DPRIETI Discussion Paper Series 22-E-037

Impacts of Increased Chinese Imports on Japan’s Labor
Market: Firm and regional aspects
HAYAKAWA, Kazunobu
JETRO

ITO, Tadashi

Gakushuin University

URATA, Shujiro
RIETI

The Research Institute of Economy, Trade and Industry

https://www.rieti.go.jp/en/

RIETI Discussion Paper Series 22-E-037
April 2022

Impacts of Increased Chinese Imports on Japan’s Labor Market: Firm and Regional Aspects 1
Kazunobu HAYAKAWA
Institute of Developing Economies, JETRO
Tadashi ITO
Gakushuin University
Shujiro URATA
Waseda University and RIETI
Abstract
Using firm/plant-level data from the Census of Manufacture, this study investigates the impact ofChinese import competition, focusing on different effects based on firm characteristics and regional
factors. We find that import competition from China harms Japanese firms’ survival ratios, with thenegative impacts being especially strong for smaller firms. Subcontractors are also more vulnerable
to Chinese import competition. However, subcontractors in metropolitan areas experience lesser
negative impact. In terms of the effects on firm employment, import competition from China had anegative impact, but no statistically significant difference exists based on firm size or whether firms
are subcontractors. Firms with overseas affiliates in China or multiple domestic plants reduced theiremployment in Japan. Moreover, plants in Tokyo, Aichi, and Osaka areas have been particularly
inflicted an adverse effect.
Keywords: China shock, JapanJEL classification: F10
The RIETI Discussion Paper Series aims at widely disseminating research results in the form of professional
papers, with the goal of stimulating lively discussion. The views expressed in the papers are solely those of
the author(s), and neither represent those of the organization(s) to which the author(s) belong(s) nor the
Research Institute of Economy, Trade and Industry.

1

This study is conducted as a part of the Project “Globalization and the Japanese Economy: Firm Adjustment andGlobal Trade Governance” undertaken at the Research Institute of Economy, Trade and Industry (RIETI). This study
uses data from the questionnaire information based on the “Census of Manufacture” (Ministry of Economy, Tradeand Industry) and “Economic Census for Business Activity” (Ministry of Internal Affairs and Communications andMinistry of Economy, Trade and Industry). We also utilize the Census of Manufacture’s plant-id converter, which
are provided by RIETI. The authors are grateful for helpful comments and suggestions by Kenta Yamanouchi(Kagawa Univ.), Toshiyuki Matsuura (Keio Univ.) and Discussion Paper seminar participants at RIETI. A part of
Ito’s work for this project is financially supported by Japan Society for Promotion of Science KAKENHI grant
number 20H01501.

1. INTRODUCTION
In the aftermath of the Global Financial Crisis in the 2010s, a rapid and massive increasein Chinese imports drew the attention of policymakers and researchers in the United States. An
issue that attracted the most attention was their impact on employment. Indeed, one of the mostcontentious issues during the 2016 U.S. presidential campaign was the negative effects ofChinese imports on employment. The unexpected victory of Donald Trump has been attributed
to strong support from workers in the Rust Belt who have allegedly suffered from increased
Chinese imports.
Although the U.S. labor market has been a major focus of debates on the effects ofChinese imports on labor markets, imports from China are even more notable in countries otherthan the U.S., most notably in South Korea and Japan, China’s neighboring countries. Figure 1
shows the import penetration ratio from China to the U.S., Japan, the UK, France, Germany,and South Korea. South Korea and Japan have much higher and increasing Chinese importpenetration ratios. Given the high import penetration ratio, research on the Japanese labormarket is especially important. Simultaneously, as shown in Table 1, the number of employees
in Japan’s manufacturing sector has decreased substantially. Such a rise in China’s importpenetration ratio could be linked to a decrease in employment in Japan.
This study investigates how the import competition from China affects Japanese firms
differently depending on firm characteristics and regional factors. In terms of firm
characteristics, we include in our dataset subcontractor firms that process raw materials andreceive processing fees from their outsourcers and have not been studied in previous studies,owing to the difficulty in assembling the necessary data by matching products to processes.
Then, we examine how the effects of Chinese import competition differ between subcontractors
and non-subcontractors. Similarly, we look into the differences in those effects based on thepresence of firms’ affiliates in China. In a nutshell, this study empirically investigates the roleof firm characteristics that have never been studied before in the literature.
This study’s findings are summarized as follows:
1. The import competition from China negatively affected the survival of Japanese firms, with
the negative effects being especially severe for smaller firms.
2. Subcontractors are more vulnerable to Chinese import competition. However, the negative
effect is attenuated for subcontractors in metropolitan areas.

13. Concerning the effects on employment, import competition from China had a negative
impact, but the difference based on firm size or whether firms are subcontractors is notstatistically significant.
4. Firms with Chinese affiliates reduced their employment in Japan more than those without.
5. Firms with multiple plants were more likely to dismiss workers.
6. In terms of plant location, plants in Tokyo, Aichi, and Osaka areas are particularly affected.
The remainder of this paper is structured as follows. Section 2 provides an overview ofthe literature on the effects of Chinese import penetration. Section 3 presents our empiricalfindings. Finally, Section 4 concludes this study.

2. LITERATURE
The trade literature has empirically investigated the economic effects of a dramaticincrease in Chinese imports, known as the “China shock.” Autor et al. (2013) pioneered a study
in the recent literature that demonstrated that an increase in Chinese imports decreases job
opportunities in the U.S. A similar finding has been obtained in other countries, including
Mexico (Mendez, 2015), Canada (Murray, 2017; Kim, 2018; Albouy et al., 2019), Denmark(Keller and Utar, 2018), Germany (Dauth et al., 2014), France (Malgouyres, 2017), Brazil(Costa et al., 2016), Spain (Donoso et al., 2015), Belgium (Mion and Zhu, 2013), Norway(Balsvik et al., 2015), Portugal (Branstetter et al., 2019), Italy (Federico, 2014), the UK(Colantone et al., 2019), and South Korea (Choi and Xu, 2020). The economic consequencesof the China shock have received much attention in recent trade literature.
This literature has expanded in various directions. The first is to examine theheterogeneous effects across jobs (Lu and Ng, 2013; Autor et al., 2015; del Angel et al., 2019),
sectors (Federico, 2014; Acemoglu et al., 2016; Magyari, 2017; Bloom et al., 2019), and firms(Asquith et al., 2019; Aslan and Kumar, 2021). The second direction is to improve themeasurement of the impacts in terms of gross trade versus trade in value added (Shen and Silva,
2018; Jakubik and Stolzenburg, 2021) and empirical identification (Adao et al., 2019; Fischer
and Saure, 2018). The third step is to investigate the effects on other indicators, such as gender(Keller and Utar, 2018; Benguira and Ederington, 2021; Majlesi, 2016), political stances (Cheet al., 2016; Autor et al., 2020; Che and Xiao, 2020; Colantone and Stanig, 2018a, 2018b;
Caselli et al., 2020), health (Adda and Fawaz, 2020; Lang et al., 2018; Charles et al., 2018;
Pierce and Schott, 2020; Giuntella et al., 2020), and crimes (Che et al., 2018; Dell et al., 2019;
Dix-Carneiro et al., 2018).
2

We empirically investigate the effects of China shocks on the Japanese economy. Several
studies on Japan have been included in the preceding literature. For instance, Taniguchi (2019)
found the inverse of the preceding result, namely, the positive effect of Chinese importpenetration on Japanese jobs. She interpreted this result as reflecting the active imports ofintermediate goods from China. Although her analysis is based on cross-regional variation,
Hayakawa et al. (2021a) discovered significantly negative effects on jobs using the crossindustry data. Furthermore, Hayakawa et al. (2021b) found that import penetration had asignificant negative impact on industries producing competing products to Chinese imports,
and a positive impact on industries from which firms purchased their inputs. At the commuting
zone level, Kainuma and Saito (2022) found similar results to Hayakawa et al. (2021b) andclaimed that the direct negative effect on local labor markets is somewhat mitigated by effects
on downstream industries within the same region. Furthermore, for Japanese firms faced withcompetition from Chinese imports, Matsuura (2022) showed a significant rise in the share ofservice workers in manufacturing, whereas Yamashita and Yamauchi (2020) found an increasein patenting and a decrease in innovation quality (measured by forward citations received).

3. DATA AND METHODOLOGY
3.1.

Data

The data on employment are obtained from the Census of Manufacture and the Economic
Census compiled by the Ministry of Economy, Trade, and Industry in Japan. The Census of
Manufacture was conducted as part of the Economic Census in 2011 and 2015. We used datafrom 1996 to 2014 because necessary concordances are available. Except for the years 1998,
2000, 2003, 2005, and 2008, the censuses cover all manufacturing plants (establishments) 1 inJapan with four or more employees. The questionnaires must be completed by all
establishments. The response rate is approximately 95%. Each year, approximately 200,000–
300,000 establishments are recorded. The total number of establishments decreased fromaround 350,000 in 1996 to approximately 200,000 in 2014. The present study uses data from1996, which is the initial year for which data are available, up to 2014. We chose 2014 as theend year of our study because of the availability of various concordance tables we needed touse.
The data on production value used to compute the import penetration variable are also
derived from censuses. Products are defined at a six-digit level in these censuses.

1

This study uses the term “plant” and “establishment” for the same meaning.

3

Approximately 1,200 “products” are available at the six-digit level. The data on Japan’s imports
from China and the rest of the world are obtained from Japan Customs under the Ministry of
Finance. Based on Japan’s tariff classification, these data are available at a nine-digit level, withapproximately 9,000 products. Our empirical analysis is conducted at the six-digit level inproduction/employment data by mapping each nine-digit code in trade data to a single six-digit
code in production/employment data. In this aggregation of codes in trade data, we use theconverter table between nine-digit codes in trade data and six-digit codes in production data
developed by Baek et al. (2019) and that of tariff-line-level codes in trade data constructed by
Aoyagi and Ito (2019).
The Census datasets provide data on establishments and parent firms separately. We usedfirm name and paid-up capital to match the two datasets because of the unavailability of firm
identification code. We were successful in matching roughly 60% of the data. Because
information to construct concordance between firms and establishments is not available for
2011, when the Census of Manufacture is conducted as part of the Economic Census, 2011 is
excluded from our sample.
In this study, we use concordance tables to aggregate plant-level data into firm-level data.
To examine the impact of Chinese import competition on firm performance, we define theproduct with the highest sales value as a firm’s representative product.

3.2. Descriptive analyses
Figure 2 shows the number of employees in Japan’s manufacturing sector as obtained
from the Census of Manufacture and the Economic Census. It has substantially decreased overthe last 30 years. Figure 3 depicts the total number of employees by industry from 1996 to 2014.
A notable decline is observed in industries, such as textiles, electrical machinery, equipment
and supplies, and information and communication electronics equipment.
Table 2 shows the change in Chinese import penetration into the Japanese market byindustry from 1996 to 2014. Following Acemoglu et al. (2016), we computed the measure on
Chinese import penetration. In particular, the change in import penetration from China iscomputed as the difference between imports from China in years t and 0, over “imports fromthe rest of the world in year 0 plus production value in year 0.” It is multiplied by 100 to show
percentage changes and divided by the number of years, i.e., t − 0, to show annual changes. In
symbol, as in Acemoglu et al. (2016), it is defined as

Table 2 shows that China’s import penetration increased, particularly in industries, suchas textiles, furniture and fixtures, business-oriented machinery, electrical machinery, equipment
4

and supplies, and information and communication electronics equipment. Specifically, Japan’s
import penetration from China increased primarily in the machinery industry. Meanwhile, food,beverages and tobacco, printing, petroleum and coal products, and transportation equipment
have seen relatively small increases.
Table 3 shows the change in employment by prefecture. It is computed by aggregating
plant-level employment data rather than firm-level data because a firm’s headquarter location
is often different from the locations of its plants. The greatest drops are observed in metropolitan
areas, most notably Tokyo (−56.71%), Kanagawa (−40.20%), and Osaka (−40.20%). Akita andTottori experienced significant declines in non-metropolitan prefectures. This trend is more
visible in Figure 4, which depicts the number of manufacturing employees by region. MinamiKanto, which includes Tokyo and Kanagawa, and Kinki, which includes Osaka, experienced
the greatest drop in employment. This decline is primarily attributed to the structural shift frommanufacturing to service industries, which occurred most notably in metropolitan areas.
However, besides the structural change, other factors, such as import competition from China,
may be driving this drastic decline.
Unlike previous studies on the impacts of Chinese import penetration on the Japanese
economy, this study includes processing-fee-receiving subcontractor firms, which are defined
as firms whose subcontracting sales exceed non-subcontracting sales. Table 4 shows the total
number of subcontractors and others (non-subcontractors). Subcontractors account for
approximately 33% of the approximately 300,000 firms. This share underscores thesignificance of subcontractors in Japanese manufacturing. The lower panel of Table 4 displays
the surviving rate, which is defined as the proportion of plants that survived in 2014 out of thosethat existed in 1996. Meanwhile, subcontractors in metropolitan areas have the lowest surviving
rate, whereas non-subcontractors in non-metropolitan areas have the highest. Thus, both plant
type and regional characteristics appear to influence plant survival.

3.3.

Estimation analyses

This section examines the effects of Chinese import penetration on firm survival before
moving on to the effects on firm employment. We intend to uncover the heterogeneous effectsof firm and regional characteristics. In our regression analyses, we set 2014 and 1996 as years
t and 0 in equation (1), respectively.

3.3.1. Survival
We analyze whether Chinese import penetration has affected firm survival and how it
varies by firm characteristics. To do so, we use the ordinary least squares (OLS) method toestimate the following linear probability model:5where takes a value of 1 if firm f existed in both 1996 and 2014 and a value of 0 if it existed in
1996 but did not in 2014. represents the change of the import penetration rate of firm f’s
representative product from 1996 to 2014, as specified in equation (1). We control for firm sizein terms of employee number by a log of their number in 1996 (). To investigate theheterogeneous effects of firm characteristics, we also introduce two interaction terms relating
to import penetration. One is an interaction with an indicator variable that takes a value of 1 if
firm f’s employment in 1996 is less than the median value of employment among all firms ().
The other interaction term is with a dummy variable on subcontractors (), which is defined by
the firm status in 1996. On the subcontractor dummy, we also introduce the non-interacted
variable. We control for prefecture-fixed effects () and industry fixed effects (defined at a twodigit level of industry classification, ).
Table 5 shows the estimation results. We begin with a specification that does not haveinteraction terms. In Column (1), we do not control for prefecture-fixed effects and industry
fixed effects, which are introduced in Columns (2) and (3), respectively. Both fixed effects are
introduced in Column (4). has statistically significant coefficients with a negative sign in all
four columns, as expected. Firms are more likely to exit if they produce products with higher
growth in Chinese import penetration. Moreover, the employment coefficients were both
positive and significant, indicating that larger firms are more likely to survive. In Column (5),
we introduce a cross term of the Chinese penetration variable with a dummy on small-sized
firms in terms of employment. Its coefficient is statistically significant and has a negative sign,
indicating the more adverse effect of competition with Chinese products on smaller firms.
In Table 6, Column (1), we introduce the subcontractor dummy variable and its crossterm with Chinese import penetration. The two coefficients on subcontractor-related variables
are negative and statistically significant. The result for the subcontractor dummy indicates that
subcontractors are more likely to exit, whereas the result for the interaction term indicates that
subcontractors are more adversely affected by Chinese import competition. Furthermore, thelocation of subcontractors may be important for their survival because they may be able to findother firms for which they subcontract if they are located in metropolitan areas, due to firm
agglomeration. 2 To examine this hypothesis, we introduce a metropolitan dummy(Metropolitan) and its interaction term with Chinese import penetration. Although location in
the metropolitan area is irrelevant for survival on average, subcontractors located in themetropolitan area can mitigate the negative impact of Chinese import penetration, as shown inColumn (2) of Table 6.

2

We define Tokyo, Saitama, Kanagawa, Chiba, Aichi, Osaka, Kyoto, and Hyogo.

6

3.3.2. Impact on employment
In this subsection, we examine the impact of Chinese import penetration on employment(i.e., the intensive margin in firms’ production) rather than survival (i.e., the extensive margin).
To do so, we substitute the annualized log-difference of employment from 1996 to 2014 for the
dependent variable in equation (2). Note that the sub-sample used in this analysis is that firmsthat have survived the entire period to focus on the effect on the intensive margin.
Specifically, we use the OLS to estimate the following equation:

where is the annualized log change in percentage over the sample period, i.e., , as reported by
Acemoglu et al. (2016). For this analysis, we altered the independent variables slightly. We
control for a log of sales per worker in 1996 (). Then, we examine the interaction term ofChinese import penetration with the dummy variable, which takes the value of 1 if a firm’ssales per worker in 1996 were less than the industry-level median (Low productivity). As in theequation (2), we also introduce subcontractors-related variables.
Table 7 shows the OLS estimation results. Chinese import penetration has had a negative
impact on employment growth. However, its impact does not differ by firm productivity (asmeasured by sales per worker) or firm type (i.e., whether subcontractors or not). As a result, wefind no evidence of heterogeneous effects of Chinese import penetration on the intensive margin
across these firm characteristics. Firms that are more productive have significantly higher
employment growth. Contrary to our expectations, the subcontractor dummy has a statisticallysignificant positive coefficient. The result of its interaction term may indicate that
subcontractors engaged in processes that do not compete with Chinese products increase
employment.

3.3.3. Number of establishments
When confronted with fierce competition from Chinese imports, firms with moreestablishments in Japan may shift their employees from one plant to the other, thereby retaining
their employees. Meanwhile, firms may find it easier to fire employees by closing one of theirplants and claiming that they should close their plants and thus have no choice but to terminate
employment. To examine this hypothesis in the context of the intensive margin, we introduce
the interaction term of Chinese import penetration as a dummy variable with a value of 1 if
firms had more than five establishments in Japan in 1996 (i.e., Many plants). We also control
for the number of establishments they had in 1996 (i.e., Number of establishments).
Table 8 shows the estimation results. This new interaction term has an insignificant
coefficient in Column (1), implying that neither of the aforementioned two opposing forces is7

dominant. The number of establishments coefficient is significantly negative, indicating thatfirms with more establishments tend to reduce their employees. In Column (2), we also include
the number of establishments belonging to a firm within the prefecture where the firm’s
headquarters are located (Number of establishments within the same region), to investigate thepossibility of worker relocation between plants. However, its coefficient is estimatedinsignificantly. Furthermore, the interaction term of Chinese import penetration has a nonsignificant coefficient.

3.3.4. Foreign direct investment link
When firms have their affiliates in China, the impact of Chinese import penetration on
their employment in Japan may be different. Firms with affiliate plants in China may shift
production to China to compete with imports from China, thus reducing the number of workers
in Japan. To test this hypothesis, we include the interaction term of Chinese import penetration
with the dummy variable of the presence of firms’ affiliates in China in 1996 (CHN affiliate
dummy) in equation (3). We also include the dummy variable’s non-interacted version. We
eliminate the other Chinese import penetration interaction terms.
The estimation results are shown in Table 9. Firms with overseas affiliates in China tend
to reduce employment, as evidenced by the statistically significant coefficient with a negative
sign for the China affiliate dummy. In contrast, there is no evidence of additional impact from
Chinese import competition, as indicated by its cross term with Chinese import penetration.
Thus, firms with overseas affiliates in China tend to reduce their employment in Japan, possibly
due to a division of labor between Japan and China, whereas having those affiliates in China
has no effect on the effect of Chinese import penetration on Japanese employment growth.

3.3.5. Different impacts by location
This final subsection examines how the effects of Chinese import competition vary bylocation. Unlike the previous analyses, the analyses in this subsection are conducted at the plantlevel because the locations of firms’ headquarters are typically different from the locations of
their plants. The following equation is estimated for prefecture and region.

The definition of each term is the same as above. We estimate this equation by the OLS.
Table 10 displays the estimation results broken down by prefecture. The table shows theestimated coefficient for Chinese import penetration. Overall, statistically significant
coefficients with negative signs are found in Tokyo and its neighboring prefectures, Aichi and8some of its neighboring prefectures, and Osaka and its adjacent prefectures. Table 11 shows theestimation results by region. Minami-Kanto, Kita-Kanto-Koshin, Tokai, and Kinki wereparticularly negatively affected. These negative effects of Chinese import penetration on
employment, particularly in urban areas, can be explained by the interaction of supply anddemand. On the supply side, factor prices, particularly those for production premises and labor,
are typically higher in urban areas than in rural areas, which works against firms facing fierce
competition from China. On the demand side, firms may benefit from increased demand in
urban areas, which may assist firms in mitigating the negative shocks of Chinese importpenetration. We conjecture that our estimates reflect the net effect of these two forces. Supplyside effects override the demand-side effects.

4. CONCLUDING REMARKSThis study investigates the impact of import competition from China using firm/plantlevel data from the Census of Manufacture, with a particular focus on different effects on firm
characteristics and regional aspects. We find that import competition from China negatively
affected Japanese firm survival ratios, with the negative impacts being especially strong forsmaller firms. Subcontractors are also more vulnerable to Chinese import competition.
However, when they are located in metropolitan areas, the negative impact is mitigated. The
import competition from China harmed the number of employees, but there is no statisticaldifference in firm size or whether firms are subcontractors. Moreover, firms with Chinese
affiliates reduced their employment in Japan more than those without. Furthermore, firms withmultiple plants are more likely to reduce their workforce. In terms of plant location, plants inTokyo, Aichi, and Osaka areas are adversely affected.

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in Japan.” Journal of the Japanese and International Economies, 51: 1-18.
Yamashita, N. and I. Yamauchi (2020) “Innovation responses of Japanese firms to Chinese
import competition.” The World Economy, 43(1): 60-80.

12

13

FIGURES AND TABLESFIGURE 1: IMPORT PENETRATION RATIO FROM CHINANOTE: CHINA PENETRATION IS COMPUTED AS IMPORT FROM CHINA / DOMESTIC DEMAND, WHERE DOMESTIC
DEMAND = DOMESTIC PRODUCTION + IMPORTS FROM THE WORLD–EXPORTS TO THE WORLD

SOURCE: FIGURE 1 IN HAYAKAWA ET AL. (2021)

14

FIGURE 2: Number of employees in manufacturing sector in Japan
12,000,000

11,000,000

10,000,000

9,000,000

8,000,000

7,000,000

5,000,000

1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

6,000,000

SOURCE: AUTHORS’ COMPUTATION FROM THE CENSUS OF MANUFACTURE (MINISTRY OF ECONOMY, TRADE
AND INDUSTRY)15

FIGURE 3: NUMBER OF EMPLOYEES BY INDUSTRY: 1996-2014
2500000
MANUFACTURE OF FOOD

MANUFACTURE OF BEVERAGES,TOBACCO AND FEEDMANUFACTURE OF TEXTILE PRODUCTS

MANUFACTURE OF LUMBER AND WOOD PRODUCTS,
EXCEPT FURNITURE
MANUFACTURE OF FURNITURE AND FIXTURES

2000000

MANUFACTURE OF PULP, PAPER AND PAPER
PRODUCTSPRINTING AND ALLIED INDUSTRIESMANUFACTURE OF CHEMICAL AND ALLIED
PRODUCTSMANUFACTURE OF PETROLEUM AND COAL
PRODUCTSMANUFACTURE OF PLASTIC PRODUCTS, EXCEPTOTHERWISE CLASSIFIED

1500000

MANUFACTURE OF RUBBER PRODUCTS

MANUFACTURE OF LEATHER TANNING, LEATHERPRODUCTS AND FUR SKINSMANUFACTURE OF CERAMIC, STONE AND CLAY
PRODUCTSMANUFACTURE OF IRON AND STEEL
1000000

MANUFACTURE OF NON-FERROUS METALS AND
PRODUCTSMANUFACTURE OF FABRICATED METAL PRODUCTS

MANUFACTURE OF GENERAL-PURPOSE MACHINERYMANUFACTURE OF PRODUCTION MACHINERYMANUFACTURE OF BUSINESS ORIENTED
MACHINERY

500000ELECTRONIC PARTS, DEVICES AND ELECTRONICCIRCUITSMANUFACTURE OF ELECTRICAL MACHINERY,EQUIPMENT AND SUPPLIESMANUFACTURE OF INFORMATION AND
COMMUNICATION ELECTRONICS EQUIPMENTMANUFACTURE OF TRANSPORTATION EQUIPMENT0MISCELLANEOUS MANUFACTURING INDUSTRIES
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014

SOURCE: AUTHORS’ COMPUTATION FROM THE CENSUS OF MANUFACTURE (MINISTRY OF ECONOMY, TRADE
AND INDUSTRY)

16

17

FIGURE 4: NUMBER OF EMPLOYEES IN MANUFACTURING BYREGION: 1996-2014
2500000

2000000

1500000

1000000

50000001996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014

Hokkaido

TohokuMinami-Kanto

KitaKanto-Koshin

Hokuriku

Tokai

Kinki

Chugoku

Shikoku

KyushuSOURCE: AUTHORS’ COMPUTATION FROM THE CENSUS OF MANUFACTURE (Ministry of Economy, Tradeand Industry)
18

TABLE 1: NUMBER OF WORKERS IN JAPAN, 2000-2015
2000

2005

2010

2015

Total

63,032,271

61,530,202

59,607,700

58,890,810

Manufacturing

12,202,064

10,485,635

9,465,070

9,077,510

19

17

16

15

Manufacturing share (%)
SOURCE: TABLE 1 IN HAYAKAWA ET AL. (2021)

TABLE 2: CHINESE IMPORT PENETRATION BY INDUSTRY
China import penetration(Annual average percent)Industry code INDUSTRY_DESCRIPTION(2-digit)
09

MANUFACTURE OF FOOD

0.36

10

MANUFACTURE OF BEVERAGES,TOBACCO AND FEED

0.06

11

MANUFACTURE OF TEXTILE PRODUCTS

2.08

12

MANUFACTURE OF LUMBER AND WOOD PRODUCTS, EXCEPT FURNITURE

0.34

13

MANUFACTURE OF FURNITURE AND FIXTURES

2.46

14

MANUFACTURE OF PULP, PAPER AND PAPER PRODUCTS

0.56

15

PRINTING AND ALLIED INDUSTRIES

0.07

16

MANUFACTURE OF CHEMICAL AND ALLIED PRODUCTS

0.91

17

MANUFACTURE OF PETROLEUM AND COAL PRODUCTS

0.18

18

MANUFACTURE OF PLASTIC PRODUCTS, EXCEPT OTHERWISE CLASSIFIED

1.69

19

MANUFACTURE OF RUBBER PRODUCTS

2.12

20

MANUFACTURE OF LEATHER TANNING, LEATHER PRODUCTS AND FUR SKINS

1.84

21

MANUFACTURE OF CERAMIC, STONE AND CLAY PRODUCTS

0.79

22

MANUFACTURE OF IRON AND STEEL

0.64

23

MANUFACTURE OF NON-FERROUS METALS AND PRODUCTS

1.10

24

MANUFACTURE OF FABRICATED METAL PRODUCTS

1.33

25

MANUFACTURE OF GENERAL-PURPOSE MACHINERY

1.40

26

MANUFACTURE OF PRODUCTION MACHINERY

0.65

27

MANUFACTURE OF BUSINESS ORIENTED MACHINERY

9.94

28

ELECTRONIC PARTS, DEVICES AND ELECTRONIC CIRCUITS

1.67

29

MANUFACTURE OF ELECTRICAL MACHINERY, EQUIPMENT AND SUPPLIES

2.72

30

MANUFACTURE OF INFORMATION AND COMMUNICATION ELECTRONICS EQUIPMENT

2.37

31

MANUFACTURE OF TRANSPORTATION EQUIPMENT

0.46

32

MISCELLANEOUS MANUFACTURING INDUSTRIES

1.77

SOURCE: AUTHORS’ COMPUTATION FROM THE CENSUS OF MANUFACTURE (Ministry of Economy, Trade andIndustry)19

20

TABLE 3: EMPLOYMENT CHANGE BY PREFECTURE: 1996-2014
Prefecture
Hokkaido
Aomori
Iwate
Miyagi
Akita
Yamagata
Fukushima
IbarakiTochigi
Gunma
Saitama
Chiba
Tokyo
Kanagawa
NiigataToyamaIshikawa
Fukui
Yamanasi
NaganoGifu
Shizuoka
Aichi
Mie

Growth (1996-2014)-31.33%-31.18%-30.83%-28.95%-40.40%-29.33%-30.39%-14.35%-19.98%-19.40%-25.56%-29.84%-56.71%-40.20%-28.28%-18.66%-19.60%-27.49%-21.27%-26.34%-18.06%-20.65%-9.87%-11.39%Prefecture
Shiga
Kyoto
Osaka
Hyogo
Nara
Wakayama
Tottori
Shimane
Okayama
Hiroshima
Yamaguchi
Tokushima
KagawaAichi
Kochi
Shizuoka
Saga
Nagasaki
Kumamoto
Oita
MiyazakiKagoshima
Okinawa
Total

Growth (1996-2014)-5.37%-31.07%-40.20%-21.78%-29.49%-25.31%-44.50%-34.13%-23.87%-16.43%-24.82%-27.23%-22.45%-35.58%-37.51%-25.16%-17.84%-29.38%-18.40%-16.31%-22.98%-22.79%-4.82%-26.72%

SOURCE: AUTHORS’ COMPUTATION FROM THE CENSUS OF MANUFACTURE (Ministry of Economy, Trade andIndustry)21

TABLE 4: NUMBER OF FIRMS IN 1996 AND THEIR SURVIVAL UP TO
2014: SUBCONTRACTORS AND NON-SUBCONTRACTORS(I) NUMBER OF ALL FIRMS IN 1996
Metropolitan area
Non-metropolitan area
Total

Subcontractors
YesNo
42,476
96,50052,043
123,348
94,519219,848

Total
138,976
175,391

Subcontractors
Yes
No
29.4%
38.1%
32.0%
44.0%
30.8%
41.4%

Total
35.5%
40.4%

(II) SURVIVING RATESMetropolitan area
Non-metropolitan area
Total

SOURCE: AUTHORS’ COMPUTATION FROM THE CENSUS OF MANUFACTURE (Ministry of Economy, Tradeand Industry)

22

TABLE 5: ESTIMATION RESULTS – SURVIVAL
Chinese penetration
Chinese penetration x Smallln Employment
Two-digit industry fixed effects
Prefecture fixed effects
Observations
R-squared(1)-0.00395***(0.000232)(2)-0.00232***(0.000248)(3)-0.00396***(0.000232)(4)-0.00236***(0.000248)

0.148***(0.000808)

0.146***(0.000819)

0.147***(0.000814)

0.144***(0.000824)(5)-0.00102***(0.000303)-0.00353***(0.000460)
0.143***(0.000851)

✓

✓
✓

✓
✓

312,2880.102

312,2880.128

312,2880.129✓

312,2880.098

312,288
0.124

NOTES: ROBUST STANDARD ERRORS IN PARENTHESES. *** P<0.001, ** P<0.01, * P<0.05, + P<0.1.
SOURCE: AUTHORS’ ESTIMATION USING THE CENSUS OF MANUFACTURE (Ministry of Economy, Trade andIndustry)

23

TABLE 6: ESTIMATION RESULTS – Survival – Location
Chinese penetration
Chinese penetration x Subcontractors
Chinese penetration x Subcontractors x Metropolitan
ln Employment
Subcontractors
Metropolitan
Two-digit industry fixed effects
Prefecture fixed effects
Observations
R-squared(1)-0.00164***(0.000304)-0.00187***(0.000474)
0.142***(0.000835)-0.0305***(0.00210)-0.000519(0.00730)(2)-0.00164***(0.000304)-0.00236***(0.000543)
0.00133+(0.000731)
0.142***(0.000835)-0.0306***(0.00210)-0.000985(0.00730)

✓
✓

✓
✓

312,2880.129

312,288
0.129

NOTES: ROBUST STANDARD ERRORS IN PARENTHESES. *** P<0.001, ** P<0.01, * P<0.05, + P<0.1.
SOURCE: AUTHORS’ ESTIMATION USING THE CENSUS OF MANUFACTURE (Ministry of Economy, Trade andIndustry)24

TABLE 7: ESTIMATION RESULTS – EMPLOYMENT GROWTH
Chinese penetration
Chinese penetration x Low productivity
Chinese penetration x Subcontractors
ln Productivity
Subcontractors
Two-digit industry fixed effects
Prefecture fixed effects
Observations
R-squared

(1)
(2)
(3)
(4)
(5)
(6)
-0.0120*** -0.00932** -0.0124*** -0.00998** -0.0133** -0.00854*(0.00329)(0.00354)(0.00331)(0.00354) (0.00458) (0.00425)
0.00686(0.00644)-0.00305(0.00704)
0.412***
0.367***
0.411***
0.374*** 0.378*** 0.486***(0.0128)(0.0134)(0.0129)(0.0135)(0.0141)(0.0144)0.579***(0.0266)✓

120,1250.010

120,125
0.037

✓

✓
✓

✓
✓

✓
✓

120,125
0.016

120,1250.043

120,1250.043

120,125
0.047

NOTES: ROBUST STANDARD ERRORS IN PARENTHESES. *** P<0.001, ** P<0.01, * P<0.05, + P<0.1.
SOURCE: AUTHORS’ ESTIMATION USING THE CENSUS OF MANUFACTURE (Ministry of Economy, Trade andIndustry)

25

TABLE 8: ESTIMATION RESULTS – EMPLOYMENT GROWTH –NUMBER OF PLANTS
Chinese penetration
Chinese penetration x Many plants
ln Productivity
Number of establishments
Number of establilshments within the same region
Two-digit industry fixed effects
Prefecture fixed effects
Observations
R-squared(1)(2)-0.00704* -0.00699*(0.00353) (0.00353)-0.00923-0.0106(0.0263)(0.0267)
0.375*** 0.376***(0.0133)(0.0134)-0.587*** -0.567***(0.0384)(0.0494)-0.0586(0.0894)✓✓✓✓

120,1250.077

120,125
0.077

NOTES: ROBUST STANDARD ERRORS IN PARENTHESES. *** P<0.001, ** P<0.01, * P<0.05, + P<0.1.
SOURCE: AUTHORS’ ESTIMATION USING THE CENSUS OF MANUFACTURE (Ministry of Economy, Trade andIndustry)

26

TABLE 9: ESTIMATION RESULTS – EMPLOYMENT GROWTH –AFFILIATES IN CHINA
Chinese penetrationln Productivity
CHN affiliate dummy
Chinese penetration x CHN affiliate dummy
Two-digit industry fixed effects

(1)
(2)
(3)
(4)
-0.0119*** -0.00923** -0.0122*** -0.00983**(0.00330)(0.00354)(0.00331)(0.00354)
0.417***
0.372***
0.416***
0.379***(0.0129)(0.0135)(0.0130)(0.0136)-1.259*** -1.278*** -1.273*** -1.276***(0.250)(0.242)(0.250)(0.242)-0.0164-0.000990-0.0275-0.0152(0.0502)(0.0477)(0.0498)(0.0473)✓✓

Prefecture fixed effects
Observations
R-squared

120,1250.010

120,125
0.037

✓

✓

120,125
0.016

120,125
0.043

NOTES: ROBUST STANDARD ERRORS IN PARENTHESES. *** P<0.001, ** P<0.01, * P<0.05, + P<0.1.
SOURCE: AUTHORS’ ESTIMATION USING THE CENSUS OF MANUFACTURE (Ministry of Economy, Trade andIndustry)27

TABLE 10: SURVIVAL BY PREFECTURE
Prefecture

Coefficient estimate

Hokkaido
Aomori
Iwate
Miyagi
Akita
Yamagata
Fukushima
Ibaragi
Tochigi
Gunma
Saitama
Chiba
Tokyo
Kanagawa
NiigataToyamaIshikawa
Fukui
Yamanashi
NaganoGifu
Shizuoka
Aichi
Mie
Shiga
Kyoto
Osaka
Hyogo
Nara
Wakayama
Tottori
Shimane
Okayama
Hiroshima
Yamaguchi
Tokushima
KagawaEhime
Kochi
Fukuoka
Saga
Nagasaki
Kumamoto
Oita
Miyagi
Kagoshima
Okinawa-0.0085-0.00630.00160.0010-0.0063-0.00220.0006-0.0035-0.00420.0001-0.0020-0.0051-0.0024-0.0018-0.0035-0.00630.0004-0.0023-0.0024-0.0017-0.0023-0.0035-0.0032-0.0045-0.0017-0.0010-0.0038-0.0027-0.0052-0.00310.0010-0.0019-0.0070-0.0034-0.0019-0.00410.0070-0.0028-0.0019-0.0052-0.0023
0.0033-0.0025-0.0004-0.0042-0.0026-0.0216Degress of freedom p-value

8,902
2,484
3,429
4,597
3,357
4,370
6,610
8,423
7,290
8,273
18,821
8,516
28,402
13,659
9,456
4,255
5,603
4,234
3,126
8,641
11,11516,021
28,726
6,349
4,038
8,148
33,806
14,762
3,830
3,237
1,602
2,172
5,856
7,986
2,923
2,502
3,505
4,210
1,756
8,747
2,249
2,819
3,200
2,283
2,254
3,089
1,351

NOTES: *** P<0.001, ** P<0.01, * P<0.05, + P<0.1.

28

0.051
0.055
0.478
0.663
0.024
0.254
0.706
0.001
0.004
0.940
0.052
0.001
0.001
0.061
0.008
0.095
0.905
0.339
0.130
0.086
0.209
0.002
0.000
0.014
0.396
0.470
0.000
0.025
0.019
0.352
0.755
0.661
0.039
0.200
0.635
0.527
0.169
0.326
0.447
0.113
0.624
0.682
0.417
0.757
0.229
0.190
0.153

star

+
+
*
***
**
+
**
***
+
**
+

+
**
***
*
***
*
*

*

SOURCE: AUTHORS’ ESTIMATION USING THE CENSUS OF MANUFACTURE (Ministry of Economy, Trade andIndustry)

29

TABLE 11: SURVIVAL BY REGION
RegionHokkaido
TohokuMinami-Kanto
Kita-Kanto-Koshin
Hokuriku
Tokai
Kinki
Chugoku
Shikoku
KyushuCoeffiicient estimate

Degrees of freedom

p-valuestar-0.0085-0.0007-0.0025-0.0026-0.0033-0.0035-0.0031-0.0033-0.0013-0.0017

8,902
24,977
69,47635,857
23,62662,28967,951
20,643
12,04926,172

0.051
0.411
0.000
0.000
0.001
0.000
0.000
0.024
0.439
0.048

+
***
***
**
***
***
*
*

NOTES: *** P<0.001, ** P<0.01, * P<0.05, + P<0.1.
Source: Authors’ estimation using the Census of Manufacture (Ministry of Economy, Trade and Industry)

30