Survey on Foreign and Domestic Price Differentials for Industrial Intermediate Input
June 6, 1999
Industrial Policy Bureau
Price Policy Division1)Purpose of the Survey
Aiming at reflecting the efforts to revitalize our economy and to reform its high-cost structure, a survey of intermediate input price differentials in industry between Japan and foreign countries has been conducted each year since 1993 by the Ministry of International Trade and Industry. We publish here the FY 1998 survey results which have just been compiled.
2)Contents and figures
1) Countries and Regions: USA, Germany, Newly Industrializing Economies (NIES: South Korea, Hong Kong, Taiwan, Singapore), China
2) Products: 152 types of manufactured items, 35 types of services for industrial use
3) Period: From September to November 1998
4) Prices: Customer delivery prices (shipment prices in part)
5) Exchange rates: USA: 1$ = ¥125.49, Germany: 1DM = ¥74,93, Korea: 1won= ¥0.094, Taiwan: 1NT$= ¥3,76, Hong Kong: 1HK$=¥16.21, Singapore: 1S$=¥75.16, China: 1 renminbi = ¥15.16 (IMF Rates, September-November 1998)
6) Note: it must be kept in mind that although much attention has been paid to comparing as much as possible product specifications and trade terms under the same conditions, the cases surveyed are within a limited range, hence the survey is not representative of all business operations.
3)Outline of the Results
(1)The price differential between Japan and foreign countries exceeds 160% for the U.S.A., 150% for Germany, and is between 2.2 and 3.4 for Newly Industrialized Economies, and 4.8 for China.
The general (manufactured products and services for industrial use) price differential between Japan and foreign countries for industrial intermediate input in this survey is 1.67 for the U.S.A., 1.57 for Germany, 3.36 for South Korea, 3.17 for Taiwan, 2.16 for Hong Kong, 2.33 for Singapore, and 4.81 for China. It exceeds 160% for the U.S.A. and 150% for Germany. It is 2.2 and 3.4 for the Newly Industrialized Economies, and 4.8 for China. (Table 1)
(2)For manufactured products and services for industrial use, the price differential between Japan and the 7 countries and regions that were surveyed exceeds 2, with a fairly high maximum of 4.
If we look at commodities and services, the price differential for services for industrial use is more than two times the price differential for manufactured products for all countries and regions surveyed.
If we look at manufactured products, the price differential is 1.01 for the U.S.A., 0.86 for Germany, and between 150% and 190% for newly industrializing economies. The price differential between Japan and China is 2.
If we look at services for industrial use, the price differential between Japan and foreign countries is 2.45 for the U.S.A., 2.41 for Germany, between 3 and 5 for newly industrializing countries and exceeds 8 for China. (Table 1)
(3) Among manufactured products, mineral products, general machinery and services for industrial use, the price differential is high for general services, information services and real estate.
If we look at manufactured products, the average price differential between Japan and 7 other countries and regions is high for mineral products (3.17) and general machinery (2.29). For industrial services, although the price differential is high for general services (6.34), information services (4.58) and real estate (3.96), it exceeds 2 on average for financial and insurance services, transport and telecommunications. (Table 2)
(Note) Information services: software development, data processing, market surveys, and information providers
General services: building cleaning, building security, staffing services, automobile repair service, machinery repair service and others
Real estate: parking rent, office rent, and shop rent
(4)If we look at general chronological trends, the price differential between Japan and America has narrowed over a period of three years, and the domestic purchasing power parity (PPP) has improved over 2 years since 1996. Although the price differential between Japan and Germany narrowed in FY 1998, it widened between Japan and South Korea. This can be attributed to the depreciation of the yen against the deutsche mark, and to the rise of the yen against the won.
The general price differential between Japan and the U.S.A. has narrowed over a period of three years. This can be attributed to the depreciation of the yen against the dollar combined with the improvement of purchasing power parity since 1997. The price differential with Germany that had widened in FY 1997 reversed to a narrowing trend in FY1998, due to the depreciation of the yen. Between Japan and Korea, the price differential narrowed in FY1996 but since then has widened. It widened especially in FY 1998 due to the rise of the yen against the won. (Table 5, Table 6, and graph)
(5)The price differential for manufactured products between Japan and the U.S.A. has narrowed for 3 years and widened for 3 years between Japan and South Korea. For services for industrial use, it widened in FY 98 between Japan and the U.S.A. due to the weakening of the purchasing power parity. It has widened over two years since FY 1996 for South Korea and for Germany.
The price differential for manufactured products between Japan and the U.S.A. has narrowed over 3 years to reach 1 in FY 98. It widened over 3 years between Japan and Korea. Between Japan and Germany, it narrowed in FY 98 due to the improvement in the purchasing power parity in addition to the depreciation of the yen. The price differential between Japan and the U.S.A. for services for industrial use widened in FY 1996 and FY 1998 due to the weakening of the purchasing power parity. It has widened between Japan and Germany and between Japan and South Korea over 2 years since FY1996. (Tables 5, 6, and 7)
(6) If we look at price differentials between Japan and foreign countries by industry for manufactured products, a narrowing trend can be observed for ceramics, earthenware, and electrical machinery, with an improvement in the purchasing power parity (U.S.A. and Germany). For services for industrial use, price differentials narrowed for financial and insurance services (U.S.A. and Germany), have increased over 3 years for transportation (U.S.A. and Germany) and the purchasing power parity has weakened over 3 years (with Germany).
The manufactured products price differentials between Japan and the U.S.A. and between Japan and Germany are narrowing for ceramics, earthenware, and electrical machinery, and the purchasing power parity is improving. The purchasing power parity between Japan and the U.S.A. and between Japan and South Korea has improved over 3 years while price differentials between Japan and South Korea widened due to the rise of the yen against the won.
For services for industrial use, price differentials narrowed for financial and insurance services between Japan and the U.S.A. and between Japan and Germany, and the purchasing power parity improved also with South Korea in FY 1998. Transportation price differentials between Japan and South Korea and between Japan and Germany have increased over three years and the purchasing power parity with Germany has weakened over 3 years.
(7) From now on deregulation is proceeding, and with the efforts to improve productivity, a narrowing trend centered around services is expected for price differentials between Japan and foreign countries.
Contact: Ministry of International Trade and Industry
Trade Policy Bureau, Price Policy Division
Tel: 03-3501-1511 , 03-3501-1909
Table 1: Price Differentials between Japan and Foreign Countries or Regions by Sector
(U.S.A., Germany, South Korea, Taiwan, Hong Kong, Singapore, China)
Price Differentials between Japan and Foreign Countries or Regions
U.S.A.
Germany
South Korea
Taiwan
Hong Kong
Singapore
China
Average
General
1.67
1.57
3.36
3.17
2.16
2.33
4.81
2.72
Manufactured products
1.01
0.86
1.91
1.54
1.46
1.55
2.06
1.48
Materials
0.93
0.94
2.03
1.50
1.35
1.02
1.64
1.34
Processing and assembly
0.73
0.75
1.87
1.71
1.89
0.89
2.60
1.49
Energy
1.84
0.89
1.66
1.41
0.84
3.46
2.80
1.84
Services for industrial use
2.45
2.41
5.09
5.12
3.00
3.26
8.08
4.20
Services for industrial use/
manufactured products2.43
2.80
2.66
3.32
2.05
2.10
3.92
2.84
Table 2: Price Differentials between Japan and Foreign Countries or Regions by Industry(U.S.A., Germany, South Korea, Taiwan, Hong-Kong, Singapore,China)
Price Differentials between Japan and Foreign Countries or Regions
U.S.A.
Germany
South Korea
Taiwan
Hong Kong
Singapore
China
Average
Manufactured products
1.01
0.86
1.91
1.54
1.46
1.55
2.06
1.48
Materials
0.93
0.94
2.03
1.50
1.35
1.02
1.64
1.34
Textile products
1.33
0.69
1.52
1.09
1.03
2.08
1.41
1.31
Lumber and wood products
0.82
1.45
4.23
2.36
1.41
1.01
1.41
1.81
Pulp and paper products
0.97
1.02
2.39
1.60
1.07
1.21
1.31
1.37
Chemical products
0.99
1.11
1.73
1.47
1.76
0.77
1.50
1.33
Ceramic and earthenware
0.93
1.00
2.47
2.05
1.50
1.20
1.96
1.59
Iron and steel
0.85
0.77
1.46
1.16
1.01
0.78
0.98
1.00
Non ferrous products
1.04
0.90
1.87
1.13
1.37
1.11
1.12
1.22
Metal products
0.52
0.67
1.56
1.51
1.23
1.11
2.20
1.26
Mineral products
1.84
1.47
4.40
2.23
3.39
1.67
7.19
3.17
Scrap and others
0.67
0.67
0.29
0.67
0.40
0.46
0.57
0.53
Processing and assembly
0.73
0.75
1.87
1.71
1.89
0.89
2.60
1.49
General machinery
1.01
1.00
2.25
3.40
3.55
1.24
3.58
2.29
Electrical machinery
0.46
0.60
1.01
0.94
0.98
0.73
1.30
0.86
Transportation machinery
0.92
0.63
1.66
1.91
1.49
0.64
2.52
1.40
Precision machinery
1.24
1.11
2.89
-
2.44
1.16
-
1.77
Other manufactured products
0.83
0.72
1.90
1.93
0.78
-
2.90
1.51
Energy
1.84
0.89
1.66
1.41
0.84
3.46
2.80
1.84
Oil and coal products
2.26
0.74
1.27
1.36
0.87
4.97
2.24
1.96
Electric Power and City Gas
1.28
1.11
2.18
1.47
0.80
1.58
3.56
1.71
Electric power
1.14
1.12
2.36
1.59
0.94
1.91
3.64
1.81
City gas
1.79
1.04
1.55
1.04
0.32
0.40
3.27
1.34
Services for the Industry
2.45
2.41
5.09
5.12
3.00
3.26
8.08
4.20
Finance and Insurance
0.85
2.99
1.77
3.04
1.70
1.19
3.26
2.11
Real estate
1.26
4.29
6.52
1.93
4.05
2.37
7.28
3.96
Transportation
1.67
2.13
2.44
1.94
2.06
1.79
3.40
2.20
Information services
1.15
1.31
-
2.21
3.28
4.23
15.31
4.58
Telecommunications
1.58
1.03
3.80
2.16
1.46
2.05
2.93
2.14
General services
4.89
1.80
6.64
10.51
3.42
5.19
11.93
6.34
(Note: - means no data available)
Table 3: Purchasing Power Parity between Japan and Foreign Countries or Regions by Sector (U.S.A., Germany, South Korea, Taiwan, Hong, Singapore, China)
(Unit: \/$, \/DM, \/Won, \/NT$, \/HK$, \/S$, \/R)
Purchasing Power Parity Between Japan and Foreign Countries or Regions
U.S.A.
Germany
South Korea
Taiwan
Hong Kong
Singapore
China
General
209
117
0.316
11.93
35
175
73
Manufactured products
127
65
0.180
5.79
24
117
31
Materials
116
70
0.191
5.65
22
76
25
Processing and Assembly
91
56
0.175
6.41
31
67
39
Energy
230
67
0.156
5.29
14
260
42
Services for industrial use
308
180
0.478
19.24
49
245
122
Table 4: Purchasing Power Parity between Japan and Foreign Countries or Regions by Industry (U.S.A., Germany, South Korea, Taiwan, Hong, Singapore, China)
(Unit: \/$, \/DM, \/Won, \/NT$, \/HK$, \/S$, \/R)
Purchasing Power Parity Between Japan and Foreign Countries or Regions
U.S.A.
Germany
South Korea
Taiwan
Hong Kong
Singapore
China
Manufactured products
127
65
0.180
5.79
24
117
31
Materials
116
70
0.191
5.65
22
76
25
Textile products
167
51
0.143
4.09
17
156
21
Lumber and wood products?
103
109
0.398
8.88
23
76
21
Pulp and paper products
121
76
0.25
6.01
17
91
20
Chemical products
124
84
0.163
5.52
29
58
23
Ceramic and earthenware
116
75
0.233
7.72
24
90
30
Iron and steel
107
58
0.137
4.37
16
59
15
Non ferrous products
130
67
0.175
4.23
22
83
17
Metal products
65
50
0.147
5.68
20
84
33
Mineral products
231
110
0.414
8.39
55
125
109
Scrap and others
84
50
0.028
2.52
7
34
9
Processing and assembly
91
56
0.175
6.41
31
67
39
General machinery
126
75
0.212
12.77
58
94
54
Electrical machinery
57
45
0.095
3.55
16
55
20
Transportation machinery
116
47
0.156
7.18
24
48
38
Precision machinery
156
83
0.272
-
40
87
-
Other manufactured products
104
54
0.179
7.27
13
-
44
Energy
230
67
0.156
5.29
14
260
42
Oil and coal products
284
56
0.120
5.12
14
373
34
Electric power and City Gas
161
83
0.205
5.52
13
118
54
Electric power
143
84
0.222
5.97
15
143
55
City gas
225
78
0.146
3.91
5
30
50
Services for Industrial use
308
180
0.478
19.24
49
245
122
Finance and Insurance
107
224
0.166
11.42
28
90
49
Real estate
158
321
0.613
7.27
66
178
110
Transportation
209
160
0.230
7.29
33
134
51
Information services
144
98
-
8.29
53
318
232
Telecommunications
198
77
0.357
8.12
24
154
44
General services
614
135
0.624
39.50
55
390
181
(Note: (-) means no data available)
Table 5: Price Differentials between Japan and Foreign Countries - Chronological Trends
U.S.A.
Germany
South Korea
FY95
FY96
FY97
FY98
FY95
FY96
FY97
FY98
FY95
FY96
FY97
FY98
General
1.52
1.48
1.18
1.11
1.32
1.37
1.51
1.49
2.70
2.37
2.45
3.39
Manufactured Products
1.44
1.31
1.12
1.00
0.88
0.86
0.89
0.79
1.29
1.52
1.65
2.09
Materials
1.00
0.97
0.93
0.84
0.90
0.99
0.99
0.91
1.20
1.56
1.82
2.31
Textile products
1.03
0.87
0.76
2.02
0.54
0.51
0.75
0.70
0.92
1.19
1.25
1.86
Lumber and wood products
1.04
1.30
1.10
0.85
0.65
0.66
0.81
0.72
1.12
2.72
3.33
4.23
Pulp and paper products
0.78
1.06
1.07
0.90
0.75
1.51
1.31
1.02
0.86
1.50
2.00
2.39
Chemical products
0.75
0.75
0.99
1.01
0.84
0.85
1.01
0.94
1.09
1.22
1.75
2.09
Ceramic and earthenware
1.12
1.05
0.86
0.79
1.32
0.96
0.85
0.84
1.35
1.78
1.83
2.43
Iron and steel
1.01
1.04
1.11
0.87
0.99
1.15
0.83
0.82
1.00
0.78
0.99
1.28
Non ferrous products
0.94
0.94
0.94
0.75
0.80
0.86
0.97
0.80
0.87
0.81
0.86
1.14
Metal products
1.02
0.63
0.56
0.55
0.60
0.64
0.86
0.90
0.58
0.75
0.82
1.01
Mineral products
1.49
2.17
1.73
1.75
1.12
1.45
1.66
1.54
3.14
3.35
3.89
4.82
Scrap and others
1.16
1.77
1.31
0.89
0.87
1.01
0.69
-
-
-
-
-
Processing and assembly
1.02
1.09
0.80
0.57
0.73
0.71
0.73
0.60
1.11
1.41
1.44
1.87
General machinery
0.96
0.93
0.81
0.77
0.75
0.74
0.89
0.79
0.95
2.14
1.95
2.63
Electrical machinery
0.98
1.09
0.65
0.31
0.77
0.72
0.65
0.43
0.95
0.60
0.85
0.66
Transportation machinery
1.20
1.33
1.19
0.92
0.64
0.65
0.65
0.63
1.22
1.16
1.27
1.66
Precision machinery
0.70
0.82
0.67
0.74
-
-
-
-
-
-
-
-
Other manufactured products
0.90
0.91
0.84
0.83
0.70
0.66
0.83
0.72
-
-
-
-
Energy
2.74
2.16
1.86
1.85
1.04
0.89
0.97
0.89
1.58
1.50
1.45
1.78
Oil and coal products
3.54
2.74
2.32
2.29
0.98
0.69
0.73
0.71
0.98
1.06
0.88
1.17
Electric Power and City Gas
1.73
1.42
1.28
1.28
1.12
1.12
1.26
1.11
2.15
1.92
1.98
2.36
Electric Power
1.70
1.46
1.18
1.14
1.22
1.18
1.22
1.12
2.15
1.92
1.98
2.36
City gas
1.82
1.26
1.61
1.79
0.80
0.93
1.39
1.04
-
-
-
Services for Industrial use
1.61
1.71
1.25
1.26
2.84
2.2
2.52
2.64
4.29
3.34
3.35
4.85
Finance and Insurance
1.40
1.09
1.06
0.86
3.63
7.71
5.39
5.00
1.36
1.45
1.66
1.84
Real Estate
2.05
1.67
1.35
1.26
4.70
3.15
3.92
4.29
5.59
3.97
3.72
6.64
Transportation
1.64
1.40
1.40
1.32
1.16
1.36
1.50
1.65
2.01
2.10
2.57
3.00
Information services
0.91
3.23
1.08
1.11
1.13
1.05
1.04
1.03
-
-
-
-
Telecommunications
1.86
1.26
1.32
1.61
1.09
0.76
1.05
0.90
3.68
3.15
4.23
4.66
General services
1.32
1.07
1.02
1.32
1.16
0.77
0.80
0.84
5.21
4.14
3.58
4.25
(Note: - means no data available)
1995-1998 Exchange Rates
FY1995
FY1996
FY1997
FY1998
U.S.A.(\/$)
96.45
107.61
122.36
125.49
Germany (\/$)
67.36
70.69
69.54
74.93
South Korea ( \/Won)
0.130
0.137
0.129
0.094
Note 1:(-) means no data available
Note 2: Due to limitations in data availability, figures in this table may not correspond with figures in Table 1 and Table 2, as the number of products used for price differentials calculations were different.
Table 6: Purchasing Power Parity - Chronological Trends
(Unit: \/$, \/DM, \/won)
U.S.A.
Germany
South Korea
FY95
FY96
FY97
FY98
FY95
FY96
FY97
FY98
FY95
FY96
FY97
FY98
General
146
160
144
140
109
97
105
112
0.351
0.325
0.316
0.318
Manufactured Products
139
141
137
126
59
61
62
59
0.168
0.208
0.213
0.196
Materials
97
104
114
105
60
70
69
68
0.155
0.213
0.234
0.217
Textile products
100
94
93
254
36
36
52
53
0.119
0.163
0.161
0.175
Lumber and wood products
101
140
135
106
44
47
56
54
0.146
0.373
0.429
0.398
Pulp and paper products
75
114
131
113
51
107
91
76
0.111
0.205
0.258
0.225
Chemical products
73
81
121
126
57
60
70
70
0.142
0.167
0.225
0.197
Ceramic and earthenware
108
113
105
100
89
68
59
63
0.175
0.243
0.236
0.229
Iron and steel
97
112
136
109
66
82
58
62
0.130
0.107
0.128
0.120
Non ferrous products
91
101
115
94
54
60
67
60
0.114
0.110
0.111
0.107
Metal products
98
68
68
69
41
45
60
67
0.075
0.102
0.106
0.095
Mineral products
144
233
212
220
75
103
115
115
0.408
0.459
0.502
0.453
Scrap and others
112
191
161
111
59
71
48
52
-
-
-
-
Processing and assembly
98
117
98
71
49
50
51
45
0.145
0.193
0.186
0.176
General machinery
93
100
99
96
51
52
62
59
0.123
0.293
0.251
0.247
Electrical machinery
95
117
80
113
52
51
45
32
0.124
0.082
0.110
0.062
Transportation machinery
116
144
145
116
43
46
45
47
0.159
0.159
0.163
0.156
Precision machinery
67
88
82
93
-
-
-
-
-
-
-
0-
Other manufactured products
86
97
103
104
47
47
58
54
-
-
-
-
Energy
265
232
228
232
70
63
67
67
0.206
0.206
0.187
0.168
Oil and coal products
341
294
284
287
66
49
51
53
0.128
0.146
0.114
0.110
Electric power and City Gas
167
153
156
161
76
79
88
83
0.280
0.263
0.256
0222
Electric Power
164
157
145
143
82
83
85
84
0.280
0.263
0.256
0222
City gas
176
136
197
225
54
66
97
78
-
-
-
0-
Services for Industrial use
155
184
152
158
191
157
175
198
0.557
0.457
0.432
0456
Finance and Insurance
135
117
129
108
244
545
375
375
0.177
0.199
0.214
0173
Real estate
198
180
166
158
316
223
272
321
7.27
0.544
0.480
0624
Transportation
158
151
172
166
78
96
104
123
0.261
0.288
0.331
0282
Information services
88
348
132
139
76
74
73
77
-
-
-
-
Telecommunications
179
136
161
202
73
54
73
67
0.479
0.431
0.546
0438
General Services
127
115
125
165
78
55
55
63
0.678
0.567
0.462
0400
(Note: (-) means no data available)
Note 2: Due to limitations in data availability, figures in this table may not correspond with figures in Table 3 and Table 4, as the number of products used for purchasing power parity calculations were different.
Change in Price Differentials between Japan and Foreign Countries - Chronological Trends
Between Japan and the U.S.A
Between Japan and Germany
Between Japan and South Korea
Table 7: Analysis of Causes of Price Differentials between Japan and Foreign Countries
General
Manufactured Products
Price Differential
Change in Price Differential
Price Differential
Change in Price Differential
Price Differential
Change in Price Differential
1995
1996
Purchasing Power Parity
Exchange Rate
1996
1997
Purchasing Power Parity
Exchange Rate
1996
1997
Purchasing Power Parity
Exchange Rate
U.S.A
1.52
1.48
-0.04
0.14
-0.18
1.48
1.18
-0.30
-0.14
-0.16
1.18
1.11
-0.07
-0.04
-0.03
Germany
1.62
1.37
-0.25
-0.18
-0.07
1.37
1.51
0.14
0.11
0.03
1.51
1.49
-0.02
0.10
-0.12
South
Korea
2.70
2.37
-0.33
-0.20
-0.13
2.37
2.45
0.08
-0.07
0.15
2.45
3.39
0.94
0.02
0.92
Price Differential
Change in Price Differential
Price Differential
Change in Price Differential
Price Differential
Change in Price Differential
1995
1996
Purchasing Power Parity
Exchange Rate
1996
1997
Purchasing Power Parity
Exchange Rate
1996
1997
Purchasing Power Parity
Exchange Rate
U.S.A.
1.44
1.31
-0.13
0.02
-0.15
1.31
1.12
-0.19
-0.03
-0.16
1.12
1.00
-0.12
-0.09
-0.03
Germany
0.88
0.86
-0.02
0.02
-0.04
0.86
0.89
0.03
0.02
0.01
0.89
0.79
-0.10
-0.04
-0.06
South
Korea
1.29
1.52
0.23
0.31
-0.08
1.52
1.65
0.13
0.03
0.10
1.65
2.09
0.44
-0.13
0.57
Services for Industrial Use
Price Differential
Change in Price Differential
Price Differential
Change in Price Differential
Price Differential
Change in Price Differential
1995
1996
Purchasing Power Parity
Exchange Rate
1996
1997
Purchasing Power Parity
Exchange Rate
1996
1997
Purchasing Power Parity
Exchange Rate
U.S.A
1.61
1.71
0.10
0.30
-0.20
1.71
1.25
-0.46
-0.29
-0.17
1.2.5
1.26
0.01
0.04
-0.03
Germany
2.84
2.22
-0.62
-0.51
-0.11
2.2.2
2.52
0.30
0.26
0.04
2.52
2.64
0.12
0.33
-0.21
South
Korea
4.29
3.34
-0.95
-0.77
-0.18
3.34
3.35
0.01
-0.19
0.20
3.35
4.85
1.50
0.18
1.32