Economic Impact of Japan's Food and Agricultural FDI on Worldwide Recipient Countries

Paula Rossi and Masaru Kagatsume

No 332018, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: The consumption of food and agricultural (F&A) products in Japan is flattening out. As a result, the sector has been shrinking reheating the talks in Japan about the need to establish policies aimed at revitalizing and enlarging the scope of the Japanese agri-business. One possible strategic response is overseas expansion which also bears the potential to improve food availability for Japanese consumers. However, concerns have been raised over whether outward FDI in F&A may in fact aggravate the country’s food security problem by having a “boomerang effect” on the farming sector caused by FDI-induced F&A exports to Japan, an issue closely related to Japan’s import protection policies. This paper discusses the impacts of Japan’s outward FDI in the F&A sectors and Japan’s F&A import protection policies. Two complementary methodologies are adopted. First, a panel data specification is used to assess the F&A productivity response to Japanese FDI in the recipient economies. Following, the GTAP model is employed to analyze the worldwide impacts of Japanese outward FDI in F&A and the effects of unilateral changes in Japan’s agricultural import protection policies. The major policy implications derived from this study are: increases in Japanese FDI can contribute to enhance F&A production in some of the regions considered, although the impact is small; Japan’s FDI is welfare-improving in both supplier and those recipient regions able to rip the benefits of the technological spillovers; concerns that outward FDI could have a boomerang effect in Japan seem to be justified although this conclusion is largely influenced by the year of the database used; an import tariff increase makes Japanese consumers worse-off, producers better-off and improves the country’s self-sufficiency rate; and import tariff reduction has positive impact for Japanese consumers, hurts producers and Japan experiences a deterioration of its self-sufficiency rate.

Keywords: Research Methods/Statistical Methods; Agricultural and Food Policy (search for similar items in EconPapers)
Pages: 19
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332018

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