Japan's International Trade

Countries engage in international trade because it is a mutually beneficial process. At the macro level, national welfare increases. At the micro level, individual exporters earn profits, provide an additional level of employment, and supply convertible foreign exchange which is used to pay for imported goods and services.

In terms of national welfare and economic common sense, imports are the ultimate rationale for trade. By definition, a good is not likely to be imported unless it meets at least one of three criteria: (1) it is cheaper than domestically produced counterparts; (2) it is of better quality than its domestic competition; or (3) it is either unavailable or in short supply in the domestic market.

Obtaining goods from abroad at cheaper prices increases consumer's buying power, and, as a consequence, real incomes rise. This in turn means an increased standard of living in the importing country. High tariffs and other barriers to imports increase costs to consumers, lower real incomes, and reduce their freedom at the marketplace. One of the major sources of price disciplines and incentives for innovation by domestic industry is import competition. Imports are intrinsically deflationary. Furthermore,