Preliminary Draft (Do not quote) A COMPUTATIONAL GENERAL EQUILIBRIUM ANALYSIS OF THE EFFICIENCY EFFECTS OF PORTS IN JAPAN. Masayuki Doi, Piyush Tiwari and Hidekazu Itoh Institute of Policy and Planning Sciences University of Tsukuba Tsukuba, Ibaraki 305-8573 Japan Fax and Tel: +81-298-535546 E-mail: doi@sk.tsukuba.ac.jp Abstract In this paper we investigate the system-wide impact of increased efficiency of ports in Japan using a computable general equilibrium model developed for 1995. Japanese Ministry of Transport has been implementing programs of the 9 th Five-year Port Development Plan to improve port efficiency. The port efficiency reduces the cost of shipping transportation and the forward and backward linkages of imports and exports introduce some positive gains in the national GDP. Our analysis proves that the spillover effects are substantial on the shipping transportation and to a lesser extent on the Japanese economy. 1. Introduction In the early 1990s, due partly to adjustment of excessive stocks of production facilities during the “bubble” period, the Japanese economy entered a recessionary phase, starting at the beginning of 1991 just after the “bubble” economy collapsed. In the four years from 1992 to 1995, Japan’s growth rate was around 1 percent or lower. Although, the recession touched the bottom in October 1993, the recovery had been very weak. However, since the autumn of 1997, adverse domestic and overseas factors, such as failures of financial institutions in Japan and financial and economic turmoil in Asia, had combined to deteriorate household and corporate sentiment. As a result, the Japanese economy was driven into an extremely severe situation. Consequently, the real GDP had declined for five consecutive quarters since the fourth quarter of 1997. As indicated in Figure 1, many economic packages were introduced to kickstart the economic turnaround but the Japanese economy continued to slump.