Does export lead growth? evidence from Japan

Japan shifted towards export-led growth strategy in the 1980s. This study analyzes the role of export performance in the Japanese economic growth. In order to examine the causal relationship between exports and economic growth, the study applied standard time series techniques. The results indicate that imports are important in positively affecting economic growth, indicating that economies should permit a greater flow of imports into the domestic economy through lowering trade barriers. Secondly, in terms of the role of exports, the evidence of export-led growth for Japan indicates that there is a strong argument for governments to follow an export-promotion strategy thereby providing exporters greater incentives to export, for example, by implementing export subsidies and adopting a favorable exchange rate policy. This analysis indicates that export growth tends to have positive long-run effect on output growth in Japan, which thereby supports the export-led growth hypothesis