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In past shocks (e.g., the 2008–2009 global financial crisis), the services trade was found to be more resilient than the goods trade. However, the ongoing novel coronavirus disease 2019 (COVID-19) pandemic has restricted people’s cross-border mobility, which is fatal to the services trade because it often requires physical proximity between suppliers and consumers. We empirically examine the impact of COVID-19 on the services trade using quarterly data from 146 countries in 2019 and 2020. Its severity is measured according to the number of cases, the number of deaths, and an index measuring the severity of lockdown orders. We found that COVID-19 had a significantly negative impact on the services trade. Moreover, the extent of the impact varied among disaggregated services sectors, reflecting the nature of services. Travel services were the most affected, followed by transport services and construction services. The harmful effects on the trade in these services were more serious than those on the goods trade.

This study sheds light on the role of the import diversity of inputs and empirically explores the effects of COVID-19 on global value chains (GVCs). Specifically, we explicitly investigate the supply-side impacts of COVID-19 on GVCs during the period from January to August 2020 and examine how the import diversity of inputs influences such effects, using monthly export data of final machinery products for 35 countries and their indicator of diversity with 252 trade partner countries. As a result, we found that the negative supply-side effects are greatest in the transport equipment industry among three machinery industries. In addition, such negative impacts on machinery industries are larger during the trade fall period from February to May. Furthermore, we demonstrated that the import diversity of inputs played a significant role in partially mitigating the harmful supply-side effects of COVID-19, particularly during the initial period, i.e., February to March.

This paper examines how Japanese manufacturing multinational enterprises (MNEs) adjust to exchange rate changes. Using the micro-data of Japanese manufacturing MNEs from 1994 to 2010, we find that exports tend to respond to exchange rate changes, in particular when wholly or majority-owned affiliates are dominant among their foreign affiliates and when intra-firm trade ratios are higher. Moreover, the responsiveness to exchange rate changes is higher for intra-firm exports than for total exports. The results suggest that Japanese manufacturing MNEs with greater foreign operations under their own corporate control would more fully absorb shocks of exchange rate movements by adjusting intra-firm transactions. We do not find such tendencies for imports, however. Our results also show that, among all manufacturing sectors, the exporting/importing responsiveness is lower in the electric machinery sectors and higher in the transport equipment sectors due to different types of international division of labor. Furthermore, our results show that the size of the firm does not matter in terms of the responsiveness for total exports, although it does for intra-firm exports only.

The paper investigates the features of production networks of Japanese manufacturing firms and their domestic operations and export/import activities in normal periods and during the Global Financial Crisis (GFC). Our previous empirical studies have shown that firms that expand their operations in East Asia are more likely to expand domestic operations, particularly domestic employment, than firms that do not in normal periods. This study further verifies that such tendency stands during the GFC. Moreover, this paper expands the scope of our series of studies by introducing labor productivity as one of the performance variables and also analyzing changes in the relative and absolute size of headquarters and manufacturing activities over time in order to seek a possible sign of de-industrialization.

This paper empirically investigates the pattern of globalizing corporate activities of Japanese manufacturing firms and its impact on their domestic operations and international trade, using 1998-2006 firm level data. More specifically, we compare changes in the domestic operations and international trade of firms expanding operations in East Asia against firms not expanding operations in two periods, 1998-2002 and 2002-2006. For our analysis in the latter period, we also incorporate the information on the firms' globalizing behavior in the former period. In addition, we conduct analyses to compare changes of firms becoming MNEs with firms choosing to remain domestic, and we also compare MNEs that are expanding operations with those not expanding operations. Although the globalization of corporate activities in less developed countries is thought to negatively affect operations and employment at home, our analysis finds that Japanese manufacturing firms expanding operations in East Asia are more likely to increase domestic employment and both the number of domestic affiliates and establishments. Such a tendency is particularly observed in the latter period, when the international division of labor in the region is more active. Furthermore, manufacturing firms that expand operations in East Asia tend to intensify their export and import activities in the region, suggesting the existence of complementary operations. At the individual firm level, the fragmentation of production by Japanese manufacturing firms seems to generate additional jobs and boost operations at home by effectively utilizing the mechanics of production process-wise division of labor in East Asia.

This publication is in Japanese. Neither an English translation of the publication nor an English abstract is available.

This paper examines how international production/distribution networks provide individual firms with exporting/importing responsiveness to exchange rate movements. With the micro-data of Japanese manufacturing firms from 1994 to 2004, we find that firms' exports tend to respond to exchange rate movements, in particular (1) when firms are large in size, (2) when majority-owned affiliates are dominant among their foreign affiliates, and (3) when their intra-firm trade ratio is moderately high. Furthermore, these tendencies are more salient for machinery firms, one of the major players in international production networks in East Asia. The results suggest that Japanese manufacturing firms, particularly machinery firms, with greater foreign operations under their own corporate control would more fully absorb shocks of exchange rate movements by adjusting intra-firm transactions. We do not find such tendencies for imports, however. The study provides implications for international production networks, which have developed drastically in East Asia.

In light of the recent movement toward regional integration through bilateral/plurilateral FTAs in East Asia, this paper attempts to estimate the impacts of several FTA scenarios in East Asia, using a CGE model. Although most previous simulation studies on the impacts of FTAs focus only on the liberalization of trade in goods, our paper attempts to consider other possible aspects of FTAs such as various trade and investment facilitation and technical assistance to developing countries in the region. Our results suggest that the economic effects of FTAs with a larger number of members are likely to be greater. Moreover, for the establishment of FTAs among countries such as ASEAN+3, ASEAN+6, and APEC, a high quality of trade liberalization including the agricultural sector is essential. Furthermore, it is vital for an agreement to be comprehensive, covering not only intraregional trade liberalization but also other elements such as facilitation measures and technical assistance. The larger the coverage, in terms of membership and contents, the greater the benefits accrued to the members.

This paper explores the relationship between preferential and multilateral trade liberalization at the sectoral level using a unique dataset that includes data on most favored nation (MFN) and bilateral preferential tariffs at the 4-digit ISIC level for 11 Latin American countries over the period 1985–2005. We find evidence of heterogeneity across sectors. While in some industries, complementary effects between both kinds of trade liberalization are observed, in others no significant links are detected and—in a few cases—even substitutability seems to prevail. Variation across sectors appears to be systematically related to both import demand elasticities and countries’ sectoral comparative advantages.

This paper empirically investigates patterns of globalizing corporate activities and their domestic operations and trade, using firm-level panel data on Japanese firms in 1998-2003. Journalistic literature in North America and Europe often claims that the globalization of corporate activities, particularly the expansion of operations in less-developed countries, is prone to reduce domestic corporate activities. This paper proves that such a claim of industrial hollowing-out is unwarranted, at least at the firm level, in the case of Japanese manufacturing firms investing in East Asia. The manufacturing sector in Japan has had a secular trend of reducing domestic employment in the past decades. The regression analysis, however, finds that manufacturing firms expanding operations in East Asia are more likely to increase domestic employment than other manufacturing firms, while non-manufacturing firms, mostly in the wholesale sector, do not present such a significant pattern; the growth of domestic employment of globalizing manufacturing firms is higher by as much as three to eight percent. As for domestic establishments and affiliates, manufacturing firms expanding operations in East Asia do not present any statistically significant differences from other manufacturing firms, while non-manufacturing firms tend to reduce it. Furthermore, firms expanding operations in East Asia tend to intensify export/import activities with East Asia more than other firms, suggesting the complementarity between trade and FDI. This is further supporting evidence for expanding fragmentation of production by Japanese firms and their involvement in further development of production/distribution networks in East Asia. Overall, Japanese manufacturing firms globalizing corporate activities seem to retain larger domestic operations than other firms. Such tendency is actually stronger in machinery industries in which international production/distribution networks are actively extended.

This paper attempted to assess impacts of existing Japanese EPAs in their initial years and to draw policy implications for possible future FTAs/EPAs. Our gravity model estimations as well as detailed analysis on trade and actual tariff reduction by EPAs demonstrated that the Japan-Singapore EPA has almost no direct impact on trade since actual reduction of tariffs by the EPA is quite limited. On the other hand, our empirical investigation confirmed a certain degree of positive impact of the Japan-Mexico EPA on trade, particularly on the export side, and investment. Several important outcomes of the EPA beyond tariff removal are also revealed. Discussion on future designs of FTAs/EPAs includes issues on some possible abuse of phasing out tariffs, desirable structure of EPA tariffs, effective utilization of EPAs beyond trade liberalization, and the relationship with multilateral trade liberalization.