Japan’s manufacturing export competitiveness is declining

The export competitiveness of Japan’s manufacturing industry continues to decline. The Cabinet Office analyzed Japanese companies’ global export share by product category and found that the export competitiveness of not only home appliances but also automobiles is declining. With the technological strength of emerging countries like Asia also increasing, revitalizing industries in which Japan has a comparative advantage has become a challenge for Japan.

In its “Regional Challenge Analysis Report,” the Cabinet Office summarized the comparative advantages of Japanese products over a 10-year period and analyzed them using the Revealed Comparative Advantage Index, a proxy for export competitiveness. For categories like automobiles and electrical machinery, the index is calculated by dividing the share of that category in Japan’s total exports by its share of global exports.

When the index exceeds 1, it indicates that Japan is more specialized in exports in that category than the global average, holding a comparative advantage.

In 2024, the index for automobiles, a major sector of Japan’s domestic manufacturing industry, was 2.7, and for auto parts, it was 1.7. Both indexes are above 1, indicating strong export competitiveness. However, the index has declined compared to 10 years ago.

Video recording equipment, including video recorders, will maintain its comparative advantage at 1.8 in 2024, but has declined by 1.1 percentage points over the past decade.

The index for household appliances, including white goods like refrigerators and washing machines, will be 0.2 in 2024. It has remained below 1 since 1994. A Cabinet Office official noted, “In the electrical appliance sector, China and ASEAN are increasingly dominant.”

Meanwhile, semiconductor manufacturing equipment will have the highest comparative advantage in 2024, at 7.7. This represents a 0.4 percentage point increase from 2014.