Competitiveness – Residency Base versus Ownership Base – in Case of Japan

This paper examines the competitiveness of Japanese firms in the manufacturing sector since the middle of 1980s when the Japanese FDI outflow was accelerated. Instead of a standard residency-based balance of trade, we use the idea of ownership-based net foreign sales introduced by DeAnne Julius (1990, 1991). The calculated results show that the Japanese overseas activities have made the firms with foreign affiliates abroad become more competitive through selling their products in the local market of the foreign country. Major exporting sectors such as electric machinery and transport machinery have sustained strong competitiveness. The competitiveness of Japanese firms is also confirmed by upward tendency of profit rate in foreign affiliates abroad. Using Dunning terminology the ownership advantages the Japanese firms acquired abroad would mainly come from their inherent management and production system.