The Future Pattern of Japanese Economic and Political Relations with Southeast Asia 9789814414401

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The Institute of Southeast Asian Studies

Established as an autonomous corporation in May. 1968. the Institute of Southeast A si an Studies is a regional research centre fo r scholars and other specialist.s concerned with modern Southeast Asia. The Institute's research interests a re focussed on the many-faceted pro blems of Modernmllion and Development and Political and Social Change in Southeast Asia The Institute is governed by a 24-member Board o f frustees on which arc represented the University o( Singapore and Nanyang llniver-.i ty. appointees from the Government. as ~e ll as representatives ftom a broad range of professional and civic o rganizations and groups. A ten-man Executive C'omm1ttee oversees day-to-day operations; it is ex oflicio chaired by the Din:cto r. the Institute's chief academic and administrati ve officer .

..Copyright subsists in this publication under the United Kingdom Copyright Act. 1911 and the Singapore Copyright Act (Cap. 187). No person shall reproduce a copy of this publication. o r extracts therefrom. without the written permission of the Institute of Southeast Asian Studies, Singapore."

THE FUTURE PA'M'ERN OF J APA..t·JESE

ECONOMIC AND POLITICAL RELATIONS WITH SOt"T'HEAST AS I A

Pap•rB and ProceedingB of a Seminar ~ rg ani ae1 b ~ th e Inatitu te of South•aat A•ian Stkdtea ~~ S ! ng ~p o re 8 Nal'ch 19 75

CURRENT ISSUES SEMINAR SERIE S NO.

5

Institute of Southeast As1an Stud1es 1n oooperat1on Wlth Center for Southeast As1an Stud1es, Kyoto Un1vers1ty Price:

S$6.00

"The Future Pa1:tern of Japanes e Econonu .c and PolitJ.c al Relatio ns with Southea st Asia" is the fifth publica tJ.on in the InstJ.tu te's Current Issues SemJ.nar series. ThJ.s series was J.naugu rated in 1972 WJ.th the obJectJ. ve of bringin g togethe r knowled geable people J.n partJ.cu lar fields to discuss top1cs of current interes t and J.mporta nce to the region . ''The Future Pattern of Japanes e EconomJ .c and PolJ.tic al RelatJ.o ns with Southea st Asia" grew out of a seminar held ThJ.s was the second semJ.nar in Singapo re in March 1975 . on Japan , the first being held J.n January 1974. SJ.nce the f1rst meeting , we had numerou s request s for another seminar At the same tJ.me, on Japanes e- Southea st Asian relatio ns . both Japan and Southea s1: Asia had been undergo ing fundame nta l changes in the wake o f momeuto us polJ.tJ.c al and economJ.c develop ments on ~he J.nterna tJ.onal scene, includi ng the energy crJ.sis and d e t ent ~ J.n United States- Soviet relatio ns and the These changes were of diplom atic emergen ce of China . only Japanes e- Southea st not for .cance conside rable sJ.gnJ.fJ Asian relatJ.o ns but also the AsJ.a- Pacific reg1on as a whole, and anyone interes ted in Japanes e-South east Asian affairs With thJ.s in mind and could ill-affo rd t o ignore them. also to take advanta ge of the presenc e J.n the regJ.on of two of Japan ' s leadJ.ng authori tJ.es on Southea st Asia - Profess ors Shinich J. Ich~ura and Tohru Yano - the Institu te organiz ed the second meetJ.ng on Japan to dJ.scuss the Future Pattern of Japanes e EconomJ .c and Politic al RelatJ.o ns with Southea st In this connect ion , we were also fortuna te in havJ.ng Asia . Dr. Chan Heng Chee of the PolJ.tic al ScJ.ence Departm ent, Univers i ty of Singapo re, and Dr. Chua Wee Meng of J. Ballas & Co. Pte . , Singapo re , as commen tators on the present atJ.ons of Profess ors IchJ.mur a and Yano. The indJ.vid ual papers and commen taries that f ollow are as they were present ed and subsequ ently rev J.sed by the authors for publica tion , and I would like to take thJ.s opportu nJ.ty of thankJ.n g Drs. Ichimur a , Yano, Chan and Chua for the J.r Whilst wishing them and contribu tJ.ons and co-oper atJ.on . their contrib Utions all the best, it is clearly underst ood that respon sibility for facts and op1nion s express ed in the papers , commen tarJ.es and proceed J.ngs that follow rests exclusi vely WJ.th the part1cu lar author or authors concern ed and d o not necessa rily reflect the Views or polJ.cie s of the Institu te o r J.ts suppor~ers. 27 August 1975

Directo r Institu te of Southea st Asian Studies

CONTENTS Page Foreword

iii

Contents

v

The - Future of the Japanese Industrial Structure and its Bearing on Japanese Trade and Investment in Shiniahi Iahimura Southeast Asia

1

Appendix : Japan , the Rising Sun or the Sinking Ship - the Energy Problem and the Food Shortage Comments on Professor Ichimura ' s Paper Japan- Southeast Asia Relations: From Optimism to Pessimism Comments on Professor Yano's Paper , Discussion Note on Contributors

Shin i ahi Iahimura

13

Chua Wee Meng

36

Tohru Yano

49

Chan Heng Chee

58 67 83

THE FUTURE OF THE JAPANESE INDUSTRIAL STRUCTURE AND ITS BEARING ON JAPANESE TRADE AND INV~STMENT IN SOUTHEAST ASIA by Shinichi Ichimura

Thank you Mr . Chairman, Your Excellencies, distinguished guests, ladies and gentlemen, It is a great pleasure to have this precious opportunity to speak on the important topic of the fu~ure of Japanese industrial structure and its bearing on trade and investment in Southeast Asia. I have been asked by the M1nistry of Foreign Affairs to give a number of lectures in Thailand, Kuala Lumpur, A lstralia, Indonesia and Singapore . Now, wherever I have been, there have always been Herman Kahnsl ahead of me who have spoken on the future of the Japanese economy and given an extremely optimistic view, or, if I may say so, a shocking optimism, to the audience. And after my speech, I am sure many people would want to ask, "Why is he so optim1stic?" They asked me about my judgement on Herman Kahn's prognostication. I am not a futurolog~st; so I would try to explain the bases of the views expressed by different authorities in Japan on the topic I am going to speak on. 1

The present world economy,as I observe it,is in a state of serious disequilibrium. There are three sets of disequlibria, viz. inflation, the energy crisis, and the shortage of food. And these three disequilibria have resulted in a very serious recession in the world economy in the midst of an equally serious inflation o This socalled stagflation is a very difficult problem to resolve. The same d1sequilibria also constrain the future development of the Japanese economy and we have to f1nd some way out. Inflation has become secular for two reasons. The first reason is the synchron~zation of business cycles 1n Western Europe, the United States and Japan. Though the factors underlying this synchronitation are somewhat obscure (and no economist has seriously discussed them> , there is no

1

Hetman Kahn. author of Emerging Japanese Superstate, ChaZlenge

and Response.

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doubt that the t~me lag which used to ex~st between the cycles of the Un~ted States and the other parts of the world has gradually shortened . The second reason for the secular 1nflat1on is the excess1ve adherence to full employment pol1c1es 1n the lea d~ng 1ndustr1al 1zed The d~ff1culty of concroll1ng 1nflation seems countr1es also to be connected w1th the lack of self-restra1ntonthe part of labour un1ons when faced with stagflat1on. Whereas these d1ff1 culties brought about 1nflation prior to the energy crisis, the food shortage occurred around 1971 , 1972 The acceleration in inflat1on had also a great and 1973 deal to do w1th inadequate monetary pol1c1es .. Many countries adopted wrong monetary policies after or immed~ately before the l1beral1zation of exchange rates . The present inflation may thus be actr1buted, among other reasons 1 to inadequacies in the 1nternat1onal monetary system and of course to the energy cr1s1s , bus~ness

Inflat1on 1n the Japanese economy started considerably before the oil cr1s~s. After the war, we exper1enced a number of short- l1ved inflations, and though the consumer price index kept on r1sing the wholesale pr1ce i ndex generally remained very stable . Our export pr1ces therefore remained more or less stable 6 whereas 1n Europe and Amer~ca wholesale prices and export pr1ces kept on r1s1ng ~ Th1s brought about the enormous expans1on of Japanese exports ~ However, around 1969, wholesale pr1ces in Japan began to r1se more sharply than consumer pr1ces and her export capab1lities seem to have started to decline . The diminished export performance was followed by the oil qrisis and soon after by a shortage of food . The shortage of food was caused 1nit1ally by fam1nes or droughts in various parts of the world in 1972 . The more serious shortages of food occurred 1n the Sovie t UnlOli and Ch1na . To meet their food deficits substantial 1mports were made from the Uni~ed States, Canada and Austral1a, causing a decline 1n food s tocks wh~ch 1n the Un1ted States had been accumulated over several years. The food cr1s1s has led to a renewed recogn1tion of the importance of the balance between food and populat1on . The v1ew expressed by some experts over many years has been that the population explosion 1n ·deve~oping countrie~ would cause a serious shortage of food, despite the opt1mism of the FAO and of op1nion elsewhere concern1ng the Green Revolut1on . At a conference 1n Par1s some years ago, I was really surprised how opt~m1st1c the FAO experts were . At that time a number of experts in Japan who had been 1nvestigating the poss1bil1ty of the spread of high-yield~ng rice varieties

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3 -

in Tha1land told me that the maximum area on wh~ch the new of rice could be planted in Tha~land ~s only 20%. Even 1f enormous investments were made ~n ~rrigat~on and o ther fac1l1t1es th~s percentage can hardly be ~ncreased . Therefore, we ~n Japan held rather caut1ous opin1ons on the potentlal of the h1gh-y1eld1ng var1et1es, tne miracle Soon enough the FAO experts Ilce, ln Southeast As~a. changed the1r op1n1ons, partiCUlarly after 1972, and The began to warn the world of a ser1ous food shortage earl1er opt1m1sm of the FAO caused a wrong 1mptess1on throughout the world on the Vltul and 1mportant problem of food and nopul~t1on. var~eties

The 0 11 cr1s1s was brought abo•Jt by many ser.;.ous Foremost among the5e was the real14at1on that factors I the world's ex1st1ng 011 resour ces are exh oust lble year a about wrote I wh1ch have g1ven a background pape~ ag o to d1s cuss the matter Wltn Sov1et experts 1n Moscow. At that t1me I tiled to persuade the Sov1et scholars that the problem of c1~ suppl1es 1s far too fundamental tc be I sha~l try to d1scuss taken advantage of pol1t1cally. In the 011 cr1s1s 1n connectlon Wlth the food problem. fact when I started to wr1te thls paper I was very d~smayed because the 011 cr1s1s had brought about very ser1ous problems for the Japanese economy fr om wh~ch I cannot f1nd The 011 cr1s1s has been caus~ng concern to a good way out. Sovlet scholars as well, and for that reason, they may perhaps be a l1ttle more sympathetiC to the d1ff~cult1es fac1ng the Japanese economy. Japan has been fac1ng very d1ff1cult problems part~­ It must be noted that Japan cularly s1nce the o ~l cr1s1s 1s dependent almost ent1rely on 1mported energy; about 85% of the energy used 1n Japan comes from petroleum and other energy materials, of wh1ch 80~ 1s from the Arab On the othe r hand, Japan 1mpor·ts about SO% countr les. of 1ts food requ1rements, of wh1 ch 80~ 1s fr om the Un~ted The Japanese economy 1s thus man1pu1ated by two States. stro ng str~ngs - one attached t o the Un1ted States, tne It 1s th1s d1le rrun...1 whl ·-'h o ther to the Arab countr1es determines the econom1c dest1ny of Japan Let me sumrnar1ze the p~cture g1ven by tnese two problems - the 011 c r1s~s and food shortage . From the po1nt of v1ew of the world, the Unl ted Sta tes, Canada and Australla have been 1n an advantage ous pus1t1on 1n regard to the energy and food cr1ses, whereas the Europ~an commun1ty and Japan seem to be suffer1ng 1n both respects.

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4 -

OPEC countries of course have an enormous advantage in energy , but st1ll suffer from food problems. The less developed countr1es W1thout oil are suffer1ng very ser1ously 1n regard to both energy and food supplies . USSR and Ch1na seem to have ga1ned an advantage 1n energy , but st1ll suffer ser1ously from a shortage of food. China, for 1nstance, has to import about S m1il1on tons of food stuffs every year. The other socialist countr1es are affected by short:ages of both o1l and food - The EEC and Japan , of course, have the advantage of possess1 ng the 1ndustr1al technology by wh1ch they can barga1n w1th the Arab countr1es . NotW1thstand ing Japan ' s bargain1ng power w1th the Arab count ries, her econorn1c difficult1es are very ObV10US, The tables attached to my paper conta1n the best 1nformat1on I could collect in Japan last year about OPEC countr1es. The OPEC countr1es, lt w1ll be seen , cons1st of three groups . The first group 1s Indones1a and Nigeria , wh1ch have a large populat1on and v ery low per cap1ta GNP . Industr1al1z ation 1s st1ll very under developed so that they have to sell as much 011 as the y can produce , at price s set by the other groups. The second group consists of Iran, Algeria, Venezuela and Iraq., wh1ch belong to the middle 1ncorne class. Their level of 1ndustr1al1z at ion 1s fa1r and further 1ndustrialization is highly desirable . These are the countries try 1ng to obta1n rnax1rnurn mvenue as soon as possible , so that they too have to sell as much 011 as they can . On the other hand , the th1rd group , l1ke Saudi Arab1a, Libya, Kuwait , Qatar , Abu Dhab1, are countr1es whose reserves are much more than those of the other two groups - The two latter groups' reserves w1ll be exhausted sooner 1f they keep on producing at the rate of 1973. If any new 011 reserves are not discovered, the f1rst two groups ' res e rves ·,nll be exhausted after 25 years , whereas the third group st1ll has at least 50 years' reserves at the rate of their 1973 production . The th1rd group has t o take a long - run view of their petrole~ pol1cy . Thus , the f1rst two groups cannot afford to reduce the1r product1on 1£ the Western countrleS and Japan and the Up 1ted States decrease the1r consurnpt10n. -So I conJecture that compet1t1on among the f1rst two groups and the third group w1ll for ce down the pr1ces of 011 b e fore ve ry long. In fact 1f the EEC, Japan and the Unlted States succeed 1n develop1ng Wlthln, say , 20 yea rs 011 substltUtes, such as tar sand , 011 shal e etc. (Japan is try1ng to develop atom1c energy , and other sources of power such as s unshine,

- 5 -

ocean currents, and hydrogen), there is a very good possibility that these oil substitutes will exert a downward pressure on the oil price . This will i ncrease the bargaining power of the oil consuming countries via I am very sure that, sooner or later, a - v~ a the producers , o~l pr~ces w~ll decl~ne relative to the prices of industrial goods exported to Arab countries. The world economy now is ser1ously trying to o vercome these problems. Japan has herself made very strenuous efforts to overcome these two problems. The extent of her econom~c readJUStment 1.s bo rne out by two outstandl.n.g facts ,. The f1.rst is the sudden drop 1n growth rates ~n GNP from the annual average of 10% to minus 1% ~n 1974. The second is the loss of about US $10 b1ll1on ~n one year merely to meet the ~ncreased payments for food and o~l. For the f1.rst t~me s~nce the Second \•1orld War Japan has dec~ded to take steps t o ensure her econom~c secur~ty. The pr~nc~ple of l1beral trade, free ~rade, has been f~rmly adhered to by Japanese merchants abroad as well as ~n Japan, and only on this pr~nc1.ple can Japa n survive . But the notion is now spread~ng among most merchants, bus~nessmen as well as poll. t~c~ans, that they must also ser~ously consider the secur~ty aspect 1n econom1c matters even though a war s1tuat1on does not ex1st . Est1mates of the future performance of the Japa nese economy have therefore been modif1ed and ser~ ou s l y reconsidered by a number of agenc~es in Japan, 1nclud1ng the Ml.ni &try of Internat~onal Trade and Industry and the well-known Econom~c Research Centre of Japan. Their present estimates are quoted at the end of my paper . The proJeCti o ns relatl.ng to the Japanese economy 1985, as g1ven 1n Table 2, are based o n the M~nistry of Internat~onal Trade and Industry and the Japan Economic Research Centre. As you see, the potent1al GOP ~s ~ncreas~ng from 1977 to 1980 by 6.1%, and from 1981 to 1985 by only 5 5% . Herman Kahn gave somethl.ng l1.ke 1 5% f o r the per~ od startlng late th~s y ear to 1985 . He may be r~ght 1f the o ~ l pr1ce resumes ~ts old level, but he did not say so. However, when I gave this f1gure in Sydney , many Australl.an econom1.sts who had JUSt come back from Europe, sa~d that even that was too opt~mistl.c. They regarded 3% as an appr o prlate figure 1n l1.ne with the prospect~ve growt h rate of the European comrnun1ty, on Such an est~mate, wh~ch Japan 1s dependent for markets. that even ~f bel1eve I however, ~s too pessJ.ml.st~c, for same of the European countries do not grow more than 3% unt~l

- 6 -

on the average, the Japanese economy could take advantage of their slow growth and become the supplier of industrial goods to many developing countr1es - - ~atin America , Iraq and the M1ddle East countries as well as to the United We could keep on growing at the annual States and Canada . rate of 6% up to 1985. In 1975 , however, we may ach1eve a growth rate of only 4%, owing to the reces sion -the · still · evident · in the f1rst half effects of wh1ch · are of the year. The rema1n1ng f1gures 1n the table are more or less self- explanatory; they are the reliable order of magnitudes on these vital econom1c variables. On ~he basis of these proJections , the M1nistry of International Trade and Industry has 1ndicated the industrial structure of the future Japanese economy. (See Table 3) The annual rates of growth prov1ded 1n the table show somewhat different1al rates of growth in the d1fferent 1ndustries. Those w1th an aster1sk mean that the industr1es are growing less rapidly or more slowly , than the total average - 6.6%. These are industries which have either moved out of the country or whose products are to be substituted by imports. They are industries which tend to move out to Southeast Asia . For instance, the textile 1ndustry has a growth rate of only 3% a year; and even this percentage may turn out to be rather h1gh because the Japanese text1le industry is now suffering Such industr1es have most serrously from the recession . out and obtaining moving by difficulties their overcome to industries l1ke other Similarly . Asia labour in Southeast have industries processing food the 1ron and steel and another gives also 3 Table . slowly begun to grow more proj€ction by the Japanese economic papers which conveys more or less the same v i ew of the potential industrial structure. On this basis, one can make a JUdgement on the industr1es that are likely to move out of Japan or those which Japan will be giving up and substituting with imported commodit1es. Table 1 has been p r oduced by the Chenery and Un1ted It re l ates the value- added in each Nations group. indu~tL to the level of population and the per capita I~ Beta- one is big ,. 1t means that the industry GNP ~* can gr w when the population inc~eases; if Beta- two is big , the 1ndustry ' s growth depends on the level of economic development; if Beta- zero is big , it means that 1ndustries can be developed with no reference to population Industr1es such as wood-producing or per cap1ta income . and agriculture have a big Beta- zero , because no matter

.

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what level of .lndustr.l alizat.lon a country 18 in, a:Jr.lcultur e must exist. The wocd-proc ess1.ng 1.ndustry 1.s 1.n the same pos.lt.lon . A country l1ke Singapore W.lth a very small populat.lo n cannot develop 1ndustr1e s which depend very much on the increase of populat.lo n, whereas industr .l es with a large Beta-two can be developed in S.lngapore . There is thus a force which pushes some .1ndustr1e s o ut of Japan and a force wh1.ch pulls 1ndustr1e s 1nto So utheast As1a, 4epend.lng on the size of the populat1o n and t he leve i of .lndustr.la l.lzat.lon 10 eac h country . We can hard l y general1z e on the 1.ndustr1.e s wh1 ch w1.ll move 1nto So uthe ast Asia; they would depend on the e conom1c s.ltuatlon 1n ~a ch country. Petroleum produc ts as an 1.ndustry wh1.ch has a b 1g coefficie nt 1.n both Beta-o ne and Bet. ~ -two may have a very good chance of be1.ng devel oped 1n S1ngapore . It 1s 1n fact the industry whlch has the b1ggest Beta-two amo ng the industr1e s listed here. Japanese econom1c .lnterests tend t o be more gl obal because of the1r scale and cons1dera t.1ons of secur1ty of investme nts . Japan 1.s also try1.ng t o obtaln freedom of action or flexibil.l ty 1n trade and 1nvestme nt . The sec ond problem 1.s how Japan's approach to Southeas t As1a compares with her act i vities 1.n the rest of the world. A number of studies have been made on Japan's future trade W.lth var1ous parts of the world . One proJeCt.lo n made by an econom1s t, Mr . Kanamori , and some others by MIT!, have concluded that Japanese exports to Southeas t As1.a W.l~L tend to decllne, whereas her 1.mports will 1ncrease . Japanese exports to Southeas t As1a in 1970 const.ltu ted 25 . 4% of her export trade, but 1n 1975 they w1. l l be somethlng l1.ke 20% and 1.n 1985 around 18.5%. There 1s a tendency f o r Japan's exports to Southeas t Asia t o decl1ne as a percentag e of her total exports . Imports however will 1.ncrease . At present they are someth1ng like 16%, but 1n 1985 they are expected t o be around 19%. W1th the enormous increase 1n the scale of Japanese trade tboth 1mports and exports ) th.ls ump l 1es a large 1ncrease in absolute amount, desp1te a dec l 1ne 1n t ne percentag e volume of exports . On the other hand, Japan's share in Southeas t As1a' s exports w1. l l not change very muc h; it has been estLmated at 30% for 19 70 and at 26% f o r !975 as well as for 1985 . In o ther words, Japan's share of Sout:heast As1an trade ..lS · not expected t-o decl1.ne. Other proJeCtl ons though d1.ffer1.ng 1.n absolute quantit.le s show almost 1dent.1ca1 percentag e changes . Japan's overseas investme nt, accord1n9 to some econom.ls ta, will not increase very much . However, I believe that it will

- 8 keep on increas1 ng from the present level of US$10 billion (accumu lated amount) at the end of 1973 to US$100 billion by 1985 This may be a very big figure but 1t 1s the figure that would result 1f Japan keeps on 1nvestin g abroad at the same rate as during the recent past. In 1974 , the absolute amount of 1nvestm ent abroad d1d not 1ncrease so much But in the future the high wages , the shortage of land , the problem of pollutio n , the need for food, energy and materia l resource s and the demand for capital from developi ng countrie s will 1nduce a ris1ng volume of Japanese capital to be invested abroad . I th1nk that the Japanese need better relatlOn S and sonnect ions with var1ous parts of the world , not only 1n trade but also in 1nvestm ents , On the other hand, fore1gn cap1tal 1n- flow into Japan has also increase d very much particu larly after the l1berali zat1on of capital movemen ts in May 1973 . I t may reach the level of US$25 b1llion 1n 1985 What percenta ge of the 1ncrease d investm ent of Japanese cap1tal abroad w1ll accrue to Southea st As1a is difficu lt to say. Japanese 1nteres ts are also expand1n g in other parts of the world . In 1973 Japan made very large investm ents in Latin America , particu larly 1n Braz1l . In 1975, as in 1974, Japan will be mak1ng very large inVestments in the Middle East , so that the Japanese 1nvestm ent in Southea st Asia will decline in percenta ge. Southea st Asia accounte d for mo r e than 50% of Japanese aid and investm ent before 1973 . Though this percenta ge cannot be maintain ed, in absolute terms Japanese 1nvestm ent in Southea st Asia will not decrease , since the total overseas investm ent will expand conside rably . The destinat ions of future cap1tal exports w1ll depend very much on the domestlC policies and incentiv es given by the d1fferen t countr1 es 1n Southea st As1a. For instance , Japanese 1nvestm ent in Tha1land rose sharpl y i n the late sixties ma~~ly beca~e of the 1ncentiv es provided by the domest1c econom1 c policies of the Thai Governm ent . If these pol1c1es wh1ch st~ulated Japanese capital 1n- flow 1nto Thailand change, then, of course , Japanese investo rs w1ll sh1ft to Malaysi a , Singapo re, Indones1 a or the Ph1lipp1 nes . They w1ll move swiftly accordin g to the b e st prof1t- rnak1ng opportu n1tles . That 1s the principl~ of our busines s , and Japanese bus1nes ses w1ll be more than sw1ft in adaptlng their pol1cies to the best opportu nities open to them , Howeve r , the figures I have g1ven of the total Japanese investme nt abroad will not be changed , for if Japanese capital can not be invested in Southea st Asia it Will move to Austral1 a , Latin America and the othe r parts of the world . Jap~ ' s

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a1d in 1973 was US$5.8 bill1on - that is more than 1.4% It is expected to reach US$26 bill1on in of her GNP . is 5 to 6% and Japan adheres to prOJeCt1on GNP 1f 1985 This pattern of investment conforms the UN pr1nc1ple. w1th the cont1nued improvement of Japan ' s balance of In o~her words, Japan would payments on current account . than she needs to 1mport . more be export1ng cons1derably Th1s implies , 1n turn, that Japan ' s manufactured goods w1ll r ema1n compet1t1ve in the world ' s markets - a prospect wh1 ch depend s very much on the prices of energy and the pr1ces cf food , I now come back to ~he f1rst po1nt I ra1sed , on wh1ch Japanese economists differ 1n the1r opin1ons . The left- wlng econom1sts tend to be rather pess1mistic about the future expansion of the economy , much more than is 1ndicat ed by the f1gures g1ven by MIT! or government econom1sts or by an average econom1st like myself , On the other hand , there are some l1ke Mr . Kanamori at the Japan Econom1 c Research Centre or Herman Rahn who have a much more optim1st1c v1ew about the recovery and development of the Japanese economy . Well , the future rema1ns to be seen and I am not a good JUdge of the future , but I hope that my talk has g1ven some 1nd1cat1ons of the In conclusion , think1ng on the part of Japanese econom1sts . I would say that a rather pessim1st1c view is preva1ling If you ask a popular scholar or a JOUrnalis~, 1n Japan now If you ask he would g1ve you a r ather pessimist1c view. most acade~c scholars , they would tend to be rather But 1t is very diff1cult cautious , and not so pessimistic l1ke Herman Kahn or economist opt1m1st1c very to f1nd a Mr. Kanamor1 among the Un1vers1ty professors. Thank you very much .

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Table 1:

10 -

Chenery-UN Coefficients for Industrial Growth Pattern Log Xi = log 80 + 8t log N + 82 log Y/N

Bo I

Primary Industries Agriculture

II

Secondary Industries Manufacture Construction

III

Transport and Communications

IV

Other Serv1ce

A.

Capital Goods 1 . Machinery 2 , Transport Equipment 3. Metal 4 Non-Ferrous Metal

B.

82

46.49

0.494

- 0.090

38.98

0.474

-0 .082

16 . 95

1. 362

0.046

11.95 4 . 06

1.441 1.152

0.199 0.055

4.64

1 . 288

-0.048

32.70

1.066

0 . 014

0.80 0.18 o. 34 0. 39

2 . 799 2.327 2.143 1.617

0.315 0.256 0 . 419 0.1 64

0.04 0.01 0.06 0 , 51 1.00

2 . 692 2.223 1.998 1 . 655 1.444

0 . 518 1.040 0.438 0.257 0,401

o. 35 0 . 32

1 :'55 1.703 1 . 687 1.642 1.129 0 . 928

0.080 0.177 0.650 0 .026 0.001 0.234

Intermediate Industries 1. 2, 3. 4. 5.

c.

81

Paper and Pulp Petroleum Products Rubber Chemicals Text1le

Consumption Goods 1. 2. 3. 4. 5. 6.

Wood Products Prinung Apparel Leather Products Food Tobacco

o.so 0.09 3.85 0.51

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Table 2:

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The Japanese Economy in 1985 (JEP) (Billion Yen a t 1970 p rices, base year 1970)

19 73

1980

09771980)

1985

(19811.985)

71 '589

100 , 020

(6 . 1)

130,440

(5 5)

4,033 6 7, 556

5 , 548 94,472

(4 ' 8) (6 . 2)

6,860 123 , 580

( 4 . 3) (5 , 5 )

5 , 217

5,549

(0 .. 7)

(0 7 )

Primary Other Industries

695 4,522

54 7 5 , 002

(-3 . 2) (1 ' 2)

5' 746 464 5 , 282

(- 3 2) ( l . l)

Personal Consumption Expend1 ture

35 ' 324

50 , 244

(6, 4)

6 7 '815

(6 2)

Pr1vate Fixed Capital For

16,664

23 ' 391

(6 8)

31 , 221

(5 . 9)

Government Fi xed Capital For

6 , 549

9 , 894

(8 , 7)

14,830

(8 4)

Pr i vate Resid Investment

4 ' 731

7 , 651.

(10 . 9)

10 , 050

(5 ' 6 j

Exports

10,198

15,837

(5 ' 2)

20 ' 611

(5 . 4)

Impo rts

9 , 9 44

14 , 9 36

(7 . 6)

21 , 565

(7 , 6)

3 ,1 65

4' 19 i

( 7 ' 3)

6 , 888

(10.4)

3,383

5 , 69 /

( 9 ' 7)

7, 941

(6 , 9 )

Pric.e Index

163

409

(12 . 1)

629

(9 . 0)

Wage Index

317

(16 ' 9)

2,023

(1 2 4)

Poten tial GDP Agriculture, Forestry , Fishery Other Industries Labour Force (10 thousand )

Government Investment fo.r Indust r ies Government Investment for We 1

l ' 12 7

Food Imports Depreciation (7.) 15 . 1

20 5

25.5

2 3. 2

23.8

29.5

39 ' 3

42 , 3

47.5

7' 2

6.5

6.0

Tax to GDP ratio (i.) Cove rnme nt I nvestment I Pri vat e F1xed Investment ( %)

Working Hours

Table J:

The Futute of Japanese Industrial

Co~osition

JEP Annual Growth Rate Projection 1965- 19 10- 19801970 1980 1985 1985

MlTl Projection 1985 1970 Agr. For. Fish . Mining Food Processing Textile Paper & Pulp Chemicals Petro & Coal Prod. Ceramics & Stones Iron & Steel Non- Ferrous Metals Metal Products G~neral Machinery Electri~ Machinery Transport tiachinery Precis1on Hachin~ry Other ~onufacturing Consttuc cion Electr1cicy & Cas Transport & Commun . Commerce Finance & Insurance Sex vice Total

(4.4) (0 .6) 959 9 , 620 (6 .0) (3.0) 5 , 349 2,621 (1 6) ( 3. 2) 5 , 191 (1.9) 3,019 (1. 7) 2,670 (7 .0) 11,286 1, 85 7 (l 2) 3, 77/ (2. 3) (; . 2) 8,324 (4. 7) 7,632 (4. 7) 7,624 (0. 7) 1 , 103 10 ,106 (6 . 3) J6,259 (10.1) (1. )) 2 , 100 7,444 (4 6) 14 , 290 (8.8) 4,907 (3 0) 28,26 7 (17 . 5) 7 , 113

161 , 518 (100.0)

9 ,470 1,590 22 , 150 8 , 310 6,250 14 , 870 ., , 720 7 ) 190 24 , 470 5 , 320 12,480 26 , 140 28 , 500 17 ,920 3,1 90 28,590 45 , J80 5 ,550 20 ,060 3~ . 560 10 . '300 77 , 290

(2. 3) (0.4) (5 . 3) (2 . 0) (1. 5) (3 .6) ( 1. 9) (1 . 7) (5 9) (1. 3)