Comparative Advantage in Japan

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The Japanese Market has become vital to the U.S. Economy. Japan is the number one export market for the United States. In 1993, Japan accounted for 37.6 percent of the total growth in U.S. value-added exports. U.S. food products, in particular, are a huge market in Japan. American agricultural exports to Japan in 1993 were $8.7 billion. About one-third of Japanese agricultural imports come from the United States. However, there is sometimes a mixed reception in Japan regarding products from the United States. Japanese, on one hand, wish to do things "American" ever since the Second World War. But, on the other hand, U.S. products are perceived as less sophisticated than Japanese and European food products, in product formulation or packaging. Also, U.S. products are considered not as safe as domestics ones, due to the use of pesticides and chemical additives and the partiality of the Japanese consumer to purchase Japanese items. The reason for the large volume of exporting to Japan is due to United State's comparative advantages. Food products are very expensive to produce in Japan. Japan's current labor shortage, combined with import restrictions and domestic price stabilization programs, have driven up domestic production costs. The Japanese food consumption pattern consist of an openness to foreign products and a strong interest in things international. All types of international cuisine can be found in Japan. Many varieties of tropical and imported fruits, such as Florida grapefruit, California cherries, New Zealand kiwifruit, and Hawaiian papayas are readily available in supermarkets and department stores, as are imported alcoholic beverages ranging from Kentucky bourbon and Chinese beer to Russian vodka and California sake. Japanese food consumption is marked by short-term trends. For example, Korean and Mexican food became popular a few years ago and then unpopular. There have also been Italian and Spanish food booms. The Japanese economic recession has shifted the focus of many consumers to the more affordable neighborhood restaurants that feature traditional Japanese dishes. This has made consumers price conscious at grocery counters, which benefits cheaper imported goods. As a result, imported foods account for over half of Japan's average annual caloric intake. Moreover, with Japanese agriculture contracting, Japan's reliance on (and openness toward) imported food products will continue to increase. Conclusion In the future, the United States may no longer be considered to have a comparative advantage for food products in Japan. Countries in the western Pacific are likely to provide stiff competition for the U.S., due to the shorter shipping distances and the ease of conducting long-distance business from with in neighboring time zones. Offshore investment for processing exporting consumer ready products to Japan is taking place in Australia. Highly processed packaged specialty items are being predicted within the European Community. These processors often put forth a greater effete to produce top-quality packaging for their items than Americans. Southeast Asia challenges the U.S. in products such as pet food. 2. Japanese place a high importance on appearance and invest heavily in packaging. Americans view Japanese processed foods as being over-packaged. 3. Domestic processors package in smaller sizes. Smaller packages are preferred by housewives who cater to the individual tastes of different members of the family. 4. Japanese processors are closely in tune with changes in society and evolving consumption patterns. Recently there has been an increase in the health-conscious consumer. Fiber-enriched foods and beverages have been created. Japan has been investing in R&D projects and developing intensive marketing programs. In addition to providing heavy competition for U.S. finished goods, however, Japanese processors also provide a large potential customer base, for U.S. suppliers of semi-finished and other high-value food inputs. The increase in imports of processed food products has forced Japanese domestic food manufacturers to search for ways to cut costs, particularly raw material and labor costs which account for 59% and 11%, respectively, of total manufacturing costs. In order to cut costs, many Japanese food processors have turned to overseas suppliers for high-quality, competitively

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