Why the Financial Crisis Affected Japanese Exports So Seriously?

The effect of the macroeconomic shock on Japanese exports, caused by the financial crisis, was far more excessive than in other countries. This paper focuses on the relationship between the change in U.S. demand and the Japanese export structure, which was formed before the crisis, as a reason for the sudden fall of Japanese exports. Japanese exporters expanded the international division of labor by outsourcing in China and formed a trade triad between the U.S., China, and Japan. The empirical analysis of the paper provides interesting findings that : (1) Japanese exporters increased the number of exported goods and the average value of exports to China, (2) they, on the other hand narrowed the range of export goods to the U.S., and specialized export goods to high-end products with high income elasticity, and (3) as a consequence of the change of trade structure, the goods for which U.S. demand decreased matched the goods in which Japanese exporters specialized for export to the U.S., (4) the demand shock after the financial crisis decreased remarkably the intensive margin of export goods for the U.S. and brought about a significant reduction of Japanese exports for the U.S. market.