International Fragmentation of Production

International Fragmentation of Production

The Impact of Outsourcing on the Japanese Economy

Nobuaki Yamashita

Using state-of-the-art econometric tools, this book examines the implications of international fragmentation of production for the performance of the Japanese manufacturing industry.

Chapter 3: Production Fragmentation and Trade Patterns in Japanese Manufacturing

Nobuaki Yamashita

Subjects: asian studies, asian economics, economics and finance, asian economics, industrial economics

Extract

INTRODUCTION Over the past two decades international fragmentation of production has transformed the fundamental nature of global trade. Firms in the US electronics industry pioneered this process of economic globalization. Since the late 1980s Japanese firms have also become increasingly involved in this process. However, despite the increasing importance, only a few studies have explicitly elucidated the modality of fragmentation trade for Japan (Fukao et al., 2003; Kimura and Ando, 2003; Ando and Kimura, 2005; Tomiura, 2005). This gap in the literature has been mainly due to the absence of the readily available measure of fragmentation trade. Against this backdrop, this chapter examines Japan’s emerging trade pattern using data on parts and components as the indicator of fragmentation trade (see Chapter 2 for the data compilation method). In particular, the patterns and trends of fragmentation trade are examined in a wider global perspective with the emphasis on Japan and other industrial countries. The chapter is organized as follows. Section 3.2 depicts the overall patterns and composition of Japanese manufacturing trade from 1962 to 2005.1 Section 3.3 provides an analysis of the patterns of fragmentation trade in Japan’s machinery trade. Section 3.4 examines the two key machinery sectors of electronics and the automotive industry. The final section presents a summary of the major findings. 3.2 AN OVERVIEW OF TRADE PATTERNS In the 1930s the share of Japan’s manufacturing exports was high at around 75–80 per cent (Ohkawa and Rosovsky, 1973). The predominant share of manufactures on the exports side has...

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