2. Macroeconomics
An argument over the sovereignty of East China
Sea islets in early September
How it affects both economies as a whole:
◦ Japanese exports to China down by 14.1%
($4.2 billion)
◦ China’s on year growth in economic output fell
to 7.4% (lowest since the beginning of 2009)
3. Principles of Macro
Demand for Japanese products in China-
Auto Industry and Shiseido Cosmetics
Capital Goods Japan exports to China-
Factory goods
GDP- Net Exports (Expenditures
Approach) and Net Foreign Factor Income
(Income Approach)
4. Demand
Auto industry-Honda, Nissan, Toyota
Vandalized dealerships and cars
Sales decreased by more than a third of
what they were
Change in consumer tastes and
preferences
Japanese companies scaled back
production in China accordingly
5. Demand
Shiseido cosmetics
5000+ network in China
Chinese woman responded by not buying
the product
Change in consumer tastes and
preferences
Japan has suspended sales in several
hundred stores in China
6. Capital Goods
Japan’s general machinery exports have
fallen by 29.1%
Machine tools and subcomponents-
intermediate goods
Japan holding onto capital goods to harm
China’s factories
Production Possibilities Curve shifts
inward, loss of resources
7. How it affects GDP
Net Exports (Expenditures Approach)
Xn=Exports-Imports
◦ China’s imports decrease=creates surplus
◦ Japan’s exports decrease=creates deficit
Net Foreign Factor (Income Approach)
◦ Japan’s Net Foreign Factor income decreases,
less money from goods sold to China
8. Predictions & Ethical Concerns
Either Japan or China will have to give
It depends who is hurt more
◦ Japanese auto and cosmetics industry
◦ Chinese factories
Concerns-a loss of jobs in both economies
Concerns-China’s acts of violent
retaliation
Each may seek more expensive trade with
other countries
9. Reference Page
Nakamichi, T. (2012,October 22). Japan
Suffers Amid China Dispute. The Wall
Street Journal. p. A15.
