Price Comparisons Between the Japanese and U.S. Markets

This Note re-examines the data from two price surveys conducted by the U.S. Department of Commerce and the Japanese Ministry of International Trade and Industry. The surveys of prices of identical goods in the U.S. and Japanese markets were conducted because significant price differences are considered to be evidence of barriers to trade. The original findings suggested that prices in Japan were higher by approximately 40 percent, but the re-examination found that the price differences are related to the country of origin of the firm. Prices for U.S. and European goods averaged more than 60 percent higher in Japan than in the United States, while prices for Japanese goods were nearly identical in Japan and in the United States. This suggests that some mechanism leads to higher prices for foreign goods in the Japanese market without affecting domestic goods. No similar mechanism appears to affect the prices of foreign goods in the United States. Existing hypotheses for the existence of higher prices in Japan are discussed in the context of the price survey results.