Discussion
Japanese products are not in competition with other countries in terms of :
Answer: C
They are not competitive in terms of cost and volume.
The quoted CEO says: 'Although Japanese products cannot remain competitive regarding cost and volume, they excel where high quality is needed.' That is the passage's own statement of where they do not compete.
The first option describes what the Asia-Pacific neighbours lead in and is close in meaning, but the passage's own words for where Japan cannot compete are 'cost and volume', so that is the option the key takes. The customer-centric approach is where Japanese firms do well, and profit margins are never mentioned.
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