While a territorial dispute over a group of islands has affected the diplomatic relations of China and Japan, with many seeing bitter exchange of words between the two almost daily, one aspect remained immune to this until recently. The economic ties both countries enjoy with each other remain intact though recent events have had a slight effect on it, particularly when it comes to the export industry.
In the past two decades, one of Japan’s driving forces in its economy is its exports. With an increase in its sales tax in 1997, many domestic companies struggled and they were left with no choice but to peddle their wares overseas. At that time, the United States was the largest market of Japanese products with an average of 28.3 percent of goods exported by Japan heading to the U.S. But almost two decades after, that percentage decreased and a new importer emerged in the face of China. In 2013, 18.4 percent of Japanese exports went to its Asian neighbor while 18.6 percent went to the U.S. While this may seem a great idea, considering the variety of nations Japanese exports go to, China not only imports products but is also one of Japan’s major competitors when it comes to producing crude steel, an export that has helped sustain the Japanese economy for the longest time. With China joining that market, Japanese steel makers struggled.
While it may seem like such a gloomy forecast, the silver lining is that China’s importation of Japanese products continues to rise as years passed. However, the territorial dispute, which until recently has not spilled over to economic ties, has now slowed down products imported from Japan. As such, the United States is back as Japan’s top importer. And while that is a good thing for the economy, the loss from China could also be felt in Japan’s domestic market already. But until both governments find a way to settle the dispute or even just find a compromise, Japan would be better looking for other markets to tap into to help revive its export economy.
[via Nikkei Asian Review]
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