From leading to following in the region

In the post-war period, Japan played an important and active role in creating and providing public goods and development assistance in the region, and in maintaining open and robust markets. For example, Japan effectively led the establishment of the Asian Development Bank, and, together with Australia, was instrumental in the creation of APEC. But for the past decade or more Japan’s foreign economic diplomacy has stalled, and the nation is doing little to actively contribute to shaping a stable and prosperous region at a time when regional and global institutions are under pressure, in a state of transition and flux

Interaction between trade, conflict and cooperation: The case of Japan and China

The complex interaction between trade and politics is analysed for the Japan-China relationship using Granger causality tests. The purpose is to determine the presence and direction of causation between trade and political events, both positive and negative, and to gauge an idea of the lag length of causality. Trade is growing quickly between Japan and China despite long standing political distance between the two countries. Results show that the economic relationship underpins and constrains the political relationship between Japan and China while an increase in positive political news and a decrease in negative political news promote trade to some degree

Japanese FDI in China - Determinants and performance

Japanese foreign direct investment (FDI) into China is analysed using an FDI model that accounts for different modes of FDI as well as third country effects and adds to existing literature by incorporating a new measurement of political distance. Political closeness between countries is shown to affect FDI. An improvement in political relations is associated with an increase in FDI by reducing uncertainty in the investment environment. The performance of Japanese FDI into China is shown to be high relative to its potential since the late 1980s. The signing of the bilateral investment treaty in 1988 and Chinas WTO accession in 2001 were events that helped reduce uncertainty in bilateral investment, with the latter mitigating the effects of increased uncertainty from rising bilateral political tensions after 2001.FDI, foreign direct investment, Japan, China

Measuring Trade and Trade Potential : A Survey

This paper provides a survey and a brief critical review of the literature on the widely used gravity models of trade, as a prelude to the justification of its use with the stochastic frontier methodology. The important papers on the theoretical foundations of the gravity model are reviewed and related to papers applied to explain determinants of trade flows. Then some shortcomings of the gravity model are discussed. The paper introduces the stochastic frontier gravity model as a way of estimating trade resistances and overcoming some of the shortcomings of conventional gravity models in their use for that purpose.

Benchmarking performance:how large is large?

China's rapid rise as a source of international investment has certainly caused a great deal of anxiety in a number of countries where China is buying up big. But it is not always easy to understand the strong response that China’s economic rise has occasioned in developed countries like Australia or the US, and in regions like Europe, where openness to foreign investment and institutional and regulatory structures for managing it are fairly well entrenched. Japan is a little different

Assessing the Scale and Potential of Chinese Investment Overseas: An Econometric Approach

The recent rise in Chinese outward direct investment (ODI) has significant global implications and impacts on host country policy. The present paper attempts to provide a theoretical basis and to define a robust econometric approach to assess the perform

Asian Trade Structures and Trade Potential : An Initial Analysis of South and East Asian Trade

A frontier of potential trade is constructed for trade flows from a world trade matrix of trade determinants to compare East Asian trade performance with that of South Asia. The results suggest that East Asian trade, led by ASEAN, is outperforming the world while South Asia lags behind significantly. Within East Asia, the transformation of Chianis trade performance is remarkable with its accession to the WTO. Australia is efficiently integrated with East Asia and performing close to its trade frontier. There is scope to lift intraregional trade among the East Asian economies but South Asia has even more unrealised potential, including within its own region.trade, East Asia, Trade Structures