...But Its Products Cost Japanese Consumers A Bundle

While the U.S. trade balance with Europe has moved steadily from a deficit of $30 billion in 1986 to a $15 billion surplus, the deficit with Japan has been stuck around $40 billion since 1990. A recent analysis of retail prices of several dozen products in Japan and the U.S. by Rand Corp. researcher Loren Yager suggests one reason why.

What Yager found was that prices of Japanese products sold in the U.S. were generally quite close to their retail prices at home. For example, a Japanese VCRr retailing for $424 in Japan cost U.S. consumers $430, while a Japanese camera priced at $578 in Japan sold for $555 in the U.S.

By contrast, about 60% of U.S. products sold in Japan carried price tags at least 40% higher than in the U.S., and the average premium was about 65%. While U.S. tires cost 37% more in Japan than in the U.S. ($65 vs. $48), for example, Japanese tires sold for exactly $66 in both countries. A $170 U.S. calculator cost Japanese consumers 67% more than that, and a $449 U.S. laser printer was priced at $825 in Japan.

Yager notes that most of the products were not subject to tariffs and that even products of U.S. companies that were manufactured in Japan cost Japanese consumers 30% more than U.S. consumers paid. The clear implication is that nontariff trade barriers are exerting strong upward pressure on the Japanese prices of foreign products, severely limiting the ability of imports to penetrate Japanese markets.

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