JAPANESE IMPORT DEMAND BEHAVIOR - THE COINTEGRATION APPROACH

Acknowledging the effect of the structural break in late 1985, a Perron-type detrending method is adopted with respect to the variables concerned with Japanese import demand. The detrended series are revealed to be nonstationary and not cointegrated, making previous research invalid. This implies that the traditionally used market force variables cannot explain Japanese import demand well, even for the officially well-liberalized period. Closed minds or a private barrier such as the peculiar domestic distribution system not related to the Japanese government's official liberalization measure seem to be important in explaining Japanese import demand behavior.