Japan's Foreign Economic Policy Strategies and Economic Performance

42 Pages Posted: 17 Nov 2014 Last revised: 5 Dec 2014

See all articles by Peter Drysdale

Peter Drysdale

Australian National University (ANU) - Crawford School of Public Policy

Shiro Patrick Armstrong

Australian National University (ANU) - Crawford School of Public Policy

Date Written: October 23, 2014

Abstract

The economic rise of Japan in the 1980s was underpinned by commitment to catching up through domestic reform and accommodated externally within the framework of the postwar multilateral institutions like the GATT/WTO. Regional cooperative processes like APEC later complemented that framework, encouraging unilateral reform across the region. Following the bursting of the asset bubble in the early 1990s and the onset of the Asian Financial Crisis, Japan turned from reliance on the multilateral system to policies based on preferential bilateralism in trade policy to secure its regional trading interests. Japan’s bilateral trade agreements have been largely ineffective in supporting the kind of deep-seated reform to regulatory institutions and competition policies needed to sustain long-term productivity growth. The evidence suggests that Japanese productivity has underperformed against its peers in the industrial world and Asia. Instead of using foreign economic policy as an instrument of domestic reform and productivity enhancement Japan has used bilateral deals largely as political and strategic tools. Re-establishing a link between Japan’s domestic reform agenda and its economic diplomacy is important for structural reform and national economic success, as is a more sure-footed engagement with China.

Keywords: Japanese economic diplomacy; domestic reform; preferential bilateralism

JEL Classification: F14; F15; F55

Suggested Citation

Drysdale, Peter and Armstrong, Shiro Patrick, Japan's Foreign Economic Policy Strategies and Economic Performance (October 23, 2014). AJRC Working Paper No. 06/2014, Available at SSRN: https://ssrn.com/abstract=2521236 or http://dx.doi.org/10.2139/ssrn.2521236

Peter Drysdale (Contact Author)

Australian National University (ANU) - Crawford School of Public Policy ( email )

Crawford Building
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

Shiro Patrick Armstrong

Australian National University (ANU) - Crawford School of Public Policy ( email )

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

HOME PAGE: http://www.crawford.anu.edu.au/staff/sarmstrong.php

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