This policy paper aims to analyze the competitiveness of Japanese manufacturing sector since the 1990s, focusing on the crisis of Japanese electronic sector, which is often called as the Galápagos Syndrome. Based on the analysis, we derive various implications for the Korean manufacturers and the government from the Japanese experiences.
Chapter two reviews the factors that affected the competitiveness of Japanese manufacturing sector, for example, the rising of Asian emerging markets, the appreciation of Yen since Plaza accord of 1985, and the digitalization and standardization of manufacturing technology.
Chapter three analyzes the competitiveness of Japanese manufacturing sector since the 1990s using indexes such as Total Factor Productivity (TFP), Intra-Industry Trade Index (IIT), and Value Added Rate. According to the TFP measurement, It is clear that  the productivity of Japanese manufacturing sector has fallen apparently from 1995. And, according to IIT measurement, the export competitiveness has  weakened in electronics, general machinery, metal and textile industry. In particular, the Japanese manufacturing sector has lost its competitiveness by the ratio of value-added to sales amount which has fallen even during the depreciation of Yen in the 2000s.
Chapter four examines the crisis of Japanese manufacturing sector from the perspective of business management (in Japanese, Monozukuri). We are emphasizing that modularization of manufacturing architecture has deprived Japanese electronic manufacturing firms of comparative advantages based on integral manufacturing technology. Moreover, the earthquake in the northeastern Japan in March 2011 has revealed the fragility of Japanese manufacturer’s supply chain, which used to be considered as one of the major strong points.
Chapter five discusses the strategies and the polices of the  Japanese government to strengthen the manufacturing sector. We are focusing on how the Japanese government supported the R&D sector with R&D Partnership and fostered the cooperation between the government, the industry and the academia. The Japanese government has tried to increase R&D expenditure, stabilize employment, and assist growth of ecological enterprises and small businesses. However, the Japanese government's polices have been ineffective in that its R&D expenditure has not contributed much to the profit growth of the enterprises, nor has the R&D Partnership induced active participation from many firms, not to speak of the unachieved innovation outcomes from the cooperation between the government, the industry, and the academia.
Chapter six discusses the lessons and the policy implications we could obtain from the Japanese experiences to strengthen the Korean manufacturing sector, so that the Korean manufacturing firms would not repeat the Japanese electronic manufacturer’s experiences. The Korean government should support the growth of the higher value-added industry such as parts and materials manufacturing sectors. Moreover, it is necessary for the Korean manufacturing firms to be more active in business cooperation with their Japanese counterparts, especially when expanding to the new emerging Asian markets. Finally, the Korean government should further actively engage in the R&D investment of the small businesses in basic science technology. In this respect, the Japanese R&D partnership and cooperation between the government, the industry, and the academia could be a good example for the Korean government.