Openness has been shown to be an important driver of economic growth. Because of the broad character of the current globalisation process, openness has many dimensions: trade (in both goods and services), foreign direct investment (FDI), circulation of people (including the highly skilled), and internationalisation of R&D, technology and knowledge. Economies not only benefit from inward flows of goods, services, people, capital and knowledge, but also from outward flows of those factors of production. But economic openness does not necessarily yield automatic benefits, and governments may need to complement policies to open the economy with policies that help individuals and firms adjust to liberalisation and ensure that aggregate benefits for the domestic economy are optimised. This working paper aims to assess the openness of the Japanese economy and to show how policies promoting openness are conducive to long-term growth. First, the paper benchmarks Japan in terms of openness in an international perspective relative to other G20 countries. Second, it reviews the theoretical and empirical literature on the link between openness and economic growth. Third, it illustrates the role that governments can play in stimulating openness and growth by presenting several case studies of countries that have implemented specific policies to promote openness in particular domains.
