708-Chaudhari Technical Institute, Gandhinagar - Gujarat ...

TRADE POLICY OF JAPAN
Export policy of Japan
For many years, export promotion was a large issue in Japanese
government policy. Government officials recognized that Japan needed to
import to grow and develop, and it needed to generate exports to pay for
those imports. After 1945, Japan had difficulty exporting enough to pay for its
imports until the mid-1960s, and resulting deficits were the justification for
export promotion programs and import restrictions.
The belief in the need to promote exports is early strong and part of Japan's
self-image as a "processing nation." A processing nation must import raw
materials but is able to pay for the imports by adding value to them and
exporting some of the output. Nations grow stronger economically by moving
up the industrial ladder to produce products with greater value added to the
basic inputs. Rather than letting markets accomplish this movement on their
own, the Japanese government felt the economy should be guided in this
direction through industrial policy.
Japan's methods of promoting exports have taken two paths. The first was to
develop world-class industries that can initially substitute for imports and then
compete in international markets. The second was to provide incentives for
firms to export.
During the first two decades after World War II, export incentives took the
form of a combination of tax relief and government assistance to build export
industries. After joining the International Monetary Fund (IMF) in 1964,
however, Japan had to drop its major export incentive — the total exemption
of export income from taxes — to comply with IMF procedures. It did maintain
into the 1970s, however, special tax treatment of costs for market
development and export promotion.
Once chronic trade deficits came to an end in the mid-1960s, the need for
export promotion policies diminished. Virtually all export tax incentives were
eliminated over the course of the 1970s. Even JETRO, whose initial function
is to assist smaller firms with overseas marketing, saw its role shift toward
import promotion and other activities? In the 1980s, Japan continued to use
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