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, .

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. "Kxportif of machinery (mainly sewing machines and textiV - h -

machinery in equal parts and bicycles in much smaller amounts) remained more or less stationary in value during 1952, but in the first quarter of 1953, they were substantially higher than a year ago; there was also a notable increase in the export of ships.

III. IMPORTS

(a) Value and Volume

The value of imports which has not ceased to increase, with only temporary interruptions, since the beginning of last year, was, in the first five months of 1953, nearly $200 m. or 19 per cent, higher than in the same period a year ago. Since import prices have been continuing their decline, the volume imported has increased by no less than 43 per cent.

(b) Origin

IMPORTS OF JAPAN. BY VALUE AM) PERCENTAGE SHARES IN TOTAL (Million U.S. $)

1950 1951 1952 Year Year 1st Half 2nd Half

Value % Value % Value % Value %

Dellar Area. Selected Countries 484 50 920 46 499 50 511 49 Sterling Area, Selected . Countries 193 20 410 21 229 23 209 20 Western Europe,x Selected Countries 28 3 103 5 42 4 36 4 Rest of vforld 268 27 562 28 223 23 279 27

Total Î973 100 1.995 100 993 100 3,035 100

See footnotes on Trade Balances Table.

Source: Economic Statistics, Japanese Government. - 7 -

The rise in imports from the Sterling Area in 1952 has been on account, especi­ ally of Australia, the largest supplier to Japan among them, and India. These two countries together with Pakistan and the Colonies, provided three-quarters of all sterling imports into Japan in 1952. It appears that, during the first half of 1953, imports from the whole sterling area were again 50 per cent higher than in the first half of 1952. In the same period imports from the dollar area appeared to have remained stable. (c) Composition

v JAPANESE IMPORTS OF SELECTED COMMODITY GROUPS (Million U.S. $)

, 1951 1952 1 i Year 1st Half 2nd Half l Year 1st Half 2nd Half

Food, Drink and Tobacco 553 298 255 617 298 319 Raw Materials 1,269 746 523 967 477 490 Fuels 166 67 99 234 123 111 iviachinery and Transport Equipment 60 18 42 90 41 49

Source: Japanese Economic Statistics.

With a population which, in 1952, was 22 per cent larger than in 1937, a reduced territory and agricultural production at about the prewar level, the increased imports of foodstuffs must be regarded as a permanent feature; similarly, in view of the higher level of production cf capital goods, the share in total imports of fuel, ir«n ore and several non-ferrous metals has increased; the share of textile fibres has been affected less not only because of the reduced activity cf the industry as a whole, but also as a result of endeavours to enlarge production and exports of synthetic fibres. Apart from tha possibility of similar substitutions in other industries (rubber), the share of manufactures in Japanese imports is so small that the resulting lack of elasticity of the import pattern makes the development of export markets imperative. Basic Indicators Country: Japan

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• 1937 1950 1951 .1952 1952 1953

Year Year Year Year J F M A M J ! J A S 0 N D J F M A M

1950 = 100 Manufacturing Production 140 100 138 148 133 137 145 144 148 147 149 152 154 155 154 157 141 143 167 172 175 a) Investment goods 121 100 144 145 L25 134 145 139 145 143 144 152 156 151 156 163 133 148 159 b) Consumer goods 180 100 136 163 148 150 155 155 156 162 165 168 171 171 174 186 168 175 181 Agricultural Production 101"^ 100 99 Trade Volume Exports 387 100 101 105 104 120 116 109 105 104 95 103 100 101 95 125 91 103 130 111 Imports 351 100 144 165 120 131 174 154 164 167 168 157 179 179 176 211 198 187 204 242 Terms of Trade (Jan.-June 1950 - 100) 931» 101 113 118 111 108 113 118 Trade Value (fcillicn U.S.f) Exports 930 820 1,355 1,273 108 126 123 115 108 104 91 100' 98 97 90 114 80 81 115 96 112 Imports 3 ,104 974 1,995 2,028 129 147 193 . 172 177 176 170 154 175 172 164 202 188 173 187 214 206 V.

Balance of Trade Trade -174 -154 -641 -755 -22 -20 -70 -57 -69 -72 -79 -54 -76 -75 -74 -88 -109 -92 -73 -118 -94 (Million U.S.$)

1938. •- CD