Abstract：
Indonesia and Japan have had a long relationship either in trade or other
historical memories. As one of the Association of Southeast Asian Nations
(ASEAN) member countries, Indonesia has a tight related trade connection
with Japan especially after the agreement between Japan and ASEAN countries
in 2000. Indonesian and Japan trade covered not only in agriculture and
manufactured products but also in services. The present study uses intra-industry
trade analysis to investigate manufactured and agricultural trade between
Indonesia and Japan.
Intra-industry trade (IIT) analysis has become the emerging tools to analyse
the extent of international trade in the presence of differentiated products
under the role of economies of scale. Some studies had been devoted to
investigate the IIT patterns encompassing countries with the different
level of development. Mostly, studies on IIT were directed to trade among
developed countries, even few of them were conducted between developed
and developing countries.
The study analyses the IIT patterns of Indonesian trade with Japan and
explore its determinants. As one of the biggest importers of Indonesian
products, it is expected that Japan consequently has a big influence on
the emerging IIT. The Asian financial crisis, as one of determinants, came
to halt the extent of intra-industry between Indonesia and Japan. As a
kind of setting up reduction in trade barriers, agreements such as under
Asia Pacific Economic Cooperation presented a positive effect on bilateral
intra-industry trade between two countries. Regarding the trade policies
imposed in the bilateral and multilateral relations gave significant benefits
to encourage the intra-industry trade. At the end of study, it is expected
to explain the position of issued bilateral trade policies between Indonesia
and Japan in encouraging bilateral intra-industry trade.
