ISBN 92-64-02695-9 OECD Economic Surveys: Japan © OECD 2006
Strengthening the integration of Japan in the world economy to benefit more fully from globalisation
Globalisation through international trade, foreign direct investment (FDI) and international movements of labour is a key force driving economic growth. However, Japan is an outlier among OECD countries, with the lowest levels of import penetration, stock of inward FDI relative to GDP and foreign workers as a share of employment, reflecting the legacy of past policies during its post-war development. Policy reforms would help Japan make greater use of goods, services, capital, technology and human resources from abroad. Given the close links among trade, investment and labour flows, it is important to pursue a comprehensive approach, including; i) reducing barriers to FDI and imports, particularly in agriculture, through multilateral trade negotiations and regional trade agreements; ii) relaxing product market regulations, notably in the service sector; iii) fully opening the M&A market to foreign firms; and iv) easing controls on the inflow of foreign workers, including those in non-technical occupations.
6. STRENGTHENING THE INTEGRATION OF JAPAN IN THE WORLD ECONOMY TO BENEFIT MORE FULLY FROM GLOBALISATION
conomic theory and history demonstrate the benefits of integration in the world economy (Box 6.1). The process of globalisation is being driven through various channels, notably foreign direct investment (FDI), trade in goods and services, labour flows between countries and technology transfers. For Japan, the steady rise in its share of world trade until the 1990s was a key aspect of its rapid post-war development. At the same time, explicit rules restricting inflows of goods and investment, aimed at promoting and protecting local companies and industries, limited the degree of integration in the world economy. In addition, product market regulation had a...