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●Globalization (1985~)
Japan had increased economic growth until 1985 by an export-driven model. However, after 1985, the situation has changed. The affairs in this period will be addressed.
1. Plaza Accord
In 1985, the Group of Five (G5) decided to take coordinated intervention steps to correct the dollar bull. After the Plaza Accord, Japan has suffered serious damage from the appreciation of the yen and degenerated into the recession.
2. Uruguay Round
A record-high 180 countries joined the Uruguay Round. The range of negotiation issues were divided into three categories: the first was about tariffs, the NTBs, and the market access; the second was about the services, the trade related aspects of intellectual property (TRIP), and the Test Rules for Inventory Management (TRIM); and the last was about the rules of the GATT articles and the safeguard. The most characteristic aspects were that the international transaction of incorporeal property became the negotiation issues, and the effectiveness of the rules of the GATT was tested. These characteristics showed that goods and services gained an important position in the global competition, and the overpowering advantage of America had become a thing of the past. After the round, the World Trade Organization (WTO) was formed in 1995 by the Marrakesh Agreement, in order to meet the demands of the enhancement of the GATT.
3. Market-Oriented Sector Selective negotiations
In accordance with a strong request by America, auto parts were subjected to the Market-Oriented Sector Selective negotiations (MOSS) in 1986. There were eight negotiations by 1987. The final result was that Japan brought a surveillance system for automobile companies into operation.
　In environments marked by the protectionism against the Japanese automobile export expansion after the 1970s, and appreciating yen after 1985, the Japanese automobile companies changed from a domestic production centralized structure to the local production structure. The Japanese automobile industry went into action on a large scale as Multinational Corporations (MNCs).
　MNCs are companies which promote foreign direct investment, have the bases in multiple countries, and operate on a global scale. One characteristic of MNCs is the overseas productions. The overseas ratio of sales, properties, profits, and employment are growing. As a result, by globalizing production, a main route of foreign economic relations of a country is switched from trade to direct investment, which means that foreign production goes beyond export.
　Secondly, as the foreign production develops into world production, the intra-firm division of the labor becomes international. However, the network of the intra-firm international division of labor generates problems. One of the problems is the intra-firm trade between the main office of MNCs and an overseas subsidiary, or overseas subsidiaries. The movements within a company are dealt with as international trade because they are transactions between corporations which are formed in different nations. Another problem is that, as a result of MNCs, there is a scramble to penetrate overseas. The competition amongst MNCs gets more serious in the world market, which leads to market control, market monopoly, and friction amongst nations. Furthermore, MNCs invade developing countries as well as developed countries. Because developed countries’ aim is to use low wages, the production in developing countries is this offshore production, which is not connected with the increase in trade. As a result, parts of the developing countries have the possibility to become an industrial plantation.
　The third characteristic is a problem of capital accumulation, such as the diffusion and the local procurement of financing and cash transfer. The profits which MNCs get are controlled by the main offices and remain there. MNCs are not stateless companies.
　As mentioned above, the intra-firm international division of labor of MNCs expanded the intra-firm trade between parent companies and branch companies, or branch companies and branch companies, and changed and improved the existing trade. Firstly, because foreign productions of MNCs are produced in foreign countries, home countries’ exports slow down. Secondly, the more MNCs that are active overseas, the more the ratio of MNCs increases in trade, which takes the form of the increase of MNCs’ trade and the rapid growth that outruns the growth rate of whole trade. In consequence, MNCs’ trades have a profound effect on promoting trade as a whole. Thirdly, the center of MNCs’ trade is intra-firm trade. In this type of trade, because the trade of branch companies overseas outruns the trade of the parent companies, the balance of trade becomes surplus if the trade from the parent companies’ side of view. Therefore, the central axis which pushes up the MNCs’ trade to surplus is the intra-firm trade. Thus, the intra-firm trade is the best contributor to create a favorable balance of trade.　In addition, there are other characteristics in intra-firm trade. One of them is that the ratio is high in the area of technological industries whose research and development investments are high. Thus, the intra-firm trade correlates with R＆D. It is because the characteristics of MNCs are technological advantage and technological monopoly, and MNCs take vast benefits off the market by using technological monopoly as leverage, and building the intra-firm international division. The other characteristic is that the ratio of intra-firm trade of the branch companies overseas is higher than that of the parent companies. This is accentuated in the automobile industry.
　In part, due to these characteristics of MNCs, Japan expanded the trade surplus in the 1980s, although both export and import were connected with the trade surplus. Japan was also experiencing a bubble boom in the late 1980s; thus, the automobile domestic production continued to increase until 1990. However, in the 1990s, the automobile domestic production was on the decline because of the maturation of the domestic market, economic slump after the collapse of the bubble economy, and the local production. Because of the economic surplus in Japan, the trade deficit became more strained, resulting in globalization of automobile companies’ activities. As a result, the amounts of the foreign production of the automobile outran those of the export in 1994.
　In 1997, there were seven Japanese automobile companies in America. The investment balance of these companies to product sites in America was over 13.7 billion, and there were over forty-one thousand employed. In addition, the transfer of R＆D bases progressed. For example, Toyota invested about 600 billion yen to transfer R＆D bases.　Also, the number of employees of Japanese automobile companies in America is growing. In 1997, the employees, which included the selling offices and dealerships, were 336,000 in all. In this aspect, Japanese automobile companies contribute to the American economy. According to a survey of public opinion in America, 86％ of Americans evaluated the contribution to the American economy.　To reduce the trade deficit of America, attention has been given to the automobile export. Fifty percent of the export is dominated by the Japanese automobile companies. American citizens evaluate the role of the Japanese automobile industry, as well.
　Needless to say, America is not the only country in which the Japanese automobile companies have penetrated. Especially, the penetration to Asian countries has been increasingly influenced by the expansion of the Asian market after the late 1980s. In the late 1980s, the penetration to South Korea and Taiwan flourished, and the penetration to South Asia flourished in 1990s. Recently, the penetration to China is increasing because China is expected to grow. As a result, the Japanese automobile industry is constantly promoting the international division of labor.
　Presently, the Japanese automobile industry has globalized. For example, Toyota’s vehicle sales are 2,217,002 in Japan, and 3,567,915 vehicles were sold overseas. Toyota also has forty-three overseas manufacturing companies.In 2003, Toyota came from behind Chrysler to lead in terms of the automobile production in America. In addition, the increased export of the automobiles and the auto pacts were large in 2004. In the EU, there is in high demand for Japanese automobile; in Russia, there are increases in economic growth to promote the increased export of the automobiles; and in the United States and China, the Japanese automobile industry is going local to promote the export increase of the auto pacts. Therefore, some economists are worried about the renewal of trade conflict. In August, 2005, the automobile production by Japanese companies became the largest in the world. To escape from the trade conflict, the Japanese automobile companies are expected to localize more.
In addition, the multinational and regional engagement, such as the World Trade Organization, OECD, the Asia-Europe Meeting, and the Asia-Pacific Economic Cooperation, as well as bilateral engagement, will be useful to solve trade conflicts. The Free Trade Agreements between East Asia and Japanese companies are also worthy of attention. They will have an effect on the Japanese automobile industry, as well as other industries. The Association of Southeast Asian Nations has moved to create a free trade area since 2003. FTA negotiations have also started between Japan and ASEAN, Thailand, and Malaysia. Under these agreements, tariffs will be phased out between 2005 and around 2012.

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