Industrial Performance and Competition in Different Business Cycles: the Case of Japanese Manufacturing

The international competitiveness of the Japanese manufacturing sector has been diminishing since 1985 due to the 'hollowing out' effect. In the early phase of its industrialisation program Japan had protected its domestic market. Japanese industries are more concentrated compared to their U.S. counterpart. Recent Japanese governments have embarked on a policy of structural reforms. Industrial policies play a major role in this respect. Technological changes, international competition and reducing barriers in domestic and international markets will help to speed up this reform process. The paper analyses the competitive process and performance behaviour of Japanese manufacturing over the period from 1985 to 1997. Variables representing scale economies, size and openness are used in explaining profit behaviour of manufacturing firms. Findings are compared with other developed countries such as the U.S. and Australia.