Discussion Papers

No.897 Japan’s Dependence on China in Supply Chains: Diversion of Imports from China to ASEAN Countries

by Kazunobu HAYAKAWA

May 2023


This study empirically investigates changes in Japan’s dependence on China in supply chains from 2012 to 2021. To this end, we exploit product-level data on Japan’s imports in machinery industries. We first show that Japan has the world’s greatest dependence on imports from China in addition to a gradual increase in Japan’s imports from ASEAN countries. Then, we conduct econometric analyses on Japan’s diversion of imports from China to ASEAN countries. As a result, we find that Japan increased its relative imports from ASEAN countries in machinery goods with greater dependence on China during the earlier study period and in those with higher labor intensity during the later study period. The observed trend is especially strong in imports of machinery parts. We also show no systematic changes in import prices from ASEAN countries relative to those from China, which indicate that the increase of relative imports from ASEAN countries is driven by the change of import quantities.

Keywords: ASEAN, Dependence on China, Japan, Supply chain, Trade diversion

JEL classification: F15, F53

Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.