Technology exports an imports of Japanese enterprises and the

impact of the financial crisis

Presentation to the 2nd Meeting of the Working Party on International Trade in Goods and Trade in Services Statistics (WPTGS)

16-18 November 2009

Toshie KoriInternational Department, Bank of Japan

2

Features of Technology trade in Japan

• Surplus of “royalties and license fees” has been increasing reflecting increasing surplus in “royalties.”

• In contrast with “royalties,” “license fees” are consistently deficit reflecting payments of fees for computer software.

–1.0

–0.5

0.0

0.5

1.0

1.5

1996 97 98 99 2000 01 02 03 04 05 06 07 08

tril. yen

Royalties License Fees Royalties and License Fees

Figure 1: Royalties and License Fees

3

Features of Technology trade in Japan

Payment & Receipts of Royalties by industry • Major part of surplus in “royalties” are those related to

transport equipment, which account for more than 90 percent of the surplus.

Figure 2: Payments and Receipts of Royalties by Industry

–2.5

–2.0

–1.5

–1.0

–0.5

0.0

0.5

1.0

1.5

2.0

2.5

2004 05 06 07 08

tril. yen

Transport equipment PharmaceuticalsElectric machinery and parts OthersNet balance

(Credit)

(Debit)

4

Features of Technology trade in Japan

• The large receipts of motor vehicle-related royalties due to the industry's high overseas production ratio. The expansion of overseas production by

Japanese motor vehicle companies is the major contributor to the increase in the overall surplus.

Table 1: Overseas Production Ratios (By Industry)

FY2004 FY2005 FY2006 FY2007

16.2 16.7 18.1 19.1

Electrical machinery

Information andtelecommunications apparatus

33.1 34.9 34.0 32.2

Transport equipment 36.0 37.0 37.8 42.0

%

9.5 11.0 11.8 11.5Of which:

Manufacturing

5

Features of Technology trade in Japan

• One of the features of motor vehicle-related receipts of royalties is that intra-firm transactions (between parent companies and their subsidiaries) account for a major portion.

Table 2: Technology Exports and Imports (By Industry)bil. ｙen, %

share oftotal

share oftotal

All industries 2,482 100.0% 1,824 711 100.0% 115

Manufacturing 2,401 96.7% 1,792 605 85.1% 80

OF which

Transport equipment1,250 50.4% 1,110 36 5.0% 5

Pharmaceuticals 283 11.4% 116 37 5.2% 4

Electrical machinery 431 17.4% 248 364 51.3% 15

Chemical and allied products 73 2.9% 33 35 4.9% 18

Receipts

Payments for Technology Imports

Paymentsof which:

to affiliatescompanies

of which:from affiliates

companies

Receipts for Technology Exports

6

Features of Technology trade in Japan

Figure 3: Direct Investment Assets by Region at Year-End

Electric machinery

Transportationequipment

Chemicals andpharmaceuticals

Other manufacturing

Wholesale and retail

Finance and insurance

Other non-manufacturing

0

2

4

6

8

10

12

14

16

2005 06 07 08

tril. yen

• Receipt of “royalties” by industries closely linked with Japanese enterprises’ direct investment.

7

Features of Technology trade in Japan

Features of Receipt of “Royalties" by Region

NorthAmerica52.0%

BRICs5.8%

EU15.8%

Asia22.2%

Others4.2% Others

5.9%

BRICs12.4%

NorthAmerica38.5%

EU17.7%

Asia25.5%

2004 2008Figure 4: The Regional Composition of Royalties

• Increasing receipt of “royalties” from BRICs countries reflecting increasing investment to those countries.

8

North America

ＥＵ

Asia (excludingChina and India)

BRICs

Other regions

0

10

20

30

40

50

60

70

2004 05 06 07 08

tril. yen

Figure 5: Direct Investment Assets by Region at Year End

Features of Technology trade in Japan

Features of Receipt of “Royalties" by Region

9

Asia (excluding China

and India)

BRICs North America EU

Others

0.0 0.5 1.0 1.5 2.0 2.5 3.0

R&D

Royaltis & License Fees

R&D

Royaltis & License Fees

tril. yen

Technology exports

Technology imports

Figure 6: Technology Exports and Imports by Region for 2008

Features of Technology trade in JapanComparison of technology exports and imports by

region

10

Features of Technology trade in Japan

Figure 7: Payments for R&D Expenses by Industry

0

100

200

300

400

2005 06 07 08

bil. yen

PharmaceuticalsTransport equipmentElectric machinery and parts

• R&D payment by pharmaceutical companies are increasing.

11

Impacts of Financial Crisis

Figure 8: Royalties and License Fees (from September to August)

–1.0

–0.5

0.0

0.5

1.0

1.5

Sep. 04–Aug. 05

Sep. 05–Aug. 06

Sep. 06–Aug. 07

Sep. 07–Aug. 08

Sep. 08–Aug. 09

tril. yen

Royalties License Fees Royalties and License Fees

• Receipt of “royalties” decreased significantly after the September 2008.

12

Impacts of Financial Crisis

Figure 9: Payments and Receipts of Royalties by Industry (from September to August)

–2.5

–2.0

–1.5

–1.0

–0.5

0.0

0.5

1.0

1.5

2.0

2.5

Sep.04–Aug.05

Sep.05–Aug.06

Sep.06–Aug.07

Sep.07–Aug.08

Sep.08–Aug.09

tril. yen

Transport equipment PharmaceuticalsElectric machinery and parts OthersNet balance

(Credit)

(Debit)

• By industry, decrease in receipts of motor vehicle-related royalties was outstanding, due to decline in global consumption particularly for automobiles.

13

Impacts of Financial Crisis

Figure 10: Comparison of Technology Exports and Imports by Region, before Financial Crisis and Afterwards

Asia

(excluding China and India)

BRICsNorth America EU Others

0.0 0.5 1.0 1.5 2.0 2.5 3.0

Sep.08–Aug.09

Before Financial Crisis

Sep.08–Aug.09

Before Financial Crisis

Sep.08–Aug.09

Before Financial Crisis

Sep.08–Aug.09

Before Financial Crisis

tril. yen

Technical exports

Technical importsRoyaltis and License Fees

R&D

R&D

Royaltis and License Fees

• While “loyalties and license fees” decreased significantly, R&D exports and imports remained at the same level as in the previous year.

14

Impacts of Financial Crisis

Figure 11: Payments for R&D Expenses by Industry (from September to August)

0

100

200

300

400

Sep.05–Aug.06

Sep.06–Aug.07

Sep.07–Aug.08

Sep.08–Aug.09

bil. yen

Pharmaceuticals

Transport equipment

Electric machinery and parts