A change in Japan's export philosophy

From a Tokyo correspondent

During the 19605, Japan’s exports showed the highest rate of growth of the major developed nations.

Products such as machinery and equipment, steel, non-ferrous metals and chemical products showed export growth rates of more than 20 per cent. Which is why the com position of Japan’s exports during this period shifted rapidly towards heavy and chemical industries.

The main reason Japan was able to increase its exports at such a rapid pace was the high level of in vestment in capital equipment for manufacturing, which allowed her to attain a high degree of competitive power both in terms of price and quality.

While Japan has increased her ability to compete on a non-price basis, that is on the basis of quality, much of her competitiveness has rested on ability to compete in price. Japan’s ability to compete on quality is still inferior to that of other advanced nations.

In spite of this, it will be neces sary for Japan, so that she can place more emphasis on welfare develop ment, to direct resources into build ing up social capital. For this rea son, rapid investment and expansion of capacity in export industries pri marily is no longer appropriate. In addition, excessive reliance on price competitiveness has the undesirable effect of creating friction in the mar .kets of Japan’s trading partners.

Because of recent monetary crises and currency realignments, it is clearly impossible for Japan to rely simply on price competition on a long-term basis. Relative superiority on a price and cost basis can be cancelled out by monetary readjust ments.

For example, the price competi tiveness of Japan’s products de creased considerably after a cur rency float in February, 1973.

Given these conditions in expanding exports in harmony and in co operation with trading partners, it will be necessary to shift the empha sis from increasing scale of exports and price competitiveness to empha sis on quality.

When it is considered that Japan’s export market is no longer the un limited frontier that it once was and that it is impossible to expand exports in an unlimited way, simply if capacity is available, it appears appropriate to break out of the export pattern of the past and estab

lish a pattern more appropriate to the present.

To satisfy both domestic and in ternational requirements and pro mote harmonious expansion of Japan’s exports, it will be necessary to shift the emphasis in export trade from expansion of volume to expan sion of exports of greater technical excellence and which are less dependent on price competition for success. This type of improvement in Japan’s export structure is im portant.

Another vital requirement is for Japan to shift its industrial structure from the current high resource usage to one which requires less natural resources.

The industrial structure of Japan requires more in the way of re sources than does industry in the United States and West Germany.

For export industries which make a big demand on raw materials, con sideration will have to be given to setting up industrial plants overseas.

The structure of Japan’s export

trade shows a high degree of bias towards a few regions. This is poten tially dangerous because it creates needless fear and friction about Japanese exports to those markets.

Therefore, Japan will need to diversify more in her export markets and establish a closer relationship with a wide variety of regions, Rapid increases in exports of particular products to particular regions could upset and destroy mar ket conditions in nations with which Japan trades. And because of the world fuel position, with countries and territories in the Pacific trying to cut down on consumption, heavy machinery and motor vehicles are not likely to be required in large numbers, It is necessary for Japan to pro mote orderly marketing of her pro ducts, not only to prevent rapid increases of specific products into specific markets, but to make sure that full consideration is given to conditions in countries with which Japan trades.