Trade Patterns in Japan's Machinery Sector

Hitoshi Sasaki and Yuko Koga
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Hitoshi Sasaki: Bank of Japan
Yuko Koga: Bank of Japan

No 05-E-15, Bank of Japan Working Paper Series from Bank of Japan

Abstract: This paper analyzes trade patterns in Japan's machinery sector using disaggregated data of export and import commodities. It is found that the vertical intra-industry trade--the two-way trade of products differentiated by quality--with Asian countries expanded in the 1990s. According to the results of the empirical study, this trade pattern is closely related to differences in the capital/labor ratio between Japan and its trading partners, and to Japan's foreign direct investments. It suggests that the development of Japan's trade in the machinery sector in the 1990s is explained by traditional trade theory, i.e., that trade patterns depend on the difference in factor endowment between trading partners. Japan's foreign direct investment, too, has played an important role.

Keywords: Vertical intra-industry trade; Foreign direct investment; Asia (search for similar items in EconPapers)
JEL-codes: F14 F20 (search for similar items in EconPapers)
Date: 2005-12
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Persistent link: https://EconPapers.repec.org/RePEc:boj:bojwps:05-e-15

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