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The Rise of China and Sustained Recovery of Japan

  • Shin-ichi Fukuda

    (Faculty of Economics, University of Tokyo)

After prolonged recessions, the Japanese economy had recovered from the crisis in the first half of the 2000s and has recorded sustained growth in the last several years. Tremendous structural changes during and after the financial crisis were one of the main driving forces for the recovery. However, dramatic increases in exports were another. In particular, increases of Japanese exports to China were substantial in the 2000s and supported the recovery of the Japanese economy from its demand side. The purpose of this paper is to examine the role of the exports to China for the recovery in the 2000s. The dependence of the Japanese export sectors on the Chinese economy has risen in the past ten years. China is now almost surpassing the United States as destination of Japanese exports. Vector autoregressions (VARs) show that the Japanese production was caused by exports to the United States until the mid-1990s but was caused by exports to China after the late 1990s. However, the effects on the production were highly different across firms. The increased exports to China were beneficial for the recovery of manufacturing industries with advanced technology. Their impacts were, in contrast, insignificant for the recovery of labor-intensive small firms and non-manufacturing firms. Consequently, the sustained growth in the last several years was accompanied by widening inequalities across firms.

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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-589.

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Length: 29pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:tky:fseres:2008cf589
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  1. Etsuro Shioji, 1997. "Identifying monetary policy shocks in Japan," Economics Working Papers 216, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Dani Rodrik, 2006. "What's So Special about China's Exports?," NBER Working Papers 11947, National Bureau of Economic Research, Inc.
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  8. IANCHOVICHINA Elena & WALMSLEY Terrie, . "Impact of China’s WTO Accession on East Asia," EcoMod2003 330700070, EcoMod.
  9. Braun, R. Anton & Shioji, Etsuro, 2006. "Monetary Policy and the Term Structure of Interest Rates in Japan," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 141-162, February.
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