Determinant Factors of the Great Trade Collapse during the 2008-09 : Reexamination by Japanese Macro Economic Data

Japan was one of the countries hit hardest by the financial crisis of 2008. The rate of trade reduction is about 50%, which is almost the highest among major countries. Based on the factors suggested by literature, this study reexamines the determinants of exports and imports during the great trade collapse by using Japanese macro-economic monthly data. It also attempts to add two modifications: one is to introduce a new measure of the constraint of trade finance, and the other is to take the exchange rate into consideration since the sharp appreciation of the yen is contrasted to the depreciation of other currencies. As empirical results imply, demand contraction is the most important factor of the Japanese trade collapse, and disruption of vertical linkages follows. Although the sample size is small, this study also detects some roles of yen appreciation and constraint of trade finance in the unprecedented decline of Japanese trade. (JEL Classification code: F14, F31)