Changes in the Japanese Manufacturing Industry’s Competitiveness since Abenomics and Korea’s Countermeasures
||Mok Sagong, Gi-un On, Hyeon-su Shin, Sang-ho Lee
The onset of the global financial crisis turned the game of competition and cooperation between Korean industries and Japanese ones much in the former’s favor until 2012. The ratio of intra-industry division of labor in Korean and Japanese industries increased from 47.8 percent to 59.8 percent between 2000 and 2012. Vertical division of labor is diminishing, while horizontal division of labor has doubled its share from 14.4 percent to 28.8 percent of the same years.
The start of the so-called Abenomics, however, has begun to lower the value of the yen (JPY) against other currencies, greatly boosting the profitability of Japanese businesses and ushering in new changes in the competitive and cooperative relations between Korean and Japanese manufacturing industries. As much of the markets and products of the two countries’ manufacturing sectors overlap to a high degree, the changes made to the competitiveness of Japan’s manufacturing sector under Abenomics require serious attention and countermeasures from Korean policy and research communities.
The objectives of this study include making in-depth analysis and assessment of the Abenomics-induced changes in the competitiveness of Japan’s manufacturing sector, exploring the implication of such changes for the Korea-Japan industrial relations, and identifying and advising possible countermeasures the Korean government and industries may take in response.
We will begin by providing an overview of the effects of the Abenomics policies, focusing on such major measures as the Industrial Competitiveness Enhancement Act. Then we proceed to make an empirical analysis of the quantitative changes in the competitiveness and prices of Japanese products due to Abenomicsinduced changes in the exchange rates. We also analyze trade statistics to determine changes in the competitive and cooperative relations between Korea and Japan, and how the changing exchange
rate affects Korean exports. Finally, we analyze Japanese industries’ increasing investment in R&D and facilities, restructuring
and business reorganization, innovative strategies, and decision to lower the prices of exported goods. Based on these analyses, we identify the recommended course of action Korean policymakers and industries ought to take.