
15.3
15.4 -23.2
21.1
and home electric appliances, an expansion
percent change (real)
%
9.5
7.3
3.3 -10.3
14.6
of domestic demand appeared to have given
percent change (price)
%
5.3
8.0
12.1 -12.9
6.5
World trade in services, export basis US$ billion
2,832 3,409 3,840 3,384 3,664
a boost to its imports. Furthermore, China’s
percent change
%
13.4
20.4
12.7 -11.9
8.3
imports expanded rapidly over the second half
World trade in services, import basis US$ billion
2,658 3,170 3,622 3,214 3,503
of 2009 through the first half of 2010. While
percent change
%
12.0
19.3
14.3 -11.3
9.0
World real GDP growth
%
5.2
5.4
2.9
-0.5
5.0
the pace of imports calmed down once in midIndustrial production index
2010, it accelerated again in the second half of
%
3.1
2.9
-2.4 -13.0
6.7
growth (developed countries)
the year.
Crude oil average price
US$/barrel
64.3
71.1
97.0
61.8
79.0
quantity of demand
million bbl/day 85.0
86.4
86.0
84.7
87.4
While Germany brought its exports back to
Notes: (1) 2010 trade value and growth rates are JETRO estimates.
the pre-financial crisis level in May 2010, ahead(2) Percent change (real) = percent change (nominal) - percent change (price).
of Japan and the United States, its imports re(3) Real GDP growth rates based on purchasing power parity.
mained at around 90% of the pre-crisis level.
(4) Definition of developed countries follows IFS classification.
Sources: IFS (IMF), WEO (IMF), WTO, BP. p.l.c and statistics of individual countries/regions.
As for Japan, exports turned down in Sep8

I The World Economy, Trade and Direct Investment

Figure I – 15 Trends of import volumes of the world and major
importers (seasonally adjusted)

Figure I – 16 Trends of export volumes of the world and major
exporters (seasonally adjusted)(August 2008=100)
150.0(August 2008=100)
130.0

140.0

120.0

130.0

110.0

120.0

100.0

110.0

90.0

100.0

80.0

90.0

70.0

80.0

60.0

70.0
60.0

I

50.0

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
2008
2009
2010
(Year/Month)

Germany
China
Japan
World (World Bank member countries)

Germany
China
Japan
World (World Bank member countries)

U.S.

Figure I – 17 World trade by country/region (2010)
Contribution
2.9
1.8
0.6
0.6
4.6
3.9
1.2
0.6
0.3
0.3
0.3
0.5
0.1
0.1
1.5
6.9
3.1
0.8
0.6
0.6
1.9
0.7
0.3
0.4
0.3
0.1
0.1
0.9
0.2
0.5
0.5
0.4
0.1
0.2

U.S.

Sources: The Global Economic Monitor (World Bank) and Real Exports andReal Imports (Bank of Japan).

Sources: Th e Global Economic Monitor (World Bank) and Real Exports andReal Imports (Bank of Japan).

Exports
Value Growth rate Share
NAFTA
1,964,473
22.6
13.1
U.S.
1,278,263
21.0
8.5
Canada387,979
22.5
2.6
Mexico298,230
29.9
2.0
EU27
5,167,405
12.4
34.3
EU15
4,573,192
11.8
30.4
Germany
1,268,890
13.2
8.4
Netherlands
573,831
15.1
3.8
France520,889
7.5
3.5
Italy
447,418
10.0
3.0
Belgium
412,408
11.5
2.7
UK
419,399
18.2
2.8
Spain
245,7218.0
1.6
Austria
152,284
11.1
1.0
Japan
767,025
32.1
5.1
East Asia
3,735,585
29.7
24.8
China
1,578,444
31.3
10.5
South Korea
466,384
28.3
3.1
Hong Kong
401,023
21.6
2.7
Taiwan262,017
35.2
1.7
ASEAN
1,027,717
29.9
6.8
Singapore
352,076
30.4
2.3
Malaysia
198,941
26.3
1.3
Thailand
195,297
28.7
1.3
Indonesia
157,779
35.4
1.0
Vietnam
72,19226.4
0.5
Philippines
51,432
34.2
0.3
Russia348,528
49.0
2.3
Switzerland
195,318
12.8
1.3
India
223,17635.1
1.5
Australia
212,782
37.7
1.4
Brazil
201,915
32.0
1.3
Turkey113,030
10.6
0.8South Africa
81,31130.3
0.5
World trade value
15,049,538
22.2
100.0
(estimate)
Developed countries 9,087,362
17.6
60.4
Developing countries 5,962,176
30.0
39.6
BRICs
2,352,063
34.1
15.6

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
2008
2009
2010
(Year/Month)(US$ million, %)Imports
Value Growth rate Share
2,606,566
23.2
16.8
1,913,160
22.7
12.4
391,92521.9
2.5
301,48228.6
1.9
5,310,122
13.0
34.3
4,650,783
12.4
30.1
1,066,723
15.2
6.9
517,15416.6
3.3
605,9198.2
3.9
484,000
16.7
3.1
390,767
11.0
2.5
588,070
14.4
3.8
314,402
7.1
2.0
158,75510.9
1.0
691,44725.2
4.5
3,448,476
34.3
22.3
1,393,909
38.9
9.0
425,21231.6
2.7
442,03525.3
2.9
251,79444.6
1.6
935,525
31.0
6.0
310,973
26.5
2.0
164,847
33.0
1.1
184,51937.1
1.2
135,66340.1
0.9
84,80121.2
0.5
54,72127.2
0.4
211,43936.2
1.4
175,97812.8
1.1
328,73127.6
2.1
193,558
21.5
1.3
181,64942.3
1.2
183,750
30.4
1.2
80,21223.7
0.5

Contribution
3.8
2.8
0.6
0.5
4.8
4.0
1.1
0.6
0.4
0.5
0.3
0.6
0.2
0.1
1.1
6.9
3.1
0.8
0.7
0.6
1.7
0.5
0.3
0.4
0.3
0.1
0.1
0.4
0.2
0.6
0.3
0.4
0.3
0.1

22.2

15,469,552

21.1

100.0

21.1

11.0
11.2
4.9

9,612,084
5,857,468
2,115,728

17.8
27.0
37.0

62.1
37.9
13.7

11.3
9.8
4.5

Notes: (1) Data for the world, EU27, developed countries and developing countries follow JETRO estimates.
(2) A SEAN stands for the following six countries: Singapore, Thailand, Malaysia, Indonesia, Vietnam and
the Philippines.
(3) E ast Asia includes the following countries and regions: China, South Korea, Hong Kong, Taiwan and
ASEAN.
(4) Definitions of developed and developing countries follow DOT (IMF) standards.
Sources: Statistics of individual countries/regions.

9tember 2008, and imports went
on a moderate decline from November of the year. Unlike China that saw both exports andimports began decreasing at thesame time, in the case of Japan,
exports started to fall ahead ofimports, and imports declined
after a few months’ time lag.
Both exports and imports cameback to over 90% of the volumes
before the financial crisis by theend of 2010. However, while imports recovered the pre-crisis
level in May 2011, exports had
yet to recoup that level as ofJune 2011, partly because of the
impact of the Great East Japan
Earthquake.
China has driven world tradein both exports and imports
In world trade (nominal exports) in 2010, exports by developed countries increased
17.6% over the previous year to
US$9,087.4 billion, and exports
by developing countries soared bya larger 30.0% to US$5,962.2 billion (see Figure I-17).
While developed countries
maintained a considerable leadover developing countries 60.4%
to 39.6% in the share of global
exports, developing countries
slightly outstripped developed
countries 11.2 points to 11.0
points in the contribution to the
22.2% year-on-year increase inglobal exports, showing that thegrowth of exports by developing countries largely helped
trade in products differentiated by quality and brands. Thus,
boost overall world exports.
both exports and imports recovered in tandem with the imChina lifted its exports by 31.3% over the previous
provement of economic conditions in developed countries.
year to US$1,578.4 billion, becoming the world’s largest
In exports, Japan had the largest contribution of 6.2 points
exporter for the second consecutive year. China’s share into the overall growth of 27.3%, leading global automobile
world exports reached 10.5%, the first double-digit shareexports together with Germany and the United States,
for the country. China’s contribution to the overall growthwhich contributed 5.0 and 2.8 points, respectively. The conof 22.2% stood at 3.1 points, far ahead of 1.8 for the United
tribution by BRICs was relatively small at 1.1 points.
States in second place, 1.5% for Japan in third place and 1.2
In automobile imports, BRICs contributed 4.2 points
for Germany in fourth place, showing China has driven theto the overall growth of 24.7%. Though lagging far behindincrease in world exports in 2010.
the United Sates that alone contributed 7.0 points, BRICs
In imports as well, China recorded a high year-on-year
did help a recovery in global automobile imports (see Figincrease of 38.9% to US$1,393.9 billion. While still short ofure I-19). In particular, the value of China’s imports almost
U.S. imports amounting to US$1,913.2 billion, China also
doubled from 2009, with the contribution of 2.8 points.
powered the overall growth of 21.1% in global imports, conAccording to the International Organization of Motor
tributing 3.1 points compared with 2.8 for the United States.
Vehicle Manufacturers (OICA), vehicle production in 2010
Exports by ASEAN countries climbed 29.9%, thanks
increased by 25.8% year on year to 77.61 million units (promainly to a recovery in shipments to Japan and China.
visional). BRICs accounted for 34.6% of the total producAsian NIEs (Hong Kong, Taiwan, South Korea and Sintion, more than trebling their share in the past decade fromgapore) also substantially increased their exports chiefly
9.9% in 2000. On the other hand, the U.S. share was halved
due to a recovery in exports to China. Exports
by EU27 rose 12.4% to US$5,167.4 billion and
Figure I – 18 World trade (Exports) by product in 2010
their imports 13.0% to US$5,310.1 billion, both
(US$ million, %)showing rather moderate increases relative to theValue
GrowthShare Contribution
Total value
15,049,538
22.2
100.0
22.2
United States, Japan and other regions. Germany
Machinery and equipment
5,822,590
20.8
38.7
8.1
increased its exports by a relatively small 13.2% toGeneral equipment
1,811,020
18.5
12.0
2.3
US$1,268.9 billion, overtaken by the United States
Air conditioners
32,90224.7
0.2
0.1
Mining and construction machinery
83,86717.7
0.6
0.1
to place third in the world in terms of the value ofMachine tools
26,82325.5
0.2
0.0
exports.
Resources-rich countries expand exports
Soaring commodity prices helped primary
product producers expand their exports by over
30% over the previous year across the board. Russia incurred the largest year-on-year fall in exports among major countries in 2009, but its exports in 2010 jumped 49.0% chiefly due to rising
prices of crude oil, which was to blame for the previous year’s plunge. Australia, a major exporter ofiron ores and coal, and Brazil, whose exports ofiron ores and other resources, as well as soybeans,mainly to China were strong, recorded an all-timehigh value of exports in 2010.
The recovery led by exports of machinery andequipment
Looking at the 2010 trade (exports) by product,exports of machinery and equipment rose 20.8%
to account for 37.4% of the total growth of world
exports. In particular, exports of automotive
products, including automobiles and auto parts,
showed remarkable growth (see Figure I-18).
Looking at automobile trade by country/region, both exports and imports by developed
countries recovered rapidly over the second halfof 2009 to the first half of 2010. Automobile tradeis said to show the distinctive nature of “intra-industry trade” where developed countries mutually

Electrical equipment
Transport equipment
Automobiles
Passenger vehicles
Motorcycles
Automotive parts
Precision instruments
ChemicalsIndustrial chemicals
Pharmaceuticals and medical supplies
Plastics and rubber
Foodstuffs
Seafood
Grains
Wheat
Corn
Rice
Processed food products
Oils, fats and other animal and vegetable products
Miscellaneous manufactured goods
Iron ore
Mineral fuels, etc.
Mineral fuels
Coal
LNG
Petroleum and petroleum products
Crude oil
Textiles and textile products
Synthetic fibers and textiles
Clothing
Base metals and base metal products
Steel
Primary steel products
Steel products
CopperNickelAluminumLead1,977,202
1,521,704
669,333
554,203
16,702
325,991
512,6632,034,018
1,386,857
448,189
647,161
965,382
80,561
76,56931,16622,48815,305
429,702151,354425,320
107,990
2,225,466
2,110,331
107,807
86,785
1,739,709
1,102,801
634,957
74,442
347,184
1,102,289
621,681379,727
241,955
65,80014,24949,597
5,131

Sources: Statistics of individual countries/regions.

10

22.6
21.3
27.3
27.0
9.1
30.9
20.2
18.3
14.8
5.2
26.7
9.5
13.0
4.3
0.8
15.3
-4.7
8.5
19.1
12.0
87.6
33.1
34.6
28.4
35.1
33.8
33.3
14.7
20.1
10.1
29.4
25.0
38.3
8.6
49.4
54.3
38.2
24.8

13.1
10.1
4.4
3.7
0.1
2.2
3.4
13.5
9.2
3.0
4.3
6.4
0.5
0.5
0.2
0.1
0.1
2.9
1.0
2.8
0.7
14.8
14.0
0.7
0.6
11.6
7.3
4.2
0.5
2.3
7.3
4.1
2.5
1.6
0.4
0.1
0.3
0.0

3.0
2.2
1.2
1.0
0.0
0.6
0.7
2.6
1.4
0.2
1.1
0.7
0.1
0.0
0.0
0.0
-0.0
0.3
0.2
0.4
0.4
4.5
4.4
0.2
0.2
3.6
2.2
0.7
0.1
0.3
2.0
1.0
0.9
0.2
0.2
0.0
0.1
0.0

I The World Economy, Trade and Direct Investment

trade in East Asia has also staged a rapid recovery throughthis production network.
Today, China is located at the center of this production network in East Asia as the supply base for the U.S.
market. Figure I-20 compares the trade intensity index (exports) (Note 2) among countries/regions in East Asia, the United States and the EU15. The trade intensity with the UnitedStates from the perspective of countries/regions in East Asia
has declined for all countries/regions except for China andVietnam, and the index in 2010 fell short of the value of 1,
which is interpreted to indicate a close trade relationship,
for all countries/regions except for Japan, China, the Philippines and Vietnam. On the other hand, the trade intensity
index with China in 2010 was above 1 for all countries/regions, an indication of a strong relationship with China.
In particular, NIEs in East Asia as a whole have increased the trade intensity with China compared with
ASEAN countries. An analysis of this point by manufacturing process using the BEC classification of the United
Nations (Note 3) shows that while raw materials, intermediate goods and final goods accounted for 25.3%, 51.9% and22.8%, respectively, of China’s imports in 2010, in China’s
imports from NIEs countries, intermediate goods accounted for 75.2% for South Korea, 77.2% for Taiwan, 76.4% forSingapore and 57.0% for Hong Kong, indicating that NIEs
countries are the main suppliers of parts to China. On theother hand, in China’s exports in 2010, raw materials accounted for 0.9%, intermediate goods 40.2% and final goods
58.9%, with final goods having the distinctively large share.
China has the industrial structure under which it imports
intermediate goods and raw materials mainly from East
Asia, processes them into final goods and exports them toaround the world.

Figure I – 19 Automobile imports by 23 major countries/regions(contribution to increase/decrease in US$-quoted value)(YoY, %)
60.0
40.0
20.0
0.0
-20.0
-40.0
-60.0

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
2008
2009
2010
(Year/Month)

BRICｓ

Developing countries/regions

Developed countries/regions

Note: 2 3 major countries/regions are 11 developed countries/regions (Canada, France, Germany, Hong Kong, Japan, Singapore, South Korea,
Switzerland, UK, U.S. and Australia), BRICs and 8 other developing
countries/regions (Argentina, Mexico, Taiwan, Malaysia, Thailand, Indonesia, the Philippines and South Africa).
Sources: Statistics of individual countries/regions.

from 21.9% to 10.0% in the same period.
Increased production in emerging countries leads to an
expansion of their imports of automobile parts. In comparison of automobile parts imports between 2000 and 2010,
while imports by the United States rose approximately
1.3 times from US$36.3 billion to US$48.4 billion, imports
by BRICs zoomed around 8.1 times from US$4.7 billion to
US$37.6 billion.
Exports of steel products improved in response to a recovery in trade in machinery and equipment, rising 25.0%
after plummeting 40.3% in 2009. According to the Japan
Iron and Steel Federation (JISF), steel production by majorcountries increased 14.8% in 2010.
Exports of pharmaceuticals and medical supplies posted a minor rise of only 5.2% in 2010. While all other products declined year on year in 2009, only pharmaceuticals
and medical supplies chalked up positive growth as exportsof the vaccine against the pandemic H1N1 flu virus thatspread from the spring of 2009 increased. In 2010, however,exports of pharmaceuticals and medical suppliers grew only
moderately, while other products posted stronger increases
partly in reaction to the previous year’s declines.

Deepening China-South Korea interdependence inelectric equipment
When we focus on electric equipment that accounts forabout 25% of exports from East Asia, the trade intensity
index with the United States for countries/regions in 2010shows a relatively high value as against the index for the
total amount of exports, but has been on the decline as awhole in the past decade. In 2010, only China, the Philippines and Thailand showed the index above 1. On the other
hand, in the intensity index with China, Japan, South Korea and Taiwan showed high values, except for Hong Kong
with a high share of re-exports. For the intensity index withJapan, countries/regions in East Asia had generally higher(2) Asia’s production networks draw tighter around
China
East Asia has built up the production network wherecountries having different degrees of production factor intensity are engaged in the inter-process division of laborand mutually trade goods they can respectively produce
efficiently. Final goods produced in the region have been
exported to the markets of the United States and other developed countries to realize the external demand-linked
expansion of trade.
Through the expansion and closeness of such production network, the impact of the financial crisis originatingin the United States immediately spread to East Asia. In the
trade recovery phase from the second half of 2009 to date,2
The trade intensity index shows how much the trade relationship between two countries deviates from the benchmark of the overall valueof world trade. An index value above 1.0 is interpreted to mean a strong
trade linkage between the two countries. The trade intensity index in exports is expressed as follows: The trade intensity with Country B fromthe perspective of Country A = (the value of exports from Country A to
Country B / the total value of exports by Country A) / (the total value ofimports by Country B / the total valule of imports by the world).
3
The classification is based on “RIETI-TID2009” (the Research Institute of
Economy, Trade and Industry), defined on the basis of the U.N. BEC (Broad
Economic Categories) classification. The U.N. comparison table was used
for the conversion of the BEC classification into HS codes.

11IFigure I – 20 Trade intensity index (total value) <2000, 2010>
2000
Japan
China
U.S.
EU15
Japan
1.7
1.5
0.4
China
2.7
1.0
0.4
Hong Kong
0.9
9.3
1.2
0.4
South Korea
1.9
2.9
1.1
0.4
Taiwan
1.8
0.5
3.8
2.4
Singapore
1.2
1.1
0.9
0.3
Indonesia
3.7
1.2
0.7
0.4
Malaysia
2.1
0.8
1.0
0.4
Philippines
2.4
0.5
1.5
0.5
Thailand
2.4
1.1
1.1
0.4
Vietnam
2.8
2.9
0.3
0.5
U.S.
1.3
0.6
0.6
EU15
0.3
0.3
0.5
-

Figure I – 21 Trade intensity index (electrical equipment) <2000, 2010>
2000
Japan
China
U.S.
EU15
Japan
1.3
1.4
0.6
China
2.7
1.1
0.6
Hong Kong
1.0
7.0
1.1
0.5
South Korea
1.9
1.4
1.3
0.5
Taiwan
2.1
0.5
1.2
0.5
Singapore
1.6
0.5
0.8
0.4
Indonesia
3.2
0.2
0.9
0.5
Malaysia
2.1
0.4
1.3
0.5
Philippines
2.2
0.2
1.5
0.7
Thailand
3.3
0.5
1.2
0.6
Vietnam
7.3
0.1
0.0
0.3
U.S.
1.3
0.4
0.5
EU15
0.3
0.4
0.4
-

2010

2010

Japan
China
Hong Kong
South Korea
TaiwanSingapore
Indonesia
Malaysia
Philippines
Thailand
Vietnam
U.S.
EU15

Japan
1.5
0.8
1.2
1.3
0.9
3.2
2.1
3.0
2.1
2.3
0.9
0.2

China
1.9
5.2
2.5
2.7
1.0
1.0
1.2
1.1
1.1
1.0
0.7
0.3

U.S.
1.1
1.3
0.8
0.8
0.8
0.5
0.6
0.7
1.1
0.7
1.7
0.5

EU15
0.3
0.5
0.3
0.2
0.3
0.3
0.3
0.3
0.4
0.3
0.5
0.5
-

Japan
China
Hong Kong
South Korea
TaiwanSingapore
Indonesia
Malaysia
Philippines
Thailand
Vietnam
U.S.
EU15

Japan
1.6
0.9
1.3
1.9
1.6
2.8
2.0
2.8
3.3
5.1
0.7
0.2

China
1.6
3.9
1.9
1.3
0.8
0.3
0.9
0.6
0.6
0.9
0.5
0.3

U.S.
1.0
1.2
0.6
1.0
1.0
0.6
1.0
1.0
1.1
1.1
0.8
0.4

EU15
0.4
0.7
0.3
0.3
0.4
0.3
0.5
0.6
0.9
0.4
0.4
0.5
-

Notes: (1) Degree of trade intensity calculated from exports data.
(2) Cells in gray indicate degree of trade intensity below 1.0.
Sources: Statistics of individual countries/regions.

Notes: (1) Degree of trade intensity calculated from exports data.
(2) Cells in gray indicate degree of trade intensity below 1.0.
Sources: Statistics of individual countries/regions.

index values in comparison with their indices in terms of
total exports, and showed higher values than the intensity index with China, except for Hong Kong and South
Korea. (Note 4)
South Korea has rapidly increased the trade intensitywith China over the past decade, and it is now higher thanits trade intensity with Japan. The trade intensity with
South Korea from the perspective of China is also rising,indicating the growing interdependence between China
and South Korea.
China’s exports of electric equipment, which accountfor about 20% of global exports of electric equipment
and maintained annual increases of over 30% since 2003,
slowed down from a year-on-year rise of 32.0% in 2007
to 14.0% in 2008 mainly due to a large drop in exports to
the United States. In 2009, they fell 12.0%, or by US$40.97
billion, from 2008.
In 2009, the trade intensity index with China for Japanand South Korea stood at 1.6 and 1.8, respectively, showing little change from 2008. However, Japanese and South
Korea exports to China in 2009 and onward followed different trends.
China’s imports of electric equipment in 2009 decreased
8.6% from the previous year, but the drop was smaller thanits exports. Imports of electric equipment from Japan fellby the double-digit figure of 13.7%, but the decline in imports from South Korea was limited to a smaller 5.1%. In
2010, imports from South Korea expanded 36.3%, far fasterthan the 22.3% rise in imports from Japan, with the shareof South Korea in China’s imports of electric equipment
exceeding that of Japan for the first time.
For semiconductors in particular, which take up about
half of China’s imports of electrical equipment, imports
from Japan in 2009 decreased by 14.6%, but the drop in
imports from South Korea was only 7.9%. In 2010, while
imports from Japan rose 15.9%, imports from South Korea
surged by 46.8%. As China’s domestic demand for automobiles and electric appliances expanded in line with the Chinese government’s massive economy-boosting measures,South Korea substantially increased China-bound shipments of semiconductors to be mounted in these products.
An increase in exports of liquid crystal displays (LCDs) also
made a big contribution.
South Korea expanded exports of electric equipment toChina because the weaker won helped enhance the pricecompetitiveness of its products in China, but South Korea
companies’ greater efforts toward local production and local
sales also played a role in boosting exports. Consequently,
South Korea’s trade intensity index with China for electric
equipment, which stood at almost the same level of Japan’s
index in 2000, rose to 1.9 in 2010, widening the lead overJapan’s 1.6 (see Figure I-21). According to the Organization for Economic Cooperation and Development (OECD),
the balance of direct investment in China by South Korea
companies in 2009, at US$31.4 billion, still stood lower thanAlmost all exports of electric equipment from Hong Kong to China are
re-exports, and the bulk of ASEAN exports to Hong Kong are re-exported
to China. Accordingly, there is the possibility that ASEAN’s trade intensitywith China is being underestimated.

412

I The World Economy, Trade and Direct Investment

Figure I – 22 Quarterly trends of the world trade for 22 major countries/regions (by main products)
22 majorcountries/
regions’ shareof world total
in 2010
Total

64.5

Machinery and equipment

78.4

General equipment

75.7

Electrical equipment

81.4

Transport equipment

76.6

Precision instruments

81.6

Chemicals
Pharmaceuticals and medical supplies

64.1
55.2

Foodstuffs

53.8

Grains76.0

Iron ores

80.1

Mineral fuels

40.8

Crude oil

26.3

Textiles and textile products
Clothing
Steel

62.2
58.2
62.4

Exports
2010
I

II

2011
III

IV

I

2,177,771 2,392,256 2,483,985 2,660,360 2,638,651(28.4)(30.5)(22.2)(18.9)(21.2)
1,017,419 1,121,758 1,171,824 1,252,550 1,194,209(29.1)(30.0)(23.6)(16.1)(17.4)
305,965 334,719 351,702 377,716 360,962(20.5)(28.0)(25.0)(18.5)(18.0)
346,430 392,868 425,931 444,129 406,793(32.5)(29.8)(23.9)(15.9)(17.4)
270,230 292,164 286,097 317,398 318,265(34.3)(33.8)(22.6)(14.2)(17.8)
94,794 102,007 108,095 113,307 108,189(31.8)(27.4)(20.8)(14.5)(14.1)
311,359 320,884 329,513 342,034 366,239(30.1)(23.1)(15.0)(14.1)(17.6)
63,816 59,300
61,810 62,269 62,027(13.6)(4.9)(2.2)(-1.6)(-2.8)
117,369 124,855 131,261 146,025 142,948(13.5)(9.5)(11.7)(15.2)(21.8)
13,852 13,505
14,301 16,546 20,068(-0.5)(-6.0)(11.6)(34.6)(44.9)
12,544
20,417 25,880
27,615 25,048(15.0)(94.1) (124.0) (141.3)(99.7)
195,317 216,975 211,606 237,267 253,757(62.3)(61.3)(26.4)(28.6)(29.9)
65,481
74,40270,97379,582
81,787(79.6)(56.5)(18.0)(18.3)(24.9)
83,150 94,863 110,406 106,584 102,896(13.3)(20.4)(18.8)(20.6)(23.7)
41,890 44,694
61,221 54,409 48,628(3.6)(13.7)(16.3)(20.9)(16.1)
85,876 102,775
97,217 101,798 109,654(16.0)(43.1)(24.0)(20.6)(27.7)

22 majorcountries/
regions’ shareof world total
in 2010
63.5
69.2
67.5
75.7
59.9
74.1
61.2
55.8
55.9
41.1
87.8
65.7
71.1
60.6
66.0
54.5

Imports
2010
I

II

III

(US$ million, %)
2011
IV

I

2,218,444 2,418,105 2,524,770 2,662,953 2,722,766(28.3)(31.9)(22.2)(19.0)(22.7)
894,955 999,371 1,057,124 1,118,679 1,068,488(28.6)(31.2)(25.0)(18.2)(19.4)
274,725 303,094 320,931 336,551 330,442(20.2)(28.2)(27.7)(20.3)(20.3)
343,329 391,925 429,468 445,675 409,392(33.8)(32.2)(26.0)(17.0)(19.2)
193,455 213,795 210,763 234,201 232,042(32.1)(35.6)(21.0)(17.8)(19.9)
83,447 90,556
95,962 102,252
96,611(30.2)(27.0)(21.0)(17.8)(15.8)
301,751 314,537 325,205 336,375 356,244(31.5)(26.2)(17.6)(16.0)(18.1)
63,906 60,879 64,697 64,326
66,151(22.8)(11.8)(8.9)(-1.6)(3.5)
128,581 136,082 135,681 152,225 150,348(12.9)(10.6)(11.0)(12.9)(16.9)
8,688
8,537
7,968
8,933
10,455(6.3)(-0.3)(11.7)(23.4)(20.3)
20,956
27,79532,013 35,848 38,892(36.0)(71.6)(66.3)(85.5)(85.6)
343,207 369,204 370,075 386,715 456,163(51.3)(51.6)(21.5)(19.2)(32.9)
195,640 216,371 213,456 218,058 261,390(71.1)(52.5)(14.2)(12.6)(33.6)
82,85084,781 103,785 98,854 100,844(8.4)(14.7)(15.8)(19.0)(21.7)
50,541
48,14467,04459,998 60,065
(0.1)
(7.6)
(12.3)(18.8)(18.8)
75,142
88,198 88,880 89,844 96,602(11.4)(45.4)(34.1)(22.1)(28.6)

Notes: (1) Based on data available as of the end of June 2011.
(2) Together with Figure I-23, the 22 major countries/regions are Japan, U.S., Canada, Mexico, Argentina, Brazil, China, Hong Kong, Taiwan, South Korea,
Singapore, Thailand, Malaysia, Indonesia, the Philipines, Australia, UK, Germany, France, Switzerland, Russia and South Africa.
(3) Figures in parentheses are YoY growth rates.
Sources: Statistics of individual countries/regions.

Japanese companies’ balance of US$55.5 billion , the paceof increase in their investment was faster. If this trend issustained, the interdependence between China and South
Korea is expected to deepen further.

For China, meanwhile, higher prices of resources, suchas mineral fuels and iron ores, pushed up the value of its
imports. The value of imports of foodstuffs also increased,reflecting higher food prices resulting from unseasonable
weather and an inflow of speculative funds. China’s imports
in the first quarter of 2011 topped US$400.0 billion to set a
new record. China’s trade balance turned into a deficit by
US$728.14 million, the first trade deficit in seven years since
the first quarter of 2004.
Exports and imports by the United States rose 18.2%
and 18.8%, respectively, both moderate growth relative toother major countries. In Europe, Germany reported an increase of 18.0% in exports and 20.0% in imports.
The World Trade Organization (WTO) predicted realmerchandise exports in 2011 will increase 6.5% over 2010 (arise of 4.5% for developed countries and 9.5% for developing countries and CIS countries). (Note 5)(3) World trade in the first quarter of 2011 shows
steady growth
Exports by 22 major countries/regions, for which data isavailable up to the first quarter of 2011, increased 21.2% inthat quarter over the corresponding quarter of 2010, showing the growth faster than the fourth quarter of 2010. The
first-quarter growth is steady, though somewhat slower
than the robust increase seen in the first half of 2010 in therecovery from the slump in the aftermath of the financial
crisis (see Figure I-22).
Country-by-country exports underscore the strong impact of the continuing strong uptrends of commodity prices(see Figure I-23). Due to the recovery in commodity pricesthat plunged during the financial crisis, Russia’s exports ofmineral fuels, which account for some 70% of its total exports, were strong, while its imports also surged 66.3% year
on year, centering on automobiles.

5
The International Monetary Fund (IMF) predicts real merchandise exports in 2011 will grow 7.7% over 2010 (an increase of 7.3% for developed
countries and 8.9% for emerging and developing countries).

13IFigure I – 23 Exports by 22 major countries/regions by product(contribution to increase/decrease in US$-quoted value)

Figure I – 25 Trade in services by country/region (2010)(US$ million, %)Exports
Imports
GrowthGrowth
Value
Share
Value
Share
rate
rate
World
3,663,900
8.3 100.0 3,502,700
9.0 100.0
NAFTA
597,400
8.8
16.3
470,400
8.6
13.4
U.S.
514,9708.2
14.1
357,9147.1
10.2
Europe1,724,200
1.7
47.1 1,503,900
1.4
42.9
EU27
1,552,577
1.5
42.4 1,393,702
1.1
39.8
UK
227,201 -0.5
6.2
156,387 -0.7
4.5
Germany
229,8611.8
6.3
256,289
1.5
7.3
France139,994-1.4
3.8
125,663 -0.3
3.6
Spain
120,846 -0.6
3.3
85,500
-1.4
2.4
Italy
97,021
3.3
2.6
108,184
1.0
3.1
Asia
962,800 21.0
26.3
960,800 20.4
27.4
China
170,200 32.3
4.6
192,200 21.6
5.5
ASEAN10
137,555
9.2
3.8
155,235
5.6
4.4
Japan
218,200 18.7
6.0
228,500 20.5
6.5
CIS
78,400 10.4
2.1
105,200 14.0
3.0
Russia43,702
6.4
1.2
69,879 18.0
2.0
Latin America
110,900 11.0
3.0
135,100 22.7
3.9
Brazil30,292 15.4
0.8
59,640 35.3
1.7
Middle East
103,300
9.4
2.8
185,200
8.8
5.3
Israel24,333 10.8
0.7
17,4403.4
0.5
Africa85,600 11.0
2.3
141,100 11.8
4.0
Egypt
23,762 11.5
0.6
12,659 -0.8
0.4

(YoY, %)
40.0
30.0
20.0
10.0
0.0
-10.0
-20.0
-30.0

/Q
1

/Q
4

11

/Q
3

10

/Q
2

10

/Q
1

10

/Q
4

10

/Q
3

09

/Q
2

09

/Q
1

09

/Q
4

09

/Q
3

08

/Q
2

08

08

08

/Q
1

-40.0

(Year/Quarter)
General equipment

Electrical equipment

Transport equipment

Precision instruments

Chemicals

Foodstuffs

Mineral fuels, etc.

Textiles and textile products

Base metals and base metal products

OthersGrowth of total value

Sources: Statistics of individual countries/regions.

(4) Transportation posts strong growth in trade inservices
In 2010, trade in services (exports of cross-border commercial services, excluding government services) increased
8.3% year on year to US$3,663.9 billion (see Figure I-24).
Trade in services plummeted 11.9% in 2009 after recording
double-digit growth for six consecutive years before the financial crisis, but recovered positive growth again in 2010.
By category, transportation services grew smoothly by
14.1%, reflecting the recovery in merchandise trade. According to the International Air Transport Association(IATA), international air cargo transportation zoomed by
20.6%, while international air passenger transportationrose 8.2%.
As for travel, the United Nations World Tourism Organization (UNWTO) announced that the number of international tourist arrivals in 2010 increased 6.6% to 940
million, surpassing the pre-crisis peak level of 917 million
recorded in 2008. UNWTO traced the increase to a stringof international cultural and sports events, including theWinter Olympics in Vancouver, the World Expo in Shanghai and the World Cup in South Africa.
In particular, the number of travelers to the Asia-Pacificregion recovered at a pace faster than other regions, recording the largest increase of 12.7% of all major regions for theentire year. The number of travelers to China ranked third,
overtaking the number of travelers to Spain.

By country/region, exports by the United States, theworld’s largest trader in services, rose 8.2% year on year
to US$515.0 billion, and U.S. imports also went up 7.1%
to US$357.9 billion. China exported US$170.2 billion andimported US$192.2 billion, with year-on-year increasesof 32.3% and 21.6%, respectively. For the EU27, exports
amounted to US$1,552.6 billion, up 1.5%, and imports to
US$1,393.7 billion, up a slight 1.1% (see Figure I-25).
(5) Japan’s trade in 2010 significantly increased in 2010
In Japan’s trade (on a customs-clearance basis) in
2010, exports expanded 32.1% over the previous year to
US$767.0 billion, while imports rose 25.2% to US$691.4
billion, both turning up significantly from the sharp falls
in 2009 (see Figure I-26). Japan’s trade in 2009 suffered thelargest postwar shrinkage under the impact of the global
recession, but bottomed out by the end of the year and improved in 2010. Comparison with 2008 shows that exports
recovered to almost the same level, but imports still remained at around 90% of the 2008 level.
By quarter, the exports in the first quarter of 2010 soared
46.4% year on year and maintained double-digit growth until
the fourth quarter, though decelerating from the first-quarter
peak. In 2011, the growth of exports in March was squeezed
by the impact of the Great East Japan Earthquake. While exports in the first quarter rose 12.5% year on year, exports in
April dropped 2.4% to record the first year-on-year fall in 18
months. In May, exports turned up by 2.5% as the U.S. dollar-quoted value of trade expanded due to the stronger yen.
Imports continued to post year-on-year growth of over 20%
from the first quarter of 2010, as crude oil prices continued torise from its recent bottom in early 2009. Imports maintained
strong growth in 2011, expanding 22.4% in the first quarter,
21.6% in April and 28.3% in May.
As exports recovered a little sooner than imports, Japan’s trade surplus in 2010 increased by US$47.0 billion

Figure I – 24 Trends of growth of world trade in services(exports)(%, US$ million)
2009
2010
Value
Contribution
Total value of world exports of services -11.9
8.3
3,663,900
8.3
Transportation
-23.0
14.1
782,800
2.9
Travel-9.1
7.8
935,700
2.0
Other services-8.3
6.3
1,945,400
3.4
Source: WTO, as with Figure I-25.

14

I The World Economy, Trade and Direct Investment

Column I − 2
IThe Asian production network from the perspective of “value-added trade”
China remained as the world’s largest exporter in 2010, keeping that position attained in 2009. The value of Chinese exports
now accounts for about 10% of the total value of world exports,
and China indeed is exporting “Made in China” products acrossthe world as the factory of the world. In its trade relations with
the United States in particular, China’s surplus in trade with theUnited States expanded about 3.3 times from US$83.8 billion in2000 to US$273.1 billion in 2010. China’s growing trade surplus
is prompting controversies within the United States, including
calls for the revaluation of the Chinese yuan, or the renminbi.
Compared with the conventional concept of trade balance
based on the records of physical movements of goods, an analysis by “value-added trade” is an attempt to shed a new light on
trade in goods. The concept of “value-added trade” is an analytical framework to identify a source of value added in each process of manufacturing goods and thereby rebuild a relationshipbetween an exporter and an importer in their trade balance.
For example, the cost of manufacturing an iPhone3GS(16GB) of Apple Inc. is estimated at US$179.0. Of the cost, thevalue added generated by Chinese workers assembling thesmartphone is only US$6.5. The remaining US$172.5 is madeup of costs of parts supplied by companies of various countries,
including Japan (US$60.6), Germany (US$30.2), South Korea(US$23.0) and the United States (US$10.8). However, when the
iPhone is exported from China to the United States, the total
manufacturing cost of US$179.0 is accounted for as the valueof Chinese exports to the United States under the conventional
trade balance concept, with the value of exports bloated far larger than the actual value added generated in China.(Note 1)
The Institute of Developing Economies, Japan External
Trade Organization (IDE-JETRO) and the WTO have published the results of their joint research that analyzed the trade
structure in East Asia by the “value-added trade” framework using the Asian international input-output table.(Note 2) As seen in

the example of the iPhone, in modern-day production activities,
a single final product receives the input of goods and services
produced in various countries in the process of manufacturing.
East Asia has established the mutually complementary production system where countries in the region can exert their respective comparative advantages in each process, with Japan andSouth Korea providing goods that require high technologies
and China and Vietnam taking up labor-intensive production
processes. With the use of the analytical framework of “valueadded trade,” the actual status of the production network thatcannot be identified by trade data alone emerges with vivid clarity. For example, when we examine the sources of value added included in China’s exports to the United States using thisframework, the value added generated in Japan and other East
Asian countries account for 10% of the total value added in thecase of manufactured products (see Figure 1).
Furthermore, when looked at on the basis of value added, theSino-U.S. trade balance presents itself in a shape completely different from that captured by the conventional concept of tradebalance. In Figure 2, the Sino-U.S. trade balance based on theconventional concept of trade balance is compared against the
Sino-U.S. trade balance based on value added. The value addedbased U.S. trade deficit with China is shown to be much smaller
than the deficit calculated under the conventional method.
The above joint research characterizes products manufactured by the production network formed by various countries
as “Made in the World,” and is promoting research on valueadded trade with a view to establishing new trade rules given
the diminishing usefulness of the “country of origin” concept
for final goods.
The IDE plans to complete and publish the final versionof the 2005 International Input-Output Table by 2012. It is
hoped that the analysis will make further progress based on
the latest data.

Figure 1 Sources of value added contained in China’s U.S.bound exports of manufactured products (2005)

Figure 2 U
 .S.-China trade balance: Traditional statistics
versus value added terms (in billions of US$)

Other East Asian countries 6%

Japan 4%
–42%

U.S. 2%

–21%

2008

–53%
–27%

2005

–20%

VA estimates (incl. China processing trade)

China 88%

2000

VA estimates
Traditional measure-300

Source: Asian international input-output table 2005 (Preliminary version).

-250

-200

-150

-100

-50

0
(US$ billion)

Note: China’s processing trade data not available for 2000.
Source: “Trade patterns and global value chains in East Asia: From tradein goods to trade in tasks” (IDE-JETRO, WTO).

Quoted from Xing, Y., and N. Detert, “How the iPhone Widens theUnited States Trade Deficit with the People’s Republic of China,”
ADBI Working Paper, NO.257, Dec. 2010. Here, the value of parts is
attributed not to a country of production but to countries where theparent companies of parts suppliers are located (for example, products being produced in other countries by Japanese companies areaccounted for under the entry of Japan). The purpose of this approachis to demonstrate that products being exported as “Made in China”
products include a lot of value added generated by companies otherthan Chinese companies. This approach is different from the computing method for “value added” in value-added trade in the latter partthat calculates value added generated in various countries with theuse of the international input-output table.

1

IDE-JETRO, WTO, “Trade Patterns and Global Value Chains inEast Asia: from trade in goods to trade in tasks,” Switzerland: WTO
Secretariat, 2011. (This can be downloaded free of charge fromhttp://www.wto.org/english/res_e/publications_e/stat_tradepat_
globvalchains_e.htm)
215

to US$75.6 billion. However, the trade surplus in the firstquarter of 2011 fell sharply to US$4.4 billion, or about onefourth of the year-before level, as imports kept growing
due to soaring commodity prices. In January in particular,
Japan posted the first trade deficit of US$5.8 billion in 22
months since March 2009. The country also suffered trade
deficits in April and May of US$5.7 billion and US$10.4 billion, respectively. In yen-denominated terms, exports continued to decrease in April and May, by 12.4% and 10.3%,
respectively, while increases in imports were also subdued
in April and May, at 9.0% and 12.3%, respectively.
In terms of volume, exports in 2010 grew 24.2% andimports also rose 13.9%, posting the first year-on-year increase in three years and four years, respectively. In the firstquarter of 2011, both exports and imports were higher thanyear-before levels. However, affected by the Great East Japan Earthquake, exports in March turned down 3.3% for
the first year-on-year decrease in 16 months, and exports
continued to dip in April and May, by 11.6% and 10.8%, respectively. The yen’s exchange rate continued to rise since2008, with the yen’s average exchange rate against the U.S.
dollar in 2010 standing at 87.8 yen, 6.6% higher than in
2009. The yen moved at around 80-85 yen to the U.S. dollar in January-June 2011, serving as a damper on a recovery
in exports.

gest factor to enlarge the current account surplus, while thedeficit in trade in services narrowed by US$4.3 billion from2009 to US$16.1 billion (see Figure I-27).
By category in the balance of trade in services, the deficit in transportation services dwindled by US$1.3 billion to
US$7.6 billion. In 2009, transportation services were stagnant, as cargo transportation decreased amid the economic
sluggishness and passenger transportation also fell primarily due to the spread of the pandemic H1N1 flu virus. In
2010, however, both cargo transportation and passenger
transportation turned more active again, with an increase
in receipts in marine cargo transportation associated withincreasing exports contributed to the narrowing of the deficit in trade in services.
In travel service, both receipts and payments rose intandem with increases in both the number of Japanese
travelers abroad and the number of arrivals of foreigners
visiting Japan. The travel service balance posted a deficitof US$14.8 billion, but the deficit narrowed for the sixth
straight year as the increase in credits was a little larger thanthat in debits. According to the Japan National Tourist Organization (JNTO), the number of Japanese overseas traveler in 2010 rose 7.7% year on year to 16.64 million for the
first increase in four years, while the number of foreigners
visiting Japan increased 26.8% to a record 8.61 million. The
number of Chinese visitors shot up 40.5% to 1.41 million,
partly due to the relaxation of conditions for tourist visa
issuance for individuals in 2009, rising past Taiwan to third
place in the number of visitors to Japan by country/region.
The number of visitors from South Korea, which retains the
top slot, climbed 53.8%, and the number of visitors from
Taiwan in third place rose 23.8%, recovering from the sharp
drops in 2009.

The current account surplus widens for the first time inthree years
On balance of payments basis, Japan’s current accountproduced a surplus of US$195.9 billion, widening for the
first time in three years to come closer to the all-time highof US$210.5 billion recorded in 2007. The trade surplus
nearly doubled to US$90.8 billion to become the single big-Figure I – 26 Trends of Japan’s trade (2009-May 2011)

Total exports (US$ million)(Percent change)
Dollar- Total imports (US$ million)
based(Percent change)
Trade balance (US$ million)(Difference from same quarter, previous year)
Total exports (billion yen)
(Percent change)
Total imports (billion yen)
Yenbased(Percent change)
Trade balance (billion yen)
(Difference from same quarter, previous year)
Export volume index(Percent change)
Import volume index(Percent change)
Crude oil import price (US$/barrel)(Percent change)
Ratio of imports of crude oil
Ratio of imports of manufactured products
Average exchange rate (yen/US$)(yen appreciation, %)

2009

2010

580,787-25.2
552,252-27.0
28,535
8,703
54,171-33.1
51,499
-34.8
2,671
608
81.6
-26.6
88.2
-14.4
60.7
-40.4
14.7
56.1
93.5
10.5

767,025
32.1
691,447
25.2
75,57847,04367,40024.4
60,765
18.0
6,635
3,963
101.4
24.2
100.5
13.9
79.2
30.5
15.5
55.0
87.8
6.6

Q1
176,94846.4
159,030
21.5
17,91827,996
16,02843.2
14,415
19.2
1,613
2,516
95.7
43.7
94.8
13.2
77.7
75.4
17.1
54.5
90.7
3.2

2010

Q2
184,980
40.9
166,418
35.4
18,562
10,16817,06633.2
15,357
28.1
1,709
892
101.8
32.8
98.0
19.2
81.3
54.7
15.2
54.9
92.0
5.7

Q3
196,470
28.1
177,72225.0
18,748
7,602
17,031
17.8
15,409
14.9
1,623
574
103.6
18.5
103.5
14.5
75.7
7.7
14.5
55.4
85.9
9.0

Q4
208,62719.0
188,277
20.5
20,3501,278
17,274
10.0
15,584
11.3
1,690
-18
104.5
8.6
105.8
9.6
82.2
9.3
15.3
55.0
82.6
8.6

(US$ million, billion yen, %)
2011
Q1
April
May
199,02962,08358,513
12.5
-2.4
2.5
194,623
67,77968,931
22.4
21.6
28.3
4,406
-5,696-10,419-13,512-13,567-13,779
16,421
5,157
4,760
2.4
-12.4
-10.3
16,063
5,624
5,616
11.4
9.0
12.3
357
-468
-856
-1,256-1,197-1,165
98.0
92.9
84.5
2.5
-11.6
-10.8
101.6
101.0
99.3
7.2
1.3
5.5
96.8
111.8
118.6
24.6
40.0
39.6
17.5
17.6
16.8
52.2
50.9
51.5
82.3
83.4
81.2
10.1
12.0
12.9

Notes: (1) For volume indices, year 2005 = 100.
(2) The exchange rates are interbank rate averages for each period.
(3) Percent change for quarterly data are year-on-year comparisons. Figures of imports in May are nine-digit (provisional).
Sources: “Trade Statistics” (Ministry of Finance) and “Foreign Exchange Rates” (Bank of Japan).

16

I The World Economy, Trade and Direct Investment

Exports to China, which became the largest destination of Japanese exports in 2010, increased 36.0% year on
year to US$149.1 billion, falling just short of reaching the
US$150 billion mark for a single country for the first time
ever. The increase in China-bound exports accounted forover 20% of the growth of the total export value, contributing the most to the increase in Japan’s exports in 2010.
Among IT-related products, semiconductors and other electronic devices and semiconductor-manufacturing equipment posted large increases amid the recovering global demand. Transportation equipment accounted for over 10%of the total value of exports for the first time ever, thanks
to big rises recorded by exports of automobiles and automobile parts. This came against the backdrop of the booming Chinese automobile market, with China becoming theworld’s leader in both automobile production and sales of
new vehicles for the second consecutive year.
Exports to ASEAN zoomed 39.8% to US$112.5 billion,
helped by big rises in exports to Thailand (up 53.2% to
US$34.1 billion) and to Indonesia (up 69.9% to US$15.9 billion), with the contribution of 17.2%, just short of 20%, to
the increase in the total value of exports, driving the growthof Japanese exports in 2010 along with China. Similar to thecase of China, exports of IT-related parts such as semiconductors and other electronic devices and automobile parts
were strong. Exports of steel products also grew over 50%.
Exports to South Korea rose 31.3% to US$62.1 billion andthose to Taiwan increased 43.3% to US$52.2 billion. As aresult, the share of East Asia in the total value of exports
also rose modestly to 54.5%.
Exports to the United States increased 26.2% to
US$118.2 billion for the first rise in four years, recoveringto the US$100 billion mark that was retained for 16 years on
end until 2008. Transportation equipment, which accounts
for about 40% of Japan’s U.S.-bound exports, rose 31.2% to
US$44.3 billion to contribute to the overall recovery of exports to the country. But the value of exports still stands ataround 80% of the 2008 level and around 70% of the peaklevel of 2006. Exports of general machinery and electrical equipment also recovered with year-on-year increasesof 33.2% and 17.1%, respectively, but like transportationequipment, the value of their exports had yet to return to
the levels before the sharp falls in 2009.
Exports to the EU27 (hereinafter referred to just the EU)
as a whole posted a relatively modest increase of 19.8% to
US$86.7 billion. While exports to Germany and the Netherlands grew robustly, rising 21.5% to US$20.2 billion and20.5% to US$16.3 billion, respectively, the growth of exports
to France was lackluster, up only 7.5% to US$6.7 billion. Exports of transportation equipment and general machinery,each accounting for about one-fourth of overall exports tothe EU, recovered, but were less than powerful, staying ataround 70% of the 2008 levels.
Japan’s imports also increased from almost all majorcountries/regions in 2010. Imports from Europe and North
America became short of breath in the fourth quarter, but
imports from China and other East Asian countries maintained strong growth throughout the year. East Asia ac-

Figure I – 27 Trends of Japan’s balance of current account(US$ million)
2009
2010
Increase/decrease
Current Account141,573
195,934
54,361
Goods & Services
22,80074,68351,883
Trade Balance
43,17890,76247,584
Exports
545,328
727,457
182,129
Imports
502,150
636,695
134,545
Services-20,378-16,079
4,299
Credit128,261
141,826
13,565
Debit
148,639
157,905
9,266
Income131,050
133,678
2,628
Current transfers-12,277-12,427-150
Current Account/GDP
2.8%
3.6%
Note: Exchange rates are based on the rules in the foreign exchange transactions. Exchange rates for exports and imports are calculated by JETRO
based on the exchange rates announced by the Customs and Tariff Bureau of the Ministry of Finance. regulation on Ministry of Finance.
Sources: B alance of Payments (Ministry of Finance, Bank of Japan), Foreign
Exchange Rates (Bank of Japan) and National Economic Accounting(Cabinet Office).

The balance of other services in 2010 produced a surplus
of US$6.3 billion, a rise of US$2.9 billion over the previous
year. Among major surplus items in the balance of services,
the surplus in royalties and license fees rose to US$7.9 billion, the largest surplus since this item turned positive in
2003, contributing the most to the narrowing of the deficit
in the balance of trade in other services. The larger surplus
in royalties and license fees resulted from an increase incredits of license fees for industrial processes, franchises,
etc.. As overseas production by Japanese automakers recovered in 2011 after showing year-on-year drops in 2008
and 2009, credits of royalties increased. The surplus inconstruction service came to US$2.8 billion, an increase of
US$1.8 billion over 2009, when it declined sharply. Whileboth credits and debits in construction service decreased
year on year, the drop in debits was larger to help widen thesurplus. On the other hand, both credits and debits in otherbusiness service increased year on year, but the growth of
debits was larger to cause the surplus to fall by US$0.4 billion to US$3.4 billion.
The income balance, which shows transactions suchas interest and dividends received on foreign investment,
was in the surplus by US$133.7 billion. Direct investment
income as a whole declined from the year-before level as reinvested earnings plummeted to less than 10% of the previous year’s amount, this was more than offset by an increasein portfolio investment income, resulting in an increase of
US$2.6 billion in the overall income balance surplus.
Both exports to and imports from major countries/
regions riseJapan’s exports to major countries/regions fell sharply
across the board in 2009, but recorded double-digit growthin 2010 in complete contrast. Compared with the value ofexports in 2008, while exports to China, ASEAN, India
and other countries/regions in Asia and to Central andSouth America surpassed the 2008 levels, exports to theUnited States and the EU fell short of the 2008 levels, showing differences in the speed of recovery (see Figures I-28
and I-29).
17

I

2009 when imports of all otheritems dropped across the board,
2009
skyrocketed 60.8% and 81.9%,
respectively. Electrical equipTotal
580,787
Exports
Percent change-25.2
ment as a whole accounted for
World
Total
552,252
Imports
40% of the increase in overall
Percent change-27.0
imports from China. In particuTotal
93,653
Exports
Percent change-31.2
lar, imports of television receivTotal
59,044
U.S.
Importsers zoomed up 2.7 times over thePercent change-23.3
Export volume percent change-35.7
2009 level.
Import volume percent change-23.1
Imports from ASEAN as a
Total
72,374
Exportswholerose 29.1% year on year
Percent change
-33.8
Total
59,130to
US$100.6
billion. Mainly beEU27 Imports
Percent change-15.4
cause of higher prices of liqueExport volume percent change-35.6
fied natural gas (LNG), imports
Import volume percent change
-20.3
Total
305,621from Malaysia increased sharply
Exports
Percent change-17.7
by 35.1% to US$22.6 billion andEast Asia
Total
241,916
Imports
those from Indonesia 29.0% to
Percent change
-19.6
Total
109,630
US$28.1 billion. Imports from
Exports
Percent change-11.6
Thailand grew 30.7% to US$21.0
Total
122,545
China Importsbillion. With Nissan Motor Co.
Percent change-13.9
Export volume percent change-15.4
starting importing the March
Import volume percent change-12.6
produced in Thailand in July
Total
80,449
Exports
2010, imports of transportaPercent change
-21.7
Total
77,936tion equipment accounted for
ASEAN Imports
Percent change-26.6
more than 10% of the increase
Export volume percent change-24.0
Import volume percent change-15.1
in Japanese imports from ThaiTotal
47,248
land, although the Nissan factor
Exports
Percent change
-19.9
South
only affected imports in about
Korea
Total
21,997
Imports
Percent change-24.8
six months.
Total
36,426
Imports from Taiwan rose
Exports
Percent change-20.3
Taiwan
25.4% to US$23.0 billion, pushed
Total
18,339
Imports
Percent change-15.2
up by the rapid recovery of inteTotal
31,868grated circuits, which accountExports
Percent change
-20.3
Hong
for 30% of Japan’s imports from
Kong
Total
1,099
Imports
Percent change-28.9
Taiwan. Imports from South KoTotal
21,650
Exports
rea increased 29.8% to US$28.5
Percent change-35.8
Middlebillion, thanks to steady growth
East
Total
92,850
Imports
Percent change-43.9
of steel products and gas oil.
Total
33,116
South
Exports
Japan’s imports from thePercent change
-18.6
and
United States grew 13.8% year
CentralTotal
20,160
Imports
America
Percent change-26.6
on year to US$67.2 billion, but
Note: East Asia is the sum of China, ASEAN, South Korea, Taiwan and Hong Kong.
the U.S. share in Japan’s total
Source: “Trade Statistics” (Ministry of Finance).
import value dipped to 9.7%,
breaking below the 10% markcounted for a little over 40% of the growth of Japanese imfor the first time in the postwar period, due in part to theports in 2010. With crude oil prices retaining the uptrend
strong momentum of imports from East Asia. As a result of
from the bottom of early 2009, imports from the Middle
robust growth of integrated circuits and pharmaceuticals,
East increased substantially as well (see Figure I-30).
electrical equipment and chemicals drove the increase inImports from China increased 24.7% year on year toimports from the United States. Imports of transportation
US$152.8 billion, surpassing the previous record scaled inequipment dropped for the second consecutive year, due to2008 to top the US$150 billion mark for the first time. The
slow imports of aircraft.
contribution to the growth of overall Japanese imports also
Imports from the EU rose 11.9% to US$66.2 billion. The
exceeded 20%, meaning that China is the country that conbiggest contribution to the increase came from chemicals,
tributed the most to the growth of both exports and imwith imports of pharmaceuticals from Germany and France
ports in 2010. For electrical equipment, the major item ofshowing robust growth. Pharmaceuticals accounted for justimports from China, communication equipment and video
less than 20% of the expansion of imports from the EU.
equipment, which maintained year-on-year growth even in
Together with pharmaceuticals, transportation equipment
Figure I – 28 Trends of Japan’s trade with major countries/regions(US$ million, %)
2010
2011
2010
Q1
Q2
Q3
Q4
Q1
767,025 176,948 184,980 196,470 208,627 199,029
32.1
46.4
40.9
28.1
19.0
12.5
691,447 159,030 166,418 177,722 188,277 194,623
25.2
21.5
35.4
25.0
20.5
22.4
118,199 26,535 27,610 30,791 33,263 29,485
26.2
36.9
31.2
25.2
16.2
11.1
67,171 15,931 16,858 16,937 17,446 17,153
13.8
8.0
20.6
18.8
8.7
7.7
21.2
31.0
28.2
18.7
12.3
6.0
11.0
4.8
23.5
15.6
1.8
5.9
86,735 20,104 20,511 21,773 24,347 23,271
19.8
21.5
22.0
22.6
14.5
15.8
66,187 15,924 15,771 17,202 17,289 18,075
11.9
8.3
15.4
16.4
8.2
13.5
24.4
19.3
31.3
29.0
19.5
14.5
12.7
9.4
19.7
16.7
5.3
2.8
417,953 95,142 101,586 107,346 113,879 107,976
36.8
62.1
44.9
28.7
21.9
13.5
306,468 68,479 73,963 79,610 84,416 84,999
26.7
20.4
35.5
27.8
23.9
24.1
149,086 32,964 35,458 37,888 42,776 40,004
36.0
60.1
36.7
27.3
28.4
21.4
152,801 33,104 36,874 39,791 43,032 41,592
24.7
15.9
32.8
26.0
24.2
25.6
25.2
47.2
29.7
18.3
13.8
11.1
18.3
17.9
25.6
17.3
13.2
13.6
112,461 25,872 27,051 29,264 30,274 28,531
39.8
67.7
54.9
29.8
21.1
10.3
100,619 23,293 24,163 26,213 26,950 28,639
29.1
21.3
39.5
31.6
25.3
23.0
27.9
67.2
39.8
16.9
4.8
-1.6
16.9
17.0
20.4
18.2
12.3
6.5
62,054 14,819 15,322 16,079 15,834 16,286
31.3
47.0
42.0
28.5
14.2
9.9
28,542 6,192 6,838
7,161 8,350 8,750
29.8
24.3
37.0
26.3
31.4
41.3
52,207 12,149 13,191 13,301 13,566 13,101
43.3
81.0
56.9
35.7
18.0
7.8
22,992 5,469
5,718 6,090
5,716 5,591
25.4
41.5
35.1
25.0
6.5
2.2
42,145 9,338 10,564 10,814 11,428 10,053
32.3
59.3
40.9
23.4
17.3
7.7
1,515
421
370
354
370
427
37.8
53.6
26.9
27.6
44.4
1.4
25,182 6,586 6,023 6,246 6,327 6,124
16.3
22.2
42.7
15.7
-4.8
-7.0
118,009 30,462 28,366 27,490 31,691 37,658
27.1
61.4
55.5
4.4
7.8
23.6
43,966 11,100 10,812 11,365 10,689 10,989
32.8
31.6
57.0
40.5
10.2
-1.0
28,359 6,015 6,268
7,462
8,614
8,318
40.7
21.1
42.3
44.8
52.9
38.3

18

I The World Economy, Trade and Direct Investmentof 30.5% over 2009. Consequently, imports from the Middle
East rose 27.1% to US$118.0 billion, accounting for about
20% of the increase in the value of Japan’s total imports inthe year.

Figure I – 29 Japan’s exports by country/region (YoY contribution)
(%)
60.0

U.S.
China
Others

50.0
40.0
30.0

EU27
ASEAN
Total export value percent change

Increased demand in Asia drove Japan’s exports
Looking at Japanese exports by product, an increase in exports of automobiles, Japan’s mainstay export product, had a significant impact on overall exports(see Figure I-31).
The value of automobile exports in 2010 expanded 45.5%
year on year to US$103.8 billion, contributing around 20%of the increase in overall exports. Europe and North America remained as the main markets of Japanese automobiles,
but the momentum of automobile exports was stronger for
China. China-bound exports of automobiles in 2010 shotup 82.1% to US$70.6 billion, with the Chinese share in the
total value of automobile shipments overseas rising to 6.8%.
Driven by the strong growth of exports to China, the shareof East Asia as a whole expanded to 13.5%, eclipsing theEU’s share of 11.2%. Automobile exports to Russia, whichshrank to just about 10% of the previous year’s level in 2009,
recovered to US$5.0 billion, approximately three times larger than the 2009 level.
Exports of general machinery rose sharply by 47.4% to
US$150.3 billion. Exports of semiconductor-manufacturing
equipment improved to reflect a recovery in global demand,
while exports of mining and construction machinery grewstrongly to emerging countries, including the doubling of
shipments to China. Exports of machine tools also doubled,reflecting smooth growth in sales to Asia. According to theJapan Machine Tool Builders Association (JMTBA), order
receipts for machine tools in 2010 expanded 2.4 times overthe previous year to 978.6 billion yen. While both domestic
and external demand increased, orders received from China showed particularly strong growth, almost trebling from2009 to 253.0 billion yen, with the Chinese share in the total
value of order receipts also rising to 25.9%. Increased orders
pushed up production of machine tools in 2010, and the

20.0
10.0
0.0
-10.0
-20.0
-30.0
-40.0
-50.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2007

2008

2009

2010

2011

Source: “Trade Statistics” (Ministry of Finance).

Figure I – 30 Japan’s imports by country/region (YoY contribution)
(%)
40.0
30.0
20.0
10.0
0.0
-10.0
-20.0
-30.0
-40.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2007

2008

U.S.
ASEAN

2009

EU27
Others

2010

2011

China
Total import value percent change

Source: “Trade Statistics” (Ministry of Finance).

also contributed to the overall growth of imports, with automobile imports from Germany recouping the level seenprior to the sharp drop in 2009.
With crude oil prices continuing their erratic fluctuations since 2008, the average arriving price in Japan of
crude oil in 2009 came to US$79.2 per barrel, a sharp rise

Figure I – 31 Japan’s exports by product (2010)

Total
Machinery and equipment
General equipment
Mining and construction equipment
Machine tools
Electrical equipment
Transport equipment
Automobiles
Passenger vehicles
Automobile parts
Precision instruments
Chemicals
SteelPrimary steel products
Steel products(Reference) IT-related equipment (total)

World
Value
Growth767,025
32.1
498,42735.7
150,26147.4
10,018
80.7
7,004
103.7
131,404
22.5
176,02736.9
103,79045.5
90,45544.8
38,852
40.7
40,734
38.6
98,94928.2
51,13431.4
38,84536.8
12,28916.9
142,123
32.2

U.S.
Value
Growth118,199
26.2
91,61428.4
24,54433.2
1,186 188.9
1,032
84.9
16,14017.1
44,32731.2
32,62734.7
32,099
34.0
8,355
40.1
6,603
23.4
11,069
25.3
3,063
35.3
1,179
74.4
1,885
18.6
19,31026.2

Note: See Appendix: Annotation I at the end of this report for the definitions of products.
Source: “Trade Statistics” (Ministry of Finance).

19

EU27
Value
Growth
86,73519.8
62,49321.8
20,902
30.6
1,208
181.3
657
49.4
15,02213.0
19,70720.1
11,61620.0
11,277
18.8
5,235
44.3
6,862
22.3
10,577
21.4
1,656
18.7
706
30.2
950
11.4
16,098
15.6

China
Value
Growth149,086
36.0
90,88447.5
33,51873.3
1,832 105.5
2,507 160.2
32,20825.6
15,371
51.2
7,060
82.1
6,246
77.9
8,447
32.9
9,786
51.1
22,10927.0
10,983
16.1
8,960
18.3
2,023
7.5
31,74335.0(US$ million, %)
ASEAN
Value
Growth112,461
39.8
66,50644.2
23,544
55.9
1,699
55.8
1,020 104.2
23,80235.8
14,567
38.0
4,720
48.1
2,162
35.0
6,492
57.2
4,593
57.0
12,15238.9
12,361
54.0
9,450
62.3
2,910
32.2
23,33641.6

Ivalue of machine tool production in Japan was the second
largest in the world, moving up from the third largest in2009 to displace Germany in the second spot. Exports ofelectrical equipment rose 22.5% to US$131.4 billion, as exports of integrated circuits, which account for one-fourth of
the total, increased centering on shipments to Asia, including China and ASEAN.
Exports of steel products all but returned to the 2008
level, rising 31.4%, mainly to Asia. According to the Japan Iron and Steel Federation (JISF), the volume of steel
products exported in 2010 increased 26.0% year on year to43.4 million tons. Exports to South Korea, the largest destination, increased 11.5% to 10.96 million tons to top the
10-million-ton mark for the first time. Shipments to Chinarose 16.2% to 7.51 million tons.
The value of exports of IT-related products increased
32.2% to US$142.1 billion, with both parts and final goods
growing (see Figure I-32).
Global sales of semiconductors plunged from mid-2008
at a decelerating pace seen during the IT recession periodof 2001, but rapidly recovered after bottoming out in January 2009. Turning around from the 9% drop in 2009, semiconductor sales rose 31.8% to US$298.3 billion in 2010, according to the Semiconductor Industry Association of theUnited States. Reflecting the recovery in global demand,
exports of semiconductors and electronic devices by Japan
also rose 29.4% in 2010, while exports of semiconductormanufacturing equipment zoomed up 131.0%, with sales to
Taiwan, South Korea and China shooting up two to threetimes the 2009 levels.
On the import front, rapid fluctuations in energy prices
have been significantly affecting overall imports of Japanin recent years. Energy prices soared in 2008, took a sharp
downturn in 2009 and then turned sharply higher again in2010 in reaction. Crude oil prices stayed in the US$70-80

range per barrel throughout 2010. The volume of crude oil
imports by Japan in 2010 stayed almost flat from the previous year with a minor gain of 0.9% over the previous
year, but the value of crude oil imports surged 31.9%, reflecting price rises. With imports of LNG also pushed upby high prices, the value of imports of mineral fuels etc.
expanded 30.3% to US$198.6 billion, accounting for some
30% of the overall increase in Japanese imports in 2010(see Figure I-33).
The second largest contributor after mineral fuels to theincrease in overall imports were machinery and equipment,
including electrical equipment. Imports of electrical equipment rose 33.4% to US$86.6 billion, as cell phones and television receivers maintained robust growth as well as semiconductors, the major import item. General machinery also
increased 21.6% to US$55.9 billion, as imports of personal
computers grew along with air-conditioning equipment,
whose imports showed the growth specifically linked tochanges in the eco-point system for home electric appliances. The increase in machinery and equipment accounted
for nearly 30% of the overall increase in Japanese imports
in 2010.
Imports of chemicals rose 26.1% to US$71.8 billion, contributing around 10% of the overall import expansion. Imports of pharmaceuticals continued to expand, as the Japanese government carried out the emergency imports of thevaccine against the pandemic H1N1 flu virus from European manufacturers and imports of major medicines against
influenza rose to cover the general shortage of supply.
Imports of IT-related products expanded 33.5% to
US$994.1 billion in 2010, coming to closer to the US$1 trillion mark, after registering the first year-on-year decline inseven years in 2009. Video equipment, which showed positive growth in 2009 when imports of all other IT-related
products decreased across the board, stayed robust with

Figure I – 32 Japan’s imports and exports of IT-related products
2009
Value
5,469
554
2,498
2,418
77
7,129
36,563
9,166
27,39725,5895,125
10,974
8,864
291
91
80
13,3388,293
66,40041,123
107,523

Computers and peripherals (Total)
Multifunctional digital equipment
Computers and peripherals
Parts of computers and peripherals
Office equipment
Telecommunication equipment
Semiconductors and electronic components
Electronic tubes and semiconductors
Integrated circuits
Other electronic components
Flat-panel displays
Video equipment
Digital cameras
Reception apparatus for television
Audio equipment
Portable audio players
Measuring and testing equipment
Machines and apparantus for the manufacture of semiconductor devices
IT parts
Finished IT products
Total IT equipment

Note: See Appendix: Annotation I at the end of this report for the definitions of products.
Source: “Trade Statistics” (Ministry of Finance).

20

Exports
Value
5,806
490
2,645
2,671
51
6,780
47,322
12,831
34,491
31,815
5,599
11,596
9,252
304
151
140
19,444
19,15685,35856,764142,1232010

Growth
6.2
-11.5
5.9
10.5
-33.3
-4.9
29.4
40.0
25.9
24.3
9.3
5.7
4.4
4.4
66.9
75.6
45.8
131.0
28.6
38.0
32.2

2009
Value
16,438
1,356
11,312
3,769
251
10,731
18,7692,494
16,275
13,815
3,371
6,259
1,434
2,074
295
232
6,770
1,123
36,78037,67274,452(US$ million, %)Imports
2010
Value
Growth20,758
26.3
1,659
22.3
14,451
27.7
4,648
23.3
283
12.8
14,29933.3
24,319
29.6
3,905
56.6
20,41425.4
17,467
26.4
4,483
33.0
11,061
76.7
1,771
23.5
5,501
165.2
563
90.4
498
114.9
8,457
24.9
2,202
96.1
47,27428.5
52,13638.4
99,41033.5

I The World Economy, Trade and Direct Investment

Figure I – 33 Japan’s imports by product (2010)

Total
Machinery and equipment
General equipment
Electrical equipment
Transport equipment
Automobiles
Passenger vehicles
Automobile parts
Precision instruments
Chemicals
Foodstuffs
Iron ore
Mineral fuels, etc.
Coal
Liquefied Natural Gas
Petroleum and petroleum products
Crude oil
Textiles and textile products
Steel
Primary steel products
Steel products(Reference) IT-related equipment (total)

World
Value
Growth691,44725.2
186,647
26.8
55,882
21.6
86,573
33.4
19,534
19.6
6,816
40.1
6,471
40.7
5,992
38.7
24,65823.3
71,772
26.1
59,838
11.2
15,637
79.6
198,592
30.3
24,18010.0
39,611
30.6
125,070
34.0
105,667
31.9
32,907
5.9
14,172
39.1
8,516
72.7
5,656
7.6
99,410
33.5

U.S.
Value
Growth67,171
13.8
27,516
9.0
8,077
3.5
7,902
17.4
4,381
-10.4
343
27.6
313
28.0
539
84.0
7,157
23.1
12,76630.2
13,734
5.8
0
41.1
1,928
83.1
603
216.8
361
48.1
646
27.5
n.a.
458
13.8
612
24.0
221
80.8
391
5.3
11,178
19.2

EU27
Value
Growth66,18711.9
24,303
18.7
7,038
9.1
3,855
17.7
7,520
24.2
5,266
31.8
5,111
31.5
1,436
8.8
5,890
25.7
21,731
10.7
7,687
5.3
0
-99.6
222
0.2
0
-77.7
n.a.
205
0.4
n.a.
1,615
-1.6
666
1.5
297
15.8
369
-7.7
5,535
29.5

China
Value
Growth152,801
24.7
72,32838.9
26,27530.9
38,607
48.3
2,894
23.6
15
-32.4
13
6.4
1,868
42.5
4,553
25.3
12,433
40.6
8,175
17.0
0
-29.3
1,805
31.5
863
9.9
n.a.
659
42.8
104
-7.2
25,467
3.8
4,562
29.0
1,429
122.3
3,133
8.2
45,15547.3(US$ million, %)
ASEAN
Value
Growth100,61929.1
29,033
31.0
7,791
27.6
16,759
28.8
2,040
88.4
517
349.0
379 5,526.0
1,311
56.0
2,443
25.1
9,905
53.3
7,991
8.5
0
-97.4
28,419
28.1
3,630
8.5
18,434
26.6
6,195
50.9
3,583
52.4
3,131
20.7
771
19.0
185
122.4
586
3.8
16,362
25.6

Note: See Appendix: Annotation I at the end of this report for the definitions of products.
Source: “Trade Statistics” (Ministry of Finance).

a massive increase of 76.7%. Imports of video equipment
were underpinned by replacement demand for television
receivers ahead of the complete shift to digital broadcastingscheduled for July 2011, in addition to changes in the ecopoint system for home electric appliances, as with the caseof air-conditioning equipment. Imports of video equipmentfrom China and Malaysia trebled in 2010, with these twocountries alone accounting for 90% of Japan’s imports of
television receivers.

similar ratio is examined for final goods, 482 items, or about
one-fourth of a total of 1,774 items, increased their export
volumes, with the combined value of their exports coming
to US$92.3 billion to account for 30% of the total value ofexports of final goods. This means that intermediate goods
have a greater number of items than final goods that canmaintain competitiveness in the severe export environment
soured by the general economic stagnation and the stronger
yen. This strength of Japanese intermediate goods powered
the expansion of Japanese exports in the course of the recovery in production mainly in Asia (see Figure I - 34).
However, the situation changed completely after theGreat East Japan Earthquake in March 2011 caused Japan’s
domestic production operations to stall. Exports grew only
6.8% in March, the first single-digit growth in 16 months,
and actually declined by 2.4% in April. Exports in May recovered to show a 2.5% increase. However, as the yen’s exchange rate against the U.S. dollar has appreciated by nearly
10 yen from the year-before levels, the potentially significantly larger impact of exchange rate fluctuations needs tobe monitored. Yen-quoted exports fell sharply in April andMay, by 12.4% and 10.3%. In terms of volume as well, exports declined 3.3% in March, 11.6% in April and 10.8% in
May, continuing to fall with large margins not seen since
the export slump in 2009. Affected particularly significantly was transportation equipment, which turned downin March. In April, exports of electrical equipment also decreased, due mainly to the poor performance of semiconductors and other electronic devices, including integrated
circuits (see Figure I-35).
On the other hand, imports continued strong, posting
the high growth of 22.5% in March, 21.6% in April and
28.2% in May, largely due to continuing rises in prices ofcommodities as well as exchange rate swings. Reflecting
these two factors, the arriving price of crude oil in March

Production recovery remains as an important challenge
The recovery in Japan’s trade in 2010 was largely driven
by Asia, particularly so for exports. This stems from the factthat intermediate goods necessary for production accountfor the considerable portion of Japan’s exports. Japan’s export composition for 2010 shows that the ratio of intermediate goods to the total value of exports stood at 55.6%, higher
than the corresponding ratios of other major exporting
countries, including 41.5% for China, 49.7% for the United States and 46.5% for Germany.(Note 6) One reason for thehigh ratio of intermediate goods is that Japan has a lot ofcompetitive products even in the face of the yen’s continuing appreciation. When competiveness is measured by increases or decreases in the volume of exports, out of a totalof 2,546 items of intermediate goods, 926 items, or nearly
40% of the total, saw their export volumes keep rising in2008 and 2009.(Note 7) The combined value of exports of these
items totaled US$210.0 billion, roughly equivalent to half
the total value of exports of intermediate goods. When the
The classification of intermediate goods and final goods is based on the
U.N. BEC classification (see Note 3 on Page 11).
7
The number of items on the HS code for six-digit code that were actuallyexported in 2008 and onward and for which unit export prices and volumes
are available.
6

21

I

Figure I – 34 Number of items of Japan’s intermediate and final goods with larger export volumes (2010)
Export volume rose in both 2008 and 2009
Each productNo. of items
Combined export
category’s share in
Ratio of the combined export value of each(2)
No. of items
value of each producttotal exports (%)
product category to total export value(US$ million)
Intermediate goods
55.6
2,546
926
210,01249.0
Processed products
26.8
2,188
797
101,978
49.5
Parts
28.9
358
129
108,035
48.6
Final goods
41.6
1,774
482
92,29028.8
Capital goods
24.8
642
178
79,881
41.9
Consumer goods
16.8
1,132
304
12,4099.6
Notes: (1) See Note (3) on Page 11 for the classificaiton of goods.
(2) The number of items at the HS 6-digit-code actually exported in and after 2008 for which data on unit prices and export volumes is available.
Source: “Trade Statistics” (Ministry of Finance).

came to US$103.1 per barrel, topping the US$100 markfor the first time since October 2008. In terms of volume,
import was rising 5.5% in March, 1.3% in April and 5.5%in May. Imports of chemicals and foodstuffs felt the significantly big impact of the earthquake, with their imports
shooting up around 30% in April. There were moves to import chemicals to cover the shortage of domestic supply, as
the earthquake forced some oil plants in Japan to suspend
operations. As for foodstuffs, imports of cigarettes set new

single-month records in terms of both value and volume in
April as operations of some tobacco plants came to a halt in
the aftermath of the disastrous earthquake. Imports of water, which fell into acute supply shortage, sharply increased
from France and the United States as well as from South
Korea and Taiwan, which had no significant track recordsof exporting water to Japan. Like cigarette imports, importsof water set all-time highs in terms of both value and volume in May (see Figure I-36).
However, the impact of the Great East Japan Earthquake
was observed mostly in bottlenecks on the supply side, suchas sharp cutbacks on production, suspended production operations and port facilities, not in the sluggishness of global
demand as seen at the time of the financial crisis. Therefore,
Japan’s trade can be expected to recover gradually as production activities of Japanese companies recover from theimpact of the earthquake and perk up going forward.

Figure I – 35 Japan’s exports by product (YoY contribution)(YoY, %)
60.0
40.0
20.0
0.0
-20.0
-40.0
-60.0

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5
2009
2010
2011
(Year/Month)
General equipment

Electrical equipment

Transport equipment

Precision instruments

Chemicals

Steel

OthersTotal export value percent change

Source: “Trade Statistics” (Ministry of Finance).

Figure I – 36 Japan’s imports by product (YoY contribution)(YoY, %)
50.0
40.0
30.0
20.0
10.0
0.0
-10.0
-20.0
-30.0
-40.0
-50.0

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5
2009

2010
Mineral fuels

Foodstuffs

Other machinery and equipment

2011(Year/Month)
Chemicals

IT-related equipment

OthersTotal import value percent change

Source: “Trade Statistics” (Ministry of Finance).

22

I The World Economy, Trade and Direct Investment

Figure I – 38 Trends of global inward FDI and cross-border M&As

3. Direct Investment of the World and Japan &Cross-Border M&As
(1) Global foreign direct investment dips 4.4% in 2010
FDI driven by investment in developing countries
Global foreign direct investment (on an inward FDI
basis: JETRO estimates of net flows based on the balance of payments) in 2010 declined 4.4% year on year to
US$1,224.9 billion for the third consecutive drop (see Figure I-37), but the decline was much smaller than in 2009.
Inward FDI showed signs of bottoming out because of1) an increase in reinvested earnings following improved
earnings of overseas subsidiaries ascribable to the recoveryof the world economy, centering on emerging countries, and2) active corporate moves to advance into overseas markets
in pursuit of market expansion, as seen in the first rise inthree years of global cross-border M&As (corporate mergers and acquisitions beyond national boundaries). However,global inward FDI in 2010 was still less than 50% of thepeak level of 2007.
By developed and developing countries, inward FDI indeveloped countries (based on the classification by BOP(IMF) of 33 countries/regions) dropped 11.7% to US$730.8
billion, while inward FDI in developing countries rose 9.0%
to US$494.1 billion, accounting for over 40% of the total
amount of inward FDI (see Figure I-38). Companies, which(US$ billion)

(%)

3,000

45.0
40.0

2,500

35.0
30.0

2,000

25.0

1,500

20.0
15.0

1,000

10.0

500
0

5.0
99

2000

01

02

03

04

05

06

07

08

09

10

0.0
(Year)

Inward FDI in developed countries
Inward FDI in developing countries
Global cross-border M&As
Proportion of FDI directed at developing countries (Right hand scale)Note: Direct investment is on a basis of inward direct investment.
Sources: Balance of payments statistics of individual countries/regions, BOP(IMF) and Thomson Reuters.

went through the severe recession and faced the need to reduce costs more than ever before, accelerated their moves totransfer production and sales bases to developing countries
with higher growth and lower wages.
The pace of recovery of FDI in developed countries was
slow relative to FDI in developing countries. Comparedwith developing countries, the developed economies wererecovering from the global financial crisis more slowly. Developed countries remained unable to shake off uncertainties hanging over their economic prospects, with some European countries embroiled in the serious financial crises.
On the other hand, the developing economies, led by China
and India, recovered more quickly and are expected tomaintain stable economic growth going forward. Becauseof this, companies in developing countries, in addition tocompanies in developed countries, are beginning to step up
efforts to cultivate the markets of developing countries.
Global outward FDI in 2010 fell 7.8% year on year to
US$1,308.9 billion.(Note 8) Among developed countries, outward FDI by the EU and Japan declined, but that by theUnited States turned up. Like inward FDI, many developing
countries made active outward FDI.

Figure I – 37 FDI of major countries/regions in 2010
<net flow, based on balance of payments>(US$ million, %)Inward FDI
Outward FDI
Value Growth Value GrowthU.S.
236,22649.0
351,350
15.7
Canada23,413
9.4
38,585-7.4
EU27292,384 -43.8
407,692 -38.2
EU15305,266 -37.2
442,451 -31.5
France33,905-0.4
84,112 -18.3
Germany
46,13422.6
104,857
34.1
Italy
9,497 -52.7
21,009-1.3
Luxembourg
152,255 -27.4
130,176 -44.4
Netherlands-65,679 n.a.
12,267 -87.8
Spain
21,086 130.8
22,268 128.7
UK
45,908 -35.5
11,020 -75.2
12 new EU member states-12,882 n.a.
-34,758 n.a.
Switzerland-6,561 n.a.
58,25375.2
Australia
32,472
26.3
26,43163.6
Japan-1,359n.a.
57,223 -23.3
East Asia
325,405
62.6
208,169
26.9
China
185,08162.0
60,15137.0
South Korea-150 n.a.
19,230
11.8
Hong Kong
68,904
31.5
76,07718.9
ASEAN569,078 142.2
41,52925.5
Singapore
38,638 152.9
19,7396.9
India
24,640 -30.9
14,626-8.2
Brazil
48,43886.7
11,519 n.a.
Russia42,86817.4
52,476
20.2
Developed countries (33 countries/regions) 730,841 -11.7 1,121,295 -10.9
Developing countries
494,057
9.0
187,59015.7
World1,224,897-4.4 1,308,885-7.8

Big differences emerge between developed countries
Inward FDI in developed countries continued to decline
in 2010, but differences also emerged between them. Whileinward FDI in many EU countries gripped by serious fiscal
problems decreased, inward FDI in the United States increased significantly. Outward FDI by the United States also
turned up, but outward FDI by the EU remained sluggish.
8
Though the total amount of inward and outward FDI should match theoretically, the actual numerical values differ because of differences between
countries in the definition of direct investment, evaluation methods andthe timing of accounting for such investment, including the lowest amountto be accounted for and treatment of reinvested earnings and subsidiaries
of subsidiaries. Another factor is that in developing countries, better datais generally available for inward FDI than for outward FDI in terms of theannouncement and quality.

Notes: (1) JETRO estimates for “World” and “Developing countries” figures.
The figure for the developed countries is the sum value.
(2) The ASEAN 5 includes Thailand, Malaysia, Indonesia, the Philippines and Singapore.
(3) “East Asia” includes China, South Korea, Taiwan, Hong Kong and
the ASEAN 5.
Souces: Balance of payments statistics, BOP (IMF) and other sources.

23

I

Inward FDI in the United States soared 49.0% year on
year to US$236.2 billion to mark the first rise in two years.
In particular, reinvested earnings (undistributed profits
internally reserved by subsidiaries on foreign companies
within a region), which sank to the lowest level in six years
in 2009, surged back around seven times to US$93.7 billion, significantly surpassing the previous record high of
US$69.1 billion scaled in 2006. This resulted from higher
earnings of U.S. subsidiaries of foreign companies that reflected a recovery of the U.S. economy as well as their larger
retained earnings ascribable to reduced outflows of earnings in dividends to parent companies overseas.
Outward FDI by the United States turned up for the
first time in three years, increasing 15.7% year on year to
US$351.4 billion, lifted by a substantial rise in reinvested
earnings. After marking a minor gain for three years onend, reinvested earnings expanded 34.9% to US$320.5 billion in 2010, registering the largest amount since 1982, when
statistical data for FDI was made available for the first time.
Active M&As by U.S. companies also helped push up equity
capital investment to mark the first rise in three years.
Inward FDI in the EU plummeted 43.8% to US$292.4 billion (JETRO estimates). Investment plunged partly because
the financial crises in Southern European countries that
unfolded in 2009 deteriorated further in 2010. In the Netherlands in particular, withdrawals of funds through specialpurpose entities (SPEs) became noticeable, pulling down
inward FDI in the EU as a whole. Equity capital investmentin the Netherlands, including reinvested earnings, marked
the first net withdrawal since 1999, when statistical data for
FDI was made available for the first time.
According to the Statistical Office of the European
Union (Eurostat), FDI from outside the EU declined 76.0%
to US$71.8 billion, a level substantially lower than the pastannual average attributable in particular to a plunge of
72.1% to US$37.7 billion in FDI from the United States. FDIin the EU from offshore financial centers (38 countries/territories as defined by Eurostat) such as the Cayman Islands(British overseas territory), which showed a remarkablenet inflow in 2009, marked a net withdrawal of US$5.2 billion in 2010. On the other hand, inward direct investment
by countries within the EU rose 7.9% to US$192.9 billion,
posting the first rise, albeit small, in three years (the total
amounts aggregated by Eurostat and JETRO do not necessarily match because of differences in the timing of aggregation and other factors).
Outward FDI by the EU dropped 38.2% to US$407.7 billion (JETRO estimates). While outward FDI by many EU
member states decreased, Germany posted a 34.1% rise to
US$104.9 billion mainly because parent companies in Germany increased intra-company lending to provide operating funds to overseas subsidiaries.
Looking at inward FDI in major developed countries in2010 on a quarterly basis (see Figure I-39), an inflow of equity capital into the United States fell year on year except in
the third quarter. Though overall inward FDI in the UnitedStates turned up for the first time in two years, equity capital movements indicate that a full-fledged recovery may not
be in the offing.
Among major European countries, inward FDI recoveredfor Germany and UK in the fourth quarter of 2009, but thegrowth in inward FDI in these countries markedly slowed
down from 2010. In the fourth quarter of 2010, inward FDI in
Germany, UK and France all declined year on year. Furthermore, inward FDI in major developed countries decelerated
further in the first quarter of 2011, as economic uncertainties spread from Europe, where the fiscal crunch is squeezing
mainly Southern European countries, to the United States.
China raises its presence in both inward and outward FDI
Both inward and outward FDI of East Asia expanded
considerably in 2010. In particular, China’s presence stood

Figure I – 39 Trends of inward FDI in major developed countries by quarter and by type of investment
Year
Quarter

Inward total
Equity capital
U.S.
Reinvested earnings
Other capital
Inward total
Equity capitalUK
Reinvested earnings
Other capital
Inward total
Equity capital
Germany
Reinvested earnings
Other capital
Inward total
Equity capitalFranceReinvested earnings
Other capital
Inward total
Equity capitalJapan
Reinvested earnings
Other capital

2008
Q4
84,405
114,857-15,767-14,685
19,517
17,386-3,231
5,363-1,6482,485-7,061
2,927
1,926
9,859
572
-8,507
6,380
6,700
819
-1,138Q1
1,026
22,800-10,727-11,047
9,931
10,961
1,307-2,337-2,392
1,864-376-3,881-5,001
594
413-6,009
3,912
3,656
830
-578

2009

Q2
29,78328,891-1,592
2,483
6,563
8,869
-2,988682
11,838-2,192291
13,73920,308
11,115
430
8,766
2,872
1,678
691
503

Q3
61,83030,16813,331
18,33225,549
9,985
9,713
5,851
12,065
3,862
1,629
6,575
-396
2,640
454
-3,490
4,635
4,416
292
-71

Q4
65,94252,453
12,487
1,002
30,92327,561-410
3,772
17,237
9,209
475
7,553
19,991
6,762
482
12,750
420
979
-619
59

Q1
51,207
21,66418,902
10,641
33,963
20,425
7,027
6,511
9,820
-560
5,145
5,235
9,876
2,668
4,450
2,760
535
4,993
-641
-3,8162010

Q2
35,82015,37023,326-2,876-10,2571,794-240-11,810
12,086
5,893-2,374
8,567
6,772
5,761
4,056
-3,042
-186
343
-896
367

Q3
83,90153,50926,072
4,320
15,306
16,328-52-970
10,321
4,991
4,066
1,264
15,957
2,953
4,161
8,844
-64
1,604
-1,146-521(US$ million)
2011
Q4
Q1
65,29825,09024,172
7,584
25,414
21,345
15,712-3,8408,017
50,773
13,59546,608-5,622
8,506
44-4,341
13,8752,474-120-2,030463
5,357
13,532
-853
1,151
-795
3,082
311
4,330
3,237
-6,257-4,342-1,643-2,328573-3,008-226-209-1,988888

Note: The country’s balance of payments was converted to US dollars using the IFS quarterly average rate. Figures for Japan were converted to US dollars using
Bank of Japan quarterly average interbank rates.
Source: Balance of payments statistics of individual countries.

24

I The World Economy, Trade and Direct Investment

out in both inward and outward investment.
though not shown in Figure I-37, dropped 13.4% year on
Inward FDI in East Asia grew 62.6% year on year toyear to US$18.6 billion on an approval basis, according to
US$325.4 billion, led by direct investment in China.
an announcement made by the Ministry of Planning andInward FDI in China increased by a substantial 62.0%
Investment. By country, direct investment from Singapore,
to US$185.1 billion. Thus, China became the second largthe Netherlands, Japan and South Korea (ROK) stood out.
est recipient of inward FDI by country in 2010, only next to
By industry, robust investment was made in processing/the United States, surpassing Luxembourg, which usually
manufacturing, construction and retail/distribution inreceives a large amount of pass-through investment (seedustries. As a case example of investment from Japan, an
Figure I-40).
investment of US$1.0 billion by Kobe Steel, Ltd. in Nghe An
The Chinese Ministry of Commerce cites the upgrading
Province was approved. While Vietnam is attracting keenof the industrial structure of foreign companies operating
attention as an emerging economy, several problems began
in China and the higher share of the service sector as theto surface in the country’s investment environment in rekey characteristics of inward FDI in 2010. These characcent years, including pressure for higher wages, a shortfall
teristics signify the qualitative change of inward FDI fromof workers and a shortage of power supply.
investment primarily focusing on the utilization of cheap
Inward FDI in India declined 30.9% to US$24.6 billion.
labor to investment targeted at the Chinese market and the
The Indian economy was among the first to recover fromprovision of services to Chinese companies. Furthermore,
the financial crisis, but India has not been successful in enas foreign-affiliated companies, which have thus far set up
ticing foreign investment while other Asian countries haveoperations mostly in coastal regions, moved to push into inseen smooth growth in inward FDI. In response, the Deland regions in pursuit of new markets, the ratio of investpartment of Industrial Policy & Promotion (DIPP) of thement in central and western China increased. Local governMinistry of Commerce and Industry on March 31, 2011, anments are also stepping up efforts to invite foreign capital,
nounced a revised policy on inward FDI. The revised policy
hoping that the advance of foreign-affiliated companies will
includes measures for flexible issuance of convertible shares
help the development of local economies. For example, theand corporate bonds and the abolition of no-objection cerCity of Chongqing in Sichuan Province in August 2010 antificate (NOC) regulations. Under NOC regulations, whennounced a new 33-point policy to ease restrictions on thea foreign company with joint venture and other capital tieadvance of foreign-affiliated companies to facilitate their
up agreements and/or technical cooperation contracts withinvestment in the city. The city allowed foreign companies
existing Indian companies concluded prior to January 12,
to set up joint ventures with Chinese individual proprietors
2005, wanted to establish a new company in the same indusand also relaxed conditions for the establishment of investtry in India, or to conclude capital and/or technical tie-up
ment companies (umbrella companies) by foreign investors
agreements with other companies, it was required to obtainon their own or in joint ventures with Chinese investors.
prior approval of the Foreign Investment Promotion Board
Outward FDI by China in 2010 zoomed 37.0% to(FIPB). In practice, the FIPB required such a foreign comUS$60.2 billion, surpassing Japan in amount for the firstpany to obtain NOCs from its existing business partners astime to rank sixth in the world, up from ninth in 2009. In
a key condition for its approval. As NOC regulations had
recent years, Chinese companies have continued to actively
been a factor to constrain Japanese companies’ investment
acquire overseas assets in a broad range of countries andin India, how things will develop following the abolition ofindustries. In December 2010, the Ministry of Commerce
the regulations is being closely watched.
came up with a policy to accelerate Chinese companies’
forays into overseas markets. In this policy, the Chinese
Latin America drawing increasing attention
government set out the direction of outward investment to
According to the United Nations Economic Commissecure the supply to China by continuing to promote Chision for Latin America and the Caribbean (ECLAC), inward
nese cooperation in significant energy, mineral resources
FDI in the region in 2010 surged 40.1% to US$112.6 billion
and agricultural projects and to support economic developfor the first rise in two years. Direct investment in Latin
ment, employment expansion and improvement of people’s
America and the Caribbean started rebounding in theliving in countries in which China
makes investments.
Figure I – 40 Global top 10 countries/regions for FDI
Inward FDI in the ASEAN 5 shot
(US$ million)
Inward FDI
Outward FDI
up 142.2% to US$69.1 billion, with
2009
2010
2009
2010
Singapore leading the pack with
1 Luxembourg 209,746 U.S.
236,226 U.S.
303,606 U.S.
351,350
US$38.6 billion, up 152.9%. Inward
2 U.S.
158,581 China
185,081 Luxembourg 234,295 Luxembourg 130,176
3 China
114,215 Luxembourg 152,255 France
102,949 Germany
104,857
FDI in Singapore fell steeply in 2008
4 UK
71,140 Hong Kong
68,904 Netherlands
100,571 France
84,112
under the heavy impact of the global
5 Hong Kong
52,394 Belgium
52,803 Germany
78,200 Hong Kong
76,077
6 Germany
37,627 Brazil
48,438 Japan
74,650 China
60,151
financial crisis, but turned up in 2009
7 Russia
36,500 Germany
46,134 Hong Kong
63,991 Switzerland
58,253
onward. Since the second quarter of
8 Saudi Arabia
36,458 UK
45,908 UK
44,381 Japan
57,2232009, investment in Singapore has
9 India
35,649 Russia
42,868 China
43,898 Russia
52,476
10 France
34,027 Singapore
38,638 Russia
43,665 Canada
38,585maintained an increasing trend.
Sources: Balance of payments statistics by country/region and BOP (IMF).
Inward FDI in Vietnam in 2010,25

Ifourth quarter of 2009 and maintained the expanding trend
throughout 2010. The aggregate amount of investment in2010 was large relative to the past average, an indicationthat multinational companies regard Latin America and the
Caribbean as an important region for them. By industry,
investment was robust in such manufacturing industries as
metals, foodstuffs, automobiles and electronic parts, and bycountry, many companies made direct investment in countries with strong domestic demand, including Brazil, Chile,
Mexico and Peru. Another factor behind the increasing
FDI was that foreign-affiliated companies pushing ahead
with cost reductions are setting up bases of operations in
the region for outsourcing purposes. It is not only extraregional companies that are focusing on the advantages of
Latin America. Intra-regional investment is also robust.
Latin America-based international companies are making
active investment, from Mexico to Brazil and from Brazil to
Colombia, for example.
Inward FDI in Brazil, the largest recipient of investment
in Latin America, shot up 86.7% to US$48.4 billion. Targets
of investment are mainly interests in natural resources andmanufacturing industries, but in recent years, the hightech sector’s presence is growing by drawing an increasing
amount of investment. China is a major investor in Brazil.
China’s increase in the country apparently reflects its growing interest in Brazil, which remained relatively unaffected
when demand stagnated in Europe and North America dueto the financial crisis and serious concerns over their fiscal
conditions. China, mainly through state-owned enterprises, is running strategic business operations in Brazil to caterto the country’s expanding domestic demand, on top of its
strong interest in Brazil’s natural resources.
According to ECLAC, Chinese companies’ direct investment in Latin America and the Caribbean was insignificant
during the period from 2006 to 2009. In 2010, however,China accounted for 9% of the total amount of investmentin the region, raising its presence to just behind the UnitedStates and the Netherlands. At present, Chinese investmentin the region is flowing mainly into areas related to natural
resources. In the medium term, however, China’s direct investment is expected to spread to infrastructure and manufacturing industries. The rapidly expanding trade relations
between China and the region are also playing a role in the
background of the recent momentum of China’s investment. Stronger trade ties are fueling an inflow of investment. However, China’s investment offensive, particularly
active investment in the agricultural sector, is spawning a
sense of vigilance in Latin American countries due to concerns over foreigners’ possible control of land and also interms of food security.

downside risk, and an inflow of equity capital into thesecountries as well as stable growth of developing economies.
After the global financial crisis, companies sold off businesses for restructuring and also for securing cash on hand.
States are moving forward with the privatization of stateowned enterprises. With investment opportunities expanding, companies that have been cautious about using theirsurplus funds are highly likely to take a strong interest insuch opportunities for the sake of proactive business expansion, which may lead to an increase in M&As and, by extension, direct investment.
(2) Global cross-border M&As up by 27.8%
The total value of global cross-border M&As completed
in 2010 came to US$659.1 billion, an increase of 27.8% year
on year, and the number of such M&As also rose 19.9% to
8,795, both turning up for the first time in three years (Note 9)(see Figure I-41). Conspicuous developments in 2010 included the doubling of acquisitions by U.S. companies andan increase in natural resources-related M&As following
surges of resources prices. Big-ticket M&As are on the riseagain, as large-scale acquisitions valued at US$1 billion ormore (so-called mega deals) increased from 99 in 2009 to
139, and acquisitions valued at US$100 million or morefrom 618 to 892. On a quarterly basis, the combined valueof M&As has continued to grow from the second quarterof 2010 through the second quarter of 2011. Conducive tothe recovery of M&A activity are the increase of enterprise
Figure I – 41 Trends of global cross-border M&A value and thenumber of deals(US$ billion)(No. of deals)

1,800

14,000

M&A deal value

1,600

12,000

Number of deals (RHS)

1,400

10,000

1,200
1,000

8,000

800

6,000

600

4,000

400

2,000

200
0

99

2000

01

02

03

04

05

06

07

08

09

10

0
(Year)

Source: Thomson Reuters.

9
Thomson Reuters (as of July 1, 2011). While FDI statistics on an international balance of payments basis represent the difference between outflows and inflows (net figures), M&A figures are calculated by aggregating
the value of each M&A upon completion (gross figures). M&A transactions in which the nationality of the ultimate parent company differs fromthat of the company invested in are defined as cross-border M&As. Under
this definition, some M&As between residents or between nonresidents,
not recorded in FDI statistics may be included in cross-border M&As.
In addition, FDI statistics include only investment for an equity stake of
10% or more, and some cases, in which funds were raised in the country
where the acquisition took place, may not be included. In cases such asthese, definitions and categories of FDI statistics and M&A data may differ, leading to discrepancies between the two sets of data, though they
could still approach each other. In all cases in this chapter, “M&As” referto cross-border M&As unless otherwise stated.

Expanding investment opportunities offer good chances
Inward FDI decreased in 2010 primarily because investment in developed countries lost steam. The picture
remained the same in the first quarter of 2011. Thus, thetrend of direct investment going forward will likely be determined by the extent of the recovery of developed economies, particularly European countries with significant
26

I The World Economy, Trade and Direct Investment

value on the stock markets following a recovery of the global economy and the easier access to acquisition funds thanat the time of the financial crisis for companies with goodfinancial standing.

products, which are manufactured without licenses frominnovator companies and marketed after the expiry dateof the patent or other exclusive rights), M&As targeted at
U.S. firms in the pharmaceutical industry continued active,
including the purchase of U.S. biotechnology-based drug
developer Genzyme Corp. by major French pharmaceutical firm Sanofi-Aventis SA for US$20.9 billion to beef up its
development of new drugs.
M&As of EU companies increased substantially as
a whole. In particular, M&As to buy British companies
doubled, with a rise of 101.1% to US$97.6 billion, leading
the overall activity. M&As involving British companies accounted for three of the 10 largest cross-border M&As in
the world in 2010. Included in the 10 largest M&As were the
US$21.4 billion acquisition of Cadbury PLC of UK by Kraft
Foods Inc. of the United States and the purchase of thepower distribution business in UK of Electricite de France(EDF) by a group of investors, including Cheung Kong Infrastructure Holdings Ltd. headed by a person of wealth

Twenty percent of acquiring companies were American
Looking at the value of M&As by country/region of acquired companies, among developed countries, M&As targeting U.S. companies rose 5.2% year on year to US$122.6 billion, while those aimed at EU companies increased 16.2%
to US$233.6 billion. The number of M&As acquiring U.S.
companies, at 1,129, recovered the 1,000 mark for the firsttime in two years. There was no super mega deal worth morethan US$10 billion in 2010, and the biggest-ticket deal was
the acquisition of U.S. life science concern Millipore Corp.
by Germany’s major pharmaceutical firm Merck KGaA,
with a price tag of US$6.9 billion (see Figure I-42). Amid
intensifying competition over generic drugs (pharmaceutical products intended to be interchangeable with innovator

Figure I – 42 10 largest cross-border M&As (2010 and January-June 2011)2010(US$ million)
Acquiring company
Target company
Ownership %Valueafter transaction
Country
Industry
Country
Industry
April
Kraft Foods Inc
U.S.
Foodstuffs
Cadbury PLC
U.K.
Foodstuffs
21,418100.0
June
Bharti Airtel Ltd
India
Telecommunications Zain Africa BV
Nigeria
Telecommunications 10,700
100.0
September Telefonica SA
Spain
Telecommunications Brasilcel NV
BrazilTelecommunications 9,743
100.0
EDF Energy PLC-UK
Electric, Gas andOctober
Investor Group
Hong Kong
Investor GroupPower Distribution U.K.
9,056
100.0
Water Distribution
Business
Newcrest Mining
Papua New
AugustAustralia
Mining (gold ore)
Lihir Gold Ltd
Mining (gold ore)
8,578
100.0
Ltd
GuineaApril
Orange PLC
FranceTelecommunications T-Mobile(UK)Ltd
U.K.
Telecommunications 8,496
100.0
SolvayFebruary Abbott Laboratories U.S.
Drugs
Belgium
Drugs
7,603
100.0
Pharmaceuticals SA
The
April
HeinekenFoodstuffs
FEMSA-Beer Op
MexicoFoodstuffs
7,325
100.0
Netherlands
China Petrochemical
DecemberChina
Oil and Natural Gas Repsol YPF Brasil SA Brazil
Oil and Natural Gas
7,111
40.0
Corp {Sinopec Group}
Precision Machinery
July
Merck KGaA
Germany
Drugs
Millipore Corp
U.S.
6,869
100.0
Manufacturing
January-June 2011

February
April
April
May
June
April
April
March
June
March

Acquiring company
Country
Industry
International PowerElectric, Gas andFrance
PLC
Water Distribution

Target company
Country

GDF Suez Energy
Belgium
Europe & International
Weather Investments
VimpelCom Ltd
The Netherlands Telecommunications
Italy
Srl
Sanofi-Aventis SA
FranceDrugs
Genzyme Corp
U.S.
Ensco PLC
U.K.
Oil and Natural Gas Pride International Inc U.S.
Barrick Canada Inc Canada
Mining (gold ore)
Equinox Minerals Ltd Australia
Electric, Gas andCentral Networks
PPL Corp
U.S.
U.K.
Water Distribution PLC
Chrysler Financial
TD Bank NA
CanadaBanking
U.S.
Corp
Bank Zachodni
Banco Santander SA Spain
Banking
PolandWBK SA
Telecommunicacoes
Vivo Participacoes
Spain
Telecommunications
Brazilde Sao Paulo SA
SA
Vodafone Group
U.K.
Telecommunications Hutchison Essar Ltd India
PLC

Value

Ownership %after transaction

25,056

100.0

Telecommunications 22,382

100.0

Drugs
Oil and Natural Gas
Mining (gold ore)
Electric, Gas andWater Distribution

20,856
8,685
7,460

100.0
100.0
100.0

6,505

100.0

Finance

6,300

100.0

Banking

5,629

95.7

Telecommunications

5,524

100.0

Telecommunications

5,000

100.0

Industry
Electric, Gas andWater Distribution

Notes: (1) Year and month indicate the completion date of the transaction.
(2) Country of the acquirer is that of its ultimate parent company.
(3) The definition of M&A follows Thomson Reuters.
(4) The ranking is based on the value of a single transaction.
(5) I f the acquirer is a single purchasing unit of a business corporation, the business corporation name is cited; if there is more than one business corporation.
(6) The Investor Group consists of Cheung Kong Infrastructure Holdings Ltd., Hong Kong Electric Holdings Ltd. and Li Ka Shing Foundation Ltd.
(7) “FEMSA-Beer Op” stands for Fomento Economico Mexicano SAB de CV {FEMSA}-Beer Operations.
Source: Thomson Reuters.

27

Ifrom Hong Kong, for US$9.1 billion. M&As for acquiring
companies in such major countries as France (up 548.7%
to US$22.1 billion) and Germany (up 23.9% to US$26.6 billion) also turned up. On the other hand, M&As involving
companies in some other European countries were lackluster to pull down the overall M&A activity in the EU, including Spain (down 47.4% to US$19.3 billion), the Netherlands(down 42.0% to US$16.5 billion) and Belgium (down 35.6%
to US$13.0 billion), partly because the European fiscal crisis made it difficult for acquiring and target companies toreach agreement on acquisition prices.
The United States stood out as a major player on the acquiring side, with the acquisitions by U.S. companies increasing 125.7% to US$139.2 billion. M&As by U.S. companies in 2010 were higher than the previous year in terms ofboth the number of acquisitions and value. The U.S. sharein the combined value of M&As in the world stood at 21.1%,
exceeding the 20% mark for the first time since 2006. The
acquisition cost per M&A nearly doubled over the previous
year to a little over US$80 million in 2010, and came close
to US$100 million in the first half of 2011.

pec Group’s purchase of the Brazilian operations from Repsol YPF, Spain’s major oil company, for US$7.1 billion.
Comparison of M&A trends by region between the periods of 2001-2005 and 2006-2010 clearly shows the animated M&A activity by regions other than Europe and North
America (see Figure I-43). Middle East and African countries, backed by the abundance of oil money, and countries
in the Asia-Pacific region and Central Asia, powered by remarkable economic growth, are stepping up M&As in developed countries in Europe and North America.(Note 10) For
example, direct investment from the Middle East and Africa included a Qatari sovereign wealth fund’s investment
of US$9.6 billion in major German automaker Volkswagen
in 2009, and among major M&As by Asia, Shining Prospect Pte. Ltd., a subsidiary of Aluminum Corporation ofChina (Chinalco), invested US$14.3 billion in major British
resources concern Rio Tinto PLC in 2008. In 2010, the valueof M&As by companies of the Asia-Pacific region and Central Asia accounted for more than 20% of the global total forthe first time ever.
Surging resources prices affecting M&As
Looking at M&As in 2010 by industry of acquiredcompanies, many major industries saw more M&As thanin 2009. The oil and gas industry had the largest value of
M&As, which rose 36.4% year on year to US$71.6 billion.
M&A activity in the industry turned very animated as soaring prices of natural resources accelerated moves among
companies to secure profits. The oil and gas industry accounted for 10.9% of the overall M&A value in 2010, gettingback to the top slot in M&As by industry for the first time infive years since 2005. Among individual deals, investment
by China’s Sinopec was the largest. In 2011, Ensco PLC, amajor offshore drilling service concern of UK, acquired
Price International Inc. of the United States in a major
M&A deal (see Figure I-44). Soaring resources prices also
helped boost investment in the mining industry. Investment in the industry expanded 86.6% to US$53.7 billion,
including many M&As involving stock swaps. Stock swaps
accounted for over 20% of M&As in the mining industry,
while the ratio of stock swaps to the total value of M&As in2010 stood only at 9.5%.
In the electricity, gas and water supply industry, where
the reorganization of electric power companies within
the EU accelerated M&A activity in 2009, the gross valueof M&As in 2010 saw a reactionary sharp fall of 56.8% to
US$34.3 billion, with the industry’s share in the total valueof global M&As slipping from 15.4% in 2009 to 5.2%. By
contrast, M&As in the food and tobacco industry expanded
111.3% to US$53.9 billion, increasing the share from 4.9%
to 8.2%. The largest M&A deal in the industry was the acquisition of Cadbury PLC of UK by Kraft Foods Inc. of theUnited States, followed by the US$7.3 billion purchase of

M&As by emerging countries active in Europe andNorth America
Looking at M&As targeting companies in emerging
countries by major country/region, M&As in East Asia in2010 increased 22.1% to US$53.1 billion. While M&As in
China decreased 23.5% to US$13.7 billion, M&As in India
turned up by 34.0% to US$11.9 billion and those in Brazil
more than trebled, expanding 245.0% to US$38.3 billion.
Among individual transactions, the largest deal was the additional investment (US$9.7 billion) in Brazilian telecommunications firm Brasilcel NV by Telefonica SA, Spain’s major telecommunications company. Major deals continued totake place in Brazil in 2011. Norsk Hydro ASA, a Norwegianaluminum manufacturer, purchased the aluminum operations of major mining concern Vale SA for US$4.9 billion.
M&As for Chinese companies in 2010 were small inscale compared with deals made in the past few years, withthe only one mega deal concluded in the year being thecapital participation in China CITIC Bank by major Spanish bank Banco Bilbao Vizcaya Argentaria (BBVA). Nevertheless, M&As targeting Chinese companies remained active, with the total number of M&A deals and the numberof M&As worth over US$100 million both surpassing the2009 levels.
M&As by companies in emerging countries were evenmore active. M&As by Chinese companies rose 45.6% to
US$39.2 billion, while M&As by Indian companies shot up
nearly 25 times to US$27.2 billion. China and India bothmade the top 10 list in terms of the value of M&As by country on the acquiring side. Among other emerging countries,
Brazil raised its presence, with M&As by Brazilian companies zooming 141.9% to US$11.0 billion. Major deals included the acquisition of the African operations of the Zain
Group, Kuwait’s cell phone operator, by major Indian cell
phone company Balti Airtel Ltd. for US$10.7 billion andmajor Chinese state-owned petrochemical company Sino-

The African share in direct investment by the Middle East and Africa inEurope and North America in 2006-2010 was 20.8% and 2.7%, respectively, bringing the low level of Africa’s direct investment in North America
into sharp relief.

1028

I The World Economy, Trade and Direct Investment

Figure I – 43 Trends of M&As by region

2001-2005

2006-2010

4,308

39,071

Middle East/Africa
33

16,930

0,3

16

1,1

North America
408,079
982,107

01

66

9

,30

10

0

,51

9
10

44,99551,948

741,543

377,273

Europe

122
,759

36
26,9

35
133,750

28

8

,03

70

2

16
198,531

Latin America

17,202

17,07237,48853,29

425,95625,525

Asia/Oceania/
Central Asia

1

9
6,3

N.A.

23,4

68

,80

89,5

49

42

73,94512,0

53

263,650

Latin America

34

4,501

28,588

N.A.

1,538

Asia/Oceania/
Central Asia

81,62813,5103,129

38,8
77

3,854

I

Middle East/Africa

31,262

63,4

6,762

(US$ million)

Europe161,546

North America
1,550,370

613,533

229,393

Note: Nonpublic figures are noted as N.A.
Source: Thomson Reuters.

the beer operations of major Mexican beverage concern
FEMSA by major Dutch beer brewer Heineken.

tion laws in response to criticism that the preceding Bushadministration was less than strict in the enforcement ofantitrust laws. The key points in the new guidelines include
an analysis of the anticompetitive effects of mergers between competing firms using various methods, including
a variety of economic analyses, and the collection of information not only on directly affected markets and industries
but also on surrounding markets and industries from thestandpoint of attaching importance to empirical rules andresults-oriented evidence. While the new guidelines are
expected to have the effect of deterring mergers that could
lessen competition, there are also concerns that the tougher
screening of mergers would impose heavier administrative
work loads on companies involved.
Cases of the strict application of competition laws were
evident in Europe as well. In January 2011, the European
Commission decided not to approve the merger between
Aegean Airlines and Olympic Air of Greece, concludingthat the merger would hamper competition in the country’s
market for domestic flights and disadvantage the consumer.
Since the Commission tends to approve of corporate acquisitions and mergers by attaching some conditions if theyraise concerns over possible competition law violations, its
decision on the airline merger came as the first case of prohibition since 2007. In the case of the acquisition of major
British electric power firm International Power PLC (IP)by major French energy company GDF Suez S.A., the European Commission required IP’s divestment of its shareholding in T-Power, its thermal power plant, out of concern
over competition law violations within the EU. In order toobtain the Commission’s approval, IP sold over one-third ofits shareholding in T-Power to Itochu Corp. of Japan.
On February 12, 2011, China’s State Council announced

China introduced the security review system for M&As
Large-scale M&As associated with industry reorganization transform the competitive environment. Major countries/regions adopted new policies on M&A activity andalso moved for the strict application of existing laws andregulations to M&A deals.
Japan’s policy is moving in the direction of encouraging
corporate realignment. The Japan Fair Trade Commission(JFTC) in March 2011 officially announced a draft plan toamend the business combination review regulations, including the key proposal to abolish the informal prior consultation system. The new rules integrate the combination
review procedures into the statutory review and enhance
the procedural transparency. This frees companies involved
from the repeated submissions of documents and materials required under the prior consultation system, making iteasier for them to get a reasonable idea about the review period needed, which is expected to be shortened. The amendment apparently reflects the JFTC’s stance of giving priority
to helping strengthen the international competitiveness ofJapanese companies.
Other countries moved to develop new policies fromthe perspective of consumers and also introduced securityoriented legal systems.
In the United States, the Department of Justice (DOJ)
and the Federal Trade Commission (FTC) in August 2010
jointly announced the guidelines for horizontal mergers
under federal antitrust laws. The new guidelines, which represent the revised version of the 1992 guidelines, are one of
the Obama administration’s moves to strengthen competi29

Figure I – 44 10 largest M&As by major industry (2010 and January-June 2011)
Month/YearAcquiring company
Target company
of M&ACountry
completion
May-11
Ensco PLC
UK
Pride International Inc
December-10 Sinopec Group
China
Repsol YPF Brasil SA
May-10Investor GroupIndia
Republic of Venezuela-Carabobo
March-11 BHP Billiton Ltd
Australia
Chesapeake Energy Corp-Asts
July-10
Royal Dutch Shell PLC
Netherlands East Resources Inc
Oil and gas
June-10Sinopec Intl
China
Syncrude Canada Ltd
April-11
Total SAFranceNovatek
October-10 Apache Corp
U.S.
BP PLC-Wstn Canadian Upstream
May-10
CNOOC Ltd
China
Bridas Corp
April-11
Sinochem Group
China
Peregrino Project,Campos Basin
April-11
VimpelCom Ltd
Netherlands Weather Investments Srl
June-10
Bharti Airtel Ltd
India
Zain Africa BV
September-10 Telefonica SA
Spain
Brasilcel NV
April-10
Orange PLC
FranceT-Mobile(UK)Ltd
April-10
Vimpelkom
RussiaKyivstar GSM
Telecommunications
June-11
Telecommunicacoes de Sao Paulo Spain
Vivo Participacoes SA
January-10 Orange Participations SA
FranceEgyptian Co for Mobile Svcs
October-10 CVC Capital Partners Ltd
UK
Sunrise Communications AG
January-11 Deutsche Telekom AG
Germany
Polska Telefonia Cyfrowa Sp
March-11 Portugal Telecom SGPS SA
Portugal
LF Tel SA
August-10 Newcrest Mining Ltd
Australia
Lihir Gold Ltd
June-11
Barrick Canada Inc
CanadaEquinox Minerals Ltd
February-11 Norsk Hydro ASA
NorwayVale SA-Aluminum Operations
May-11
Cliffs Natural Resources Inc
U.S.
Consolidated Thompson Iron
April-11
Rio Tinto PLC
UK
Riversdale Mining Ltd
MiningDecember-10 Goldcorp Inc
CanadaAndean Resources Ltd
April-11
Walter Energy Inc
U.S.
Western Coal Corp
December-10 All Glorious Ltd
China
Album Resources Pte Ltd
August-10 Adani Mining Pty Ltd
India
Linc Energy-Galilee Basin Coal
April-10
Vale SA
Brazil
BSG Resources Guinea Ltd
February-11 International Power PLC
FranceGDF Suez Energy Europe
October-10 Investor Group
Hong Kong EDF Energy-UK Power Distn Bus
April-11
PPL Corp
U.S.
Central Networks PLC
April-11
Iberdrola Energia do Brasil
Spain
Elektro Eletricidade e Servico
Electricity, gas, February-10 TenneT Holding BV
Netherlands transpower stromuebertragungs
March-10 China Investment Corp{CIC} China
AES Corp
water
December-10 Electricity Supply Board
Ireland
Northern Ireland Electricity
February-10 TenneT Holding BV
Netherlands E.ON AG-High Voltage Network
June-10
MT Falcon Hldg Co SAPI de CV Japan
Gas Natural-Combined Cycle Pow
March-11 TRUenergy Pty Ltd
Hong Kong EnergyAustralia Pty Ltd-Retail
April-11
Sanofi-Aventis SA
FranceGenzyme Corp
February-10 Abbott Laboratories
U.S.
Solvay Pharmaceuticals SA
August-10 Teva Pharmaceutical Industries Israel
Ratiopharm International GmbH
June-11
Grifols SA
Spain
Talecris Biotherapeutics Hldg
June-10Ruby Acquisition IncJapan
OSI Pharmaceuticals Inc
Pharmaceuticals
September-10 Abbott Laboratories
U.S.
Piramal Healthcare LtdFebruary-10 Sanofi-Aventis SA
FranceChattem Inc
June-10
Cinven Ltd
UK
Sebia SA
February-11 Greenback Acquisition Corp
Netherlands Martek Biosciences Corp
April-11
Daiichi Sankyo Co Ltd
Japan
Plexxikon Inc

Country

Value(US$ million)

U.S.
BrazilVenezuela
U.S.
U.S.
CanadaRussiaCanadaArgentina
BrazilItaly
Nigeria
BrazilUK
UkraineBrazilEgypt
Switzerland
PolandBrazilPapula New Guinea
Australia
BrazilCanadaAustralia
U.S.
CanadaAustralia
Australia
Guernsey (UK)
Belgium
UK
UK
BrazilGermany
U.S.
UK
Germany
MexicoAustralia
U.S.
Belgium
Germany
U.S.
U.S.
India
U.S.
France
U.S.
U.S.

8,685
7,111
4,848
4,750
4,700
4,650
4,000
3,250
3,100
3,070
22,382
10,700
9,743
8,496
5,589
5,524
5,207
3,269
2,777
2,656
8,578
7,460
4,948
4,340
3,661
3,311
2,889
2,818
2,740
2,500
25,056
9,056
6,505
2,897
1,649
1,581
1,566
1,490
1,465
1,459
20,856
7,603
4,931
4,016
3,838
3,713
2,107
1,094
996
935

Ownership% aftertransaction
100.0
40.0
40.0
100.0
100.0
9.0
12.1
100.0
50.0
40.0
100.0
100.0
100.0
100.0
100.0
100.0
51.0
100.0
100.0
35.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
100.0
100.0
15.8
100.0
100.0
76.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

Notes: (1) Deals completed in 2010-June 2011.
(2) Abbreviated names are used for some companies.
Source: Thomson Reuters.

the “Notice of the General Office of the State Council on
Launching the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors.”
The system is designed to review if there are any national security problems in mergers and acquisitions of Chinese companies by foreign companies, including those from Hong
Kong, Macao and Taiwan. The review system also covers
acquisitions of Chinese companies producing agricultural
products and providing transportation services. The Noticedefines the scope of security review as cases where “foreign
investors might acquire the actual controlling right” in“M&As of military industrial enterprises or military industry related supporting enterprises, enterprises located near
key and sensitive military facilities, and other entities relating to national defense; foreign investors’ M&As of key do-

mestic enterprises in areas such as agriculture, energy andresources, infrastructure, transport, technology, assembly
manufacturing, etc.” While the Notice cites key industries,
it does not specify all the industries to be covered by the security review, leaving some uncertainties about the system’s
enforcement. In recent years, there are an increasing number of cases where Japanese companies invest in Chinesecompanies in their efforts to expand sales in the Chinese
market. Therefore, there are many Japanese companies thatare concerned about the impact of the security review system introduced by China. Tougher investment regulations
and strict law enforcement may constrain business expansions by Japanese companies bent on catering to demand on
overseas markets.
30

I The World Economy, Trade and Direct Investment

ings, and rose 0.9% in the first quarter of 2011. Reflecting
a large-scale investment in the United States in April, outward FDI for January-April 2011 expanded 51.1% year on
year to US$19.0 billion.

M&As increase in the first half of 2011
Global M&As turned up in 2010, and maintained the increasing trend in the first half of 2011 as well, rising 42.6%
year on year to US$428.9 billion. There were several supermega deals in excess of US$20 billion in such sectors as public
utility services, telecommunication and pharmaceuticals.
By country, acquisitions of U.S. companies increased
100.1% to US$96.7 billion, accounting for the largest portion of the global M&A value and involving companies ina variety of industries, including pharmaceuticals, finance,and oil and gas. M&As in emerging countries remained
generally robust, with deals in Brazil, India and China
posting increases over the first half of 2010. By country ofacquiring companies, the United States also came out as thelargest M&A investor.
With uncertainties looming over the future of the world
economy, M&A activity is unlikely to increase substantially going forward. Yet, there may be some room for more
M&As as both companies becoming selective in their business operations and governments pressured by swelling fiscal deficits are expected to proceed with the sell-off of moreof their asset holdings.

Increased investment in Asia
By country/region, Japan’s outward FDI in Asia in 2010rose 7.2% year on year to US$22.1 billion. But outward FDI
in all other regions declined across the board, including Latin America (down 69.3% to US$5.3 billion), North America(down 17.2% to US$9.0 billion), Europe (down 15.6% to
US$15.0 billion), and Oceania (down 16.0% to US$6.4 billion) (Figure I-46).
In Asia, the only major region to receive increased investment, FDI in Singapore continued robust, rising 33.5%
to US$3.8 billion. Investment in the food sector registereda sharp increase of US$1.4 billion primarily because of a
US$1.0 billion investment made by Kirin Holdings Co. Ltd
in Fraser & Neave Ltd (based in Singapore), the top beverFigure I – 45 Trends of Japan’s outward FDI by type
(US$ million)
250,000(3) Japan’s outward FDI showing recovery
Japan’s outward FDI (net flows based on the balance of
payments) in 2010 declined 23.3% year on year to US$57.2
billion for the second consecutive drop (see Figure I-45).
The decline is attributable mainly to the continued contraction of reinvested earnings due to deteriorating profitabilityof overseas subsidiaries, as in 2009, and the lack of capitalincreases via special purpose entities (SPEs) seen in 2008
and 2009.
In a gross outflow of assets that represents overseas advances by Japanese companies, credit of reinvested earnings
turned to negative in September 2009 for the first time in
109 months and remained until August 2010.(Note 11) Though
reinvested earnings moved back to positive in September
2010, reflecting a recovery in corporate earnings, they decreased to US$2.0 billion for the full year, just one-sixthof the previous year’s US$12.2 billion. With equity capital
dropping by 12.2% to US$72.3 billion and other capitalby 21.5% to US$62.5 billion, the total outflow declined by
US$37.3 billion to US$136.7 billion. A gross inflow of assets,
which represents withdrawals of Japanese companies fromoverseas markets, fell by 19.9 billion from 2009 to US$79.5
billion, roughly matching the 2008 level, as both equity capital and other capital decreased by 29.6% to US$17.6 billion
and by 16.8% to US$62.0 billion, respectively.
On a quarterly basis, Japan’s outward FDI in the fourth
quarter of 2010 posted the first year-on-year rise in fivequarters, thanks in part to a recovery of reinvested earn-

200,000
150,000
100,000
50,0000-50,000-100,000-150,000

96

97

98

99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20102010 2011
1–4 1–4(Year)

Equity capital (outflow)

Other capital (outflow)

Reinvested earnings (outflow)

Equity capital (inflow)

Other capital (inflow)

Outward FDI (net)Note: The yen-based value is converted to dollars by quarter, using the average quarterly Bank of Japan interbank rate, and the annual sum is thencalculated.
Source: “Balance of Payments Statistics” (Ministry of Finance and Bank ofJapan).

Figure I – 46 Trends of Japan’s outward FDI by region (net)(US$ million)
140,000
120,000

Others100,000

Latin America

EuropeNorth America

Asia

World

80,00060,00040,00020,0000-20,000

As for reinvested earnings in the balance of payments statistics, onetwelfth of increases/decreases in retained earnings of overseas subsidiaries are accounted for about six months after the closing of the accounting
year of parent companies. As there are many parent companies that close
the accounting year at the end of March, reinvested earnings, in manycases, are accounted for in statistics in or after September of the sameaccounting year.

11

96

97

98

99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20102010 2011
1–4 1–4(Year)

Note: The yen-based value is converted to dollars by quarter, using the average quarterly Bank of Japan interbank rate, and the annual sum is thencalculated.
Source: “Balance of Payments Statistics” (Ministry of Finance and Bank ofJapan).

31

Iage business operator in Singapore and Malaysia. Investment
in China, the largest recipient of Japanese FDI in Asia, increased up 5.1% to US$7.3 billion, setting a record high for
two straight years. Among manufacturing industries, investment in transportation equipment and general machinery
remained robust with US$1.0 billion each, and investment inwholesale/retail and finance/insurance sectors was also firm.
Investment in India dropped 21.9% to US$2.9 billion for thesecond consecutive contraction. Though there were no largescale M&As or large equity participation as seen in 2008 and2009, some sectors show sharp rises in investment, including
major steelmaker JFE Steel Corp.’s US$1.0 billion investment
in JSW Steel Ltd. in an effort to build a business foothold in
emerging countries.
In North America, Japan’s outward FDI in the UnitedStates decreased for the second consecutive year, falling
13.8% to 9.2 billion. Affected by lower reinvested earnings
amid deteriorating profitability, investment in transportation equipment posted the second consecutive net withdrawal of US$6.1 billion, and investment in the wholesale/retail sector also marked net withdrawal of US$1.2 billion. On the other hand, investment in the chemicals andpharmaceuticals sector amounted to US$5.9 billion due
to large-scale M&As for business expansion in the UnitedStates, including Astellas Pharma Inc.’s acquisition of OSI
Pharmaceuticals, Inc. for US$3.8 billion and the purchaseof Bare Escentuals, Inc. by Shiseido Co. for a total of US$1.8
billion. Investment in the telecommunication sector alsoamounted to US$6.1 billion, including KDDI Corp.’s acquisition of equity stakes in Jupiter Telecommunications
Co. held by a group of companies under the aegis of major
U.S. media concern Liberty Global Inc. for US$4.0 billion.
These investments offset the decreases in investment intransportation equipment and other sectors.
The sharp decline in Japan’s outward FDI in Latin America was largely affected by the absence of Japanese banks’large-scale acquisitions of participation certificates issued
by SPEs in the Cayman Islands seen until 2009.(Note 12) Investment in the Cayman Islands amounted to US$12.9 billion,
making it the largest recipient of Japan’s outward FDI. In
2010, however, investment in the Cayman Islands turned to
net withdrawal of US$1.8 billion, becoming the biggest factor
behind the contraction of Japan’s outward FDI in the year.
But investment in Brazil posted a steady increase of 15.0% to
US$4.3 billion due to big rises in investment in the mining
and finance/insurance sectors. Contributing to the smooth
growth was Sumitomo Corp.’s purchase of iron ore mining
stake, worth US$1.9 billion, from major steelmaker Mineracao Usiminas.
The impact of deteriorating profitability was apparent inEurope as well. After turning in a strong performance in2009, investment in the Netherlands fell by a steep 50.9%
to US$3.3 billion and investment in Luxembourg turned to

net withdrawal of US$108 million. Investment in Germany
also shifted to net withdrawal of US$321 million, suffering
the first net withdrawal since 1987, the most recent year forwhich data is available. Investment in Britain doubled to
US$4.6 billion. This apparently stems from the acquisition
by Nippon Telegraph and Telephone Corp. (NTT) of Dimension Data Holdings Plc, South Africa’s major ICT service company listed on the London Stock Exchange (LSE),
for US$2.7 billion.
In Oceania, investment in Australia decreased 10.7% to
US$6.4 billion, in reaction to a string of M&As carried out
by major beverage manufacturers in 2009. But investment
for the purpose of acquiring natural resources-related interests remained firm, with investment in the mining sector increasing 62.2% to US$4.2 billion. Sumitomo Chemical
Co. Ltd’s US$546 million investment in major farm chemicals manufacturer Nufarm Ltd lifted investment in thechemicals and pharmaceuticals sector by about 25 times toUS$662 million.
Deteriorating profitability adversely affected
investment in the manufacturing sector
By industry sector, Japan’s outward FDI in the manufacturing sector in 2010 plunged 45.9% to US$17.8 billion
and FDI in the non-manufacturing sector dipped 5.5% to
US$39.4 billion. Investment in the manufacturing sector
marked the lowest level since 2005, the most recent year forwhich sector-by-sector data is available.
The biggest reason for the sluggish investment in the
manufacturing sector in 2010 is that investment in thetransportation equipment industry turned to net withdrawal of US$3.6 billion following the previous year’s sharp
decline. In the United States, transportation equipment-related investment registered net withdrawals for six straightquarters from the third quarter of 2009 due to poor earnings, suffering net withdrawal of US$6.1 billion for thewhole of 2010. In contrast, investment in the transportationequipment in Asia rose 17.6% to US$2.8 billion, reflecting
increases in Thailand and Malaysia. Investment in the foodstuff industry plummeted 77.5% to US$2.0 billion in 2010,
in reaction to the massive expansion of investment in 2009
due to large-scale M&A deals by major beverage manufacturers. Investment in the chemicals and pharmaceuticals
industry, meanwhile, stayed at a high level, rising 6.7% to
US$7.9 billion, thanks to the growth of investment in the
United States, including the high-value acquisitions by
Astellas Pharma and Shiseido as mentioned above. Investment in the general machinery and steel/nonferrous Iron/
non-ferrous/metals industries came to US$4.4 billion and
US$3.9 billion, respectively, maintaining the previous year’slevels on the back of large-scale M&A deals.
In the non-manufacturing sector, investment in the finance/insurance sector declined 26.3% to US$11.4 billion,
but recorded the largest amount by industry for the fourthstraight year. Though there were no large-scale capital increases by Japanese financial institutions via SPEs in the
Cayman Islands as seen in the previous year, investment inother tax havens rose sharply. Investment in the commu-

Purchases by Japanese securities firms of particiation certificates issued
by special purpose entities (SPEs) established by Japanese financial institutions in the Cayman Islands, etc., are accounted for as Japan’s outward
direct investment in countries/regions where SPEs are set up.

1232

I The World Economy, Trade and Direct Investment

nications industry grew 2.5 times to US$9.9 billion, thanks
to KDDI’s acquisition of the Jupiter Telecommunications
stake and NTT’s acquisition of the South African company.
Investment in the mining industry also increased 39.8% to
US$9.1 billion, as moves to secure natural resources continued strong, including Sumitomo Corp.’s purchase of ironore mining stake in Brazil, acquisitions of coal mine stakein Australia by JFE Steel, and Nippon Steel Corp. Nonferrous metal makers, Toho Zinc Co.’s US$218 million dollar
effort to turn CBH Resources Ltd. of Australia into a wholly
owned subsidiary.

Figure I – 47 Trends of value and number of deals of Japan’s
outward M&As
(US$ million)
80,00070,000350

60,000300

50,000250

40,000200

30,000150

20,000100

10,00050

0Japanese companies’ outward M&As show a sharp risein 2010The value of outward M&As by Japanese companies in2010 rose by a sharp 64.5% to US$34.0 billion (Note 13) (see Figure I-47). Overseas M&As by Japanese companies in 2009
slumped, as did cross-border M&As around the world, but
staged a comeback in 2010. The number of deals continued
to follow a moderate uptrend since 2005, and that number
in 2010 reached 347, the second largest after a record 427
deals made in 1990.
Outward M&As in January-June 2011 amounted to
US$13.2 billion. While the amount is lower than the yearbefore level of US$19.5 billion, M&As concluded in thefirst half of 2011 include such large-scale deals as Terumo
Corp.’s purchase of CaridianBCT Holding Corp., a major
U.S. blood-transfusion service provider, for US$2.6 billion,
NTT Data Corp.’s US$1.3 billion acquisition of U.S. IT service concern Keane International, Inc. and Dai-ichi Life
Insurance Co.’s US$1.2 billion initiative to turn Australian
insurer TOWER Australia Group Ltd. into a wholly owned
subsidiary. The number of M&A transactions, at 195, cameclose to the half-year peak of 200 deals in 1990, an indication of Japanese companies’ proactive interest in M&As (seeFigure I-48).
Looking at Japan’s outward M&As by nationality of acquired companies, the value of M&As was the largest for
U.S. companies, expanding 3.6 times to US$14.2 billion in2010. The United States was followed by South Africa with
US$2.7 billion, Brazil with US$2.0 billion and India with
US$1.7 billion, in that order, with the M&A values all pushed
up by the consummation of large-scale deals. In contrast,
M&As of Australian companies, which kept renewing therecord amount in the past three years, plunged by 70.5% to
US$1.5 billion in 2010, slipping to fifth place from the previous year’s top slot.
By industry, M&As in pharmaceuticals scored thelargest amount of US$4.1 billion, up 28.4% year on year,
followed by computer-related services and other business services with US$4.0 billion for a tenfold jump, and(No. of deals)
400

96

97

98

99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

U.S.

UK

OthersNumber of deals (RHS)

Australia

2010 2011
1–6 1–6(Year)

0

Source: Thomson Reuters.

mining with US$3.8 billion, an increase of nine times, allindustries where higher-ranking M&As in terms of value
took place.
In the pharmaceuticals industry, patents on bread-andbutter products that have underpinned the growth of major
manufacturers are expiring around 2010 one after another.
Faced with “the year 2010 problem,” pharmaceutical companies find it urgent to acquire profit-yielding areas of business, but the development of new drugs that can make up
for revenues generated by widely-used patented products
requires a lot of time and money. Accordingly, major pharmaceutical manufacturers are proactively pursuing strategies to acquire venture firms that have already succeeded
in developing new drugs and turn them into the new pillarsof earnings. Astellas Pharma’s acquisition of OSI Pharmaceuticals has completed an expected round of large-scale
M&As by major pharmaceutical companies. Quasi-major
and middle-standing drug makers, such as Dainippon
Sumitomo Pharma Co. and Hisamitsu Pharmaceutical Co.,
have been also on the hunt for M&A targets since 2009.
M&As in the pharmaceutical industry have two distinctive objectives. One is the reinforcement of cancer-related
drugs, regarded as the most critical area. M&A deals concluded by Eisai Co. (MGI Pharma, Inc. of the United States)
and Takeda Pharmaceutical Co. (Millennium Pharmaceuticals, Inc. of the United States) in 2008 and by Astellas Pharma in 2010 (OSI Pharmaceuticals) all involved theacquisitions of companies with strong track records in thecancer field.
Another objective is the cultivation of emerging markets. According to the IMS Institute for Healthcare Informatics, a U.S. research firm, while the growth of the world’s
pharmaceuticals market in 2011-2015 is estimated at 3-6%,
the pharmaceuticals markets in emerging countries can be
expected to see the much stronger growth of 13-16%.(Note 14)
The size of emerging markets is expected to grow from
US$150.5 billion in 2010 to US$300.0 billion in 2015, rank-

Because of data constraints, the amount includes the US$4.0 billion
transaction in which a group of subsidiaries of major U.S. media concern
Liberty Global Inc. sold their stakes in Jupiter Telecommunications Co.,
Ltd, a major cable TV operator in Japan to KDDI Corp. Since the transaction actually involves an equity investment in a company in Japan, precisely speaking, it is not considered to be an outward M&A deal.

13

IMS Institute for Healthcare Informatics, “The Global Use of Medicines:
Outlook Through 2015” (May 2011). The emerging markets referred to inthis report are 17 countries, including China, Brazil, India and Russia.

14

33

I

Figure I – 48 Japan’s top 10 outward M&A transactions (2010-June 2011)
Month/YearAcquiring company
Target company
of M&A
Industry
completion
June-10Astellas Pharma Inc.

Country

Industry

Value(US$ million)

Ownership% aftertransaction

Pharmaceuticals

OSI Pharmaceuticals Inc.

U.S.

Pharmaceuticals

3,838

100.0

December-10 NTT

Telecommunications

Dimension Data HoldingsSouth
AfricaBusiness services(computer related)

2,730

100.0

April-11

Healthcare Equipment CaridianBCT Inc.

U.S.

Healthcare Equipment

2,625

100.0

Mineracao Usiminas

BrazilMining

1,930

30.0

Bare Escentuals Inc.

U.S.

Soap and cosmetics
products

1,522

86.9

Oil and natural gas

1,500

32.5

1,465

76.0

1,368

100.0

TerumoDecember-10 Sumitomo Corporation Trading
March-10

Shiseido Co Ltd

Soap and cosmetics
products

Mitsui Oil Exploration
Oil and natural gas
Co.,Ltd.
Mitsui & Co./ Tokyo
Gas & Co., Ltd

Anadarko Petro Corp-Shale
U.S.
Assets (2)Natural Gas Thermal Power
MexicoPlant of Gas Natural (Spain) (3)January-11

NTT DATA

Keane International Inc

U.S.

May-11

Dai-ichi Life Insurance Insurance

Tower Australia Group

Australia Insurance

1,203

100.0

June-11ItochuKwik Fit Ltd

U.K.

1,040

-

May-10June-10

Telecommunications

Trading

Electric, gas and water
distri-bution
Business services(computer related)

Retail sales (tires)

Notes: (1) Rankings are based on the amount of single transaction.
(2) A cquired a 32.5% stake in Anadarko Petroleum’s shale gas project in Marcellus Shale Area, PA. (Shale gas refers to natural gas contained in mudstone,
an unconventional natural gas.)(3) Five natural gas thermal power companies and natural gas pipeline companies.
(4) Th e transaction wherein KDDI acquired (for US$4 billion) from a subsidiary group of Liberty Global (U.S.) shares of Jupiter Telecom (J:com), a major
cable TV provider, is regarded as an investment in a domestic company, and hence is excluded.
Source: Thomson Reuters.

ing with the world’s largest U.S. market. However, the presence of Japanese pharmaceutical companies still remains
mediocre in emerging countries where demand is strong
for generic drugs and vaccines.
Daiichi Sankyo Co., Ltd. was among the first to enter the
emerging markets. In 2008, Daiichi Sankyo acquired Ranbaxy Laboratories Ltd., the largest Indian pharmaceuticals
manufacturer, to gain a foothold in the Indian market andalso took control of its sales channels in Eastern Europe andAfrica, where Ranbaxy has a strong presence. In 2009, thecompany commenced the sale of Daiichi Sankyo productsin Romania and South Africa through Ranbaxy, and began
to launch mainstay products on these markets in 2010.
Moves to cultivate the emerging markets through M&As
are spreading in 2011. Daiichi Sankyo purchased U.S. biotech venture Plexxikon Inc., which is strong in anticancer
agents, for US$935 million in April, and Takeda Pharmaceutical also announced in May that it will purchase major
Swiss pharmaceuticals firm Nycomed International Management GmbH for over 1 trillion yen. With Nycomed already making active inroads into emerging countries suchas Russia, East European countries and Brazil, the acquisition should help Takeda Pharmaceutical, Japan’s top drugmaker, make a full-fledged entry into emerging countries.

trend is continuing from 2010 onward. They are continuing
efforts to expand their business bases in Asia, with Kirin
Holdings, on top of its acquisition of Fraser & Neave of Singapore, making major Vietnamese soft drink producer Interfood Shareholding Co. its subsidiary with an undisclosed
amount of investment, and Asahi Breweries, Ltd. making
an investment of US$500 million in Ting Hsin Group, China’s largest food distributor.
The proactive forays into the emerging market by pharmaceutical companies and beverage manufacturers is being
fueled by the expectation that domestic demand in Japanis less likely to expand significantly in the future. OverFigure I – 49 Number of outward FDI by Japanese companies(by country of target company)(No. of deals)
2011
2007 2008 2009 2010
(January-June)
Total
310
314
285
347
195
U.S.
91
109
72
87
37
EU15
10
7
9
3
Asia
75
79
86
129
81
China
12
13
13
31
12
Singapore
15
7
5
10
7
Thailand
8
9
10
10
13
Malaysia
935
105Indonesia
76510Philippines
35
54
Vietnam
4
5
7
10
7
India
7
11
12
17
8
South and Central America
11
9
13
14
3
Brazil76553Middle East/Africa
1355South Africa
3
3
3
Russia/Eeastern Europe
4
10
4
2
Russia3
10
1

M&As broadening into various industries
Not limited to the pharmaceutical industry, the “cultivation of emerging markets” has become the keyword for
M&As in a wide array of industries. The number of M&A
deals is increasing in regions with many emerging countries, particularly in Asia (see Figure I-49). In the beverageindustry, a string of M&As was carried out by major beverage manufacturers in Asia and Oceania in 2009, and theNote: Only completed M&A deals accounted for in the month of the yearof completion.
Source: Thomson Reuters.

34

I The World Economy, Trade and Direct Investment

seas advances by companies in domestic demand-oriented
industries became noticeable from around 2009, and thescope of aspiring industries is beginning to broaden in 2011,
including services industries such as retail, food service andtransportation. For example, Yamato Holdings Co., Japan’s
top door-to-door parcel delivery service, faced with theslowing growth of the number of parcels delivered in Japan, commenced the parcel delivery service in China andother Asian countries in 2010, striving to cultivate demand
for the Japanese way of fine-tuned delivery services mainly
among wealthy people.
Another characteristic of recent M&As by Japanesecompanies is that they are showing signs of spreading tosuch regions as India, Russia, Eastern Europe and Latin
America. China has the largest number of M&As by Japanese companies among emerging countries, but M&As by
Japanese firms are gradually increasing in other emerging countries/regions. For example, Rakuten, Inc., a major
Internet-based shopping mall operator, which has alreadyadvanced into the Chinese market, acquired a Brazilian
company as the next move to enter the emerging markets(see Figure I-50)．
In addition, some Japanese companies are purchasing foreign firms because of their strong business bases inemerging countries. NTT’s acquisition of the South Africancompany was prompted by the acquired entity’s networkof businesses in over 50 countries. Takeda Pharmaceutical’s acquisition of the Swiss drug maker also represented astrategic move for its advance into emerging countries. In amove to expand global business bases, NTT Data purchased
Italian information system concern Value Team S.p.A. for
US$340 million in June 2011, considering the Italian firm’s
business bases in such countries as Turkey, Brazil and Argentina as valuable.
These M&As of foreign companies with well-establishedbusiness networks often involve targets that are alreadylarge companies requiring hefty acquisition costs. NTT’s
acquisition of the South African firm was the second largest
M&A transaction in value in 2010. Takeda Pharmaceutical’splanned purchase of Nycomed of Switzerland is expected to
become the second most expensive acquisition of a foreignbusiness by a Japanese company, next only to the acquisition of major British tobacco maker Gallaher Tobacco Ltd.
by Japan Tobacco, Inc. (JT) for US$18.8 billion in 2007.
(4) Asian countries active in inward FDI in Japan
Inward FDI in Japan (net flows based on the balance of
payments) in 2010 fell steeply for the second consecutive
year, showing a net outflow of US$1.4 billion. Gross inflow
of capital rose 59.4% to the third largest record of US$59.4
billion, but the outflow of capital was larger. The negative
growth in 2010 was chiefly attributable to a large-scale

Figure I – 50 Examples of overseas expansion of Japanese companies in emerging countries (since 2010)
Industry Target country
Overview
The soba and udon noodle chain, Kazokutei, established joint venture companies first in China and then subsequently in
Food
China, India, India and Thailand. The company plans to extend overseas business centered on Asia through franchise outlets. In 2010services
Thailand, etc. opened two soba and udon restaurants in Shanghai, China, one in Singapore and four in Thailand, and has a plan to set up abusiness in India in 2011. Is also considering an extension into Russia, Vietnam, Indonesia, Canada and Australia.
China,The major small parcel delivery service, Yamato Holdings, bought a 65% stake of a Chinese government related logistics
Hong Kong,
company, Shanghai Bus Logistics, for US$37.0 million, and began parcel delivery service in January 2010. Aims to capture
Transport
Singapore,demand from wealthy consumers in conjunction with the growth in online shopping. Has already started services in
Malaysia
Singapore and Hong Kong and has plans for starting in Malaysia as well in the second half of 2011.
Yamada Denki, a major home appliances retailer, opened its first overseas store in Shenyang, China in December 2010 and
China’s second outlet in Tianjin in June 2011. Aims to differentiate itself from Chinese mass retailers by Japanese-style retail
RetailChina
service characterized by separate sales areas for each type of product. Plans to open five stores in China within three years
and launching online sales covering whole China by the end of 2011.
Mitsui Sumitomo Insurance concluded a capital tie-up agreement with Malaysia’s major financial group Hong Leong andInsurance Malaysia
invested US$300 million in the Malaysian company. Hong Leong’s nonlife insurance business was integrated into Mitsui
Sumitomo Insurance’s Malaysian subsidiary, with Hong Leong focusing on life insurance business (October 2010).
Taiyo Nippon Sanso, Japan’s largest industrial gases supplier, acquired the Indian industrial gases company, K-Air India
Industrial
India
Gases (acquisition value not disclosed). Plans to start producing industrial gas in 2012. This is the first case of a Japanesegasindustrial gas manufacturer starting business in India (March 2010) .
Krosaki Harima, a refractory manufacturer, acquired for US$100 million shares in India’s largest refractory manufacturer, Tata
Ceramics India
Refractory. Krosaki has been exporting products from its manufacturing site in China but with the growth of the Indian market
moved to establish a production base. Aims to expand sales to neighborhood regions including the Middle East (May 2011).
Sompo Japan Insurance Inc. acquired the mid-size Turkish non-life insurance company Fiba Sigorta for US$343 million.
Insurance Turkey
Turkey is seen as an up-and-coming market next to BRICs (November 2010).
Sanyo Foods acquired a 49.99% stake (acquisition value not disclosed) in KL Sanyo Foods (headquarters in Cyprus), theFoodstuffs Russia
holding company for Russia’s third ranking instant noodle manufacturer, King Lion Group. Ultimately looking into local
sales of “Sapporo Ichiban” and other brands (April 2011).
Lotte Holdings (the holding company for the confections Lotte) acquired a Polish chocolate maker Wedel from Kraft Foods
Foodstuffs Polandof the U.S. (acquisition value not disclosed). In addition to securing a foothold for entering the markets of Middle andEastern Europe, aim is to strengthen overall European business (September 2010).
Takasago International bought from Givaudan, the largest Swiss fragrance manufacturer, a flavor and fragrance plant in
ChemicalsBrazilBrazil for US$10 million. Together with existing plants, this strengthens the company’s manufacturing base for Central and(fragrance)
South America. Plans to export to neighboring countries as well (July 2010).
Rakuten bought a stake (75% of outstanding shares, acquisition value not disclosed) in Ikeda, a leading Brazilian electronic
OnlineBrazilcommerce servicing company. Aims to startup a virtual shopping mall business some time in 2011. With Brazil’s online sales
sales
sharply growing, expansion in the market ahead of the leading U.S. and European competitors (June 2011).
Notes: Values are from Thomson Reuters. The dates shown in parentheses are the dates transactions were completed.
Sources: Thomson Reuters, company press releases and news reports.

35

I

Column I − 3
Overseas divisions underpin an earnings recovery for Japanese companies
Earnings in Asia/Oceania regain the pre-financial crisislevel
By region, sales and operating income in Asia/Oceania
continued firm, rising 27.0% and 43.5%, respectively. Operating income earned in Asia/Oceania pushed up the overall
operating income by 12.4%, indicating that the region is getting a firm foothold as an important source of income forJapanese companies. Out of 29 industries covered, 20 industries chalked up higher operating income or returned
to profitability, with metallic products, machinery, electric
equipment and transportation equipment showing marked
improvement. Operating income in the Americas and Europe grew 75.3% and 143.8%, respectively, both owing chiefly
to the return to profitability or large increases achieved by
the transportation equipment industry. The number of industries swinging back into the black or posting growthin operating income came to 18 in the Americas and 17 inEurope, with industries in the red numbering two and one,respectively. Until FY2009, both regions eked out operating
income by reducing operating expenses while sales remained
stagnant. With declines in sales coming to a halt in FY2010,
they managed to monetize business operations. In both regions, however, the levels of operating income have yet to return to the pre-financial crisis FY2007 levels, lagging behind
Asia/Oceania (see Figure 1).
The rate of increase in operating income in this tabulation, after consolidated adjustment, stood at 67.1%, higher
than 47.2% for all companies listed on the Tokyo Stock Exchange (1,551 firms for the accounting year ended in March
2011), underscoring the strong resilience of companies withoverseas divisions.

Operating income earned overseas account for overhalf of the total
According to JETRO’s tabulation of corporate earnings
overseas, based on brief notes on the settlement of consolidated accounts released by 375 listed companies whose fiscal
year ended between December 2010 and March 2010, salesof overseas divisions of Japanese companies (not including
exports from Japan) and their operating income accounted
for 42.4% and 53.1%, respectively, of total sales and operating income, with operating income earned overseas surpassing operating income generated in Japan (see Table 1). The“Accounting Standard for Disclosures about Segments of anEnterprise and Related information” (Statement of the Accounting Standards Board of Japan (ASBJ)) and the “Guidance on the Accounting Standard for Disclosures about
Segments of an Enterprise and Related information” (Guidance of the ASBJ) became applicable from the consolidated
accounting years beginning on or after April 1, 2010, andthis substantially narrowed down the scope of companies fortabulation. Accordingly, on a basis of 362 listed companies
for which data for FY2010 can be compared with the previous
accounting year’s data, sales and operating income of overseas divisions accounted for 41.8% and 57.9%, respectively,of total sales and operating income in FY2009, and for 42.9%
and 54.7%, respectively, in FY2010, with the ratio of operating income earned overseas showing a slight drop. Thisdecline stems from the domestic divisions of the machineryand transportation equipment sectors swinging back into theblack and the marked improvement of earnings of the domestic division of the electric equipment sector, whose operating income showed a steep year-on-year increase of 71.7%
compared with a 50.6% rise in operating income of the overseas division. At any rate, these numbers clearly point to theever-growing importance of overseas divisions for Japanesecompanies (see Table 2).

Table 1 Proportion of operating income overseas of listed Japanese companies(%)(%)
Sales share by region
Operating income share by region
Fiscal Year
Fiscal Year
(Number of(Number ofDomestic Overseas
Domestic Overseas
Asia/
Asia/
companies)
companies)
Americas Europe
Other
Americas Europe
Other
Oceania
Oceania
FY1997 (582)
71.4
28.6
11.3
5.4
5.8
6.1
FY1997 (582)
76.6
23.4
9.8
3.4
4.8
5.3
FY1998 (593)
71.1
28.9
13.4
6.0
4.9
4.6
FY1998 (593)
73.4
26.6
13.8
4.8
4.4
3.6
FY1999 (643)
72.5
27.5
12.4
5.4
5.5
4.2
FY1999 (643)
75.0
25.0
14.1
2.1
5.0
3.7
FY2000 (668)
71.9
28.1
12.6
5.2
6.4
3.9
FY2000 (668)
79.9
20.1
10.4
0.7
6.0
3.0
FY2001 (715)
69.7
30.3
13.7
5.5
6.7
4.4
FY2001 (715)
76.0
24.0
12.4
0.6
6.7
4.2
FY2002 (728)
68.0
32.0
13.7
6.0
7.8
4.6
FY2002 (728)
72.9
27.1
13.0
2.8
7.2
4.1
FY2003 (738)
67.9
32.1
12.9
6.1
8.2
4.9
FY2003 (738)
73.3
26.7
11.1
4.3
7.5
3.7
FY2004 (774)
67.3
32.7
12.2
6.4
8.8
5.3
FY2004 (774)
71.8
28.2
10.9
4.7
8.6
4.0
FY2005 (804)
66.1
33.9
12.5
6.3
10.1
5.0
FY2005 (804)
70.8
29.2
10.8
4.7
10.0
3.7
FY2006 (832)
66.2
33.8
12.6
6.9
10.3
4.1
FY2006 (832)
73.5
26.5
9.1
4.1
8.3
5.1
FY2007 (866)
63.1
36.9
13.0
8.5
12.0
3.5
FY2007 (866)
67.1
32.9
8.7
6.8
12.2
5.2
FY2008 (890)
63.8
36.2
11.0
7.0
14.8
3.4
FY2008 (890)
47.5
52.5
1.9
3.6
39.4
7.6
FY2009 (887)
65.0
35.0
11.1
6.9
13.3
3.7
FY2009 (887)
56.5
43.5
9.5
3.0
23.8
7.1
FY2010 (375)
57.6
42.4
15.3
7.3
15.0
4.8
FY2010 (375)
46.9
53.1
14.1
3.4
24.6
11.1
Notes: (1) C ompanies covered are listed companies closing their accounting year between December and March (excluding banks, securities houses
and insurance companies) that make segment information by region of operations available.
(2) F or FY2010, companies covered are those that announced brief notes on the settlement of accounts by May 31, 2011, and those that announced financial reports by June 27, 2011.
(3) Sales include internal sales between segments.
(4) Since companies covered include listed subsidiaries, there may be some overlapping.
(5) “Others” include combined items of multiple regions (for example, “North America” and “Overseas”).
(6) Year-on-year percent changes are calculated only for companies for which comparison with the previous year is possible.
(7) Shares by region are the shares in the sum before consolidation adjustment.
Sources: T ables 1 and 2 and Figures 1 and 2 are compiled based on Toyo Keizai Corporate Financial Carte CD-ROM (up to FY2005) and brief noteson the settlement of accounts and financial reports (FY2006-FY2010) of individual companies.

36

I The World Economy, Trade and Direct Investment

Table 2 Percentage change in operating income overseas of listed Japanese companies(Year-on-year, %)(Year-on-year, %)Sales percent change
Operating income percent change
Fiscal Year
Fiscal Year
(Number of(Number of
World
World
companies)
companies)
Domestic Overseas
Domestic Overseas
Asia/
Asia/
Americas Europe
Other
Americas Europe
Other
Oceania
Oceania
FY1998 (556)
-7.0
-7.5
-5.8 10.9
3.0 -21.6 -29.3
FY1998 (556) -20.0 -23.7-8.0 12.9 14.9 -26.4 -45.7
FY1999 (576)
-3.6
-2.9
-5.3
-7.9
-9.6
11.5 -10.1
FY1999 (576)
7.8
9.7
2.7
13.1 -50.6 22.0 10.9
FY2000 (620)
4.2
3.0
7.5
7.4
1.2 22.2-3.8
FY2000 (620) 26.8 34.8
2.9
-4.7 -58.5
51.4
2.1
FY2001 (650) -2.7
-6.0
5.8
7.6
4.8
1.2
9.1
FY2001 (650) -31.3 -35.6 -14.6 -13.2 -33.0 -22.1-0.2
FY2002 (683)
2.4
0.0
7.7
2.3 11.3 16.8
6.4
FY2002 (683) 40.2 35.7 54.0 40.8 389.8 49.0 38.1
FY2003 (694) -0.4
-0.9
0.9
-4.9
5.4
3.6
7.5
FY2003 (694) 15.5 15.7 15.2
-0.4 86.3 24.4
2.6
FY2004 (710)
7.4
6.1 10.0
2.9
11.7
17.1
15.1
FY2004 (710) 15.4 14.4 18.0
17.6
6.7
21.1 26.3
FY2005 (748) 10.3
7.8 15.4 13.7 10.5 28.0
4.2
FY2005 (748) 14.6 12.4 20.3
16.1 18.2 33.7
5.4
FY2006 (773) 13.9 14.3 13.0 10.3 18.7 16.7
3.9
FY2006 (773) 28.2 33.4 14.9
6.5 38.2
2.9
47.8
FY2007 (786)
7.9
6.4 10.5
7.5
19.1 15.0-8.5
FY2007 (786) 11.3
7.4 20.3 -10.0 55.0 41.2 12.5
FY2008 (841) -13.0 -12.3 -14.2 -18.8 -16.0 -11.1-7.4
FY2008 (841) -55.0 -65.5 -38.7 -89.8 -69.9 -20.0 -10.8
FY2009 (854) -12.8 -12.5 -13.4 -12.8 -22.0-8.0 -15.2
FY2009 (854) 20.1 25.2
14.1 335.5 -19.7
7.1 -28.4
FY2010 (362)
8.3
6.2
11.1
4.9
-0.4
27.0
8.1
FY2010 (362) 59.5 71.7 50.6 75.3 143.8 43.5 25.9

Overseas divisions contributing to Japanese firms’
enhanced profitability
The overseas divisions, including those in Asia/Oceania,
are increasing their contribution to the profitability of Japanese companies. Here, we use the return on asset (ROA; operating income/total assets at the end of the accounting year)
as an indicator of profitability to make comparison between
FY2010 and the past (the average for FY1998-2001). The ROA
for the domestic divisions did not show much change, only
inching up from 4.3% to 4.8%, while the ROA for the overseas divisions significantly increased from 4.0% to 7.6%, securing a higher profitability than the domestic divisions (seeFigure 2). In particular, the ROA for the overseas divisionsin Asia showed a remarkable growth from 5.2% to 12.9%,
with this trend particularly noticeable for industrial materials and processing manufacturers. Overall profitability did
not show much improvement in the Americas or Europe,
but the nonmanufacturing sector’s profitability did improvesignificantly, pushing up the ROA for the overseas divisions
from 2.1% to 5.1%, higher than 4.1% for the domestic divisions. The overseas sales ratio for the nonmanufacturing sector (73 companies, excluding the mining and constructionindustries) in FY2010 stood at 15.8%, far lower than 46.4%
for the manufacturing sector (260 companies), and the overseas sales ratio for Asia/Oceania was also low at 8.3%. In
Asia, some segments of services industries have yet to fully
develop, and restrictions on the entry of foreign companies
are maintained in not a few fields from the standpoint of

Figure 1 Trends of operating income of listed companies
by region (FY1997=100)
600.0
500.0

World

Domestic

Americas

EuropeAsia/Oceana

Others

400.0
300.0
200.0
100.0
0

97

98

99 2000 01

02

03

04

05

06

07

08

09

10 (FY)

Note: Figures are indices against 100 for operating income of FY1997
based on Table 2.

protecting and fostering domestic industries. On the other
hand, the rising income levels are expected to increase theneeds for various services and restrictions on foreign capitalare being relaxed gradually in recent years, raising hopes foran expansion of business opportunities over the medium andlong term. If nonmanufacturers actively expand into Asiaand other overseas markets and build business structures toearn income overseas, their profitability can be expected to
improve.

Figure 2 Return on asset (ROA) by major industry/region(1) Average for FY1998-FY2001
15.0

15.0

World
Domestic
Entire overseas
Asia/Oceania
Americas
Europe

10.0

5.0

0.0

(2) FY2010

(%)

All
industriesAll
manufacturing

(%)

World
Domestic
Entire overseas
Asia/Oceania
Americas
Europe

10.0

5.0

0.0

Industrial
Processing
Other Nonmanufacturing
materials manufacturing manufacturing
manufacturingAllindustriesAll
manufacturing

Industrial
Processing
Other Nonmanufacturing
materials manufacturing manufacturing
manufacturing

Notes: (1) C ompanies covered are those for which figures for operating income by region and total assets are available for each fiscal year, and theaverage for each fiscal year was used for FY1998-FY2001.
(2) The ratio of operating income to total assets = operating income/total assets at fiscal year-end.
(3) Th e industry classification follows the Securities Identification Code Committee (SICC) and the Survey of Corporate Behavior (Cabinet Office).

37

Iwithdrawal from the finance sector in Japan in 2009, whichwere accounted for in the 2010 statistics. Given the sheer
size of the withdrawal, the massive outflow of capital is assumed to have stemmed from the withdrawal of Citigroupof the United States from the Nikko Cordial group.(Note 15)
Another adverse impact came from the negative growth ofreinvested earnings (equivalent to increases/decreases inretained earnings of Japanese subsidiaries of foreign companies) reflecting the downward trend since the financial
crisis of corporate earnings of foreign affiliates based in Japan. The net withdrawal for the full year was recorded forthe first time since 2006, when Vodafone Group PLC soldoff its Japanese unit to the Softbank group.
By type of investment, equity capital, including acquisitions of new shares and sales of equity shares, registered a
net inflow of US$7.5 billion, while reinvested earnings saw
a net outflow of US$2.9 billion and other capital, whichmainly covers the lending and borrowings between parent
companies and subsidiaries, also posted a net outflow of
US$6.0 billion (see Figure I-51). Reinvested earnings turnedto the net withdrawal for the first time in 10 years since
2000. The net outflow of other capital appears to reflect thefrequent collection of funds from Japanese subsidiaries byparent companies overseas.
Statistics as of April 2011 show that inward FDI in Japan
recorded a net outflow of US$700 million, affected mainlyby the withdrawals of U.S. companies in the telecommunications and finance/insurance sectors.

Mexico and Bermuda (British overseas territory) posting particularly large net withdrawals of US$7.3 billion and US$1.0
billion, respectively. Mexico’s balance of direct investment inJapan stood at only US$6 million at the end of 2009. This canbe explained that Mexico in 2010 purchased financial claims
on Japan held by other countries and then withdrew its investments in Japan during the first quarter.(Note 16) The Mexican move is believed to be related to Citigroup’s capital withdrawal described earlier. A net outflow of capital to Bermuda
was also concentrated on the finance sector.
Europe’s inward FDI in Japan plummeted 97.5% to
US$204 million, affected by the Netherlands’ net withdrawal of US$7.7 billion. An outflow of capital to the Netherlands, where holding companies of many multinational
corporations are located, stems, in many cases, from thewithdrawal of foreign companies from Japan or the businessrestructuring between foreign companies. In the second
quarter of 2010, for example, the chemicals and pharmaceuticals industry posted a capital outflow of US$2.5 billion,
which apparently reflects the consolidation of subsidiaries
in Japan following the merger of U.S. pharmaceutical companies. The Netherlands also registered net withdrawal of
US$3.6 billion for the telecommunications industry in the
fourth quarter of 2010.
For Europe, Germany and the UK made sizable direct
investment in Japan. An inflow of US$2.2 billion from Germany was ascribable largely to Volkswagen’s investment inSuzuki Motor Corp. to raise its equity stake to 19.9%. An
inflow of US$4.8 billion from the UK is believed to havestemmed mainly from the purchase by an investment company based in UK of shares in Mizuho Financial Group, Inc.
offered for public subscription overseas. A similar transac-

By region, Asia is the largest investor in Japan
Looking at inward FDI in Japan in 2010 (see Figure I-52),
Latin America showed net withdrawal of US$7.7 billion, with

Figure I – 52 Trends of Japan’s inward FDI by region

Figure I – 51 Trends of Japan’s inward FDI by type
(US$ million)
80,000(US$ million)
30,00060,00025,00040,00020,00020,00015,0000

10,000-20,000

5,000-40,0000-60,000-5,000-80,000

96

97

98

99 2000 01

02

03

04

05

06

07

08

09

10

Equity capital (inflow)

Equity capital (outflow)

Reinvested earnings (inflow)

Other capital (inflow)

Other capital (outflow)

Inward FDI (net)-10,000

10 11
1–4 1–4(Year)

96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10

Asia

North America

Latin America

EuropeOthers

10 11
1–4 1–4 (Year)

World

Note: The yen-based value is converted to dollars for each quarter, using the
average quarterly Bank of Japan interbank rate, and the annual sum isthen calculated.
Source: “Balance of Payments Statistics” (Ministry of Finance and Bank ofJapan).

Note: Th e yen-based value is converted to dollars for each quarter, using the
average quarterly Bank of Japan interbank rate, and the annual sum isthen calculated.
Source: “ Balance of Payments Statistics” (Ministry of Finance and Bank ofJapan).

16
When financial claims on Japan are traded between nonresidents, suchtransactions are not reflected in flow statistics and recognized in balance
statistics. Accordingly, countries that bring in capital and countries thatwithdraw capital do not necessarily match in flow statistics. Flow statistics
account for accrual and disappearance of financial assets and liabilities ascribable to foreign countries, while balance statistics record end-year figures after country-by-country reclassification of existing assets.

According to the public notice posted and financial statement reports
filed by Citigroup Japan Holdings Corp., the company reduced its equity
capital and capital reserves by a combined amount of approximately 1
trillion yen in August 2010.

15

38

I The World Economy, Trade and Direct Investment

tion was conducted in 2009 between a Japanese financial institution and a European investment bank. Since financial
claims purchased by overseas investment companies areoften resold after short periods of holding, they are highly
likely not to be included in the balance of direct investment
in Japan.
Direct investment from the United States amounted to
US$3.0 billion, recovering somewhat from the low of US$1.8
billion in 2009. However, a net outflow of US$4.2 billion wasrecorded in the third quarter of 2010, apparently reflecting
the withdrawal of funds by a U.S. financial institution.
Direct investment from Asia showed a jump of about
threefold to US$3.1 billion, the largest amount among major regions. Singapore led with US$1.6 billion, followed byHong Kong with US$700 million, and China and South Korea with roughly US$300 million each. Investment in realestate in Japan by Asian government-affiliated enterprises,
which was very active around 2008, showed signs of reactivation, with a subsidiary of Temasek Holdings Pte. Ltd., aSingapore government-affiliated investment firm, purchasing distribution facilities and warehouses one after anotherin Japan. A large-scale investment in the general machineryindustry is believed to have come from Hong Kong.
China made the largest amount of direct investment inJapan since 1987, the year when statistical data on its direct
investment began to be made available. In the second halfof 2010, an inflow of US$100 million each was seen in suchindustries as wholesale/retail and wood/pulp, including an
investment of 4 billion yen in Renown, Inc. by major textile maker Shandong Ruyi Science & Technology Group Co.
While China is said to have made active investment in realestate in 2010 (see Column I-4), no significant real estatetransactions could be confirmed in statistics on direct investment. China is believed to have made not a few investments in Japan through Hong Kong and tax havens.
An inflow of nearly US$300 million came from South
Korea mainly for nonmanufacturing industries, such as finance and wholesale/retail.

flows, while the services industry had the largest net inflow
of US$900 million, mainly reflecting investment from theUnited States.
Massive investments seen in the automobile industry
M&As of Japanese companies by foreign companies in2010 increased 33.6% to US$7.3 billion to post the first yearon-year rise in three years (see Figure I-53). M&As by German companies, at US$3.9 billion, accounted for over halfof the total, including Volkswagen’s investment in Suzuki
Motor and Daimler AG’s investment in Nissan Motor Co(US$778 million for an equity share of 3.2%; considered to
be securities investment). Germany ranked first for the firsttime in M&A value in Japan by country.
M&As of Japanese companies by U.S. companies
amounted to US$1.7 billion, the smallest since 1997. The
United States ranked second in terms of value, slippingfrom the top slot it had maintained since 2002. In termsof the number of M&A deals, however, the United States
retained the top position with 43 deals in 2010.
The number of M&As of Japanese companies by Chinese companies reached a record 19 deals, putting China
in second place after the United States. Cases of Chinesecompanies acquiring or making investment in Japanesemanufacturers with high technological competence were
noticeable, including the acquisition of solar cell-related
equipment manufacturer Evatech Co. by Liaoning GaoKe
Energy Group Co. (A-Power Energy Generation Systems,Ltd.) for US$49.90 million and Shandong Ruyi Science &Technology Group’s investment in Renown.
The value of M&As of Japanese companies by foreigncompanies in the first half of 2011 reached US$7.4 billion,
already surpassing the M&A value for the entire 2010, lifted
mainly by the acquisition by Prudential Financial Inc. of
the United States of AIG Star Life Insurance Co., a groupcompany of American International Group, Inc. (AIG) (seeFigure I-54). The transaction, which represents the transferof business between U.S. companies in the same industry, isassumed to have no impact on statistics on inward direct investment in Japan. Among other cases, ON Semiconductor
Corp. of the United States acquired Sanyo Semiconductor
Co., a subsidiary of Sanyo Electric Co., for US$665 million.
Sanyo Electric pulled out of the semiconductor business.

Investment in the manufacturing sector firm, while a
big outflow seen in the nonmanufacturing sector
By sector, the manufacturing sector had a net direct investment inflow of US$1.8 billion, while the nonmanufacturing sector saw a net outflow of US$3.1 billion.
The manufacturing sector posted a net inflow of over
US$1 billion for four years on end since 2007 to show a relatively firm trend, though the net inflow in 2010 was down asharp 49.4% from the previous year. The transport machinery and equipment industry had the largest net inflow among
all industries, mainly due to Volkswagen’s investment in Suzuki Motor. The general machinery and equipment industry
followed suit with a net inflow of US$1.1 billion, apparently
reflecting investment from Hong Kong. The precision instrument industry also recorded a net inflow of US$300 million
due largely to Hoya Corp.’s sale of its hard disk glass media
manufacturing operation to a U.S. company.
In the nonmanufacturing sector, the finance/insurance
and telecommunications industries recorded large net out-

Figure I – 53 Trends of values of Japan’s inward M&As
(US$ million)(No. of deals)

30,000250

Value

25,000

Number of deals
200

20,000150

15,000100

10,000

50

5,000
0

96

97 98 99 2000 01 02 03 04 05 06 07 08 09 10

Source: Thomson Reuters.

39

0
10 11
1–6 1–6 (Year)I

Figure I – 54 Japan’s top 10 inward M&A transactions (2010-June 2011)
Month/Year
Target company
Acquiring company
of M&A
Industry
Country
Industry
completion
February-10 AIG Star Life Insurance
Insurance
Prudential Financial
U.S.
Insurance
January-10 Suzuki Motor
Tarnsport equipment Volkswagen AG
Germany Tarnsport equipment
April-10
Nissan Motor
Tarnsport equipment Daimler AG
Germany Tarnsport equipment
Electronic/electric
ON Semiconductor
Electronic/electric
January-11 Sanyo Semiconductor
U.S.
equipment
Corporationequipment
Fuji Fire & Marine
American International
March-11
Insurance
U.S.
Insurance
Insurance
Group (AiG) Inc.
General equipment
Investment company,
March-11 Tsubaki Nakashima
Carlyle GroupU.S.
(bearings)
securities business, trust
Business services
Kohlberg Kravis Roberts &Investment company,
July-10
IntelligenceU.S.
(temporary staffing) Co. (KKR)
securities business, trust
January-11 Mitsubishi Fuso Truck & Bus Tarnsport equipment Daimler AG
Germany Tarnsport equipment
Boehringer Ingelheim
April-10
SS PharmaceuticalPharmaceuticals
Germany Pharmaceuticals
GmbH
Socrates specual purpose
Banking, bank holding
October-10 company (UNIQLO
Retail (apparel)
Deutsche Bank Group
Germany
company
flagship outlet)
HOYA (hard disk glass media
HOYA Western Digital
Electronic/electric
June-10
Precision instruments
U.S.
manufacturing operations
Corporationequipment
and related assets)
Telecommunication Investor group, including SouthJanuary-11 Invoice
Investor groupservicesmanagement
Korea

4,800
2,527
778

Ownership% aftertransaction
100.0
19.9
3.2

665

100.0

536

97.7

469

96.6

Value
(US$ million)

369

100.0

360

89.3

302

93.8

237

100.0

234

100.0

199

76.7

Note: Industry classificaiton by Thomson Reuters. The name of an acquiring company is the name of the ultimate parent company of an acquiring company.
Source: Thomson Reuters.

accumulation and the attractive points of Japanese companies, and (2) cases where investment is pump-primed by theJapanese markets. Cases in (1) include investment promptedby moves to strengthen the global alliance as seen in the automobile industry, investment for the purpose of acquiring
brands and technologies as seen in Shandong Ruyi Science& Technology Group’s capital participation in Renown, andinvestment in response to the sell-off of noncore businesses
by Japanese companies as seen in Hoya’s sale of its glass media manufacturing operation. Recent cases in (2) include theexpansion of retail stores by European and North American
fashion retailers and the inauguration of services by lowcost carriers (LCCs).
Regarding active inward FDI in Japan by Asian companies in 2010, from the perspective of Japan’s industrial accumulation, many Chinese and Taiwanese manufacturers advanced into Japan for the purpose of acquiring technologies
and knowhow from Japanese companies (see Figure I-56).

The balance of inward FDI in Japan drops by 1 trillion yen
The balance of inward FDI in Japan at the end of 2010
fell 5.0% year on year to 17,502.0 billion yen.(Note 17)
By region, the balance of direct investment from Asia
surged 18.8% to 1.9 trillion yen. The share of investment
from Asia also rose 2.1 points to 10.8%, the first double-digit share since 1997. By country, the balance of direct investment increased for such countries as Singapore, Malaysia,
China and South Korea. Pushing up the balance was investment in finance and other nonmanufacturing industries
for Singapore, investment in the steel/nonferrous/metals
industry for Malaysia, and investment in wood/pulp andother manufacturing industries for China.
The decline in the overall balance is ascribable almost
entirely to the United States, whose balance fell steeply fromsome 7 trillion yen at the end of 2009 to some 6 trillion yen
at the end of 2010, contributing nearly 100% to the overall
drop of about 1 trillion yen, largely due to the withdrawal of
capital by Citigroup.
The ratio of the balance of direct investment in Japan tonominal gross domestic product (GDP) came to 3.7%, registering the first drop since 1998 (see Figure I-55).

Figure I – 55 Trends of Japan’s inward direct investment position(%)(Trillion Yen)
20

Direct investment in Japan may be pump-primed by
Japan’s industrial accumulation and markets
Inward FDI in Japan can be broadly divided into (1) cases where investment is pump-primed by Japan’s industrial

18

Others16

North America

EuropeLatin America
Asia
2.4

12

1.9

10

6
4

2.0

0.7

0.7

0.9

3.5

2.5

2.0

2.0
1.5

1.1

1.0

0.6

0.5

2
0

4.0
3.7

3.0

2.5

1.3

8
17
The US$-denominated balance of inward FDI in Japan rose 7.4% year
on year due to the yen’s appreciation. Given the large discrepancy withthe yen-quoted balance, we made the year-on-year comparison in termsof yen. While the balance of direct investment is shown on a book value
basis (flow statistics is marked to market), the market to market balanceof direct investment in Japan, released by the Bank of Japan for reference,stood at 19.2 trillion yen at the end of 2010, a decrease of about 1.5% froma year before.

2.9

Inward FDI balance/GDP (RHS)

14

3.9

3.7

96

97

98

99

2000

01

02

03

04

05

06

07

08

09

0.0
10 (Year)

Sources: “Direct Investment Balance Statistics” (Ministry of Finance andBank of Japan) and the Economic and Social Research Institute of
the Cabinet Office.

40

I The World Economy, Trade and Direct Investment

In terms of Japan’s markets, there were many acquisitionsof real estate assets, such as those by the Singapore government-affiliated investment company and Hong Kong firms,
and Asian LCCs launched flights to and from Japan, including Air Busan Co. of South Korea and AirAsia of Malaysia.

I

Figure I – 56 Major investment cases by Asian companies in Japan in 2010
Company
Investment value Investment
Country
Overview(Estimates)
form
Industry
Liaoning Hi-Tech Energy Wind power generator
Acquired Evatech (Kyoto), an LCD manufacture and sales
4.8 billion yen
M&AGroup (A Power Energy) manufacturecompany. Evatech’s facilities will survive as R&D center.
Acquired 41.25% share of Renown, an apparel and textile
Shandong Ruyi Group Textiles
4.0 billion yen
M&A
China
manufacture and sales company.
Acquired HYNT, an industrial film production company
CITIC Group
Investment fund
4.1 billion yen
M&A
through funds established in Belgium.
Liquid crystal panel
Acquired M.SETEK (Tokyo), which manufactures silicon
AUO
15.0 billion yen
M&A
manufacture
wafer for solar batteries.
TaiwanWith Itogumi Construction (Hokkaido), a general contractor,
Solar battery
Motech270 million yen Venture established a joint company, Itogumi Motech. Manufactures
manufacture
photovoltaic modules.
A subsidiary company of Temasek Holdings, a government
Real estate investment 1.0 to
Mapletree
M&A
investment corporation. Acquired six facilities in 2010,
fund
4.8 billion yen
including an industrial warehouse in Kashiwa-city, Chiba.
Singapore
Real estate investment
From 2008, acquired domestic nursing homes. In 2010,
Parkway Life REIT
7.0 billion yen
M&A
fund
acquired eleven facilities.
YTL Hotels &YTL, a Malaysian conglomerate, acquired Niseko Village
Hotels
6.0 billion yen
M&A(facilities such as Hilton Hotel, Hokkaido).
Properties
Malaysia
AirAsia X, long-flight division of AirAsia (LCC), the largest
Flightdiscount airline in East Asia, introduced a new route between
AirAsia
Airlines
services
Kuala Lumpur and Haneda.
Introduced Busan - Kansai Airport route and Busan Flight
Fukuoka Airport route. Fukuoka mayor looks forward to the
Air Busan
Airlines
services“construction of cross-border economic sphere.”South Korea
Acquired all shares of Livedoor. NHN is the operating
NHN
Software services
6.3 billion yen
M&A
company of “Naver,” the largest portal site in South Korea.
Sources: JETRO SENSOR (May 2011), company press releases and news reports.

41

Column I − 4
Acquisition of land by foreign capital and international rules
cable when they are necessary for the protection of essential
security interests “relating to the supply of services as carriedout directly or indirectly for the purpose of provisioning a
military establishment” and “relating to fissionable and fusionable materials or the materials from which they are derived.” These provisions are in conformity with provisions for
exceptions under the OECD Code of Liberalization of Capital Movements of 1960. At the Organization for Economic
Cooperation and Development (OECD), Japan, as sectors
with restrictions on foreign capital under the OECD Code,specifies electric power, gas and water service as well as railroads for public order-related exceptions, and nuclear power,
aircraft and space development for security-related exceptions. However, GATS Article XIV and the OECD Code only
provide rules for exceptional circumstances and do not serveas the basis for broad restrictions on the acquisition of landby foreign capital. The above are currently applicable rules.
Then, what about ongoing negotiations on trade in services under the WTO Doha Round? In its initial requests
made in 2002, Japan sought the “abolition of restrictions on
the acquisition of land and other real estate” as cross-sector
commitments of other member countries. The Japanese government has made the request presumably bearing the abolition of restrictions on foreign direct investment by Japanesecompanies in mind.
In the initial requests, Japan has also sought the “abolition of all measures listed as most-favored-nation-treatment
exemptions.” While GATS Article II provides for obligationsof member countries to accord most-favored-nation treatment, member countries can list exemptions to Article II
obligations, or the principle of most-favored-nation treatment under Annex on Article II Exemptions. For example,
the United States lists exemptions on the acquisition of land
across all service sectors. In contrast, as Japan has not listed
any exemptions, it is not allowed to restrict the acquisition ofland against any specified WTO member country.
As described above, Japan’s basic policy on the acquisition of land in WTO-related service sectors has been open
overall. Currently, land-related rights of foreigners are regulated under the Act on Foreign National’ Rights in Relation
to Land written during the Taisho Period, but this law is noteffectively functioning because of the absence of corresponding government ordinances. Furthermore, Japan’s obligations under GATS and its negotiating stance in the WTO
Doha Round indicate that measures the Japanese government can take regarding the acquisition of land by foreigners
are limited.
Among other international agreements, some bilateral
investment agreements have provisions concerning the acquisition of land by foreigners. For example, under the Japan-ROK investment agreement, South Korea (ROK), in Annex I listing “exceptional sectors and matters,” cites “foreignacquisition of land” as Item 9. On the other hand, as Japan
does not list any exception related to the acquisition of land,
Japan cannot take measures for restricting the acquisition ofland that do not conform to national treatment or the principle of most-favored-nation treatment as prescribed in Article
2 of the bilateral investment agreement, except as measures“for the protection of its essential security interests” or “forthe maintenance of public order,” as provided for under theagreement’s Article 16.
(Reference) Kazuhiro Nakatani, “Recent Issues Concerning Restrictions on Foreign Capital,” March 2011, Jurist
No.1418 (Yuhikaku Publishing Co., Ltd.)It has been pointed out that foreign investors, particularly
Asian companies, are very actively acquiring land in Japan,
including forests. The Forestry Agency’s announcement on
the results of “Survey on the Buyout of Forests by Foreign
Capital” in December 2010 indicates the growing interest inJapan in the status of land acquisitions by foreign capital. According to the survey, there were a total of 25 cases of forest
acquisitions by foreign corporations or foreign nationals in
the four years between 2006 and 2010. Of these, 10 transactions were concluded by Hong Kong-based companies andfour acquisitions were made by individuals of Singaporeannationality, suggesting the high ratio of land acquisitions by
Asian firms or individuals. Though it still remains difficult tojudge whether or not the acquisition of land in Japan by foreign capital is increasing, it appears certain that cases of landacquisitions by foreign investors are not rare in recent years.
One of the reasons for this trend may be that Japan has
not imposed particularly rigid restrictions on the acquisition of land by foreigners under international commitmentsof the World Trade Organization (WTO) and other international organizations.
Under WTO rules, relevant provisions are included in the
General Agreement on Trade in Services (GATS). As one of
the four modes of trade in services, GATS refers to the supply
of a service “by a service supplier of one Member, throughcommercial presence in the territory of any other Member”(the third mode of services). As legal restrictions on the acquisition of land work as barriers to the establishment ofcommercial presence by foreign companies, countries needto abide by their commitments concerning the third modeof services when they set up restrictions on the acquisitionof land.
Under commitment schedules of GATS (based on the
Uruguay Round agreement), WTO members, along with restrictions on each service sector, can specify restrictions onmarket access and national treatment principles common foreach mode in all service sectors (cross-sector commitments).
If a member country specifies restrictions on the acquisitionof land as the cross-sector commitment for the third modeof services on its commitment schedule, it can set up such
restrictions under domestic law without causing any legal
problems under WTO rules.
For example, China, in its GATS commitment schedule,
includes the restriction of 40 to 70 years on the use of land byforeigners in its cross-sector commitment, maintaining that
“The land in the People’s Republic of China is State-owned.
Use of land by enterprises and individuals is subject to thefollowing maximum term limitations.” On the other hand,
Japan does not specify restrictions on the use of land in its
GATS commitment schedule. Consequently, Japanese laws
and regulations that restrict the acquisition of land are notallowed to be restrictive to foreigners under GATS.
However, since GATS provides for general exceptions under Article XIV, Japan can set up restrictions to that extent.
In relation to the acquisition of land, important provisions
are “measures necessary to protect public morals or to maintain public order” (Article XIV(a)) and “security exceptions”(Article XIV:1).
When a member country imposes exceptional restrictions on the supply of services (including the establishmentof commercial presence on acquired land) by foreign companies or individuals to “maintain public order,” GATS rules
limit such exceptional restrictions to “only where a genuine
and sufficiently serious threat is posed to one of the fundamental interests of society.” Security exceptions are appli-

42

II World Trade Rules under the New Economic Environment
tariff negotiations only beginning later with the Uruguay
Round. The commitment outlined in this declaration to secure the same level of ambition regarding market access forthese two differing trade areas has become a factor behindthe difficulty of negotiations seen today.
Another factor that has made the Doha Round complicated has been the single undertaking principle where“nothing is agreed until everything is agreed.” This same
principle is seen as a reaction against the fact that differences had occurred in the rights and obligations between
GATT member nations, since the various agreements
reached at the Tokyo Round of the GATT in the 1970s (Tokyo Round “codes”) were voluntary in nature (for example,
only 32 countries signed an agreement that would become
the agreement on technical barriers to trade [TBT agreement]). On the other hand, the fact cannot be denied thatthe single undertaking principle has made negotiations
rigid and delayed rule making in the WTO.
In light of the current situation in which progress seems
not to be expected in negotiations on the main issues of agriculture and NAMA, WTO Director-General Pascal Lamy
proposed an early harvest program for negotiating certain
matters focused on those relating to least-developing countries (LDC) at the Trade Negotiations Committee meeting
held at the end of May 2011 (Figure II-1). This can be viewed
as a major turning point for the Doha Round. However,Item 47 of the Doha Ministerial Declaration of 2001, although based on the single undertaking principle, also has
leeway for an early harvest program in consideration of thebalance of overall negotiations, meaning the content of this
proposal does not totally deviate from that of the ministerial declaration. As of the end of June 2011, it appears that
adjustments on what should be covered in this early harvest

1. WTO Rules: Significance and Issues(1) The prospects of the Doha Round and the role ofthe WTOThe Doha Round reaches a turning point 10 years afternegotiations commence
10 years have passed since the launch of the Doha Development Agenda (the Doha Round) at the WTO’s Fourth
Ministerial Conference in November 2001. During thistime, irreconcilable gaps in values relating to trade liberalization and development have caused talks to breakdown
and restart on several occasions, illustrating that challenges
persist and still no prospects for an agreement are in sight.
Essentially, the history of the Doha Round has been marked
by China, which joined the WTO at around the same timeas the Doha Round began, and other developing nations increasing their influence in conjunction with their economic
growth, which has made developed nations-led consensus
building impossible. For example, immediately prior to
the WTO’s Fifth Ministerial Conference held in Cancun,
Mexico in 2003 where talks broke down, the U.S. and EU
had largely reached an agreement on the key issue of agricultural subsidies. This agreement reached between the twopoles of the U.S. and EU should have held the sway to rapidly accelerate later negotiations.
Although there are various reasons behind the rift innegotiations, agriculture and non-agricultural market access (NAMA) are the two major issues. Article 24 of theHong Kong Ministerial Declaration adopted at the WTO’s
Sixth Ministerial Conference in 2005 mentions a “balance
between agriculture and NAMA.” This was seen as recognition of need for the reduction of tariffs on NAMA by developing nations, which was ofstrong interest to developed
Figure II – 1 The Doha Round early harvest proposal
nations, and the reduction ofClassification
Main issues
TargetFirst Track• In principle duty-free and quota-free market access for LDC
Early harvest at thedeveloped nation subsidies,(for LDCs)
products and related rules on the country of origin
December 2011 WTO
in particular domestic sup• Waiver of obligations for LDCs (liberalization of services, etc.)
Ministerial Conference.
• Cotton issue (reduction of subsidies by developed countries)
port, for agricultural prodSecond Track • Trade facilitation
Aim to reach a firstucts, which was the topic of(LDC-Plus) • Agricultural export subsidies
agreement on the possible
concern for developing na• Some non-tarrif barriers to non-agricultural market accessscope at the December• Fisheries subsidies
2011 WTO Ministerialtions. However, in contrast• Implementation issues (relaxation and waiver of existing
Conference. Developing
to the conventional focus ofobligations of developing countries under WTO agreements)
countries hesitant towardthe 47-year old GATT system• Special and different treatment (strengthening and review ofa LDC+ framework. Someconsideration given to developing countries)
sectors likely to clash over(the system prior to the estab• Reduction of duties on environmental goods or agreement tomaking rules for fisheries
lishment of the WTO known
maintain present tariff rates
subsidies.
Third Track • Non-agricultural market access (tariff reductions, elimination by Clarify roadmap at theas the General Agreement on
sector, etc.)
December 2011 WTO
Trade and Tariffs [GATT]) to• Agricultural market access and domestic subsidies
Ministerial Conference.
reduce tariffs on industrial• Liberalization of services• Review of rules on subsidies, countervailing measures andproducts, for many years theanti–dumping
system essentially did not• Intellectual property rights (expansion of protections for certain
geographic indications, etc.)
extend its regulations to agSources: WTO Secretariat materials, WTO Reporter (BNA) and Inside U.S. Trade (Inside Washington Publishers).
riculture, with full-fledged
43

IIColumn II − 1
The WTO Doha Round – aiming to reduce tariffs on environmental goods
nificantly, as the East Asia region is making leaps forward as
an export base for environmental goods.
Roughly 60% of China’s environmental goods exports
are solar power generation devices that fall under the “semiconductor devices and light-emitting diodes (HS8541.40)”
category. However, China is not the only country to see its
exports of these goods slanted toward solar power generation
devices. The percentage that solar power generation devices
accounted for in terms of total exports of environmental
goods was 80% for Taiwan, 41% for the ASEAN5 and 41% forSouth Korea, as exports of these products have increased at alarge pace for nearly every country in the region. Among theASEAN5, Malaysia in particular saw robust growth, as exports in 2010 increased 2.3 times over figures for 2009. This
figure was also driven by the rise in exports of solar power
generation devices, with major importing countries including Germany, China and France. Bosch of Germany alsoannounced plans in June 2011 to establish a new factory in
Malaysia for solar power generation devices, as the country is
expected to see future growth as a manufacturing base.
The rise in China’s exports of solar power generation devices has continued into 2011, as the trade value ofHS8541.40 items in the January to May period rose 72% overthe same period of 2010 to US$12.9 billion, which has alreadyexceeded the annual figure initially planned in 2009. Germany, which was the largest importer of these items over theprevious two years, saw its share of imports decline year on
year. In its place, exports to Italy, the Netherlands and the
U.S. have doubled across the board. Similarly, exports to
Spain, which had accounted for a 35% share in 2007, dropped
to only around 2% in 2010. The solar power promotion measures of each country have caused major upheavals in the top
importers of these items. In particular, exports to the U.S.
nearly tripled year on year in 2010, while for the 2011 (January to May) exports have risen 3.5 times over the same period
last year.

The early harvest program, which was proposed as a result of a shift in policy of the WTO Doha Round, seeks topush forward first with addressing certain issues centered onmatters related to least-developing countries (LDC). Discussions are underway regarding what other issues can be added
to the program as part of a LDC+ framework, with the reduction of tariffs on environmental goods one such possibility.
WTO member nations are looking to significantly reduce
tariffs on eco-friendly products and products with smaller
environmental impact compared to other non-agricultural
goods or to completely eliminate these tariffs.
This issue has been brought up not only in the WTO but
also by APEC, having been cited at a trade ministers’ meeting
held in May 2011 as one of the specific green growth objectives to be achieved in the run up to the APEC Summit meeting in November 2011. Since it holds the APEC chairmanshipin 2011, the U.S., which is seeking to double its exports, isstrongly pushing this agenda forward. China, however, is the
only country against holding discussions through APEC because it believes this issue should be negotiated at the WTO.
This does not mean, however, that negotiations will
progress smoothly at the WTO. Even at the WTO, China
has stated that it will not work to reduce tariffs as long astechnology transfers are not guaranteed. As will be discussed
below, China is the world’s largest exporter of environmental
goods, but it remains against these negotiations because it
has taken a stance that focuses more on protecting its exports
rather than battling it out with other countries by reducing
tariffs. In addition, most of China’s core exports already are
subject to zero tariffs in developed nations, so the current
scheme lacks an incentive for the country to participate in
the negotiations.
Which specific items will appear on the list has yet to materialize. The U.S. has wanted to expand the number of items
by as much as possible, as it initially advocated for 153 items.
The 43 six-digit HS items designated by the World Bank as“clearly environmentally friendly” represent one springboard
for discussions. However, the potential exists that items notnecessarily used with the purpose of protecting the environment, or so-called dual use items from six-digit HS, will be
included, and so developing nations are alarmed about theprospects that the scope of non-tariff items will be expanded
beyond what is necessary. In addition, a variety of other proposals have also been brought to the table, including one to
first start with 25 items and another that keeps applied tariff
rates below the current level.

Figure E xport value of environmental goods by majorcountry/region (43 item basis)(US$ million, %)
2007
2008
2009
2010
Value Value Value Value Growth
NAFTA
24,849 27,585 25,605 30,644 19.7
U.S.
17,119 18,630 17,645 21,064 19.4
EU15
76,205 94,882 75,777 84,816 11.9
Germany
28,796 36,792 28,282 32,530 15.0
Italy
10,497 12,456 10,048 9,903 -1.4
Japan
17,440 19,750 15,854 19,316 21.8
East Asia
32,919 47,527 43,498 72,318 66.3
China
16,174 27,371 24,397 42,572 74.5
South Korea
4,389 5,744 6,738 9,241 37.1
Taiwan4,141 5,820 5,145 9,403 82.8
ASEAN-5
8,214 8,592 7,218 11,102 53.8
World (JETRO estimates) 173,843 218,820 184,659 235,273 27.4

East Asia centered on China sees rise in exports
Below, global trade involving environmental goods
is reviewed based on the World Bank’s list of 43 items. In
2010, global trade value (exports) rose 27.4% year on year to
US$235.3 billion (see figure), which marked a pace that outstripped overall global trade at 20.7%. Most countries saw arise in imports thanks to the recovery seen off the figures for2009 when the world was in the midst of an economic recession. Among these, China’s exports increased approximately
1.7 times, as it raced past Germany to become the world’s
largest exporter of environmental goods. In addition, not justChina, exports from Taiwan and the ASEAN5 also grew sig-

Notes: (1) The ASEAN-5 countries are Indonesia, Malaysia, the Philippines, Singapore and Thailand.
(2) The figures for East Asia include the total of China, South
Korea, Hong Kong, Taiwan and the ASEAN-5 countries.
Source: Trade statistics from individual countries/regions.

44

II World Trade Rules under the New Economic Environment

program, with the exception of LDC matters, are proceeding with difficulty. For example, trade facilitation has beenraised as a topic. The negotiation seeks to clarify Articles V,
VIII and X of the GATT on trade rules and other matters,with the process expected to raise the transparency of tradeoperations. In addition, the reduction of tariffs on environmental goods is also a theme of great interest primarily
among developed nations (Column II-1).

cusing on the application of export rules in the WTO. Other future issues relating to multilateral trade rules include
government procurement, the protection of intellectual
properties and stepped up crackdowns against counterfeit
goods.
Below, the current situation of and issues facing primarily WTO trade rules will be examined from two contexts:(1) trends in subsidy rules and conflicts and (2) issues relating to WTO rules, such as disciplinary rules on export
restrictions.

The importance of the WTO as a rules-driven institution
Thus, the focus has become more on how the Doha Roundwill avoid the worst case scenario of a breakdown in talks,(2) Trends and arguments of WTO disputes
indicating that hope is fading on an ambitious agreement
concerning subsidies
on trade liberalization regarding the main issues at hand.
Scope of disciplinary rules in the WTO’s ASCM
Yet, the trouble faced by the Doha Round does not necessarGovernments and public institutions around the world
ily call into question the very existence of the WTO. Corare providing public assistance in a variety of forms to dorective measures can be sought in response to trade pracmestic industries and companies that belong to specific intices that do not follow with WTO rules through the WTO’s
dustries located within a country under the goal to boost the
Dispute Settlement Body and various committees. There iscompetitiveness of domestic industry. For example, in recent
little doubt that settlements of disputes through the WTO’s
years public institutions from various countries have aggresdispute settlement procedures have helped to resolve trade
sively launched export promotion measures (Column II-2).
disputes through the interpretation of existing WTO rules.
Understanding which assistance measures fall under
While it remains hard to say that the WTO functions as a
the rules set out in the WTO ASCM is essential for a complatform for agilely developing new trade rules, in terms ofpany looking to expand operations internationally to assessmanaging its established rules, the WTO will continue towhether or not it stands at a competitive disadvantage toplay an important role as a multilateral trade organization.
companies located in countries that provide these domestic
Although the use of free trade agreements (FTA) as a
subsidies. Local governments and public institutions mustmeans to trade liberalization is growing more prominent,
also verify whether the various business assistance measures
there remain trade issues that are difficult to settle without
they provide are in conflict with WTO rules on subsidies.
a multilateral framework. Specifically, in most cases seen to
The definition of subsidies that fall under the ACSM
date disciplinary rules on subsidies have not been included(Figure II-2) states that a subsidy exists when there is a fiin FTA. As a disciplinary rule on financial assistance, innancial contribution as well as any form of income or pricecluding export subsidies, granted to domestic industries
support by a government or any public body that confer
by governments, the WTO’s
Agreement on Subsidies andFigure II – 2 Overview of subsidies covered under the WTO ASCMCountervailing
Measures
Type
Overview
Clause(ASCM) stands as the most
There is a financial contribution by a government or any public
effectively functioning trade
Subsidy
body or any form of income or price support and a benefit is
Article 1.1
thereby conferred.
rules today.
The subsidy is granted to a specific enterprise or industry or
Still, there are issues
A subsidy has specificity
group of enterprises or industries. A prohibited subsidy is
Article 2deemed to have specificity.
which the WTO today does
If the Dispute Settlement Body finds the subsidy to be a
not cover sufficiently, neverProhibited (“red”) subsidies
prohibited subsidy, the subsidizing country shall withdraw the Article 3
theless are issues that require
subsidy without delay.
Export subsidy
Subsidy contingent, in law or in fact, upon export performance.
1(a)multilateral consensus buildSubsidy favoring the use of Subsidy contingent upon the use of domestic over imported
1(b)ing. Trade rules on exports
domestic goods
goods.
can be cited as a representaIn the case of subsidies found to have adverse effects tothe interests of other countries, either the adverse effecttive example. The GATT and
Actionable (“yellow”) subsidies shall be removed or the subsidy eliminated. Or if injury to
Article 5
WTO system has functioned
the domestic industry of the importing country is found,countervailing duties can be imposed.
mostly as disciplinary rules
The effect on domestic market of importing country by theon countries’ import restricInjury to domestic industry subsidy. Selection of either remedy based on dispute settlement(a)tion measures, including
proceedings or implementation of a countervailing measure.
Nullification or impairment In particular, the invalidation of concessional benefits (tariffs)
mainly tariffs on imports.
(b)of benefits under GATT
based on Article II of the GATT.
Today, however, given theCases, for example, in which the subsidy displaces the imports
backdrop of soaring resourceof another member country in the market of the subsidizing
Serious prejudice(c)country or of a third country market, impedes a rise in market
prices, cases have become
price or significantly reduces sales in the same market.
more obvious of countries
A non-specific subsidy is not subject to the disciplinary rules
Non-specificity
Article 1.2of the Agreement on Subsidies and Countervailing Measures.
laying down border measures
Source: WTO Agreement on Subsidies and Countervailing Measures.
on exports, with attention fo45

II

benefit for a company (Article 1). The issue of financial contributions by a government represents perhaps the biggest
problem, as this includes not only direct funding or lending, but also when the government gives up its right to collect revenue it should collect.
Next, a subsidy must retain specificity for it to fall under
the disciplinary rules of the ASCM (Article 2). Here the term
specificity refers to a subsidy provided to a specific company
or industry, or an industry group. Article 2 is widely recognized because it includes instances when this specific quality can be confirmed on the basis of positive evidence.
The scope of rules in the ASCM includes prohibited subsidies (Article 3; hereinafter referred to as Red Subsidies) andsubsidies subject to actionable subsidies (Article 5, hereinafter referred to as Yellow Subsidies). Prohibited subsidies include two types: export subsidies and subsidies contingent
upon the use of domestically produced goods. Export subsidies include not only directly granted subsidies, but also
are categorized in Annex 1 of the ASCM, with the scope extending to a wide range of government practices including
exemptions on direct charges related to exports. Subsidies
that prioritize the use of domestically produced goods arealso referred to as local content subsidies. Red Subsidies are
considered to be specific subsidies.
Subsidies which fall under the scope of actionable subsidies include subsidies that adversely affect the interests ofanother WTO member nation. Adverse effects are broken
down into three types: (1) injury caused to the domestic
industry of another Member (Article 5, [a]), (2) nullification
or impairment of benefits or indirectly to other Members
under the GATT (Article 5, [b]) and (3) serious prejudice tothe interests of another Member (Article 5, [c]).
Although there are instances when countervailing measures are understood as being subject to the same disciplinary scope as actionable subsidies, countervailing measures
are used as one form of remedy when a subsidy damages

the domestic industry of the importing country (Article 5,[a]), while actionable subsidies in the context of the ASCM
also include the right to seek the withdrawal of the subsidy
or the removal of its adverse effects as well as countervailing duties. When a subsidy damages the domestic industryof the importing country, the country being affected caneither enact a countervailing measure to counteract this adverse effect after conducting an investigation domesticallyon the countervailing measure, or seek remedy through the
WTO’s dispute-settlement procedures (Figure II-3).
More disciplinary rules for non-red subsidies in WTO
disputes
Most disputes focused on subsidies that violate WTO
rules have centered mainly on red subsidies, or export subsidies and subsidies that give preference to the use of domestically produced goods. On the other hand, the recent
rise in the number of WTO decisions on yellow subsidies
has increased the breadth of WTO subsidy disputes.
Of the adverse effects caused by yellow subsidies, whendamage is caused to the domestic industry of the importing country, this country can levy a countervailing measure
as long as it follows Article 7 and Articles 10 to 23 of theASCM. Disputes related to yellow subsidies in most cases
have led to the enactment of a countervailing measure.
What type of remedies can be taken when a country
other than the importing country is affected, such as thecase of an adverse effect on competition in the market ofa competing third country? Or, what happens when themarket price of a product receiving a subsidy is distorted in
the market of the country providing the subsidy? These adverse effects fall under the category of “serious prejudice” asstipulated in Article 5 (c) of the ASCM. In this instance, thecountry can seek the elimination of the applicable subsidy
or the removal of the adverse effect caused by the subsidy.
Although official finding as “serious prejudice” had been

Figure II – 3 Overview of remedy process stipulated in the WTO ASCMYES

A prohibited
subsidy(Article III)A subsidy
coveredby the ASCM
(Article I)

AffectsNO
domestic market
of importing
YES
country

YES

Selection(Note)
Has adverse
effect on
Has
NO
YES
YES
other
specificity
member(Article II)
country(Article V)NONOThe adverse
effect affects
the domestic
market of
the importing
country

NO

NO

YES

Selection(Note)

Found in violation ofWithdraw subsidy without
YES
the agreement throughdelay; countervailing
special dispute settlement
measure can be implemented
proceedings (Article IV)
if not followed (Article IV)

Recognition ofdamages throughcountervailing measure YES
investigation conductedwithin the country(Articles X to XXIII,
especially Article XV)Enact countervailingmeasure (Article XIX)

Found in violation ofagreement through YES
dispute settlement
proceedings(Article VII)

Removal of adverse effector withdrawal of subsidy;
countermeasure can be
implemented if not
followed (Article VII)NO
Measure not subject to the scope of the ASCM

Note: Can only use a countervailing measure or seek a remedy according to Article IV or Article VII of the ASCM against applicable subsidies.
Source: WTO Agreement on Subsidies and Countervailing Measures.

46

II World Trade Rules under the New Economic Environment

Column II − 2Developed nations flocking to assist exports to emerging nations
interest rates lower than the market rate, has also become a
topic of debate in negotiations on the Trans-Pacific Partnership (TPP) agreement, from the standpoint of “organizing
competitive conditions with state-owned enterprises.”
UK Trade & Investment, which is responsible for promoting exports from the UK, announced its five-year plan in May
2011 in which it announced a policy to provide assistance sothat more small and medium sized enterprises that are posting robust growth can export their goods and services as wellas promote the market entry of existing export companies
in emerging nation. Among emerging nations, the UK has
placed specific emphasis on China. UK Prime Minister David Cameron led a business mission to China in November
2011 where he announced that the UK would “increase UKChina trade by US$100 billion each year, effectively doublingit by the year 2015.” In conjunction with this, the UKTI appointed 32 persons as UK Business Ambassador, giving them
the role of supporting export promotion for primarily small
and medium sized enterprises.
The French Trade Commission (UBIFRANCE) is aiming
to find and assist 10,000 new export companies before theend of 2011. UBIFRANCE has a network of 66 offices in 46
countries, and provides trade fairs over the Internet and assists companies with market research. In order to facilitate
assistance for trade and investments, Germany established asa limited liability company Germany Trade & Invest (GTAI)
in 2009, with interests focused mainly on markets in emerging nations. In January 2011, GTAI cited Australia, Finland,
Kazakhstan, Kuwait, Colombia, South Korea and South Africa as focus markets for German exports in 2011, indicating
it has a strong interest in a wide range of markets. In addition, it also launched a Germany business portal site online
as part of its integrated approach to attracting investments.
In addition, in May 2011 Trade Minister Craig Emersonof the Australian Trade Commission (Austrade) announced
a comprehensive reform package, stating that “More of Austrade’s operations will more than likely be conducted inemerging nations going forward.” This package includes establishing new offices in Mongolia and Central Asia as well
as expanding existing offices in South America, China andAfrica. Explaining the importance of promoting trade withmarkets in emerging nations as, Emerson stated, “Understanding how business is undertaken in emerging nations involves costs that are hard for a single company to cover. This
is where the experience of Austrade can be applied.” In thismanner, the focal points of trade organizations in developed
nations around the world can be found in export assistanceand promotion, with most if not all aiming to promote tradewith markets in emerging nations.

In considering that emerging nations represent promising export markets thanks to their robust economic growth,
governments of developed nations around the world are eachvigorously pushing forward with export assistance measures.
These same governments are also attempting to gain support
domestically by explaining that such measures will help toprop up employment in the country. Although these assistance measures are not necessarily covered under the ASCM,
understanding the trade policy trends of major countries will
likely be beneficial for Japanese companies to maintain a fairenvironment of competition.
Following its National Export Initiative (NEI), the U.S.
is aiming to double exports before the end of 2014 and willcontinue to position export assistance at the core of its trade
policies. In 2010, exports of goods and services from the
U.S. recorded an increase of 16.6% year on year, which U.S.
Trade Representative Ron Kirk praised as evidence, “We are
steadily moving toward our target.” However, it can also be
pointed out that figures for 2010 only saw large increases because they were coming off sharp lows from the downturn
seen in 2009.
Governments that are providing export assistance arealso facing fiscal troubles. The federal budget of the U.S. isalso facing a crunch, as fiscal 2011 (October 2010 to September 2011) expenditures were cut by US$40 billion year
over year, or 3.8%, across both mandatory and discretionary
spending. As a result, many government programs have also
been slashed or cut, as evidenced by the fact that the budget
was completely cut for a preliminary study on a high speed
railway system that was one of the Obama administration’s
featured policies.
Despite such difficulties, the budget for export assistancehas been allocated constantly. In the U.S., export assistanceprograms are covered by the International Trade Administration (ITA) of the Department of Commerce. The Departmentof Commerce’s budget for fiscal 2011 was slashed by 17% overfiscal 2010, but the budget appropriated for export assistancewas only reduced by 1.1% to US$450.99 million. As a striking
point regarding the progress of the NEI, the Export-Import
Bank of the United States is assertively providing assistancethrough doubling the volume of export finance it provides,with deals involving the environmental sector and emerging
markets being taken up frequently. In particular, competition seen in 2009 between the Export-Import Bank of theUnited States and China for providing finance to exports
destined for Pakistan garnered much attention and became
a motivational factor for the U.S. to launch full-fledged export assistance measures. Competition with China, whichhas provided favourable conditions for its exporters such as

extremely rare, as this happened on only two occasions
between 1995 and 2009, the number of cases has increased
since the second such case that occurred—the 2002 UnitedStates Upland-cotton dispute (below, “cotton dispute”).
The cotton dispute involved Brazil referring to the WTO
the issue of domestic assistance provided by the U.S. to its
cotton industry in the form of various subsidies and financing under the Agricultural Act as well as export subsidies.
The outcome saw the U.S. recognized as violating WTO rules
and through arbitration proceedings Brazil was allowed toenact a countermeasure in the amount of US$150 million.
Both countries agreed in August 2010 to a framework for an

U.S.-led assistance program for Brazilian cotton producers,
and Brazil announced that as long as this agreement was
kept, it would not implement the countervailing measure.
Many in the U.S. have voiced criticism toward the continuation of this program, with future developments concerning
this case likely to be in the spotlight.
It is important to note here that the 2005 WTO Appellate Body report on the cotton dispute recognized the stringof domestic assistance provided by the U.S. as one form ofa yellow subsidy, or “serious prejudice.” Specifically, thisassistance was found to bring about “serious prejudice” incausing “significant price suppression in the same market
47

II(global market in this instance)” based on Article 6, Item 3(c) of the ASCM. The recognition of a market where competition exists is an important concept in terms of competition
law, and generally speaking, competition law affirms that a“global market” exists as a single market. Prior to the cotton
dispute, the hurdles in being recognized as “serious prejudice” were seen as extremely high because it was difficult toprove a causal link between domestic subsidies and existing
prejudice. It can be pointed out, however, that opportunities
for complaining countries to prove “serious prejudice” have
expanded since the broad concept of a global market wasrecognized by the WTO.
Furthermore, the cotton dispute also shed light on the
differences between the recognition of “serious prejudice”
and countervailing measure investigations. A countervailing measure investigation is undertaken by the authoritiesof the importing country which use a quantitative methodof calculating the amount of the countervailing measure. In
contrast, the WTO panel for the cotton dispute and Appellate Body found that an accurate calculation of the subsidy
provided was not always necessary in recognizing “serious
prejudice” existed. Instead it found that in finding “serious
prejudice” there was leeway not for a quantitative calculation but a qualitative calculation, which it can be pointed
out, has increased the number of disputes concerning yellow subsidies that can be brought before the WTO.
Indeed, in the dispute between the EU and U.S. overcommercial aircraft subsidies that occurred after the cotton
dispute, “serious prejudice” was found in both complaints
filed by the US and EU respectively.
Furthermore, the Airbus Dispute Panel (June 2010) in
which the US filed a complaint against the EU indicatedthat hurdles to the recognition of “serious prejudice” werelowered compared to the cotton dispute. In the Airbus Dispute Panel, the U.S. claimed there was damage against U.S.
domestic industry (Article 5 [a]) and serious prejudice inthe EU market and third countries (Article 5 [c]), but only
one of these complaints, Article 5(c), was recognized by
the panel. Damage from (a) refers, in other words, to thecalculation of damage in the countervailing measure investigation. That is, it can be inferred based on the decisionby the panel that there are instances when it is easier toprove “serious prejudice” in (c) rather than the damage ofthe countervailing measure. Although the WTO Appellate
Body, which acts as a higher appeals court, overturned thepanel’s decision in favour of “serious prejudice” existing incertain third country markets in a report on the dispute in
May 2011, it did recognize that “serious prejudice” existed
in the EU market and China market where Boeing commercial aircraft exports would be replaced by Airbus aircraft
due to subsidies.
The report of the Boeing Dispute Panel (March 2011),
where the EU filed a complaint against the U.S., also recognized certain complaints made by the EU regarding theexistence of “serious prejudice,” and found that assistanceprovided to Boeing impeded exports of Airbus aircraft tothird countries.
From these series of disputes, the potential exists for thenumber of disputes regarding not only red subsidies, suchas export subsidies, and yellow subsides, or mainly countervailing measures, but also other forms of domestic assistance not provided necessarily to benefit exports, to increase going forward.
Are subsidy disputes set to increase?
What types of subsidies are more easily subject to WTO
disputes? Needless to say, subsidies involving large sums ofmoney represent one example. In particular, because monetary amounts are quite large when the relevant industry
receiving the subsidy is the key industry of a country, these
instances can easily lead to a WTO dispute as seen in thecommercial aircraft dispute noted above.
Moreover, as with the relationship between Boeing(leader) and Airbus (follower), subsidies are often given to
the follower to catch up with the leader or to a comparatively weaker industry of a country to catch up with a comparatively dominant industry in another country. The prospects
that this leads to is the possibility that the structure where
the leading developed country attempts to seek remedy
from the competitiveness of a company from a developing
nation on the basis of subsidies will become more evident,
given the fact that companies in developing nations including China have rapidly strengthened their industries in recent years.
Even if more subsidy disputes are brought before theWTO, however, these disputes will likely involve a limited
number of sectors. Since it takes several years to resolve
after a dispute has been formally referred to the WTO, in
most instances the countervailing measure investigation
represents a more agile means of remedy if the dispute involves damage domestically.
One industry whose subsidies may easily be brought before the WTO in a dispute is the automotive industry. Previously, subsidies that give preference to the use of domestically produced goods for the automotive industry in India
and Indonesia have become an issue in the WTO. Since it
encompasses a wide range of sectors, the automotive industry occupies an important position in the industrial policyof developing nations, from the perspective that it helps
cultivate many domestic industries. There is the potential
for China, much like India and Indonesia, to be the subjectof similar automotive disputes. The steel and semiconductor industries are known as process industries that requirehuge amounts of upfront investments, and because structurally they require subsidies in most cases, these industries
are susceptible to disputes. On the other hand, over the previous 10 years M&A has accelerated consolidation in thesesame process industries, which has made it more complicated to recognize how certain companies are affected bycertain markets, and how the market is affected, making it
difficult to prove prejudice. In this sense, compared to theera when steel and other process industries were the core industries in many countries, today there is a lower possibilityof a dispute at the WTO concerning subsidies provided tothese industries.
In terms of other manufacturing industries, the ship48

II World Trade Rules under the New Economic Environmentbuilding industry is a sector subject to long-term slowdowns
structurally because of the nature of its one-off orders andextended supply-demand cycle, and as such, is considered
to be an industry that requires government assistance. The
commercial aircraft industry is very similar in this respect.
Outside of certain countries that have a comparative advantage, subsidies for agriculture are essential for the industry’s survival. The WTO Agricultural Agreement defines ingreat detail the process for reducing export subsidies, but in
actuality this agreement has not necessarily been followedin the past. The fact that referrals of disputes concerning agricultural subsidies were frozen until the end of 2003 due tothe principle of “due restraint” (or the “peace clause”) from
Article 13 of the WTO Agricultural Agreement has had an
influence. As negotiations on the reduction of agricultural
subsidies have stalled at the Doha Round, there is sufficientpossibility developing nations that are dissatisfied with theagricultural subsidies of developed nations, much like thecotton dispute involving Brazil and the U.S., will choose the
WTO to settle their dispute.
In general terms, there are many cases when products
for which the market price is easy to determine in international markets involve subsidies that are subject to a WTO
dispute. Viewed by industry, the same can also be said for
sectors with an advanced market oligopoly internationally.
This validates the general structure in which developed nations target industrial product related subsidies of developing nations that were used to rapidly enhance their com-

petitiveness and developing nations target the agricultural
subsidies implemented by developed nations.
Regarding the potential for subsidy disputes to increaseat the WTO, there appears to be more leeway going forward
for targeting not only prohibited subsidies but also yellow
subsidies that adversely affect WTO members, from theperspective that a legal judgement has been formed. The
standard for recognizing “serious prejudice” in the cotton
dispute was lowered further in the Airbus-Boeing dispute,and as a result, the number of countries claiming adverse
effects from yellow subsidies in future subsidy disputes islikely to grow. However, the relationship between Airbus
and Boeing is rather unique in that the two are on equal
footing in the market where one company can substitutethe imports of the other, and so the same standards cannot be applied as those used generally for product markets
where multiple competitors exist.
As illustrated in Figure II-4, in terms of disputes between specific countries, those between the U.S. and China
stand out. The 2011 report of the WTO Appellate Body on
the U.S. anti-dumping duty and countervailing measurelevied on China recognized that China’s state-owned commercial banks correspond to “public body,” as stipulated in
Article 1, Item 1 of the ASCM. Essentially, this recognizedthat low interest loans extended by state-owned commercial
banks correspond to subsidies. This means that if it is cited
as subject to a WTO dispute, there is a possibility that export
credit extended by the Export-Import Bank of China will be

Figure II – 4 Major disputes in recent years at the WTO relating to subsidies
Case name (Year) (WTO Dispute No.)
Summary of the dispute
Current status(Judgment of the WTO Dispute Settlement Body or Nature of the Complaint)
Respondent
Complainant
EU Export subsidies on sugar (2002)
The export refund system based on the EU’s Common Organisation of the Market (CMO)(DS265, 266, 283)
Panel and Appellate
corresponds to an export subsidy that exceeds the EU's Schedule of Concessions, and as
Body reports adopted
Australia, Brazil,
such violates Article 3:3 and Article 8 of the WTO Agreement on Agriculture.
EU
Thailand
U.S. Subsidies on Upland cotton
There exists “serious prejudice” as a result of increases in the market price of cotton being
Panel and Appellate(2002) (DS267)
impeded due to various domestic subsidies provided for under U.S. laws relating to agriculture, Body complianceand some of the subsidies fall under subsidies favoring the use of domestic products.
reports adopted
U.S.
BrazilSouth Korea’s subsidies on trade in Debt waivers, etc., granted by the South Korean government correspond to export subsidies.
vessels (2002) (DS273)“Serious prejudice” was not found to exist in this case. South Korea filed a complaint about
Panel report adopted
the EU's shipbuilding subsidies, but these were not found to violate the ASCM.
South Korea
EU
Commercial aircraft (Airbus) (2004) Various subsidies by the EU have given rise to “serious prejudice” by causing substitution
Panel and Appellate(DS316, 347)
of Boeing exports in EU and third-country markets. The Appellate Body reversed the
Body reports adopted
findings
of
the
Panel
in
regardtothecorrespondencetoexportsubsidies.
EU
U.S.
Commercial aircraft (Boeing) (2004) The Panel found Boeing’s profits resulting from tax exemptions on offshore income
Proceedings by(DS317, 353)
corresponded to an export subsidy and also found “serious prejudice” due to export
Appellate Body
substitutions of Airbus aircraft in third country markets.
U.S.
EU
China preferential tax treatment (2007) Assertion that preferential tax treatment (refunds, reductions, exemptions, etc.) in regard Agreement on(DS358, 359)
to products including steel, lumber and paper, fall under export subsidies. A memorandum withdrawal ofof understanding was signed with China agreeing to abolish the treatment.
proceedings
China
U.S., Mexico
China's anti-dumping and
The imposition of a countervailing duty on Chinese made welded steel pipes by the U.S.
Panel and Appellate
countervailing measures (2008) (DS379) violated the requirements for appropriate amount of countervailing measures. China’s stateBody reports adopted
owned commercial banks were found to correspond to a “public body” under the ASCM.
U.S.
China
China's brand development subsidies Assertion that government support for home appliances, textile products, etc., aimed at(2008) (DS387, 388, 390)
the development of domestic brands was given contingent upon export performance, and Panel proceedings
U.S., Mexico, and thus corresponded to export subsidies. A memorandum of understanding was concluded frozen
China
among the concerned countries.
othersProvince of Ontario feed-in tariff
Japan asserted that the added value requirement for procurement of materials in Ontario
program (2010) (DS412)
as a condition for participation in the province of Ontario's renewable energy feed-in tariff Panel establishedprogram correponds to subsidies favoring the use of domestic goods.
CanadaJapan
Chinese wind power equipment (2010) The U.S. asserted that preferential measures granted by the Chinese government toTermination foreseen(DS419)companies establishing wind power plants in China are subsidies favoring the use ofunder bilateraldomestic products. In June 2011 China agreed to rectify the situation.
consultations
China
U.S.
Note: The year shown in parentheses is the year in which the request for consultation was made. Only disputes regarding the illegality of subsidies areincluded.
Sources: WTO Secretariat materials and Case Book - WTO Law (Yuhikaku Publishing Co., 2009).

49

IIfound to be in violation of the ASCM. Moreover, there isalso a possibility that Chinese government assistance, suchas low-interest lending for orders of infrastructure exports,
regardless of industry, will become an issue in the WTO,
and so the response of the U.S. government and industry
circles will come under the spotlight going forward.

information on this system, please refer to Part 4 in Chapter
2 of the 2010 JETRO Global Trade and Investment Report.)
Discussions have been at odds over the theories regarding whether Article XX in the GATT, which is a general exemption clause to the stipulations of the GATT, can be abasis for justifying measures that violate stipulations of the
WTO rules outside the GATT. The WTO Dispute Appellate Body report of 2009 that reviewed claimed violationsof China’s obligation to provide trading rights for publishedworks and other materials recognized that, despite various
restrictions, the possibility that China could invoke Article
XX of the GATT in response to a violation of Article 5, Item
1 of the protocol of accession for China’s membership in the
WTO. This was the first time that Article XX was applied torules outside the GATT. Out of context from this dispute,experts have pointed out “Adequate prudence is required
concerning the application [of Article XX] in other situations such as whether it can be used to justify environmental subsidies that are not in conformity with the ASCM”(Nagoya University Professor Fujio Kawashima), but affirmative interpretations also exist toward invocating Article
XX of the GATT to the ASCM.

Rise in the number of WTO disputes overenvironmental-related subsidies
Governments around the world are providing prioritized assistance to environmental industries, which are expected to grow moving forward. As was seen when subsidies in China and Canada for renewable energy production
were brought before the WTO, the number of environmental subsidy disputes is expected to rise (Figure II-4).
In June 2011, Japan requested establishment of a WTO
panel be set up regarding a subsidy for renewable energy
power generation implemented by the province of Ontario
in Canada. Japan requested consultations in September
2010 based on the complaint that Ontario’s feed-in tariff(FIT) program for renewable energy corresponded to a prohibited subsidy, but bilateral talks broke down. This marked
the first time in three years—not since its dispute over theclassification of EU tariffs on IT products in 2008—Japan
had taken procedures to set up a WTO dispute settlement
panel as a party in a dispute. Ontario’s FIT program guarantees that electricity produced using renewable energy,
such as hydroelectric, wind or solar power, will be boughtback at a fixed price over an extended period if the producer
sources a significant portion of their raw materials or equipment from within the province. Japan filed a complaint that
this measure corresponds to a subsidy that gives preference
to the use of domestically produced products over its products. After Japan’s request for consultation, Ontario further
raised the ratio of local content under question. The WTO
panel was set up in July the same year.
In December 2010, the U.S. also requested consultation at
the WTO concerning a subsidy China was providing to wind
power equipments. The argument for this dispute, similar tothe one in Canada noted above, was that this subsidy was aprohibited subsidy that gave preference to the use of domestically produced goods. In June 2011 China promised to eliminate the subsidy in question and the dispute ended.
Subsidies relating to environmental conservation, orcommonly known as “green subsidies,” were given favorable standing until the applicable rule expired at the end of
1999. Until this rule expired, even if it had a specificity, agreen subsidy was not subject to an actionable subsidy. Today, however, a subsidy with a specificity, even if it is forconserving the environment, is subject to an actionablesubsidy. There are those that point out the possibility exists
a country will seek to justify a subsidy that is meant to conserve the environment according to a different rule or basedon Article XX of the GATT. Some have pointed out that the
granting of free emissions allowances to specific industries
in a for-profit emissions trading system, such as the one that
the EU is planning to implement, can be considered as one
example of this environmental related subsidy. (For more

Subsidy disputes and trade remedies
Although WTO disputes over the legality of a subsidy itself have stood out in recent years, a large percentage of these
WTO subsidy disputes have focused on whether a countervailing measure implemented by an importing nation whenthe effect of a subsidy affects its domestic market is in conformity with the ASCM. Amidst such trade remedy disputes,
the WTO issued a ruling of particular interest concerning
one of the frequent subsidy disputes involving the U.S. andChina because of its interpretation of the ASCM.
In the anti-dumping duty and countervailing measurelevied on China by the U.S. noted above, one contention
was over whether the imposition of an anti-dumping dutyon the same import product as the countervailing measurecorresponded to a “double remedy.” The WTO Appellate
Body overturned the report of a WTO panel that said the
U.S. action did not violate the ASCM and ruled that the
U.S. did violate the condition of “appropriate amounts” fora countervailing measure stipulated in Article 19, Item 3 of
the ASCM.
Both an anti-dumping duty and countervailing measure
are accepted as a remedy for the industry of the importing
country concerning unfairly priced exports. In principle,
an anti-dumping duty is a tax to make up the difference between the domestic price (normal value) in ordinary courseof trade and the export price. When the price of a certain
product is held down by the effect of the subsidy, the subsidy
element is deducted in the calculation of the normal value
and export price. In contrast, a countervailing measure is a
tax that offsets the effect of a subsidy on an imported product up to an amount equal to the subsidy.
Since the target of each remedy differs, even if an antidumping duty and countervailing measure were imposedon the import of a product, theoretically a “double remedy” that redundantly compensates for the same situation50

II World Trade Rules under the New Economic Environment

should not occur. When China joined the WTO, however,its membership was accepted with the precondition that it
was difficult to calculate the normal value in China’s domestic market (Article 15 of the protocol of accession in effectstates that China is recognized as a non-market economy
country). In an anti-dumping investigation of a non-market
economy country, the difference between the export priceand the sales price of a third country is applied, and not thedomestic price. In countervailing measure investigations of
non-market economy countries as well, adjustments can bemade in the calculation of benefits realized from the subsidy in consideration of the situation of a third country.
The WTO Appellate Body for this dispute determined that
because the U.S. employed a calculation method for a nonmarket economy country, there was no clear distinction
between the effect of the countervailing measure and theanti-dumping duty, and so in the sense that part of the antidumping duty had counteracted the effect of the subsidy,
the amount of the countervailing measure did not qualify
as an appropriate amount.
The interpretation of Article VI:5 of the GATT also became a point of contention. Article VI:5 stipulates that acountervailing measure against an “export subsidy” cannot
be combined with another measure in order “to compensate
for the same condition.” This is what led the lower appeals
panel to determine that a “double remedy” in response to adomestic subsidy was not prohibited according to the ASCM
because the target of export subsidy was limited in nature.
In contrast, the WTO Appellate Body concluded that it
could not approve this type of “double remedy” if it redundantly compensated for the same condition by imposing
both an anti-dumping duty and countervailing measure ona domestic subsidy because avoiding compensation for thesame condition is the central requirement of Article VI:5.
It should be noted that the Appellate Body did not mention
that imposing both an anti-dumping duty and countervailing measure at the same time was a violation.
In May 2011, the EU announced that for the first time
it would impose an anti-dumping duty and countervailingmeasure on the same product, Chinese made coated paper.
The EU’s announcement included an explanation that themeasure did not correspond to a “double remedy.”
Going forward, increased attention should be seen on
trade remedies taken against exports from developing countries, including not only China, but also Vietnam, which has
the same non-market economy country clause in its protocol to accession, and Russia, which is expected to join the
WTO soon. In addition, the non-market economy countryclause stipulated in the protocol to accession is set to expire
at the end of 2016 for China and 2018 for Vietnam.

dies that give preference to domestically produced products
and prohibited subsidies as a subsidy clause in addition to
WTO rules in the ASCM. Specifically, it prohibits either (1)subsidies that guarantee the liabilities of a company regardless of amount or time period and (2) subsidies provided
to a bankrupt company that has not submitted a businessrestructuring plan, which have an adverse effect on transborder commerce. The FTA also includes a provision on
settlement procedures for arbitrator-led subsidy disputes.
Will the subsidy clause in the EU-South Korea FTA become a model for future FTAs? Generally, the granting or
elimination of subsidies is not conducted based on a bilateral relationship alone, and as such, there is a limit to making
comprehensive rules on subsidies in FTAs or establishing acap on the amount of subsidies granted. Such clauses will
likely include other restrictions, as indicated by the fact thatfishing and agricultural subsidies are not subject to the subsidy clause in the EU-South Korea FTA.
(3) The future of WTO rules – A closer look at
disciplinary rules for export restrictions
Points of contention regarding export restrictions
based on WTO agreements
While the GATT and WTO are systems that have developed with a focus on disciplinary rules on imports, the
GATT, since 1947, does contain provisions on exports. First,
Article I of the GATT clearly states that most favoured nation principle can be applied to both imports and exports.
General prohibitions on quantity restrictions in Article XI:1
can also be applied to either imports or exports. In addition,“fees and formalities and fees connected with exportationand importation” from Article VIII and “state trading enterprises” status from Article XVII can be applied exports
much like they are to imports.
However, there are also many exceptions. First, Article
XI:2 provides for an exception to the prohibition on quantity restrictions. Specifically, 2 (a) of the Article contains an
exception focused on exports that allows for a restriction
on “Export prohibitions or restrictions temporarily applied
to prevent or relieve critical shortages of foodstuffs or otherproducts essential to the exporting contracting party.” In
addition, general exceptions found in Article XX and exceptions applied under the premise of national security in
Article XXI can also be applied to exports. Since there are agreat many exceptions centered on Article XX, it has been
pointed out that the prohibitions of export restrictions in
the GATT essentially have no effect.
Although interest has grown in society about the finite
nature of natural resources since the oil crises of the 1970s,
debates on trade liberalization have concentrated on opening the markets of each country. Needless to mention the
GATT era, there were few cases where restrictions on exports became an issue at the WTO. In recent years, however,prices of mineral resources and foodstuff have skyrocketed,and as the importance of finite natural resources and foodcrops grows in national policies, more countries have begun
to recognize the need for and importance of rule-making
against measures that restrict exports.

Subsidy clause in FTAs
In bilateral FTAs concluded to date, on top of the factthat few stipulations have been made concerning subsidies,
there have also been many cases where even if a provision
is present the remedy carries no effectiveness. However, the
EU-South Korea FTA, which came into force provisionallyin July 2011, contains a provision on export subsidies, subsi51

II

Following the financial crisis of 2008, the WTO has
regularly monitored protectionist measures implemented
by countries around the world, and in a report it points
out that the number of export restrictions are on the rise.
From October 2008 to October 2009, new export restriction
measures (export duties, export bans, export quotas, etc.)
instituted by WTO member nations and observer nations
totalled 15, but from November 2009 to mid-October 2010
this same number was 35. In the most recent report spanning mid-October 2010 to April 2011, this number was 30 injust the space of a little over six months, indicating that thatthe number of these measures is rising markedly.
Around the same time as a collision involving Japanesepatrol boats and a Chinese fishing boat occurred in September 2010, a problem arose where exports of rare earth from
China were disrupted. With countries exporting raw materials, including rare earth, concentrated on specific few(Figure II-5), it has become essential for Japan, which must
depend heavily on imports for its raw materials, to securea stable supply. Therefore, companies must actively reportquestionable export restriction practices based on WTO
rules to the national government.

con carbide, metallic silicon, yellow phosphorous, and zinc.
A dispute settlement panel was set up later in the same year.
Regarding export duties, in Article 11.3 of its WTO Accession Protocol (below, the Protocol) China had promised to “eliminate all taxes and duties imposed on export
products,” with the exception of items noted in Annex 6 of
the Protocol or cases that correspond to export charges inconformance with Article VIII of the GATT. As of 2009,
China had imposed export duties of between 10% and 70%
on these items, with the exception of silicon carbide, but ofthese only yellow phosphorous was mentioned in Annex 6.
In other words, with the exception of yellow phosphorus,
export duties placed on the remaining seven items were inviolation of Article 11.3 of the Protocol. Moreover, despite
the export duty ceiling for yellow phosphorous, which was
the only item to be mentioned in Annex 6, being set at 20%,
China had levied an export duty of 70% in 2009 (as of January 2011 China reduced this to 20%). China did not refute
this violation of the Protocol, but rather claimed that theseexport duties could be justified as exceptions according to
Article XX (b) and (g) of the GATT.
China’s export licensing, export quotas and minimum
export price systems explicitly violated Article XI:1 of the
GATT that prohibits import or export licenses and export
quotas besides tariffs or specific surcharges. Together withclaiming it was justified according to Article XX of the
GATT, China also argued that these systems were justified
according to Article XI:2 (a) as well. Article XI:2 (a) item
stipulates restrictions “temporarily applied to prevent or
relieve critical shortages of foodstuffs or other products essential to the exporting contracting party” are not subject
to Article XI:1, which means such measures are justified as
exceptions.
The WTO panel found that China was in violation of
Article 11.3 of the Protocol and Article XI:1 of the GATT,
and also did not recognize its justification for its measuresaccording to Article XI:2(a) and Article XX of the GATT.
This first WTO interpretation of Article XI:2(a) of the
GATT found that China did not fulfill the requirements
for “temporary” restriction and “critical shortages” stipulated in the same provision. On the other hand, regarding
the provision “foodstuffs or other products essential to theexporting contracting party,” Japan, which had participated
as a third country, stated that this should be applied only
to “famine and other such situations,” but the panel determined that essential products would be determined according to the situation of the contracting party that takes themeasure. This interpretation has left leeway for Article XI:2
to be used as a basis for justifying export restrictions on avariety of natural resources going forward.
Regarding Article XX of the GATT, China cited (b)“[measures] necessary to protect human, animal or plantlife or health” and (g) “ [measures] relating to the conservation of exhaustible natural resources” as the basis of its
argument, but in either instance the WTO panel foundthat China’s measures did not correspond with the purposeof each. As for (b), the panel cited that the existence of alternative measures not restricting trade, such as limits on

Overview and points of contention regarding China’s
raw material export restriction dispute
In the sense of clarifying the limit and nature of current disciplinary rules in the WTO, decisions made by the
WTO Dispute Settlement Body, which have been few andfar between to date, regarding export restrictions have become a focus of attention. China’s export restrictions on
natural resources had been disputed in the WTO even prior
to the rare earth incident, with a panel report released inJuly 2011. This dispute garnered much attention because it
was the first panel decision on Article XI:2(a) of the GATT,
and was the first time the WTO ruled on the application of
Article XX to export restrictions.
In 2009, the United States, EU and Mexico requested a
consultation at the WTO regarding China’s export restriction measures (export duties, export licensing, export quotas,
and minimum export price, etc.) on nine raw materials, including coke, bauxite, fluorite, magnesium, manganese, siliFigure II – 5 Share of world’s rare earth export value by country(US$ thousand)
400,000

Other

350,000EU

300,000

U.S.

250,000

China

200,000

Total export value

150,000
100,000
50,000
0

99

2000

01

02

03

04

05

06

07

08

09

10 (Year)

Note: R
 are earth metals, defined as HS code 2805.30, is a collective term forthe 17 rare earth metals including yttrium, lanthanum, europium, neodymium and others.
Sources: T rade statistics from individual countries/regions.

52

II World Trade Rules under the New Economic Environment

production domestically or restrictions on waste products,
was reason why China’s export restrictions did not fulfill
the requirements for “necessary measure.” Next, with regards to (g), the panel found that as an exceptional clausethis was limited to instances “if such measures are madeeffective in conjunction with restrictions on domestic production or consumption.” In other words, the condition forexport restrictions to be implemented under the purpose of(g) is that some type of restriction be taken on production
or consumption of the applicable product domestically andnot on exports. Starting in 2010, China instituted a limiton the total amount of extracted bauxite and phosphorous,
but these measures were implemented after the issue wasreferred to the WTO, so the panel did not accept China’s argument based on the exception noted in (g). In addition, thepanel stated that even if a limit on total extraction amounts
is present, if the ceiling of this amount is actually higher
than the production amount, it cannot be called an effective
restriction, and cannot be considered a measure that fulfills
the requirement of (g) indicating that “if such measures are
made effective in conjunction with restrictions on domestic production or consumption.” It has been pointed outthat there is a high probability this ruling will function asa precedent if for example China’s rare earth export quota
system is disputed at the WTO in the future.

Going forward, there is the possibility that other items
from Article XX of the GATT will be points of contention
in WTO disputes on exports. For example, Article XX (j)states as a reason for an exception, “[measures] essential tothe acquisition or distribution of products in general or local short supply.” Although several conditions are presentin (j), depending on the interpretation, this provision can beread to cover a wide range of export restrictions.
Rules on export restrictions in FTAs
As has been discussed above, although WTO trading
rules include exports by nature, as it was indicated by the
first examination of Article XI:2(a) of the GATT in China’s
raw material export restriction dispute, even if the WTO
Dispute Settlement Body’s ruling was sufficiently clear, itremains hard to say that disciplinary rules on exports havebeen adequately stipulated in WTO rules (Figure II-6).
As one point of contention regarding non-tariff barriers
in non-agricultural market access (NAMA) negotiations in
the Doha Round, proposals have been made about clarifying
disciplinary rules on exports. As representative proposals,
there is an EU proposal on export duties and the proposal
on enhanced transparency of export restrictions, primarily
proposed by Japan. For example, the EU proposed that procedures be added and further details included in the imposi-

Figure II – 6 Principal export regulations and exceptions under WTO rules
Item
Description / Applicable conditions
ClauseShall be granted immediately and unconditionally to like products directed to theGeneral most-favored-nation
territory of all treaty countries in respect to the method of collection of export duties GATT Article I:1
treatment
and surcharges and all related rules and procedures.
Principle
In regard to sales for export or for import, no prohibitions or restrictions other than
General prohibition oftariffs and surcharges shall be established or maintained, whether quotas, export
GATT Article XI:1
quantitative restrictions
licenses or other procedures.
Temporarily applied export prohibitions or export restrictions for the purpose ofPrevention of criticalpreventing or relieving critical shortages of products essential to the exporting
GATT Article XI:2(a)shortages of foodstuffs, etc.
country.
Establishment of prohibitions When establishing export prohibitions or restrictions, adequate consideration
WTO Agreement onor restrictions of exports ofshall be given to the food security of importing countries and provide necessary
Agriculture Article
foodstuffs
information as requested.
12.1
Protection of life or healthExport prohibition, etc., of materials harmful to the health of humans and animals. GATT Article XX:(b)Exportation of gold or silver Restriction measures on the export of gold or silver.
GATT Article XX:(c)Protection of artistic works For the protection of national treasures of artistic, historic or archaeological value.
GATT Article XX:(f)Only to be implemented in conjunction with restrictions on domestic production
Conservation of exhaustible
and consumption. For example, a measure that restricts exports of a specific resource GATT Article XX:(g)natural resources
when restricting the extraction of said resource in order to conserve a scarce resource.
Exception
Measures under anintergovernmental
Only when not disapproved between WTO member countries.
GATT Article XX:(h)commodity agreement
Maintenance of essential
Measures to impose restrictions on the export of raw materials needed domesticallyquantities pursuant to ain order to ensure essential amounts for domestic processing industries. However,GATT Article XX:(i)stabilization plan by thesuch measures shall not operate to increase the afforded protection to the domestic
government
industry and shall follow the provisions of non-discrimination.
Essential measures for the acquisition or distribution of products for which there are
Maintenance of products
supply shortages either generally or locally. Provided that such measures be consistent
for which there are supply
GATT Article XX:(j)with the principle that all contracting parties are entitled to an equitable share of theshortages
international supply of such products.
The taking of necessary measures for maintaining national security shall not be
Important security interests
GATT Article XXI
precluded.
Prohibition in principle ofJapan-Switzerland
No export duties whatsoever shall be established or maintained.
export duties
EPA Article 16, etc.
(Reference) Quantitative export
The export quantity shall not as a result of the export restriction be lower than the
NAFTA Article 315:(a)Examples of restriction clause
exporting country's share of the supply over the past three years.
FTA rules
An export price higher than the domestic price at the time of export shall not be
Export price clause
imposed by means of export licenses, tariffs or other surcharges or establishment of a NAFTA Article 315:(b)minimum export price.
Sources: W
 TO agreements and Mitsuo Matsushita, “Export Controls on Natural Resources and Foodstuff in the Context of the WTO/GATT System” (Trade andTariffs, November 2008).

53

IItion of export duties in the current GATT stipulations, suchas most-favoured nation treatment, tariff evaluations, export
charges, state trading enterprises, and others. In the Doha
Round, however, NAMA is the most controversial area, andso a quick settlement cannot be expected. Although it is preferred to have stable trading rules on a multilateral basis, thisrepresents a difficult challenge over the short term.
For this reason, supplementing export rules with FTAs
should also be eyed. As a way of clarifying WTO rules, FTAs
have included some provisions that prohibit the impositionof export duties as well as disciplinary rules that exceed thestipulations of the GATT. In most cases Japan’s economic
partnership agreements (EPA) prohibit export duties. For
example, Article 16 of the Japan-Switzerland EPA stipulates
that for products exported to the other party, the exporter“must not establish new or maintain any export duties.” Notably, because Japan is a nation that depends on imports ofnatural resources, the “Energy Chapter” in Japan’s EPA withIndonesia and Brunei, from which it imports large quantities of crude oil and natural gas, includes detailed provisions such as the obligation to promptly notify the otherparty in case of implementing export or import restrictions
and the requirement to conduct talks when requested to do
so by the other party.
Examining FTAs not including Japan as a contracting
party shows that the North American Free Trade Agreement (NAFTA) includes detailed mention of rules on exports that exceed those in the GATT. NAFTA Article 314
and Article 604, relating to energy goods, not only prohibits
the imposition of export duties, but Article 315 and Article
605 also includes restrictions on using Article XI:2 and Article XX of the GATT to justify export restrictions. Article
315 Item 1 (a) is the provision on export quantities. This
stipulation recognizes that the GATT can be used to justify
export restriction measures only when the restriction does
not reduce the proportion of the total export shipments ofthe specific good made available to that other Party relative
to the total supply of that good of the Party maintaining the
restriction as compared to the proportion prevailing in themost recent 36-month period. Article 315 Item 1 (b) is theprovision on export prices. This stipulates, as a condition
for applying the GATT, the Party does not impose a higher
price for exports of a good to that other Party than the pricecharged for such good when consumed domestically, bymeans of any measure, such as licenses, fees, taxation andminimum price requirements. Article 315 Item 1 (c) stipulates as a condition that the restriction does not require thedisruption of normal channels of supply to that other Partyor normal proportions among specific goods or categories
of goods supplied to that other Party. NAFTA Article 605 onenergy-related goods is the same stipulation as Article 315.
Japan’s EPAs only stipulate that Article XX of the GATT or
Article XXI concerning national security can be applied asa reason for justifying export restrictions, as is the case with
Article 22 of the Japan-Switzerland EPA.
NAFTA provisions form a point of reference forstrengthening disciplinary rules to guarantee the stablesupply of natural resources through a bilateral FTA. On theother hand, experts have also pointed out that strengthening these rules serves to benefit the national interest of theimporting country only, and from the standpoint of a country in possession of the natural resources, the possibility exists for the position to be reversed (Professor Kawashima).
For example, if Japan is an importer of natural resources
and at the same time considers the future export of a specific resource such as water, there are instances when seeking
stronger export rules limited to a specific area such as the“Energy Chapter” is closer to being in conformity with national interests compared to strengthening rules on exports
as general provision.
Work continues on expanding disciplinary rules ingovernment procurement agreements
The strengthening of government procurement rules
can be cited as one of the many challenges surrounding
WTO rules in the post-Doha Round international trade.
Although no accurate estimate on the ratio of government
procurement to GDP for countries around the world exists,
this ratio is said to be between 10% and 20% and higher indeveloping nations.
Mainly developing nations are hesitant about creating rules for government procurement, while the Government Procurement Agreement (GPA) within the WTO,
which bases its rules on the single undertaking principle,
is irregularly a plurilateral agreement that does not require
membership. Only 14 WTO member countries and regions(including the EU) are party to the agreement (Armenia isscheduled to join the GPA soon). The Doha Round sought
to launch negotiations by lowering the hurdles rather thanstrengthening disciplinary rules on government procurement, such as promoting greater “transparency of government procurement.” In the end, however, a consensus was
not reached and talks have been deferred.
Within the framework of the current GPA reviews havebeen continuing since 1997 on a separate track from theDoha Round. These reviews have focused primarily on (1)simplifying procedures including electronic procurement;(2) strengthening rules to eliminate discriminative measures; and (3) and expanding the scope of procurement subject to the agreement. A provisional agreement was reachedin December 2006 on the revised text of the GPA, and withthe exception of certain final provisions, the new rules havebeen nearly finalized. As for (1) noted above, Article 14 of theamended GPA stipulates provisions for electronic auctioning, while other revisions were made to the entire GPA withconsideration placed on electronic procurement. In (2), therevised text clarified the guarantee of fairness within the provisions, as illustrated by the new general principle includedin Article 4 Item 4, “a procuring entity shall conduct covered
procurement in a transparent and impartial manner thatavoids conflicts of interest and prevents corrupt practices.” As
for (3), work continues among member countries to finalize
the review of thresholds for applicable government procurement bidding by area. A new agreement might be adopted
at the WTO Ministerial Conference in conjunction with theresults of the Doha Round in December 2011.
54

II World Trade Rules under the New Economic Environment

The participation of developing nations is essential toraise the effectiveness of government procurement rules. At
present, nine countries including China are in negotiations
to be member to the GPA. At the time it joined the WTO
China expressed its intent to become party to the GPA, but
negotiations have made little headway. In the open offers
to date, China has not clearly specified the scope of local
government organizations and government-affiliated organizations that would be subject to the government procurement rules of the GPA. The U.S. and Europe have included
a broad scope, and so have requested China to set the samelevel of threshold as existing member countries. Therefore,
reaching an agreement with China will be no easy task.
It appears, however, that China will submit a new revised
proposal in December 2011 that includes local governmentorganizations.

The ACTA is an agreement that focuses on the enforcement of intellectual property right violations. It mainly covers (1) criminal procedures and charges relating to infringements; (2) enforcement in civil law; (3) border measures
such as cracking down on counterfeit products at customs,(4) and intellectual property rights in digital environments.
As a TRIPS-plus provision on criminal charges, the ACTA
makes the import of counterfeited labels subject to criminal
prosecution (Article 23 Item 2) in order to prevent counterfeiters importing counterfeit products and labels separately.
Also, regarding “commercial-scale” acts, which are stipulated in Article 61 of the TRIPS and became a point of contention in the China intellectual property rights WTO panel,
the ACTA defines such scale of criminal actions to “include
at least those carried out as commercial activities for direct
or indirect economic or commercial advantage” (Article
23.1). In terms of enforcing civil law, the ACTA includes aprovision (Article 9.2) where the right holder can seek damages from the offender that equal the amount the offender
realized in profits from the act. Regarding such damages,
Article 45 of the TRIPS stipulates “an adequate amount tocompensate for the injuries,” and so the difficult nature ofcalculating these damages has been seen as a problem.
In order for the ACTA to function effectively after it
has taken force, participation is essential not only from thecurrent 11 countries and regions, but also from developing
countries that have been hesitant toward joining the ACTA
to date. In addition, friction regarding the protection of intellectual property rights exists not only between developing
nations and developed nations. During ACTA negotiations,the U.S. and EU intensely opposed one another especiallyin terms of the definition of geographic indications, which
once again illustrated the difficulty of incorporating theprotection of intellectual property rights into trade rules.

Text of the Anti-Counterfeiting Trade Agreement(ACTA) finalized
The recognition that strengthening the protection ofexisting intellectual property rights is an essential issue
to trade growth is high among mainly developed nations.
However, it has been pointed out that enforcement provisions, such as civil claims and criminal charges against infringement of intellectual property rights, are insufficientin the WTO’s Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS).
The 2009 WTO Panel on China’s measures affecting
the protection and enforcement of intellectual property
rights reviewed a dispute over whether China’s crackdown
on counterfeited and pirated goods violated TRIPS. Although it sided with the U.S. claim that China’s protectionof copyrighted properties violated “compliance with theprovisions of the Berne Convention” stipulated in Article
9 of the TRIPS, the panel did not determine that China’s
violation relating to criminal prosecution, which the U.S.
had favored. For example, the interpretation of the Chinese
authorities at the time of the incident was that an offenderfound with over 500 pirated DVDs would be subject to prison for no more than three years. The U.S. claimed that thisviolated Article 61 of the TRIPS, which establishes criminal
charges for the illegal reproduction of copyrighted work.
However, in response to the fact that the scope of Article
61 of the TRIPS includes only “commercial-scale” acts, theWTO panel found that the U.S. was unable to sufficiently
prove the existence of “commercial-scale” intellectual property rights infringements in the Chinese market, and ruled
against the U.S. complaint.
This dispute illustrated the limits of the current TRIPS,
such as its provisions on criminal charges. Given such circumstances, developed nations are attempting to supplement the TRIPS with a protection of intellectual property
rights in a multilateral framework or FTAs. The ACTA represents such of pluralist initiative. 11 countries and regions
centered on developed nations such as Japan, the U.S. andthe EU pushed discussions forward since 2008, reaching an
overall agreement in 2010 and finalizing the text. The ACTA
is expected to be signed and take effect soon.
55

IITwo types of FTAs in particular have seen a rise in number recently: cross-regional FTA and FTA between major
trading nations. As FTAs between small trading countries
are already in effect for the most part, FTAs between countries doing large scale trading have become more prominent
among each country in recent years. The FTA between the
EU and South Korea, which provisionally took effect in July
2011, and the FTA between the U.S. and South Korea, whichis yet to be approved by the legislature of both countries,
represent noteworthy examples. The Economic Cooperation Framework Agreement (ECFA: not notified to WTO)
between China and Taiwan took effect in 2010.
Given the fact that intra-regional FTA networks havebeen completed to a certain extent, the number of crossregional FTAs involving countries from different regions
has been on the rise in recent years. One example of this is
the Trans-Pacific Partnership (TPP) where negotiations are
currently moving forward. Other example FTAs that tookeffect in 2010 includes the followings; Turkey enacted three
FTAs with Chile, Jordan and Serbia respectively, in order toextend its economic partnerships outside of the EU.
Recently, the South America common market (MERCOSUR: Argentina, Brazil, Paraguay, Uruguay) has been
actively undertaking cross-regional FTA negotiations, asmany countries have approached it. Although negotiations
with the EU had been shelved for many years, they were
officially restarted in October 2010. The EU side has positioned MERCOSUR as one of priority countries for FTA in
its new trade policy strategy known as “Global Europa.” In
addition, MERCOSUR has completed negotiations with theSouthern African Customs Union (SACU) and Egypt andnegotiations with Morocco and Turkey likely to accelerate(some of them are preferential agreement rather than FTA).
MERCOSUR has also completed a joint study with South
Korea with an eye toward entering negotiations. Japan, atthe 41st MERCOSUR Summit meeting held in June 2011,
also proposed the launch of “Japan-Mercosur Dialogue for
Closer Economic Relations.”

2. Overview of FTAs around the World(1) FTA networks around the world
Currently 199 FTAs in the world in effect
As of June 1, 2011, there were a total of 199 free trade
agreements (FTA) in effect around the world, including custom unions. (Based on WTO reports; see reference “Worldand Japanese Trade Statistics” for a list of FTAs around theworld.) (Note 1)
The number of FTAs in effect, which was only 16 before
1990, increased by 51 in the 1990s and again by 120 in thenext decade since the year 2000, indicating that FTAs havegrown by around 200 over the last 20 years (Figures II-7
and II-8). In particular, the Asia and Oceania region saw
a recent spike in this number, as 60% of the FTAs in theseregions have come into effect after 2005. This rapid increase
comes from two contributors, including the full completionof ASEAN+1 FTAs in 2010, namely FTAs involving ASEAN
and its neighboring countries of Japan, South Korea, China,
Oceania (Australia and New Zealand), and India respectively, and the steady promotion of Japan’s bilateral FTAs
with ASEAN countries.
Figure II – 7 Number of FTAs worldwide by year12
1965–1969 0
1955–1959
1960–1964

199 FTAs in Total (As of June 1, 2011)

4
3
3
3

1970–1974
1975–1979
1980–1984
1985–198918

1990–199433

1995–199952

2000–200468

2005–200912

2010–Present
0

10

20

30

40

50

60

70

80
(FTAs)

Figure II – 8 Number of world’s FTAs by period and region(FTAs)
MiddleRussia /Asia / CrossEurope
East / Americas
Total
CIS
Oceania Regional
Africa1955–1959
1
1
1960–1964
1
1
2
1965–19690
1970–1974
1
1
2
4
1975–19792
1
3
1980–1984
1
2
3
1985–1989
1
2
3
1990–1994
4
5
2
2
3
2
18
1995–1999
3
17
2
5
6
33
2000–2004
8
4
5
8
9
18
52
2005–2009
5
2
7
20
34
68
2010–Present
5
4
3
12
Total
28
28
9
26
40
68
199

(2) Trends surrounding Japan’s FTAs
While Japan increased its FTA coverage ratio, othercountries moving faster
The FTA coverage ratio (the percentage of how much a
country or region’ trade is with FTA partners), illustrated
in Figure II-9, serves as a measurement of the country or region’s FTA progress. Japan’s most recent coverage ratio was
18.2%, which marked a 1% increase over the previous year,
boosted by the Japan-India FTA that took effect in August
2011. The fact that Japan’s share of trade with ASEAN, withwhich it has already concluded an FTA, rose from 14.0% in2009 to 14.6% also contributed to this increase in coverage
ratio. In addition, the signing has already taken place for theJapan-Peru FTA as of May 2011, with both countries working to enact the agreement before the end of 2011.
However, Japan’s coverage ratio will only increase slightly
to 18.4% once the Japan-Peru FTA takes effect. Japan continues to negotiate with Australia on an FTA, while it postponeda decision regarding TPP negotiations originally planned for

Source: Both figures II-7 and II-8 were compiled based on a list publishedon the WTO website.
(http://rtais.wto.org/UI/PublicAllRTAList.aspx : As of June 1, 2011)1
Although the government of Japan defines an FTA as an agreement usedin the trade of goods and services and agreements involving broader areas from investment to government procurement as economic partnershipagreements (EPA), the term FTA is uniformly used in this chapter which
also includes EPA.

56

II World Trade Rules under the New Economic Environment

Figure II – 9 FTA coverage rate in major countries/regions
Top countries/regions for trade value(Exports + Imports)

FTA Coverage Rate
Exports +Exports
Imports
Japan
18.2
18.4
U.S.
34.9
40.8
Canada68.2
77.5
Mexico
80.9
92.6
Chile
89.0
87.6
Peru
69.0
69.2
EU Total Trade Value
74.8
77.4
External Trade
26.4
29.5
South Korea
25.2
26.9
China
16.6
12.0
India
17.9
21.0
Singapore
66.1
66.3
ASEAN
60.1
57.9
Australia
26.5
18.1
New Zealand
48.7
48.1

Imports
18.0
31.0
59.0
69.4
90.9
68.7
72.2
23.6
23.4
21.7
15.7
65.9
62.3
35.6
49.3

1st

2nd

(%)

3rd

ASEAN (14.6)
India (1.0) Switzerland (1.0)
NAFTA (28.8) DR-CAFTA (1.5) Singapore (1.5)
NAFTA (65.9)
EFTA (1.2)
Peru (0.5)
NAFTA (67.2)
EU (7.8)
Japan (2.8)
China (20.6)
EU (16.2)
U.S. (13.2)
U.S. (17.7)
China (16.2)
CAN (8.7)
EU (65.0) Switzerland (2.4)
EEA (1.6)
Switzerland (6.6)
EEA (4.0)
Turkey (3.6)
ASEAN (10.9)
EU (10.3)
India (1.9)
ASEAN (9.8)
Taiwan (4.9)
Chile (0.9)
ASEAN (9.3) South Korea (2.4)
Japan (2.3)
ASEAN (27.3)
China (10.6)
U.S. (8.7)
ASEAN (25.6)
China (13.6)
Japan (10.6)
ASEAN (14.2)
U.S. (7.2) New Zealand (3.4)
Australia (20.6)
China (13.5)
ASEAN (12.3)

Notes: (1) “ FTA coverage rate” shows how much a country's trade is done with trading partners with which thecountry has an FTA (as of August 1, 2011). The rate is calculated based on 2010 Trade Statistics.
(2) D R-CAFTA: the U.S. FTA with the Dominican Republic and Central American countries / EEA: the European Economic Area.
(3) C hina excludes the ratio for Hong Kong (7.7%) and Macau (0.1%).
(4) S ome countries have yet to enforce ASEAN-related FTAs, but trade amounts for all countries involved
have been added to the calculation above.
Sources: Government documents, DOT (IMF), trade statistics of individual countries.

Figure II – 10 Status of FTAs by Japan and South Korea

(%)

Japan

South Korea
Share of Imports
Share of Imports
and Exports
and Exports
ASEAN
In effect
14.6
In effect
10.9
Singapore
In effect
2.3
In effect
2.6
Malaysia
In effect
2.8
In effect (ASEAN)
1.8
ThailandIn effect
3.8
In effect (ASEAN)
1.2
Indonesia
In effect
3.0
In effect (ASEAN)
2.6
BruneiIn effect
0.3
In effect (ASEAN)
0.2
Asia Pacific
The Philippines
In effect
1.3
In effect (ASEAN)
1.0
Vietnam
In effect
1.1
In effect (ASEAN)
1.5
India
In effect
1.0
In effect
1.9
Australia
Under negotiations
4.2
Under negotiations
3.0
New Zealand
0.3
Under negotiations
0.2
Negotiations
Negotiations
Japan / South Korea
6.2
10.4
suspendedsuspended
U.S.
12.7
Signed
10.1
Canada1.4
Under negotiations
0.9
In effect
0.9
Under negotiations
1.2
North America / Mexico
Latin America Chile
In effect
0.7
In effect
0.8
Peru
Signed0.2
In effect
0.2
Colombia
0.1
Under negotiations
0.2
In effect
EU
Preliminary talks
10.5
10.3
(provisional)
EuropeEFTA
1.2
In effect
1.0
Switzerland
In effect
1.0
In effect (EFTA)
0.3
Under negotiations
0.5
Turkey0.2
Trans-Pacific Strategic
Domestic
24.6
20.4
Economic Partnership discussion over
(17.4)(13.6)
Other
Agreement (TPP)
participation
Gulf Cooperation
Under negotiations
8.4
Under negotiations
8.9
Council (GCC)
FTA coverage rate
Total in effect18.2
Total in effect25.2
Notes: (1) Percentages are calculated based on 2010 Trade Statistics.
(2) Top figure for the TPP indicates the share for the nine countries, while the bottom figure indicates theshare of countries with which either country has yet to conclude an FTA.
Sources: C ompiled based on data from the Ministry of Foreign Affairs, Ministry of Economy, Trade and Industry,
South Korea’s Ministry of Foreign Affairs and Trade and trade statistics from each country.

it was decided that “in consideration of Japan’s current situation, industry-governmentacademia joint study will beconcluded before the end of
the year.” Although the process is accelerated from original plans, the current situationsuggests that negotiations will
likely not begin immediately.
As for the Japan-South Korea
FTA, where negotiations havebeen suspended, ministry’s
director-general level discussions have been started aimed
at reopening negotiations,with the second such meetingtaking place in May 2011.
Yet, the progress of neighboring country FTAs has beensignificant. First, South Korea,
as will be discussed below,
overtook Japan in terms of its
FTA coverage ratio in the timesince its FTA with the EU tookeffect in July 2011 (Figure II10). All of the ASEAN+1 FTAs
took effect in 2010, and theASEAN’s ratio boosted by 6.1%
due to new FTAs with India
and Oceania. China’s coverage
ratio rose to 16.6% since the
ECFA between Taiwan tookeffect, which is roughly on parwith Japan. Countries aroundthe world are rushing to negotiate and enact FTAs.
Trends of FTAs with major
trading nations and cross-regional FTAs mentioned above
represent similar issues forJapan. That is, by concludingthese types of FTA, a country
will be able to increase its FTA
coverage ratio substantially,
indicating that the time hascome for Japan to consider
FTAs with major trading nations and cross-regional FTAs.

Preliminary talk begins on
the Japan-EU FTAInterest is rising on an
FTA involving Japan and theEU, which is expected to be
Japan’s next counterparty in a large-scale FTA. Since thegovernment of Japan has continued discussions aimed at
beginning negotiations for a Japan-EU Economic Integra-

June 2011 because the government is focusing on the Great
East Japan Earthquake recovery effort. As for the Japan-China-South Korea FTA, at a summit meeting held in May 201157

IItion Agreement (EIA), an agreement was reached at theJapan-EU Summit held in May 2011to begin preliminary
talks on the scope of this agreement, or scoping work. If
this scoping work is completed successfully over monthsof consultation, formal negotiations would then be set tobegin. This would mark an FTA involving countries withhuge trading volumes exceeding US$130 billion annually,
and there is great significance to promoting the creation of
trade rules amid a stall in multilateral negotiations.
Expanding the economic partnership between Japan andthe EU began with the establishment of an EIA review task
force in 2007 that included members of the business communities of both countries. The joint report issued by thissame task force in July 2008 issued a recommendation thatas the next step discussions should begin on areas of sharedinterests and involve more senior government officials andgovernment authorities. The Japan side proposed the fourpillars (inclusive of trade tariffs), namely cooperative initiatives to: 1) “build innovative societies of the world’s highest
level,” 2) “build new dimensional environment-friendly societies,” 3) “develop a safe social infrastructure” and 4) “undertake mutual efforts to improve trade and investment,”
while it was confirmed that EU has a strong interest on Japan’s regulations and non-tariff barriers.
Since voices arose from Japanese companies requestinga review of more specific agreement details, the Japan-EU
EIA Study Group was launched in January 2009 (Secretariat: JETRO) as a platform for FTA study on the Japanside. The group had six meetings and released a report inJune 2009 that found EU interest in Japan in particular focused on medical devices, lumber products, services andgovernment procurement. These four areas were mentioned
at the 2009 Japan-EU Summit meeting discussions as “several specific non-tariff matters.” In addition, the report also
included feedback that requested the promotion of JapanEU cooperation in areas other than tariffs, such as sharing
information prior to the implementation of environmental
regulations, harmonizing various product standards andtechnical standards, creating rules on intellectual property
rights, and concluding an investment agreement. Based on
their Mutual Recognition Agreement (MRA), Japan andthe EU have already reached mutual approval on four fields(telecommunications equipment, electronic products, goodlaboratory practice [GLP] for chemicals and good manufacturing practice [GMP] for pharmaceuticals), but this recommendation called for these areas to be expanded.
In 2010, the European Commission, in the newly established Joint High Level Group (HLG), launched a public
hearing involving various industry groups and summarized the views of interested parties. Several opinions wereraised from the EU side since the Japan-EU EIA ResearchCommittee released its report questioning the effectiveness of a Japan-EU FTA because Japan’s tariffs on industrial
products are already low. Among EU industry, food andbeverage, IT and chemicals industries had a positive stance,
while automakers and automotive parts manufactures were
hesitant, marking a divergence. As a result of the HLG, in
July 2010 the European Commission cited “27 examples of

non-tariff measures faced by European companies doing
business with Japan,” and provided a clearer requests forJapan’s non-tariff barriers on trade such as regulations. The
27 items cover a wide range of areas, from items questioning
transparency and conformity with international standards
to regulations on individual businesses such as financial
services and cosmetics, among others. For example, the international departure and arrival time is currently permitted late at night at Haneda International Airport and it isincluded in the area of air transport.
In order to meet these requests, the government of Japanis reviewing several of its existing regulations. First, given
its mention during the 2009 Japan-EU Summit meeting
discussions, in December 2010 Japan announced its commitment to take specific actions on four areas, providing
access at a single location to information in English on
government procurement information for governmentaffiliated organizations including local governments, safety
and technical guidelines for advanced automobiles, lumber standards for building materials, and medical devices.
Specifically on government procurement information, theJapanese government agreed to provide primary procurement information in English on not only central government but all prefectural, major cities governments throughthe JETRO website by the end of March 2011.
In addition to this, Japan, in the Regulatory and Systems
Reform Subcommittee set up within the Government Revitalization Unit, incorporated a wide range of review, including loosening conditions for alcoholic beverage distributor
licenses, simplifying and speeding up approval protocol forfood additives, lifting the ban on imports of beef, lamb andrennet from goat (compound used to manufacture cheese)from EU countries, and promoting mutual approval ofcommercial airliners and crew certification in developed
nations, with cabinet approval received on the policy at theend of March 2011. For most of these items, a review and decision is supposed to be made before the end of fiscal 2011,
and as a result these actions by the government of Japan areinterpreted to have helped improve the stance of the EU.
The EU Council Meeting (EU Summit meeting) held on
March 24 and 25, 2011 emphasized the strategic importanceof the Japan-EU relationship, announcing that “Looking to
the future, the European Council reiterates the strategic
importance of the EU/Japan relationship. The forthcoming
summit must be used to strengthen this relationship andbring forward our common agenda, including through thepotential launch of negotiations for a free trade agreementon the basis that Japan is willing to tackle inter alia the issue
of non-tariff barriers and restrictions on public procurement.” The conclusion served as the basis for an agreement
to start scoping work in May 2011.
EU side has high hopes for effects from the eliminationof non-tariff barriers
Although not the official view of the European Commission, Copenhagen Economics, a private sector economic consulting firm, conducted a study in February 2010
entitled “Study on the Barriers to Trade and Investment be58

II World Trade Rules under the New Economic Environment

tween the EU and Japan” based on a request from the Trade
Department of the European Commission to examine theeffect a Japan-EU FTA would have on imports and exports.
The study estimated that in the event tariffs on all goods
were eliminated EU exports (total of goods and services) toJapan would increase by 14.1 billion euro. This corresponds
to a 23.1% rise over the figure for 2008, which is the baseyear in the study. Although there was somewhat of a range,
the study found that the effect of eliminating non-tariff barriers would increase EU exports by up to 29.4 billion euro,
or 48.2%. The sector benefiting the most from the elimination of tariffs was processed foods, 4.8 billion euro increase,
while for the elimination on non-tariff barriers it was thechemicals including pharmaceuticals sector at 10 billion
euro. The report also calculated the increase in Japanese
exports bound for the EU. If all tariffs were eliminated, thestudy estimated that Japanese exports would increase by
25.2 billion euro, or 28.4% from the elimination of tariffs(28.4% increase), and 28.5 billion euro, or 32.2% from theelimination of non-tariff barriers. The sector from the Japanside that would benefit this most was automotive, which accounted for more than half of the 27.2 billion euro increase
when combining the effect of eliminating both tariffs andnon-tariff barriers to trade.
The effect will largely be influenced by the surrounding environment, such as the results of negotiations, what
other FTAs have taken effect, and others. In particular, thereport did not consider the effect of the EU-South Korea
FTA, which at the time of compilation had yet to be signed,
and these figures should not be considered to be entirely accurate. However, it is worth noting that the elimination of
non-tariff barriers is estimated to have a significantly larger
effect than the elimination of tariffs, as well as the estimatethat EU exports to Japan would largely increase despite Japan’s already low tariffs on industrial products.

will include items covered under the WTO’s Agricultural
Agreement (Note 2) as well as marine produce (HS03 category)and lumber (HS44 category), while all other items will beconsidered as non-agricultural goods.
A glance indicates that while the Japan side has a large
percentage of duty free items, imports with a greater than
15% tariff rate occupies 1.8% for both agricultural goods
and non-agricultural goods. In contrast, the EU side had asmall number of items that were duty free, while many nonagricultural goods had around a 10% tariff rate, as nearly allimports were found in categories up to 15% tariff rate. Few
items exist with a tariff rate of higher than 15% for both
agricultural and non-agricultural goods.
First, Japan’s exports to EU totalled US$66,187 million
in 2010, with agricultural goods accounting for 14.6% andnon-agricultural goods 84.5% (the remaining 0.9% includes
re-imports that cannot be classified for purposes of thisstudy). Although varying by year, typically Japan’s importsof agricultural goods from around the world average around
11% of its total imports, so imports of agricultural goods
from the EU were slightly above this mark. Among agricultural goods imports, around 25% is tobacco (HS24), 17%
for beverages and alcoholic beverages (HS22), 14% for swine(HS02) and 13% for lumber (HS44). As for tariffs, nearly all
tobacco products are duty-free, swine has differential tariffs(difference between the import price and benchmark price)or 4.3%, while for most lumber items the tariff is under 5%.
Swine and lumber accounts for some 70% of the 0.1% to 5%
tariff category for agricultural goods. Denmark accounts
for a 70% share of EU swine exports to Japan with the highest share, and in recent years Hungary has increased its
share to 10%. Combining both agricultural goods and nonagricultural goods, 68.4% of Japan’s imports from the EU
are duty free. Including the 0.1% to 5% tariff category would
boost this total to 88%, indicating that a huge percentage ofJapan’s import trade value from the EU is either duty freeor subject to low tariffs. This also proves that the Japan has
little room for further tariff reduction.
Agricultural goods in the 5.1% to 10% tariff category account for 1.2% of the total, and mainly encompass tomato
preparations, proteins (protein, corn starch, albumin andcasein) and lumber. In addition, agricultural goods in the
10.1% to 15% tariff category account for 1.3% of the total,
with most originating from beverages and alcoholic beverages (HS22), which included wine (15% or 125 yen per liter,
whichever is lower) and water with fruit juice and addedsugar (13.4%), as some items in the beverage category wereseen to have a rather high tariff rate. Other processed fooditems including herbal teas (15%) are also included in thistariff category. With regards to wine, in the Japan-Chile
FTA tariffs are set to be eliminated in stages over a 12-year
period, with the tariff rate having been reduced to 9.2% as of2011. Cheeses (22.4% to 40%) accounted for half of all agricultural goods in the more than 20% tariff category, which

Examining Japan-EU trade value distribution by tariff levelOn bilateral goods trade, there is a point of how much
goods have duty-free access, low tariffs access or high tariffs access in EU-Japan trade. The following section breaks
these goods and services down by the lowest HS code, or
tariff line, and categorizes these into tariff levels (Figures
II-11 and II-12) based on 2010 import statistics for the
EU from Japan and from the EU to Japan. There are approximately 6,100 tariff lines for Japan’s imports from theEU, while EU imports from Japan there are approximately
6,600. The tariff range was categorized into duty free, 0.1%
to 5%, 5.1% to 10%, 10.1% to 15%, 15.1% to 20%, more than
20% and quantity-based tariffs.
The figure illustrates the percentage for each tariff level
when the total import value is set to 100.There is a discussion of whether trade liberalization, in light of eliminating
barriers for “substantially all trade” from GATT Article
XXIV, which forms an important condition of an FTA, bemeasured based on the tariff line number or trade value,
here the measurement will be on a trade value basis in order to examine the share of both parties in terms of total
trade. As for the definitions of items, agricultural goods

2
Subject items: HS01 to HS24 (excluding fish and marine produce), 2905.43,
2905.44, 3301, 3501 to 3505, 3809.10, 3823.60, 4101 to 4103, 4301, 5001 to
5003, 5101 to 5103, 5201 to 5203, 5301to 5302.

59

II

Figure II – 11 Distribution of Japan's import value with EU by tariff level (2010)
Agricultural products
Non-agricultural products
Total

Duty free
5.5%
63.2%
68.7%

0.1-5%
4.5%
14.9%
19.3%

5.1-10%
1.2%
4.9%
6.2%

10.1-15%
1.3%
0.8%
2.0%

15.1-20%
0.2%
0.2%
0.4%

20%0.8%0.5%
1.3%

Japan’s imports from the EU (US$ million): 66,187
Non-ad valorem Unclassifiable
Total
1.1%
14.6%
0.1%
84.5%
1.2%
0.9%
100.0%

20%0.0%0.0%
0.0%

EU’s import from Japan (US$ million): 85,564
Non-ad valorem Unclassifiable
Total
0.0%
0.4%
0.1%
98.8%
0.1%
0.9%
100.0%

Figure II – 12 Distribution of EU's import value with Japan by tariff level (2010)
Agricultural products
Non-agricultural products
Total

Duty free
0.1%
35.8%
35.9%

0.1-5%
0.0%
37.9%
37.9%

5.1-10%
0.1%
24.3%
24.4%

10.1-15%
0.0%
0.7%
0.8%

15.1-20%
0.0%
0.0%
0.0%

Notes: (1) “Agricultural products” are products defined in the WTO Agreement on Agriculture, plus fishery products (HS03 etc.) and lumber (HS44 etc.). “Nonagricultural products” are the remaining products.
(2) “Non-classifiable” refers to re-imports and others.
Sources: B oth figures II-11 and II-12 are from Trade Statistics of Japan, Customs Tariff Table of Japan, Trade Statistics of the EU, Customs Tariff Table of the EU
and WTO Tariff Analysis Online.

also includes wheat gluten (21.3%), olive oil (21.3%) as well
as sweets such as candy, caramel and chocolate (each 25%).
To summarize, imports of agricultural goods from theEU primarily include preparations, beverages and alcoholic
beverages, which contrasts with agricultural goods imports
from Australia and the U.S. that typically are primary products such as beef, wheat and soy beans.
Conversely, EU imports from Japan (Japanese exports
to the EU) totalled US$85,640 million in 2010, virtually
all with non-agricultural goods. Particularly large portionof non-agricultural goods are subject to duties, with only
35.8% duty free. When including the 0.1% to 5% tariff category, this figure totals 73.8%, which is lower compared tothe 88.0% figure noted above for Japan’s import from EU.
The share of the 5.1% to 10% tariff category is large share of
24.3% since the EU’s tariff on automobiles is generally 10%.
This contrasts greatly with the fact that the same category
for EU imports to Japan only accounted for a 4.9% share of
the total. Two thirds of automobiles and parts (HS87) fallunder this 5.1% to 10% tariff category, while the remaining one third, which is primarily auto parts, is includedin the 0.1% to 5% tariff category because the tariff rate is
typically lower than vehicles at between 3% and 4.5%. For
other items, most chemical products (HS28 to 40) generally
has a 6.5% tariff rate, which was also another factor that
increased the share of this tariff rate category.
The 10.1% to 15% tariff category for non-agricultural goods mainly included non-computer monitors(HS8528.49 and 8528.59) and other video camera recorders(HS8525.8099), with the tariff rate set at 14% for both, oramong the highest for industrial products. However, items
included in this tariff category only accounted for 0.7% of
the total. China accounts for nearly a 70% share of EU imports of non-computer monitors (for TV use), followed by
Japan at around 10%. The share of South Korea is behind
the U.S. and Taiwan at 3.4%. Although the effects of the EUSouth Korea FTA on Japan’s export are frequently pointed
out, this does not necessarily mean that only Japan andSouth Korea are in a competitive relationship.
The tariff rate for certain models of cargo vehicles(HS8704: trucks), such as those with engines larger than2500cc, is 22%, and the export value of Japanese trucks

bound for the EU has fallen from US$678 million down to
US$380 million and then US$256 million over the previous three years since 2008. Although the share for the hightariff rate category is small, this can be interpreted hightariff prevents the product from being imported to the EU,
thereby keeping the share relatively small.
(3) Cross-regional FTA Initiatives in Asia and Oceania
TPP as a vital initiative for United States in doubling
exports
The Trans-Pacific Strategic Economic Partnership
Agreement (TPP) is a multilateral free trade agreement,
which is gathering an excessive attention in Japan becauseof the arguments over whether to join the negotiation. It is
an important agreement from the perspective of establishment of trade rules in Asia and Oceania, so it is necessary
to keep abreast of the latest trends in the TPP negotiations
regardless of whether Japan will join it or not.
Initially, the TPP was an agreement established by Singapore, New Zealand, Chile and Brunei, but negotiations
expanded as other countries joined the process. In October 2010 Malaysia officially joined negotiations for the TPP,
bringing the number of countries engaged in TPP negotiations to nine (the four original members plus Australia,
Peru, the U.S., Vietnam and Malaysia). The negotiations
were launched in March 2010, and as of June 2011 sevenformal rounds have been held. There are 24 working groups(WGs) in the TPP negotiations that deliberate on specifictopics (see Figure II-13).
The Asia-Pacific Economic Cooperation (APEC) has established the concept of a Free Trade Area of the Asia-Pacific (FTAAP) as its long-term objective, and TPP, ASEAN+3(Japan, China, and South Korea) and ASEAN+6 (Japan,
China, South Korea, India, Australia, and New Zealand)
are the process to achieve it. Among these processes, negotiation round has already started for TPP, and TPP is a stepahead toward achieving a FTAAP. Each initiative is aiming
to build a unified framework for Asia and Oceania under
the understanding that a simple accumulation of bilateral
FTAs is not sufficiently comprehensive. If we compare theirglobal share, in terms of population, ASEAN+6 stands highat 49.2% as it includes Japan, China and India, while TPP is60

II World Trade Rules under the New Economic Environment

deals with various schemes that have cross-sectional impact
on business, and they cover different angles, such as harmonization of regulations, efficiency of supplier chains, andpromotion of SMEs trade.

Figure II – 13 Areas of negotiations in the TPP
Areas of Negotiations
Discussions of chief negotiators
Market access (goods)
Services (cross-border services)
Market access (textiles / apparel)
Services (finance)
Market access (agriculture)
Services (telecommunications)
Services (movements of business
Rules of origin
officials)
Trade facilitation
E-commerce
Sanitary and phytosanitary
Investment
measures (SPS)
Technical barriers to trade (TBT)
Environment
Trade remedies (safeguards, etc.)
Labor
Government procurement
Institutional issues
Intellectual property rights
Dispute settlement
Competition policy
Cooperation
Cross-cutting issues

The framework of the TPP on goods remains unsettled
The most significant point of contention that will havean impact on the completed framework of the TPP is the existence of numerous FTAs among the negotiating countries(see Figure II-14). The relevance is not yet clear between these
existing trade agreements and the ongoing TPP, in terms ofthe tariff elimination schedule. Some U.S. negotiating officials are claiming the general rules that TPP will requirethat all products are subject to eventual tariff elimination,but on the other hand the U.S. itself has exempted several
products from trade liberalization in its existing FTAs. For
instance, in the Australia–United States Free Trade Agreement (AUSFTA), which came into force in 2005, sugar andsome dairy goods were excluded from the U.S. liberalization list. In fact, a review of existing agreements reveals thateach country has numerous sensitive products (see FigureII-15). The approach of existing FTAs regarding liberalization of trade in services also differs, as some uphold themethod of determining the sectors that will be subjected toliberalization (positive list), while others determine only thesectors that will be exempted from liberalization (negativelist). Another difference is whether the agreements include
chapter on government procurement. For instance, Malaysia and Vietnam have not concluded a single FTA that contains government procurement chapters.
The U.S. approaches on the TPP negotiations intends tomaintain the conditions it has achieved under the existing
FTAs and keep them in the TPP. To put it the other way
around, it has no intention to eliminate tariffs beyond thelevel of existing trade agreements. Based upon this premise, the TPP negotiating countries will engage in negotiations only with countries with which they have no FTAs,
while following the tariff elimination schedule determinedin existing agreements. In the case of the U.S., that means
negotiations only with New Zealand, Malaysia, Vietnam,
and Brunei.
Australia and New Zealand, on the other hand, believethat the right approach is to “paint over” the existing agreements and aim to reach a new consensus on a unified tariffelimination schedule among the TPP negotiating countries.
In other words, Australia expects the U.S. to open its sugar
market, while New Zealand harbors the same expectations
regarding the U.S. dairy goods markets. At present, the negotiating countries have shelved such issues on the overall
framework of negotiations in order to maintain the momentum of negotiations, but at some time countries would choose
the style. The completed structure of the TPP is expected tovary greatly depending on the way these issues are solved.

Sources: Th e Ministry of Foreign Affairs, Ministry of Trade, Economy andIndustry and governments of participating countries.

relatively low at 7.4%. In terms of GDP, however, the TPP,
which includes the U.S., exceeds ASEAN+6. In other words,
the scale of the GDP of the U.S., a single country, exceeds
the sum of Japan, China, and India.
There are three factors that underlie the interest of the
U.S. in the TPP. First, all negotiating parties are APEC member countries, and the process of negotiations can be positioned as a step toward establishment of a FTAAP. Second,
the ruling Democratic Party of the U.S. prefers multilateralagreement and does not aspire to work on bilateral FTAs.
Third, the TPP is a trade framework that does not include
China, and also Myanmar, with which the U.S. scarcely
engage in bilateral relation. Regarding the third factor, inparticular, the U.S. enhancing trade relations with ASEAN
whole is currently unlikely because ASEAN includes Myanmar. In this respect, the TPP is a framework that includes
only part of the ASEAN member countries. As for China,
the U.S. has a priority in first establishing trade rules thatwill become leverage when the FTAAP becomes a reality inthe future and China considers to join it.
Since the U.S. announced in November 2009 that it
would enter the TPP negotiations, the U.S. is leading thenegotiations and its discussion. With the stalemate of WTO
Doha Round in establishing multilateral trade rules, TPP
represents a trade initiative of utmost importance over the
next few years for the U.S. The U.S. places priority on intellectual property protection and labor and environment
clauses, and is expected to pose high-level demands in theupcoming rounds of negotiations. Under the objectives ofdoubling exports by 2014, the U.S. government intends toattract the TPP to the American people as a “model for a
21st century regional trade agreement,” and, aiming to garner the support of various groups domestically by claimingthat the TPP will facilitate creation of employment and willcontribute to more exports. By giving the TPP a distinctive
image from that of existing FTAs, the U.S. government isworking to gain the support of small and medium-sizedenterprises (SMEs), labor unions and other groups thattraditionally have maintained a low support for FTAs. An
unprecedented discussions working group includes “crosscutting issues,” which had never been part of any FTA in
the past, upon the strong insistence of the U.S. The group

Aiming to establish trade rules for the Asia-Pacific region
The TPP tends to attract the greatest amount of attention for its clauses concerning the elimination of tariffs on
goods, but in fact the goal pursued by the U.S. is to establish
61

IIFigure II – 14 Existing FTAs among TPP negotiating countries
NonmemberParticipating Countries
Singapore

New
Zealand

Chile

BruneiU.S.

Australia

Peru

Vietnam

Malaysia

Japan

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

Negotiations
concluded(bilateral)+(Bilateral)

l

l

l

l

l

l

Under
Negotiations(Bilateral)

Singapore
New
Zealand

Participating
Countries

Non-member

l

Chile

l

l

Brunei

l

l

U.S.

l

Australia

l

Peru

l

Vietnamll

Negotiations
Concluded(Bilateral)ll

Malaysiall+(Bilateral)

l

l

Japan

l

l

l

Under
Negotiations(Bilateral)

l

l

l

l

l

l

l

l

l

l

l

l

FTA in effect+l+(Bilateral)l

FTA signed (not yet in effect)ll+(Bilateral)

l

l
l

l

New negotiations under the TPP

Source: TPP negotiating governments documents.

Figure II – 15 Major areas excluded from liberalization in existing FTAs among TPP negotiating countries
Area
Country
FTA
Items
Measures
U.S.-Australia
Sugar, dairy products, etc.
Maintain the current tariff-quota system.
U.S.
U.S.-Peru
Sugar
Maintain the current tariff-quota system.
Chile-Malaysia
96 items such as wine, alcoholic beverages, rice,
Chile
Excluded from liberalization.
(not yet in effect)
tobacco, wheat, sugar, honey and used tires
Meat (including pork, chicken)
Maintain the current tariff-quota system.
Some passenger cars, cargo vehicles, andMaintain the 5% tariff even 10 years after the FTA
ASEAN-Australia-NZ
Tariffmotorcycles
into force.
(AANZFTA)
Malaysia
Maintain the 10% tariff even 10 years after the
Steel products (rolled steel plates)
FTA into force.
Chile-Malaysia
138 items such as fireworks, explosives, alcoholic
Excluded from liberalization.
(not in effect yet)beverages, rice and tobacco
Some passenger cars, cargo vehicles, andMaintain the 5-50% tariff even 12 years after theVietnam
AANZFTA
motorcycles
FTA into force.
Area

MeasuresExcluded from the Buy American Act• U.S.-Australia FTA: Requires competitive bidding from a total of 80 federal government agencies
Governmentand organizations as well as state-level organizations, and gives non-discriminative treatment to
Procurement Australia
All FTAs
U.S. companies (subject to certain restrictions)• Australia-Singapore FTA:  Only includes central (national) government procurement”
U.S.-Australia andDoes not include provisions on dispute settlement (However, included in other FTAs such as
Investment Australia
Australia-New Zealand Australia-Thailand, Australia-Singapore, AANZFTA, and Australia-Chile, etc.)(Dispute
Does not include provisions on dispute settlements (However, included in other FTAs such as
Settlement) New Zealand Australia-New Zealand
Malaysia-New Zealand and AANZFTA)AreaCountry
U.S.

FTA
U.S.-Australia

Details of Measures

Government Containing the chapter
Procurement
Not containing the chapter
Services

Negative list
Positive list

FTA
U.S.-Australia, U.S.-Singapore, U.S.-Chile, U.S.-Peru, Australia-Singapore, Australia-Chile,
Singapore-Peru, Singapore-New Zealand, P4
Australia-New Zealand, Malaysia-New Zealand, Malaysia-Chile (not yet in effect), AANZFTA, Chile-Peru
U.S.-Australia, U.S.-Singapore, U.S.-Chile, U.S.-Peru, Australia-Singapore, Australia-Chile,
Australia-New Zealand, Singapore-Peru, P4Singapore-New Zealand, Malaysia-New Zealand, AANZFTA

Note: P4: Current TPP agreement.
Sources: Each agreement and related documents.

trade rules for the Asia-Pacific Region. Having set a targetof doubling exports by the end of 2014, the U.S. is focusing
efforts on formulation of rules for nontariff areas with theobjective of eliminating regulations and systems that hinder U.S. exports. Their idea is that when new member coun-tries join the TPP in the future, already established rules
will be applied to the new member. That is why some of therules under negotiations are being offered specifically with
China in mind.
One of the points of contention in the investment sec62

II World Trade Rules under the New Economic Environment

tor is whether to include rules and regulations for settlement of investor-state disputes. Such rules and regulations
represent a framework for settlement of disputes between
companies doing business in foreign markets and the local
governments by referring the disputes to international judicial institutions. Australia and New Zealand are against theinclusion of such rules in fear of possible litigation, while
the U.S. views positively the inclusion, and this differenceof opinions attracts attention. Still, both Australia and New
Zealand have included these regulations in other existing
FTAs, so they do not oppose in every FTAs. In fact, New
Zealand successfully included the dispute settlement rulesin the New Zealand–China FTA. As for the U.S., despite
its generally positive attitude to such rules and regulations,some domestic circles vehemently oppose them claimingthat having third-party judicial institutions issue decisions
that transcend national laws represents outsourcing of theconstitution.
As for the issue of competition provisions for stateowned enterprises, the U.S. industrial circles are strongly
pushing for the establishment of regulations that will prevent state-owned enterprises from taking advantage of theirposition in order to gain the upper hand over their privatecompetitors. The U.S. is conscious of Malaysia, Vietnam,
and Brunei among the TPP negotiating countries, becauseof the relatively high level of involvement of the public sector in their national economies. For instance, the U.S. is
mindful of possible cases in which state-owned enterprises
backed by government subsidies may enter bidding competitions under conditions that are no match for private companies. The U.S. efforts in this matter are seen as a strategic
move that envisions the day further down the road when
China joins the TPP and aims to impose rules that will govern possible competition disputes.
The “rule of origin” is seen as the most difficult issue inthe non-tariff area negotiations. Most observers believe thateventually the conflicting opinions will be drawn together
into a single set of rules, but because of the large number ofexisting FTAs and the fact that for each product the standard for meeting the rules of origin differs depending on
the FTA, the work to unify them will take quite some time.
The rules of origin are a point of contention that is related to
the framework mentioned above. In the event that a single
set of rules is not established and the agreement cannot accumulate added value, manufacturing processes between
multiple countries will not necessarily qualify for using
TPP, and, some observers say such a TPP will be meaningless as a multilateral FTA.
The TPP negotiations are proceeding at a pace set by the
U.S., but even if an agreement is reached, the U.S. Congress
is not likely to easily approve the pact. For the U.S., the passage of several pending FTAs (with Colombia, Panama, andSouth Korea) comes as the top priority, and the serious discussion between the Congress and the administration on
the U.S. stance in the TPP negotiations comes afterwards.
On top of that, year 2012 will be the next presidential elections. The TPP negotiations will continue during the election campaign, but even if an agreement is reached in 2012,

the U.S. Congress can proceed with its ratification no sooner than 2013. Normally, the Trade Promotion Authority(TPA) of the U.S. President, also known as the “Fast Track
Negotiating Authority,” is granted to the administration inorder to avoid amendments to the content of an agreement
or rehashing arguments in the process of Congressional approval, but this authority currently is expired. In the eventthat the TPP negotiations come close to an agreement, thediscussions over reinstating the TPA will intensify. In thatcase, conditions under which such an authority will be
granted to the President and the authorities that the Congress may receive in exchange are expected to consume asignificant amount of time.
Initially, the U.S. had set a schedule for reaching anagreement in the TPP negotiations by November 2011, when
the U.S. will host the APEC Leaders Meeting as the chair
country, but it is becoming increasingly difficult to meetthis target. Still, the U.S. is set on using the APEC Leaders
Meeting to demonstrate to the world’s leaders that the negotiations have reached a certain end point.
Of the TPP negotiating countries, Japan already has FTAs
with the ASEAN countries (Singapore, Malaysia, Vietnam
and Brunei) and with Chile, and has concluded negotiations
with Peru. Therefore, Japan’s participation in the TPP negotiations means that it has to start fresh negotiations with the
U.S., Australia (with which bilateral negotiations are now under way), and New Zealand. Many of the negotiating countries wish to see Japan join the negotiations, as some hopeJapan’s participation will put a brake on the process which
is proceeding at a pace set unilaterally by the U.S. The U.S.
itself upholds the position that Japan’s participation will dramatically enhance the significance of the agreement and inprinciple welcomes Japan into the negotiations.
If more countries join the negotiations, it will become
necessary to start them from the beginning. From thisperspective, the U.S. does not envision new participants atleast until November. In the event that more countries join
the negotiations after November, one of the most probable
points of contention will be whether they will have to accept
some already settled, to a certain degree, content, or there
will be still room left for making new proposals.
(4) South Korea advances FTAs with large trade
partners
EU–South Korea FTA provisionally in force since July;focus on automobiles
The spotlight in the 2011 FTA initiatives in the Asiaand Oceania region is on South Korea. The country madesignificant progress toward putting into force two largescale FTAs. First, the European Union–South Korea Free
Trade Agreement came provisionally into force on July 1,
2011, raising the coverage rate to 25.2%, above Japan’s rateof 18.2%. The FTA is provisional because ratification of
the agreement by each of EU member countries will taketime, and therefore it was put into force provisionally under
the EU authority, eliminating tariffs for those products forwhich the FTA could be applied, and will formally comeinto force later. As for the FTA with the U.S., re-negotia63

IItions were successfully concluded at the end of 2010, andthe agreement is expected to pass its largest obstacle, theformal approval by the U.S. Congress, in tandem with thepending trade deals with Colombia and Panama by the endof this year.
The impact of the FTAs concluded by South Korea on
Japanese exports is an issue of great interest. The EU imposes an import tariff of more than 10% on some electric
appliances and passenger vehicles, but under the EU–South
Korea FTA, South Korean products will be exempt fromtariffs for up to five years after the agreement comes into
force. There is a possibility that this may put some products
exported from Japan at a disadvantage. An examination of
the shares held by Japan and South Korea in the major EU
imports and their tariff rates demonstrates that automobiles are the one area in which tariffs are high and Japan andSouth Korea compete as rivals. Automobiles made in Japanaccount for 33.3% of the value of EU import of passenger
vehicles in 2010, while South Korean automobiles accountfor 11.1%, but should the EU–South Korea FTA come into
force, there is a possibility that exports from South Korea
may take over a portion of the share held by Japanese exports. The following measures can be considered in order toenable Japan to adequately respond to these developments:
firstly, conclude an FTA with the EU, and obtain the benefitof tariff elimination measures identical to those applied forSouth Korean products; secondly, switch from exports fromJapan to local production in Europe; and thirdly, switch to
production in third countries that have concluded FTAs
with the EU.
Some observers note that since local production of vehicles by Japanese companies in the EU has advanced significantly and is already approximately double the export
volume, the EU–South Korea FTA may not have a significant impact on Japanese exports. According to the resultsof the FY 2010 Survey on the International Operations ofJapanese Firms carried out by JETRO between November
and December 2010 (1,002 respondents), when asked about
the impact of the EU–South Korea FTA, 42.4% (the largest
share) of the respondents stated that they feel no particularimpact, exceeding the 18.3% share of respondents who envisioned a possible drop in exports to the EU and saw the
impact of the FTA as negative. This distribution is maintained even when the respondents are narrowed down tocompanies in the automotive industry and the electric andelectronics industry.
We here analyze what Japanese and South Korean products are likely to compete on the EU markets. Based on thecomparative advantage concept, we calculated the revealed
comparative advantage (RCA) index (Note 3) using EU importstatistics, and compared the competitiveness of Japaneseand South Korean exports to the EU. Regarding productswith an eight-digit HS code, we selected those that met thefollowing two conditions: to feature particularly strong
competition (the difference between the indices of the twocountries to be less than double), and the export amountto reach a certain level (above 10 million euro) (see Figure
II-16). The results were characterized by a large number ofcompetitive products in the field of automobiles and automotive components.
In the electric and electronics industry, it is often pointed out that at 14% the tariff on TV receivers (HS8528.71–
8528.72) is quite high. However, Turkey and China eachhold about 40% of the TV import share to the EU, and Japan
with 0.3% and South Korea with 2.9% are hardly rivals inthat field. Also, South Korean enterprises are already advancing local production in Eastern Europe. Rather thanTV receivers, South Korea holds a significant share of about
30% of the imports of TV components (HS8529). The tariff
rate there is not so high at up to 5%, so South Korean products are expected to compete with products made in China,
which holds an approximately 40% share. As for the sectorsof mobile phones (HS8517) and semiconductors (HS8542),
where South Korea holds a share of the EU markets, they
have already become tariff-free based on the WTO’s Information Technology Agreement (ITA), so the EU–South
Korea FTA does not have any particular effect in boosting
exports in these areas.
From the perspective of the EU–South Korea FTA’s impact on Japan’s exports, looking just at the EU markets is
not enough. South Korea imposes an 8% tariff to most products in the categories of general machinery (HS84), electrical equipment (HS85), and automobiles and parts (HS87),
and a 6.5% tariff on most plastic products (HS39), but thesetariffs will be eliminated immediately once the EU–South
Korea FTA comes into force. Japan, too, exports to South
Korea products that fall under the above categories. Thismeans that the possibility for Japanese products to be exposed
to competition by EU products on the South Korean market
is higher than the possibility for them to compete with South
Figure II – 16 Competitiveness of Japan and South Korea’s
exports for EU (2010, HS code: 8 digits)
14.0
84581180: Lathes (Numerically controlled)

South Korea’s competitiveness in exports
to the EU market (RCA index)

12.0
10.0
8.0
6.0
4.0

84151090: Air
conditioning units (forwindow and for wall, withelectric power consumption
exceeding 3kW)
87112093:
Motorbikes(with engine
of a cylinder
capacity
between 125
and 250cc)

85472000: Plastic
products forelectricity
insulation

87088020:
Suspension systems
and parts thereof

87033219: Passenger vehicles(with cylinder capacity
between 1500 and 2500cc)

84272019: Fork-lift trucks(self-propelled and other)

87082990: Automotive components (other)
87085091: Drive shafts
73181510: Other nuts and bolts
84069090: Steam turbin components
85366990 Electric circuit devices (other)
85078080: Other rechargeable batteries

2.0
0.0

87089310: Clutches
and parts thereof

83023000: Base-metal braces
and fixtures (for automobiles)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Japan's competitiveness in exports to the EU market (RCA index)

The global RCA index for Commodity i of Country A is calculated according to the following formula: (Country A’s export amount of Commodity
i/Total amount of exports of Country A)/(World export amount of Commodity i/Total amount of world exports) – 1.

3

Note: We picked up products in which the competition is particularly intensifying, and Japanese exports value exceeds 10 million euro.
Source: EU Trade Statistics.

64

II World Trade Rules under the New Economic Environment

Korean products on the EU markets. Furthermore, should aU.S.–South Korea FTA come into force in the near future, we
can expect escalation of competition with products made in
the U.S. on the South Korean market.

years, but the KORUS FTA extends this period to five years.
The application procedure for visa renewal requires morethan just submission of documents. In order to receive avisa stamp in the passport, each visa applicant must leave
the U.S. for a period of three–four days and attend an interview at a U.S. consulate or embassy. The process is extremely
time-consuming and troublesome. The travel expenses, application fees and attorney fees add up to a sum in the rangeof US$10,000 for a family of four. If the initial period of validity is set at five years, many companies will make surethat the term of their expatriate employees is within thisperiod, and thus will eliminate the necessity to go throughthe renewal procedures. From the perspective of South Korean companies, this is extremely beneficial as it reduces theburden of office work costs and monetary expenses.
In South Korea, the promotion of the KORUS FTA
was backed by the provision of compensations to domestic agriculture and the implementation of measures for its
strengthening. The launch of negotiations for an FTA with
Chile prompted the establishment of a medium to long-termplan for financial investment and loans in the fields of agriculture and rural communities for the period from 2004
through 2013, and allocated 119 trillion won for the implementation of the plan. It incorporates support measures for
improvement of competiveness, expansion of the traceability system, and establishment of a system for income stability. The above amount was enhanced to 123.2 trillion won
after the conclusion of the KORUS FTA.
The advancement of FTAs by South Korea is not without impact on the activities of Japanese firms. Recently,
many companies, particularly in the chemical industry,
are announcing large-scale entries into the South Koreanmarket or expansion of existing bases. Such corporate activities are explained as a way to take advantage of South
Korea as an export base or to provide intermediary commodities to South Korean companies, but in some cases
they result in outflow of processes that should be carriedout in Japan to production bases abroad. Such outflow may
have a significant impact on employment in Japan, andfrom this perspective as well it is imperative that Japanadvances FTA efforts.

South Korea wins extension of visa validity under the
KORUS FTA
Negotiations for the Republic of Korea-United States
Free Trade Agreement (also known as the KORUS FTA)
were concluded in April 2007, and the agreement was
signed soon after. It took four years for the U.S. Congress
to begin work on ratifying the agreement. The agreement,
as concluded by the previous Bush administration, did
not garner the support under a Democrat-controlled U.S.
Congress, so for years it was left to gather dust on the shelf,
until the end of 2010, when the two governments renegotiated it and reached a consensus on revising the schedule
for elimination of tariffs on automobiles, clearing the pathto ratification. Strongly aware of the provisional enactmentof the EU–South Korea FTA, the U.S. Congress is speeding
the ratification of the KORUS FTA in order to ensure equal
conditions for competition. The South Korean side, too, is
working to achieve an early ratification with view to thenext National Assembly elections in April 2012.
The Japanese export product that is most feared to suffer
the impact of the KORUS FTA is automobiles. Japan holds
more than a quarter of all automobile exports to the U.S.,
while South Korea’s share is only 6%. Against this backdrop,some believe that the agreement, like the EU–South Korea
FTA before it, will result in an expansion of the share ofSouth Korean automobiles. Let’s not forget, however, thatat 2.5% the U.S. tariff on automobiles is lower than that the
tariff imposed by the EU. Furthermore, in the renegotiations of the agreement in 2010, the two sides reached a consensus to maintain the current tariffs on automobiles forfour years, effectively delaying tariff reductions for South
Korean automobiles for five years. Therefore, for the time
being Japanese automakers will continue to compete with
their South Korean rivals under the same conditions. Also,
the local production volume of Japanese automakers in the
U.S. is 1.5–1.9 times the volume of their exports to the same
market, so considering the tariff and export structure, it issafe to say that the KORUS FTA is unlikely to have such asignificant impact on Japanese exports.
As for other industrial products, tariffs exceeding 5%
are imposed on the following items: bearings (up to 9.9%),
electric motors and engines (up to 6.7%), plastic products(6.5%), synthetic textile and fabrics (7.5% to 14.9%), etc. The
KORUS FTA stipulates a schedule for their phased elimination. It is possible that the share of such products made inSouth Korea in exports to the U.S. will expand.
Apart from tariffs, another issue that was included in
the renegotiated agreement and will offer significant benefits to South Korean expatriate employees in the U.S. is theextension in the validity of non-immigrant visas.
The L-1 visa that employees of international companies
with offices both in their home country and the U.S. usually use (intra-company transferee visa) has validity of three

The domino effect of FTA by neighboring countries
South Korea’s next goal appears to be the conclusion of
an FTA with Australia that is currently under negotiation.
Australian Prime Minister Julia Gillard visited South Korea
in April 2011, and at the summit meeting the two leadersconfirmed their intention to conclude negotiations on a bilateral agreement by the end of 2011. Further ahead in the
future, South Korea seems to be eyeing the possibilities tolaunch negotiations for an FTA with China. The Institute ofDeveloping Economies JETRO carried out in October 2010a research project on the potential impact of South Korea–
China and Japan–China FTAs. According to the results of
the research project, it has been calculated that if an FTA between South Korea and China comes into force, the volumeof South Korean exports to China will increase by US$27.76
billion. This effect is immense even in comparison with65

IIthe effect of the KORUS
Figure II – 17 S
 hare of South Korea and Taiwan in Chinese imports and general tariff rates(HS85 products with import value over US$1 billion)
FTA, which is calculated
Import share
Import total General tariff
HS CodeProduct nameto result in an increase(US$ million)(%)
South Korea Taiwan(Ref.) Japanof US$6.4 billion – 6.9
8507.8020 Lithium ion batteries
4,625
12
37.0%
4.1%
38.1%
8538.9000 Switches, fuses and other components
4,362
7
9.5%
8.0%
26.5%
billion in the volume of8529.9049 Components (for digital cameras, etc.)
2,029
12
13.8%
5.8%
29.5%
South Korean exports to8525.8013 Other TV cameras
1,602
35
32.9%
0.8%
9.7%
the U.S. (Source: Unit8529.9042 Components (camera modules)
1,400
12
14.1%
1.2%
21.3%
8501.1099 Electric motors (output below 37.5W)
1,186
9
3.4%
4.4%
11.0%
ed States International
Sources:
China
Trade
Statistics
andEconomic
Cooperation
Framework
Agreement(ECFA).
Trade
Commission).
In its exports to China,
South Korea is expected to take over a share equivalent touary 2011, enabled further easing of measures. For instance,
US$17.293 billion from third countries, and Japan, respecthe number of years of operating representative offices intively, is expected to see its exports to China, which curmainland China, which constitutes one of the conditions
rently amount to US$5.336 billion, dwindle.
for opening of branches by Taiwanese banks, was reduced
One of the factors that could explain why South Korea isfrom three years to one year. In the hospital services, too,so sensitive regarding a possible FTA with China is the Ecothe establishment of hospitals by foreign-affiliated comnomic Cooperation Framework Agreement (ECFA), a crosspanies was previously limited to China-Taiwan joint venstrait trade agreement between the governments of the Peotures, but under ECFA it became possible for Taiwaneseple’s Republic of China (mainland China) and the Republic ofcompanies to set up wholly owned hospitals in some areas
China (Taiwan) which came into force in September 2010. A
of China (Shanghai Municipality, Jiangsu Province, Fureduction and elimination of tariffs on the “early harvest” list
jian Province, Guangdong Province and Hainan Province).
of products under ECFA started in January 2011. The early
ECFA incorporates clauses allowing the establishment of
harvest list of tariff concessions covers 539 Taiwanese prodwholly-owned enterprises by Taiwanese service suppliers in
ucts, such as chemical goods, automobile parts, and textile
the fields of software implementation services, research andproducts, and 267 mainland Chinese goods, and envisions
experimental development services on natural sciences andelimination of tariffs within up to three years. The concern
engineering, and convention services. The quota limitingthat this trade agreement may give Taiwanese products a
the import of Chinese language motion pictures produced
competitive edge in terms of prices on the Chinese market
by production companies in Taiwan to ten movies per year
is pointed out by some observers as the driving factor behind
was removed.
South Korea’s intent to advance an FTA with China. Thus,
China is advancing measures for enhancement of ecoFTAs between third parties accelerate the establishment of
nomic partnership under the so-called “WTO-Plus” obligaFTAs between yet other third parties, and this creates antions for liberalization measures exceeding those required
overall trend in which such FTAs threaten to affect the exby WTO agreements not only with Taiwan, but also withports of countries that have yet to establish FTAs with theirHong Kong, Macau, and other neighboring countries andtrade partners, as exemplified by the case of ECFA and its
regions. The 7th Supplement to the Closer Economic Partpossible impact on Japan’s exports. In order to prevent suchnership Agreement (CEPA VIII), which came into force indevelopments, all countries strive to advance the establishJanuary 2011, added two new areas—technical testing andment of FTAs, thus creating a true domino effect.
product testing—to the 19 areas and 35 categories subject
Integrated circuits (HS8542) and mobile phones
to measures for trade liberalization, thus expanding the(HS8517), which constitute major export items for Taiwan,
number of service areas that have been opened to 44. Honghave already been freed of tariffs under WTO’s ITA, so they
Kong travel agents and tour operators with branch offices inare not included in the early harvest list on the TaiwaneseBeijing or Shanghai were permitted on an experimental baside, but the category of other electric equipment (HS85)
sis to operate tours departing from Beijing or Shanghai andcontains products for which Taiwan competes with Southbound for Hong Kong or Macau. CEPA also incorporates a
Korea. Figure II-17 shows the import shares held by South
provision that permits branches and subsidiaries of Hong
Korea and Taiwan and the general tariff rates for a list of
Kong banks in China to issue RMB bonds to Hong Kong
HS85 products whose amount of imports into China excompanies in China provided that the respective branch or
ceeds US$1 billion. The list includes several types of elecsubsidiary has been operating in China for more than one
tronic components, such as switches, lithium ion batteries,
year and is profitable.
etc., for which the general tariff rate in China is relatively
high, and the implementation of tariff reduction measures(5) Utilization status of ASEAN+1 FTAs
will have an impact.
Utilization value of ASEAN FTAs soars in 2010
ECFA has established an early harvest list for trade in
An increasing number of Japanese companies take adservices as well. The two sides have reached an agreement
vantage of FTAs or at least consider the possibilities to dothat China will ease investment regulations in 11 service
so. According to the results of the FY 2010 Survey on the
sectors, and Taiwan in nine. The policies for investment
International Operations of Japanese Firms carried out byliberalization stipulated in the early harvest list, which are
JETRO between November and December 2010, the comnow in the second stage of implementation launched in Janpanies that take advantage of major FTAs enacted by Japan66

II World Trade Rules under the New Economic Environment(with Mexico, Malaysia, Chile, Thailand, Indonesia, Philippines, ASEAN, Switzerland, and Vietnam) have reached35.2% of all surveyed companies engaged in trade with FTA
parties (673 companies). The share rises to 48% or almost
half of the surveyed companies, if the number of potential
FTA users is included. An examination of the utilization byindustry shows that in the field of exports, the petrochemical industry, transportation machinery industry, and steel
industry boast the greatest utilization rate, while in the fieldof imports the food and beverage industry and textile industry are among the industries in which FTAs are utilized
the most. The ranking in the utilization rate by FTA for exports is topped by the Japan–Chile Economic Partnership
Agreement (36 out of 102 companies, or 35.3%), followedby the Japan-Thailand Economic Partnership Agreement(29.1%). Chile imposes a flat general tariff rate of 6% on allimported products, so the results demonstrate the significance of utilizing FTAs.
In the Asia and Oceania region, all ASEAN+1 FTAs (bilateral free trade agreements between ASEAN and Japan,
China, South Korea, Oceania, and India) had come into effect as of January 2010. The first ASEAN+1 FTA to come into
force was the ASEAN–China Free Trade Agreement (ACFTA) (2004), which covered various agricultural and fisheries products. It was followed by the ASEAN–South Korea
Free Trade Agreement (AKFTA) in 2007, and the ASEANJapan Comprehensive Economic Partnership Agreement in2008. In January 2010, the ASEAN-Australia-New ZealandFree Trade Agreement (AANZFTA) and the ASEAN–India
Free Trade Agreement (AIFTA) came into force. Althoughsome agreements are yet to come into effect in some of theASEAN countries, in 2010 the process of building an FTA
network in the Asia and Oceania region made significant
progress. Furthermore, the percentage of tariff-free products in these FTAs increased greatly. In the ASEAN Free
Trade Area (AFTA) established within the ASEAN region,
the original member states (Thailand, Indonesia, Malaysia,
Philippines, Singapore, and Brunei) eliminated tariffs on
99% of all products subject to trade from January 2010. Thismeans that now trade of goods within the ASEAN region isalmost entirely tariff-free. Moreover, under the stipulationsof ACFTA and AKFTA, which have already come into effect, from January 2010, China, South Korea and the ASEAN founding members have eliminated tariffs on approximately 90% of all products subject to trade, thus advancing
greatly the process of tariff elimination in a manner similar
to AFTA and boosting the FTA utilization value. It is interesting to see the change in the FTA utilization using 2010 as
the base year for comparison.

by Japanese companies was calculated by using the numberof companies that conduct trade between ASEAN countries
and their FTA partners in Asia and Oceania as the denominator, and dividing it by the number of companies that takeadvantage of the FTAs.
The first thing that becomes obvious from the results of the
FY 2010 survey is that the number of companies that conduct
trade between third countries has increased significantly fromthe previous fiscal year. This trend is visible in the increaseof the parameter n, which has expanded almost 1.5 times for
AFTA, ACFTA, and AKFTA. Moreover, the increase in theutilization rate is particularly prominent in ACFTA and AKFTA. The numbers clearly demonstrate that Japanese companies proactively utilize FTAs between third countries. The rateof utilization of AFTA remains almost unchanged from theprevious year, but the parameter n has increased which meansthat the number of users is on the rise.
As for the trends in the ASEAN+1 FTAs, after the enactment of AIFTA in January 2010, the number of companies
that conduct trade among the parties to the agreement increased 1.3 times from the previous year. The FTA utilization rate exceeded 20% as early as the first fiscal year after
the agreement came into effect, making AIFTA the mostutilized ASEAN+1 agreement. As for other FTAs that India
is party to, the Thailand–India FTA, which covers an early
harvest list of 82 items, came into force in 2004 and boasts
a utilization rate in the range of 20%. It is interesting to see
what changes occurred in the utilization of the Thailand–
India FTA as AIFTA came into effect, and whether users
have switched to AIFTA as an alternative to the bilateralagreement. The results showed that the utilization rate of
the Thailand–India FTA remained almost unchanged. This
could be interpreted as a sign that companies continue totake advantage of it, while using the newly enacted AIFTA,
too. The share of companies that responded that they were
exploring the possibilities to use AIFTA was relatively highFigure II – 18 A
 SEAN+1 FTA utilization status by Japanesecompanies (based on number of companies)
FTA

StatusAFTA
existing user(n= 135→198) potential user
ASEAN-China
existing user(n= 189→287) potential user
ASEAN-South Korea
existing user(n= 114→165) potential user
Thailand-India
existing user(n= 80→94) potential user
ASEAN-India
existing user(n= 79→103) potential user
Thailand-Australia
existing user(n= 65→70) potential user
ASEAN-Australia-NZ
existing user(n= 77→80) potential user

Large increase in the number of Japanese companies
that conduct trade between ASEAN and China
First, let’s examine the FTA utilization status at Japanese companies. We observed the changes in the status of
utilization of ASEAN+1 FTAs by comparing the results of
the FY 2010 Survey on the International Operations of Japanese Firms with the results of the survey carried out in theprevious fiscal year (see Figure II-18). The rate of utilization

FY 2009
33.3
18.5
15.9
22.8
13.2
17.5
21.3
18.8
46.8
24.2
12.9
33.8

→

(%)
FY 2010
32.3
23.7
19.5
23.3
16.4
18.8
19.1
25.5
21.4
29.1
27.1
14.3
17.5
18.8

Notes: (1) P ercentage is per (n), which is the number of companies engaged in
trade in respective FTA participating countries.
(2) A SEAN-India and ASEAN-Australia-NZ FTAs were not in effect in
FY 2009, so there is no data for that period.
(3) Th e number of companies that responded to the survey is 935 in FY
2009 and 1,002 in FY 2010.
Source: “FY 2009/2010 Survey on the International Operations of JapaneseFirms” (JETRO).

67

II

at 30%, so it seems likely that the utilization by Japanesecompanies will expand in the future.
Combining the two answers regarding the utilizationof AIFTA and the Thailand–India FTA gives an idea of theway these two agreements are utilized. Eleven companies
responded that they use AIFTA when conducting trade between Thailand and India, and eight of these eleven companies responded that they also use the Thailand–India FTA.
(Two companies did not use the bilateral agreement, and one
is currently exploring the possibilities for utilization.) These
results demonstrate that for companies, the two agreements
do not substitute but rather complement each other.
Next, let’s examine from what bases Japanese companies
use FTAs between third countries and AFTA in particular.
If we envision a process in which components and materials exported from Japan are processed in ASEAN member
countries, and then are again exported to the ASEAN market using AFTA, then the distribution of companies that
responded positively to the question whether they export
from Japan to ASEAN countries will serve as a reference. We
examined the answers of the 64 companies that responded
that they use AFTA to the questions which countries theyexport to from Japan and whether they take advantage of
FTAs in their export activities (see Figure II-19).
Thailand was the most often selected destination of exports from Japan, as 56 out of the 64 companies that use
AFTA, or approximately 90%, responded that they export to
Thailand. The ratio of companies that use FTA and export
to Thailand is also high. Vietnam, Indonesia, Malaysia, andPhilippines follow Thailand as preferred export destinations.
Also, and it is not obvious from the figure, 10 out of the 64
companies responded that they export from Japan to all five
ASEAN countries using FTAs. In other words, this indicatesthat companies that use FTAs take full advantage of them.
The gap between large enterprises and SMEs in theirutilization of Japan’s FTA depends on the partner country(see Figure II-20). For instance, among the 470 companies
that export from Japan to Thailand there is almost no difference in the percentage of large enterprises (45.2%) and
SMEs (41.1%) that responded that they utilize or are examining the possibilities to utilize preferential taxation under
trade agreements. In the case of exports to the Philippines,
however, large enterprises boast a utilization rate of 33.5%
against only 16.3% for SMEs. The number of SMEs is particularly high among the companies that respond that they
do not take advantage of FTAs because they are not familiar
with the FTA system, and this suggests that the utilization
rate may increase if the FTA system becomes widely known.

Figure II – 19 Trade relation of Japanese companies that use
AFTA with Japan(Multiple answers. N=64)(number of companies)
Companies exporting Companies that use FTAs
Partner country
from Japanin exports from Japan
Thailand56
40
Malaysia
44
23
Indonesa
4428
Philippines
36
16
Vietnam
46
22
Source: “FY 2010 Survey on the International Operations of Japanese Firms”(JETRO).

Figure II – 20 Japanese companies FTAs utilization by FTA
partners and company size (the share that
responded that they are using or considering thepossibility of using FTAs)(%)
Partner country
Thailand
Malaysia
Indonesia
Philippines
VietnamOverall
43.2
28.9
33.0
26.1
32.7

Large enterprises
45.2
35.0
41.0
33.5
36.2

SMEs
41.1
22.7
23.4
16.3
28.7

Source: “FY 2010 Survey on the International Operations of Japanese Firms”(JETRO).

that utilize FTAs and the utilization rate in relation to thetotal amount of exports.
In 2010, the rate of utilization of FTAs in the Asia andOceania region in exports from Thailand increased substantially. The AFTA utilization rate within ASEAN exceeded 30%, and the rate of utilization of ASEAN+1 FTAs
skyrocketed. The rate of utilization of the ASEAN–China
Free Trade Agreement (ACFTA) soared to 34.4%, surpassing the AFTA utilization rate. The ACFTA utilization ratesurpassed the AFTA rate in exports from Malaysia as well.
The enactment of the Second Protocol to Amend the Framework Agreement officially recognized intermediary tradefrom 2011, and as a result it has become possible to utilize
ACFTA for trade activities that use a third country as intermediary between the country from where the exports
originate and their destination country. Thus ACFTA has
enabled companies to concentrate their financial functions
and settlement mechanisms in a third country as their regional base, boosting the utilization value of the agreement.
It is expected that the utilization rate of ACTFA will further
increase in the future.
It is interesting to see for what products companies takeadvantage of ACFTA. In exports from Thailand, the ranking of products for which the trade agreement is used mostoften is topped by cassava, compounded rubber, and chemical goods, and remains mostly unchanged from the previous year (see Figure II-22). This demonstrates that the FTA
comes to be utilized not in wider range of products, , but inhigher degree in existing same products. In contrast, theutilization rate of ACFTA for imports into Thailand (fromChina) remains relatively low at 7.5%. Traditionally, theranking of products for which ACFTA is used most often
is topped by combine harvesters, ceramic products, andapples, but recently textile products and video recorders

Many of ASEAN+1 FTAs utilization rate exceed 30%
Not many countries keep statistics of their FTA utilization rate, and statistics released by the governments of Thailand and Malaysia provide a clear picture of the FTA utilization status in the region of Asia and Oceania. An analysisof the trade statistics in terms not of number of utilizing
companies but of trade value reveals what imports and exports have been carried out using FTAs. Figure II-21 shows
the monetary value of exports from Thailand and Malaysia
68

II World Trade Rules under the New Economic Environment

Figure II – 21 FTA utilization status in Thailand and Malaysia (exports)
Exports value that use FTA
Partner country/
Country
FTA
region2006 2007 2008 2009 2010
ASEAN
AFTA
5,509 7,865 10,735 9,671 14,015
China
ASEAN-China
1,450 1,769 1,691 3,990 7,387
South Korea
ASEAN-South Korea
881
India
328
399
418
352 1,466
ASEAN-India
900
ThailandThailand-India
328
399
418
352
566
(an early harvest list of 82 items)
Oceania
2,746 4,067 4,944 4,316 5,640
ASEAN-Australia-New Zealand28
Thailand-Australia
2,746 4,067 4,944 4,316 5,613
JapanJapan-Thailand, ASEAN-Japan642 4,507 4,281 4,831
ASEAN
AFTA
3,069 3,922 4,809 5,186 8,833
China
ASEAN-China
1,042 1,628 1,896 2,381 4,426
South Korea
ASEAN-South Korea
403 4,286 4,195 4,941
Malaysua
India
ASEAN-India
703
Oceania
ASEAN-Australia-New Zealand
861
Japan
Japan-Malaysia, ASEAN-Japan850 1,948 2,503 2,344 3,038
AFTA
8,578 11,786 15,544 14,856 22,848
ASEAN-China
2,492 3,397 3,587 6,371 11,813
Total
With India
2,169
With Japan
7,011 6,624 7,869(US$ million, %)Utilization rate in relation to the total exports
2006
2007
2008
2009
2010
20.2
22.6
26.8
29.9
31.6
12.3
11.1
10.4
24.8
34.4
24.4
18.1
14.0
12.3
11.0
33.4
20.5
89.1

98.3

83.4

69.0

74.1

62.6
62.6
7.4
9.0
10.4
12.4
10.6
-

66.3
66.3
18.1
8.7
10.6
10.9
12.0
14.8
10.8
-

61.9
61.9
22.4
9.4
10.0
55.3
11.6
16.9
10.2
17.0

50.5
50.5
27.3
12.8
12.5
70.0
15.2
20.4
18.1
21.3

55.5
0.3
59.9
23.7
17.5
17.7
65.8
10.8
10.3
14.7
24.1
25.4
19.9
19.2

Notes: (1) The category “Oceania” includes Australia and New Zealand for 2010. For all other prior periods, the category includes only Australia.
(2) Th e Japan-Thailand figures for 2007 are for the period November-December; the Japan-Malaysia figures for 2006 are for the period July-December, theASEAN-South Korea figures in relation to Malaysia for 2007 are for the period June-December.
Sources: M inistry of Commerce of Thailand, the Ministry of International Trade and Industry of Malaysia, and trade statistics of each country.

utilization rate of AANZFTA for exports from Malaysia hasreached 10.3%, probably due to the fact that Malaysia does
not have a bilateral trade agreement with Australia.
As for the ASEAN–South Korea Free Trade Agreement(AKFTA), its utilization rate for exports from Malaysia exceeds 60%. It is exceptionally high compared with the utilization rate of other FTAs concluded by Malaysia or with the
25% utilization rate of the same agreement in Thailand. It is
probably because, 40% of the Malaysia exports to South Korea are composed of fossil fuels (HS27) and the FTA is seemingly used in these products, thereby contributing to the highutilization rate. The South Korea’s general tariff imposed onnatural gas (HS2711.11.0000) and crude oil (HS2709.00.1010),
both key export products, is 3%, but use of AKFTA eliminates tariffs. In other words, from the perspective of importing natural gas and crude oil to South Korea, the FTA is utilized in order to secure low-cost supply of energy.

Figure II – 22 Major exports from Thailand that take advantage
of FTAs
FTA
Products
Passenger vehicles, commercial vehicles, automobile
AFTA
components, air conditioning machines
Cassava, compounded rubber, organic chemicals,
ASEAN-China
plastic goods
Thailand-India,
Organic chemicals, alluminum alloys, air
ASEAN-India
conditioning machines, engines, plastic goods
Passenger vehicles, commercial vehicles, prepared
Thailand-Australia,
seafood products (tuna), air conditioning
ASEAN-Australia-NZ
machines, washing machines.
Japan-Thailand,
Prepared chicken producs, shrimps, plastic
ASEAN-Japanproducts, fish, steel springs
Source: Ministry of Commerce of Thailand.

and players have newly ascended to the top of the ranking.
However the import amounts remain small, so observers
are waiting to see whether the utilization rate will increaseand how the spread of products for which the FTA is usedwill change from next year onward.
As for the ASEAN–India Free Trade Agreement(AIFTA), which came into force in 2010, its utilization rate
for exports from Thailand has exceeded 20% in the first yearof enactment of the agreement. Combined with the utilization rate of the existing India-Thailand Free Trade Agreement, the overall utilization rate exceeds 30%. In terms ofaccess to the Indian market, the India-Thailand Free Trade
Agreement covers only 82 products, so AIFTA is utilized asa means to supplement the bilateral agreement. Regarding
access to the Australian market, there is already an existing
Thailand-Australia Free Trade Agreement (TAFTA), which
covers a wide range of products. Already six years havepassed since TAFTA came into force, so the utilization rateof the newly enacted ASEAN-Australia-New Zealand Free
Trade Agreement (AANZFTA) remains low at 0.3%. This
indicates that AANZFTA is not much used in Thailand. The

Significant progress in the integration of Asia and Oceania
Trade in 2009 decreased due to the global economic
stagnation, but bounced back in 2010 when most countries
significantly expanded their trade volume. Furthermore, all
ASEAN+1 FTAs came into effect in 2010, and the liberalization of the flow of goods through Asia and Oceania advanced
greatly. As a result, the ratio of intra-regional trade went up.
The intra-regional trade ratio of ASEAN+6 (adjusted forre-exports) in 2010 was 45.9%, up 2.1 points from the 43.8%of the previous year (see Figure II-23). Japan’s exports to
ASEAN+6 account for 45.6% of its global export volume,
and keep expanding every year. The same trend is visible
in South Korea and Australia. Such expansion in the intraregional trade ratio of the big trade powers contributes tothe further integration of ASEAN+6.
69

IIFigure II – 23 I ntra-regional trade ratio in the world's major regions

(%)
1980
1990
1995
2000
2005
2008
2009
2010
ASEAN+6 (Re-export adjusted)
41.9
44.1
43.1
43.8
45.9
ASEAN+6
33.2
33.0
40.3
40.6
43.0
42.5
43.0
45.0
ASEAN+3
28.9
28.6
36.9
37.4
39.1
37.4
37.8
39.6
ASEAN
15.9
17.0
21.0
22.7
24.9
25.0
26.1
25.6
ASEAN+China
14.9
15.8
19.1
20.1
20.7
20.4
20.3
22.0
Asia
ASEAN+India
15.1
16.5
20.7
22.3
23.8
24.2
24.7
24.4
ASEAN+Japan
23.4
21.7
27.4
26.4
26.0
26.0
27.0
27.3
ASEAN+6+Taiwan
35.1
36.2
43.7
44.9
47.7
46.4
46.8
49.0
ASEAN+3+Taiwan
30.9
32.0
40.4
41.9
44.2
41.7
42.0
44.0
ASEAN+Taiwan
15.8
17.4
21.7
23.8
25.1
25.3
26.3
25.9
Americas
NAFTA
33.2
37.2
42.0
46.8
43.0
40.0
39.5
40.4
Europe
EU27
57.5
65.4
65.4
65.1
65.0
64.8
65.1
65.0
APEC
57.5
67.5
71.6
72.3
69.3
64.7
66.8
66.9
TPP (Trans-Pacific Strategic Economic Partnership)
10.5
12.1
15.1
13.0
12.6
12.4
12.9
12.8
Notes: (1) A SEAN+6 includes ASEAN, Japan, China, South Korea, Australia, New Zealand, and India.
(2) A SEAN+3 includes ASEAN, Japan, China, and South Korea.
(3) A PEC includes Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New
Guinea, Peru, Philippines, Russia, Singapore, Taiwan, Thailand, the U.S., and Vietnam.
(4) T PP includes the U.S., Singapore, Brunei, New Zealand, Chile, Australia, Peru, Vietnam, and Malaysia.
(5) Th e share of intra-regional trade (export+import) is calculated as follows: (intra-regional exports + intra-regional imports) / (exports to the world +imports from the world) *100.
(6) I n calculating “ASEAN+6 (Re-export adjusted)”, adjustments are made to exclude re-exports which would cause double counting, using the methods
below.
		 - For Singapore’s export, domestic-export value is used in order to exclude re-exports.
		 - For Singapore’s import, import minus re-export is used as a “net import.”		 - H ong Kong’s trade imported from an ASEAN+6 country and re-exported to a ASEAN+6 country is added in intra-regional trade, although trade flowfrom China to China via Hong Kong is regarded as China’s domestic trade, and hence is excluded.
Sources: DOT (IMF), trade statistics of Taiwan, Hong Kong and Singapore.

Column II − 3
How do countries take advantage of FTAs in their exports to the U.S.
to be the underlying factor for the stable utilization rate.
Utilization of the U.S.–Jordan FTA soared in 2010 as exporters of textile products to the U.S. switched from using
the non-tariff benefits under Qualified Industrial Zone (QIZ)
agreements to the advantages provided by the U.S.–Jordan
FTA. The bilateral trade agreement, which came into effectin December 2001, is now in its tenth year, and tariff elimination is well under way, so exporters switch to using it insteadof QIZ agreements. Textile products account for 80% of Jordan’s exports to the U.S. and the lineup of fashion brands
such as Levi’s and Ralph Lauren features textile products
made in Jordan.

U.S. import statistics keep track of FTA utilization rates.
In other words, they are a source of indicators that demonstrate the extent to which various countries take advantage of
FTAs in their exports to the U.S.
The North American Free Trade Agreement (NAFTA),
which is considered the pioneer U.S.-style trade agreement,
boasts a stable utilization rate of around 50% every year.
More than 15 years have passed since the agreement cameinto force, and the tariff elimination schedule is alreadycompleted, so there are no more changes in the products thathave utilization value and those that do not. In other words,
products that are tariff-free under the most-favored nation
status do not bring the necessity to use FTA. This is believed
Figure FTA utilization status in the U.S. (imports)
Partner country/region

Year of coming into
force

Canada (NAFTA)
Jan-94
Mexico (NAFTA)
Jan-94Australia
Jan-05SingaporeJan-04Chile
Jan-04Peru
Feb-09Dominican Republic – Central America Mar-2006 to Jan-2006
Free Trade Agreement (DR-CAFTA)(varied by the partner)
BahrainAug-06IsraelAug-85
JordanDec-01
MoroccoJan-06
Oman
Jan-09African Growth and Opportunity Act (AGOA)
Andean Trade Preference Act (ATPA)(US$ million, %)Utilization rate in relation to the total
amount of imports
2006
2007
2008
2009
2010
2006 2007 2008 2009 2010
159,062 157,284 159,892 108,905 141,938 52.4
50.2
47.6
48.4
51.3
117,820 120,757 115,587 91,604 118,458 59.4
57.3
53.5
51.9
51.6
3,134
3,117 3,902 2,712 2,654 38.2
36.2
36.9
33.8
30.9
869
903
972
824 1,056
4.9
4.9
6.1
5.3
6.0
5,486 4,988 4,443 3,345 4,277 57.4
55.4
54.3
56.2
61.1
976 2,130
23.3
41.8
Amount of imports that utilize FTAs

3,929

8,112

9,326

8,923 10,385

47
2,768
309
116
-

199
2,750
313
136
-

288
3,162
280
161
-

258
2,493
240
114
456

21,215 23,652 27,936 12,737
10,963 10,489 12,872 5,908

Source: United States International Trade Commission (ITC).

70

21.2

43.3

48.2

47.4

43.7

274
7.4
2,725 14.5
606 21.7
163 22.2
335
-

31.8
13.2
23.4
22.3
-

53.4
14.2
24.6
18.3
-

55.6
13.3
26.0
24.5
50.3

65.3
13.0
62.2
23.8
43.4

15,276
6,598

36.6
50.5

34.4
46.0

29.4
28.4

25.1
23.4

37.6
49.3

III International Business for Disaster Recovery

III International Business for Disaster Recovery
months. Moreover, the index sank again in April by 11.6%,
further increasing the scale of decrease. The halt of operations at Tohoku plants not only halted domestic production,
but also severed supply of finished products and parts toother countries. In terms of individual items, the volume
index for transport equipment fell by 43.4% in April, a larger decrease than the 19.3% fall in March. The electric parts
IC also dropped by 17.7%, showing a larger rate of decrease
than in March.
The decrease in exports has a major negative impact on
the economy of Japan, a trading nation. Exports in 2010accounted for 15.2% of Japan’s nominal GDP, which may
not seem like much compared to the 58.6% accounted forby private consumption. However, looking at the production inducement coefficient (an index that shows how muchproduction is induced when final demand increases by oneunit) by final demand, exports are 2.2 while private consumption is 1.5, and if combined with the ripple effect, theimpact of exports on the overall economy is by no means
small (from an 2005 input-output tables for Japan releasedby the Ministry of Internal Affairs and Communications).

1. The Great East Japan Earthquake Influences on
Goods Flow
(1) The Japanese economy as seen by post-disaster
economic indicators
Seriously worsening economic confidence
On 11 March 2011, a massive magnitude 9.0 earthquake occurred off the Sanriku Coast of Japan in the Pacific
Ocean, sparking a tsunami that caused extensive damage
to the Tohoku and Kanto regions and put significant downward pressure on Japan’s economy. The Cabinet Office estimates that the disaster destroyed 16.9 trillion yen in social
infrastructure, housing, private sector corporate facilities
and other capital stock.
Post-disaster economic indicators markedly worsenedacross the board. On the Economy Watchers Survey, released in March to inquire about the economic confidenceof people that are able to assess subtle movement in economic trends, the sentiment diffusion index for the current
situation dropped by 20.7 points on the previous month to
27.7, marking the largest decrease in history. Furthermore,in the Tohoku region the index dropped to 16.8, a decreaseby 32.1 points, which is larger than the national average. The
supply shortages and deterioration in consumer confidence
caused by the disaster have weakened individual consumption. In March, real consumption expenditures for households of two or more people sank greatly by 8.5% over theprevious year. Corporate sentiment also experienced significant worsening. The March Short-Term Economic Surveyof Enterprises in Japan (the Tankan), which separated andrecalculated answers from before and after the disaster, indicated worsening business sentiment forecasts for the ensuing three months for both major corporations and small andmedium-size enterprises (SME), but gloomy outlooks wereparticularly visible for SMEs.

(2) Tohoku and Kanto corporations support global
industry
Japan’s materials sector retains high global shares
The disaster caused extensive damage to corporations in
the Kanto region as well as the Tohoku region. Corporationsin these regions ship out large amounts of materials such as
nonferrous materials, paper, and pulp, as well as food andelectronic components. In 2009, for instance, the industries
that take the top three spots in terms of shipment value inMiyagi Prefecture, which was one area greatly damaged by
the disaster, were food (20.4% of overall prefectural shipping value; same applies hereinafter); electronic components, devices, and circuits (11.7%); and pulp, paper, andpaper processed goods (7.0%), in that order. The top three inFukushima Prefecture were information communications
equipment (16.5%); electronic components, devices, andcircuits (10.4%); and chemicals (9.7%).
Looking at shipments by industry for the combined totals for Aomori, Iwate, Miyagi, Fukushima, Ibaraki, andChiba, which all suffered great damage, a large amount ofmaterials products are shipped from these areas, led by oil
and coal products. In other words, this region carries great
weight in Japan in terms of the production of parts and materials that are used as the foundation for finished goods(Figure III-1).
Many of the corporations affected in the Tohoku andKitakanto regions produce parts and materials that maintain a large share of the market not only in Japan, but internationally as well. For instance, in the materials sector, theregion is host to businesses that occupy nearly 50% of the
global share for materials and parts used to produce lithi-

Impact on the domestic and foreign supply chain
The disaster temporarily decreased domestic supply
capacity to a significant degree. As production plants wererendered inoperable and rolling power outages continued
to hinder economic activity, the industrial production index in March dropped by 15.5% on the previous month,marking the largest decrease since 1953. Damage caused toelectronic and automobile-related parts plants, which arelargely concentrated in the Tohoku region, fragmentized
the national supply chain, making for a particularly large
decrease in transport machinery. Indeed, the number offour-wheel vehicles produced domestically in March morethan halved, sinking by 57.3% over the previous year.
The decrease in production also spread to exports. The
March export volume index sank by 3.3% over the previous
year, registering a year-on-year drop for the first time in 16
71

III

Figure III - 2 T rends in the specialization coefficient for siliconwafers by country

Figure III - 1 S
 hare of shipped value of 6 prefectures in Tohoku/
Kanto among the nation by industry(%)
Product/Industry
Share
Petroleum and coal products
28.9
Non-ferrous metals and products
20.6
Chemical and allied products
17.7
Iron and steel
17.0
Beverages, tobacco and feed
16.7
Lumber and wood products except furniture
16.4
Food
16.0
Fabricated metal products
13.9
Ceramic, stone and clay products
13.1
Plastic products except otherwise classified
13.0
Business oriented machinery
13.0
Electronic parts, devices and electronic circuits
12.7
Pulp, paper and paper products
12.7
Information and communication electronics equipment
12.3
Total manufacturers
12.5

0.8
0.6

Exportspecialization

0.4

Japan
China

0.2

U.S.

0.0

South Korea

-0.2
-0.4
Importspecialization

-0.6
-0.8
-1.0

2000 01

02

03

04

05

06

07

08

09

10 (Year)

Note: The trade specialization coefficient is calculated as follows: [exports imports] / [exports + imports].
Source: Trade statistics of various countries.

Note: The six prefectures are Aomori, Iwate, Miyagi, Fukushima, Ibaraki and
Chiba.
Source: “ Census of Manufactures (2009, final version)” (Ministry of Economy, Trade and Industry).

parts, as well as manufacturers in Taiwan.
The Renesas Electronics Corporation, a major semiconductor corporation, possesses a large number of plants
in the affected areas. Of those, the Naka Plant in Ibaraki
Prefecture produces automobile semiconductors that aresaid to maintain a top global share. These are essential to
improving fuel efficiency through engine control, and thecompany receives a large amount of inquiries from automobile manufacturers in Japan and abroad. In terms ofgeneral-purpose products, automobile manufacturers will
not face problems if they change their procurement source,
but the halt in production of customized products such as
automobile semiconductors caused great confusion in the
supply network, as manufacturers are unable to quickly
look for alternative procurement sources. The Naka Plant
in fact suspended production of automobile semiconductors until June. The lack of these products as well as otherJapanese automobile parts created an impact around theworld, including forcing operations to stop at the Louisiana
plant of major U.S. automobile manufacturer General Motors (GM).

um-ion batteries, as well as plants that produce 40% of the
global share of ITO target materials used in electrodes forliquid crystal panels. The regions even possess international
competitiveness in terms of intermediate materials. The regions host plants that produce 20% of the world’s lithiumion batteries as well as 30% of the world’s automobile semiconductors, or, “microcomputers”. In this way corporationsin these regions are producing products that are vital to industries around the world.
It is not only major corporations that are producing
highly competitive items. In the Pacific Ocean coastal areas,
where damage was most severe, there are a large number of
medium-sized enterprises and small enterprises that garner
global attention for their unique technologies. For example,
Toadenka, located in Morioka City, Iwate Prefecture, possesses a strongly competitive technology that directly joins
metals such as copper and aluminum with plastic without
using an adhesive agent. The company’s technology is used
for electronic components such as ultra-precision motors
and digital cameras, as well as mobile phones and laptop
computers.
Horio Seisakusho, in Ishinomaki City, Miyagi Prefecture, has realized high precision molding using zinc diecasting, which has conventionally been thought difficult toachieve. The company currently accounts for approximately
30% of the global share of optical pickup parts.
In addition to securing large global shares, items produced in the affected areas of Tohoku and Kanto boast highexport competitiveness. For instance, in terms of siliconwafers, which are an essential material in the production ofsemiconductors, Japan’s high export competitiveness is clear
even compared to China, South Korea, and the U.S. (FigureIII-2). Major silicon wafer producer Shin-Etsu Chemical
temporarily stopped operations at its plant in Fukushima
Prefecture directly after the disaster, and this impacted
places throughout the world, not only Japan. Countless corporations feared that the halt in supply would last for thelong term, including South Korea’s Samsung Electronics
and Hynix, which heavily rely on Japan for semiconductor

Tohoku exports account for approximately 2% of
overall Japanese exports
The Tohoku and Kitakanto regions produce materials andparts important to production; however, the direct shipment
value from these regions is by no means great on a national
scale. If one combines the 2010 export values of the 15 major
ports and airports in prefectures facing the Pacific Ocean in
the Tohoku region (here this refers to Aomori, Iwate, Miyagi,
Fukushima, and Ibaraki Prefectures), where production bases suffered major damage, for which trade statistics are available, one would find that amounts total 1,275.3 billion yen,approximately 2% of Japan’s total export value (Figure III-3).
By destination, while each port and airport present special
characteristics, particularly large export values are seen from
Kashima Port (Ibaraki Prefecture) to South Korea, and from
Hitachi Port (Ibaraki Prefecture) and Shiogama Port (Miyagi
Prefecture) to the U.S.
Looking at the ratio that each product accounts for in
the total export value of Japan by individual port, at Sen72

III International Business for Disaster Recovery

The impact of Tohoku production
stoppages spread from the Kanto
region to the world
The destruction of production sites
Hachinohe
1,726
151,688
0.23
Aomori
Aomori
105
9,244
0.01
in the Tohoku and Kanto regions not
Aomori Airport
00
0.00
only directly impacted exports from
Kamaishi
119
10,3870.02
Iwate
Ofunato
96
8,461
0.01
these regions, but they caused signifiMiyako
0
40
0.00
cant indirect impact via the domestic
Shiogama
3,413
298,790
0.44
supply chain. Because it was difficult toIshinomaki
360
31,4240.05
MiyagiSendai Airport
210
18,3670.03
move goods from the Tohoku region to
Kesennuma
7
588
0.00
other areas in Japan, the impact on the
Onahama
443
38,8080.06
exports of places where Tohoku goods
Fukushima
Soma
159
13,9150.02
Fukushima Airport
1
65
0.00
were supposed to travel spread widely.
Kashima
4,010
350,020
0.52
According to the 2005 Inter-Regional
Ibaraki
Hitachi
3,960
343,457
0.52
Input-Output Table, produced by the
15 port/airport total
14,6101,275,254
1.90Japan’s total export value
767,025
67,399,627
100.00
Ministry of Economy, Trade and IndusSource: “ Trade Statistics” (Ministry of Finance).
try, the value of goods exporting outward
domestically from the Tohoku region
Figure III - 4 R
 egional breakdown of consumers of goods from Tohoku in major(Aomori, Iwate, Miyagi, Akita, Yamagaindustries (intra-regional production basis)ta, and Fukushima Prefectures) is ap(%)
proximately five times the export value.
Hokkaido Tohoku Kanto Chubu Kinki Chugoku Shikoku Kyushu
Agriculture, forestry
Furthermore, the intermediate input
4.5
55.9
24.9
2.9
7.5
1.0
0.9
2.3
and fisheryfrom the Tohoku region to industries in
Beverages and foods
5.2
45.4
34.3
4.6
5.9
1.2
1.0
2.5
Pulp, paper, paperboard,
other regions mainly comprises primary
2.1
47.8
33.1
4.1
10.6
0.8
0.4
1.0
building paper
and intermediate commodities.
Non-ferrous metals
1.0
45.2
39.0
4.8
5.3
3.6
0.1
1.0
Items produced in the Tohoku reMetal products
2.7
43.9
38.2
6.2
4.6
1.9
0.5
2.0
General machinery
1.3
44.0
34.5
6.6
5.8
2.4
0.7
4.7
gion – mainly materials – are used by
Householdmajor consumers in the Kanto region,
2.3
26.7
42.1
6.0
10.4
3.3
2.0
7.2
electronics equipment
not only the Tohoku region. For examComputers and
1.1
54.2
27.6
6.9
3.6
3.8
0.8
2.0
accessory devices
ple, more than half of the automobile
Electronic
0.9
61.0
26.4
5.0
2.7
1.0
0.8
2.2
parts and accessories, and over 40% ofcomponents
communications equipment and relatMotor vehicle parts
0.0
28.8
55.1
6.6
2.6
0.9
0.0
5.9
and accessories
ed devices are being used in the Kanto
Notes:	(1) The top ten categories in sales value are shown.
region. In this way, a large amount of(2) “Kyushu” includes Okinawa.
materials are being used as parts andSource: “ 2005 Inter-Regional Input-Output Table” (Ministry of Economy, Trade and Industry).
materials for products in the Kanto
region (Figure III-4). In addition, thedai Shiogama Port, which has the highest export value of
Chubu region uses nearly 20% of certain transport machinthe four Tohoku prefectures, products such as frozen fishery. We can see that the supply chain for Tohoku products isand shellfish (HS0303), paper and pulp (HS48), and steel
spread rather widely while the region’s exports remain low.
bars (HS7213-7214, 7227) account for over 30% of all exIt is therefore not possible to say that the impact of the diports in Japan. Kashima Port, which is known for its accusaster on the world was limited, but rather that it impacted
mulation of chemical, steel, machinery, ceramics and earth
the world through other regions such as Kanto.(Note 1)
industries, accounts from between 10% to 40% of Japan’s
total exports of organic chemicals (HS28-29) as well as flat(3) Goods flow through traderolled steel products (HS7208-7209, 7219, 7255) used in auMarked fall in passenger car exports
tomobiles, home appliances, and others. In addition, other
Following the disaster exports from Japan declined sigregional ports maintain a high ratio of overall Japanese exnificantly. In particular, exports of transportation machinery
ports of mainly industrial materials; steel bars (HS7213) atsuch as automobiles presented a striking drop, followed by
Kamaishi Port, steel (HS72) at Hachinohe Port, paper andmajor falls in exports of electrical equipment such as recordpaper board (HS48) at Ofunato Port, plastic materials, tire,ing and playback equipment and electronic components.
and copper products at Onahama Port, and plywood, paper,
In terms of automobiles, it was impossible to procure
and paper board at Ishinomaki Port. Hitachi Port, which
sufficient amounts of the materials and parts necessary forpossesses production sites for heavy machinery, shows highexport ratios of trucks and bulldozers (HS8704), in addition
1
The 2011 White Paper on International Economy and Trade (Ministry
to chemicals, electric wires, and other products.
Figure III - 3 E xport values for major ports and airports in Tohoku and Kitakanto (2010)
Export value
Port/Airport
Share in Japan’s
Prefecture(customs point) nametotal exports (%)
US$ million
Million yenof Economy, Trade and Industry) presents an analysis that shows that the
Tohoku region has a markedly high ratio of indirect exports of automobile parts, more than 60%, which are processed in other regions.

73

III

manufacturing because operations
Figure III - 5 Twenty items that largely contributed to the decrease in exports
Rank of negative
Share of Japan’s
were suspended at plants in the afHS code
Category
contribution
total exports (%)
fected areas, making the effects of1
8703
Passenger vehicles
11.7
the severed supply chain spread to2
8542
Integrated circuits
4.5
3
8704
Cargo vehicles
1.3
other areas. Indeed, looking at the
48525
Visual apparatus
1.2
total of global exports from Japan5
8708
Automobile components
4.6
6
8901
Vessels
3.3
for March and April by item and7
8443
Printing
machines,parts
andaccessories
2.0
four-digit HS code, the item showOil and bituminous oil other than crude-oil,
8
2710
1.5
ing the largest decrease in level in
preparation for such products and waste oil
98407
Piston-type internal combustion engines
0.7
contribution to total export value is108517
Communication devices
0.7
the 46.9% decrease to 734.7 billion
118529
Audio and visual device components
0.7
yen for passenger vehicles (HS8703)
127403
Refined copper and copper alloys ingot
0.5
13
8429
Construction and mining machinery
1.2(Figure III-5). By country, significant
14
9001
Optical fibers and other optical goods
0.7
decreases in exports were seen for
Diodes, transistors and other similar
1.6
15
8541
the United States (222.6 billion yen;semiconductor devices
169018
Medicalandveterinary
devices
0.5
51.5%), Australia (46.6 billion yen;
17
7210
Iron and non-alloyed steel flat-rolled products
0.7
53.3%), and China (50.9 billion yen;
18
4011
Rubber pneumatic tires
0.9
46.2%). Due to the impact of the di198532
Fixed, variable or adjustable condensers
0.7
Switching, protective or connection devices forsaster on the plants of major manu1.0
208536
electric circuits
facturers of automobile semiconducNotes: (1) Categories are listed in order of minus contribution, with the sum of March-April 2011 compared
tors, an essential part of passenger
by YoY.
cars, in terms of quantity, exports of(2) “Share of Japan’s total exports” is for 2010.
(3) The product categories listed here have shares in excess of 0.5% of 2010 exports.
microcontrollers (HS8542.31-992)
Source:“Trade Statistics” (Ministry of Finance).
dropped by 11.7% in March, 27.8%
in April, and 38.7% in May, presentFigure III - 6 Trends in silicon wafer export value
ing a growing rate of decline. Silicon wafers (HS3818.00), a
fundamental material in semiconductors, saw a loss on the(Billion Yen)(%)
previous year in terms of yen-based exports in April, the35
100.0
first such loss in 17 years, and the first decrease in terms
30
80.0
of numbers on the previous year in 20 months. Delays in
25
60.0
the foreign supply chain are thus becoming apparent via
2040.0
exports (Figure III-6).
In terms of items other than passenger vehicles, the con15
20.0
tribution by electrical equipment to overall exports has also
10
0.0
Value
considerably fallen, including integrated circuits and video
Value percent change (YoY): right axis
5-20.0
equipment (HS8525). Looking at the share of imports from
Volume percent change (YoY): right axis
Japan in the statistics of major importers from Japan, the0-40.0
01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05
presence of Japanese products had decreased mainly for IT(Yr/Mo)2010
2011
products by April. In terms of IT final commodities (seeSource: “Trade Statistics” (Ministry of Finance).
Attachment 2 for JETRO classifications), Japan’s share ofimports in South Korea sank to 16.4% from 27.5% in April
2010. This was largely due to the reduction in digital camquantity base, figures in April showed between a 10% andera imports (US$ 12.08 million; 59.7% decline). The affected
20% drop in shares of meters instruments (HS9032.89),
areas host a large number of plants that manufacture items
internal combustion engines (HS8409.91), semiconductor
related to such devices, so it is apparent that the impact
machinery (HS8486.20), passenger vehicles (HS8703.23),
from the disaster has manifested itself in a clear decline inand construction and mining machinery (HS8429.52).
imports from Japan. China’s imports of IT final commodiIn terms of imports by the United States of Japanese
ties from Japan in April did not change greatly on the previproducts, passenger vehicles (HS8703.22) and watches
ous year. Meanwhile, however, Japan’s share parts showed a(HS9102.11) both experienced major drops in shares. By
decline; 6.5% to 5.1% for computer parts, 10.1% to 9.7% for
item, there was a prominent decline in imports of transporsemiconductor-related electronic components, and fromtation machinery-related items, including engines and other
21.2% to 19.5% for other electronic components. In China,
parts, while drops in the share of materials such as organic
the decline in imports of Japanese IT parts will significantly
chemicals (HS2933.79) and silicon wafers also stood out.
impact the supply chain of companies active in China, as
By product, several parts used to make smartphones,
international corporations including those from Japan asfor example, are produced in the affected areas. As Japanese
semble a large share of IT products.
companies occupy a large ratio of these types of products in
Looking at the share of major imports of Japanese prodthe global market, it is not easy to locate substitutes. In fact,ucts by China, Japan’s largest importer, by the six-digit HS
many exports of such parts and materials began to show74III International Business for Disaster Recovery

slower growth, or even declines, in April, impacting a large
number of Japanese and foreign companies (Figure III-7).
The export of binder resin for lithium-ion batteries has
continued to decline since March. Lithium-ion batteries,
also an intermediate good, continued a trend where export
numbers were lower than the previous year between Marchand May. Some smartphone parts are used overseas while
the final commodity is imported into Japan. If the supply
chain remains sluggish for the long-term, it is forecasted
that there will actually be a delay in the supply of mobile
phones, the final commodity.

that efforts by foreign governments to attract Japanese companies will encourage the overseas expansion of Japanesecompanies. For instance, local governments in South Korea engage in active PR activities, including the dispatch ofgroups to attract investment in South Korea to Japan. These
local governments also implement a preferential taxation
system and have expanded their investment consultations
with the intention of encouraging the spread of Japanesecompanies in South Korea. Similarly, other Asian countries, such as the Guangdong Province of China, Thailand,
and Viet Nam, have also been working aggressively to attract Japanese companies with the aim of boosting domestic industries (Figure III-8).
Japanese companies located overseas are also beginningto show signs that they have learned from the recent disaster and are working to prepare against breaks in the supply
chain. A major automobile manufacturer that has expanded
into China, for instance, is considering securing secondary
suppliers for individual parts and intends to include Asian
countries other than Japan as procurement sources. A major electronics manufacturer that has expanded into Singapore is even considering revising their structure, where
they rely on a single domestic supplier that provides special
design technology, and change the specifications of theircompany’s own products, and then ordering parts from another company.
Disruptions in the supply chain have also impacted foreign companies. There is a possibility that foreign
manufacturers that have relied on Japanese parts in thepast have learned from this disaster and are considering
substitute procurement sources other than Japan. Of theitems China imports from Japan, looking at the items forwhich Japanese products have greatly declined in share aswell as items that have notably increased in import sharefrom other countries and for which there is no major divergence in price between Japan and the other country, there
are vehicle engines (HS8409.91), construction and mining
machinery (HS8429.52), batteries such as nickel and hydrogen batteries as well as lithium-ion batteries (HS8507.80),
and others. China’s import shares for vehicle engines havedramatically increased from Germany, while the same canbe said for construction and mining machinery as well asbatteries from South Korea. In particular, in April, follow-

Importers of Japanese products begin to consider
alternative procurement
The disaster and the ensuing power shortages causedchanges in the production and procurement strategies ofJapanese companies. Companies are beginning to consider
overseas production in addition to production in other areas in Japan based on their own will or requests from theirclients. For instance, a major materials manufacturer decided to establish a manufacturing line in another part of Asiawith the purpose of providing backup supply, as the company’s production of materials for use in mobile phones, thecompany’s core product, was temporarily halted due to therolling power shortages following the disaster.
Furthermore, one engineering manufacturer is planning to transfer a portion of their operations based on requests from foreign clients.
In addition to overseas expansion based on strategies
established by Japanese companies, there is the possibility
Figure III - 7 Export trends of smartphone related parts(Year-on-year, %)
2011
Feb
Mar
Apr
May
ITO target materials
17.4 -10.2-4.1 -19.1
Materials
Silicon wafers
34.3
45.0
14.4
-4.3
Binders (adhesive)
15.7 -13.9 -25.1 -28.1
0.8 -13.2 -11.1 -19.4
Intermediate Lithium-ion batteries
goods
Semiconductors (DRAM) -29.5 -49.5 -68.6 -70.2
Final goods Mobile phones (imports)
40.4 123.6
13.0
17.4
Notes: (1) Volume base.
(2) HS codes are used for each part and material; however, the codes
do not necessarily only cover parts and materials for smartphones
alone.
Source: “Trade Statistics” (Ministry of Finance).

Figure III - 8 E
 xamples of policy measures to attract Japanese corporations by foreign and local governments
Policy measure
In order to increase foreign capital inflow, China has worked to attract Japanese companies that were expected to move their offices
Chinafollowing the disaster. Keeping in view the industrial transformation of Japanese companies following the disaster, some cities even advancemeasures to attract Japanese corporations by using infrastructure and human resource qualities to appeal.
Some municipal governments work to attract investment by exempting foreign companies from corporate taxation for three years or income
South Korea
tax for seven years, or use the Korea Trade-Investment Promotion Agency (KOTRA) as an intermediary.
President Ma Ying-jeou has ordered the Executive Yuan to establish a special office to promote partnerships with Japan. Government
officials work to attract Japanese corporations while keeping in mind post-disaster risk dispersion as an extension of enhancing
Taiwanpartnerships, and believe that bringing Japanese technologies to Taiwan through such efforts will contribute to raising the level of the
Taiwanese economy.
The Board of Investment (BOI) provides assistance for Japanese companies that were affected by the disaster. Specifically, the BOI supports
Thailandthe activities of Japanese corporations in Thailand by easing procedural requirements and taking other measures to make the import ofmachinery easier.
The Saigon Investment Group (SIG) intends to support the expansion into Vietnam of SMEs impacted in the disaster. SIG aims to attract
VietnamJapanese SMEs with high technological capabilities in order to strengthen its own domestic supply chain.
Sources: Various news sources.

75

III

ing the disaster, it was clear that import levels from South
Korea for batteries had surpassed levels from Japan. South
Korea’s share had risen from 33.7% in April 2010 to 43.8%
in April 2011, while Japan’s share had declined from 39.5%
to 30.8%. It is possible to conceive that companies in China
had selected South Korea as a substitute import source. In
May, as well, the increase in South Korea share continued. A
look at shipment trends shows that during the first quarterof 2011 the global shipment share of lithium-ion batteries
from South Korea was generally on par with Japan. As shipment levels of lithium-ion batteries from South Korea wereon an upward trend from before the disaster, this can beinterpreted to mean that the disaster potentially accelerated
this rising trend.

for Japan. Of the items listed above, the export of cigarettes
sank by 57.0% in volume, while imports jumped by 42.2%,
led by imports from the United States and the Netherlands.
This marks the largest important volume since 1995. This
contrasting trend between imports and exports can also beseen in baby foods. In April, Japan began to rely on Brazil
for baby food imports. There were some items for which foreign imports increased in order to make up for the drop in
Japanese supply. However, this trend only lasted for a shortamount of time. In May, the ratio of increase in import levels of cigarettes began to show signs of slowing down andimports of baby foods were reduced to zero.
Impact of foreign import restrictions
Food exports not only face problems spawning from thelack of infrastructure in the affected areas; they are also impacted by restrictions imposed by importing countries. Following the incident at the Fukushima Daiichi Nuclear Power Station after the earthquake and tsunami, some countries
and regions strengthened their regulations, including somecountries starting radiation-related screenings on food imports from Japan (Figure III-10). There were a total of 41
countries or regions that introduced regulatory measures(as of 15 July). On 22 March in the United States, a major
importer of food products from Japan, the Food and Drug
Administration (FDA) commenced an immediate halt without screening on processed foods made from milk, dairy
products, fruits, and vegetables from Fukushima, Gunma,
Ibaraki, and Tochigi Prefectures. Later, on 12 April the FDA
amended their import warning and began the immediate
halt without screening on milk, dairy products, fruits, andvegetables from Chiba and Saitama Prefectures as well, in
addition to the previous four prefectures.
In Taiwan, the Department of Health made an official
announcement on 25 March that starting from midnight on
26 March it would be temporarily suspending the receipt ofimport quarantine applications on food products produced
or manufactured in the five prefectures of Fukushima, Ibaraki, Tochigi, Gunma, and Chiba. Concerning food products from other prefectures, radiation testing would be
conducted on food products when imported, a complete
lot inspection would be carried out on fruits, vegetables,
fishery products, seaweed products, dairy products, beverages including mineral water, and baby food, and a sample
inspection would be carried out on processed foods.

Drastic decline in food exports following the disaster
The export of foods was also impacted by the disaster.
Exports of food products (see Attachment 1 for JETRO classifications) in April sank by 21.9% to 29.7 billion yen, thebiggest drop since August 2009 (Figure III-9). This was not
only due to infrastructure damage at port and other facilities as a result of the disaster and harmful rumors spreadabroad related to radioactive substances; apparently, the impact of import restrictions by foreign countries concerned
about the possibility for radioactive substances being mixed
in food products negatively influenced exports. Between
March and April, directly following the disaster, there wasa marked drop in fish products, mainly comprising frozen
fish, to China, Russia, and the United States. Concerning
non-fish products, there was a prominent decline in theexport of processed foods, including leaf tobacco and baby
food. Individual nine-digit HS items that displayed a particularly large drop were frozen Pacific Ocean salmon (notincluding sockeye salmon) (HS0303.19-000), frozen saury(HS0303.79-100), cigarettes (HS2402.20-000), baby food
(HS1901.10-000), and scallops (HS1605.90-920).
The lack of supply power was one cause for the decreasein export of food products, and this not only affected foreign countries, but also served to choke domestic supply
Figure III - 9 J apan's Foodstuff exports(contribution year on year, yen-based)(Year-on-year, %)

20.0

Other
Seafood

15.0

Processed food products
Foodstuffs (total)

10.0(4) Supply networks restored first
Following the disaster, it was forecasted that it would
take a long time to restore the supply chain. However, in
May the industrial production index returned to 90%, thelevel it was before the disaster in February. Efforts to restore corporations were being carried out fast. In March,Renesas Electronics Corporation had aimed to restore
production of its microcomputer system LSI and analogue
power semiconductors, which are produced at the Naka
Plant (Hitachinaka City, Ibaraki Prefecture), by July 2011;
however, in May they announced that they planned to restart production of their 200 mm line by 1 June and their

5.0
0.0
-5.0
-10.0
-15.0
-20.0
-25.0

05

2010

06

07

08

09

10

11

12

01

02

03

04

05

2011

Note: “Foodstuffs” are defined based on JETRO classifications.
Source: “Trade Statistics” (Ministry of Finance).

76

III International Business for Disaster Recovery

Figure III - 10 Restriction of agricultural/fishery products from Japan in major countries/regions
Local
Targeted prefectures
Products
Measures
Other information
authority
Kanagawa, Gunma and Chiba Tea leaves
Products for which domestic saleand exports are restricted: somevegetables, milk, mushrooms,
Imports suspended
bamboo shoots, greens and sandlance from Fukushima, spinachfrom Tochigi and tea leaves from
Fukushima, Tochigi and
Ibaraki and Tochigi
U.S.
FDA
Ibaraki
Milk and dairy products andRadiation inspection
vegetable, fruits and their processedcertificate required
products
Radiological inspection
Products other than those listed
certificate may be issued byabove
U.S. inspection agency.
Inspection of samples in U.S.
Other prefectures (including
Foodstuffs and feed
Kanagawa, Gunma and Chiba)
Fukushima, Gunma, Tochigi,
Government-issued radiation
Ibaraki, Miyagi, Nagano,inspection certificate
Yamanashi, Saitama, Tokyo,
All foodstuffs and feed
required and inspection
Production date certificate
Chiba, Kanagawa and Shizuoka
of samples in importing
Europeanrequired for foodstuffs and(12 prefectures)countries
EU
Commission
feed produced or processed
Government-issued
before March 11.
certificate of origin required
Other prefectures
All foodstuffs and feed
and inspection of samples inimporting countries
Fukushima, Gunma, Tochigi,
Ibaraki, Miyagi, Niigata,
All foodstuffs and feed
Imports suspended• Foreign exporters ofNagano, Saitama, Tokyo, Chiba
Japanese foodstuffs or(10 prefectures)
their agents are required to
Vegetables and such products, milkregister.
China AQSIQ
and dairy products, fishery products Government-issued radiation• Import and sale recordand aquatic animals, tea leaves
inspection certificate andsystem imposed on
and such products, fruits and fruit certificate of origin
Other prefectures
Chinese importers of
products and medical plant products
Japanese foodstuff.
Foodstuffs, food crops and feed
Government-issued
other than those listed abovecertificate of origin
Fukushima, Gunma, Tochigi, All foodstuffs (shipped March 26,
Imports suspended
Ibaraki, Chiba (5 prefectures) 2011 or later)
Department
Fruits, vegetables, fishery productsof Health,(live, chilled, frozen), dairy
TaiwanInspection of all lots
Executive
products, baby foods, mineral andOther prefectures
Yuan
other water and seaweed
Processed food (produced March 12,
Inspection of samples
2011 or later)
Note: Restrictions shown here are based on reports as of July 12.
Sources: Reports from JETRO overseas offices and documents from Ministry of Agriculture, Forestry and Fisheries.

300 mm line by 6 June. In this way the company was able toachieve recovery earlier than initially expected.
Toyota Motor, a manufacturer of finished cars, forecasted in April that it would normalize domestic production by
between November and December, but in June the company announced that it would restore domestic production tonormal levels by October. The company was able to achieve
recovery earlier, as the restart of production at parts companies took place sooner than expected. The recovery of automobile supply networks presents itself in improvements
in exports, and the export volume index for automobiles in
May had reduced its rate of decline compared to April.
Foreign countries’ response to food product exports is
also beginning to show signs of relaxing with time. For instance, on 17 May in the United States, the FDA amended its
import warning and removed Gunma, Saitama, and Chiba
Prefectures from the regions subject to measures where imports of milk, dairy products, fruits, and vegetables were to
be immediately halted without inspection. This amendment
also shrank the region subject to strengthening sample inspections. In addition, on 13 June, Canada became the first

country to remove its import restrictions on food products.
On 1 July, Malaysia decided to ease its regulatory measures,lightening the paperwork burden required by Japan whenexporting products to the country. These efforts to ease regulations by foreign countries are beneficial for Japan’s foodproducts industry.
For Japan, there is tremendous meaning in achieving
early recovery and having the importance of its materials
industry reconfirmed. While Japanese automobile manufacturers expanding overseas are considering substituteprocurement sources for their parts, they continue to favor Japanese parts with high added value for the majorityof their core parts. From the perspectives of preventing theoutflow of expertise and maintaining domestic employment in Japan, a trend is apparent where companies tend toaccept user requests from among parts manufacturers andhesitate to make unilateral expansions overseas. The earlyrecovery of the supply chain and the presence of Japanesematerials to support global industries are expected to again
make companies aware of the importance of locating offices
domestically.
77

IIIout the world. Japan also maintains a firm position as a supply source for important intermediate goods such as materials and parts.
It is technological development capacity and local production capacity that support these high-quality products.
The Global Competitiveness Report, which is released annually by the World Economic Forum, provides a similarview. The report compares the competitiveness of countries
from various aspects based on the results of questionnaire
surveys carried out on experts as well as statistical data. The
2010 report ranked Japan highly, at the sixth in the world,
due to its “business sophistication,” which was ranked first,
and its “innovation,” ranked fourth (Figure III-11).
A detailed look at “business sophistication” shows thathigh scores are given to “local supplier quantity” (ranked
first) and “local supplier quality” (ranked fourth), as well as“state of cluster development” (ranked second), which areformed by the local suppliers, in addition to “production
process sophistication” (ranked first). It can be said that thereport highly evaluates Japan’s strong foundation of “monozukuri” (creative manufacturing) underpinned by rich production networks of SMEs with robust technological skills.
Parts, materials, and other intermediate goods produced
from this foundation maintain a strong level of competitiveness in production networks of Asia, which are currently
expanding and deepening at a rapid pace.
First, let us look at a situation of intraregional trade inAsia. Figure III-12 presents shares of exports and imports
for intraregional trade in East Asia by trade goods category
based on the RIETI-TID database of the Research Instituteof Economy, Trade & Industry (REITI). Here, East Asia
is defined as Japan, China, South Korea, Taiwan, and theASEAN-5 (Indonesia, Singapore, Malaysia, Philippines, andThailand). Import statistics of each country are used here sothat exports through a third country can be calculated asexports from their country of origin to their final destination. As for exports, Japan accounts for approximately one

2. Reaffirming Japan’s Strengths in Reconstruction
Process(1) Japanese strengths that attracted attention
following the disaster
The Great East Japan Earthquake created extensive damage and, as seen in the previous section, caused a massive
and widespread impact on the business activities of Japanese firms. However, at the same time, the disaster drew attention to Japan’s strengths.
Following the disaster, foreign media covered stories on
how people remained calm and maintained order without
any instances of looting. For instance, in a contribution to
the May issue of Forbes magazine, Lee Kuan Yew, former
Minister Mentor of Singapore, spoke about the responseof Japanese people following the Earthquake, commenting, “The Japanese people's comportment under such severe stress has been remarkable. No panic, no looting. A
calm, disciplined and stoic manner has prevailed, withpeople caring for one another. Few societies could maintain such order and solidarity during a catastrophe of thismagnitude.” Indeed, it goes beyond the scope of this paper
to cover the entire list of cases where Japan’s spirit of mutual help was observed. In the industrial arena, there werealso many such instances as providing boats for fisheries indisaster-struck areas from other parts of Japan, and supplying necessary equipment to rebuild plants by firms of thesame industry located far away from the area. There is noquestion that the discipline and sense of solidarity laid thefoundation for reconstruction from the disaster.
Moreover, as observed in the previous section, the factthat the disrupted production of materials and parts has
impacted the global supply chain has reconfirmed, in Japanand the world, the significant roles Japanese firms are playing. Furthermore, there are technologies that attracted attention as a result of the disaster due to their advanced level,
including early earthquake warning, as well as technologies
that present new potential if refined during reconstruction,such as energy conservation technologies.
It is vital that Japan utilizes its own strengths in order toachieve reconstruction and pursue a new path of prosperity.
Let us now review the strengths of Japan and Japanese companies by looking at mid-term trends before the disaster.

Figure III - 11 E valuation on Japan in Global Competitiveness
Report (6th place overall)Innovation (4th)Businesssophistication(1st)(2) Local production and development capacity thatgenerate high-quality products
The high level of local production capacity forintermediate goods
The high-quality products created by Japan’s manufacturing industry form the core of the diverse Japan’s
strengths. From the periods of post-WWII reconstruction
and rapid economic growth until present, Japan has grownby manufacturing and exporting high-quality products at
reasonable prices. Moreover, it is safe to say that the “Japanbrand”, comprising safe and trustworthy products and services, has been nurtured by companies steadily supplying
high-quality products to consumers in Japan and through-Market size
(3rd)Institutions (25th)
7
Infrastructure (11th)6
5
4
3

Macroeconomic
environment(105th)2
1
0Health andprimary
education (9th)Higher educationand training(20th)

Technologicalreadiness(28th)
Financial market
development(39th)(scores from 1 to 7)

Labor market
efficiency(13th)

Goods market
efficiency(17th)Japan
China
South Korea

Note: Numbers in parentheses show Japan’s rank among 139 countries/regions.
Source: The Global Competitiveness Report 2010-2011 (World Economic
Forum).

78

III International Business for Disaster Recovery

Figure III - 12 Export and import shares in East Asia by traded good and type (based on import statistics)
RIETI-TID Classification
Category

Sub-category

Primary
goods

-

(%)
Shares of Asian intraregional exports (upper level) and imports(lower level) in 2010
(rate of increase over 2007 in parentheses)
Japan
China
South Korea
TaiwanASEAN

BEC title

Food and beverages, primary, mainly for industry
Industrial supplies, n.e.s., primary
Fuels and lubricants, primary
Food and beverages, processed, mainly for industry
Processed
Industrial supplies, n.e.s., processed
goods
Fuels and lubricants, processedIntermediate
goods
Parts and accessories of capital goods, except
Parts &
transport equipment
components
Parts and accessories of transport equipment
Capital goods, except transport equipment
Capital goods
Other industrial transport equipment
Food and beverages, primary, mainly forhousehold consumption
Food and beverages, processed, mainly for
Final goods
household consumption
Consumption
Passenger motor cars
goods
Other non-industrial transport equipment
Durable, semi-durable, non-durable consumer
goods n.e.s.

Export2.3 (17.8)

1.6(5.7) 77.8 (51.8)

Import23.2 (13.0) 32.2 (73.0) 17.9 (29.2)

6.3(7.7) 20.4 (32.3)

Export26.5 (25.4) 17.2 (18.1) 15.7 (36.9) 10.2 (16.9) 30.5 (38.4)

9.7 (-25.4)

Import14.5 (12.5) 32.1 (26.9) 13.3 (15.6)

Export23.6 (29.9) 15.8 (32.6) 16.3 (43.2) 17.3 (24.7) 27.0 (22.8)

Import10.8

9.2 (17.1)

8.1 (190.4) 30.1 (29.1)

ExportImport29.8 (29.2) 29.3 (40.3) 12.6 (22.0)
15.9 (19.7) 39.7 (30.7) 11.3 (26.9)

9.5 (0.3) 18.8 (19.9)
7.7 (46.4) 25.5 (17.7)

Export

14.6 (40.8) 49.8 (21.5)

5.1 (46.6)

4.9 (33.2) 25.6 (43.6)

Import 46.3 (25.1) 14.4 (63.5)

9.6 (5.3)

5.5 (78.4) 24.1 (32.2)

ExportImportTotal amount

8.6 (30.6)(7.1) 41.8 (25.5)

8.9 (16.7) 31.2 (52.1)

23.9 (24.7) 21.8 (21.8) 13.7 (28.4) 11.5 (15.5) 29.2 (26.2)
17.5 (16.0) 34.3 (29.7) 11.2 (17.9) 7.9 (18.1) 29.1 (26.3)

Notes: (1) Based on a correspondence table of BEC and HS codes of the United Nations Statistics Division, and the Total amount is not equal to the sum of the
breakdowns.
(2) ASEAN here refers to Indonesia, Singapore, Malaysia, Philippines and Thailand.
Sources: “RIETI-TID2010” (Research Institute of Economy, Trade and Industry) and import statistics of various countries and regions.

fourth of all regional trade in East Asia and maintains particularly strong shares for intermediate goods (processed
goods and parts) and capital goods. With regards to capital
goods, China has expanded exports to a level generally on
par with Japan, but at the same time China is the largest
importing country of capital goods in the region: China
accounts for approximately 40% of regional imports andshows an excess of imports for the goods in the region.
ASEAN shows high shares for most of goods, partly because
its amounts include the trade among member countries,
but strong growth in primary goods, intermediate goods,
and final goods suggests increasing presence of ASEAN in
the intraregional production network. Please note that thenatural gas exported to the region from Indonesia and Malaysia is classified in the Broad Economic Category (BEC)
as “fuels and lubricants, primary”, and liquefied natural gas
as “fuels and lubricants, processed”, which brings ASEAN’s
export shares high in these categories.
Let us look at the trade relations in East Asia in a moredetailed manner. Figure III-13 shows the trade balances between countries and regions of East Asia in 2010 in termsof intermediate goods (processed goods and parts) and final consumer goods. The main flow of goods in East Asia
is as follows: Intermediate goods are exported from Japan,
South Korea, and Taiwan to China and ASEAN countries,
and China and ASEAN, in turn, export the final consumer
products back to these countries. Japan, South Korea, andTaiwan have trade surpluses of intermediate goods, but
Japan also has an export surplus to South Korea and Taiwan. Furthermore, comparing export amounts to China in
2010, Japan exported US$117.3 billion to China, which exceeded the export of US$104.8 billion by South Korea, andUS$90.3 billion by Taiwan. These figures indicate that Japan

maintains a predominant position in terms of intermediate
goods in the East Asian production network.
The trade balances between Japan and other countries
and regions by commodity type show that Japan earns foreign currency by intermediate goods in East Asia (FigureIII-14). In the intraregional trade, Japan has secured a position where it imports primary goods mainly from Southeast
Asia and exports processed intermediate goods and parts aswell as capital goods, and then importing consumer goods
from China. This structure has allowed Japan to maintainan overall trade surplus on each country and region, andthis surplus has expanded from the levels in 2007. Japan isusing its edge in parts, industrial processed materials, andFigure III- 13 T
 rade flow in East Asia (intermediate goods andfinal consumption goods)(2010, trade balance)(US$ million)

China
66,952

61,97860,85848,56525,607

2,155
20,188

Japan
82
14,0997
31,146

7,839

Taiwan37,432South Korea

6,162

6,156

12,945
50

998
ASEAN
Final consumption goods

Intermediate goods

Notes: (1) Definition of trade goods classification is by RIETI-TID.
(2) ASEAN here refers to the same as defined for Figure III-12.
Source: Import statistics of the countries and regions.

79

III

Figure III - 14 J apan’s trade balance with East Asia
(2007 and 2010)
120,000
100,000
80,000Figure III - 15 R
 &D expenditure in major countries by funding
source as a percentage of GDP(US$ million)

3.5

TaiwanSouth Korea
China
ASEAN

2.5
2.0

40,0001.5

0-20,000-40,000

Primary
goods
2007 2010

Consumption
goods2007 20102007 2010 2007 2010 2007 2010
Intermediate Intermediate Capital
goods
goods
goods
-processed-parts &goods
components

Other
Government
Private sectors

3.0

60,00020,000

(%)

1.0
0.5
2007 2010
Total

0.0

Japan South Korea U.S.

GermanyOECD
Average

China

FranceUK

Notes: (1) The figures for UK are from 2010 and the rest are from 2008.
(2) The financial sources for "Other" are higher education institutions,private nonprofit institutions, foreign sources, etc. Figures forOECD Average and China were calculated backward from total.
Source: Main Science and Technology Indicators, Vol. 2010/2 (OECD).

-60,000

Note: Same as Figure III-13.
Source: Same as Figure III-13.

other intermediate goods to maintain its competitivenessamidst the growing Asia. Even taking into accounts that theexport from Japan includes internal transactions of Japanese firms that have expanded into the East Asian region, it
is fair to say that there is no change in the superior technological level of Japan in intermediate goods production.

China.(Note 3) However, Japan greatly outranks China in international patent applications based on the Patent Cooperation Treaty (PCT). According to statistics by the World Intellectual Property Organization (WIPO), Japan has ranked
second globally since 2002, accounting for nearly 20% of
all applications, a number that has been increasing steadily
since 2008. From January and March 2011, Japan filed 10,630
applications on par with the United States figures, 10,868.
In monthly basis, Japan’s applications surpassed that of US
in February and March. Every year there are a large amountof applications filed by Japan between January and March,while the Untied States tends to file less application during
this period. However, this is the first time that Japan has
surpassed the United States in terms of monthly PCT international patent applications since WIPO began publishing

Research and development underlies high-quality
products
Along with local production capacity, another source ofhigh-quality products is research and development, R&D,
capacity. Japan retains its position among the global topclass in this area as well.
Comparing R&D expenditures as a percentage of GDP
in major countries shows that Japan has remained the world
highest investor in R&D since 1986. In recent years, South
Korea has gave increasing focus on R&D and has achieved
rapid growth, but Japan has also shown a continuous growthin R&D expenditure.(Note 2)
One of Japan’s most prominent characteristics is that the
R&D expenditures are lead by its private sector. Breaking
down R&D expenditures by financial sources shows that the
average in OECD countries is 0.65% of GDP for the public
sector and 1.51% for the private sector. In Japan, while public
sector is just 0.54%, private sector invested as high as 2.69%
of GDP for research and development (Figure III-15).
Part of the success of investment in R&D makes itself
evident in the number of patent applications (Figure III16), where Japan maintains a top level globally. China isadvancing rapidly in total application, submitting approximately 390,000 applications in 2010 mainly domestically,an increase of 24% over the previous year. Japan submitted
344,598 applications in 2010, a 1.1% drop over the previous
year, falling into third place behind the United States andFigure III - 16 T rends in the top five countries filing international
patent applications under PCT
(%)
45

U.S.

40

Japan

35

Germany

30

China

25

South
Korea

20
15
10
5
0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010 (Year)

Note: Ratio of countries' application numbers compared to the total numberof patent applications filed under the Patent Cooperation Treaty.
Source: World Intellectual Property Organization (WIPO) database (as of
May 2011).

2
Main Science and Technology Indicators, Vol. 2010/2, Organisation for
Economic Co-operation and Development.

3

80Japan Patent Office Annual Report 2010, Japan Patent Office.

III International Business for Disaster Recovery

statistics in January 1985.
Figure III - 17 PCT international patent application share by major industry in majorcountries (total of 2009 and 2010)
As for the field of technology(%)
by WIPO category, large numbers
South Global Total
Japan
U.S.
GermanyChinaof patents are applied from Japan
Korea(2009)
Optics
47.4
21.8
7.6
2.2
4.0
6,165
in optical equipment, audio andAudio-visual technology
45.5
18.3
5.5
3.4
6.4
6,368
video technology and semiconSemiconductors
43.2
29.2
7.9
1.8
5.1
7,601
ductors, which make up nearly
Electrical machinery, apparatus, energy
32.7
20.6
16.0
4.2
4.1
11,420
Telecommunications
24.7
22.8
3.3
9.5
13.4
9,346
half of total patent application.
Transport
21.5
15.4
23.4
2.6
2.4
7,418
This is apparent in Figure IIIMeasurement
21.3
25.7
14.6
1.9
2.5
9,088
17 which compares application
Basic materials chemistry
21.1
34.4
15.1
1.9
2.1
7,176
Computer technology
19.5
41.0
4.8
3.5
4.2
12,579numbers filed by major countries
Organic fine chemistry
15.7
29.1
12.1
2.9
2.8
8,832
between January 2009 and SepDigital communication
13.0
25.0
2.9
20.5
7.4
10,460
Medical technology
11.6
45.3
7.8
1.6
2.2
12,097tember 2010. Japanese share in
Biotechnology
11.5
39.7
7.1
2.1
3.4
7,448
the above mentioned categories
Pharmaceuticals
10.1
38.2
6.4
2.7
2.4
12,167in 2000 was just around 20%,
Notes: (1) E xtracted the fields having at least 6,000 applications in 2009 from WIPO's 35 technical field claswhich means a more than twosifications.
fold increase in a decade. Japan,(2) Figures for applications by field in 2010 are totals up to September.
(3) Applications that belong to multiple fields are counted in each field.
however, trails far behind the
Source: Same as Figure III-16.
United States in medical technology, biotechnology, and pharmaceuticals.
shortages are not limited to the jurisdiction of the Tokyo
Among individual applicants, Panasonic claims a top
Electric Power Company alone, but are spreading to othershare. In 2008, Panasonic lost its number one spot to Huawei
regions as well, significantly impacting the industrial sector
Technologies, a Chinese digital communications company,
and citizens lifestyles.
but in 2009 reclaimed the top spot with 1,891 applications
However, conversely, this is an opportunity for Japan toand again in 2010 with 2,154 applications (ZTE, anotherfurther enhance the energy-conserving technologies thatmajor Chinese communications device manufacturer, took
lead the world. As shown in Figure III-18, while China’s figsecond in 2010 with 1,868). In addition, other Japanese corures are improving, it still has a great room to improve theporations that placed in the top 20 list in patent applications
efficiency. The efficiencies in ASEAN countries have worsin 2010 were Sharp (eighth), NEC (tenth), Toyota (eleventh),ened in recent years as they expand production. As such,
Mitsubishi Electric (fourteenth), and Fujitsu (nineteenth).
energy conservation is a common challenge for Japan and
The number of applications filed by China in the field ofother countries. If Japan is able to overcome the energydigital communications is rapidly increasing; starting fromsaving challenge it now faces, there will be more and morea mere five applications filed in 2000, this number grew soopportunities for those technologies to assist in resolving
much that in 2009 the country accounted for 20% of thechallenges overseas.
world’s total international patent applications in the field.
Regarding renewable energies, while Japan possesses
This massively large number of applications is apparently
filed by Huawei Technologies and ZTE.
Figure III - 18 T
 otal energy consumption per US$1 million of
However, Japan also faces a challenge in R&D. The R&D
added value in industrial fields
capacity of Japanese private firms, which is evident in thenumber of applications, is not necessarily contributing to
1,828(TR Missing)
1,000
increases in sales and profits. In order to address the de900
1990
mand of growing markets overseas, Japan must increase ef2000
forts to use its advanced technologies to customer-oriented
800
2010
product development.
700
626
575

600

(3) Further advances expected in Japan’s energy
conservation and other environmental
technologies
With regard to the efficient use of energy, Japan successfully survived two oil shocks through joint efforts by the
public and private sectors. Comparing how much energy isconsumed for a given added value in industrial sector, Japan
uses energy in a more efficient manner than other countries,
and the level is even improving (Figure III-18).
The power supply shortage as a result of the recent nuclear power plant accident increased the necessity to conserve electricity during the summer of 2011. Power supply

500
400

378

300 250
200
100
0

147
221
125
188 196 188 164 178
143 129
110

U.S.

OECD

Germany

U.K.

368

399

89 93 77
Japan

ASEAN

China

Note: Total industry consumption of energy (including non-energy use) per
value added in industry (constant 2000 US$).
Source: Energy Balances of OECD Countries, Energy Balances of NonOECD Countries (IEA, 2010) and World Development Indicators(World Bank).

81

III

advanced renewable energy technologies, it has not necessarily used those technologies for actual generation as muchas other countries. Japan has several constraints including
limited locations suitable for wind, solar and other renewable energy generation. However, as efforts are underway to
expand the use of renewable energies after the recent disaster, technological innovation is expected to be advanced toovercome these challenges. Renewable energies are promoted around the globe to mitigate climate change, which is theshared and common challenge across countries. Furthermore, there are many locations where renewable energies
are suitable to use as small-scale power sources to respondto local conditions, such as electrification in remote areas.
There is great potential for Japanese technologies once Japan overcomes the current challenge.

Figure III - 19 Natural disasters by region between 1990 and
May 2011
37.6

Total number ofnatural disasters(7,912)
Number ofearthquake/tsunami (590)

4.5

23.7

20.8

13.9

19.6

8.2

1.3

Other regions: 1.7
63.3

Number of deathsby natural disasters(1,699 thousand)
33.8

Number of deaths byearthquake/tsunami(813 thousand)

8.6

Oceana: 0.3

13.4

Other regions: 0.6
0(4) Common challenge of creating societies resilient
to natural disasters
Issues faced by emerging Asian economies and theexperience of Japan
Considering the issues that Japan faces in achieving reconstruction from the disaster, as well as the mid- to longterm issues it will face in the future, just like the aforementioned energy conservation and renewable energies, Japan
shares many challenges with other countries, including the
emerging economies of Asia.
For instance, many Pacific Rim countries including Japan face the major issue of how to reduce damage resulting
from earthquakes and tsunamis. It is also forecasted thataging of a society, which is also a major issue that Japan faces, is to rapidly progress in countries such as China, South
Korea, and Singapore.
Japan, in a sense, has an advanced position in addressingthese issues. If Japan finds solutions to these common global
issues, it will be able to contribute to resolving problems ofother countries while also expanding business opportunities overseas. In order to effectively exploit its position, it
will be important for Japan not to consider local responses
tailored only to Japan but to consider business solutions inview of expansion to foreign markets.
In addition to the aforementioned environmental technologies, let us first have a look at disaster prevention technologies, followed by the countermeasure to aging society.

4.1

10
Asia

20

30
Americas4050
Africa6070Europe

80

90

100
(%)

Oceania

Source: “EM-DAT: The OFDA/CRED International Disaster Database –www.emdat.be – Université catholique de Louvain – Brussels – Belgium” as of May 10, 2011.

May 2011 using statistical data, EM-DAT by the Centre for
Research on the Epidemiology of Disasters at the Université
Catholique de Louvain, 38% of disasters and 63% of deaths
are concentrated in Asia (Figure III-19; Asia includes theMiddle East eastward of Israel). Of those disasters, earthquake and tsunami were limited in number of occurrences,
but took the lives of many people. The number of deaths
caused by earthquakes and tsunami in Asia since 1990
amounted to approximately 580,000 people. This figure accounts for one-third of the total number of deaths causedby all natural disasters in the world during that period. Thisshows the sheer massiveness of damage caused by earthquakes in Asia.
Japan’s earthquake resistance and disaster prevention
technologies draw global attention
The recent disaster, especially the tsunami, caused an
extensive amount of damage. However, there is also theview that the damage caused by the earthquake alone wasincommensurate with the 9.0-magnitude quake, one of thelargest in history. For example, in an interview on June 8 by
JETRO Overseas Office, Ms. Françoise Nicolas, the head of
the Asia Center, the French Institute of International Relations, commented, “The earthquake resistance of Tokyo’s
infrastructure proven in this earthquake has indicated thehigh technological level of Japan’s earthquake-resistant architecture. Japan’s advanced earthquake resistance technology is to become a strength as an exporting industry.”
Maria Constanza Garcia, the Vice Minister of Transport for
Colombia, also commented at an interview by JETRO Office on May 30 that, “I highly commend the overall strengthof Japan’s infrastructure, which can be inferred from how
fast recovery work is being carried out in response to thedisaster.”Moreover, there were no deaths involving Japan’s Shinkansen (bullet train) as a result of the earthquake, which has

Frequent natural disasters in Asia
As was seen in the recent disaster, how to tackle natural
disasters has been a challenge that Japan has faced since before its recorded history. This is a common issue for othercountries as well, and particularly in Asia with frequent
earthquakes.
According to the United Nations International Strategy
for Disaster Reduction (ISDR), in 2010 alone, a total of approximately 300,000 people were killed by natural disasters
and economic loss amounted to US$109 billion. Threefourths of the deaths in 2010 were caused by the major
earthquake in Haiti, but in the long term, Asian countries
have suffered a significant amount of damage.
Looking at natural disasters occurring from 1990 to
82

III International Business for Disaster Recovery

been praised for its high level of safety since the start of operations. In addition to its reinforced earthquake-resistant
structure, it is believed that its early earthquake detection
system contributed to preventing casualties. It is said that
this system activated the emergency brake and began reducing speed nine seconds before the first shaking started,and one minute and ten seconds before the largest shaking.
It is also believed that this is due to improvements made on
the system following the derailing accident of a Shinkansen
during the 2004 Chuetsu earthquake. The Shinkansen ishighly praised in foreign countries for its safety, including
the CEO of California High-Speed Rail in the United States
who applauded the earthquake response of the East Japan
Railway Company.
The earthquake early warning system uses the same
principles as the Shinkansen’s system. The system, which
was launched by the Japan Meteorological Agency in October 2007, uses seismic measurements taken at approximately 1,000 locations to detect the initial tremors, estimates theepicenter and magnitude, predicts its intensity, and issues
an alert. Even though the accuracy of warnings has decreased due to the frequency of aftershocks, many foreign
media praised the system for the benefit it provides in issuing warning before people feel the tremor of earthquake.
According to Professor Richard Allen of the Universityof California at Berkeley, earthquake warning systems arebeing used in Mexico, Turkey, Taiwan, and Romania in addition to Japan. However, the systems other than Japan either cover only limited areas or not issuing public warning.
Professor Allen commented that Japan’s system is the mostadvanced in the world. He is pressing for a full-fledged trial
and early implementation of the same system in California,
as Japan’s alert system produced successful results in the
March 11 earthquake.
The earthquake early warning system is gathering agreat amount of attention in Chile as well. Interests began
to grow following an 8.8-magnitude earthquake that struck
Chile in February 2010. Chilean media reported with surprise how the warning system worked using interviews ofChileans living in Japan. Chile adopted the same terrestrial digital broadcasting system as Japan, and anticipates
starting consideration on implementing a public warning
system using special attributes of the system. However,in order to construct a comprehensive earthquake alert
system it is necessary to combine a diverse range of systems, such as detecting seismic waves, relaying those toa governmental organization, and using communication
satellites. Japanese corporations with related technologies
are currently working to provide those technologies to theChilean Government.
These disaster prevention-related technologies can beconsidered the result of efforts to gather and apply knowledge in Japan, a country with frequent earthquakes, in orderto prevent disasters as much as possible. Japan’s advancement of research and development efforts in this field is also
apparent in the number of patent applications it has filed.
The Japan Patent Office analyzes patent application trends
in important technological fields, and in April 2010 released

Figure III - 20 B reakdown of international patent applications
for earthquake-resistance and seismic-isolationrelated technologies by country
Other 20
China 7(No. of applications)Japan 68

New Zealand 10

Total: 215(2000-2010)

Other Europe 38

Spain 10
Germany 11

Italy 16

U.S. 35

Note: Number of applications under the Patent Cooperation Treaty (PCT)with the attached International Patent Classifications (IPC) numberof E02D 27/34 (foundations for sinking or earthquake territories) andE04H 9/02 (structures withstanding earthquake or sinking of ground).
There were 37 applications for E02D 27/34 and 178 applications for
E04H 9/02; however, applicatons with both IPC numbers might becounted twice.
Source: Data provided by the WIPO Statistics Division.

a report on “Versatile Vibration-Prevention, Control, andElimination Systems.” According to this report, the number of patent applications filed in this field between 1997
and 2007 in Japan, the United States, Europe, China, andSouth Korea amounts to 9,162 applications, of which 7,860
were filed by Japanese (figures include control and reduction technologies for vibrations resulting from wind andconstruction). Japan outnumbers other countries, including the United States in second (375) and Germany in third(240), accounting for approximately 85% of all applications.
Figure III-20 shows the number of PCT international applications which were attached with classification numbersthat are strongly related to earthquake resistance and seismic isolation technologies. It does not extract data as rigorously as the report above, but the number of applications
by Japan between 2000 and 2010 amounted to 68. This is
the largest number, accounting for one-third of the overall
number of applications, making it clear that Japan maintains a superior level of technology over other countries.
Nevertheless, the ratio of one-third is still limited compared with the overall number of patent applications, andlikely indicates the significant untapped potential for expanding overseas. In the aforementioned report by the Japan Patent Office it is pointed out that most of the applications submitted by Japanese were filed in Japan, while onlyaround 3% of that amount was filed in foreign countries.
Especially in the area excluding mechanical equipment, architecture and civil engineering, the ratio of patent applications filed overseas is less than 1%. Moving forward to reconstruction from the Great East Japan Earthquake, it will
be necessary to mobilize all advanced technologies related
to disaster prevention to construct a society resilient to disasters. Furthermore, if these technologies are actively put
to use overseas, business opportunities for Japanese companies are expected to expand. In particular, in emerging
countries, the need to retrofit transportation infrastructure
and public facilities to make them earthquake-resistant willgrow in the future. If Japan exploits its technologies in these83

IIIareas it will be able to contribute to the common challenges
of protecting life and property from disasters. For that purpose, it will be important to keep foreign markets in view
more than ever when applying disaster prevention technologies.

bers for Japan. By the year 2050, China and South Korea
are forecasted to reach 25.6% and 32.8%, respectively, thus
approaching Japan’s predicted level of 35.6%. Furthermore,predictions have been presented that indicate that ASEAN
and India are to surpass the global averages by 2040 and
2070, respectively (Figure III-21). According to the same
prediction, the population of those age 65 years or older in
China, ASEAN, Hong Kong, South Korea, and India is expected to grow from 209.58 million in 2010 to 311.38 million
in 2020, and then to 713.93 million in 2050 (Figure III-22).

(5) Exploiting Japan’s strengths as a nation withadvanced aging experience
The anticipated growth of Asia’s elderly market
Aging is to rapidly advance in Asia. Aging is a major
problem that Japan faced from before the disaster; however,
the issue can be a Japan’s strength when entering the growing overseas elderly market.
According to population statistics by the United Nations(2010; median variant), the elderly population ratio (ratio ofpeople aged 65 years or older compared to the total population) as of 2010 was 22.7% in Japan, 8.2% in China, and11.1% in South Korea, presenting particularly large num-

Rising healthcare and leisure-related needs in Japan
The progression of aging is anticipated to impact various
areas, including economic growth, social security systems,
and public finance. However, from a business perspective,
the change in consumption structure garners attention.
Changes in the consumption structure of Japan, where aging has advanced ahead of other countries can be used as areference for such business interests.
Aging in Japan is progressing faster than anywhere elsein the world, and according to United Nations statistics asof 2010 Japan had the highest elderly population ratio in
the world, while predictions (median variant) show thatthat level is to stay the same until 2050. Japan can thus beconsidered to have a head start compared to other nationsin terms of aging. Expenditure items of household by age
group in Japan in 2010 show that elderly households (households where the household head was 65 years or older) spent
more than average households on “lighting, heating, andwater,” “healthcare,” “learning and entertainment,” and“other expenditures,” while they spent less on “transportation and communications” and “education.” For more detailed items, elderly households spend more than averageon social expense-related items such as “donations,” “foodexpenses,” and “package travel expenses,” on housing renovation-related costs such as “facility refurbishments andmaintenance,” on items related to “health and medical”
such as “health maintenance supplements,” as well as on
raw food products (Figure III-23).
Among many characteristics of the living environmentand consumer behavior of the elderly population, the firstthing that can be pointed out is the growing discretion for
consumption. The generation is growing in size who receives
retirement allowances in addition to financial assets accumulated during working period. Many households possesshouses and have finished repaying their housing loans.
The next point that can be made is the large amountof time that can be spent for leisure activities. According
to the Survey on Time Use and Leisure Activities releasedby the Ministry of Internal Affairs and Communications(FY2006), leisure activities begin to grow more vigorousfrom around the 50s, and as people grow older, the amountof time they spend on using media such as watching television and on resting and relaxation increases.
According to the Public Opinion Survey Concerning
People's Lifestyles, released by the Cabinet Office in 2010,
the most frequent response to “Things I want to particularly focus on in my future lifestyle” was leisure activities

Figure III - 21 E
 lderly population ratio in the world’s majorcountries/regions
(%)
40.0

Japan
South Korea

35.0

Hong Kong
China

30.0

ASEAN
U.S.

25.0

India
World

20.0
15.0
10.0
5.0
0.0
1950

1965

1980

1995

2010

2025
(Est.)

2040(Est.)

2055(Est.)

2070(Est.)

2085(Est.)

2100(Est.)(Year)

Source: W orld Population Prospect: The 2010 Revision, the United Nations(May 2011).

Figure III - 22 Elderly population of major Asian countries andregions(Million people)

800

714

India
ASEAN
Hong Kong
South Korea
China
Total

700
600
500

228
445

400
311

300

0

87

210

200
100

126

1
5

60

33

1
8

110
2010

48
166
2020

2
12

76

137
3
15

331
229

2030

2050

Source: S ame as Figure III-21.

84

III International Business for Disaster Recovery

Figure III - 23 Items to which elderly households (household headdd by age 65 or older) spend more than average (difference with total
household averages; 2010)
0

1,000

2,000

3,000

Other consumption expenditures/Social expenses/Money gifts

4,000

6,000（Yen）

5,000
5,086

Housing/Repairs & maintenance

2.760

Other consumption expenditures/Social expenses/Food

2,378
1,853

Housing/Repairs & maintenance/Service charges for repairs & maintenance
Culture & recreation/Recreational services/Package tours

1,486

Medical care/Medical services

1,449
1,012

Food/Fish & shellfish/Raw fish & shellfish
Housing/Repairs & maintenance/Tools & materials for repairs & maintenance909

Food/Fruits/Fresh fruits

875
632

Food/Vegetables & seaweeds/Fresh vegetables
Medical care/Medicines

610

Medical care/Health fortification

520

Other consumption expenditures/Social expenses/Culture & recreation

481

Other consumption expenditures/Miscellaneous/Personal care services

378

Fuel, light & water charges/Other fuel & light

303

Food/Fish & shellfish/Salted & dried fish

299

Food/Cereals/Rice247

Food/Vegetables & seaweeds/Other processed vegetables & seaweeds

220

Furniture & household utensils/Domestic services

217

Food/Fish & shellfish/Other processed fish173

Note: The top 20 small to medium categories that were not broken down any further and had the largest disparity with the overall household average were listed.
Source: “ Family Income and Expenditure Survey (Two-or-more-person Households, Nationwide)” (Ministry of Internal Affairs and Communications).

(33.3%), with particularly high figures for males between
the ages of 60 and 69 (42.2%).
The experience of Japan suggests the possibility of increasing presence of elderly people in the consumer markets
in Asia, and of expanding business opportunities of goods
and services that allow this generation to spend quality leisure time, in addition to areas directly connected to aging,such as medical care and nursing.

Now let us look at trends in foreign countries. Looking
at the aging index (the ratio of the elderly population (age
65 and older) to the youth population (age 15 and younger))and expenditure items that maintain a large share of total
expenditures, there is a strong correlation between “recreational and cultural services ” (cost to enter, view, or use various entertainment facilities) and “other recreational items
and equipment, ” (games and other toys, outdoor products,
gardens, and pet products) in “leisure and recreation” category. This correlation can be understood as showing thesame consumption patterns of Japan (Figure III-24).

Ratio compared to overall consumption expenditures

Figure III - 24 I tems with a strong correlation between aging
index and ratio compared to overall consumption(2010)(%)
5.5

Using Japan’s experience in Asia’s elderly market
One tool in advancing into the Asian market, which isanticipated to age at a rapid pace, is experience and expertise that have been accumulated domestically by Japanese
corporations. Several Japanese corporations have alreadybegun expanding overseas in the areas of sanitary ware,
food products for elderly persons, food delivery services,and paid elderly homes. In addition, there is also believed to
be potential for expansion into Asia for areas that have already started disseminating domestically, such as household
appliances and mobile phones for elderly people, as well as
barrier-free housing. Moreover, as can be seen in Japan’s experience, goods and services that allow for spending richer
life are expected to be a growing market in the future.
The consumption structures of countries and regions ofcourse do not only depend on age levels. They also differ
depending on industrial structure, household composition,savings rates, social security systems, and cultural back-y = 0.0165x + 0.705(8.1432) (3.6483)
R² = 0.4563

5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5

y = 0.0085x + 0.2581(6.7157) (2.1367)
R² = 0.3634

1.0
0.5
0.0

0.0

50.0

100.0

150.0
Aging Index

200.0

250.0

Recreational and Cultural Services
Other Recreational Items and Equipment, Gardens and Pets

Source: “ World Population Prospects: the 2010 Revision” (United Nations;
May 2011), “International Marketing Data and Statistics 2011” (Euromonitor International).

85

III

ground. In China, a decline in fertility rate and progressionof aging has led to a transfer of income between generations
and growth in a market for high-end goods and services forchildren. As an impact of aging on consumption behavior
depends on country and region, thorough consideration
should be made before an actual market entry. However, aneffective mid- to long-term strategy would be to make themost of assets that Japan is steadily accumulating to expand
into future Asian market.

the R&D centers of foreign company (upper limit of 1 billionyen). Of the companies that applied for this subsidy between
February 9 and March 29 2011, which coincidentally covered
the time of the disaster, the decision was made to adopt projects by the five corporations listed in Figure III-25.
One of these companies, Dou Yee aims to establish amanufacturing and R&D site for film liquid crystal displays
in Shobara City, Hiroshima Prefecture. Dyesol Japan alsoplans to establish an R&D base related to dye sensitized solar cells. Both corporations aim to develop more advanced
products by forming partnerships and conducting joint research with related manufacturers and research institutes
in Japan.
There are other examples where the domestic industrial
accumulation in Japan has served to stimulate investment
to Japan. Umicore, a company based in Belgium, is the casein point. Umicore, a global manufacturer of nonferrous
metals, officially announced in April 2004 that it would
establish an R&D and manufacturing center for positiveelectrode materials for lithium-ion batteries in Kobe City.
Umicore maintains the second highest global share of the
manufacturing of positive electrode materials. Japan is thelargest market for lithium-ion batteries, and by establishinga manufacturing and R&D base near the company’s Japanese manufacturer clients, it strives to develop and supply
products that fit the needs of its clients. The Ministry of
Economy, Trade and Industry’s Employment Generating
Low Carbon Enterprise and Regional Development Subsidy
was used for the investment.
In accordance with the opening of its Kobe Plant, from
April 19 to 21, 2011 Umicore held a board member’s meetingfor their group in Kobe City where the company confirmedthat its investment strategy for Japan remain unchanged after the disaster. Umicore also announced on June 22, 2011that it would establish a design, development, and manufacturing base for a platinum glass melting system in Yokohama City. Platinum systems are used in the manufactureof liquid crystal and optical glass, and such manufacturers
are agglomerated in Japan. The purpose for this investment
is for “an even closer learning and development with our
local customers” (Umicore Japan press release).
On May 16, 2011, TEVA Pharmaceutical Industries Ltd.,the world’s largest generic drug corporation (hereinafterreferred to as “TEVA”; headquarters in Israel), announced
that it would purchase Taiyo Pharmaceutical Industry Co.,
Ltd. (Nagoya City), Japan’s third largest generic drug manufacturer. TEVA would purchase 57% of all issued stock of
Taiyo, a private company, for approximately US$460 million. According to a joint press release by TEVA and Taiyo,
the two aim to achieve new growth by infusing global management resources with Japan’s management foundations.
On July 14, TEVA announced that it acquired effectively allof the company’s issued shares for US$934 million. There
are also many more examples of investment to Japan, someof which are presented in Figure III-26.
Industrial agglomeration would attract new firms andenhance production networks while also facilitating thefurther advancement of technology via partnerships and(6) Japan’s strengths attract direct investment fromabroadWhen considering reconstruction from the disaster, it is
crucial to gain economic vitality from foreign markets. In
addition to exports from Japan, another method for exploiting the dynamism of other countries is by receiving direct
investment from abroad.
Foreign direct investment to Japan is tremendously
small compared with the size of its economy. According to
the 2010 World Investment Report, released by the United
Nations Conference on Trade and Development, of the 198
countries and regions with recorded ratios of GDP to inward FDI, Japan ranked 195th as of the end of 2009 (Japan was ranked 20th in terms of absolute amount). Due tothe reasons such as continuing economic growth and therelatively low level of corporate tax ratio in other Asian
countries, it was pointed out that Japan’s location competitiveness is deteriorating. According to the Survey on
Attitudes of Foreign-Affiliated Companies toward Direct
Investment in Japan, which was implemented by the Ministry of Economy, Trade and Industry, in fiscal 2007 thelargest number of corporations selected Japan as regional
center and R&D center in the Asian region. However, inthe fiscal 2009 survey, while maintaining second place as
Asia’s R&D center, Japan fell far below other Asian countries such as China as a regional center.
Amidst such a situation, it is the strengths of Japan, outlined thus far, that are the key to attract direct investment
to Japan.
The accumulation of advanced technology industries
sparks investment in JapanOn April 28, 2011, the Ministry of Economy, Trade andIndustry selected projects under the Subsidy Program for
Promoting Site Location in Japan. This promotional project
was created to subsidize from half (for SMEs) to one thirdof all project costs (companies other than SMEs) for companies to set up high value added locations in Japan, such as
Figure III - 25 B
 usinesses adopted by the Project Promoting
Asian Site Location in Japan
Company Name
Industry
Country of Global HQ
Next generation solar
Dyesol Japan
Australia
batteries
Zydus Pharma Japan
PharmaceuticalIndiasalesforce.com
IT services
U.S.
Eurocopter Japan T&E Specialized Helicopter France
Dou Yee International
Liquid Crystal Display Singapore
Pte. Ltd.
Source: Press release by the Ministry of Economy, Trade and Industry.

86III International Business for Disaster Recovery

Figure III - 26 Major investment cases to Japan after the earthquake
Company/Country ofIndustry
Overview
Industry
Global HQ
On June 21 it was announced that the company would establish a manufacturing and R&D base for
Dou YeeLiquid crystal
film LCDs in Shobara, Hiroshima Prefecture. Selected as a beneficiary of Subsidy Program for Projects
International
Singaporedisplay
Promoting Asian Site Location in Japan by the Ministry of Economy, Trade and Industry, as seen in
Pte. Ltd.
Figure III-25. Total amount of initial investment expected to be roughly one billion yen.
In April 2011, the company opened a plant in Kobe for the manufacture of cathodes for lithium ion
batteries. Utilized the Employment Generating Low Carbon Enterprise and Regional Development
Nonferrous
Subsidy, which is made available by the Ministry of Economy, Trade and Industry. The planned
UmicoreBelgium
metal
investment amount is 4 billion yen. On June 22 announced plans to open a design, R&D andmanufacture base for platinum glass melt systems in Yokohama.The purpose for this investment is for“an even closer learning and development with our local customers”
Teva
On May 16, announced acquisition of Taiyo Pharmaceutical (Nagoya) for US$460 million. Aims to
Pharmaceutical Generic drugs
Israelachieve new growth by combining global management resources with Japan's management foundation.
Industries
On July 14 announced that it had completed the acquisition of effectively 100% of outstanding shares.
On June 2, construction of a logistic facility in Tomiya, Kurokawa-gun, Miyagi was completed. Being
constructed since August 2010, the facility has a favorable location in the inland portion of Miyagi
Prologis
Logistics
U.S.
Prefecture and thanks to prompt and careful responses of related parties, effects of the disaster wereable to be reduced to a minimum and construction was completed as initially scheduled. The facility isused for distribution bases in six Tohoku prefectures as a specialized facility of the Miyagi Co-op.
On May 9, plans to expand investment in Japan and South Korea were reported to the Mexican
Chemicals
Mexichem
MexicoStock Exchange. With a total investment of US$150 million, it plans to produce refrigerants (fluorine
manufacturecompounds) in Japan and hydrofluoric acid in South Korea.
Toyota Motors agreed to strategic alliances with Microsoft, in April, and salesforce.com, in May. Toyota
Microsoft
IT services
U.S.
Motors intends to utilize this strategic alliance to strengthen services for its next-generation ecofriendly cars by connecting customers with cars and houses and providing driving information tailoredto each customer via in-car informational devices. The three firms plan to invest one billion yen in total
in a Toyota affiliate, where Toyota will provide 442 million yen, while Microsoft and salesforce.com will
salesforce.com
IT services
U.S.
provide 335 and 223 million yen, respectively.
On April 26, announced that it had acquired land in the Tokyo Metropolitan inland area for a major
LaSalleReal estate
logistics facility. The land will be developed as a large multi-tenant logistics facility by the fall of 2012;
Investment
U.S.
investment
total investment of over 10 billion yen estimated. LaSalle states that thie acquisition is a testament to theManagement
unwavering investment stance and long-term commitment to Japan.
On April 1, opened a new logistics center Amazon Tokoname Fulfillment Center in Tokoname, Aichi, toAmazon Japan
Logistics
U.S.
support increasing scale of distribution of Amazon.co.jp and to provide prompt delivery service. This is
Logistics
the first fulfillment center in the Chubu region.
On March 25 announced that it had acquired a logistics facility in Hiroshima for 7.3 billion yen.
Real estateWith this deal, the fund’s investment in Japan covered 15 facilities for a total of around 65.2 billion
Mapletree
Singaporefundyen. In a press release the company stated that it perceived that Japan was steadily moving foward toreconstruction and that it believed Japan to be an important market from a long-term perspective.
Qingdao
On March 1, signed agreements for establishing a plant with Tottori Prefecture and the town of DaisanJinlong Plastic
Packingcho. The plant will be established at a closed school. Preparing to establish a local affiliate, with theCompoundmaterial
China
goal of constructing a system for the full production of plastic bags and other goods for the JapaneseColor Printing manufacture
domestic market. Because the company imports raw materials from Japan, a major reason for its
Co., Ltd.
expansion to Japan is to achieve a significant cost-cut by maintaining its base in Japan.
Source: Press releases and news reports.

Figure III - 27 Trends in flights to Japan by low-cost carriers in Asia following the disaster
Company
Headquarters
Flight service, etc.
Established a flight between Shanghai and Ibaraki in July 2010 (regular charter flight). In May 2011 announced that aregular charter fight between Shanghai and Takamatsu would start from July 15. The opening had been scheduled for the
Spring Air
China
end of March, but it was postponed due to the Great East Japan Earthquake. Flights are twice a week, on Tuesdays andFridays.
A regular flight between Seoul and New Chitose started on May 5, 2011. This is the first LCC flight to Hokkaido. The firstEastar Jet
South Korea flight was initially scheduled for March 27, however they were later postponed due to the earthquake. Flights are twice a
week, on Thursdays and Sundays. A weekly flight between Seoul and Narita started on July 1, 2011.
On May 23, 2011 the Ministry of Land, Infrastructure, Transport and Tourism gave permission to Jin Air to establish a
Jin Air
South Korea regular flight between New Chitose Airport and Incheon Airport, South Korea starting July 15. Jin Air is a subsidiary of
Korean Airlines.
Flights between Busan and Fukuoka started in March 2010, and between Busan and Kansai International Airport in
Air Busan
South Korea April 2010. On June 12, 2011 flights started between Busan and Narita (one round-trip flight per day). Air Busan's largest
shareholder is Asiana Airlines.
All Nippon Airways and First Eastern Investment, an investment firm in Hong Kong, established an LCC in February 2011
First Eastern
Hong Kong
together with other domestic investors. On May 25, 2011 it was announced that the new company was named Peach Aviation
Investment
and the new brand labeled the "Peach" brand, and that the company would use a peach-colored motif for its design.
Source: Press releases and various news sources.

competition. This mechanism appears to be important for
maintaining and boosting Japanese competitiveness. Wellestablished business environment for investment would attract more foreign direct investment which could facilitate
the mechanism even further. The Government of Japandecided its New Growth Strategy in June 2010 in which itaims to double the flow of people, goods, and money into
Japan over the ensuing 10 years. As one effort to encourage
foreign firms to station their Asia regional offices in Japan,“International Comprehensive Strategic Zones” was selected as a national strategy project. Revisions were made to theprogression of the strategy in response to the impact of the87IIIdisaster, but it is still expected that efforts will be made toadvance policies that promote location of foreign companies
in Japan. On June 22, the Act on Comprehensive Special
Zones, which allows creating International Comprehensive
Strategic Zones, was passed and put into law at a plenary
session of the House of Councillors. These policy measuresare expected to promote foreign direct investments that
benefit Japan through job creation and further technological improvements.

3. Contribute to Reconstruction through Expanding
Overseas Business with Japan’s Strengths(1) Unchanged priority - capturing overseas demands
especially in emerging countries
Markets in emerging countries continue to expand
In carrying out reconstruction, it will surely prove to be
crucial to capture overseas demand by leveraging strengths
of Japan which are laid out in the preceding section. The
emerging countries, especially in Asia, are increasing theirpresence in the global economy, so as their importance forJapan.
Emerging and developing countries such as China andIndia have consistently achieved economic growth that
surpasses that of advanced nations since 2000, and thesecountries are gradually extending their share in the global
economy. Today, these countries face such challenges as theprice of natural resources and the resulting inflation. These
short-term fluctuations will keep happening in the future,
but from a long-term perspective, it is safe to say that theseemerging and developing countries are headed toward a
trend of continued economic growth.
Looking back at the 1980s and 1990s, global economic
growth was generated mostly by advanced countries (Figure III-28). However, in the first decade of 2000s, emerging and developing countries expanded their presence as
their economic growth accounted for just under half of the
global total growth. Furthermore, according to a prediction
by the IMF, approximately 60% of global economic growth
between 2011 and 2016 will be brought by emerging and developing countries, making their role as a driving force ofthe global economy even more evident.
As their economies grow, the purchasing power of
emerging economies has grown steadily and their markets
continue to grow. With regard to household consumption
expenditures in emerging and developing countries, comparing with Japan by setting its size at 100, in the mid-1990s
even if the all countries and regions were put together, thetotal would still only slightly exceed the figure of Japan.
However, these figures rapidly grew from the middle of thefirst decade of the 2000s, and the total is more than triple(7) The flow of people awaited to revitalize
There are also signs of improvement in terms of the flowof people. According to the Japan National Tourism Organization (JNTO), the number of people visiting Japan fromabroad has decreased since the disaster. During the period
from March 12 to 31, the number of foreign visitors dropped
significantly by 73% over the previous year. In April numbers fell by 62.5%, and then again by 50.4% in May. While
the rate of decline did begin to recovered, foreign visitor
were still below half of numbers from the previous year.
Nevertheless, travel tours originating from other Asian
countries to Japan have gradually restarted. The first to restart such operations was EGL Tours, a major tour agency
for tours to Japan from Hong Kong. The company restarted
tours on April 16 under the condition that it would return
tour money to customers if a major earthquake took place
during the tour. The system stipulated that tour participants that subscribe to the company’s overseas insurance
beforehand would be reimbursed in the event that an earthquake of intensity six degree or more occurred during thetour. The company introduced this system as it wanted tosend tourists from Hong Kong to Japan as soon as possible.
In addition, the company set lower tour prices than normal upon restarting services. Thanks to these efforts, thecompany receives a favorable amount of requests mainly for
Hokkaido and Okinawa.
Opening flight routs by Asian low-cost carriers, which
had been temporarily delayed following the disaster, aresteadily beginning to start up again (Figure III-27). Thisevidenced that Japan is still recognized as an attractive
tourism market in Asia. According to statistics of JNTO
released on July 14, the number of foreign tourists to Japanin June was decreased by 36.0% over the previous year. It
is still a decrease of over one-third, but the rate of decline
continues to improve.
In achieving reconstruction from the disaster, the flowof people from abroad is of tremendous importance. If visitors actually witness that people live a normal life and production activities are being carried out just like before thequake, as well as the strong recovery in the affected areas, it
is sure to improve the image and assessment of Japan. This
will in turn add impetus to investment and the flow of tourism to Japan. The creation of such a virtuous cycle will playa big role in steady recovery.

Figure III - 28 Ratio of contribution by advanced, emerging anddeveloping nations to global economic growth(nominal)
(%)

100

90
80

82.9

Advanced country
Emerging/developing country

79.9

70
60

51.6

50

57.3
48.4

40
30
20

17.1

20.1

1981-1990

1991-2000

42.7

10
0

Source: “WEO” (IMF).

88

2001-20102011-2016 (Projections)III International Business for Disaster Recovery

that of Japan (Figure III-29). In Asia, where China alone
had already surpassed Japan in terms of GDP in 2010, thecombined total household consumption for China, India
and ASEAN members has also surpassed Japan since 2007.
In 2009, that total of Asian countries had reached 1.2-foldmore than Japan, while the Middle East and Africa together
amounted to 65% and Central and South America including
Brazil reached 89% of Japan’s consumption expenditure.
The difference in population size, of course, contributed these figures, but income levels of each individual

are steadily rising in many regions. For instance, looking at the annual disposable income (PPP) in China byhousehold numbers, in 1995 only 2.4% of households exceeded US$15,000, while in 2010 the ratio had increased to27.4%.(Note 4) In India, the same figure increased from 3.4%
to 37.5%, and income levels in many other emerging economies are also increasing along with economic growth. Itmeans that so-called middle class is steadily growing, andas a result, the types of goods and services being consumed
are also changing, indicating that the target market for Japanese firms is expanding.
For more detailed analysis, let us look at the scale of consumption by purpose in China, India and ASEAN member
states (Figure III-30). Comparing household expenditurewith Japan, by setting it at 100, shows that the expenditure
on education, cars, motorcycles and other vehicles, and video and audio devices and other durables have grown rapidly
and exceeded respective expenditure of Japan since 2000.
Luxurious spending such as package holidays, althoughstill below Japanese level, has also been increasing

Figure III - 29 Scale of household expenditure in emerging/developing countries (nominal)(Japan: 100)350
300
Emerging/developing
countries total

250
200

Room for growth for Japanese presence in emerging
economies
Amidst these circumstances, exports from Japan toAsia and other emerging economies are increasing. However, compared with China and South Korea, the growthin export levels is not enough and Japanese presence is still
considered limited.
Looking at exports from Japan, China and South Korea, we see that Asia is the largest export destination for thethree nations (Figure III-31). The majority of Japanese exports were once toward Europe and the United States, but
exports to Asian countries are gradually growing and in2009 that ratio rose to 54.1%, and again to 56.1% in 2010,
meaning that the majority of Japanese exports are now directed to Asia. Japanese export shares to China (19.4%) and
ASEAN (14.7%) are particularly high. Furthermore, exports
to emerging economies other than China and ASEAN are
also growing, although their shares compared to other export destinations are still relatively low. Comparing export
amounts in 2000, while overall exports had increased by
1.6-fold, exports to Russia and CIS states, India and Brazil
present high rates of growth, at 11.6-fold, 3.6-fold and 2.5fold, respectively. This was in contrast with the 0.9-fold increase to the European Union, United States and Canada. It
is obvious that Japan has increased its exports to the emerging countries as with market growth in these countries.
Nevertheless, exports by China and South Korea toemerging countries are growing at a rapid rate that dwarfs
Japan’s expansion.
The overall rate of export growth of China during theten-year period between 2000 and 2010 was 6.3-fold. Chinese export to India grew 26.0-fold, while its expansion was
20.0-fold for Brazil, and more than 10-fold to other regions
like Central and South America, Russia and CIS, the Middle

Japan: 100

150
100
50
0

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(Year)

Middle East and Africa
BrazilRussiaIndia

Other Latin America and the Caribbean
Other Asia, Oceania and CIS
ASEAN
China
China, India and ASEAN

Note: “Emerging/Developing Countries” here are the countries as classified by
the UN for statistical convenience, plus Russia and the CIS countries.
Source: National Accounts Main Aggregate Database (UN).

Figure III - 30 S cale of expenditure in Asian region (total of
China, India and ASEAN) by purpose(Japan: 100)
250

200

150

100

Japan: 10050

01990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
(Year)

Education
Cars, motorcycles, and other vehicles etc.
Pharmaceutical products, medical appliances and equipment
Video/audio devices and other durables for recreation and culture
Catering
Package holidays

4“World Consumer Income and Expenditure Patterns 2011” (Euromonitor International). Same source for figures in India.

Source: C onsumer Asia Pacific and Australasia 2011 (Euromonitor International).

89

III

Figure III - 31 J apan, China and South Korea's exports by country/region (2010,
export basis)
Shares of Japan, China
Export destination
Increase from 2000
and South Korea atcomposition ratio (%)(multiple)
destinations (%)
South
South
South
Japan China
Japan China
Japan China
Korea
Korea
Korea
Asia
56.1
40.5
54.2
2.2
5.1
3.1
9.9
14.6
5.8
China
19.4
25.1
4.9
6.3
11.9
9.3
ASEAN
14.7
8.8
11.4
1.6
8.0
2.6
12.0
14.7
5.7
India
1.2
2.6
2.5
3.6
26.0
8.6
2.8
12.7
3.6
Latin America
4.5
4.7
5.9
2.2
12.7
3.9
5.8
12.5
4.6
Brazil
0.8
1.5
1.7
2.5
20.0
4.5
3.4
13.3
4.2
Russia and CIS
1.2
3.4
2.4
11.6
16.9
8.5
2.6
14.9
3.1
Middle East
3.6
4.7
5.6
2.6
10.3
3.4
4.5
12.0
4.2
Africa
1.6
3.8
3.3
2.4
11.9
4.7
3.0
15.1
3.9
Europe and America 27.9
39.1
23.0
0.9
6.4
1.7
2.9
8.2
1.4
World
100.0 100.0 100.0
1.6
6.3
2.7
5.2
10.7
3.1

goods and services, is undeniable as a resultof the disaster, especially dumping radioactive substances. Nevertheless, there aremany firms developing their overseas businesses by exploiting strengths that they have
conventionally possessed. Let us have a lookat some examples with a particular focus on
SMEs.

(2) D
 eveloping sales channels using
product development and on-site
production capacity
As described in the previous section, thefoundation of Japan’s strengths is the highNotes: (1) W ith respect to “Shares of Japan, China and South Korea”, the figures are based on thequality products supported by R&D and provalue of exports from countries where custom statistics were available. Hence, there
duction capabilities. This goes beyond major
may be discrepancies with other figures in this report.
companies, as many SMEs use their product(2) Th e figures for “Europe and America” are the aggregate of those for U.S., Canada and EU.
Source: Trade Statistics of individual countries/regions.
development capabilities to meet the needs ofcustomers, create “only one” products using
East, and Africa. As a result, the 12.7% export value to India
their high level of on-site production capacity, and sell thoseand 13.3% to Brazil were from China, and each greatly inproducts to other countries. In a questionnaire carried out
creased from their 2000 figures, which were only 3.1% andon JETRO Member firms, SMEs presented a noticeably pos2.2%, respectively.
itive stance on future exports (Figure III-33). Following the
Although not on the same level as China, South Korea
disaster, local governments are working together with local
is also increasing its presence in these regions. South Kofirms to support promoting industrial products to foreign
rea increased export to India, Brazil and Africa more thanmarkets, and this year JETRO has received more applicaits overall growth rate and surpassed Japan’s share in thesetions than previous years for its overseas exhibitions.
region.
As small- and medium-sized enterprises develop their
In the area of direct investment as well, Japan is increasoverseas business, their capabilities of product development
ing investmen to emerging economies, but the growth isand production would improve even more and there would
eclipsed by China and South Korea.
be ripple effects such as expanding business opportunities
Looking at regional shares of outward direct investwith companies in Japan as well. In this sense, expanding
ment, Japan is increasing its ratio to areas other than Northoverseas sales will be of increasing importance.
America and Europe, such as Asia and Central and South
Below, several examples of SMEs will be introduced that
America (Figure III-32). For instance, the share of Japan’s
are working to develop overseas markets by leveraging theiroutward direct investment to Asia at the end of 2003 stood
own technologies.
at 19.1%, but that had risen to 25.6% by the end of 2010.
Although they do not invest as much as Japan in total,
Putting unique technologies on the global market
South Korea and China are also focusing more investment
Asia Giken Co., Ltd., a venture company in Kitakyushu
towards emerging economies. More than 50% of South KoCity, Fukuoka Prefecture, offers a full range of products
rea’s outward direct investment is to Asia, mostly directed
and services for stud welding, from the studs (pins) itself
to China. China itself has invested large amount in Africa,
to welding machines and contract construction. Stud weldand that share reached 11.1% at the end of 2009, it means
ing is a technique where a part such as a stud, which is athat absolute amounts surpassed Japan at approximately
type of bolt, is melted with pressure to weld with a metal
US$9 billion (regional classifications used here are thoseplate of steel or aluminum. The technique is used in various
used in international balance statistics by the Ministry ofindustries, including construction, electrical equipment,
Finance and Bank of Japan).
industrial equipment and automobiles. Asia Giken was theBoth in trade and investment, Japan is expanding into
first in the world to successfully conduct instantaneous stud
emerging markets, but the expansion lacks impetus comwelding with magnesium alloy. In 2007, this technology repared to China and South Korea, suggesting Japan has aceived an award of excellence at the Monodzukuri Nippon
room to expand.
Grand Awards. It was thought to be difficult to weld magnesium, as the metal has a low melting point; however, theExpanding overseas business further by using
company was able to develop this technology with techniJapanese strengths
cal assistance from the Kyushu Institute of Technology and
In order to expand business in global markets, includthe Fukuoka Industrial Technology Center using a subsidy
ing emerging economies, Japan must revisit and use its own
from Fukuoka Prefecture.
strengths outlined in the previous section. The damage
Asia Giken was founded in 1994 by current CEO Junichion the “Japan Brand”, safe and reliable image of Japanese
Mizoguchi, and it started full-fledged exports in 1998, be90

III International Business for Disaster Recovery

The company also
receives trainees from
0%
20%
40%
60%
80%
100%
China and aims to fur20.7
6.2
37.9
7.9
13.9
2.4
11.1
2009
ther increase its inter(US$245.8 billion)
national sales by takChina
16.5
6.4
53.8
5.5
6.2
6.1 5.5
ing advantage of IT.
2003(US$33.2 billion)
As a member of theKitakyushu League of
1.3
53.3
18.9
6.5 2.5
16.5
2009International IT Com(US$115.5 billion)
1.0
panies, Asia Giken has
South Korea
42.4
29.7
9.6 1.7
14.1
1.3
2003
partnered with other IT(US$33.8 billion)
1.2
software-related com25.6
31.6
12.9
5.3
23.3
0.6
panies in implementing
2010(US$830.5 billion)
an original system that
0.7
Japan
19.1
42.7
6.5 4.1
26.4
0.3
can manage products
2003
in remote locations.
(US$335.9 billion)
0.6
Despite being in Japan,
Asia
North America
Latin America
Oceania
EuropeMiddle East
AfricaAsia Giken is working
Notes: (1) Figures in parentheses are total world position.
to provide customers(2) I n calculating share by region, excluding investments by China in Hong Kong and by South Korea in unspecified
countries.
with a sense of reassur(3) C lassification of regions are based on Balance of Payments Statistics of Japan (Ministry of Finance and Bank ofance by comprehenJapan).
sively managing its
Source: J apan: “Direct Investment Position, breakdown by Region and Industry” (Bank of Japan), South Korea: OECDmachinery around theInternational direct investment database, China: “2009 Statistical Bulletin of China’s Outward Foreign Direct Investment” (China’s Ministry of Commerce).
world in real-time andoffering tailored postginning with Southeast Asia, where demand for machinerypurchase maintenance services. Currently, the company
and processed metals was increasing. After exporting aphas its sights set on developing new products that use theproximately 500 stud welding machines to Malaysia andcharacteristics of magnesium alloy, which elicits a miniIndonesia via trading companies, the company began tomal burden on the environment, and entering the United
gradually expand to Taiwan and China, as well as otherStates market, while it also aims to increase its sales in theSoutheast Asian counties. In Taiwan and China, the comrapidly growing Chinese market.
pany strives to employ an expansion campaign based on its
TRINC.ORG also aims to expand overseas by usoriginal sales strategy by concluding distributor’s agreeing their advanced technologies to develop breakthroughments with local companies. In their overseas expansion,
products. Located in Hamamatsu City, Shizuoka Prefecthe company has demonstrated success in its efforts to creture, TRINC.ORG started as a company commissioned
ate broad-spanning human networks by actively participatto develop communication equipment and other products
ing in overseas missions, business talks and exchanges, inin 1991. The company, having produced mechanical units
addition to exploiting its sophisticated technologies.
of fax machines and other products, received an inquiry
concerning countermeasures to static electricity in 1998,
Figure III - 33 Future export plans (for the next three years or so)and began to develop static electricity removal devices. The
neutralization devices that had been sold until then had not
65.9
sufficiently met user’s needs, as they used wind to blow ions
To expand exports
63.3
which resulted in the scattering of dust. That is when CEO
67.7
Makoto Takayanagi adopted a direct-current model, which
12.6
had been deemed too difficult to use for such purpose. The
To maintain
11.9
their current status
direct-current model produces a large amount of ions and13.0
the ions react against each other, allowing them to fly far
0.9
To shrink or withdraw
enough without using an air blower. This breakthrough al1.2
from exports
0.7
lowed for a device that removed the static electricity fromproducts and dust and thus preventing the object in ques5.0
Not involved in export buttion from getting dusts. The company has used this origi2.2
intend to start exports
6.9
nal technology to develop many apparatuses that service
Total
various purposes, and the company has already acquiredLarge
companies
11.1
Not involved in exports
Small and medium-sized enterprises
and have no intention
16.1
approximately 130 patents. CEO Takayanagi also puts foto start exports
7.6
cus on PR and educational activities, and has written books
(%)
0
10
20
30
40
50
60
70
in both English and Japanese.
TRINC.ORG has also aimed to develop the Asian marSource: “ FY 2010 Survey on the International Operations of Japanese Firms”(JETRO, March 2011).
ket in parallel with its sales activities in Japan. In 2002, a
Figure III - 32 Japan, China and South Korea's outward FDI stocks (breakdown by region)

91

III

Japanese trading firm in Singapore introduced TRINC.
ORG’s products to a Toyota plant in the Philippines. Thanks
to a Japanese expatriate staff working at the plant who expressed interests in the product, TRINC was invited to provide a sample machinery to a Toyota plant in Toyota City.
The company’s neutralization device demonstrated excellent performance at a test conducted at an automobile paintline by Toyota. Toyota’s high praise on the product thenspread to other companies, and now manufacturers in various industries have adopted the product. They are spreading reputation about it even further as it has dramaticallyreduced product defectiveness.
The company has also begun to receive an increasing
number of orders from overseas, and is now embarking
on an overseas market strategy. In particular, the country
is aiming to expand to China, South Korea, Thailand andVietnam, where industrial production continues to grow.
In January 2010, the company established an office in Dalian with stationed representatives. Moreover, in November
2010, the company launched LOHEN, a brand specializing
in foreign markets such as Asia, and is now making a fullfledged effort to develop foreign markets with products using different specifications from those sold in Japan.
Tanaka Electric Laboratory, a company with headquarters in Setagaya-ku, Tokyo, is searching for business
opportunities in foreign markets exploiting its product development abilities that take into account the views of thecustomer. The company, a manufacturer of environmental measurement devices, has a plant in Nasukarasuyama
City, Tochigi Prefecture, and strives to export a dust density
monitor that can continuously measure soot dust containedin emitted gas in factory chimneys. Assisted by JETRO
under the Project to Assist the Development of Promising
Exporting Companies, Tanaka Electric Laboratory has already reached a tentative agreement for delivery to a coalfired thermal power station in Thailand. In late June, thecompany also had productive business negotiations with aforeign cement company in Vietnam.
The dust density monitor of Tanaka Electric Laboratory irradiate light in a chimney for reflection by dust andthen measure a density of dust by converting reflected lightinto an electrical signal. The device can carry out continuous measurements even in high temperature and pressure
environments, and is able to measure low-density dust withsuperior precision. When developing the product, company
CEO Toshifumi Tanaka placed particular emphasis on ensuring that the product could be easily maintained. The detectors placed in chimneys, for example, avoid collecting dustby blowing out air from carefully placed holes. Expendable
parts such as light bulbs are set to use everyday products thatcan be purchased at less expensive prices. These measurestake into consideration cutting running costs of customers.
In Thailand and Vietnam, this aspect of the product has been
well received. The attitude of putting the user first in developing products has served as an asset when deploying the product overseas.
Another case is Amaike Textile Industry. The company has used its original technology to produce the world’s

thinnest and lightest fabric. The company was in businesssince 1956 and officially founded in 1965 and has handled
a diverse range of materials, from clothing and accessory
goods to industrial materials. They have used technologies
accumulated over many years in their operation to develop atechnology that weaves a fabric made of microfiber polyester.
The technology makes use of a thread developed by a thread
manufacturer that had initially planned to sell the material
as industrial material. However, because the company wentbankrupt, Amaike made use of the thread’s feel and sense oftransparency in apparel, ultimately commercializing it underthe brand name, Amaike Super-Organza.
As sales did not progress successfully in the domestic market, where purchasing is price oriented, CEO
Mototsugu Amaike began to look abroad. In February
2007, the company set out on its first overseas undertaking by participating in a textile business conference held by
JETRO in Milan. Later, utilizing the unique product to hisadvantage, he actively participated in exhibitions and held
negotiations with foreign buyers while engaging in consistent sales activities such as sending samples and proposing
new products. Thanks to his efforts, the value of Amaike
Super-Organza was well recognized, and he received bulk
orders from several influential fashion brands in Europe.
Amaike has received high praise for his unparalleled material, and he is now working to address new challenges, suchas enhancing sales capabilities by enhancing company’s
operation systems of overseas business and improving thedevelopment capacity for new materials.
Using cutting-edge medical equipment technology topromote Fukushima
Robust actions have also been took place in the disasterstruck area. One example is a endeavor to promote medical
devices “made in Fukushima”.
An R&D team lead by Mr. Takahashi, Vice-Presidentof Fukushima University, introduced medical technologies
from Fukushima Prefecture at the MD&M East medical
device exhibition held in New York from June 7 to 9, 2011.
The cutting-edge technologies which can be used in highfunctionality endoscopes have been developed in cooperation with local SMEs for two years.
Fukushima Prefecture has had well developed medical device production. According to the Survey on Trends
in Pharmaceutical Production released by the Ministry of
Health, Labour and Welfare, the production of medical
devices in Fukushima Prefecture amounted to 80.1 billion
yen, ranking eighth in Japan with a 5.1% nationwide sharein 2009. Fukushima has maintained the first position nationally in terms of commissioned production over the past
several years. Its share stood at 14.8% (18.7 billion yen) in2009. Moreover, on the Census of Manufactures, which isreleased by the Ministry of Economy, Trade and Industry,
Fukushima ranks second for production of “Medical device
parts, attachments and accessories,” with a national shareof 13.4%, or 11.5 billion yen. These results show the important position that Fukushima’s corporations maintain in the
production network of medical devices. The government of92

III International Business for Disaster Recovery

Fukushima Prefecture has kept a keen eye on the high potential of the medical industry, and is implementing “Utsukushima's project to encourage the next-generation medical
industry” to support the development of the medical device
manufacturing industry.
The prototype endoscope exhibited by Fukushima University at the June 2011 MD&M East incorporated a diverse
range of highly advanced technologies. These include athree dimensional cam that eliminates wobbliness and has
a wide range of movement, a high transmission powered reducer that creates no backlash and is compact in size, andthe worlds thinnest angular sensor. The three dimensional
cam and reducer were developed in cooperation with Tokyo’s Namiki Precision Jewel, Associate Professor Hiroyuki
Sasaki of Yamagata Prefecture’s Tsuruoka National College
of Technology and Atom, a precision processing manufacturer located in Bandai Town, Fukushima Prefecture. The
cam and reducer are currently being screened for an international patent, and the angular sensor jointly developedwith Matsuo Industries in Aichi Prefecture has already received a domestic patent. These efforts have increased thelevel of freedom for the endoscope and have allowed forrealizing refined operations by eliminating disparity andbacklash in the refraction parts.
At the exhibition numerous global medical device
manufacturers and precision device manufactures contacted them with concrete business inquiries. Showing
participants of the exhibition that Fukushima Prefectureis steadily reconstructing itself can be seen as a significant
achievement.
In January 2011, Fukushima Prefecture had announced
that it would support universities and companies in theprefecture in setting up booths at MEDICA, the world’s
largest international medical device exhibition to be heldin Germany in November 2011. The prefecture government had considered suspending participation due to thedisaster, but it reconsidered and decided to take part in
MEDICA and began accepting applications for corporate
booths. This endeavor deserves attention, as Fukushima
will be globally promoting the medical device technologies it has accumulated over the years, contributing to thereconstruction of the region.
The United States maintains the largest market for
global medical devices, with a size over four times that ofJapan according to a report.(Note 5) The markets in emerging economies are predicted to grow rapidly in the future.
Asia, in particular, especially China and India, is expected
to show growth between 1.5 to 2.0-fold during the years
2010 and 2015, and the overall market size will surpass
Japan (total for the 12 countries listed in the report). The
overseas expansion of Japanese medical device manufacturers lags behind manufacturers in Europe and theUnited States, but many countries maintain solid trustin Japanese products. Many distributors from emerging
countries participate in exhibitions such as MEDICA, andthese opportunities can be used to boost recognition anddevelop overseas markets.
Conventional technologies responding to new needs
There are a lot of cases where technologies for conventional products that have been passed down over the years
have found new area in overseas markets and prospered byutilizing their traditional technologies.
Hosoo, a Nishijin brocade manufacturer with over 300
years of history in Kyoto, successfully sold a high-quality
interior material created with manufacturing technologies
cultivated from tradition to contract markets in Europe andthe United States. The company had been processing traditional woven cloth into cushion covers and other products
and developing sales channels in Europe and the UnitedStates, and with assistance from JETRO the company exhibited itself at the International Contemporary Furniture
Fair, ICFF, in New York. Hosoo successfully sold its products as high-quality interior materials to a high-end contract market. Currently, the materials are used as interiormaterials at the stores and showrooms of famous fashionand jewelry brands in the United States and Europe.
Another example is Oigen, a manufacturer of Nambu
Iron in Oshu City, Iwate Prefecture. They have used traditional technologies of a craftwork passed down from the mid
17th century to develop new products and are now exploring
foreign markets. While continuing to produce traditional
products such as iron kettles, the company is actively developing new iron products. Moreover, they have improved
the traditional methods through a joint research projectwith Iwate University, developing an iron pan that is nonrust and non-stick. The method used requires no surface
coating or other chemical substances, and the company has
named the frying pan the “Naked Pan” and has commenced
sales activities. They received inquiries from a company inAustralia, with which in February 2011 they concluded anagency contract and began sales in earnest. The company’sother products are being sold as iron kettles in China, while
its teapots are gradually widening sales channels in Europe.
Following the disaster, clients in Europe demanded certificates of proof on radioactive substances, and thanks to mediation by JETRO the products were screened at the Iwate
Industrial Research Institute. While the company was able
to avoid damage from the tsunami, it was severely affectedby the earthquake. Nevertheless, the company continues toexpand its business activities under the direction of CEO
Kuniko Oikawa. She exclaims that companies such as hersin the inland part of the prefecture must work hard until thecoastal area companies recover.
At the ICFF held in May 2011, all companies that exhibited their products held tremendously successful business negotiations (Column III-1). The concerns of buyers
about the disaster and nuclear power station incident were
not as strong as initially suspected, allowing for vibrantbusiness negotiations. Interest was reaffirmed for Japan’s
products, which offer high-quality, exceptional design
backed by tradition.

5“Medistat Worldwide Medical Market Forecasts to 2015” (Espicom Business Intelligence).

93

III

Column III − 1
 onstruction materials and interior-related companies that received active business inquiries at exhibitions afterC
the disastermerous requests from designers of hotels, residential housing and furniture. We realized that we could target the U.S.
market to sell construction materials, as we reconfirmed thedemand.

At the International Contemporary Furniture Fair,
ICFF, held in New York from May 14 to 17, 2011, following the disaster, a large number of companies exhibited
their products and many received inquiries. In the end, thenumber of business negotiation inquiries increased on theprevious year and many negotiations resulted in contracts,
making for results that surpassed anticipation. The following is the results from interviews conducted with eight ofthe exhibiting companies.

Yoshizaki Wooden Industry, manufacturer of wooden
fixtures and interior products, Tokushima City,
Tokushima Prefecture
We received more inquires from buyers than last year,
including an offer to purchase 100 of our US$200 wooden
speaker sets. This is not an inexpensive product but we areable to sell it at the prices by adding a design that depicts thewhirling waves of Naruto, from our region. We received agood response from the U.S. market.

Koyo Seiga, manufacturer of traditional Ibushi tiling,
Himeji City, Hyogo PrefectureInterest in the Great East Japan Earthquake and nuclear
power station incident was said to be strong overseas, and anticipated that we would be asked about these events, we prepared materials in English to explain them before the exhibition. However, visitors did not ask about the incident at all,and we actually received concrete requests for business negotiations and inquiries. The nuclear incident had absolutely no
impact; to the contrary, we actually sensed the strong level ofinterest in Japanese products.

Seishin Tougei Corporation, producer and distributorof interior products using ceramics, Seto City, Aichi
Prefecture
Our major field of focus is interior products but we haveestablished a speaker division with the aim of expanding a
new business. This was the first time that we exhibited ourartisan hand-made ceramic speakers overseas. While they
are priced rather high at US$10,000, their innovative design
drew interest and we received many inquiries. This was thefirst time we exhibited overseas but we sensed good prospect
for the U.S. market.

Shiborian, producer and distributor of products
using kanoko shibori dye materials, Kyoto City, Kyoto
Prefecture
We received many inquiries from hotel-related personnel
and retail shops. Also, we received inquiries about using our
product for automobile seat covers. In all, we conducted negotiations with over 70 different companies, which were far
more than expected. Our materials are expensive but are wellreceived as high-quality items with a sophisticated design. In
response to the large number of inquiries we are now considering holding an exhibition in New York within the year.

NAGAE, producer and distributor of metallic
processed interior design products, Takaoka City,
Toyama Prefecture
We design and develop various interior products using
copper and other metals. During this exhibition we received
the most inquiries about our 99% pure tin plates that are flexible and can change its shape. They gathered great interest
from many buyers and we received a high number of concrete business inquiries. Our oxidized copper containers
were also very popular because of their stylish design. In fact,
we received so many inquiries for orders that we nearly soldeverything on exhibit.

AKI, producer and distributor of cardboard threedimensional models, Kunisaki City, Oita PrefectureThis is the first time that we exhibited our cardboard robots outside of Japan. The robots received a particularly large
amount of inquiries from retailers, department stores anddesigners. We were able to find buyers for almost all of our
products, and things went so well that we had little to bringback to Japan with us. There were even people that wanted topurchase the display case made from cardboard. We sensed
strong market interest and a good response from exhibiting.

DCS, producer and distributor of interior lighting
fixtures, Fujieda City, Shizuoka PrefectureThis is the second time that we exhibited our products at
ICFF. We exhibited lighting products which can quickly bechanged to U.S. specifications and sold in the U.S. market.
We received a good number of inquiries for lighting fixtures
and were able to actually sell some during the exhibition period. We received more inquiries than last year. I sensed thegreat importance in continuing to exhibit our products.

Momentum Factory Orii, producer and distributor ofinterior products using Takaoka Copper, Takaoka City,
Toyama Prefecture
We received quite a few inquiries for using construction
materials rather than interior products. We also received nu-(3) Continued strong interest in Japan’s energy
conservation technologies
As interest increases in renewable energies as climatechange countermeasures and due to the nuclear power plant
accident, related business markets are expected to grow as
well. However, renewable energies are forecasted to requirepolicy-related assistance such as subsidies for the foreseeable
future. Attentions must be paid to the policy trends of countries when companies expand their businesses overseas.
Conversely, energy conservation could contribute to cut

costs and improve revenues at many production sites. Numerous Japanese companies have developed experience andtechnologies for energy conservation of manufacturing facilities, and many foreign business opportunities have been
explored using these technologies.
In China, there are cases where companies combine
their diverse technical skills related to energy conservationin an effort to enter the Chinese market. One example is theGreen Group Members, GGM, consortium established in
November 2009. GGM was launched by 10 electrical equip94

III International Business for Disaster Recovery

ment manufactures that handle energy-saving
Figure III - 34 B
 usiness negotiations at the China International
Environmental Protection Exhibition & Conference (CIEPEC)
products and energy conservation consulting
CIEPEC 2009
CIEPEC 2011
companies, and is chaired by Mr. Sun Ji Xin,
PeriodJune 3-6, 2009
June 7-10, 2011
from an energy conservation consulting firm
Participating Japanese companies/organizations
11
24
No. of negotiations
322
1,096
Shanghai Brian Power-Saving Technology Co.,
No. of tentative contracts
41
137Ltd. The number of participating companies inAmount of tentative contracts
US$2.64 million US$5.81 million
creased to over 30 in just under one year followNote: The number and amount of tentative contracts includes those that were concluded
ing its launch.
during the event.
Source: Interviews.
Even if Japanese companies possess superiorenergy conservation technologies in individual
areas, it is still difficult to provide a comprehenapproximately 50%, while also allowing for securing 80%
sive service. GGM works to facilitate entry into the Chinese
visible light transmission. In Singapore, the Housing andmarket by allowing participating companies to bring their
Development Board has already decided to adopt Fumin
technologies together and creating a structure that provides
Coating for public housing. The vibrant business negotiacomprehensive assistance including funding. GGM’s busitions at this year’s CIEPEC indicate the tremendously great
ness scheme is that of a so-called Energy Service Company,
possibility for expanding Fumin Coating’s business in Chior ESCO. They provide energy conservation devices free ofna.
charge and then have the money saved as a result of the deAnother example is Watara Engineering, a company
vices’ use returned to the company. As of March 2011, thethat offers a broad range of products regarding soil, watercompany had worked on 123 projects, with a profit margin
and air pollution. The company has acquired numerousof 35%. 6,588 tons of CO2 was estimated to be reduced due
prospects for contracts following active negotiations withto these efforts.
customers, and it is anticipated that the company’s business
However advanced a company’s technology is, there arechances will grow in the future.
cases where it still may not be enough to meet customer
needs. GGM’s provision of comprehensive energy conserUsing Japanese technology to deliver electricity tovation services – from an accuracy diagnosis to proposals,unelectrified communities in developing countries
design, facility installation and fund procurement – can be
Numerous companies are also entering the market of reconsidered a strong competitive edge. It appears that efforts
newable energies. In particular, Japanese companies mainto exploit individual technologies by team players may protain a large share of geothermal power generation turbines.
vide significant implications in other fields as well.
Three companies control over 70% of the global shares inthis field; Mitsubishi Heavy Industries (24.6%), Toshiba
Unwavering interest in Japanese environmental(23.6%) and Fuji Electric (20.1%).(Note 6)
technologies
Furthermore, there are SMEs that are working to spread
There are also examples indicating that the high reputaactivities overseas using their advanced technologies. Onetion of Japan’s environmental technologies has not changed
example is A-Wing International. Exploiting an original apbefore and after the disaster.
proach, this company is attempting to supply electricity with
The China International Environmental Protection Exsmall wind power generation to unelectrified communities inhibition and Conference, CIEPEC, which is held biyearly
developing countries. The company has delivered over 1,300
in China, is an exhibition on energy conservation and ensmall wind power generators mainly to public sector orgavironmental technologies where a total of approximately
nizations, including for streetlights and educational institu500 companies and organizations exhibit their products,
tions in Japan. The product’s strength comes from its highand draws over 50,000 visitors. At this year’s CIEPEC 2011,
level of power generation efficiency, as it can generate power
which was held from June 7 to 10, 24 companies and orgafrom a small 1.0-meter/second breeze. The technology was
nizations participated in the Japan Pavilion organized bydeveloped in efforts to deliver light to communities without
JETRO. Despite being held directly following the disaster,electricity in Mongolia.
this year produced a larger number of business inquiries
During interactions with Mongolian exchange students
than the previous year (Figure III-34). Crowds gatheredat the Miyakonojo National College of Technology in Miaround booths that exhibited solar collectors and simple
yazaki Prefecture, some people voiced that they would likewater analysis instruments. It confirmed that there is stillto bring electricity to homes of Mongolian students, wherea strong interest in Japanese technologies in China, where
there is no access to electricity. Research began with focus
interest is growing over energy conservation and environon wind power generation by the head of the school’s Techmental technologies.
nical Support Center, Keiichi Kawasaki, and after numerTwo companies from Fukushima Prefecture particious improvements the team successfully developed a windpated in this year’s CIEPEC. Fumin exhibited a thermal
power generator that can efficiently produce power evenbarrier coating named Fumin Coating. This technology
with weak wind. This is the prototype generator that Aevenly applies a clear coat of a substance to a glass surface
6
that absorbs and reduces infrared and ultraviolet rays, cut“Geothermal Power Generation in the World, 2005–2010 Update Report,” (Ruggero Bertani).
ting ultraviolet rays by approximately 90% and infrared by
95

IIIWing, for which Mr. Kawasaki serves as a technical advisor,
is currently working on.
The company has produced favorable results domestically due to the high efficiency of power generation, and thesophistication of the technology has allowed the company
to deliver its products in the United States as a recreationuse power generator. However, in the markets of advanced
countries, the company has been told by some clients thatthey installed a generator just to show their environmental consciousness, so they were just interested in displaying
the turbine spinning. A-Wing maintains that the primaryrole of their small wind power generator is not for such purpose, but for communities without electricity in developing countries. For that reason, the company has establisheda manufacturing plant that targets the Mongolian market
in Ulan Bator, and is currently working on constructing a
manufacturing plant in the outskirts of Bangkok, for products to Thailand and surrounding countries.
A major issue when bringing products to developing
country markets is controlling the cost, and the company
has been successful in significantly reducing the number ofparts compared to products used in Japan while also maintaining performance. The company anticipates cutting
costs by 80% compared to when made in Japan by lowering
the specifications. Another characteristic of A-Wing is thatit actively recruits exchange students from Asian countries
that study at Ritsumeikan Asia Pacific University in Beppu
City, Oita Prefecture. While utilizing their knowledge ofsociety and human networks in their home countries, they
are working to construct a manufacturing and distribution
network in Asia.

tries exist in terms of economic level and living environment, and there is even disparity inside a country. If SubSaharan Africa is also taken into account, there is still alarge amount of people suffering from poverty around theworld.
The base of the pyramid (BOP) concept looks at markets
comprising the world’s poorest populations. Using a population pyramid to represent the world’s population, the BOP
is named for the lower tier of the pyramid. There are various
definitions of what types of people comprise the BOP, but inmany cases it is considered to be the class of people whose
annual income in purchasing power parity is US$3,000 per
capita or less. If this definition is applied, approximately 4billion people make up the world’s BOP.
Traditionally, international organizations, aid agenciesof the governments of advanced countries and NPOs were
the only type of institutions that provided assistance for the
BOP; however, the concept of “BOP business” provides anidea that the people in BOP offer tremendously large business opportunities for private enterprises. Some also believe that many issues faced by poor populations could be
resolved by the business activities of private companies.
One challenge faced by these people is called BOP penalty. In areas suffering from poverty in developing countries,
there are instances where the BOP purchases more expensive products than the wealthy classes living in urban areas
due to such reasons as undeveloped logistics networks. Furthermore, the quality of those products is often inferior, as
many lack sufficient nutrition and include large amounts ofadditives. The BOP can be considered a large market overall, as the class is so large in number, regardless of its per
capita purchasing power. If private sector corporations canefficiently supply those markets it will be possible for thepeople in BOP to acquire quality products and services. In

Energy conservation grows more appealing in
consumer goods markets
In consumer markets too, energy conservation will be
more attractive, because energy conservation consciousness is increasing in emerging markets such as Asia, in addition to advanced nations that have conventionally beenvery environmentally conscious. This was backed by asurvey conducted by JETRO between December 2010 andJanuary 2011 in Beijing, Bangkok, Delhi and surrounding regions (Figure III-35). The ratio of respondents thatanswered, “When buying electronic appliances, I choose
energy efficient products” was 96% in Thailand, and over
80% in China and India. Even higher percentage of people
intended to do so in the future.
In Japan, as a result of the power supply shortages during the summer season, further refinements to energy conservation technologies can be expected at manufacturing
plants and in the development of consumer products. These
efforts will allow companies to acquire business opportunities overseas.

Figure III - 35 E nergy saving awareness in China, Thailand andIndia
Among the people who answered “When buying
electronic appliances, I choose energy efficient
products”
(%)
100

13.2

90

16.8

80
70

26.9

32.8

27.2

35.7

60
50

30

86.8

75.6

40

69.3

62.8

54.4

45.6

20
10
0

(4) High quality Japanese products reaching people
in the BOP
The target markets of A-Wing, as mentioned earlier, arethe communities without electricity in Asia. While Asia is
growing at a rapid rate, marked differences between coun-

Present Future
China

Present Future
ThailandI do (but sometimes do not).
I always do.

Present Future
India

I plan to do so.
I plan to do so by all means.

Source: Survey on “Energy Saving Awareness and Purchase Behavior (inChina, Thailand and India)” (JETRO, March 2011).

96

III International Business for Disaster Recovery

addition, involving the people in BOP as a player for production and distribution, not just for a buyer, could expand
the scope of corporate business and provide the BOP withstable employment opportunities.
There are various reasons for private firms to engage inbusinesses related to poor populations in developing countries. There are companies that chose business methods withan objective of resolving issues faced by poor populations indeveloping countries from the onset. Other companies focus on long-term investment for securing future markets orboosting their corporate image. There are also cases wherecompanies end up approaching the BOP as a result of usual
marketing to make the most of the value of their company’s
products and technologies.
Companies such as Ajinomoto, a global brand famous
for their “umami” flavoring, and Yamaha Motor, who supplies outboard motors to over 200 countries, have conducted business for foreign clients including the BOP businessbefore the term BOP was coined.
The Mandom Corporation is a similar case. This company embarked on its first overseas business activities in 1958
in the Philippines, and established a local company in Indonesia in 1969. The company has carried out thorough product development in view of local markets from an early stage
under the philosophies of “with consumers, for consumers”
and “products to make consumer lives easier.” In foreign
market, the company requires that consumer surveys arecarried out that includes actually entering the homes ofconsumers and viewing their sinks and bathrooms.
Many companies provide their products in smaller
packages as an approach for the BOP. This allows to reduce
costs and makes it easy to distribute to rural retail shops andother areas. Mandom also provides hair styling products
in sachets in the Philippines. When creating their strategy
for distributing the packets to Sari-Sari Store, a traditional
small retailer in the Philippines, it is said that one of thecompany’s Japanese employees sat in a Sari-Sari Store fora full day and observed customer behavior. Using this intimate style of local marketing, the company is working toefficiently deliver quality products to customers.
One of Fumakilla Limited’s management principles is“Protecting the lives of people” from dengue fever, malaria
and other diseases in tropical areas. The company expanded
to Indonesia in 1990. Indonesia, a country with a tropicalclimate, differs from Japan in that pests are a problem residents must face throughout a year. The company began surveying the country in 1988 because of its large population
and relative ease in entry for foreign corporations. The company decided to enter the market when they found that thequality of mosquito coils made by local manufacturers wasinferior to their own product, and due to sufficient profit
prospects owing to the ability to reduce production costs.
Despite the high quality of Fumakilla’s mosquito coils, it
took time for consumers to acknowledge their products. The
company’s products contained a larger ratio of drug agents,
but consumers were unable to experience the difference inquality and thus continued to purchase the mosquito coils
produced by their competitor, which consumers were accus-

tomed to buying. It was an especially difficult in Java, where
the capital Jakarta lies. That is when the company thoughtof approaching a small retail chain called Warung, where
people go to purchase everyday items. In order to cover the
1.5 million Warung shops in Java Island, the company deployed a sales team it dubbed the “Camper Van Unit.” The
three-person team is visiting each of the Warung shops, one
at a time, in their assigned area to sell the company’s product. These efforts have led to significantly boosting awareness of the company’s products. Other feature of Java is thatmany customers buy the product by a single package, notby a box. Fumakilla sold their products in an individuallywrapped coil so as to increase awareness of their brand evenwhen the product was separated into a coil. Such efforts
have been successful in steadily boosting the sales of theirlocal company in Indonesia, which reached 4.3 billion yen
in 2010 (an 11.5% increase on 2007), while current profits
jumped by 4.2-fold in 2007 to 454 million yen.
There are some BOP business models that can be better employed by large firms, such as ones that are basedon mass production and supply and ones that incorporate
long-term payout plans. Moreover, the BOP includes people
living under a diverse range of conditions, and there are alarge proportion of people for which it will be difficult forJapanese companies to approach in the immediate future.
Nevertheless, there will be cases where they can exploit theircompany’s products and technological strengths by considering the BOP their target customers. While demand in thedomestic market has decreased for the products and technologies that have been provided by companies over many
years, those might fit the needs of the people in BOP andcontribute to resolving their challenges. It is appropriate to
avoid sticking to certain fixed approaches to BOP businessand to flexibly consider BOP business itself as a measure for
exploiting company’s strengths.
(5) Current situation of the Asian senior market andJapanese firm’s approach
Steady growth anticipated for China’s senior market
Next, let us examine the current situation of the seniormarket in Asia and the effort to approat to the market by
Japan.
China, where aging is expected to progress at a rapid
pace in the future, faces issues such as an increased burden
on the working class and lack of facilities for elderly individuals, while the so-called “graying market” (consumer
market of senior citizens) is anticipated to grow. According to a report released by the Chinese Research Center on
Aging, “The underdeveloped graying market: opportunityand difficulty,” sales from senior-oriented industries in 2010
was only 700 billion yuan, but that number is expected toincrease to nearly 30% of China’s GDP by 2030. According
to the report, 42.8% of senior citizens living in urban areas
have savings and total annual revenue of them accounts for
between 300 billion and 400 billion yuan from pensions,assistance from relatives, and salaries in the case of thosecontinued working past the retirement age. Moreover, consumption by children for the sake of their parents is also
97

IIIlarge, meaning that it is not only senior citizens that support the senior market. Economic Weekly, May 5, 2011 also
reported that in 2010 consumption by the elderly population exceeded 1.4 trillion yuan, and that number is predicted to rise to 13 trillion by 2020, making them a major actor
in the market.

Chinese businesses for elderly people that have started
to make groundSome people believe that products and services for elderly people in China, not only facilities for the elderly,
have yet to disseminate widely and that this area has great
business potential. In a survey conducted by Chinese newspaper Life Time entitled “Survey on Products for Elderly
People in China”,(Note 9) in response to the question “Whatkind of products do you want to be developed?”, people gave
a diverse range of answers. The list included easy-to-open
canned goods, chewing gum for elderly people, flashlights
with radios, a walking stick that allows one to call and communicate with the police with the touch of a single button,
bifocal glasses and seated showers. In terms of clothing, in
China, clothing made for senior citizens is only different interms of design and color. In advanced countries, however,clothing for senior citizens is specially designed to make it
more practical for their needs. For instance, German-madeclothing being sold on shopping site Taobao.com puts shirt
buttons on the shoulders so that elderly citizens with stiffshoulders can easily dress and undress. The site has numerous other similar products that meet the needs of senior citizens, including nail clippers equipped with a magnifying glass and clocks that light up when touched. Vice
President of Peking University, Liu Wei, commented that,“The senior citizen industry is about to hit a major growth
spurt. This will impact emerging industries such as entertainment, travel, finance and education, in addition to the
traditional senior industries of medical care, nursing andinsurance.” (Note 10)
New companies that are actively attempting to address
the growing needs of senior citizens are also beginning toappear.
In recent years, travel demand by senior citizens has
drawn attention, and this is particularly true during thespring and fall seasons, where senior citizens account forover 50% of travelers. Travel companies are also working
on developing products that address the needs of seniorcitizens. Jiahua International Travel Company established a“Parents’ Club” that targets senior citizens. The company’s
president, Zhang Ming, claims that, “Travel by senior citizens has just started and there are still many challenges tobe faced, but there are already signs of growth.” Today in
China, students and workers that would like to travel canrarely make the time. However, President Ming says, “Senior citizens have both time and money, so they are to become the main target in the future. What is more, seniorcitizens have started to change their values, and now travel
has become a necessity for old-age life.” (Note 11) Golden Age
Travel, located in Tianjin City, is also planning tours forsenior citizens and developing the senior citizen market.
Company Director Lei Yanshan says that, “It is impossible
to appeal to senior citizens using conventional tours andsimple price reductions. It is vital to offer promotions andLack of elderly and nursing facilities
However, the current situation remains that there is alack of products and services to adequately meet the demand of the senior market. One example is the lagging development of facilities for elderly citizens. In Beijing, for example, the elderly population (aged 60 and over) was at 2.65
million people, accounting for 15% for the total population
in a 2010 survey. According to a forecast, by 2015 the elderly
population is expected to reach 3.6 million, followed by 4.5
million in 2020, with overall population ratios of 17.6% and20%, respectively. However, in Beijing the number of elderly
homes is a mere 386 with an overall maximum capacity of
61,823 people, thus only covering around 2.5% of Beijing’s
elderly population.(Note 7)
Public elderly homes are inexpensive and provide good
services, but many people want to enter such facilities, making it difficult to accommodate them all. The Beijing City
First Welfare Center located in the Chaoyang District ofBeijing has a capacity of 500 people and is the closest elderly home to the city’s center. In addition to nursing, thehome offers medical, entertainment and other facilities,
and is very popular for its reasonable price of 2,500 yuan
per month. The home has indicated that it is currently full,
there are 3,000 people in waiting and some have been waiting for two to three years already. The Fifth Welfare Center,located nearby with 230 people capacity, also has a waiting
list of more than 200 people.
Private elderly homes provide quality facilities and services, but they come with a substantial price. The Beijing
City Shoushan International Welfare Service Center for Elderly People is an elderly home with a capacity of 300 people
that commenced operations in 2009. Currently, it accommodate 240 people and charges 4,900 yuan per month excluding meals in Beijing where the average monthly income
is around 5,000 yuan, which is nearly twice as much as its
public counterpart.
Furthermore, these facilities face the challenge of keeping up with demand in terms of human resource numbers
and quality. In 2002, the “Standards for Nurses for Elderly
People” were released, which state that only individuals
with a certification can provide nursing; however, the actual situation is that individuals with no specialized training,or the so-called floating-population (migrant workers), takeup nursing positions. Head of the China Association of Social Welfare, Jiake Fang, states that, “There is still a significant disparity between elderly care businesses in China andthose in Europe and the United States. Services in China arejust getting started.” (Note 8)

People’s Daily, September 18, 2010.
Shanghai Stock Information Service Corporation, May 5, 2011.
11
Economic Weekly, May 5, 2011.
9

Beijing Civil Affairs Bureau.
8
The China Youth Daily, March 11, 2011.
7

10

98

III International Business for Disaster Recovery

an operational strategy with differentiating characteristics.
Senior citizens have a strong sense of loneliness and want tofeel that society and their families value them. Therefore, an
important aspect of tours for senior citizens is thoughtfulness.” Concerning the company’s future operational strategy, he says, “Most travel companies focus on urban areas,and senior citizens in rural areas often cannot travel dueto the lack of information. In addition to maintaining customers in urban areas, we must expand into rural areas aswell.” (Note 12)

Undertakings by Japanese companies in China
Some Japanese corporations are exploiting the technologies, expertise and brand power developed domestically andbeginning to work to develop the elderly market in China, amarket with a great deal of potential.
Major sanitary ware manufacturer TOTO has focusedon the development and sale of products that are easy touse for patients and senior citizens since it first development
and released a bathtub in Japan in 1980 as a product thattook into consideration the needs of elderly people. Afterselling sanitary ware to China in 1979 when refurbishments
were made to the Diaoyutai State Guesthouse, the company
expanded business into China in 1994 through a joint venture company. TOTO went on to build relationships withlocal distributors using showrooms as points of dissemination, and today claims the top share in the Chinese highend sanitary ware market. In fiscal 2010, the company’ssales and operating profit in China amounted to 36.1 billion yen and 7.6 billion yen, respectively. Operating profits,
in particular, grew by approximately 2.6-fold over the six
years since fiscal 2004, making as much as nearly half ofthe company’s total operating profit (Figure III-36). TOTO
has opened showrooms that it directly operates in four locations, namely Beijing, Shanghai, Chengdu and Guangzhou,
and runs flagship showrooms in joint operations with agencies in six cities, Nanjing, Hangzhou, Ningbo, Zhengzhou,
Chongqing and Shenzhen. The showroom in Shanghai
is showing new developments, such as exhibiting toilets
equipped with handrails. In this way, TOTO is applying theexperience and expertise that it cultivated in Japan in operations in China in efforts to steadily capture the market ofa country where aging is to progress in the future.
Japanese corporations and NPOs are also expanding
their nursing businesses in view of Asia’s senior citizen
market. In November 2010, Japan Long Life, a subsidiaryof major nursing company Long Life Holdings, establisheda joint venture company Hiking (Qingdao) Longlife Care
Service Co., Ltd together with a group company of the Hik-

Growing interest in Japanese products and services
While Chinese companies are starting efforts to enter
the senior citizen market, the current situation remainsthat they are unable to adequately meet the needs of elderly
people due to their lack of accumulated experience and expertise. There is thus great interest being drawn locally tothe products and services of Japanese companies that havealready been working to accumulate experience and expertise domestically in Japan.
During December 3-5, 2010, at China’s largest welfare
device exhibition Care & Rehabilitation Expo China 2011
(hosted by the China Disabled Persons’ Federation and theLiaison Office to the Nationwide Elderly Workers’ Association), JETRO set up a Japan Pavilion for the first time,allowing 18 companies and one organization that handle
welfare-related products put their products on exhibit. The
companies exhibited a diverse range of products, including
welfare-use dishware, nursing foods, nursing bathtubs andmore. Visitors displayed strong interest in the high-quality
Japanese welfare products, and the Japan Pavilion received
a large number of visitors.
In particular, a booth exhibiting nursing foods for senior citizens that were developed in collaboration with anursing dishware manufacturer was immensely popular,
and one visitor that sampled the foods even said, “China
also has nursing foods, but there are not many that are thistasty and enjoyable. I really hope you introduce these to theChinese market.” Other products rich with Japanese originality also drew great interest, including insoles that reducethe burden on the knees when walking and a moped thatcan be ridden while sitting in a wheelchair.
Demand for welfare products is growing with the increase in senior citizens and people with disabilities, but
supply has yet to catch up. China has few welfare-relatedcompanies and the amount of product variety on the market
is overwhelmingly too small. Furthermore, many products
are inferior in terms of design and quality, and China relies on imports for most of its welfare products. In terms ofprice, some assert that higher priced Japanese products will
not be received well in China, but the concept that higher
price means higher quality exists in China as well. As such,even if prices are set high, there is believed to be strong potential to acquire business opportunities by providing users
with information that appeals to the superiority in quality.

12

Figure III - 36 TOTO’s business performance in China(TR Missing)Sales

50,000(%)

Operating profit

Percentage of sales in China (right axis)

45,00070

Percentage of operating profits in China(right axis)

40,00060

35,00050

30,00040

25,00020,00030

15,00020

10,000

10

5,000
0

80

2004

2005

2006

2007

2008

2009

0
2010 (FY)

Note: Overall sales and operating profit figures were calculated before consolidated adjustments.
Source: Brief note on the settlement of accounts and securities report by
TOTO.

Tianjin City Observer, February 16, 2011.

99

III

ing Group under the investment ratio of 34% and investment amount of US$1.02 million, thus becoming the firstJapanese company to open an elderly home (168 rooms) in
Qingdao. Training has been started for Chinese staff withthe aim of launching operations from October 2011, and thecompany expects to pull in approximately 30 million yen a
year in profits. Even in China, where aging is rapidly progressing, there are not many private enterprises that provide high-quality services, so the company intends to focus
efforts on disseminating the services and brand that it hasdeveloped in Japan.
In addition to developments in the private sector, undertakings to bring together aging and community economic
revitalization in Asia are gathering attention, and one example is the Asian Aging Business Center (AABC) based in
Fukuoka City. AABC was established in March 2008 withthe objectives of providing Asia with the experience andknowledge gained by Japan as an advanced aging society.
It also intended to use the geographical advantage of Fukuoka City as a gateway to Asia to develop the city to be amodel case of elderly-friend city as well as developing aging
businesses that are needed in Asia based on a partnershipamong industry, academic and public. Specifically, AABC
coordinates observation visits and trainings at facilities forthe elderly in Japan for human resource development of
Asian countries such as China and South Korea. Throughthese initiatives AABC also hopes to raise the profile of Fukuoka City, promote international exchange and expand
tourism.

from preceding generations in that their level of educationis comparatively high and they show vibrant consumer confidence. The retirement of baby boomers is expected to create a new “silver market.”
However, the industry remains so underdeveloped thatsome people say that there are not enough companies tosupport the industry, and, overall, prominent companies
yet to emerge in this area.
Despite these circumstances, developments are spreading to create new businesses in view of the progression of
aging. One example is “Silver Towns” (welfare housing forsenior citizens). Silver Towns are group home facilities thatpeople aged 60 and over can either purchase or rent and areequipped with medical facilities and community spaces.
Certain benefits were also granted in the construction of
the facilities, such as easing construction regulations. According to statistics by the Ministry of Health and Welfareof South Korean Government, in 2007 there were a total of
14 Silver Towns throughout the country, and that number
rose to 22 in 2010. These figures do not include facilities thatwere recently constructed, so figures are thought to be evenhigher today. More than half of all Silver Towns are locatedin major cities with superior transportation convenience,such as Seoul and Busan, and it is these major cities thatSilver Towns are drawing even more interest. “Seoul Seniors
Tower,” which operates four Silver Towns in the capital of
Seoul, is run by a major hospital (Songdo Hospital) that advertises its fully equipped medical and nursing structure.
Samsung-Novell County, another influential Silver Town,
is operated by a foundation owned by Samsung Life Insurance, a major life insurance company. In this way, “silver”
related companies have been entering the market. Local
media in South Korea has recently been reporting on therising interest in Silver Towns and increasing prices of theapartments.
In addition, in response to the increase in the senior
population, a demographic with both leisure time and purchasing power, there is an increasing need for culture-oriented schools for senior citizens. According to local media,
culture centers run by major department store Shinsegae
have enriched programs for senior citizens, including “senior line dancing”, “senior musical ballet” and “everyday
English for seniors”. As a result, the ratio of their customersof age 50 and older rose from 20% in 2006 to 30% in 2010.
Other major stores, including Lotte and Hyundai, are also
expanding their programs for senior citizens.
In entering the senior business market, some companies implement the business models of companies of Japan,
where aging has advanced ahead of Korea. For instance, in2008 major dairy products manufacturer Binggrae partnered with Japan’s X-Vinn (currently “Senior Life Create”)
to acquire its expertise for a new food delivery service for senior citizens that Binggrae was to establish. Currently, they
make home deliveries under the Yegadwon brand name andhave stores at two locations.
In July 2010 total food product manufacturer Daesang
began sale of its balanced food product “NuCare Toromi
Perfect,” a food thickener jointly developed with the Nisshin

Businesses targeting elderly people in South Korea andthe undertakings of Japanese companies
Just as China, in South Korea fertility is decreasing andaging is progressing at a faster pace than in Japan. The total
fertility rate (number of children that one woman gives birthto during her lifespan) in 2010 was 1.22, which is one of thelowest in the world. Meanwhile, life expectancy is steadily
growing. According to population forecasts released by thecountry’s Statistics Bureau, the ratio of people age 65 andolder compared to the total population was 11.0% in 2010.
This is a little less than half the ratio of Japan today; however, those figures are expected to rapidly increase to 15.6%
by 2020 and again to 24.3% by 2030. Furthermore, forecasts
show that the ratio will reach 38.25 by 2050, which, alongwith Japan, will be the highest in the world. Therefore, businesses that target elderly populations are anticipated to see
strong growth in the future. The South Korean Government
has defined 14 different sectors as “silver industries” in the
broad sense, including nursing, medical devices, leisure,which includes rest facilities for elderly people and reverse
mortgages and other finance. The Government expects thatthe market will rapidly grow from its level of approximately
44 trillion won in 2010 to approximately 149 trillion won
by 2020.
Particular attention is centered on the fact that the baby
boomer generation, which was born after the Korean War
and now between 55 and 63 years old, is approaching theage of retirement. The baby boomer generation is different
100III International Business for Disaster Recovery

OilliO Group. The product aims for smooth rehydration andproviding nutritional support for elderly people and persons
suffering from dementia with a weaker ability to swallow
foods and beverages. The product is sold at hospitals, elderly
care facilities, pharmacies and other locations. Writing on
the outside of the box is in Katakana, Japanese phonetics,
emphasizing the expertise of a Japanese company with advanced experience in aging business.

reasons for expanding into the Asian market are the expected progression of aging in China and other Asian countries,
and the foreseen growth in demand for high-quality medical service in parallel with rising income levels.
In the case of Parkway Holdings, it operates 16 hospitals
in five countries, namely Singapore, Malaysia, Brunei, India
and China, and is working to expand its business operations
widely throughout Asia. Parkway Holdings was acquired
by Khazanah Nasional Berhad, a Malaysian state-run investment firm, in 2010. Mitsui & Company made a capital
investment to Integrated Healthcare Holdings, Malaysia,
a holding company of Parkway Holdings in 2011, under
the condition of investment ratio of 30% and investment
amount of 3.3 million Malaysian ringgit, approximately
92.4 billion yen. Mitsui & Company began to display efforts
to address the rising demand for medical services in Asia,
which is growing in parallel with aging, as early as January
2010, by acquiring capital in Gleneagles CRC, Singapore,a company of the Parkway Group (investment ratio of justunder 50%; investment amount of approximately 400 million yen).
Fortis Hospitals, a major hospital group in India, is also
working on expanding its hospital operations in Asia, including in Singapore. The company unsuccessfully competed with Khazanah Nasional Berhad for acquiring Parkway
Holdings, and later in 2011 announced that it would acquirea hospital under construction in Singapore and intended toenter the Singaporean market.

The foreign expansion of Singaporean medical
institutions
In Singapore too, low fertility and aging are serious issues, much like Japan. In fact, the total fertility rate in Singapore is 1.16 in 2010, lower than the 1.37 in Japan.
Moreover, the elderly population will rapidly grow in the
future as the ratio of population aged 65 or over comparedto the total population is predicted to double from 10.2% in2010 to 22.9% in 2025.
In Singapore, the ratio of medical-related expenditurescompared to total household expenditures is increasing as
aging progresses. The composition of medical expenses accounted for in monthly household expenditures in Singapore increased from 3.5% in 1997 to 5.3% in 2007. With anaverage annual growth rate of 6.2%, this is growing fasterthan any other items, including communications fees andhousing-related expenses (Figure III-37). This rise in medical expenditures is also connected to the increase in sales at
Singaporean medical institutions.
The sales of major Singaporean hospital Raffles Medical Group doubled from 112.9 million Singaporean dollars
in fiscal 2005 to 239.12 million Singaporean dollars in fiscal 2010. The sales of Singaporean giant Parkway Holdings
grew from 548.97 million Singaporean dollars in fiscal 2005
to 979.21 million Singaporean dollars in fiscal 2009.
Singapore’s population is only 5.08 million people, making it a relatively small market. So, its major hospitals are
beginning to focus their efforts on expanding operations
abroad in view of the Asian market. Raffles Medical Group
opened a hospital in Shanghai in 2010, thereby establishinga foothold for entry into the Chinese market. The company’s

Lessons from prior Asian aging business cases
From prior cases of senior businesses in Asia conductedby Japanese corporations, we can see a strategy that links
to capturing local markets by utilizing the accumulated
experience and knowledge of Japan while also constructing and expanding networks either by expanding production and distribution bases, by forming joint ventures withlocal companies, or through M&A. The key is superiority
in quality of products and services developed ahead of therest of Asia. Some believe that high quality inevitably associated with high price, and that it will be difficult to sellsuch products and services in Asia, where an intense pricecompetition is taking place. However, Asian income levels
are steadily rising and the level of demand for high quality
products is growing along with it. In addition, elderly people in Asia increasingly have sufficient disposable income
for their consumption. If these are taken into consideration,
there is ample business opportunity in the area of high-end
products and services that Japanese companies have specialized in.
In other words, Asia’s elderly market would be an area
where Japanese corporations can fully demonstrate thestrengths that they have developed. At present, Asia’s elderly market is still in its nascent stages and is one of the
few remaining growing markets for Japanese corporations.
It is believed that it will become increasingly important forJapanese companies to work to address this growing market
in their overseas strategies.

Figure III - 37 B reakdown of monthly household expendituresby good/service in Singapore(SGD, %)
Average annual
FY1997 FY2002 FY2007
growthExpenditures
3,628
3,738
4,388
3.3
(including imputed rent)
Food
23.7
21.3
21.6
1.0
Clothing/footwear
3.9
3.4
3.3
0.2
Housing-related costs
24.2
24.6
26.6
2.9
Medical
3.5
4.7
5.3
6.2
Transportation
18.6
16.4
15.8
0.3
Communications
3.6
4.6
4.8
4.9
Entertainment
10.5
12.0
8.7
0.0
Education
4.4
5.2
5.3
3.8
Other
7.7
7.8
8.5
2.9
Notes: (1) Th e average annual growth rate is for between FY1997 and
FY2007.
(2) “ Other” includes alcohol, cigarettes, rent and other goods and services.
Source: “ Household Expenditure Survey” (Department of Statistics, Singapore).

101

III

Figure III - 38 J apan’s outward direct investment position by country/region at the end of 2010 (Ratio to total amount. Figures inparentheses indicate compound annual growth rates from 2005.)(Unit: %)NonWholesale andFinance andOther nonTotal
Manufacturing
Miningmanufacturingretailinsurance
manufacturing
Global total
100 (8.2)
46.3 (2.8)
53.7 (14.7)
6.3 (36.1)
14.0 (13.5)
23.4 (15.1)
10.0 (8.3)
OECD members
61.5 (5.3)
28.5 (-0.4)
33.0 (12.3)
4.7 (31.6)
10.4 (12.3)
11.4 (12.9)
6.4 (4.4)
Non-OECD members
31.0 (13.1)
17.7 (9.6)
13.3 (19.1)
1.5 (66.4)
3.5 (17.5)
5.0 (15.4)
3.4 (18.2)
Asia
25.6 (10.8)
16.7 (9.1)
8.9 (14.7)
0.2 (57.5)
2.9 (13.9)
3.1 (14.9)
2.8 (13.7)
China
8.0 (13.3)
5.7 (11.6)
2.3 (18.3)
×
1.0 (15.5)
0.7 (25.5)
×Asia NIEs
8.2 (7.7)
4.3 (5.6)
3.9 (10.4)
0.1 N/A
1.4 (10.3)
1.2 (10.9)
1.3 (8.4)
ASEAN
10.9 (9.2)
7.2 (6.3)
3.7 (16.6)
0.2 (57.8)
1.0 (23.2)
1.4 (11.3)
1.1 (15.4)
Central/South America
5.3 (15.5)
1.6 (3.0)
3.8 (24.8)
1.4 (85.1)
0.7 (45.3)
0.9 (3.5)
0.8 (21.6)
Middle East and Africa
1.3 (20.6)
0.6 (9.5)
0.7 (40.4)
0.1 (45.3)
0.0 (11.9)
0.4 (40.4)
0.2 (46.4)
Notes: (1) The growth rates from 2005 are calculated in yen base.
(2) “Non-OECD members” and “Central/South America” excludes the Cayman Islands.
(3) An “x” indicates that amounts have not been publically released. The total for Asia NIEs industries in 2005 was zero, so the rate of increase is represented
by “N/A”.
Source: “Direct Investment Position, breakdown by Region and Industry” (Bank of Japan, Ministry of Finance).

(6) Services industry continues overseas expansion
Efforts to address foreign demand by the Japanese services industry had been considered insufficient comparedto the manufacturing industry, but those efforts are expanding. Looking at the stock of foreign direct investment
from Japan at the end of 2010, we see that figures for nonmanufacturing industries surpass 50% (Figure III-38). Finance and insurance businesses account for nearly 25%,
while mining, wholesale and retail business also show large
percentages; however, other non-manufacturing investment has also reached 10%. Investment in emerging economies and developing countries, non-OECD members inthis case, showed particularly large growth, with an averageannual growth rate of 18.2% from 2005.
The Survey on Overseas Operation Status in Service Industry implemented by JETRO also shows that the overseas
development of Japan’s services industry has been growing
in recent years (Figure III-39). When services industry corporations with existing operations abroad were asked when
they first ventured abroad, the answers revealed that a large
number of companies recently expanded overseas.

Food product industry was impacted by the disaster, asradiation testing was made obligatory for food products bymany countries and restrictions were placed on the importof food products manufactured in multiple prefectures.
There were reports of declines in sales of Japanese foods
and at Japanese restaurants in several countries. However,in countries such as UK and Russia, overseas JETRO offices
reported that there was no trend to avoid Japanese foodsin particular after the disaster. In Taiwan, many consumers, immediately after the disaster, were reported to checkthe time of shipments of Japanese food products, but sinceApril oversensitive responses have been decreasing.
In London, the International Food & Drink Event washeld from March 13 to 16, 2011, right after the disaster.
Eight Japanese companies participated as planned. There
was little impact from the disaster, where the companies
held 160 business negotiations and concluded nearly 30
contracts (including tentative contracts), allowing them tosurpass targets set before the disaster. Later, the participating companies were interviewed and it was confirmed that
their negotiations are advancing smoothly.
The Japanese restaurant industry also continues to expand into South Korea. Japanese food restaurants, such as
ramen shops and izakaya, had been increasing in South
Korea in recent years, where numbers have reached approximately 3,000 nationwide. Since the disaster, exportsof food products from Japan have decreased, but there was
no impact on sales and customer numbers at stores in theJapanese restaurant industry, and more and more restaurants are continuing to enter.

Figure III - 39 T ime of launching Overseas operation in service
industry(Number of companies)
300
BtoC(retail, food services, services related to daily living, etc.)
250
BtoB(wholesale, telecommunications, construction, finance, etc.)
200
27

150

16

100

10

50
0

49

31

3

30

2

1959 and before 1960-69

119

232

Capturing increasing interest in education in emerging
Asian countries
The biggest destination for Japanese services industry
companies when expanding abroad is Asia, and China inparticular.
In the aforementioned Survey on Overseas Operation
Status in Service Industry, there were a total of 860 services
industry companies that have prior experience in foreign
markets or plan to expand overseas in the future. Morethan half of these companies prioritize China as a destination country (Figure III-40). If Thailand, Hong Kong,

147

74
1970-79

1980-89

1990-99

2000-10Notes: (1) Th e chart excludes "Other service industry" and companies that
did not answer on thier industry field or time of launcing overseas
operation.
(2) A s for 2010, the number of launches includes the companies thatanswered that they planned to launch. (Survey period: OctoberNovember 2010.)
Source: “ Survey on overseas operation status in service industry: the fiscal
year 2010” (JETRO).

102

III International Business for Disaster Recovery

Gakken Holdings also opened a science school in Jakarta
in May 2010. Indonesia is like many other Asian countries
in that classes tend to rely on memorization due to the lackof instruments for experiments. Gakken provides a program centered on experiments using familiar resources. In
addition to the science class, the company is also working
to establish arithmetic schools in order to respond to risinginterest mainly by the middle and high-income classes.

Figure III - 40 C ountries targeted by corporations expanding
overseas (services industry)
Other 5.2%

Unknown 1.9%

U.S. 7.7%

Other Asia 12.8%
China 56.9%
Vietnam 4.4%

Japanese foods appealing to local U.S. customers
Japanese restaurants continue to employ unique marketing strategies in the United States and other countries.
Initially, Japanese restaurants in the United States targeted
Japanese businesspersons living in the United States, peopleof Nikkei descent, other Asians, and the small populationof Americans that enjoyed Japanese food. Prices were alsohigh for the average United States citizen. The prevailingtrend was for major Japanese food manufacturers or individual Japanese chefs to run such establishments. However, as Japanese food gained popularity as healthy food, itbegan to draw popularity from the average American andrestaurant chains from Japan have now started their entry
into the United States market. Recently, these restaurants
employ a marketing strategy where they conduct productdevelopment tailored to the United States market targeting
American customers.
In the Upper West Side, a high-end residential area in
New York City, Muginoho, a company that sells cream puff
products, has established its New York location of Beard
Papa New York. Initially, many customers were Japaneseand other Asians, but now other Americans account for
60% of their customer base. The store has grabbed the interest of customers by emphasizing the quality of Japanese
foods in terms of reduced sweetness, healthiness and safety,
and is now increasing its number of stores. It has alreadyexpanded to more than 20 shops in the continental UnitedStates.
In order to meet the demand of the wide-ranging demographics of the United States, the company is now tailoring its product strategy to meet local needs. In New York,
caramel-flavored cream puffs called the “Dulce de Leche,”a product not sold in Japan, attracts great popularity. The
company developed the product for the Hispanic market,
which tends to purchase sweeter products. Muginoho targets a wide range of New Yorkers by employing a strategy
modified to the characteristics of locals.
Chikaranomoto Company, a corporation with approximately 60 ramen shops in Japan, including the well-known
Hakata Ippudo, entered the New York market in March
2008 with the objective of spreading the taste and passionof Japanese ramen to the world.
The New York store is designed differently from theJapanese stores. It is different from many ramen shops inJapan that focus mainly on counter seating. The company
aimed to create a shop that takes full advantage of its adultcentered appeal and that communicates a sense of “Japanese coolness” to the world. At nighttime, the store serves
alcohol such as Japanese sake and shochu, as well as small

Hong Kong 4.8%
Thailand 6.4%

Note: Ratio with the denominator as 860 companies, including corporations
that plan to expand overseas in the future.
Source: Same as Figure III-39.

Vietnam and other Asian countries are added, 85.2% of thecompanies emphasize expansion to Asian countries and regions.
In terms of sectors, food, beverage and education-relatedcompanies are gradually beginning to expand overseas inaddition to wholesale and finance industries, which have
conventionally been active abroad. As can be seen in FigureIII-30 on page 85, education expenditures in Asia are rapidly
increasing along with economic growth, and more and moreparents are having their children attend prep schools to learn
English, arithmetic and others, or such skills as music anddrawing, in addition to traditional school education. Thereis also an increase in the number of Japanese corporations
expanding into Asia in response to this growth in demand.
Yamaha Music Foundation expanded into Asian countries from a very early stage, launching music schools in
Thailand in 1966, Singapore in 1968 and in Indonesia in
1971. The company has employed a so-called demand creation business model, where it uses its music schools to teachcustomers the fun of playing music, leading to the purchaseof instruments. Recently, the company’s student numbers
have been increasing in response to the rise in interest in theemotional development of children. Yamaha music schools
are located in more than 40 countries and regions worldwide, with 1,550 schools and 182,000 students.(Note 13)
Kumon Educational Japan has expanded to 46 countries
and regions, starting with New York in 1974, and as of March2011 has 2.93 million students overseas. The following year
after its expansion into the United States, it established a local corporation in Taiwan, thereby launching its operationsin Asia. It now has schools in 14 countries in the region.
Its schools in Thailand and Indonesia, which were set up
in 1991, have showed particularly marked growth in recent
years. Kumon runs approximately 430 schools in Thailand
and approximately 520 in Indonesia, and student numbers
in each country have surpassed nearly 100,000.(Note 14)
13
Figures are from the FY2010 Yamaha Music Foundation business report. Excluding domestic schools in Japan.
14
Figures are from a May 16, 2011 press release of Kumon Educational
Japan. “Students” refers to the number of total subjects being taken, notthe number of member.

103

III

dishes using fish and other ingredients familiar to Japanese,such as tuna, yellowtail and codfish. It then serves a bowl ofauthentic ramen to finish everything off. This dining styleis the concept for the New York store developed throughrigorous analysis and marketing.
Ninety per cent of the customers at the New York store
are Americans, and there is a secret behind these figures.
The company has changed services, menu items and otherthings that can be altered to be better in tune with trends in
the United States. Many Americans put the noodles on the
spoon when eating, so the company has made the spoons
bigger and noodles shorter, thus displaying their careful attention to even the smaller details. Many groups of friends
that visit the restaurant take time before they start eatingeven after the ramen is brought to the table because they arebusy in talking. Restaurant staff therefore remind customers to eat it while it is hot. If one person starts eating, thegroup will follow. This type of mindfulness is a Japaneselike service that will help Japanese companies to gain superior positions in global markets such as the United States.
The company takes care to create an environment that
United States residents are familiar with. Near the entrance
there is a bar counter designed like a food stall from Kyushu. If the restaurant is full, customers can enjoy Japanesesake, shochu or beer at the counter, instead of having to waitoutside for a seat to open.
Some Japanese corporations are also working to reachwider scopes of consumers in places like Hawaii, where
there are a large number of Japanese visitors. Toridoll, acompany known for its Marukame Seimen chain that specializes in self-service Sanuki udon noodles, with approximately 470 locations throughout Japan, opened its first shop
in Waikiki, Hawaii on April 1, 2011. The new shop targets
tourists visiting the area from around the world. There area large number of Japanese restaurants in Hawaii, but they
are usually priced high and only few offers less expensive
casual food. Generally it would cost at least US$10 to US$15,
including tip, to eat at an udon restaurant. Toridoll decided to enter the Hawaiian market with the goal of providing people with the chance to enjoy udon at a reasonable
price so that tourists visiting Hawaii from around the world
would be able to experience the delicious taste of Japan’s
Sanuki udon.
The store has employed some tactics in order to spreadawareness locally about Sanuki udon. The portion of thestore facing the main road is made completely of glass, allowing people outside to see into the shop, and a noodlemaking machine delivered from Japan is put on display
near the entrance. This allows people outside and inside tosee fresh noodles being made by the machine.
The company faced trouble in the procurement of raw
materials, particularly seafood, in its efforts to cut costs. For
instance, if the same standard of shrimp used in Japan was
simply applied, the price of the product would surely increase. The company visited shrimp farmers in Hawaii andan expert was dispatched from Japan to do menu development through trial and error. This allowed the company todiscover a shrimp that can pass their quality standard withan agreeable price. This store opened after the disaster, andcustomer numbers are steadily increasing. Just as planned,
the majority of customers are tourists from the continental
United States.
As noted earlier, Japanese companies in the services industry currently tend to emphasize Asia as a destination foroverseas expansion. However, just as presented in a proposal compiled on May 12, 2011 by the Public-Private Expert
Panel on Creative Industries, which is carried out to foster industries under the concept of “Cool Japan,” advanced
countries such as the United States are not only attractive
for their own markets, but also important for a branding
effect for Asian market. Moving forward, the services industry is looked on to adopt an approach where it expands
to a diverse range of foreign markets, including promoting
the type of regional strategy described above.
(7) All-out effort to revitalize and enhance the Japan
Brand
Towards accelerating foreign market development
As explained earlier, a large number of Japanese companies are exploiting their own strengths in developing foreign markets, even after the disaster. The importance of foreign markets is increasing as vigorous reconstruction fromthe disaster carrying out. Then what is required in order for
a company to use its strengths in expanding business overseas? It is not possible to cover all relevant topics, but below
are the main points that arise in case studies introduced
earlier and in questionnaire surveys carried out by JETRO.
(1) Acquiring information on foreign markets
In FY 2010 Survey on the International Operations ofJapanese Firms, conducted in November and December
2010 by JETRO, most companies, 67.0%, answered thatgathering information concerning the preferences andneeds of the export destination market was the most important topic to promote exports. Customer needs, as a matter of course, differ widely due to local culture, geography,
climate, economic levels, and other various causes. This
chapter earlier touched upon the case of Mandom, which
conducts comprehensive surveys on consumer households
and rural retail shops. There are many companies that conduct this type of local-oriented marketing and it is likely an
important step for market expansion.
Information on the local regulatory structure would
also be essential. In particular, many countries set regulations on the entry of foreign firms in the services industry,
and attention must be paid to such regulations. The attention should not be a temporary one as these regulations areoften complicated and are changed frequently. On the other
hand, if information on regulatory changes is swiftly assessed and a response promptly implemented, it could offer
business opportunities.
(2) Promoting products that match the target segment
People often say that Japanese products may be highquality, but that they are also too expensive. This meansthat it may be difficult in many cases to compete in price104

III International Business for Disaster Recovery

alone with the products of other countries.
However, as seen in the senior citizen market, high-end
products with high-quality may present adequate business
opportunity in emerging Asian economies depending on
the segment they target. In China, in particular, individual
income levels are rapidly increasing, and Japanese companies have expressed in interviews that strong-selling products are becoming more “advanced.”
For instance, customers increasingly want to purchase asingle-lens reflex camera, not a compact camera, from thestart, and sales for Cannon’s entry-level camera are rising.
Gunze’s high-end leg-related products, which are produced
and exported from Japan, are also experiencing favorable
sales.(Note 15) Energy-conservation function appealed morecustomers, as explained earlier, with environmental awareness strengthened. Even in the case of intermediate goods,
there are many instances where it is possible to maintain
price competitiveness by working to promote differentiation using unique products that exploit development andproduction capacity.
On the other hand, as was seen in the cases of Mandom
and Fumakilla, there are companies that boost their sales
by developing products that meet local consumers’ needs
and providing them using a distribution method that is tailored to local conditions. In the case of Acecook, who occupies a 70% share of Vietnam’s instant ramen market, amajor factor in their success appeared to be their effort inproviding quality products at reasonable prices that match
local preferences.
In this way, markets in emerging economies andother overseas countries offer the wide variety of business chances as well as challenges, making it importantto thoroughly assess the target segment for the company’s
product, and work to develop and sell products that meetthose needs.

visit the local site and assess whether the partner is reliableby directly meeting with them.
(4) Developing human resources
While the degree differ according to the scale and depthof overseas operation, many companies face the challenge
of developing human resources related to overseas business.
The Hitachi Group has begun to promote a Global Human
Resource Management Strategy including maintaining a
database of the group’s 300,000 employees located worldwide. Many other companies also work to develop their human resources, which are the key to any global expansion,
by recruiting and promoting foreign employees, dispatching
their Japanese employees abroad at an early stage and so on.
There are also many SMEs that face troubles in securing human resources involved in the trading business. However,there are also companies where the opportunity to involvein foreign expansion contributes to boosting employee motivation. Moreover, just as with the aforementioned A-Wing
and AsiaGiken, some SMEs are actively using exchange students and trainees from emerging countries in Asia andother regions. It would continue to be important to strategically secure and train human resources to carry out foreign
expansions in accordance with the situation and directionof each company.
(5) Protecting intellectual property rights
The answers of the questionnaire on business environment of major Asian countries in the aforementioned
JETRO survey revealed that many companies feel that
protecting intellectual property rights is a particular challenge in China; 60% of the respondents answered so in the
FY2010 survey. On the Japan Patent Office’s FY2010 Counterfeit Damage Survey Report, a total of 1,059 companies,
or 24.6% of all responding companies, answered that they
had suffered some form of damage as a result of counterfeiting. Of those, the most companies, 65.9%, answered thatthat damage was incurred in China. In addition to China,
companies indicated that they had also received damage asa result of counterfeiting in South Korea (23.0%), Taiwan(22.3%), North America (13.9%) and Europe (13.4%) (Note 16).
The countermeasures such as promptly acquiring patents,
trademarks and registered designs are undeniably neededin China and other countries. Moreover, for small and medium-sized manufacturers whose competitive edge is theirtechnological development capacity, protecting intellectual
property rights is important not only as a protective measure but for a proactive strategy to penetrate into foreign
markets.

(3) Searching for reliable partners
It is especially vital for companies to secure reliable
partners as distributors and other business partners, particularly for companies that are entering overseas businessfor the first time. Unfortunately, there are many unsuccessful cases caused by local partners, such as by those who
produced counterfeit products after concluding a distributor contract.
Companies could have another reliable client introduce
one of their own distributors or conduct a credit check, buteven these measures are not panacea. Some companies indicate that the only way is for the Japanese company to gather
information as much as possible and then confirm the potential partner’s management and business philosophy aswell as the partner’s assessment of the Japanese company’s
goods through direct talks in person. In particular, in thecase of an SME expanding abroad for the first time, it would
be indispensable for the company’s senior management to

The future of the Japan Brand formed by individual action
As this report describes, the disaster seriously impacted
Japan, and it is difficult to forecast the future repercussionof it. However, there are many cases that indicate that otherFor more details see “Chinese Business Strategy Report for JapaneseCompanies during an Era where China’s GDP is Ranked Second Globally,” March 2011, JETRO.

The percentages in parentheses indicate the ratio with 1,059 cases as thedenominator.

15

16

105

III

countries continue to show their strong trust and high praise
toward Japan. This can probably be attributed to the trust inJapanese products and services built up over time throughunstinting efforts of many Japanese individuals and companies. It is necessary to restore and enhance this trust in
the future, but this will likely take more than a single action
to achieve. As such, the “Japan Brand” can be considered asort of public good.
It is vital for Japan to provide safe, high-quality products and services to customers when marketing and manufacturing export products, welcoming overseas visitors toJapan, offering Japanese food and content abroad, and inmany other occasions. It is also essential to actively disseminate information. Synergetic results can be anticipatedthrough the accumulation of these actions carried out by
firms, individuals, and other stakeholders. The Japan Brand
can be revitalized and enhanced if the sense of solidarity
felt after the disaster is maintained and actions are taken byindividuals.

106

IV International Business as a Catalyst forJapan’s Reconstruction (Conclusion)
at a speed exceeding that of Japan. For example, South
Korea’s trade with countries with which an FTA has beensigned or has come into force accounts for approximately
35% of the country’s overall trade, but it is still below 20% in
the case of Japan. In order for Japan to achieve sustainablegrowth in tandem with Asia, it is necessary to enhance the
FTA network as quickly as possible, and improve connectivity in the area of tangible infrastructure as well, in fields
such as transportation and communication technology.

Promotion of International Business toward
Reconstruction from the Earthquake
The Great East Japan Earthquake that occurred on March
11, 2011 uprooted the foundation of the Japanese economy.
The areas along the Pacific Ocean in Tohoku and Northern
Kanto regions that support the backbone of Japanese manufacturers, as well as the supply chains of the manufacturingindustry, suffered great damage. The accident that occurredconcurrently at the nuclear power plants also caused damage to the “Japan brand” underpinned by “security” and“safety,” and the industry also faced restrictions in termsof electric power supply, which brought tremendous impact
on Japan’s production environment. Although subsequentefforts toward recovery contributed to the restoration of
supply chains at a pace that exceeded expectations, a lot ofchallenges remain to be resolved.
In order to find a way out of this situation as soon as
possible, it is necessary to take in all kinds of vitality fromabroad. Specifically, it is required to improve the environment to enhance locational competitiveness within Japan,
and promote investment from abroad. In this regard, there
has been moves, even after the earthquake, to invest in Japan as a result of efforts such as the establishment of Projects
Promoting Asian Site Location in Japan by the government.
Enhancing Japan’s locational competitiveness and improving the production environment through such efforts arepriority challenges that must be tackled from the standpointof preventing the hollowing-out of industry in Japan.

Efforts toward “Open” Reconstruction Utilizing Japan’sStrength
Since the 1990s, Japan’s presence in the global economy
has been showing a declining trend, with the global shareof its nominal GDP dropping from 13.8% in 1990 to 8.7%
in 2010. GDP per capita based on purchasing power parity, which ranked 13th in the world in 1990, also declined
to 25th, falling behind other countries and regions in Asia
such as Singapore (3rd), Hong Kong (8th), and Taiwan(21st), with the difference with South Korea (26th) also narrowing rapidly.
Since prior to the earthquake, as the Japanese economy
faced the rapid aging of the population resulting from thedecline in the birthrate, falling population, and long-term
deflation, the major challenge has been how to achieve sustainable growth. In the future, it will become important totake in the vitality of emerging countries including Asia inboth trade and investment. In this regard, the percentage ofJapan’s export volume (including goods and services) andthe percentage of its balance of outward foreign direct investment to GDP in 2010 were 15.2% and 14.1%, respectively. Compared with the world average of 29.7% and 32.6%,
those in Japan remain at a low level. The percentage of Japan’s balance of inward foreign direct investment to GDP
was 3.7%, far below the world average of 30.3%.
In order for Japan to get out of this situation and establish a medium- to long-term foundation for growth, it
is essential to utilize to the maximum extent not only its“strength” that the country has fostered in the past – i.e.,developmental power that supports high quality products
and high level of manufacturing capacity at production
sites – but also technical capabilities and expertise that contribute to tackling challenges common to the world such asenergy-saving and environmental technologies, quake-resistant and disaster management/mitigation technologies,
and businesses targeting the elderly, and to expand profit
opportunities overseas as well. In order to achieve this, itis necessary to revive and strengthen the “Japan brand,”and foster human resources in fields such as marketingand management that support the global development ofcorporate activities. From the perspective of avoiding thehollowing-out of domestic industry and securing and expanding employment opportunities, it is vital to attract and

Aiming for Growth Together with Asia throughEnhanced Economic Partnership
From the standpoint of ensuring successful reconstruction, the cultivation of overseas markets, and especially those in emerging countries that are achieving highgrowth, is becoming more important than ever. Companies
that have bases overseas (375 companies) depend on overseas markets for approximately half of their sales and operating profits. In particular, the Asia-Pacific region accounts
for 25% of their total operating profits, the level of which
exceeds the peak level prior to the financial crisis.
With Asia being the growth center in the world, economic integration within the region is advancing day byday. Intra-regional trade ratio within ASEAN+6 in 2010
was 45.9%. This was higher than the 40.4% within NAFTA,
for which an economic partnership was advanced ahead of
ASEAN+6. In this region, an FTA network for ASEAN+1
was nearly completed in 2010, and there was significant
progress in the elimination of tariffs. With regard to Japan,
a certain level of progress has been seen in this field such as
the coming into force of an Economic Partnership Agreement (EPA) with India and the agreement being reached onstarting preliminary negotiations for a Japan-EU EPA; however, South Korea’s and China’s efforts have been advanced
107

IVfoster value-added functions and globally viable talented
personnel by improving Japan’s locational competitivenessand accelerating investment into Japan. In other words, it isconsidered that revitalizing bidirectional flows in terms ofinvestment will become an important challenge in establishing a medium- to long-term foundation for growth.
The March 11 earthquake is imposing a substantial
hardship on Japan. Japan, however, has overcome a numberof disasters and crises and achieved development in its history. We believe that in this difficult situation as well, it ispossible for Japan to transform the hardship it is facing into
a cornerstone of its next development if public and private
sectors launch full-scale efforts to collect the wisdom andunflinchingly and squarely tackle the challenges the country is facing.

108

Appendix

World and Japan’s Statistics of Trade and Investment
Annotation I:

Product category definitions

Annotation II:

1) Products
Product nameHS
Total
00 - 99
Machinery and equipment
84 - 91
General equipment84
Air conditioners
8415
Mining and construction equipment 8429 - 8430, 8431.42 - 8431.43, 8474, 8479.10
Machine tools
8456 - 8461
Electrical equipment
85
Transport equipment
86 - 89
Automobiles
8702 - 8705
Passenger vehicles
8703
Motorcycles
8711
Automotive parts
8707 - 8708, 8407.31 - 8407.34
Precision instruments
90 - 91
Chemicals
28 - 40
Industrial chemicals
28 - 38
Pharmaceuticals and medical supplies
30
Plastics and rubber
39 - 40
Foodstuffs
1 - 11, 16 - 24
Seafood03
Grains
10
Wheat
1001
Corn
1005
Rice
1006
Processed food products
16 - 24
Oils, fats, and other animal and vegetable products
12 - 15
Miscellaneous manufactured goods
64 - 67, 92 - 97
Other raw materials and products
25 - 27, 41 - 63, 68 - 83
Iron ore
2601
Mineral fuels etc.
27
Mineral fuels
2701 - 2705, 2708 - 2713, 2715
Coal
2701
LNG
2711.11
Petroleum and petroleum products
2708 - 2710, 2712 - 2713, 2715
Crude oil2709
Textiles and textile products
50 - 63
Synthetic bers and textiles
54 - 55
Clothing
61 - 62
Base metals and base metal products
72 - 83
Steel
72 - 73
Primary steel products
72
Steel products
73
Copper7403
Nickel
7502
Aluminum
7601
Lead
7801

Estimates of world trade value in 2010

The value of world trade in 2010 was estimated based on 53 economies’ trade statistics
available as of July 11, 2011, and then by obtaining a grand total of the following three
categories. The trade value by product is the aggregation of (1) and (2).
(1) The total export (import) value of the 53 economies.
(2) For economies, for which statistics were not available (mainly developing
economies, approximately 120 in number), the value of imports from thoseeconomies was extracted from the statistics (CIF basis) of the 53 economies andconverted to FOB based figures (for imports by those areas, the export values [FOBbasis] were converted to CIF based figures).
(3) For trade among economies, for which statistics were not available, data was
extracted from Direction of Trade Statistics (June 2011, IMF).
The 53 economies:
Japan, U.S., Canada, Mexico, Costa Rica, Panama, Venezuela, Colombia, Peru, Chile,
Argentina, Brazil, China, Hong Kong, Taiwan, South Korea, Singapore, Thailand,
Malaysia, Indonesia, the Philippines, Vietnam, India, Australia, New Zealand, UK,
Germany, France, Italy, Spain, Netherlands, Belgium, Denmark, Sweden, Finland,
Switzerland, Austria, Poland, Czech Republic, Hungary, Romania, Greece, Ireland,
Lithuania, Luxemburg, Norway, Portugal, Slovakia, Slovenia, Russia, Ukraine,
Turkey, and South Africa.

Annotation III:

Estimates of global direct investment value in 2010

Global inward direct investment in 2010 was estimated as described below.
(1) Figures were collected for the following 123 countries and regions for which 2010
data were available.
i) For the following 61 countries and regions, each country or region’s balanceof payments statistics were used: the United States, Canada, Australia, New
Zealand, the United Kingdom, Austria, Belgium, Finland, France, Germany,
Greece, Ireland, Italy, Portugal, Luxemburg, the Netherlands, Spain,
Denmark, Sweden, Cyprus, the Czech Republic, Estonia, Slovakia, Slovenia,
Hungary, Latvia, Lithuania, Malta, Poland, Bulgaria, Norway, Switzerland,
China, Taiwan, Hong Kong, South Korea (ROK), Malaysia, the Philippines,
Singapore, Thailand, Indonesia, India, Argentina, Brazil, Chile, Colombia,
Mexico, Venezuela, Russia, Israel, Turkey, Iceland, and the Republic of South
Africa, Ukraine, Egypt, Saudi Arabia, Albania, Armenia, Croatia, Moldova
and Belarus. For countries that released two types of statistical values, i.e., one
including transactions via special purpose enterprises (SPEs) and the othernot including such transactions, the former was used. Data valued in local
currencies were converted to US dollars using the IMF’s annual average rate.
ii) For Japan, the balance of payments statistics released by the Bank of Japan wereconverted to US dollars at the average Bank of Japan interbank rate during the term.
iii) For the following 33 countries, data from the IMF’s Balance of Payments
Statistics (BOP, July 2011) were used: Romania, Albania, Azerbaijan, Bahrain,
Bangladesh, Bosnia and Herzegovina, Cameroon, Gambia, Georgia, Ghana,
Jordan, Kazakhstan, Kosovo, Kyrgyzstan, Macedonia, the Maldives, Lebanon,
Mauritius, Montenegro, Morocco, Mozambique, Nepal, Nigeria, Pakistan,Samoa, Serbia, Sierra Leone, Sri Lanka, Sudan, Tajikistan, Tanzania, Uganda
and Zambia.
iv) For the following 28 countries and regions, data from the Economic
Commission for Latin America and the Caribbean (ECLAC) were used:
Anguilla (a British overseas territory), Antigua and Barbuda, Peru, El Salvador,
Trinidad and Tobago, Honduras, the Bahamas, Belize, Guatemala, Nicaragua,
Panama, Paraguay, Ecuador, Bolivia, Costa Rica, the Dominican Republic,
Guyana, Grenada, Jamaica, Suriname, Saint Kitts and Nevis, Saint Vincent and
the Grenadines, Saint Lucia, Dominica, Haiti, Barbados, Montserrat (a British
overseas territory) and Uruguay.
(2) For 36 developing countries and regions, for which data for 2010 were notavailable, but those for 2009 were listed in the BOP (July 2011), 2009 data from the
BOP were used as data for estimation purposes.
(3) As a result of the above steps, 2010 data on inward direct investment values wereavailable for the following countries and regions: 33 developed countries and regions(corresponding to the IMF’s classification of Advanced Economies: the UnitedStates, Canada, Australia, Japan, New Zealand, EU15, Iceland, Norway, Switzerland,
Cyprus, Malta, Slovenia, Czech Republic, Slovakia, Israel, South Korea, Singapore,
Hong Kong and Taiwan; for an aggregate sum of US$730.8 billion), and 90
developing countries and regions (countries other than the 33 developed countries
and regions; for an aggregate sum of US$462.8 billion). The aggregate sum for the
90 countries and regions in 2009 accounted for 93.7% of the aggregate sum for 126
developing countries, for which data for 2009 were available.
(4) The aggregate sum for the 33 developed countries and regions was used as theinward direct investment value for developed countries in 2010, and that for the 90
developing countries and regions was divided by the percentage of 93.7% for 2009
to obtain an estimated 100% value, which was used as the direct investment value
for developing countries in 2009. The aggregate sum for developed and developing
countries was used as the total global inward direct investment value.
Incidentally, the same method was used for the global outward FDI value: Fromthe 33 developed countries and regions, for which 2010 data were available (asum of US$1.1213 trillion) and 77 developing countries, for which 2009 data werealso available (US$174.6 billion, with the 2009 aggregate sum for the 77 countries
accounting for 93.1% of the aggregate sum for the 121 countries and regions, forwhich the data for 2009 were available), the sum was estimated for developed
countries, developing countries, and the world total, respectively.

2) IT Products

Product nameHS
(1) Computers and peripherals (total)
8443.31, 8471, 8473
Multifunctional digital equipment
8443.31
Computers and peripherals
8471
Parts of computer and peripherals
8473(2) Office equipment
8469, 8470, 9009
(3) Telecommunications equipment
8517, 8525.10, 8525.20, 8526
(4) Semiconductors and electronic components
8540 - 8542
Electronic tubes and semiconductors
8540 - 8541
Integrated circuits
8542(5) Other electronic components 8504, 8518, 8522, 8523, 8529, 8532 - 8536
Display modules
8529.90(6) Video equipment
8521, 8525.30, 8525.40, 8525.80, 8528, 9006
Digital cameras
8525.80
Reception apparatus for television
8528.71, 8528.72(7) Audio equipment
8519 - 8520
Portable audio players
8519.818543, 9014 - 9015, 9024 - 9027, 9030 - 9032
(8) Measuring and testing equipment(9) Machines and apparatus for the8486
manufacture of semiconductor devices
IT parts
8473, 8486.90, (4), (5)8443.31, 8471, 8486.10, 8486.20,
Finished IT products
8486.30, 8486.40, (2), (3), (6), (7), (8)Total IT equipment
IT parts + Finished IT products

109

Table 1 GDP growth rate and contribution rate by country and region
(%)
2007
2008
2009
2010
Growth rate Contribution Growth rate Contribution Growth rate Contribution Growth rate Contribution
1.9
0.4
0.0
0.0
-2.6
-0.5
2.8
0.6
3.2
0.7
0.7
0.2
-4.1
-0.9
1.8
0.4
2.4
0.2
-1.2
-0.1
-6.3
-0.4
3.9
0.2
10.8
1.9
7.0
1.3
5.8
1.1
9.3
1.9
14.2
1.4
9.6
1.1
9.2
1.1
10.3
1.3
5.1
0.1
2.3
0.0
0.2
0.0
6.1
0.1
6.7
0.3
4.4
0.2
1.4
0.1
7.5
0.3
5.0
0.0
2.5
0.0
-2.3
-0.0
7.8
0.1
8.8
0.0
1.5
0.0
-0.8
-0.0
14.5
0.1
6.5
0.0
4.7
0.0
-1.7
-0.0
7.2
0.0
8.5
0.0
6.3
0.0
5.3
0.0
6.8
0.0

U.S.
EU27
Japan
East Asia
China
South Korea
ASEAN
ThailandSingapore
Malaysia
Vietnam
India

9.9

0.4

6.2

0.3

6.8

0.3

10.4

0.5

Australia
New ZealandCentral and South America
BrazilCentral and Eastern Europe
RussiaMiddle East and North Africa
Sub-Sahara Africa
World

4.6
2.8
5.7
6.1
5.5
8.5
6.2
7.2
5.4

0.1
0.0
0.5
0.2
0.2
0.3
0.3
0.2
5.4

2.6
-0.2
4.3
5.2
3.2
5.2
5.1
5.6
2.9

0.0
-0.0
0.4
0.1
0.1
0.2
0.2
0.1
2.9

1.3
-2.1
-1.7
-0.6
-3.6
-7.8
1.8
2.8
-0.5

0.0
-0.0
-0.1
-0.0
-0.1
-0.3
0.1
0.1
-0.5

2.7
1.5
6.1
7.5
4.2
4.0
3.8
5.0
5.0

0.0
0.0
0.5
0.2
0.1
0.1
0.2
0.1
5.0

For reference:
Developed countries
Developing countries
ASEAN +6
BRICS including South Africa
BRICS not including South Africa

2.7
8.8
8.6
11.1
11.3

1.6
3.7
2.5
2.4
2.3

0.2
6.1
5.2
7.5
7.6

0.1
2.7
1.5
1.7
1.7

-3.4
2.7
3.6
4.8
5.0

-1.8
1.2
1.1
1.1
1.1

3.0
7.3
8.2
9.0
9.2

1.6
3.4
2.6
2.2
2.2

Notes: (1) The world growth rate was calculated by the IMF using purchasing power parity weighting.
(2) Each country or region’s contribution rate was calculated using 2009 prices and purchasing power parity weighting.
(3) East Asia includes China, South Korea, Hong Kong, Taiwan and ASEAN.
(4) ASEAN+6 includes ASEAN, Japan, China, South Korea, India, Australia, and New Zealand.
(5) Some figures may differ from those in other parts because of the revision and the difference in original statistics.
(6) Developed and developing countries are as defined in the WEO (IMF).
Source: Based on WEO (IMF) data.

Table 2 World export matrix (2010)(US$ million)
World

World
NAFTA
U.S.
EU27
Japan
East Asia
ASEAN+6
ASEAN+3
China
ASEAN
APEC

14,994,300
1,951,609
1,277,630
4,987,300
771,720
3,788,921
4,368,862
3,908,276
1,580,400
1,094,542
7,280,372

NAFTA
2,429,653
938,534
411,515
329,372
139,374
585,450
687,026
643,357
323,761
119,200
1,719,395

U.S.
1,779,810
500,690
272,179
120,483
509,035
594,969
556,331283,679
106,177
1,174,943

EU27

Japan

East Asia

ASEAN+6

5,222,840
289,230
240,589
3,351,170
87,105544,144619,886
560,725
311,478
118,009
1,142,212

617,694
72,64560,54550,674
282,113296,217
248,671
120,262
102,364
421,099

3,310,640
284,218
250,594
288,549
413,970
1,612,441
1,795,822
1,630,118
457,604
551,095
2,489,745

3,750,062
353,848
305,552
364,196351,583
1,669,299
1,826,780
1,604,857
398,180
633,975
2,642,902

ASEAN+3
3,219,252
303,229
261,702
286,518
324,764
1,478,858
1,599,376
1,409,734
327,309554,315
2,334,702

APEC
China
1,275,590
110,939
91,878130,088
149,626
542,674
488,203413,893
138,791904,058

ASEAN
944,196
76,56370,43473,061
112,868
523,672
615,621571,782
138,236
268,852
742,800

6,835,431
1,351,892
770,887
818,477
582,698
2,609,047
2,947,405
2,669,051
967,840
808,986
4,870,052

Notes: (1) Exports from each economy to Taiwan were converted to FOB figures by multiplying 0.9 by Taiwan’s CIF imports.
(2) East Asia consists of China, South Korea, Hong Kong, Taiwan, and ASEAN.
(3) ASEAN + 6 includes ASEAN, Japan, China, South Korea, India, Australia, and New Zealand.
(4) ASEAN + 3 includes ASEAN, Japan, China, and South Korea.
(5) A PEC includes Japan, Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, South Korea, Malaysia, Mexico, New Zealand, Papua New
Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, U.S., and Vietnam (21 economies in total).
Sources: Direction of Trade Statistics (IMF) and Taiwan’s trade statistics.

110Appendix World and Japan’s Statistics of Trade and Investment

Table 3 World trade by country and region(US$ million, %)Exports
Imports
2008
2009
2010
2008
2009
2010
Growth rate
Value
Growth rate
Value
Growth rate
Value
Growth rate
Value
Growth rate
Value
Growth rate
Value
North America
1,743,951
11.2 1,372,657-21.3 1,666,242
21.4 2,512,550
7.5 1,881,111-25.1 2,305,085
22.5
U.S.
1,287,442
12.1 1,056,043-18.0 1,278,263
21.0 2,103,641
7.5 1,559,625-25.9 1,913,160
22.7
Canada456,5098.6
316,614-30.6
387,97922.5
408,9097.4
321,487-21.4
391,925
21.9
Europe6,879,535
13.2 5,240,567-23.8 5,985,581
14.2 7,049,983
18.1 5,254,823-25.5 5,967,892
13.6
EU15
5,302,835
10.3 4,089,174-22.9 4,573,192
11.8 5,462,771
11.5 4,137,112-24.3 4,650,783
12.4
Germany
1,448,973
9.6 1,120,639-22.7 1,268,890
13.2 1,185,536
12.3
925,833-21.9 1,066,723
15.2
Netherlands
638,503
15.7
498,503-21.9
573,83115.1
581,495
17.9
443,548-23.7
517,154
16.6
France616,90910.2
484,367-21.5
520,889
7.5
716,50213.4
559,895-21.9
605,919
8.2
Italy
544,5318.8
406,838-25.3
447,41810.0
563,001
10.0
414,876-26.3
484,000
16.7
UK
483,8488.9
354,870-26.7
419,39918.2
669,882
5.3
514,217-23.2
588,070
14.4
Belgium
473,2509.7
369,992-21.8
412,408
11.5
467,284
13.4
351,942-24.7
390,767
11.0
Spain
282,395
11.4
227,460-19.5
245,7218.0
422,643
8.4
293,560-30.5
314,402
7.1
Sweden183,9468.8
131,056-28.8
158,30920.8
169,026
10.1
120,297-28.8
148,683
23.6
Austria
181,699
10.9
137,092-24.5
152,284
11.1
184,465
13.0
143,120-22.4
158,755
10.9
Ireland125,616
3.4
115,579-8.0
116,903
1.1
84,1180.2
62,495-25.7
60,080-3.9
Denmark
117,097
13.3
93,964-19.8
97,6493.9109,437
11.5
82,561-24.6
84,808
2.7
Finland96,817
7.4
62,894-35.0
69,642
10.7
92,08912.6
60,889-33.968,525
12.5
Portugal
57,5249.5
44,359-22.948,78010.0
94,651
15.0
71,754-24.2
75,641
5.4
Greece26,40411.8
20,464-22.5
21,423
4.7
91,032
19.4
67,664-25.7
63,263-6.5
Luxembourg
25,32413.0
21,096-16.7
19,649-6.931,611
14.6
24,459-22.6
23,994-1.9
Poland171,02321.8
136,786-20.0
155,787
13.9
209,360
26.0
149,718-28.5
173,719
16.0
Czech Republic
147,21419.9
113,168-23.1
132,901
17.4
142,21320.0
105,247-26.0
126,167
19.9
Hungary
108,745
13.8
83,197-23.5
95,49714.8
109,208
14.1
77,902-28.7
88,157
13.2
Slovakia
71,222
21.4
56,247-21.0
65,391
16.3
73,961
21.6
55,774-24.6
66,587
19.4
Romania
49,68522.5
40,674-18.1
49,383
21.4
84,291
19.4
54,465-35.4
61,947
13.7
Slovenia
34,232
13.6
26,187-23.5
29,44612.4
37,12417.4
26,529-28.5
30,051
13.3
Lithuania
23,74038.2
16,494-30.5
20,821
26.2
31,26027.8
18,340-41.3
23,38927.5
Switzerland
200,336
16.4
173,148-13.6
195,318
12.8
183,200
13.6
155,995-14.9
175,978
12.8
Norway172,455
26.4
120,818-29.9
130,184
7.8
90,206
12.3
69,258-23.2
74,9058.2
Asia
4,462,475
13.3 3,679,109-17.6 4,788,715
30.2 4,304,855
20.1 3,469,924-19.4 4,589,000
32.3
Japan
775,9188.9
580,787-25.1
767,02532.1
756,08621.7
552,252-27.0
691,447
25.2
East Asia
3,429,191
57.7 2,880,305-16.0 3,735,585
29.7 3,123,379
17.6 2,567,879-17.8 3,448,476
34.3
China
1,428,869
17.3 1,202,047-15.9 1,578,444
31.3 1,131,469
18.3 1,003,893-11.3 1,393,909
38.9
South Korea
422,00713.6
363,534-13.9
466,38428.3
435,275
22.0
323,085-25.8
425,212
31.6
Hong Kong
370,6546.0
329,738-11.0
401,02321.6
393,443
6.1
352,688-10.4
442,035
25.3
Taiwan243,233
3.6
193,815-20.3
262,01735.2
239,666
9.6
174,071-27.4
251,79444.6
ASEAN
964,42813.2
791,171-18.0 1,027,717
29.9
923,52722.5
714,142-22.7
935,525
31.0
Singapore
338,14312.9
269,909-20.2
352,07630.4
319,74821.5
245,852-23.1
310,973
26.5
Malaysia
199,656
13.4
157,527-21.1
198,94126.3
156,538
7.0
123,907-20.8
164,847
33.0
Thailand
177,8469.0
151,793-14.6
195,29728.7
180,583
19.0
134,597-25.5
184,51937.1
Indonesia
137,02020.1
116,510-15.0
157,77935.4
129,197
73.5
96,829-25.1
135,663
40.1
Vietnam
62,685
29.1
57,096-8.9
72,19226.4
80,71428.8
69,949-13.3
84,801
21.2
Philippines
49,078-2.8
38,335-21.9
51,432
34.2
56,7462.2
43,008-24.2
54,721
27.2
India
195,07032.2
165,202-15.3
223,176
35.1
321,41047.7
257,658-19.8
328,731
27.6
Oceania
227,692
27.7
187,319-17.7
253,94135.6
247,158
20.5
210,731-14.7
249,798
18.5
Australia
186,505
31.9
154,525-17.1
212,78237.7
190,86820.9
159,268-16.6
193,558
21.5
New Zealand
30,571
13.4
24,977-18.3
31,41925.8
32,32411.1
24,261-24.9
28,92919.2
Central and South America
884,756
16.9
672,644-24.0
858,266
27.6
890,34721.6
667,789-25.0
866,582
29.8
Mexico292,666
7.6
229,621-21.5
298,23029.9
308,849
9.5
234,385-24.1
301,482
28.6
Brazil197,94223.2
152,995-22.7
201,91532.0
173,19743.6
127,647-26.3
181,649
42.3
Argentina
70,01925.1
55,669-20.5
67,42921.1
57,46228.5
38,781-32.5
56,18644.9
Chile69,5805.8
49,974-28.2
67,42534.9
56,47532.2
38,402-32.0
52,56036.9
Colombia
37,62629.4
32,853-12.7
39,552
20.4
39,66921.7
32,898-17.1
40,68323.7
Peru
31,20813.1
26,535-15.0
34,90931.6
29,982
46.5
21,864-27.1
30,127
37.8
Costa Rica
9,745
1.8
8,836
-9.3
9,045
2.4
15,2898.5
12,232-20.0
13,92013.8
Panama
1,125
4.3
806
-28.4
711
-11.8
8,896
32.2
7,660
-13.9
8,964
17.0
Russia, CIS
532,557
34.5
334,856-37.1
477,33042.5
446,957
36.2
281,350-37.1
358,030
27.3
Russia367,57331.4
233,936-36.4
348,52849.0
255,57434.8
155,206-39.3
211,439
36.2
Ukraine67,00336.1
39,703-40.7
51,431
29.5
85,53541.0
45,436-46.9
60,74033.7
Middle East
912,005
41.9
571,123-37.4
743,92930.3
735,840
25.4
573,898-22.0
680,766
18.6
Turkey131,95922.9
102,161-22.6
113,03010.6
201,70918.4
140,932-30.1
183,75030.4
Africa491,25431.2
324,108-34.0
421,95630.2
443,03527.1
375,942-15.1
429,649
14.3
South Africa
80,20814.8
62,380-22.2
81,311
30.3
91,05913.964,867-28.8
80,212
23.7
Notes: (1) Estimated for regions other than North America. See Annotation II for the estimating method.
(2) ASEAN includes the following six countries: Singapore, Thailand, Malaysia, Indonesia, the Philippines, and Vietnam.
(3) East Asia includes the following 10 economies: China, South Korea, Hong Kong, Taiwan, and the six ASEAN countries.
Sources: National trade statistics.

111

Table 4 World exports by product (2010)
World

U.S.

EU15

Value

Growth rate

Value

Growth rate

Value

2,187,212
1,093,925
1,093,287

24.1
27.0
21.2

192,167

93,301
98,866

23.8
19.5
28.1

474,760
21,196311,293
142,271
4,056
350,608
535,713132,218
403,495
405,273
58,860181,820
41,34384,615
5,059
4,033
178,293
51,630

20.7
25.3
22.1
17.2
5.4
17.8
33.9
58.7
27.4
21.3
21.9
10.7
14.1
15.4
1.1
-5.4
25.3
135.2

38,571531
23,931
14,110485
24,92047,465
9,772
37,69429,012
2,631
8,106
1,925
2,901
381
254
30,91012,316

15.0
34.4
17.9
9.9
2.1
21.5
25.8
28.8
25.1
12.1
-12.1
32.8
24.2
47.6
-0.6
-5.1
22.4
131.0

15,049,538
Total
Machinery and equipment 5,822,590
General equipment
1,811,020
Air conditioners
32,902Mining and construction equipment
83,867
Machine tools
26,823
Electrical equipment
1,977,202
Transport equipment 1,521,704
Automobiles
669,333
Passenger vehicles
554,203
Motorcycles
16,702
Automotive parts
325,991
Precision instruments
512,663
Chemicals
2,034,018
Industrial chemicals
1,386,857
Pharmaceuticals and medical supplies
448,189
Plastics and rubber
647,161
Foodstuffs
965,382
Seafood
80,561
Garlic3,018
Coffee23,603Grains76,569Wheat
31,166Corn
22,488Rice
15,305
Processed food products
429,702
Oils, fats, and other animal and vegetable products
151,354
Miscellaneous manufactured goods 425,320
Iron ore
107,990
Mineral fuels etc.
2,225,466
Mineral fuels
2,110,331
Coal
107,807
LNG
86,785
Petroleum and petroleum products 1,739,709
Crude oil
1,102,801
Textiles and textile products
634,957
Synthetic fibers and textiles
74,442Clothing
347,184
Base metals and base metal products 1,102,289
Steel
621,681Primary steel products 379,727
Steel products
241,955
Copper
65,800
Nickel14,249
Aluminum
49,597Lead
5,131

Growth rate

Japan

China

Value

Growth rate

Value

409,741
178,056
231,685

11.8 142,123
15.9 85,358
8.8 56,764

32.2
28.6
38.0

83,7695,060
56,381
22,329719
70,93858,86525,83333,033
94,6406,261
24,670
7,474
7,206
1,786
1,464
63,08911,264

-3.6
-1.8
-5.4
0.7
-0.7
14.6
29.3
50.5
16.5
11.5
8.8
1.8
15.0
-9.7
-6.6
-10.8
13.6
130.7

6.2
-11.5
5.9
10.5
-33.3
-4.9
29.4
40.0
25.9
24.3
9.3
5.7
4.4
4.4
66.9
75.6
45.8
131.0

22.2 1,278,263 21.0 4,573,192
11.8 767,025
20.8 593,406 17.6 1,835,697 10.8 498,427
18.5 182,898 19.4 655,614
6.3 150,261
24.7
2,332 21.8
7,018
0.5
1,933
17.7
16,083 11.4
30,040 10.4 10,018
25.5
1,656 23.9
9,235
-6.9
7,004
22.6
151,712 21.5 410,715 13.2 131,404
21.3
183,935 14.3 604,878 14.2 176,027
27.3
55,512 36.3 292,855 16.2 103,790
27.0
39,326 38.7 250,715 16.0 90,455
9.1
1,196
2.9
5,434
-3.6
3,118
30.9
37,277 38.1 123,417
21.1 38,852
20.2
74,862 13.7 164,490
11.2 40,734
18.3
215,162 18.3 941,124 10.0 98,949
14.8
149,441 15.5 696,263
7.6 56,870
5.2
40,771
0.3 296,387
4.2
3,604
26.7
65,721 25.3 244,861
17.3 42,080
9.5
88,921 15.7 403,320
4.3
4,755
13.0
4,027 14.1
18,831
8.7
1,292
94.4
19 48.9
402
41.9
0
19.4
720 20.6
5,331
12.4
7
4.3
20,062 15.4
15,4527.7
29
0.8
6,774 25.9
8,684 10.4
15.3
10,084 11.3
2,439
-3.3
-4.7
2,337
7.3
1,499
-8.1
29
8.5
31,928 15.3 199,498
2.7
2,885
19.1
27,294 15.6
28,6095.4
331
12.0
29,356
8.7 132,387
2.1
6,785
87.6
1,092 206.4
5,852 102.9
0
33.1
81,523 48.1 298,078 26.6 13,010
34.6
78,178 49.3 241,736
29.1 12,349
28.4
9,837 63.4
4,180
-3.3
2
35.1
644 134.7
532
7.2
33.8
60,324 46.6
217,669 29.3 11,933
33.3
1,772
0.3
45,682 28.2
0
14.7
23,595 29.0
151,274
4.7
8,615
20.1
3,828 25.6
17,266
8.6
3,961
10.1
3,990 13.8
83,8642.2
385
29.4
67,410 26.5
387,91221.8 70,395
25.0
36,016 23.2 231,246
18.1 51,134
38.3
19,828 28.4 135,617
31.7 38,845
8.6
16,188 17.4
95,6293.0 12,289
49.4
719 35.5
7,414 24.0
4,028
54.3
205
1.8
1,879 33.0
232
38.2
1,088 59.9
10,857
55.1
52
24.8
87
4.2
1,542 29.6
133

Value

Growth rate

497,527
170,520
327,00630.2 142,616
36.2 87,168
27.3 55,448

180,721
10,301
139,10731,313
1,201
107,964
62,17432,52529,64976,656
10,99052,347
11,397
17,530995
720
14,443
1,026

34.0
45.8
36.9
19.5
-0.4
22.8
56.7
102.7
25.5
29.6
30.0
9.9
17.5
29.4
5.1
-15.5
42.0
124.4

32.1 1,578,444
35.7 842,965
47.4 309,958
55.3
10,087
80.7
7,450
103.7
1,286
22.5 388,916
36.9
88,881
45.5
6,530
44.8
2,206
-1.5
4,392
40.7
17,56838.6
55,21028.2 124,641
24.1
75,024
4.9
4,492
34.2
49,61719.4
44,517
19.7
8,816
-99.2
2,319
28.9
102
97.0
539
n.a.
0
n.a.
33
97.7
416
18.1
19,38511.5
3,128
9.2 134,267
-30.6
5
24.3
26,72024.4
25,406
68.5
2,242
n.a.
23.9
20,282307.9
1,661
16.6 199,561
21.3
18,052
9.8 121,070
32.6 110,835
31.4
68,10736.8
28,93716.9
39,170
30.2
306
622.4
1,155
-6.0
1,536
5.1
55

Growth rate

ASEAN431.3 603,449
32.0 224,574
31.4 74,671
42.0
4,642
16.8
1,622
34.7
291
29.1 109,381
47.9 29,560
31.6 14,405
58.8
8,415
43.5
704
43.1
8,328
33.4 10,962
38.4 77,345
38.6 27,087
31.3
854
38.1 50,257
25.4 43,106
29.3
5,923
113.4
4
25.4
826
-12.7
5,520
-99.9
12
5.6
153
-20.5
5,341
20.9 24,494
13.7 34,837
24.2 13,094
729.6
349
30.8 88,993
31.6 87,897-5.6 18,389
n.a. 22,418
28.4 42,026-25.1 21,194
23.7 23,003
33.1
6,511
20.5 11,832
43.7 29,215
44.0 12,311
114.7
4,599
15.9
7,712
-30.4
3,062
102.3
0
203.2
723
26.2
93

(US$ million, %)Asia NIEs
Value

Growth rate

22.5
21.1
24.6

553,566
401,254
152,312

31.5
34.9
23.2

14.4
22.0
15.6
11.5
-0.2
28.9
20.7
50.2
13.7
30.3
19.8
37.4
18.7
70.9
-0.5
-8.2
48.1
234.5

76,7091,304
27,46347,942830
80,905
249,418
32,939216,478
102,548
22,12917,007
5,855
3,892
1,095
964
19,311
5,742

31.0
23.1
27.2
33.5
24.3
15.7
38.3
59.5
35.5
27.2
27.5
12.5
15.8
13.5
-8.6
-11.6
52.4
199.3

30.0 1,481,500
25.6 912,176
19.2 187,725
36.5
2,059
43.7
7,850
113.4
4,239
26.5 506,486
36.3 124,531
67.6
37,76070.3
33,973
12.7
598
36.5
24,12037.0 93,434
48.0 163,369
37.5
83,387
29.0
7,960
54.2
79,981
16.6 20,686
18.8
3,468
4.6
2
-1.5
63
4.0
45
79.6
0
-40.8
0
6.2
44
19.2
11,850
36.1
1,300
21.7
29,959116.0
5
37.5 103,557
36.7 102,140
32.3
2
37.2
0
34.6 101,565
29.4
22
18.6
61,24231.0
11,985
10.6
26,15228.0
85,7599.3
53,73033.9
35,889-1.4
17,841
25.5
1,602
617.0
1,046
33.3
628
110.4
340

28.0
29.7
30.4
24.4
13.1
65.6
30.0
24.8
37.1
39.2
-1.9
52.0
33.1
31.2
28.3
9.7
34.3
21.0
21.5
48.8
46.4
25.7
35.1
18.1
27.4
22.8
15.2
2.2
128.4
34.8
34.9
65.5
-26.7
35.0
3.6
12.6
21.7
5.6
28.9
27.1
35.4
13.1
56.7
75.4
-25.5
12.8

<IT Equipment>
Total IT equipment
IT parts
Finished IT products
Computers and peripherals (total)

Multifunctional digital equipment
Computers and peripherals
Parts of computer and peripherals
Office equipment
Telecommunications equipment
Semiconductors and electronic components
Electronic tubes and semiconductors

Integrated circuits

Other electric and electronic components

Display modules
Video equipment
Digital cameras
Reception apparatus for television
Audio equipment
Portable audio players
Measuring and testing equipment

Machines and apparatus for the
manufacture of semiconductor devices

Notes: (1) See Annotation I for the definition of products.
(2) Value of world exports based on JETRO estimates.
(3) Asia NIEs include South Korea, Hong Kong, Singapore, and Taiwan.
Sources: Same as Table 3.

112

5,806
490
2,645
2,671
51
6,780
47,322
12,831
34,491
31,815
5,599
11,596
9,252
304
151
140
19,444
19,15647,092
2,144
28,49916,448308
4,614
49,62011,79537,82520,942
3,685
13,369
3,141
6,676
192
107
6,256
222

Appendix World and Japan’s Statistics of Trade and Investment

Table 5 World imports by product (2010)
World

Value

15,469,552
Total
Machinery and equipment 5,881,423
General equipment
1,831,114
Air conditioners
32,901Mining and construction equipment
80,246
Machine tools
25,861
Electrical equipment 2,126,451
Transport equipment 1,421,622
Automobiles
669,672
Passenger vehicles
549,183
Motorcycles
15,476
Automotive parts
317,183
Precision instruments
502,236
Chemicals
2,088,829
Industrial chemicals
1,431,067
Pharmaceuticals and medical supplies
455,117
Plastics and rubber
657,762
Foodstuffs
989,306
Seafood
83,425Garlic1,652
Coffee22,202Grains82,973Wheat
33,547
Corn
24,552
Rice
16,476
Processed food products
437,227
Oils, fats, and other animal and vegetable products
156,058
Miscellaneous manufactured goods 457,229
Iron ore
132,754
Mineral fuels etc.
2,355,623
Mineral fuels
2,236,195
Coal
118,037
LNG
105,334
Petroleum and petroleum products 1,840,570
Crude oil
1,186,907
Textiles and textile products
611,430
Synthetic fibers and textiles
71,499Clothing
341,799
Base metals and base metal products 1,107,895
Steel
627,291
Primary steel products 381,523
Steel products
245,768
Copper
62,456
Nickel
15,719
Aluminum
49,653Lead
5,187

Growth rate

U.S.

Value

21.1 1,913,160
19.7
775,11616.8 249,719
20.3
3,626
12.8
5,172
22.4
2,182
22.6 258,230
19.7 204,547
24.7
127,70924.2
115,198
1.4
1,143
29.4
48,43918.6
62,62017.1
214,169
13.6 157,454
5.5
61,62925.6
56,716
8.3
89,885
10.3
11,198
23.0
130
11.6
4,561
1.9
1,850
-3.1
563
12.3
300
-4.5
574
7.2
43,78616.1
6,981
11.0 106,020
69.2
703
31.0 355,056
32.6 352,133
19.2
1,376
33.7
2,380
34.4 328,984
33.4 260,105
11.5
95,450
15.0
3,560
7.9
72,52026.5
94,631
20.6
48,121
32.6
21,461
5.8
26,659
43.9
4,338
53.9
2,451
40.0
6,361
21.8
560

Growth rate

EU15

Japan

China

ASEAN4Value

Growth rate

Value

Growth rate

Value

Growth rate

Value

Growth rate

23.0 505,066
28.7 201,461
20.9 303,605
28.0 131,367
6.8
7,257
31.6 96,268
23.1 27,842
5.8
1,341
19.2 92,079
38.2 84,121
57.7 48,740
32.3 35,381
22.9
87,001
21.6
7,901
5.9 56,234
10.3 12,081
2.1 26,272
10.3
2,939
10.0
2,382
31.1 45,217
80.0
4,767

15.9
26.6
9.8
6.7
7.3
9.2
-1.2
10.7
14.1
57.3
83.3
31.5
14.4
9.4
2.7
5.1
3.7
-6.9
-11.1
11.3
90.9

99,41047,274
52,136
20,7581,659
14,451
4,648
283
14,29924,3193,905
20,414
17,467
4,483
11,061
1,771
5,501
563
498
8,457
2,202

33.5
28.5
38.4
26.3
22.3
27.7
23.3
12.8
33.3
29.6
56.6
25.4
26.4
33.0
76.7
23.5
165.2
90.4
114.9
24.9
96.1

355,995
265,131
90,864
46,796655
26,86019,281
133
23,274
180,617
22,674
157,943
64,330
7,112
5,841
4,422
44
42
41
23,476
11,48532.3 117,383
31.6 89,370
34.5 28,013
30.5 19,512
45.8
318
23.4
7,094
41.2 12,099
15.5
157
18.5
9,222
32.2 51,887
42.6
5,604
30.8 46,283
26.6 25,225
17.5
6,516
20.7
2,840
37.3
735
-17.7
463
15.1
103
18.2
47
43.9
7,744
138.5
692

30.8
30.1
33.4
8.2
24.6
32.0
-2.4
3.0
25.6
38.8
44.5
38.2
33.5
50.5
36.3
1.9
90.3
29.7
35.1
40.5
187.4

22.7 4,650,783
24.5 1,637,710
23.0 518,794
22.6
9,305
33.8 12,556
16.6
4,749
20.6 465,437
34.2 515,417
41.3 235,606
41.7 202,373
-36.6
6,553
42.9 112,255
17.9 138,063
17.1 773,456
13.2 559,482
10.6 221,024
29.4 213,974
11.8 401,092
12.0 32,506
95.3
477
21.7
11,518-10.3
16,056
-19.4
7,091
5.7
4,184
-2.4
2,118
10.3 179,076
11.7
42,17717.9 166,077
85.8
16,22830.6 665,221
30.9 593,453-3.8
23,1960.2
21,04832.5 476,121
33.7 305,462
14.7 204,354
26.5
15,49312.8 141,357
31.5 362,291
31.3 200,407
73.4 125,870
9.8
74,53743.9
15,777
92.0
5,033
19.5
18,96836.6
1,600

12.4 691,447
10.6 186,647
8.1 55,882
8.1
2,274
11.8
242
-13.6
351
17.6 86,573
8.1 19,534
3.5
6,816
1.5
6,471
-4.9
592
17.4
5,992
8.2 24,658
9.9 71,772
7.0 53,692
1.2 16,212
18.3 18,080
2.4 59,838
7.1 11,695
44.5
41
15.1
1,361
-3.9
6,928
-2.7
1,663
0.2
3,950
-13.8
506
-0.1 22,648
5.4
6,437
4.7 19,568
100.5 15,637
23.9 198,592
26.5 198,148
2.8 24,180
28.6 39,611
30.0 125,070
29.4 105,667
5.3 32,907
14.4
1,245
3.0 25,366
28.6 32,973
24.4 14,172
38.4
8,516
6.2
5,656
50.1
356
104.7
954
55.9
6,122
33.4
38

25.2 1,393,909
38.9 539,750
26.8 644,315
34.4 226,222
21.6 172,403
39.2 71,313
25.0
820
37.5
935
6.0
5,465
46.3
3,923
14.4
7,520
64.7
1,587
33.4 314,405
29.0 109,334
19.6
65,581
52.1 32,909
40.1 30,595
99.3
9,815
40.7
28,912 101.4
6,156
-5.9
12
54.5
380
38.7 20,346
46.3
9,770
23.3
91,92534.1 12,666
26.1 173,778
35.4 67,972
22.9
93,17934.2 42,617
24.2
7,240
20.4
3,695
36.5 80,599
36.9 25,355
11.2
24,74943.0 34,303
11.4
4,371
21.3
3,067
84.0
n.a.
395
24.2
70
38.1
215
5.8
1,501
71.2
6,317
15.0
309
50.7
2,647
5.1
367 1,692.9
1,268
-17.8
253
25.8
2,362
9.7
9,608
49.8 15,270
11.5 36,264
25.2
5,724
3.7
6,720
36.2
4,666
79.6
78,91157.3
855
30.3 188,381
53.0 85,567
30.2 185,307
52.4 84,359
10.0
17,016
60.9
3,230
30.6
3,014 138.70
34.0 160,765
49.8 74,910
31.9 134,936
51.8 43,804
5.9
29,56535.7 12,733
30.9
6,801
18.8
3,337
5.6
2,234
35.3
1,118
51.7 102,825
19.4 57,032
39.1 34,453-6.0 36,182
72.7 25,298-9.0 24,019
7.6
9,155
3.2 12,163
63.7
22,144
39.5
4,218
142.8
3,854
7.9
75
81.0
800 -70.8
2,782
49.5
114 -61.9
496(US$ million, %)Asia NIEs
Value

Growth rate

461,539
318,470
143,070
60,811
1,209
26,63332,969571
51,181
203,804
24,488179,316
77,29011,19014,757
7,130
1,865
1,015
956
24,27827,833

33.6
30.3
41.5
26.8
33.6
30.4
23.8
28.1
29.3
30.2
40.6
28.9
30.4
16.9
16.9
11.4
23.5
0.6
2.1
44.8
147.3

35.5 1,430,015
31.0 671,616
25.3 184,046
50.0
1,771
56.8
6,562
73.9
2,409
34.2 393,604
31.5 36,475
67.9
10,211
70.2
8,704
9.3
240
71.4
7,900
36.1
57,49137.0 135,791
32.7 90,599
11.7
9,389
44.7 45,192
26.4 52,853
11.6
6,818
62.4
89
38.1
516
23.7
5,684
-1.1
1,464
61.8
3,240
45.7
906
26.3 20,411
38.3
5,708
34.9 29,071
85.8
9,183
38.6 270,835
38.5 267,634
28.5 20,389-98.9 22,788
39.2 217,246
28.6 118,512
39.5 42,733
39.7
4,849
25.8 22,799
46.4 95,662
41.4 55,099
52.4 42,098
23.7 13,001
63.2
7,757
67.1
1,993
60.4
4,607
35.0
669

30.5
30.0
33.7
22.3
14.3
65.2
28.8
16.1
31.0
29.7
16.8
41.1
36.1
35.2
32.8
13.7
40.4
20.5
18.5
406.9
30.1
17.3
6.9
24.5
12.2
20.8
16.1
5.3
99.7
35.8
36.0
21.5
28.1
38.0
30.9
15.9
25.5
11.7
33.1
31.5
41.7
6.7
31.6
25.7
20.8
15.4

<IT Equipment>
Total IT equipment
IT parts
Finished IT products

2,332,651 25.4
1,213,423 28.6
1,119,227 22.0
Computers and peripherals (total)
475,148 20.3
Multifunctional digital equipment
19,881 15.6
Computers and peripherals 310,000 22.4
Parts of computer and peripherals 145,266 16.8
Office equipment
4,935 11.0
Telecommunications equipment 372,113 19.7
Semiconductors and electronic components 625,245
35.9
Electronic tubes and semiconductors 128,120 60.2
Integrated circuits
497,125 30.8
Other electric and electronic components 431,878 22.2
Display modules
76,479 24.8
Video equipment
182,629 13.1
Digital cameras
43,887 14.3
Reception apparatus for television
80,630 14.1
Audio equipment
7,119
5.7
Portable audio players
5,884
5.1
Measuring and testing equipment 180,235 24.5
Machines and apparatus for the
53,350 125.4
manufacture of semiconductor devices

316,296
89,664
226,632
98,284
4,985
70,28323,016921
74,78329,526
7,806
21,72035,2532,228
46,768
8,323
24,243959
808
24,3505,451

Notes and Sources: Same as Table 4.

113

Table 6 FDI of major economies (net flows; balance-of-payments basis)

U.S.
CanadaEU27
EU15
Belgium
Luxembourg
Austria
Denmark
FinlandFranceGermany
GreeceIreland
Italy
Netherlands
Portugal
Spain
SwedenUK
12 new EU members
Czech RepublicHungary
PolandSlovakia
Slovenia
Estonia
LatviaLithuania
CyprusMalta
Bulgaria
Romania
NorwaySwitzerland
Australia
New ZealandJapan
East Asia
China
South Korea
TaiwanHong Kong
ASEAN5Thailand
Malaysia
Indonesia
Philippines
Singapore
India
Argentina
BrazilChile
Colombia
MexicoVenezuela
RussiaIsraelSouth Africa
TurkeyDeveloped economies (33 countries and regions)

Developing economies
World

2009
158,581
21,406
519,994
486,127
22,695
209,746
8,967
2,966
-4
34,027
37,627
2,436
24,58520,077
29,7042,706
9,135
10,322
71,14033,8672,870
3,535
13,022
-50
-586
1,908
94
126
3,991
760
3,351
4,846
14,07426,96425,716-1,293
11,839200,187
114,2152,249
2,805
52,39428,524
4,976
1,430
4,877
1,963
15,27935,6494,017
25,94912,874
7,137
15,334-3,10536,500
4,438
5,365
8,411

2010
236,226
23,413292,384
305,266
52,803
152,255-25,870-340-452
33,905
46,134
2,188
27,0499,497-65,679
1,452
21,086
5,328
45,908-12,882
6,721-41,037
9,056
526
897
1,534
339
622
1,797
1,041
2,170
3,453
11,857-6,561
32,472561-1,359325,405
185,081-150
2,492
68,904
69,0786,320
9,103
13,304
1,713
38,63824,6406,193
48,43815,096
6,765
18,679-1,40442,868
5,152
1,553
9,258

Inward FDI
Growth rate
49.0
9.4
-43.8
-37.2
132.7
-27.4
n.a.
n.a.
n.a.
-0.4
22.6
-10.2
10.0
-52.7
n.a.
-46.3
130.8
-48.4
-35.5
n.a.
134.2
n.a.
-30.5
n.a.
n.a.
-19.6
262.1
392.1
-55.0
37.1
-35.2
-28.7
-15.8
n.a.
26.3
n.a.
n.a.
62.6
62.0
n.a.
-11.2
31.5
142.2
27.0
536.6
172.8
-12.7
152.9
-30.9
54.2
86.7
17.3
-5.2
21.8
n.a.
17.4
16.1
-71.1
10.1

827,648453,363
1,281,011

730,841
494,057
1,224,897

-11.7
9.0
-4.4

Share
20.4
2.0
25.3
26.4
4.6
13.2
n.a.
n.a.
n.a.
2.9
4.0
0.2
2.3
0.8
n.a.
0.1
1.8
0.5
4.0
n.a.
0.6
n.a.
0.8
0.0
0.1
0.1
0.0
0.1
0.2
0.1
0.2
0.3
1.0
n.a.
2.8
0.0
n.a.
28.2
16.0
n.a.
0.2
6.0
6.0
0.5
0.8
1.2
0.1
3.3
2.1
0.5
4.2
1.3
0.6
1.6
n.a.
3.7
0.4
0.1
0.8

Contribution
6.1
0.2
-17.8
-14.1
2.4
-4.5
-2.7
-0.3
-0.0
-0.0
0.7
-0.0
0.2
-0.8
-7.4
-0.1
0.9
-0.4
-2.0
-3.6
0.3
-3.5
-0.3
0.0
0.1
-0.0
0.0
0.0
-0.2
0.0
-0.1
-0.1
-0.2
-2.6
0.5
0.1
-1.0
9.8
5.5
-0.2
-0.0
1.3
3.2
0.1
0.6
0.7
-0.0
1.8
-0.9
0.2
1.8
0.2
-0.0
0.3
0.1
0.5
0.1
-0.3
0.1

2009
303,606
41,665659,970645,894-17,016
234,295
8,220
6,880
3,831
102,949
78,2002,055
23,923
21,275100,571
816
9,737
25,77844,381
14,076
918
3,757
4,562
432
156
1,575
-57
201
2,604
134
-119
-88
28,62333,251
16,160308
74,650
164,062
43,89817,197
5,877
63,99133,098
4,096
7,930
2,249
359
18,464
15,929710-10,084
8,058
3,088
7,019
1,834
43,665
1,695
1,151
1,553

59.7
40.3
100.0

-7.6
3.2
-4.4

1,257,906
162,158
1,420,064

Outward FDI
2010
Growth rate
351,350
15.7
38,585-7.4
407,692-38.2
442,451-31.5
31,055n.a.
130,176-44.4-20,872
n.a.
3,148
-54.2
4,130
7.8
84,112-18.3
104,857
34.1
1,269
-38.2
16,220-32.2
21,009-1.3
12,267-87.8-8,608n.a.
22,268128.7
30,40017.9
11,020-75.2-34,758
n.a.
1,757
91.5
-44,249
n.a.
5,646
23.8
328
-24.2
184
18.1
129
-91.8
15
n.a.
132
-34.1
786
-69.8
87
-35.3
238
n.a.
190
n.a.
12,195-57.4
58,25375.2
26,431
63.6
-589
n.a.
57,223-23.3
208,169
26.9
60,151
37.0
19,23011.8
11,18390.3
76,07718.9
41,529
25.5
5,310
29.6
13,328
68.1
2,664
18.5
487
35.7
19,7396.9
14,626
-8.2
946
33.2
11,519
n.a.
8,745
8.5
6,562
112.5
14,345
104.4
2,390
30.3
52,476
20.2
7,960
369.7
450
-60.9
1,464
-5.7
1,121,295
187,590
1,308,885

-10.9
15.7
-7.8

(US$ million, %)
Share
27.1
3.0
31.5
34.1
2.4
10.0
n.a.
0.2
0.3
6.5
8.1
0.1
1.3
1.6
0.9
n.a.
1.7
2.3
0.9
n.a.
0.1
n.a.
0.4
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.9
4.5
2.0
n.a.
4.4
16.1
4.6
1.5
0.9
5.9
3.2
0.4
1.0
0.2
0.0
1.5
1.1
0.1
0.9
0.7
0.5
1.1
0.2
4.0
0.6
0.0
0.1

Contribution
3.4
-0.2
-17.8
-14.3
3.4
-7.3
-2.0
-0.3
0.0
-1.3
1.9
-0.1
-0.5
-0.0
-6.2
-0.7
0.9
0.3
-2.3
-3.4
0.1
-3.4
0.1
-0.0
0.0
-0.1
0.0
-0.0
-0.1
-0.0
0.0
0.0
-1.2
1.8
0.7
-0.1
-1.2
3.1
1.1
0.1
0.4
0.9
0.6
0.1
0.4
0.0
0.0
0.1
-0.1
0.0
1.5
0.0
0.2
0.5
0.0
0.6
0.4
-0.0
-0.0

85.7
14.3
100.0

-9.6
1.8
-7.8

Notes: (1) J ETRO estimates used for “World” and “Developing Economies” figures (see Annotation III for methods of estimation). Figures for “Developed Economies” represent the sum total of figures for 33 countries and regions.
(2) F or countries and regions which do not release dollar-based data, figures are converted to dollar values using IMF average exchange rates for corresponding years.
(3) “ Developed Economies” refers to 33 countries and regions classified based on BOP (IMF) categories. “Developing Economies” is defined to include allother countries and regions.
(4) F igures for “East Asia” represent the sum total of figures for China, South Korea, Taiwan, Hong Kong, and five ASEAN nations.
Sources: National and regional balance of payments statistics, BOP (IMF), and UN Economic Commission for Latin America and the Caribbean (ECLAC) data.

114

Appendix World and Japan’s Statistics of Trade and Investment

Table 7 World cross-border M&As (by target and acquirer country and region)
2010
Value
Growth rate
Share659,11127.8
100.0

No. of Deals Value
8,795
428,930(US$ million, %, deals)
First half 2011
Growth rate
Share No. of Deals
42.6
100.0
4,203

Target country or region

2009
Value
515,761

U.S.
CanadaEU27
EU15
UK
FranceGermany
Netherlands
Italy
Spain
12 new EU members
Czech RepublicHungary
PolandSwitzerland
NorwayAustralia
Japan
East Asia
China
South Korea
TaiwanHong Kong
ASEAN6Singapore
Thailand
Malaysia
Indonesia
Philippines
VietnamIndia
MexicoBrazilUnited Arab Emirates
South Africa
Russia326,716
123,187805,527
786,385
225,91168,78595,371
192,000
36,73565,55619,142
1,449
6,285
3,559
27,845
10,842
67,961
28,39369,586
13,945
3,009
7,833
12,50932,289
11,578
2,769
8,090
4,441
4,769
642
25,408
11,581
19,724
1,739
9,587
27,071

320,537
44,785482,989
462,960
178,519
26,121
61,14932,43331,70343,471
20,029
5,860
3,035
3,843
21,60319,75544,326
19,113
113,855
22,511
5,308
3,647
49,24533,144
17,166
421
3,643
6,788
4,042
1,083
16,8305,893
21,553
4,279
8,428
19,110116,565
15,448201,065
186,076
48,5453,414
21,442
28,4895,201
36,565
14,989
4,375
2,882
2,298
20,845
2,538
36,1585,496
43,48817,975
3,861
466
4,612
16,574
9,674
536
579
3,648
1,679
458
8,865
509
11,115
392
5,857
8,134

122,627
31,338233,572
224,459
97,622
22,146
26,561
16,514
9,753
19,250
9,113
583
701
2,624
7,517
9,566
36,1997,343
53,09013,7492,151
1,519
16,425
19,246
8,841
1,117
4,187
4,027
780
294
11,877
12,81038,346
665
4,070
5,495

5.2
102.9
16.2
20.6
101.1
548.7
23.9
-42.0
87.5
-47.4
-39.2
-86.7
-75.7
14.2
-63.9
276.9
0.1
33.6
22.1
-23.5
-44.3
225.9
256.1
16.1
-8.6
108.5
623.8
10.4
-53.6
-35.9
34.0
2,414.6
245.0
69.9
-30.5
-32.4

18.6
4.8
35.4
34.1
14.8
3.4
4.0
2.5
1.5
2.9
1.4
0.1
0.1
0.4
1.1
1.5
5.5
1.1
8.1
2.1
0.3
0.2
2.5
2.9
1.3
0.2
0.6
0.6
0.1
0.0
1.8
1.9
5.8
0.1
0.6
0.8

1,129
409
3,136
2,768
671
334
418
186
203
249
368
71
40
101
115
151
436
163
1,042
329
54
38
171
450
133
54
84
119
19
41
229
97
198
26
57
502

96,66823,210150,514135,048
34,803
5,836
11,131
7,275
28,014
5,024
15,466
1,379
2,009
9,735
4,499
6,399
28,401
7,445
28,764
9,038
984
104
4,621
14,017
2,964
1,954
1,510
6,039
745
805
11,121
231
27,248484
3,249
12,339

100.1
46.5
25.8
17.1
-24.7
-33.6
-36.7
-4.5
339.2
-33.3
260.1
273.2
186.8
578.9
62.2
38.7
346.2
35.6
25.8
58.7
-24.0
-83.7
-44.6
103.7
16.3
209.7
60.0
193.0
50.8
292.8
233.6
-97.5
241.1
14.2
237.4
1,958.6

22.5
5.4
35.1
31.5
8.1
1.4
2.6
1.7
6.5
1.2
3.6
0.3
0.5
2.3
1.0
1.5
6.6
1.7
6.7
2.1
0.2
0.0
1.1
3.3
0.7
0.5
0.4
1.4
0.2
0.2
2.6
0.1
6.4
0.1
0.8
2.9

573
199
1,485
1,329
334
134
233
96
111
107
156
25
11
45
75
63
194
42
555
158
43
13
60
281
76
34
44
85
19
23
123
38
109
22
34
174

Acquirer country or region

World

2007
2008
Value
Value
1,649,044 1,242,613

U.S.
CanadaEU27
EU15
UK
FranceGermany
Netherlands
Italy
Spain
12 new EU members
Switzerland
NorwayAustralia
Japan
East Asia
China
South Korea
TaiwanHong Kong
ASEAN6Singapore
Thailand
Malaysia
Indonesia
Philippines
India
MexicoBrazilSaudi Arabia
United Arab Emirates
South Africa
Russia315,412
68,956
842,012
837,003327,343
114,756
117,097
33,35973,036
61,1805,008
28,145
12,09555,24841,162
79,622
20,0409,530
1,862
12,47735,71428,515
285
5,225
1,318
170
32,17019,976
10,697
16,72926,735
5,217
22,031

158,862
55,253584,124
577,561
144,655
90,781
82,57263,43536,50334,714
6,564
50,6499,499
26,482
67,625
142,739
76,2107,821
1,479
11,71545,51429,293
1,535
13,525832
304
14,930
746
5,703
4,544
27,9385,459
20,72961,68031,627202,380
198,557
37,40359,991
39,042
4,409
21,9606,851
3,823
61,261
1,330
3,982
20,64656,341
26,896
7,151
1,460
12,597
8,236
3,384
881
3,578
276
117
1,103
5,371
4,533
303
19,8891,827
9,928

139,216
43,504
196,730
192,867
51,66137,28530,27323,376
2,956
21,746
3,863
21,101
2,565
18,241
33,971
91,231
39,168
11,525628
17,941
21,96911,413
3,324
6,076
888
209
27,245
3,644
10,967
1,534
4,649
1,732
10,575

125.7
37.4
-2.8
-2.9
38.1
-37.8
-22.5
430.2
-86.5
217.4
1.0
-65.6
92.8
358.1
64.5
61.9
45.6
61.2
-57.0
42.4
166.7
237.2
277.3
69.8
222.1
78.4
2,370.8
-32.1
141.9
406.1
-76.6
-5.2
6.5

21.1
6.6
29.8
29.3
7.8
5.7
4.6
3.5
0.4
3.3
0.6
3.2
0.4
2.8
5.2
13.8
5.9
1.7
0.1
2.7
3.2
1.7
0.5
0.9
0.1
0.0
4.1
0.6
1.7
0.2
0.7
0.3
1.6

1,673
569
3,472
2,984
764
434
402
313
119
147
488
272
103
213
347
1,038
197
99
46
232
464
274
30
129
19
9
177
34
53
14
58
59
127

79,941
27,304
199,447
198,552
46,022
66,38013,35925,334
3,963
26,597895
11,1206,895
13,561
13,20835,696
14,0902,434
496
11,153
7,522
3,151
1,885
2,166
273
47
5,291
3,516
3,716
256
332
5,150
5,154

-2.4
136.2
143.9
144.7
200.6
135.2
36.8
82.2
427.0
376.3
38.6
-2.2
530.1
172.1
-32.4
8.4
-20.8
-18.0
33.6
136.2
6.0
-46.2
1,297.2
224.9
32.7
-72.1
-74.0
318.6
-45.1
-45.8
-89.8
731.2
-23.1

18.6
6.4
46.5
46.3
10.7
15.5
3.1
5.9
0.9
6.2
0.2
2.6
1.6
3.2
3.1
8.3
3.3
0.6
0.1
2.6
1.8
0.7
0.4
0.5
0.1
0.0
1.2
0.8
0.9
0.1
0.1
1.2
1.2

835
335
1,573
1,432
393
188
209
144
52
58
141
114
49
121
195
479
94
45
14
122
204
123
17
49
10
5
80
21
23
9
22
23
56

Notes: (1) Data as of July 1, 2011.
(2) ASEAN 6 consists of Singapore, Thailand, Malaysia, Indonesia, the Philippines, and Vietnam.
(3) East Asia figures represent totals for China, South Korea, Taiwan, Hong Kong, and ASEAN6.
Source: Thomson Reuters.

115

Table 8 World cross-border M&As (by industry)

All industries
Primary industries
Oil and Gas: Petroleum Refining
Agriculture, Forestry, and Fishing
MiningManufacturing
Food, Tobacco
Food and Kindred Products
Tobacco Products
Textile and Apparel Products
Wood and Paper Products
Wood Products, Furniture, and Fixtures
Paper and Allied Products
Stone, Clay, Glass, and Concrete Products
Chemicals
Chemicals and Allied Products
Drugs
Metal and Metal Products
Machinery and Equipment
Machinery
Electronic and Electrical Equipment
Computer and Office Equipment
Communications Equipment
Transportation Equipment
Aerospace and Aircraft

2007
2008
Value
Value
1,649,044 1,242,613

125,441
82,457
3,763
39,221
519,358
72,36950,22522,144
13,59013,851
5,135
8,716
49,496
139,821
27,947
98,795113,248
94,27325,704
23,614
4,560
4,082
9,035
13,779Measuring, Medical, Photo Equipment; Clocks
13,500Printing, Publishing, and Allied Services
20,076
Miscellaneous Manufacturing
2,633
Service
1,004,245
Electric, Gas, and Water Distribution
152,917
Transportation
42,421
Transportation and Shipping (except air)
36,158
Air Transportation and Shipping
6,263
Telecommunications
67,324
Construction Firms
16,497
Commerce
81,433Wholesale Trade24,212Retail Trade, Eating and Drinking Places
57,221
Real Estate; Mortgage Bankers and Brokers
112,681
Finance, insurance
367,988
Commercial Banks, Bank Holding Companies
183,213
Investment & Commodity Firms, Dealers, Exchanges
131,021
Insurance
45,902
Hotels and Casinos
20,572Other service
142,412Advertising Services
2,942
Broadcasting Services (radio, television)
35,820
Leisure related Services
5,750
Film related Services
2,743
Business Services
50,330(such as computer-related services)
Prepackaged Software
16,816
Others0
IT (for reference)
163,8992009
Value
515,761

2010
Value Growth rate Share
659,11127.8
100.0

144,290
77,9893,010
63,291
413,667
157,874
108,849
49,025
4,176
8,096
2,223
5,873
31,896
97,60034,86251,05629,253
77,693
16,194
21,746465
1,951
13,545
3,680
20,1135,023
2,056
684,641
100,624
40,171
31,453
8,718
76,972
4,571
46,70525,71920,98654,146
235,131
124,177
62,80038,0406,814
119,508577
10,2491,712
389

82,61852,513
1,334
28,772
174,529
25,49924,544
955
838
5,886
697
5,188
3,858
88,27911,48575,155
3,872
45,401
4,229
15,971962
2,611
17,438
320
3,870
482
415
258,614
79,497
11,542
5,128
6,414
21,31413,007
13,2987,521
5,777
19,61060,40322,242
12,236
17,652
1,438
38,506
1,076
7,182
706
186

132,093
71,631
6,776
53,686
191,50253,87153,798
73
6,726
4,303
504
3,799
5,579
53,137
6,085
34,6608,949
52,63010,032
12,100
1,306
6,536
9,941
123
12,592
5,709
598
335,515
34,32916,16815,839329
53,62810,432
26,554
8,511
18,044
26,86984,37521,92834,991
14,4786,325
76,834765
12,6752,018
324

60,84917,74936,0620160,364

6,965
063,551

No. of Deals Value
8,795
428,930

59.9
36.4
408.1
86.6
9.7
111.3
119.2
-92.3
702.9
-26.9
-27.7
-26.8
44.6
-39.8
-47.0
-53.9
131.1
15.9
137.2
-24.2
35.7
150.4
-43.0
-61.6
225.4
1084.0
44.2
29.7
-56.8
40.1
208.9
-94.9
151.6
-19.8
99.7
13.2
212.3
37.0
39.7
-1.4
186.0
-18.0
339.7
99.5
-28.9
76.5
185.8
74.4

20.0
10.9
1.0
8.1
29.1
8.2
8.2
0.0
1.0
0.7
0.1
0.6
0.8
8.1
0.9
5.3
1.4
8.0
1.5
1.8
0.2
1.0
1.5
0.0
1.9
0.9
0.1
50.9
5.2
2.5
2.4
0.0
8.1
1.6
4.0
1.3
2.7
4.1
12.8
3.3
5.3
2.2
1.0
11.7
0.1
1.9
0.3
0.0

1,071
330
106
635
2,581
316
313
3
94
127
55
72
75
621
223
268
234
993
260
258
43
53
154
15
210
69
52
5,143
313
324
278
46
169
167
712
415
297
301
1,048
184
470
148
111
1,998
62
52
67
32

92,81545,902
3,449
43,464103,404
12,09412,082
12
1,282
1,427
226
1,201
737
51,26911,39534,262
8,223
27,178
5,621
10,741
1,154
257
3,961
727
4,716
487
707
232,71147,621
16,38014,0162,364
46,9582,491
17,161
10,586
6,575
9,102
57,512
15,821
11,293
18,693
2,197
33,289
1,348
3,491
2,655
3,999

29,582

66.7

4.5

1,111

17,2910
117,026

148.3
n.a.
84.1

2.6
0.0
17.8

362
0
1,314

(US$ million, %, deals)
First half 2011
Growth rate Share No. of Deals
42.6
100.0
4,203
87.3
51.2
176.7
142.1
0.9
-68.8
-68.8
-83.8
-69.7
-56.8
0.0
-61.0
-82.3
99.2
304.4
69.7
414.2
32.0
290.8
142.5
82.2
-94.5
-36.4
489.9
53.1
-87.7
632.2
56.4
201.3
643.7
636.0
692.9
26.8
163.6
24.7
265.5
-39.5
-33.6
77.2
14.0
8.0
299.3
-1.9
8.7
732.6
-65.8
362.6
1597.3

21.6
10.7
0.8
10.1
24.1
2.8
2.8
0.0
0.3
0.3
0.1
0.3
0.2
12.0
2.7
8.0
1.9
6.3
1.3
2.5
0.3
0.1
0.9
0.2
1.1
0.1
0.2
54.3
11.1
3.8
3.3
0.6
10.9
0.6
4.0
2.5
1.5
2.1
13.4
3.7
2.6
4.4
0.5
7.8
0.3
0.8
0.6
0.9

553
175
50
328
1,181
150
147
3
38
68
29
39
37
277
117
102
130
415
124
109
16
13
59
9
85
44
22
2,455
140
170
155
15
70
75
341
191
150
133
458
49
200
98
43
1,025
34
23
32
31

14,100

23.9

3.3

585

4,123
0
71,004

-14.1
n.a.
10.0

1.0
n.a.
16.6

190
0
660

Notes: (1) Data as of July 1, 2011.
(2) Based on industries of target company.
(3) IT includes hardware such as computers and peripherals, telecommunications equipment, software services, and telecommunications services.
Source: Same as Table 7.

116

Appendix World and Japan’s Statistics of Trade and Investment

Table 9 Japanese trade by country and region
Exports
2008
2009
Value Growth rate Value Growth rate
Asia
382,658
11.5
314,406-17.8
China
124,035
13.7
109,630-11.6
South Korea
58,9858.8
47,248-19.9
Taiwan45,7082.1
36,426-20.3
Hong Kong
39,9883.0
31,868-20.3
ASEAN
102,79918.2
80,449-21.7
Thailand
29,253
14.5
22,254-23.9
Singapore
26,425
21.3
20,696-21.7
Malaysia
16,3298.7
12,863-21.2
Indonesia
12,508
38.3
9,334
-25.4
Philippines
9,902
4.7
8,233
-16.9
Vietnam
7,767
36.9
6,518
-16.1
India
7,850
27.6
6,336
-19.3
Oceania
21,06917.8
15,126-28.2
Australia
17,162
20.9
12,180-29.0
New Zealand
2,501
0.5
1,509
-39.7
North America
146,891-4.6
101,400-31.0
U.S.
136,200-5.0
93,653-31.2
Canada10,691
1.6
7,746
-27.5
Central and South America 40,684
16.0
33,116-18.6
Panama10,851
26.3
12,851
18.4
Mexico
9,880
-3.3
6,836
-30.8
Brazil
5,878
47.4
4,236
-27.9
Chile
2,727
72.5
1,347
-50.6
Europe118,411
5.3
81,460-31.2
EU27109,383
3.9
72,374-33.8
Germany
23,796
5.4
16,658-30.0
Netherlands
20,92313.0
13,518-35.4
UK
16,3090.3
11,825-27.5
France
8,922
6.7
6,191
-30.6
Belgium
8,415
6.6
5,343
-36.5
Italy
6,754
0.7
4,804
-28.9
Spain
4,363
-21.7
2,561
-41.3
Sweden
2,183
11.3
1,447
-33.7
Finland
2,325
-7.7
852
-63.3
Austria
1,239
-4.1
790
-36.2
Ireland
1,268
-20.7
752
-40.7
Greece
1,211
-6.9
689
-43.1
Portugal
759
-7.3
398
-47.6
Denmark
727
-5.1
391
-46.3
Luxembourg
176
-8.9
51
-70.8
Poland
1,962
19.9
1,389
-29.2
Hungary
2,599
9.2
1,730
-33.5
Czech Republic
2,992
14.3
1,696
-43.3
Slovakia
460
5.2
367
-20.2
Romania
445
74.1
225
-49.4
Bulgaria
139
3.9
75
-46.5
Norway
1,321
17.9
1,047
-20.8
Switzerland
4,313
42.9
6,283
45.7
Turkey
3,070
11.9
1,597
-48.0
Russia, CIS
19,139
53.3
4,129
-78.4
Russia16,374
52.5
3,295
-79.9
Middle East
33,72228.8
21,650-35.8
United Arab Emirates
10,793
34.0
6,498
-39.8
Saudi Arabia
7,824
16.6
5,395
-31.0
Oman
3,912
55.0
2,354
-39.8
Iran
1,889
42.1
1,650
-12.6
Qatar
2,010
9.1
1,630
-18.9
Kuwait
2,088
25.4
1,247
-40.3
Israel
2,166
14.2
1,145
-47.1
Africa13,344
15.0
9,498
-28.8
South Africa
4,598
0.0
2,613
-43.2
Liberia
1,203
1.2
1,473
22.4
Egypt
1,859
44.5
1,360
-26.9
Nigeria
923
26.2
564
-38.9

(US$ million, %)Imports
2010
2008
2009
2010
Value Growth rate Value Growth rate Value Growth rate Value Growth rate
430,49936.9
307,169
14.7 246,431-19.8
313,18527.1
149,086
36.0 142,337
11.5 122,545-13.9 152,801
24.7
62,05431.3
29,248
7.3
21,997-24.8
28,54229.8
52,207
43.3
21,637
9.2
18,339-15.2
22,99225.4
42,145
32.3
1,545
6.7
1,099
-28.9
1,515
37.8
112,46139.8
106,118
22.1
77,936-26.6
100,61929.1
34,092
53.2
20,627
12.9
16,036-22.3
20,95330.7
25,146
21.5
7,829
11.3
6,113
-21.9
8,120
32.8
17,571
36.6
23,02732.6
16,755-27.2
22,62935.1
15,85969.932,29322.1
21,825-32.4
28,14929.0
11,012
33.8
8,355
-4.0
6,402
-23.4
7,903
23.4
8,148
25.0
9,027
47.4
6,962
-22.9
8,144
17.0
9,020
42.4
5,215
25.6
3,733
-28.4
5,658
51.6
20,36434.6
51,65845.4
37,989-26.5
49,30529.8
15,81229.8
47,28051.7
34,780-26.4
45,003
29.4
1,891
25.3
2,892
7.7
2,121
-26.7
2,690
26.8
127,484
25.7
89,78011.0
68,313-23.9
78,151
14.4
118,199
26.2
77,0188.7
59,044-23.3
67,171
13.8
9,284
19.9
12,680
27.4
9,180
-27.6
10,90218.8
43,96632.8
27,44813.8
20,160-26.6
28,35940.7
15,372
19.6
18
35.4
181
905.2
421
132.9
9,541
39.6
3,783
20.0
2,799
-26.0
3,473
24.1
6,172
45.7
9,068
51.6
6,369
-29.8
9,842
54.5
2,715
101.5
7,852
-3.5
5,307
-32.4
7,725
45.6
98,372
20.8
79,053
9.0
67,732-14.3
75,517
11.5
86,735
19.8
69,915
7.6
59,130-15.4
66,187
11.9
20,24521.5
20,702
6.8
16,775-19.0
19,21614.6
16,285
20.5
3,790
35.4
3,461
-8.7
3,945
14.0
14,180
19.9
7,410
-1.5
5,690
-23.2
6,347
11.6
6,652
7.5
10,561
5.5
9,132
-13.5
10,248
12.2
6,670
24.8
2,047
6.3
1,833
-10.5
2,332
27.3
5,555
15.6
7,897
9.2
6,370
-19.3
6,771
6.3
3,176
24.0
2,487
26.2
2,348
-5.6
2,603
10.8
1,831
26.5
2,072
-7.3
1,692
-18.4
2,067
22.2
989
16.1
1,891
12.6
1,152
-39.1
1,560
35.4
968
22.5
1,544
-3.3
1,355
-12.3
1,499
10.6
895
19.0
4,133
1.0
4,647
12.4
4,285
-7.8
535
-22.3
101
79.8
59
-41.4
61
3.1
479
20.3
219
29.6
223
2.0
271
21.3
414
6.0
2,428
20.2
2,181
-10.2
2,253
3.3
197
284.0
43
-6.3
37
-15.2
52
41.3
2,393
72.3
477
25.7
373
-21.7
562
50.5
1,928
11.5
717
15.7
645
-10.1
815
26.3
1,762
3.9
523
9.0
426
-18.5
535
25.5
575
56.6
215
5.4
125
-41.9
129
3.6
278
23.4
216
-3.3
220
1.9
297
35.1
74
-0.1
56
5.2
58
3.2
59
2.4
1,101
5.2
2,055
23.6
1,642
-20.1
1,936
17.9
7,770
23.7
6,393
22.7
6,268
-2.0
6,765
7.9
2,551
59.7
417
11.3
399
-4.2
399
-0.2
9,157
121.8
14,743
28.0
9,659
-34.5
17,167
77.7
8,027
143.6
13,281
25.8
8,853
-33.3
16,09781.8
25,182
16.3 165,445
45.4
92,850-43.9 118,009
27.1
7,306
12.4
46,41543.7
22,727-51.0
29,183
28.4
6,459
19.7
50,47042.8
29,203-42.1
35,763
22.5
3,104
31.8
5,519
54.2
3,325
-39.8
4,496
35.2
2,074
25.7
18,095
42.7
9,319
-48.5
11,127
19.4
1,137
-30.3
26,23354.8
15,940-39.2
21,627
35.7
1,414
13.4
15,121
52.3
8,997
-40.5
10,250
13.9
1,761
53.8
916
1.8
816
-10.9
833
2.1
12,001
26.4
20,768
40.6
9,107
-56.2
11,749
29.0
3,820
46.2
8,920
15.7
4,989
-44.1
7,246
45.3
1,920
30.4
46 33,134.7
1
-98.0
0
-46.2
1,462
7.5
1,576
87.9
299
-81.1
460
54.1
668
18.4
1,749
159.4
535
-69.4
552
3.0

World
APEC
NAFTA
Mercosur 4

767,025584,223
138,8737,240

775,918
567,769
158,368
7,085

8.9
7.7
-4.6
42.2

580,787
432,529
109,911
4,968

-25.2
-23.8
-30.6
-29.9

Note: Exchange rates are converted to US$ based on applicable customs rates.
Source: Based on “Trade Statistics”(Ministry of Finance).

117

32.1
35.1
26.4
45.7

756,086
468,213
94,765
9,977

21.7
16.4
11.1
44.4

552,252
365,838
72,530
7,121

-27.0
-21.9
-23.5
-28.6

691,447
462,057
83,144
10,952

25.2
26.3
14.6
53.8

Table 10 Japan’s exports by products (2010)
World
Value Growth rate
Total
767,025
32.1
Machinery and equipment
498,427
35.7
General equipment
150,26147.4
Air conditioners
1,933
55.3
Mining and construction equipment 10,018
80.7
Machine tools
7,004
103.7
Electrical equipment
131,404
22.5
Transport equipment
176,027
36.9
Automobiles
103,790
45.5
Passenger vehicles
90,45544.8
Motorcycles
3,118
-1.5
Automotive parts
38,852
40.7
Precision instruments
40,734
38.6
Chemicals
98,94928.2
Industrial chemicals
56,87024.1
Pharmaceuticals and medical supplies
3,604
4.9
Plastics and rubber
42,08034.2
Foodstuffs
4,755
19.4
Seafood
1,292
19.7
Grains29
97.0
Processed food products
2,885
18.1
Oils, fats, and other animal andvegetable products

U.S.
Value Growth rate
118,199
26.2
91,61428.4
24,544
33.2
195
60.1
1,186
188.9
1,032
84.9
16,14017.1
44,32731.2
32,62734.7
32,099
34.0
635
-37.1
8,355
40.1
6,603
23.4
11,069
25.3
6,759
16.5
1,382
-3.9
4,310
42.4
642
-1.7
155
-15.9
0
-10.9
445
4.3

(US$ million, %)
EU27
China
ASEAN
Asia NIEs
Value Growth rate Value Growth rate Value Growth rate Value Growth rate
86,73519.8 149,086
36.0 112,461
39.8 181,552
33.3
62,49321.8
90,88447.5
66,50644.2
91,32037.0
20,90230.6
33,51873.3
23,54455.9
31,797
55.0
794
59.7
283
52.9
185
51.4
156
32.1
1,208
181.3
1,832
105.5
1,699
55.8
1,308
15.1
657
49.4
2,507
160.2
1,020
104.2
1,210
108.7
15,02213.0
32,20825.6
23,80235.8
40,00324.5
19,70720.1
15,371
51.2
14,567
38.0
9,538
29.6
11,616
20.0
7,060
82.1
4,720
48.1
2,581
34.1
11,277
18.8
6,246
77.9
2,162
35.0
2,032
29.4
1,444
9.9
1
45.1
67
30.6
78
21.1
5,235
44.3
8,447
32.9
6,492
57.2
2,340
45.7
6,862
22.3
9,786
51.1
4,593
57.0
9,983
49.8
10,57721.4
22,10927.0
12,152
38.9
34,341
32.8
6,644
15.4
12,424
20.9
6,438
37.4
21,236
31.7
907
0.3
300
30.6
132
28.0
441
9.6
3,933
32.8
9,685
35.8
5,714
40.6
13,105
34.7
193
12.4
533
30.0
640
31.3
2,407
21.0
27
-5.9
320
35.4
253
47.9
381
18.0
1
50.8
1
218.2
2
97.8
5
25.2
141
14.5
175
23.7
262
18.0
1,710
22.4

331

11.5

61

-0.2

47

9.5

44

29.0

32

2.6

110

8.8

Miscellaneous manufactured goods
6,785
Other raw materials and products 120,642
Mineral fuels etc.
13,010Mineral fuels
12,349Petroleum and petroleum products 11,933
Textiles and textile products
8,615
Synthetic fibers and textiles
3,961
Clothing
385
Base metals and base metal products 70,395
Steel
51,134
Primary steel products
38,845
Steel products
12,289Copper4,028
Nickel232
Aluminum
52
Lead
133

9.2
32.1
24.3
24.4
23.9
16.6
21.3
9.8
32.6
31.4
36.8
16.9
30.2
622.4
-6.0
5.1

1,688
7,722
714
694
596
574
204
26
4,480
3,063
1,179
1,885
44
2
4
-

-0.5
37.4
114.9
110.1
80.5
23.3
27.4
3.5
35.6
35.3
74.4
18.6
92.1
149.4
53.3
n.a.

1,318
7,462
589
588
518
755
449
41
2,799
1,656
706
950
9
17
2
0

0.0
17.5
-9.6
-9.6
-16.2
26.1
36.9
-2.4
21.3
18.7
30.2
11.4
-17.1
-0.3
699.2
n.a.

1,044
27,477
2,057
1,873
1,871
3,363
1,446
62
17,195
10,983
8,960
2,023
1,865
191
9
22

14.9
21.1
7.4
3.5
3.8
13.4
19.2
-1.4
19.1
16.1
18.3
7.5
13.8
3,951.8
-33.3
-50.8

683
27,775
4,240
4,230
4,202
1,505
641
38
16,851
12,361
9,450
2,910
883
4
23
70

27.8
40.5
7.3
7.4
7.6
25.2
32.1
35.6
55.8
54.0
62.3
32.2
85.0
158.4
35.2
38.3

1,287
40,574
6,095
5,653
5,516
1,407
442
213
21,32515,807
14,184
1,623
1,174
16
10
40

16.7
33.5
19.6
20.8
21.3
13.9
14.8
14.8
31.6
29.3
30.7
18.2
28.3
145.8
43.9
40.5

1,871
277
1,019
575
16
1,378
3,050
1,012
2,038
3,583
374
3,089
2,303
33
110
106
3,452

-4.5
-10.0
-2.9
-4.5
-61.8
13.4
35.9
23.0
43.5
18.2
-19.0
17.1
12.3
56.4
127.3
147.4
32.5

1,086
117
649
321
11
1,332
3,497
2,074
1,423
3,412
737
2,804
2,186
12
21
16
3,071

7.8
-24.2
16.9
7.4
3.7
29.7
25.2
25.1
25.2
11.7
-12.6
-15.5
-19.3
-61.8
-22.1
-30.4
24.5

672
18
273
381
2
1,500
11,924
2,585
9,339
7,867
1,336
2,019
1,896
5
1
1
4,281

1.9
35.8
-5.2
6.4
264.3
-14.6
31.6
46.8
28.0
25.6
5.9
20.0
21.4
151.4
34.1
36.2
47.6

716
8
198
509
11
631
11,426
2,872
8,554
5,779
1,042
721
557
28
6
5
2,543

36.2
-14.7
100.9
22.1
3.0
-16.3
38.2
57.3
32.7
36.8
35.9
12.7
15.5
4.5
41.4
37.2
76.3

1,260
36
427
796
8
1,572
19,614
4,143
15,471
9,227
1,036
2,027
1,649
95
9
8
4,980

19.4
2.9
20.4
19.7
28.8
-13.3
26.6
37.6
23.9
28.1
0.6
10.9
14.9
-18.4
11.9
6.6
67.5

IT products
Computers and peripherals
Multifunctional digital equipment
Computers and peripherals
Parts of computer and peripherals
Office equipment
Telecommunications equipment
Semiconductors and electronic components
Electron tubes and semiconductors
Integrated circuits
Other electric and electronic components
Display modules
Video equipment
Digital cameras
Reception apparatus for television
Audio equipment
Portable audio players
Measuring and testing equipment

5,806
490
2,645
2,671
51
6,780
47,322
12,831
34,491
31,815
5,599
11,596
9,252
304
151
140
19,444

6.2
-11.5
5.9
10.5
-33.3
-4.9
29.4
40.0
25.9
24.3
9.3
5.7
4.4
4.4
66.9
75.6
45.8

19,156

131.0

2,762

81.7

864

287.4

3,477

193.1

1,503

145.1

11,229125.6

IT parts
Finished IT products
Total IT equipment

85,35856,764142,123

28.6
38.0
32.2

8,380
10,931
19,310

27.3
25.3
26.2

7,474
8,624
16,098

19.8
12.2
15.6

20,442
11,301
31,743

29.3
46.8
35.0

17,975
5,361
23,336

37.5
57.0
41.6

31,347
18,57949,926

29.7
66.1
41.2

Machines and apparatus for the
manufacture of semiconductor devices

Notes: (1) See Appendix, Annotation I for product-category definitions.
(2) Singapore figures are included under both ASEAN and Asia NIEs statistics.
(3) “0” indicates an amount of less than one million US dollars; “-” indicates no exports/imports recorded during the corresponding period.
Source: Same as Table 9.

118

Appendix World and Japan’s Statistics of Trade and Investment

Table 11 Japan’s imports by products (2010)
World
Value Growth rate
Total
691,447
25.2
Machinery and equipment
186,647
26.8
General equipment
55,88221.6
Air conditioners
2,274
25.0
Mining and construction equipment242
6.0
Machine tools
351
14.4
Electrical equipment
86,573
33.4
Transport equipment
19,534
19.6
Automobiles
6,816
40.1
Passenger vehicles
6,471
40.7
Motorcycles
592-5.9
Automotive parts
5,992
38.7
Precision instruments
24,65823.3
Chemicals
71,772
26.1
Industrial chemicals
53,69222.9
Pharmaceuticals and medical supplies 16,212
24.2
Plastics and rubber
18,08036.5
Foodstus
59,838
11.2
Seafood
11,695
11.4
Grains
6,928
5.8
Wheat
1,663
15.0
Corn
3,950
5.1
Processed food products
22,648
9.7

U.S.
Value Growth rate
67,171
13.8
27,516
9.0
8,077
3.5
23
59.2
62
58.6
21
-35.0
7,902
17.4
4,381
-10.4
343
27.6
313
28.0
148
-22.8
539
84.0
7,157
23.1
12,76630.2
10,509
28.2
2,801
29.8
2,257
40.5
13,734
5.8
1,214
4.5
4,995
-0.4
991
15.3
3,510
-3.1
3,528
1.8

EU27
China
ASEAN
Value Growth rate Value Growth rate Value Growth rate
66,187
11.9 152,801
24.7 100,619
29.1
24,30318.7
72,32838.9
29,033
31.0
7,038
9.1
26,275
30.9
7,791
27.6
19
2.8
1,825
22.7
373
34.7
71
-10.3
54
-5.2
11
32.7
101
-19.5
83
152.7
41
56.3
3,855
17.7
38,60748.3
16,759
28.8
7,520
24.2
2,894
23.6
2,040
88.4
5,266
31.8
15
-32.4
517
349.0
5,111
31.5
13
6.4
379 5,526.0
96
3.3
121
-5.1
82
104.2
1,436
8.8
1,868
42.5
1,311
56.0
5,890
25.7
4,553
25.3
2,443
25.1
21,731
10.7
12,433
40.6
9,905
53.3
19,921
8.9
7,766
55.8
3,967
54.5
8,825
16.6
247
9.4
834
310.5
1,810
35.0
4,667
21.0
5,938
52.4
7,687
5.3
8,175
17.0
7,991
8.5
374
-20.9
1,110
13.9
2,196
15.5
37
10.9
102
-2.9
181
53.4
2
36.3
n.a.
n.a.
9
-50.4
6
7.3
2
-25.1
5,117
2.7
5,000
15.7
3,932
8.5

(US$ million, %)Asia NIEs
Value Growth rate
61,16928.7
28,882
22.4
6,167
22.8
28
36.2
33
-5.0
96
59.0
19,539
21.8
1,071
19.8
36
-10.2
18
-31.4
143
-18.7
609
47.0
2,105
29.8
7,858
40.9
4,652
44.9
915
224.1
3,207
35.5
3,384
27.0
1,488
38.2
0
-93.0
n.a.
0
-43.8
1,481
23.5

Oils, fats, and other animal andvegetable products

6,437

11.5

2,003

5.3

446

11.2

8.8

809

24.4

117

1.2

Miscellaneous manufactured goods 19,568
Other raw materials and products 337,460
Iron ore
15,637
Mineral fuels etc.
198,592
Mineral fuels
198,148
Coal
24,180
LNG
39,611Petroleum and petroleum products 125,070
Crude oil
105,667
Textiles and textile products 32,907
Synthetic bers and textiles
1,245
Clothing
25,366
Base metals and base metal products 32,973
Steel
14,172
Primary steel products
8,516
Steel products
5,656
Copper356
Nickel954
Aluminum
6,122

3.7
30.5
79.6
30.3
30.2
10.0
30.6
34.0
31.9
5.9
30.9
5.6
51.7
39.1
72.7
7.6
63.7
142.8
81.0

858
9,005
0
1,928
1,755
603
361
646
458
71
141
1,634
612
221
391
1
1
12

8.9
34.7
41.1
83.1
74.2
216.8
48.1
27.5
n.a.
13.8
14.3
0.2
15.2
24.0
80.8
5.3
167.4
52.9
-50.6

1,600
10,127
0
222
221
0
205
1,615
140
1,034
2,080
666
297
369
3
87
54

5.3
12.0
-99.6
0.2
0.3
-77.7
n.a.
0.4
n.a.
-1.6
7.3
-5.3
25.4
1.5
15.8
-7.7
-11.5
61.1
47.3

13,216
2.3
45,141
12.7
0
-29.3
1,805
31.5
1,746
29.6
863
9.9
n.a.
659
42.8
104
-7.2
25,4673.8
291
40.4
21,200
4.8
8,185
42.4
4,562
29.0
1,429
122.3
3,133
8.2
3
187.8
19 57,521.0
835
190.7

2,547
46,664
028,41928,3383,630
18,434
6,195
3,583
3,131
359
2,019
4,964
771
185
586
15
2
335

8.6
29.9
-97.4
28.1
28.4
8.5
26.6
50.9
52.4
20.7
41.7
17.1
53.2
19.0
122.4
3.8
52.1
n.a.
32.4

795
15,076
3
4,389
4,197
1
4,125
997
337
257
6,172
4,717
3,620
1,097
16
4
90

-1.7
41.0
-20.5
43.5
47.0
17.4
n.a.
46.7
n.a.
18.7
40.4
6.5
48.6
48.0
62.3
14.5
177.4
317.6
7.5

IT products
Computers and peripherals
Multifunctional digital equipment
Computers and peripherals
Parts of computer and peripherals
Office equipment
Telecommunications equipment
Semiconductors and electronic components
Electron tubes and semiconductors
Integrated circuits
Other electric and electronic components
Display modules
Video equipment
Digital cameras
Reception apparatus for television
Audio equipment
Portable audio players
Measuring and testing equipment

20,7581,659
14,451
4,648
283
14,29924,3193,905
20,414
17,467
4,483
11,061
1,771
5,501
563
498
8,457

26.3
22.3
27.7
23.3
12.8
33.3
29.6
56.6
25.4
26.4
33.0
76.7
23.5
165.2
90.4
114.9
24.9

885
0
663
221
6
925
4,264
239
4,025
1,275
292
112
47
9
5
3
2,724

2.2
17.0
-2.0
17.0
-58.5
-7.0
33.7
-2.0
36.6
13.2
43.3
11.3
0.9
42.2
12.1
-4.1
11.3

613
1
501
110
1
776
813
135
678
711
42
115
68
2
3
1
1,903

-11.8
440.4
-13.6
-3.9
46.8
87.6
18.9
17.0
19.3
15.8
6.0
6.0
17.1
8.7
2.8
-23.3
25.2

13,914
1,046
10,315
2,553
213
8,899
3,111
1,355
1,756
8,585
2,482
8,053
959
3,944
505
450
1,769

34.5
31.9
36.1
29.1
9.6
60.8
46.4
79.2
28.3
32.0
42.2
81.9
17.6
172.9
128.8
164.0
40.4

3,421
577
2,354
489
24
1,589
4,693
1,157
3,536
3,173
625
2,258
598
1,360
36
33
1,011

15.3
9.4
18.0
10.1
61.0
-5.0
26.5
39.4
22.8
18.5
5.6
91.7
34.6
204.9
-36.9
-32.2
45.7

2,479
34
1,147
1,298
39
1,808
12,343
1,016
11,327
3,546
1,053
453
79
182
10
7
680

23.4
-3.3
26.1
21.9
34.0
-4.4
25.7
77.0
22.5
28.1
35.3
13.7
48.3
5.2
18.5
8.3
29.6

2,202

96.1

983

54.5

600

155.3

107

172.3

158

202.5

434

145.3

IT parts
Finished IT products
Total IT equipment

47,274
52,136
99,410

28.5
38.4
33.5

6,167
5,011
11,178

30.3
7.8
19.2

1,705
3,830
5,535

15.7
36.8
29.5

14,31430,84145,155

34.6
54.1
47.3

8,446
7,917
16,362

23.2
28.4
25.6

17,436
4,357
21,793

26.8
12.1
23.6

Machines and apparatus for the
manufacture of semiconductor devices

Notes and Source: Same as Table 10.

119

476

Table 12 Japan’s outward/inward foreign direct investment by country and region (net flows; balance-of-payments basis)(US$ million, %)Outward FDI

Inward FDI

2008

2009

2010

Asia
23,348
China
6,496
Hong Kong
1,301
Taiwan
1,082
South Korea
2,369
ASEAN10
6,309
Thailand
2,016
Indonesia
731
Malaysia
591
Philippines
705
Singapore
1,089
Vietnam
1,098
India
5,551
Oceania
6,060
Australia
5,232
New Zealand
635
Guam
5
Marshall Islands
72
North America
46,046
U.S.
44,674
Canada1,372
Central and South America 29,623
Mexico315
Brazil5,371
Cayman Islands (GB) 22,550
Panama807
Bermuda (GB)185
British Virgin Islands
138
Peru
32
Argentina
101
Europe23,068Western Europe
22,418Germany
3,905
UK
6,744
France1,703
Netherlands
6,514
Italy
177
Belgium
2,196
Luxembourg
527
Switzerland
165
Sweden
570
Spain
210
Norway37
Denmark
23
Ireland-158
Austria
27
Cyprus12
Turkey25
Malta
Eastern Europe, Russia, etc.
650
Russia306
Poland53
Hungary106
Czech Republic
98
Middle East
1,138
Saudi Arabia
892
United Arab Emirates
194
Egypt
63
Africa1,518South Africa
648
Liberia-4
Mauritius
772(Reference) EU
22,93920,636
6,899
1,610
339
1,077
7,002
1,632
483
616
809
2,881
563
3,664
7,629
7,136
237
-2
209
10,88910,660229
17,393211
3,753
12,903
114
24
24
60
-3
17,83017,073
2,089
2,126
1,161
6,698
110
423
3,279
221
160
162
275
54
311
-20
98
92
17
757
391
-6
87
156
575
378
139
40
-301
143
40
-359
17,03922,131
7,252
2,085
-113
1,085
8,930
2,248
490
1,058
514
3,845
748
2,864
6,407
6,371
-61
1
65
9,016
9,193
-177
5,346
688
4,316
-1,848
999
577
161
55
-56
15,043
14,450
-321
4,624
551
3,288
372
-166
-108
143
-623
38
77
81
138
-4
215
321
593
350
74
-34
122
-348
117
-498
47
-372
104
136
-646
8,359

Share
38.7
12.7
3.6
n.a.
1.9
15.6
3.9
0.9
1.8
0.9
6.7
1.3
5.0
11.2
11.1
n.a.
0.0
0.1
15.8
16.1
n.a.
9.3
1.2
7.5
n.a.
1.7
1.0
0.3
0.1
n.a.
26.3
25.3
n.a.
8.1
1.0
5.7
0.7
n.a.
n.a.
0.2
n.a.
0.1
0.1
0.1
0.2
n.a.
0.4
0.6
n.a.
1.0
0.6
0.1
n.a.
0.2
n.a.
0.2
n.a.
0.1
n.a.
0.2
0.2
n.a.
14.6

Growth rate
7.2
5.1
29.5
n.a.
0.7
27.5
37.7
1.4
71.8
-36.5
33.5
33.0
-21.9
-16.0
-10.7
n.a.
n.a.
-69.0
-17.2
-13.8
n.a.
-69.3
226.0
15.0
n.a.
775.9
2,309.0
569.1
-8.8
n.a.
-15.6
-15.4
n.a.
117.5
-52.5
-50.9
239.5
n.a.
n.a.
-35.3
n.a.
-76.5
-72.1
50.5
-55.7
n.a.
120.8
247.9
n.a.
-21.7
-10.6
n.a.
n.a.
-21.5
n.a.
-69.0
n.a.
16.5
n.a.
-26.8
241.2
n.a.
-50.9

World

74,65057,223

100.0

-23.3

130,801

2008

2009

2010

Asia
China
Hong Kong
TaiwanSouth Korea
ASEAN10
ThailandIndonesia
Malaysia
Philippines
Singapore
India
Oceania
Australia
New Zealand
North America
U.S.
CanadaCentral and South America
MexicoBrazilCayman Islands (GB)PanamaBermuda (GB)British Virgin Islands
EuropeEU
Germany
UK
FranceNetherlands
Italy
Belgium
Luxembourg
Switzerland
SwedenSpain
Ireland
Austria
Eastern Europe, Russia, etc.
RussiaMiddle East
Saudi Arabia
United Arab Emirates
Iran
IsraelAfricaSouth Africa
Mauritius(Reference) EU

3,381
37
257
66
279
2,740
6
0
13
3
2,716
1
258
53
204
12,005
11,792
213
4,020
3,592
7
189
137
4,867
4,861
1,185
-1,289177
2,692
33-2,040
477
1,873
92
66
1,524
42
5
1
-2
-0
-1
0
21
2,943

1,093
-137
-81
57
255
985
24
0
203
756
14
50
40
4
1,712
1,831
-119
690
-8
965
5
-329
24
8,211
8,210
389
5,629
371
2,584
-18
14
543
-990
-97
9
-252
41
1
0
23
10
0
1
7
61
0
9,207

3,128
314
698
21
274
1,810
9
43
184
-1
1,575
4
-17
-6
-12
3,014
2,961
53
-7,724-7,3212616
4-1,000
-3
204
198
2,206
4,817
1,128
-7,733
163
-479
381
51
9
28
-406
36
6
-0
0
-0
-0
36
132

Growth rate
186.3
n.a.
n.a.
-62.8
7.5
83.8
-64.5
12,703.4
-9.5
n.a.
108.3
-69.6
n.a.
n.a.
n.a.
76.1
61.7
n.a.
n.a.
n.a.
n.a.
-36.2
-30.6
n.a.
n.a.
-97.5
-97.6
467.2
-14.4
203.8
n.a.
n.a.
n.a.
-29.9
n.a.
n.a.
210.6
n.a.
-10.2
709.6
n.a.
n.a.
n.a.
31.9
n.a.
n.a.
-41.2
n.a.
n.a.
-98.6

World

24,55011,839-1,359n.a.

Notes: (1) Figures released in yen were converted to the US dollar at the average quarterly Bank of Japan interbank rate.
(2) Negative figures indicate withdrawal.
(3) “0” indicates an amount of less than one million US dollars; “-” indicates no investment recorded during the corresponding period.
(4) Growth rates are yoy.
(5) E urope shows the sum of Western Europe and Eastern Europe, Russia, etc. Western Europe for 2010 was calculated by subtracting Eastern Europe,
Russia, etc. from Europe.
(6) As figure recorded under “World” included the undisclosed item, “World” figures are not necessarily equal to the sums of regional components.
Sources: Balance of Payments Statistics (Ministry of Finance) and Foreign Exchange Rates (Bank of Japan).

120

Appendix World and Japan’s Statistics of Trade and Investment

Table 13 Japan’s outward/inward foreign direct investment by industry (net flows; balance-of-payments basis)(US$ million, %)Outward FDI
2008

2009

2010

Manufacturing (total)
Food
TextileWood and pulp
Chemicals and pharmaceuticals
Petroleum
Rubber and leather
Glass and ceramics
Iron, non-ferrous and metals
General machinery
Electrical equipment
Transport equipment
Precision instruments
Non-manufacturing (total)
Agriculture and forestry
Fishery and marine products
MiningConstruction
Transportation
Communications
Wholesale and retail
Finance and insurance
Real estate
Services

45,268
3,601
716
734
11,647
652
771
1,417
3,152
3,726
5,675
10,924953
85,53359
119
10,518
389
2,283
1,675
13,31952,243162
2,721

32,934
8,954
477
1,207
7,407
-51
445
2,042
3,738
4,411
2,505
566
609
41,717
10
36
6,482
499
2,894
3,870
8,418
15,463
463
2,163

Total

130,801

74,650Inward FDI

17,803
2,017
377
1,068
7,902
-837
634
377
3,873
4,385
1,361
-3,58251
39,420
145
47
9,061
302
2,294
9,899
1,946
11,397
765
1,596

Share
31.1
3.5
0.7
1.9
13.8
n.a.
1.1
0.7
6.8
7.7
2.4
n.a.
0.1
68.9
0.3
0.1
15.8
0.5
4.0
17.3
3.4
19.9
1.3
2.8

Growth rate
-45.9
-77.5
-21.0
-11.5
6.7
n.a.
42.4
-81.5
3.6
-0.6
-45.7
n.a.
-91.6
-5.5
1,380.5
28.8
39.8
-39.5
-20.7
155.8
-76.9
-26.3
65.2
-26.2

57,223

100.0

-23.3

2008

2009

2010

2,261
-86
-3
-5
245
300
4
212
124
721
642
-55
113
22,2891-2-60
43-1,0281,160
19,823
581
473

3,490
421
-8
-1
307
-19
6
-90
287
115
1,705
469
94
8,349
-5
1
-1
16
-90
619
1,057
5,205
-71
1,343

1,766
220
-95
87
-2,859
-144
5
-138
233
1,089
-281
3,359
291
-3,125
9
0
64
-1
197
-3,244-229-1,503216
875

Growth rate
-49.4
-47.6
n.a.
n.a.
n.a.
n.a.
-5.7
n.a.
-19.1
843.7
n.a.
616.6
209.0
n.a.
n.a.
-50.6
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
-34.9

24,55011,839-1,359n.a.

Notes: (1) Figures released in yen were converted to the US dollar at the average quarterly Bank of Japan interbank rate.
(2) Negative figures indicate withdrawal.
(3) “0” indicates an amount of less than one million US dollars; “-” indicates no investment recorded during the corresponding period.
(4) Growth rates are yoy.
Sources: Same as Table 12.

121

Table 14 Japan’s outward/inward foreign direct investment position by country and region(US$ million, %)Outward FDI (assets)

Inward FDI (liabilities)

2008-end

2009-end

2010-end

Asia
China
Hong Kong
TaiwanSouth Korea
ASEAN10
ThailandIndonesia
Malaysia
Philippines
Singapore
Vietnam
India
Oceania
Australia
New Zealand
North America
U.S.
CanadaCentral and South America
MexicoBrazilCayman Islands (GB)EuropeWestern Europe
Germany
UK
FranceNetherlands
Italy
Belgium
Luxembourg
Switzerland
SwedenSpain
Eastern Europe, Russia, etc.
RussiaMiddle East
Saudi Arabia
United Arab Emirates
Iran
AfricaSouth Africa(Reference) EU(Reference) OECD

159,570
49,002
11,716
8,830
12,18067,654
20,529
8,528
7,743
7,800
19,511
3,307
9,440
21,624
19,107
1,440
234,957
226,611
8,346
90,794
2,097
16,492
61,531
165,435
161,649
11,992
32,576
14,92072,172882
14,009
4,332
1,332
3,054
1,276
3,786
668
4,164
3,481
303
6
7,325
1,673
161,783
433,482

175,645
55,045
13,0489,349
12,60375,746
22,748
9,491
8,017
8,186
23,6083,353
8,982
36,17532,5572,039
240,246
230,948
9,298
99,056
1,718
21,33765,353179,052
174,939
15,096
31,282
16,811
77,4701,100
14,503
7,235
1,555
2,565
1,568
4,112
954
4,453
3,650
338
6
5,734
1,730
174,881466,630

212,708
66,47815,542
10,351
15,04390,74927,78911,946
9,972
8,687
27,502
4,501
13,55843,86539,856
2,273
262,339251,805
10,533106,978
2,755
27,03862,623
193,499
188,861
15,31637,956
16,21275,995
1,410
14,120
9,632
1,861
1,987
1,562
4,638
1,220
4,928
3,905
377
7
6,145
2,291
182,194
510,489

Share
25.6
8.0
1.9
1.2
1.8
10.9
3.3
1.4
1.2
1.0
3.3
0.5
1.6
5.3
4.8
0.3
31.6
30.3
1.3
12.9
0.3
3.3
7.5
23.3
22.7
1.8
4.6
2.0
9.2
0.2
1.7
1.2
0.2
0.2
0.2
0.6
0.1
0.6
0.5
0.0
0.0
0.7
0.3
21.9
61.5

Total

683,872

740,364

830,464100.0

2008-end

2009-end

2010-end

16,769
225
3,203
1,892
1,235
10,19361
12
7
61
10,047
0
18
1,075
838
231
75,68074,344
1,336
23,5766
40
17,363
86,97886,915
6,592
6,750
16,23336,510
719
1,362
4,000
7,150
901
175
63
61
29
4
1
-2
275
0
75,600160,743

17,336
197
2,656
1,999
1,444
11,00479
12
216
60
10,632
0
32
1,095
853
230
76,18475,003
1,181
20,990
6
32
16,96583,94583,883
7,166
7,318
15,20836,034
694
934
4,262
4,913
731
168
63
60
51
13
1
-1
342
0
74,832
158,446

23,279
399
4,044
2,255
1,933
14,596
100
60
460
68
13,901
0
40
1,245
983
248
73,90072,497
1,403
23,593261
38
18,784
92,203
92,126
10,0099,386
19,19336,890
909
94
4,842
5,271
827
223
77
68
59
15
3
-2
387
0
82,236
164,867

Share
10.8
0.2
1.9
1.1
0.9
6.8
0.0
0.0
0.2
0.0
6.5
0.0
0.0
0.6
0.5
0.1
34.4
33.8
0.7
11.0
0.1
0.0
8.7
42.9
42.9
4.7
4.4
8.9
17.2
0.4
0.0
2.3
2.5
0.4
0.1
0.0
0.0
0.0
0.0
0.0
n.a.
0.2
0.0
38.3
76.8

204,433

199,991

214,722100.0

Notes: (1) Figures first released in Japanese yen were converted to US dollars using Bank of Japan year-end interbank rates.
(2) For inward FDI, negative figures indicate net outflow.
(3) “0” indicates an amount of less than one million US dollars; “-” indicates no investment recorded at the end of corresponding year.
(4) OECD member countries include the EU15, Australia, Canada, Iceland, New Zealand, Norway, Switzerland, Turkey, U.S., Mexico, Czech Republic,
Hungary, South Korea, Poland, Slovakia, Chile, Slovenia, Israel and Estonia (33 countries in total). Chile, Slovenia, Israel and Estonia were included
beginning with data as of the end of 2010.
(5) Europe shows the sum of Western Europe and Eastern Europe, Russia, etc. Western Europe for 2010 was calculated by subtracting Eastern Europe,
Russia, etc. from Europe.
Sources: Based on Japan’s Balance of External Assets & Liabilities statistics by Ministry of Finance and Bank of Japan, and Bank of Japan foreign exchange rates.

122Appendix World and Japan’s Statistics of Trade and Investment

Table 15 Worldwide FTA list (202 agreements)

Russia and the CIS

1976.6.17
1977.2.1
1981.1.1
1983.1.1
1991.6.20
1992.1.28
1994.1.1
2001.1.1
2001.12.15
2002.11.30
2003.5.13
2003.7.1
2003.7.28
2003.11.30
2004.1.1
2004.1.1
2004.9.1
2005.1.1
2005.6.12
2005.7.1
2005.8.1
2006.1.1
2006.3.2
2006.7.13
2006.7.29
2007.6.1
2007.7.1
2007.11.1
2008.1.1
2008.7.1
2008.7.31
2008.10.1
2008.12.1
2008.12.11
2009.1.1
2009.10.1
2009.10.27
2010.1.1
2010.1.1
2010.1.1
2010.8.1
2010.9.12
2011.1.1
1958.1.1
1960.5.3
1973.1.1
1991.7.1
1992.4.2
1993.7.1
1994.1.1
1995.3.1
1996.1.1
1997.1.1
2000.9.1
2001.1.1
2001.6.1
2002.1.1
2002.3.1
2002.4.1
2003.7.1
2003.7.1
2006.11.1
2006.12.1
2008.1.1
2008.5.1
2008.7.1
2010.2.1
2010.3.1
2010.9.1
2010.10.1
2010.11.1
1993.3.25
1993.4.24
1994.2.21
1994.5.10
1994.12.30
1995.10.27
1995.11.4
1995.11.11
1995.12.21
1996.1.1
1996.6.4
1996.7.7
1996.7.10
1996.9.2
1996.11.21
1996.12.18
1997.10.8
1998.1.19
1998.3.20
1998.10.19
1998.11.11
1999.7.16
2000.1.1
2001.12.25
2002.7.11
2004.5.20
2005.5.19
2006.11.1

Area

Americas

Effective date

The Middle East andAfricaName

Asia-Pacific Trade Agreement (APTA)
Papua New Guinea-Australia Trade and Commercial Relations Agreement (PATCRA)
South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA)
Australia/New Zealand Closer Economic Relations Trade Agreement (ANZCERTA)
Laos-Thailand
ASEAN Free Trade Area (AFTA)
Melanesian Spearhead Group (MSG)
New Zealand-Singapore
India-Sri Lanka
Japan-Singapore
India-Afghanistan
ASEAN-China (Framework Agreement)
Singapore-Australia
Pacific Island Countries Trade Agreement (PICTA)
China-Macao
China-Hong Kong
Thailand-India
Thailand-Australia
Pakistan-Sri Lanka
Thailand-New Zealand
India-Singapore
South Asian Free Trade Area (SAFTA)
South Korea-Singapore
Japan-Malaysia
India-Bhutan
South Korea-ASEAN
China-Pakistan
Japan-Thailand
Pakistan-Malaysia
Japan-Indonesia
Japan-Brunei
China-New Zealand
Japan-ASEAN
Japan-Philippines
China-Singapore
Japan-Vietnam
India-Nepal
ASEAN-Australia-New Zealand
ASEAN-India
India-South Korea
Malaysia-New Zealand
Economic Cooperation Framework Agreement (ECFA)
Hong Kong-NZ
European Union (EU; formerly European Community [EC] under Treaties of Rome)European Free Trade Association (EFTA)
EU-Switzerland
EU-Andorra
EFTA-Turkey
Faroe Islands-Norway
European Economic Area (EEA)
Faroe Islands-Switzerland
EU-Turkey
EU-Faroe Islands
Turkey-Macedonia
EFTA-Macedonia
EU-Macedonia
EFTA-Croatia
EU-Croatia
EU-San Marino
Turkey-Bosnia and Herzegovina
Turkey-Croatia
Faroe Islands-Iceland
EU-Albania
EU-Montenegro
Turkey-Albania
EU-Bosnia and Herzegovina
EU-Serbia
Turkey-Montenegro
Turkey-Serbia
EFTA-Serbia
EFTA-Albania
Armenia-Russia
Kyrgyzstan-Russia
Ukraine-Russia
Georgia-Russia
Commonwealth of Independent S tates (CIS) economic union
Kyrgyzstan-Armenia
Ukraine-Turkmenistan
Kyrgyzstan-Kazakhstan
Armenia-Republic of Moldova
Ukraine-Uzbekistan
Georgia-Ukraine
Armenia-Turkmenistan
Georgia-Azerbaijan
Ukraine-Azerbaijan
Kyrgyzstan-Republic of Moldova
Armenia-Ukraine
Eurasian Economic Community (EAEC)
Kyrgyzstan-Ukraine
Kyrgyzstan-Uzbekistan
Ukraine-Kazakhstan
Georgia-Armenia
Georgia-Kazakhstan
Georgia-Turkmenistan
Armenia-Kazakhstan
Ukraine-Tajikistan
Single Economic Space
Ukraine-Republic of Moldova
Ukraine-Belarus

Cross-Regional

EuropeAsia and Oceania

Area

Name

Central American Common Market (CACM)
Caribbean Community (CARICOM)
Latin American Integration Association (ALADI)
Andean Community (CAN)
Common Market of the South (Mercosur)North American Free Trade Agreement (NAFTA)
Colombia-Mexico
Costa Rica-Mexico
Canada-Chile
Mexico-Nicaragua
Chile-Mexico
Mexico-El Salvador
Guatemala-Mexico
Honduras-Mexico
Chile-Costa Rica
Chile-El Salvador
Canada-Costa Rica
Panama-El Salvador
U.S.-Chile
DR-CAFTA (FTA between the U.S. and the Dominican Republic and the four Central American countries)
Chile-Panama
Panama-Costa Rica
Panama-Honduras
U.S.-Peru
Chile-Colombia
Canada-Peru
Economic Community of West African S tates (ECOWAS)
Common Market for Eastern and Southern Africa (COMESA)
Pan-Arab Free Trade Area
CEMAC (Economic and Monetary Community of Central Africa)
Western African Economic and Monetary Union (WAEMU/UEMOA)
East African Community (EAC)
Southern African Development Community (SADC)
Gulf Cooperation Council (GCC)
Southern African Customs Union (SACU)
EU-OCTs (Overseas Countries and Territories)
PTN (Protocol relating to Trade Negotiations among Developing Countries)
EU-Syria
U.S.-Israel
GSTP (Global System of Trade Preferences among Developing Countries)
Economic Cooperation Organization (ECO)
EFTA-Israel
Canada-Israel
Turkey-Israel
EU-Palestinian Territories
EU-Tunisia
EFTA-Palestinian Territories
EFTA-Morocco
EU-South Africa
EU-Morocco
EU-Israel
EU-Mexico
Israel-Mexico
EFTA-Mexico
Ukraine-Macedonia
U.S.-Jordan
EFTA-Jordan
EU-Jordan
EFTA-Singapore
EU-Chile
EU-Lebanon
Panama-Taiwan
U.S.-Singapore
South Korea-Chile
EU-Egypt
EFTA-Chile
U.S.-Australia
Japan-Mexico
EFTA-Tunisia
Turkey-Palestinian Territories
Turkey-Tunisia
Jordan-Singapore
EU-Algeria
Turkey-Morocco
U.S.-Morocco
Trans-Pacific Strategic Economic Partnership Agreement (P4)
Panama-Singapore
U.S.-Bahrain
EFTA-South Korea
China-Chile
Turkey-Syria
EFTA-Lebanon
Turkey-Egypt
Central European Free Trade Agreement (CEFTA)
EFTA-Egypt
India-Chile
Japan-Chile
Nicaragua-Taiwan
Honduras-Taiwan
EFTA-SACU
Turkey-Georgia
EU-CARIFORUM
EU-Cote d’Ivoire
U.S.-Oman
Australia-Chile
Mercosur-India
EFTA-Canada
Peru-Singapore
Japan-Switzerland
EU-Cameroon
Peru-China
Turkey-Chile
Turkey-Jordan

Effective date1961.10.12
1973.8.1
1981.3.18
1988.5.25
1991.11.29
1994.1.1
1995.1.1
1995.1.1
1997.7.5
1998.7.1
1999.8.1
2001.3.15
2001.3.15
2001.6.1
2002.2.15
2002.6.1
2002.11.1
2003.4.11
2004.1.1
2006.3.1
2008.3.7
2008.3.7
2009.1.9
2009.2.1
2009.5.8
2009.8.1
1993.7.24
1994.12.8
1998.1.1
1999.6.24
2000.1.1
2000.7.7
2000.9.1
2003.1.1
2004.7.15
1971.1.1
1973.2.11
1977.7.1
1985.8.19
1989.4.19
1992.2.17
1993.1.1
1997.1.1
1997.5.1
1997.7.1
1998.3.1
1999.7.1
1999.12.1
2000.1.1
2000.3.1
2000.6.1
2000.7.1
2000.7.1
2001.7.1
2001.7.5
2001.12.17
2002.1.1
2002.5.1
2003.1.1
2003.2.1
2003.3.1
2004.1.1
2004.1.1
2004.4.1
2004.6.1
2004.12.1
2005.1.1
2005.4.1
2005.6.1
2005.6.1
2005.7.1
2005.8.22
2005.9.1
2006.1.1
2006.1.1
2006.5.28
2006.7.24
2006.8.1
2006.9.1
2006.10.1
2007.1.1
2007.1.1
2007.3.1
2007.5.1
2007.8.1
2007.8.17
2007.9.3
2008.1.1
2008.3.1
2008.5.1
2008.11.1
2008.11.1
2009.1.1
2009.1.1
2009.3.6
2009.6.1
2009.7.1
2009.8.1
2009.9.1
2009.10.1
2010.3.1
2011.3.1
2011.3.1

Sources: B ased on the list on the WTO website (http://rtais.wto.org/UI/PublicAllRTAList.aspx) as of June 1, 2011, to which Thailand-India, Malaysia-New Zealandand China-Taiwan (ECFA) have been added.

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