ABSTRACT
People sometimes ask which sectors will lead Japan’s revival, expecting the answer to be some high-tech area. Most of Japan’s food processing plants—only one-tenth the size of comparable US facilities—are too small to take advantage of mass automation and other economies of scale. Sectors such as machinery, already ahead of the United States in the late 1980s, showed the biggest gains in efficiency in the last decades. Moreover, downsizing seems to have provided much of that meager productivity growth. During the 1990s those industries with the biggest increases in import competition also showed the most productivity improvement. One final note about textiles shows the amazing amount of disguised unemployment in Japan’s backward sectors. The critical line dividing light from dark in the dual economy is exposure to competition. During the 1973-90 period covered by the study, the biggest beneficiaries of import protection were these inefficient industries with weak domestic competition.
