This study is an extension of the study by Tang (Japan and the World Economy, 15, 419–36, Citation2003b), which has documented no long-run equilibrium relationship among the Japanese aggregate imports, real income and relative price of imports. This finding, however, is probably due to the bias of variable(s) omission. To fill this gap, financial variable(s) has been empirically incorporated into the Japan's import demand analysis. Using a cointegration approach, this study has provided empirical support for the inclusion of financial variable(s) into the Japanese aggregate import demand function. This is an important finding from the viewpoint of policymakers upon the implications of momentary policies on the Japanese trade balance.
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