Trade imbalance between Korea and Japan mainly depends upon the degree of economic interdependence. The enormous trade deficit of Korea against Japan is due to the fact that small and medium sized companies supplying high-quality capital or intermedia...
Trade imbalance between Korea and Japan mainly depends upon the degree of economic interdependence. The enormous trade deficit of Korea against Japan is due to the fact that small and medium sized companies supplying high-quality capital or intermediary goods are not enough and henceforth, this causes the import of those goods from Japanese companies. Accordingly, it is required that Korea should put its effort into investing in R&D and raising small and medium sized companies. Also, currently the Import Source Diversification System has been completely lifted. Therefore, in order to improve the growing trade deficit against Japan, Korea should improve the product quality and price competitiveness as a strategy for promoting export to Japan. For this goal, Korea should improve business and economic environment for strategic alliance with and direct investment of Japanese companies.
On the other hand, in order for Japanese companies to construct global network, they should search for international partners for outsourcing to gain the economy of scale, the economy of effectiveness and synergy effect. Korea might be a good outsourcing partner of Japan in the sense that Korea is the nearest country from Japan in geography, has similar background in business culture and has relatively huge domestic market for Japanese products.
Finally, it is expected that when Korea and Japan construct win-win cooperation strategy, Korea and Japan will contribute to promotion of world economy as well as East-Asian economy.