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Posted on August 16th, 2012, by

In the economic sphere Japan is one of the most developed countries. Thanks to low tax rates, plenty of economic freedom, and a system dominated by the private sector, Japan’s economy is the second largest economy in the world and the largest in Asia, based on real GDP, market exchange rates, and nominal GDP (EconomyWatch, 2008). Its economy is the second largest in the world after the United States. The industrial sphere is high developed: many automobiles and home appliances are exported and such names as Honda, Sony, and Toyota are well known all over the world.

In my essay I’ll try to analyze the Japanese economy from the position of the HO theory.  Heckscher-Ohlin trade theory is a theory to explain the existence and pattern of international trade based on a comparative cost advantage between countries producing different goods. Heckscher and Ohlin state that this advantage exists because of the relative resource endowments of the countries trading.(EconomyProfessor, 2006)

As everybody knows, Japan is poor in natural resources. Nowadays Japanese companies import almost all raw materials: iron-stone from Australia, oil from the Middle East; then these raw materials are manufactured and exported. The Japanese companies also use method of “the direct investment”ť, building plants and factories mainly in North America, South-Eastern Asia, and Europe and selling off products either on the local markets or export them. In that way Japan helps the economy of this country.

Substantial changes happened in the structure of Japanese import. The most considerable among them are the diminishing of part of raw material commodities and gain of specific weight of integrated products. Japan imports about 99.7 % of oil, 100 % of aluminium, iron-stone, and nickel, more than 95 % of coppers, and more than 92 % of gas. Therefore the Japanese try to support even the 100-days supply of oil in oil-storage tanks and in supertankers, just in case.

The Japanese industry and energy are largely provided due to the imported mineral and fuel. Only the sources of coal, copper and leaden ores, and also some other types of non-metal minerals have the practical significance. Lately, due to perfection of extracting technologies, enriching and processing of minerals, the development of small fields, in particular, nonferrous and rare metals became economic profitable; it concerns also the use of World ocean resources, for example, extraction of manganese compounds from the ocean bottom and uranium from salt water.

The main agriculture of Japan is rice. It doesn’t have sufficiently sown area for the cultivation of wheat, soy, and other kind of plants. Among the high-developed countries Japan fills one of the lowest places in self-sufficiency of food and imports a lot. Nevertheless Japan gets the second place in the yearly fish catching after China.

The development of Japanese economy had a lot of peculiarities, which helped it to renew after the Second World War. Japan uses planned development of science and technology, and has a strong work culture, which benefits the country as a whole. (EconomyWatch, 2008) It also accentuates good relationships between the industrial sector and national government.

Japan is one of world leaders in area of nuclear-power engineering. It builds reactors under foreign licenses mainly the American ones. The research works in area of atomic energy is very important for Japan; the state plays a leading role in their realization. It can be explained by the extreme scarcity of its own energy supply and instability of position in the world market of oil.

Both in the Japanese export and import the USA occupies one of the main places. However in American-Japanese trade there is a large disbalance in favor of Japan. The real “trade war”ť is conducted for the markets. For example, enormous disproportions appeared in trading of the telecommunication equipment. The sales volume of the Japanese equipment in the USA in 11 times exceeds the volume of sales of the American equipment to Japan.

Americans buy the Japanese devices instead of American ones. It can be explained only that it is impossible to sell what people do not want to buy; it is conditioned by Japanese quality. The same situation is observed in engineering industry and in many other fields of Japanese industry. The Japanese commodity has comparatively low price at a good value. The general philosophy is peculiar to the whole Japanese industry and consists in that producible products are necessary to be done without defects on every stage of operation. The certain percent of defects is assumed in America. In Japan the elementary economy does not allow to do it, the Japanese try to avoid even the solitary cases of defect.

One of major factors of Japanese economic development is the wide participation in the international trade in technology. The achievement of the high scientific and technical level in leading fields of industry and toughening of terms of licenses acquisition in the world market was brought to the relative decline of role of import technologies for the Japanese economy. The licenses in the field of electrotechnical and transport mechanical engineering, chemistry, and building have got the main part in the industrial structure of the Japanese technology export. The export of Japanese technologies into the USA and European has risen. The expansion of technology export in Japan is connected with the decision of sharp external economic and foreign policy problems.

During the year term export increased on 8.0% to 7.629 trillion yen and import increased on 18.2% – to 7,543 trillion yen. Analysts considered that amount of balance decreased because of excessive growth of yen, which from July 2007 to 2008 strengthened compared to dollar on 18.5%. Undoubtedly this fact damages the Japanese budget, which showed the decrease since the 1 quarter of 2005. Japanese companies mainly are oriented on the export but not on the internally consumption, the loin’s share of which falls at the USA and Europe.

As we can see the main factors of production of Japanese economy are labor, capital, human and intellectual capital.

These factors are necessary for producing exportable goods and services. So according to the HO-theory the most exportable commodities are technical equipment, production of motor-car industry, IT technologies, agriculture, and seafoods. Japanese equipment is famous for its quality; it guarantees its popularity among customers all over the world. But Japan is poor in minerals and fills one of the lowest places in self-sufficiency of food in the world. These facts cause the import of the country.

Japanese trading pattern consistent with trade theory because about 80% of the export of the development countries come in the other high development countries and about 70 % from the development countries come to the markets of other countries. The main trade partners of Japan are China and the USA (exports: the USA 22.9%, China 13.4%, imports:    China 21%, the USA. 12.7%).

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