National economic profit


Mitsugu Yoneda
Professor, Faculty of Economics, Chuo University
Area of Specialization: Financial Theory and Modern Capitalism Theory

End to the Japanese economic growth system driven by exports

The Japanese economy has stagnated for 20 years. In 1997, the Japan GDP reached a nominal record high of 523 trillion yen. Since then, the economy has continued to shrink and stagnate, declining to 475 trillion yen in 2012. Even after the end of the rapid economic growth period, the Japanese economy has continued to promote a growth system driven by exports. Through this system, Japan had recorded a trade surplus of more than 10 trillion yen every year. However, upon reaching 12 trillion yen in 2007, this surplus has declined rapidly. Since 2011, Japan started reporting a trade loss, a trend which continues to grow. Together with the automotive industry, the electrical industry had been a leading export-driven industry. However, during the period from January to September in 2013, the electrical industry fell into an import surplus of approximately 800 billion yen.

These trends are attributed to a variety of reasons such as a rising yen, a decline in the international competitiveness of Japanese corporations due to the rise of developing nations and increased difficulty of exporting. Another reason is the stagnation of the global market, a problem which began with the Bankruptcy of the Lehman Brothers and is centered on advanced nations. However, the peculiar long-term decline of the Japanese economy compared to other advanced nations is fundamentally controlled by major Japanese export-related corporations. Once having prospered through exports from Japan, these corporations are now taking major steps towards the behavior pattern of global corporations.

Overseas net sales by Japanese global corporations increased dramatically from USD466.8 billion in FY2003 to approximately USD1.03 trillion in FY2012. Similarly, during the same period, the balance of local tangible fixed assets (excluding land) increased from USD13.6 billion to USD37.5 billion, while the number of local employees increased from 2.34 million to 3.72 million. Such increases are in favorable contrast to the stagnation of the Japanese economy during the same period. This means that while Japanese export-related corporations are continuing to grow based on a globalization strategy (of course, the market principle of survival of the fittest effects each corporation and industry differently), the growth of these global Japanese corporations is no longer a growth factor for the entire Japanese economy. Indeed, by acting in accordance with the “Japanese Management System in a New Era—Direction and Concrete Policies” that was formulated in 1995, these global Japanese corporations have caused an explosive increase in non-regular employment and the wage level of the Japanese working class has been greatly reduced. Consequently, we must recognize that there is a fundamental contradiction between global corporation profit and national economic profit. The trickle-down effect asserted by the government and economic circles is nothing more than an illusion or a lie. 

Recent trends in globalization of Japanese corporations and industries

Now, based on the Nihon Keizai Shimbun newspaper (June 2012 to July 2014), I would like to define the recent trends in globalization of Japanese corporations and industries. First, major export-related corporations are expanding globally (in other words, expanding overseas production and enlarging their network of international subcontractors) with no signs of slowing down. Among all Japanese corporations, the automotive industry has been most successful with the globalization strategy. In 2003, the domestic-overseas ratio for the number of cars produced was about 10.3 million cars produced domestically to 8.6 million overseas. In 2007, the ratio flipped to approximately 11.6 million domestically to 11.9 million overseas. Furthermore, in 2013, the number of cars produced overseas was an overwhelming 16.8 million, compared to 9.63 million domestically (total of passenger cars, buses and trucks).

This overseas production has caused corporations to pursue an increased local production ratio for overseas plants, as well as increased exports from these overseas locations. As a result, Japanese automotive part manufacturers (primary subcontractors) who had previously exported parts from Japan to overseas factories for finished vehicles are now changing course to expand overseas production and establish new overseas plants. Furthermore, the same trends can be seen in the steel industry and chemical industry which manufacture high-performance steel sheets and plastics for automobiles.

Second, there is an increasing trend of overseas production for other manufacturing industries which, unlike the automotive industry and electrical industry, have been based mainly in the domestic market. For example, consider the hygiene and healthcare industry. Every year, 66 million babies are born in Asia, approximately half of the annual global birthrate. An increasing number of Japanese corporations are expanding globally into this massive “baby market.” Pigeon Corporation, a major baby product company, already holds a 50% share of the nursing bottle market in China. In addition to increasing the yield of its plants in Shanghai and Changzhou by 20% every year, Pigeon is also opening a new plant in India. Another example is Unicharm Corporation, one of the 3 largest sellers of disposable diapers in India. Unicharm has constructed a second plant in India with an eye on expanding into Bangladesh. The company is also producing high-performance disposable diapers for the wealthy class in China, ultimately seeking to capture 10% of the global share. Oji Holdings also going to hold a production center for disposable diapers in Indonesia, the first such facility in Asia. In response to this increased production of disposable diapers for developing nations, Sumitomo Seika Chemicals Company is opening a facility in Korea to produce superabsorbent polymer (SAP), a core material for disposal diapers. This is Sumitomo Seika’s fourth such production facility.

Third, due to rapid growth of national income in BRICs and East Asian countries, various industries which had been viewed as domestic-demand related industries due to their close relationship with consumer spending are now starting to expand their business globally. Such trends are particular prevalent in the service industry. Furthermore, this expansion is not limited to major corporations; mid-sized corporations are also looking overseas.

In addition to clothing retailers headlined by Fast Retailing (UNIQLO), clothing manufacturers such as Teijin and Toray are continuing to expand their stores and factories throughout Asia. Moreover, supermarkets and convenience stores such as AEON and Seven & i Holdings are now leading the spread of Japanese consumer culture and youth culture in urban areas throughout Asian. In China, the number of motor vehicles owned has exceeded 100 million and GDP per capita has reached a level around USD10,000. Japanese corporations are now planning to open large suburban-type shopping centers and malls which target the middle class. There are endless examples of overseas expansion by Japanese corporations in various industries. For example, in the food-service industry there is expansion in sushi (Sushiro), beef-on-rice bowls (Yoshinoya, Sukiya), coffee (Doutor), ramen noodles, staff cafeterias, and lunchboxes; in the education industry there is Benesse, Kumon, Gakken and Ichishin; in the tourist industry there are Japanese inns, commercial hotels and travel agencies; in the medical and healthcare service industry there are hospitals and nursing homes: there are also numerous other examples such as parking lot management, cleaning services, and security services (ALSOK).

Fourth, China has been entered not only by Japanese corporations but also by global corporations from throughout the world. This has caused wages in China to increase rapidly. Furthermore, the foreign policy of the Abe administration has increased the severity of territorial disputes between Japan and China. As a result, many global Japanese corporations have moved a portion of their production facilities and offices from China to countries such as Thailand, Indonesia, Vietnam, India and Myanmar.

Fifth, in conjunction with expanded production and business activities by Japanese corporations in Asia, Sagawa Express, Nippon Express and other major corporations involved in shipping, general trading and warehouse services are working to acquire logistics centers and construct shipping systems in order to realize a precise and timely Japanese-style logistics network throughout Asia. Moreover, through a partnership with the Japan ODA, the Japan Railways Group and subway companies are working in East Asian countries to establish infrastructure for areas of concentrated industry, and to develop transportation networks in major urban areas.

Sixth, the globalization of Japanese corporations has spurred demand for capital overseas and demand for growth capital in emerging nations. In order to respond to this demand, Japanese financial institutions are entering Asia at an increasingly rapid pace. Japanese megabanks which had withdrawn from international finance after the collapse of the bubble economy in Japan are now working to resurrect their international finance business based on Asia.

Stabilizing the Japanese economy based on a sustainable regional economy

As discussed above, until now, export corporations and industries had contributed to growth of the Japanese national economy by increasing exports from Japan. Today, these corporations and industries are starting to construct full-scale export facilities in China and East Asian countries. In turn, this has prompted many other corporations, including manufacturing industries and the so-called domestic demand industries, to abandon the Japanese domestic market and seek corporate growth through global expansion.

Regardless of how much the Japanese government works to strengthen the international competitiveness of these global corporations, it will not lead to growth of the national economy or improvement of people’s lives. Despite the globalization of money and possessions—in other words, the globalization of capital—an overwhelming number of workers live in regional society which is the site of Japanese lifestyle and labor. In order to create job opportunities and stabilize the Japanese economy, it is urgent that we construct throughout Japan numerous regional economies (based on local agriculture, forestry, fishing and other native industries) which are recycle-oriented local economies and not influenced by the behavior of global corporations.

Reference Literature

Manuscript by Mitsugu Yoneda: “Form of Economic Management in a Global Economic Stage” (August 2012 issue of Keizai).
Manuscript by Mitsugu Yoneda: “The Lost 20 Years of the Modern Japanese Economy and Abenomics—A Counterargument to Economic Globalization and the Structure Reform of Neoliberalism (Modern Capitalism and Marxian Economics—Can Economics Become Effective Again?; co-written by Takuyoshi Takada, ShinNihon Publishing, 2013).

Mitsugu Yoneda
Professor, Faculty of Economics, Chuo University
Area of Specialization: Financial Theory and Modern Capitalism Theory
Professor Yoneda was born in Toyama City, Toyama Prefecture in 1952.
He entered the College of Social Sciences at Ritsumeikan University in 1970.
In 1978, he entered the Graduate School of Economics at Osaka City University, and completed the Doctoral Program at the Graduate School of Economics at Osaka City University in 1984.
After being appointed as Assistant at Chuo University in 1984, he became Professor at Chuo University in 1995.