JAPAN INTO AFFLUENCE
direction growth.
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the nation's economic
One major factor is the question of balance of payments. As has been stated earlier, the feature of the cur- rent business upswing was the recovery of a balanced position in the inter- national accounts at a time when imports were maintained at a higher level. Exports made a sharp rise before imports showed any sign of sagging, consequently, unlike past busi- ness recovery periods when international accounts recorded a deficit, in the present case at the carly stage of recovery, Japan's economy attained a position close to its ceiling in ex-
ternal accounts.
At present the overall account is still in the black. While the trade account is barely able to maintain a balance, invisible trade registered a considerable figure in the red. Credit from capital transactions is responsible for maintaining the overall account in the black. In the capital transactions it is not at all a healthy policy overly to depend on their credit balance when viewed from a long-range standpoint, while it might be overlooked in a short-range view, as was clearly indicated when the U.S. inaugurated the interest equalisation tax act only recently. Japan feels this more keenly in the light of her international responsibility to offer economic aid to developing countries. Demand is thus strong for an improvement in the position of current receipts and payments.
As for participation in the trade liberalisation movement, Japan used to lag behind the advanced nations but taking the matter in real earnest in the recent past, her import liberalisa- tion rate reached the 92% level in August this year, a rate comparable to those of advanced countries. Clearly trade liberalisation is most essential for the promotion of the world economy but Japan felt a certain anxiety over her competitive
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FAR EASTERN ECONOMIC REV
powers on the international trade market. Once the step was taken, however, no visible effect has been noted to date. With liberalisation coming into effect, however, a gradual increase is noted in the import of consumer goods which is expected to expand further. Machinery imports, the rate of which is relatively low compared with other advanced countries, are likely to increase gradually. And at the same time, the ques- tion of deficits in invisible trade appears to be difficult to overcome in a short period of time.
When payments from current account are tending to rise high, therefore, salvation can only be found in expanded ex- ports. Fortunately, up to the present, the world's trade has followed a favourable pattern of expansion in which Japan took her share with a resulting sharp increase in her exports. Japan's high economic growth rate was in fact sustained by the growth in her exports. On the other hand, it must be remembered that, as a result of maintaining the high growth rate, certain changes took place domestically in industries engaged in producing export goods.
A Notable Change
The first notable change was a sharp rise in the levels of wages paid especially in medium and small enterprises which occupy a prominent part in the production of export goods. As a result, one of the advantages that Japan enjoyed in the field of production cost for export goods is being lost, and this is more pronouncedly notable in light industry. The tempo in this regard is most likely to be further accelerated. In order to counteract this situation, what is essentially needed is, first, to raise productivity in export industries and, at the same time, to effect full modernisation and automation of produc- tion facilities, with added efforts for the expansion of heavy industrial equipment exports. On the other hand, at the same time, no effort should be spared to remove all existing restrictions imposed without ample reason on imports of Japanese goods.
Japan is not completely free from troublesome problems involving external payments, and no unreserved optimism for this problem is permissible. Whatever steps may be taken, they must be executed within the framework of progress wherein a balanced position is assured in the world's economy. Therefore while Japan must promote economic aid to develop- ing countries, especially those in Southeast Asia, policies should he so formulated as to expand Japan's trades to the same arcas. The raw material supply imported to Japan, which she re- quired to maintain a high economic growth rate, has reached a total of over US$300 million from these developing coun- tries. These increased amounts of raw material exports ac- count for 75% of all exports from each of these countries. Thus, Japan's imports have greatly contributed to the increase in their foreign currency holdings.
Japan's economy is poised to maintain its current high rate of growth and thereby achieve progress in industrial pro- duction and elevation in the standard of living. For the at- tainment of these objectives, it is necessary to expand imports of industrial raw materials and agricultural products and all efforts should be first given to import from these countries in Southeast Asia. Our cooperation must contribute to economic advance to the benefit to all concerned.
A second factor is related to the rise in prices of consumer goods and services, which has been rather sharp in the im- mediate past. Since 1960, this rise has been from 6% to 7% a year and for this year it is estimated to be between 7% and 8%. Contributory factors are many for the price rise in con- sumer goods, one being the bad weather which affected foodstuffs, but basically it is the shortage of labour which directly and quickly affected the rise in wage levels. To the
October 31, 1963
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