Trade Development Summary September-1953 JAPAN I. BASIC INDICATORS (a) Production 1952 was the first postwar year when the level of manufacturing production exceeded that of prewar. During the first'five months of 1953, a further advance was made. It is remarkable that the emphasis now is much more on investment goods than before the war. Even in the first quarter of 1953, the production of consumer goods did not yet achieve the prewar level. This was exclusively due to the textile branch. The great impediment to the revival of the textile industry lies in its inability to recapture export markets. This factor has also been mainly responsible for a radical change in the relation of industrial output to foreign trade as regards both exports and imports which still consist for a major part cf finished textile products and textile raw materials, respectively. INDICES OF FOREIGN TRADE AND MANUFACTURING OUTPUT \ Volume of Trade Manufacturing Period :Exports j Imports output 1937 100 100 100 1950 26 28 71 1951 26 41 99 1952 27 47 106 1953 28 56 107 1st Qr. In the production of investment goods, the xargest increase was achieved by output of precision instruments (more than five times prewar output), followed by transport equipment (more than double) and machinery (almost double). Output of electric power in 1952 was almoso two-thirds higher than in 1937. In 1951 staple food production (rice and wheat), which in any case had suffered little or not <\t all from the war, was still at approximately prewar levels; wheat production was somewhat higher in 1951/52, by 14 per cent compared with 1934-8, whereas rice production was slightly lower. MJT/10/54 - 2 - (b) Terms of Trada Since, in 1952, the prices of imported minerals, metals and chemicals de­ clined somewhat more than those of processed export products, the terms of trade improved somewhat over 1951 in spite of the fact that there was a severe decline of 26 per cent in the average prices of exported textiles against a decrease of 16 per cent only in the prices of imported textile raw materials. One feature which may have a more permanent adverse influence on the terms of trade is the price of imported rice which, compared with 1937 levels, has increased between three and five times, tc~.United States and Burma rice, respectively. (c) Balance of Trade The drastic reduction in the value of imports during the latter half of 1951, coupled with a temporary rise in the value of exports towards the end of that year, created a near equality between them during the first two months of 1952. However, the diverging movement of imports and exports throughout the year, which continued in the first five months of 1953, has resulted in a deficit, in 1952, almost one-fifth larger than that of 1951, and a monthly average deficit during the first five months of 1953 of nearly $100m. against one only half as large during the same period last year. BALANCES Off TRADE OF JAPAN (Million U.S. $) 1950 1951 1952 Year Year 1st half 2nd Half Dollar Area. Selected Countries - 258 - 637 - 355 - 322 2) Sterling Area. Selected Countries + 74 + 99 + 51 - 38 3) Western Europe. Selected Countries + 31 - 20 + 18 _ Rest of World + 1 - 82 - 23 - 85 Total - 152 - 640 - 309 - 445 U.S.A., Canada, Philippines, Ryukyus, Mexico, Liberia. U.K., Australia, Union of South Africa, India, Pakistan, Burma, Ceylon, Gold Coast, Nigeria, Kenya, Aden, Malaya, Hong Kong, 3) Belgium, France, Germany, Netherlands, Sweden, Norway, Switzerland, Italy. Source: Economic Statistics, Japanese Government. - 3 - (d) International Payments Position PAYMENTS POSITION OF JAPAN ON CURRENT ACCOUNT (Million U.S. $) Goods and Services 1948 1949 1950 1951 1952( 1. Trade Balance -408 -376 -191 -656 -759 2. Services Government + 19 + 49 •153 +623 +828 Other + 2 * 21 • 83 +190 +164 Total -387 -306 + 45 +157 +23c Source: IMF Financial Statisti.es, August 1953. Japan's payments position since the war has been precarious. Up to mid-1950 when the Korean War broke out, a large proportion of her imports were financed by tyrants from the United States. From 69 per cent in 1948, this proportion fell to 59 per cent in 1949, and still acounted for 36 per cent in 1950. "When these ^ronts were terminated at the outbreak of the Korean War another extraordinary source of income, i.e. payments for services rendered and goods supplied to the United^îïatipns Armed Forces, helped to make up the deficit on Merchandise Account. These extraordinary receipts are included in the foregoing -table under Services Rendered by government. TheiT importance can be gauged by noting that they were equivalent to 31 per cent- yf cotal imports in 1951 and 40 per cent in 1952. Now that an armistice Has been concluded in Korea, it remains to be seen how Japan can balance her accounts. It can hardly be expected that orders arising from reconstruction in Korea will be sizeable enough to replace the extraordinary rsceipts during recent years. On the other hand, it seems improbable that commercial exports can be increased sufficiently to meet the deficit on current account since large markets and sources of supply which were important before the war are now closed to Japan (China and Manchuria). In other, chiefly South East Asian, markets Japanese goods are meeting increasing international competition in fields where Japan possesses little experience as an exporter (durable goods). Competition from native industries is also important in the field of non-durable goods, especially textiles. With both the value of imports substantially higher, and that of exports lower during the first five months of 1953 than in the same period of 1952, the outlook for Japan's payments position in the current year thus seems uncertain. - 4 - II. EXPORTS (a) Value and Volume During the first five months of the year the value of exports was $96 m., or 16 per cent, below last year's level in that period, but there was a gradual improvement towards mid-year, and the May export figure was even somewhat higher than a year ago. Since export prices fell much less than export values (textile prices had already reached their lowest levels in the last two months of 1952) the export volume was reduced by a few per cent only. On the other hand, the inability of export prices to adjust themselves better to world market levels is one of the main reasons for the disappointing performance of exports. (b) Direction EXPORTS OF JAPAN, BY VALUE AND PERCENTAGE SHARES IN TOTAL (Million U.S. $) 1950 1951 i 1952 i Year Year , 1st Half 2nd Half | Value % Value % j Value % Value % Dollar Area, Selected Countries 226 28 283 21 144- 21 189 32 Sterling Area, Selected Countries 267 33 509 38 280 41 171 29 Western Europe, Selected Countries 59 7 83 6 60 9 36 6 Rest of World 269 32 480 35 200 29 194 33 Total 821 100 1.355 100 684 ' 100 | 590 100 ! i See footnotes on Trade Balances Table. Source: Economic Statistics, Japanese Government. The fact that the value of Japanese exports is almost constantly declining is solely on account of Sterling Area trade and is all the more serious in view of the increasing imports .from that area; exports to the area in the first quarter of 1953 were only 42 per cent of the rate prevailing during the first half of 1952. Ao the same time, exports to the Dollar Area (and especially - 5 - the U.S.A.) and all other destinations were, in the first quarter, substantially- above the rate of the first six months of 1952. The largest losses have been suffered in exports to Australia, India, Pakistan, Malaya and the United Kingdom. The gains in exports to the Dollar Area have continued in the first six months of 1953. Exports to France ^Germany, Italy, OEEC D.O.T.s, Formosa, Korea and others have on_ the-whole developed favourably, but exports to Argentina and Indonesia'have been lower. Since it is realised that for various reasons promotion of exports to the Sterling Area will be more difficult than to other destinations, the greatest effort will be in the direction of South Eastern Asia in general, and countries such as China, Indonesia and Thailand in particular, as well as all other developing countries in the Middle East and Latin America. (c) Composition COMPOSITION OF JAPANESE EXPORTS (Million U.S. $) 1951 ! 1952 1953 i Year 1st Half 2nd Half 1st qr ,j Food, Beverages and Tobacco 69 42 61 31 Textiles and Clothing 570 239 165 74 Iron, Steel and other Base Metals 250 187 119 46 Machinery and Transport Equipment 108 59 58 45 Other Exports 358 156 187 80 Total 1,355 683 590 276 ciource: Report on Overseas Trade. In 1952, the export value of iron and steel ranked, for the first time, as the most important single export item. With those of copper, exports of steel have been mainly responsible for the extraordinary rise of the metals group. However this situation was short lived. Even in the second half of 1952. and further in 1953, exports of steel tapered off and those of copper were reduced to insignificant amounts. Cotton textile exports also diminished throughout the year but revived at the end, and du^.np the. fiTst quarter of 1953; exports of the more highly priced A-ayon~goo~d3, on the other hand, decreased less and were able to profit more from the subsequent revival. But in both these items, exports in the first quarter of 1953 were still considerably lower than a year ago.