『経済研究』（明治学院大学）第 155 号

2018 年

Used car exports from Japan

Toshihiro ATSUMI
Faculty of Economics
Meiji Gakuin University1．Introduction
In this research note, I examine used car exports from Japan, using trade statistics issued by
the Japanese Ministry of Finance. The rise of the Japanese automobile industry and the corresponding increase in the stock of vehicles in Japan has been accompanied by increased exports of cars soldand used domestically. The latest data indicate that more than one million used cars were exportedfrom Japan in 2015, with major export destinations that included such countries as the United ArabEmirates, Singapore and New Zealand. A preliminary analysis of the determinants of used car exports finds that usual factors such as market size and income fail to explain the bilateral trade flows
in used cars.
The remaining contents of this note are as follows: Trends in used car exports from Japan arepresented in the next section; factors affecting Japanese used car exports are analyzed in Section 3;comments regarding further research follow in Section 4.

2．Trade statistics on used car exports from Japan
2.1 Trends
Units
Based on official international trade statistics issued by the Japanese Ministry of Finance(MOF), Figure 1 shows annual total car exports, used car exports, and the percentage share of used71

『経済研究』（明治学院大学）第 155 号

cars in total car exports. In 2002, Japan exported nearly 5 million cars, including used cars. This total
continued to increase, exceeding 7 million cars in 2007 and 2008. Since the global economic downturnin 2009, total car exports from Japan have been around 5 million units per year.
Similar to the pattern of total car exports, used car exports increased from 2002 through 2008.
In 2002, 504,556 used cars were exported, which amounted to 10.2 percent of the year’s total car exports. The used car share of total car exports has continued to rise, except for the years 2006 and2009. In 2015, 1,021,712 used cars were exported, meaning that 21.8 percent of the total number ofcars exported from Japan were used cars.
Value totals and unit values
The value of car exports can also be found in the MOF data. Figure 2 shows, in value terms,
total car exports, used car exports, and the used car percentage share of total car exports. This figure looks similar to Figure 1. From 2002 to 2007, the total value of car exports increased from around8 trillion yen to 12.5 trillion yen. The economic shock of 2009 caused the total to fall below 6 trillion
yen, less than half of its 2007 peak. However, following this precipitous decline, the value of total car
exports began to grow once again, reaching roughly 10 trillion yen today. Over the same period, thevalue of used car exports has also risen and currently accounts for 6.4 percent of the car export total.
The difference between the unit share and value share of used cars in these figures reflects
the lower unit values of used cars compared to new cars. Figure 3 shows the calculated average unit
prices of exported Japanese used cars from 2002 to 2015. As indicated, these unit prices are in therange of approximately 400 thousand yen to 650 thousand yen. This is clearly lower than the price ofFigure 1: Total and used car exports in units, 2002-2015
8,000,000

（％）
25
21.8％

7,248,799

7,000,000

20

6,000,000
4,932,034
5,000,000

4,976,879

15

4,000,000
10

3,000,000
2,000,000

5

total car exports（unit）

used car exports（unit）

Source: Graph created by author using data from MOF trade statistics.

72

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

02002

1,000,000

0used car share（％）

Used car exports from Japan
Figure 2: Value of total and used car exports, 2002-2015 (unit: 100 million yen)（％）
7
140,000
6.4％
126,834
120,000

104,062

100,000
80,00078,25865
457,97160,0003

total car exports（value）

used car exports（value）

2015

2014

2013

2012

2011

2010

2009

2008

2007

02006

02005

12004

20,000
2003

2

2002

40,000used car share（％）

Source: Graph created by author using data from MOF trade statistics.

Figure 3: Average unit value of exported used cars, 2002-2015 (unit: thousand yen)
700647
594
600
500
400

4093002002015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

0

2002

100

Source: Graph created by author using data from MOF trade statistics.

a typical new car, which would be at least a few million yen. This explains why today the value
share of used cars is only 6 percent, compared to the unit share of used cars, which exceeds 20 percent.
2.2 Destinations
Table 1 lists the top 20 export destinations for used cars in the category of 1.0 to 1.5-liter gasoline engine cars (corresponding to compact cars in HS code 8703.22.910), which is the main categoryof Japanese used car exports. The first column of the table shows the top 20 destination countries inunit terms; the second column shows the same in value terms. Interestingly, most countries listed
here are not Japan’s usual trading partners. In unit terms, the prime destination in 2016 was the73

『経済研究』（明治学院大学）第 155 号
Table 1: Major destinations of used car exports from Japan, 2016
Units1234567891011121314151617181920

United Arab Emirates
New Zealand
Myanmar
Chile
Sounth Africa
Kenya
Mongolia
Bangladesh
Georgia
Singapore
RussiaSri Lanka
Tanzania
Jamaica
Pakistan
CyprusAfghanistan
Trinidad and Tobago
Fiji
Mauritius

Value (1000yen)

50,75544,33537,61337,54624,341
23,355
22,15020,69020,407
16,46814,891
11,821
10,322
10,004
9,400
7,412
6,486
5,823
5,677
5,610

123
45678910111213
1415
161718
1920

Singapore
Bangladesh
Sri Lanka
Myanmar
New ZealandPakistan
Kenya
United Arab Emirates
Chile
Mongolia
Russia
Mauritius
Jamaica
CyprusTrnidad and Tobago
GeorgiaSouth Africa
FijiGuyana
Tanzania

33,416,449
23,130,141
19,270,663
15,756,340
12,020,776
9,497,958
9,479,074
7,872,540
6,818,023
6,495,019
5,790,730
5,551,770
4,654,892
3,962,466
3,849,271
3,185,903
2,386,123
2,336,806
1,881,051
1,801,011

Note: 1.0 to 1.5-liter gasoline engine cars (HS code 8703.22.910)
Source: Created by author using data from MOF trade statistics.

United Arab Emirates (UAE); 50,755 cars, worth a total of 7,872,540 thousand yen, were exported
there. The second major destination was New Zealand, where 44,335 cars (12,020,776 thousand yen)were exported, followed by Myanmar, Chile, South Africa, and Kenya.
In value terms, a somewhat different picture appears. In 2016, Singapore was the prime destination, with Japanese used car imports worth a total of 33,416,449 thousand yen. Ranking second wasBangladesh, followed by Sri Lanka, Myanmar and New Zealand.
The destinations include a variety of countries in Asia, the Middle East, and Africa, ranging
from developing countries like Afghanistan and Bangladesh to developed countries such as Singapore and New Zealand. One notable new destination for Japanese used cars is Myanmar. In addition,
a number of small island countries such as Cyprus, Trinidad and Tobago, Fiji and Mauritius are included on the list.

3．Preliminary analyses of the determinants of used car exports from Japan
3.1 Hypotheses regarding factors affecting bilateral trade flows in used cars
Given that Japan’s used cars are exported to a variety of countries and that many of thesecountries are not among Japan’s major trading partners, examining the determinants of Japanese74

Used car exports from Japan

used car export destinations is of particular interest. What are the factors affecting the export ofused cars from Japan to each country? Trade flows in general are affected by such obvious factors
as market size - other things being equal, the larger the economy of the destination, the greater theexports to that destination. Along with many other factors, the role of market size is described in theso-called gravity model literature in empirical international economics.
With respect to used cars, in addition to the usual factors explaining bilateral trade flows, one
would also expect there to be used-car specific factors. For example, because Japan is a right-handdrive country (meaning that drivers sit on the right-hand-side of the car and that, as a consequence,steering wheels are positioned on the right-hand-side of the car), used cars from Japan would appear
to be most suitable for similar right-hand-drive countries (otherwise, the cars would have to be converted to left-hand-drive, which would likely be costly). Another potential factor is income. Because
used cars tend to be considerably cheaper than new cars, as confirmed in Figure 3, one would expect that demand for used cars would be relatively higher in lower income countries.
3.2 A preliminary examination the hypotheses
Do these factors actually explain the exports of used cars from Japan? Given the hypotheses
set out above, other things being equal, one would expect larger used car exports to larger markets
and right-hand-drive countries, with fewer exports of used cars to higher income countries and countries where drivers drive on the left.
Casual observation of the data suggests that because many of the major export destinations
listed in Table 1 are developing countries, it would be reasonable to believe that lower incomes explain part of Japan’s used car trade flow. Also from a cost point of view, many of the countries in thetable are right-hand-drive countries, which suggests that this factor, too, may help explain where Japan’s used cars are shipped. On the other hand, although the growing size of the Russian economy
appears to support the hypothesis that market size helps explain used car exports, most other destinations listed in Table 1 are relatively small economies. Thus, whether economic size explains theflow of used cars seems not totally clear at this point.
As a first step in a more formal study the determinants of used cars exports from Japan, I
present preliminary findings from cross-sectional regression analyses. The dependent variables here
are export units and export values of used cars from Japan in 2016, as presented in Table 1. The explanatory variables are market size and income of the destination country, and whether the destination country is a right-hand-drive country. Market size is measured by the GDP of the destination
country. The data are summarized in Table 2. A dummy variable is used to indicate whether thedestination is a right-hand-drive country: The dummy is given a value of one if the destination is aright-hand-drive country and zero if it is not. Among the 188 countries in the present data set, 51 are75

『経済研究』（明治学院大学）第 155 号

right-hand-drive countries.
Results of regressing the hypothesized factors on the number of units and the value of usedcars exported from Japan to all destinations are shown in Table 3. Because there are a number of zeros in the dependent variables, that is, some countries do not import any used cars from Japan, theregression method used here is the Tobit model. The first column of the table shows the results ofregressing the various factors on export units. In the second column, the dependent variable is export value. The third and fourth columns show results when a “hub” variable is introduced, as explained in the next section.
Findings from the two regressions can be summarized as follows: The coefficients for all theexplanatory variables have the expected signs. However, the coefficients for market size and income
are not statistically significant in the two regressions. Only the steering wheel position has the expected positive and statistically significant coefficient, meaning that, other things being equal, more
Table 2: Descriptive statistics
export units
number ofobservations

export value(1000yen)market size (GDP)(billion dollars)

per capita income(dollars)

188

188

188

188

minimum

000.1260maximum

50,75533,416,449

17,994.1

106,140

average2278.340

1017802.085

381.678

14342.872

standard error

7265.604

3775334.887

1592.805

20287.319

Table 3: Preliminary regression results（Tobit）
dependent variables

constant
market size
incomeright-hand-drivehub
Pseudo R2

export units

export value

export units

export value－4495.037(－3.57)－2761265(－4.42)－3664.758(－3.75)－2817547(－4.56).4927683(1.01)

275.7473(1.15).4036462(1.07)

283.1957(1.20)－.0199958(－0.46)－7.330041(－0.34)－.0280578(－0.82)－9.908966(－0.46)9069.116(4.96)

5530492(6.12)

7676.518(5.43)

5492751(6.18)－－

39112.88(8.55)

6795149(2.37)

0.01120.01070.03580.0122

Note: t-values of the coefficients are shown in parenthesis.
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Used car exports from Japan

used cars are exported to right-hand-drive countries. Hence, among the factors studied to this point,
only the steering wheel position of the destination country explains at least some of the variation.

4．Comments
The above analysis is based on data from a particular year (2016) and segment (compact cars).
Further studies using a richer data set are clearly required. Nevertheless, it was found that factors
such as market size and income fail to explain the export destinations of Japanese used cars. Only
the steering wheel position was shown to explain at least a fraction of the variation in both export
units and export value. This suggests that there are other influencing factors. Below, I introduce several potentially important factors that may affect Japanese used car exports, namely, the role of hub
countries, regulations in importing countries, and business networks.
Role of hub countries and entrepot trade
Drivers in the UAE are required to sit on the left-hand-side of the car, which means that Japanese cars are not suitable for driving within the UAE. It is therefore puzzling that the UAE is aprime destination for Japanese used cars (first in terms of units and eighth in terms of value). However, according to surveys and field studies conducted by Azuma et al. (2017), the UAE is a hub andfunctions as an entrepot for used cars from Japan. Japanese used cars are imported initially into theUAE, where the cars are converted to left-hand-drive when necessary, and then sent to final destinations in the Middle East. In the business, the conversion is called a “steering change.”
According to Azuma et al. (2017), Chile and South Africa also serve as hubs of the international used car trade. Chile is an entrepot for other South American countries, including Bolivia and Paraguay. These countries are all left-hand-drive, so Japanese right-hand-drive imports need to be converted. In Africa, there a number of right-hand-drive countries where Japanese used cars can bedriven without a steering change. South Africa may function as an entrepot for many of these landlocked African countries.
Taking into account such hub effects, the initial regression analyses were modified by adding“hub country” as a new explanatory variable. An appropriate dummy variable was given a value of
one for the UAE, Chile and South Africa and zero for all other countries.
Regression results with the hub dummy variables added are given in the third and fourth columns of Table 3. As can be seen, the explanatory power of the model increases with the inclusion of
the hub dummy variable, particularly in the units case. The coefficients for the hub dummy variable
are found to be positive and statistically significant, meaning that, other things being equal, moreused cars are exported to hub countries, both in terms of units and values.
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『経済研究』（明治学院大学）第 155 号

The preliminary results that some of the variations in used car exports from Japan can be explained by steering wheel position and hubs suggest these supply-side or cost factors are much more
important than demand-side factors such as market size and income.
Regulations in destination countries
In addition to its role as a used car hub, import regulations and road vehicle laws in the destination country, which were not included in the regression analyses in Section 3, can be important.
New Zealand suddenly became one of the major destinations for Japanese used cars in thelate 1980s, immediately after the country liberalized its regulation of imports, including used cars. Asa right-hand-drive country and one that is relatively proximate to Japan, it had always been a potentially rich destination for Japanese used cars. Similarly, used car exports to Russia began to increase
dramatically at the end of the 1980s, despite the fact that Russia is not a right-hand-drive country.
This was partly a response to the country’s tariff reduction for imported cars. Its proximity to Japan
may also have contributed to the rise in Japanese used car imports.
It is noteworthy that regulations do not always work to promote trade. In Russia, after the reform in 2009, import tariffs on used cars were raised, and exports to Russia suddenly dropped. Thiscase serves as a warning that used car exports are subject to sudden policy and regulation changes,
with potentially drastic consequences.
Business networks
Another supply-side factor influencing international used car trade may be business networks.
For example, Azuma et al. (2017) discovered an agglomeration of ethnic business networks in theUAE, organized by traders from Pakistan and Afghanistan. These networks extend worldwide, including into Japan, where traders search, select, purchase and ship used cars to the hub. How suchnetworks organize and locate their businesses is likely to affect the trade flows of used cars.
AcknowledgementI appreciate the financial support of Grants-in-Aid for Scientific Research (16H06551) from theJapan Society for the Promotion of Science.

References
Azuma, Yutaka, Tomoko Fukuda, Kenichi Togawa, and Katsunori Okamoto. 2017. Jidosha Riyusu to Gurobaru Shijo(Automobile Reuse and the Global Market), Tokyo: Seizando Shoten.
Ministry of Finance. various years. Trade statistics of Japan. Available in electronic format from http://www.customs.
go.jp/toukei/info/index_e.htm
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