How Closed is Japan's Market? Additional Evidence

Although conventional wisdom attributes the trade imblance between the US and Japan to macroeconomic factors, many in the US maintain that it is due partly to unfair trade practices by Japanese competitors. Based on the results of a survey of 62 firms in Australia, the purchasing behavior of Japanese-owned subsidiaries is definitely different from that of the US-owned and European-owned firms. They are tightly controlled by the parent firm, procure their equipment mainly in Japan, and own and operate mainly Japanese machinery. By contrast, western firms have a great deal of autonomy to make purchase, sourcing, and other decisions, procure capital equipment by competitive bids, and own machinery made in 3 continents. Japan is an outlier in that it imports fewer manufactures than it would if its markets were as open as those of other developed countries, and its industrial structure and buyers' preferences play an important part in bringing about this outcome.