【Discussion Paper Series by ESRC-JSPS Research Project on Japan and the UK】
Has COVID-19 Pandemic Transformed Japan's GVCs? Tracking Changes by Applying RAS Technique to Multi-Regional Input-Output Tables
The aim of this paper is to analyse whether any significant transformation has taken place in Japan’s global value chains (GVCs) as a result of the COVID-19 pandemic. In order to answer the research question, RAS technique is applied to Multi-Regional Input-Output (MRIO) tables to decompose the changes in input and output coefficients to those that reflect “economic-incentive effects” and “policy-induced effects”. Analysis of changes in input coefficients of Japan’s electrical and optimal equipment industry (ELEC) and transportation equipment industry (TRAN) shows that COVID-19 has led to further “outsourcing” of intermediate inputs, rather than “onshoring”, in both industries due to the two effects. Analysis of the changes in output coefficients shows that the pandemic has led to increase in foreign marketing of intermediate inputs in the case of ELEC, but to reduction in their domestic sales in the case of TRAN. The main driving force of the changes was the policy-induced effects in the case of ELEC, but was the economic-incentive effects in the case of TRAN. The results also suggest the usefulness of the methodology in understanding the impact of COVID-19 and other shocks on the GVCs.
