chapter  2
19 Pages

The effect of intermediate and final goods trade on labor demand in Japanese firms

WithSACHIKO KAZEKAMI, MASAHIRO ENDOH

Introduction How trade affects wages and jobs is well established as a research topic, and this theme continues to attract the attention of researchers with respect to various economic activities. In 2010 in Japan, at monetary policy meetings and in various speeches and town meetings, members of the policy board of the Bank of Japan repeatedly cited strengthening “globalization” and growing “competition” with foreign countries as reasons why the real wages of Japanese workers had not increased despite the (then) economic upturn. More recently, the sharp appreciation of the nominal Japanese yen has sparked the argument that such sudden yen appreciation encourages Japanese firms to outsource their activities, partly or completely, to developing countries, thereby decreasing the number of domestic jobs. As Japanese firms have increased their economic transactions with Asian countries in the past decade or two, concern about the negative effect this may have on fair wages and stable employment in Japan has emerged.