Japanese Miracle
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The Japanese economic miracle () refers to a period of
economic growth In economics, economic growth is an increase in the quantity and quality of the economic goods and Service (economics), services that a society Production (economics), produces. It can be measured as the increase in the inflation-adjusted Outp ...
in the post–
World War II World War II or the Second World War (1 September 1939 – 2 September 1945) was a World war, global conflict between two coalitions: the Allies of World War II, Allies and the Axis powers. World War II by country, Nearly all of the wo ...
Japan. It generally refers to the period from 1955, around which time the per capita gross national income of the country recovered to pre-war levels, and to the onset of the
1973 oil crisis In October 1973, the Organization of Arab Petroleum Exporting Countries (OAPEC) announced that it was implementing a total oil embargo against countries that had supported Israel at any point during the 1973 Yom Kippur War, which began after Eg ...
. Before the war, Japan had achieved industrialisation from the second half of the 19th century, but light industry and agriculture remained the backbone of the economy, and poverty was widespread among the working class and peasants. Heavy industry was primarily focused on the military, such as aviation, shipbuilding, and military vehicles, rather than the production of civilian goods. The
Second World War World War II or the Second World War (1 September 1939 – 2 September 1945) was a World war, global conflict between two coalitions: the Allies of World War II, Allies and the Axis powers. World War II by country, Nearly all of the wo ...
resulted in the loss of all its colonial possessions, and both the mainland's industrial capabilities and population were heavily damaged. After the war, the government was deep in debt, while the people suffered privation of vital supplies, which inevitably caused hyperinflation. Under the Allied Occupation Forces, Japan's economy underwent significant structural changes, which initially included the dissolution of all major ''
zaibatsu is a Japanese language, Japanese term referring to industrial and financial vertical integration, vertically integrated business conglomerate (company), conglomerates in the Empire of Japan, whose influence and size allowed control over signifi ...
'' and the weakening of heavy industries and scientific research, so as to deprive the country of the ability to wage war ever again. The government and the
Bank of Japan The is the central bank of Japan.Louis Frédéric, Nussbaum, Louis Frédéric. (2005). "Nihon Ginkō" in The bank is often called for short. It is headquartered in Nihonbashi, Chūō, Tokyo, Chūō, Tokyo. The said bank is a corporate entity ...
had to deal with hyperinflation while rebuilding the economy under these restrictions. However, along with West Germany, Japan later benefited from a fundamental shift in US policy, which now tried to help rebuild these former enemies in a democratized form, rather than weakening them, in an effort to prevent the spread of communism in their respective regions. Japan's economy gradually recovered to regain pre-war standard of living towards the mid-1950s, around which time the 'economic miracle' started. During this period, Japan's economic growth was driven by its heavy industries and the expansion of the middle class, which provided both a large domestic consumer market and bank savings. These savings were, in turn, lent to companies to invest in fixed capital. The Japanese government's interventionism also played a role, most notably through the
Income Doubling Plan The was a long-term economic development plan initiated by Japanese prime minister Hayato Ikeda in the fall of 1960. The plan called for doubling the size of Japan's economy in ten years through a combination of tax breaks, targeted investment, ...
, conceived by
Osamu Shimomura was a Japanese organic chemist and marine biologist, and professor emeritus at Marine Biological Laboratory (MBL) in Woods Hole, Massachusetts and Boston University School of Medicine. He was awarded the Nobel Prize in Chemistry in 2008 for ...
and implemented by prime minister
Hayato Ikeda was a Japanese politician who served as prime minister of Japan from 1960 to 1964. He is best known for his Income Doubling Plan, which promised to double the size of Japan's economy in 10 years, and for presiding over the 1964 Tokyo Olympics. ...
. Japan also benefited from the
Bretton Woods system The Bretton Woods system of monetary management established the rules for commercial relations among 44 countries, including the United States, Canada, Western European countries, and Australia, after the 1944 Bretton Woods Agreement until the ...
, which pegged major currencies, including the yen, to the United States dollar. During the economic boom, Japan rapidly became the world's third-largest economy, after the
United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...
and the
Soviet Union The Union of Soviet Socialist Republics. (USSR), commonly known as the Soviet Union, was a List of former transcontinental countries#Since 1700, transcontinental country that spanned much of Eurasia from 1922 until Dissolution of the Soviet ...
. Japan joined the
OECD The Organisation for Economic Co-operation and Development (OECD; , OCDE) is an international organization, intergovernmental organization with 38 member countries, founded in 1961 to stimulate economic progress and international trade, wor ...
as an early member in the 1960s, and became a founding member of the G7. By the 1970s, Japan was no longer expanding as quickly as it had in the previous decades despite per-worker productivity remaining high.


History


Recovery stage (1946–1954)

The Japanese economy was in ruins following the end of World War II. Moreover, by 1946, Japan was on the verge of a nationwide famine that was averted only by American shipments of food. The virtual destruction of the Japanese standard of living, combined with the military threat presented by the Soviet Union, compelled the United States to support a wide-reaching economic recovery. Every country experienced some industrial growth in the post-war period, but those countries that achieved a heavy drop in industrial output due to war damage such as Japan, West Germany and Italy, achieved the most rapid recovery. In the case of Japan, industrial production decreased in 1946 to 27.6% of the pre-war level, but recovered in 1951 and reached 350% in 1960. By the end of the American
occupation of Japan Japan was occupied and administered by the Allies of World War II from the surrender of the Empire of Japan on September 2, 1945, at the war's end until the Treaty of San Francisco took effect on April 28, 1952. The occupation, led by the ...
in 1952, the United States had successfully reintegrated Japan into the global economy and rebuilt the economic infrastructure that would later form the launching pad for the Japanese economic miracle. Arguably, one reason for Japan's quick recovery from war trauma was the economic reform by the government. The government body principally concerned with industrial policy in Japan was the
Ministry of International Trade and Industry The was a Ministry (government department), ministry of the Government of Japan from 1949 to 2001. The MITI was one of the most powerful government agencies in Japan and, at the height of its influence, effectively ran much of Japanese industri ...
. One of the major economic reforms was to adopt the . The "Inclined Production Mode" refers to the inclined production that primarily focuses on the production of raw materials including steel and coal. Textile production occupied more than 23.9% of the total industrial production before the economic miracle. Moreover, to further stimulate growth, the Japanese government encouraged women to enter the labor market. The legislation on recruitment contains three components: the restriction placed on regional recruitment and relocation of workers, the banning of the direct recruitment of new school leavers, and the direct recruitment of non-school leavers under explicitly detailed regulations issued by the Ministry of Labour. Another reason that accounts for Japan's recovery from WWII in the early 1950 was the outbreak of the
Korean War The Korean War (25 June 1950 – 27 July 1953) was an armed conflict on the Korean Peninsula fought between North Korea (Democratic People's Republic of Korea; DPRK) and South Korea (Republic of Korea; ROK) and their allies. North Korea was s ...
in 1950. The war was fought in a territory that had been a Japanese colony until 1945, which was later divided between the Soviet-backed North and the US-backed South. As a result, the US had to procure military supplies from Japan to support the war effort in Korea. The country's heavy industries, which were on the verge of bankruptcy, were saved by orders to repair thousands of damaged planes and military vehicles, while car companies such as
Toyota is a Japanese Multinational corporation, multinational Automotive industry, automotive manufacturer headquartered in Toyota City, Aichi, Japan. It was founded by Kiichiro Toyoda and incorporated on August 28, 1937. Toyota is the List of manuf ...
flourished with orders for numerous lorries and other military vehicles.


High increasing stage (1954–1972)

After regaining its pre-war standard of living in the mid-1950s, Japan's economy soared until the early 1970s. Between 1957 and 1973, the country saw an annualised growth rate of around 10% in terms of GNP. In 1964, Japan joined the OECD, which had been established three years earlier and has been widely regarded as one of the primary indicators of developed nation status. At the time, Japan was the only member from the
Pacific Asia Pacific Asia is the region along the east coast of Asia bordering the western Pacific Ocean. It constitutes most of East Asia, Northeast Asia, and Southeast Asia. The region is contested by China, America, and Japan, with India recently enga ...
and
Oceania Oceania ( , ) is a region, geographical region including Australasia, Melanesia, Micronesia, and Polynesia. Outside of the English-speaking world, Oceania is generally considered a continent, while Mainland Australia is regarded as its co ...
region until Australia joined in 1971, followed by New Zealand in 1973 and South Korea in 1996. That same year, Japan hosted the
Tokyo Olympics Tokyo Olympics may refer to: * 1940 Summer Olympics, Games of the XII Olympiad, cancelled due to World War II * 1964 Summer Olympics, Games of the XVIII Olympiad * 2020 Summer Olympics The officially the and officially branded as were an ...
, and large infrastructure projects such as the
Shinkansen The , colloquially known in English as the bullet train, is a network of high-speed railway lines in Japan. It was initially built to connect distant Japanese regions with Tokyo, the capital, to aid economic growth and development. Beyond lon ...
and
expressways Expressway may refer to: *Controlled-access highway, the highest-grade type of highway with access ramps, lane markings, etc., for high-speed traffic *Limited-access road, a lower grade of highway or arterial road * ''Expressway'' (film), a 2016 Fi ...
were completed to accommodate the increased demand for transport brought about by the event. The Japanese Economic Yearbooks from 1967 to 1971 witnessed a significant increase. In 1967, the yearbook said: the Japanese economy in 1966 thus made an advance more rapidly than previously expected. In 1968, the yearbook said that the Japanese economy continued to make a sound growth after it had a bottom in the autumn of 1965. The words "increase", "growth" and "upswing" filled the summaries of the yearbooks from 1967 to 1971. The reasons for Japan to complete industrialization are also complicated, and the major characteristic of this time is the influence of government policies of the
Hayato Ikeda was a Japanese politician who served as prime minister of Japan from 1960 to 1964. He is best known for his Income Doubling Plan, which promised to double the size of Japan's economy in 10 years, and for presiding over the 1964 Tokyo Olympics. ...
administration, vast consumption, and vast export.


Influence of government policies: Ikeda administration and ''keiretsu''

In 1954, the economic system MITI had cultivated from 1949 to 1953 came into full effect. Prime Minister
Hayato Ikeda was a Japanese politician who served as prime minister of Japan from 1960 to 1964. He is best known for his Income Doubling Plan, which promised to double the size of Japan's economy in 10 years, and for presiding over the 1964 Tokyo Olympics. ...
, whom
Chalmers Johnson Chalmers Ashby Johnson (August 6, 1931 – November 20, 2010) was an American political scientist specializing in comparative politics, and professor emeritus of the University of California, San Diego. He served in the Korean War, was a consult ...
calls "the single most important individual architect of the Japanese economic miracle," pursued a policy of heavy industrialization. This policy led to the emergence of 'over-loaning' (a practice that continues today) in which the
Bank of Japan The is the central bank of Japan.Louis Frédéric, Nussbaum, Louis Frédéric. (2005). "Nihon Ginkō" in The bank is often called for short. It is headquartered in Nihonbashi, Chūō, Tokyo, Chūō, Tokyo. The said bank is a corporate entity ...
issues loans to city banks who in turn issue loans to industrial conglomerates. Since there was a shortage of capital in Japan at the time, industrial conglomerates borrowed beyond their capacity to repay, often beyond their net worth, causing city banks in turn to over-borrow from the Bank of Japan. This gave the national Bank of Japan complete control over dependent local banks. The system of over-loaning, combined with the government's relaxation of anti-
monopoly A monopoly (from Greek language, Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic Competition (economics), competition to produce ...
laws (a remnant of SCAP control) also led to the re-emergence of conglomerate groups called ''
keiretsu A is a set of companies with interlocking business relationships and shareholdings that dominated the Japanese economy in the second half of the 20th century. In the legal sense, it is a type of business group that is in a loosely organized al ...
'' that mirrored the wartime conglomerates, or ''
zaibatsu is a Japanese language, Japanese term referring to industrial and financial vertical integration, vertically integrated business conglomerate (company), conglomerates in the Empire of Japan, whose influence and size allowed control over signifi ...
''. Led by the economic improvements of
Sony is a Japanese multinational conglomerate (company), conglomerate headquartered at Sony City in Minato, Tokyo, Japan. The Sony Group encompasses various businesses, including Sony Corporation (electronics), Sony Semiconductor Solutions (i ...
businessmen
Masaru Ibuka Masaru Ibuka (井深 大 ''Ibuka Masaru''; April 11, 1908 – December 19, 1997) was a Japanese electronics industrialist and co-founder of Sony, along with Akio Morita.Kirkup, James"Obituary: Masaru Ibuka," ''Independent'' (London). December ...
and
Akio Morita was a Japanese entrepreneur and co-founder of Sony along with Masaru Ibuka. Early life Akio Morita was born in Nagoya. Morita's family was involved in sake, miso and soy sauce production in the village of Kosugaya (currently a part of Toko ...
, the ''keiretsu'' efficiently allocated resources and became competitive internationally.At the heart of the ''keiretsu'' conglomerates' success lay city banks, which lent generously, formalizing cross-share holdings in diverse industries. The ''keiretsu'' spurred both horizontal and
vertical integration In microeconomics, management and international political economy, vertical integration, also referred to as vertical consolidation, is an arrangement in which the supply chain of a company is integrated and owned by that company. Usually each ...
, locking out foreign companies from Japanese industries. ''Keiretsu'' had close relations with MITI and each other through the cross-placement of shares, providing protection from foreign take-overs. For example, 83% of Japan's Development Bank's finances went toward strategic industries:
shipbuilding Shipbuilding is the construction of ships and other Watercraft, floating vessels. In modern times, it normally takes place in a specialized facility known as a shipyard. Shipbuilders, also called shipwrights, follow a specialized occupation th ...
,
electric power Electric power is the rate of transfer of electrical energy within a electric circuit, circuit. Its SI unit is the watt, the general unit of power (physics), power, defined as one joule per second. Standard prefixes apply to watts as with oth ...
,
coal Coal is a combustible black or brownish-black sedimentary rock, formed as rock strata called coal seams. Coal is mostly carbon with variable amounts of other Chemical element, elements, chiefly hydrogen, sulfur, oxygen, and nitrogen. Coal i ...
and
steel Steel is an alloy of iron and carbon that demonstrates improved mechanical properties compared to the pure form of iron. Due to steel's high Young's modulus, elastic modulus, Yield (engineering), yield strength, Fracture, fracture strength a ...
production. ''Keiretsu'' proved crucial to protectionist measures that shielded Japan's sapling economy. ''Keiretsu'' also fostered an attitude shift among Japanese managers that tolerated low profits in the
short-run In economics, the long-run is a theoretical concept in which all markets are in economic equilibrium, equilibrium, and all prices and quantities have fully adjusted and are in equilibrium. The long-run contrasts with the short-run, in which there a ...
because ''keiretsu'' were less concerned with increasing stock dividends and profits and more concerned about interest payments. Approximately only two-thirds of the shares of a given company were traded, cushioning ''keiretsu'' against market fluctuations and allowing ''keiretsu'' managers to plan for the long-term and maximize market shares instead of focusing on short-term profits. The Ikeda administration also instituted the Foreign Exchange Allocation Policy, a system of import controls designed to prevent the flooding of Japan's markets by foreign goods. MITI used the foreign exchange allocation to stimulate the economy by promoting exports, managing investment and monitoring production capacity. In 1953, MITIs revised the Foreign Exchange Allocation Policy to promote domestic industries and increase the incentive for exports by revising the export-link system. A later revision-based production capacity on foreign exchange allocation to prevent foreign dumping.


Vast consumption: from survival to recreation

During the time of reconstruction and before the
1973 oil crisis In October 1973, the Organization of Arab Petroleum Exporting Countries (OAPEC) announced that it was implementing a total oil embargo against countries that had supported Israel at any point during the 1973 Yom Kippur War, which began after Eg ...
, Japan managed to complete its industrialization process, gaining significant improvement in living standards and witnessing a significant increase in consumption. The average monthly consumption of urban family households doubled from 1955 to 1970. Moreover, the proportions of consumption in Japan was also changing. The consumption in daily necessities, such as food and clothing and footwear, was decreasing. Contrastingly, the consumption in recreational, entertainment activities and goods increased, including furniture, transportation, communications, and reading. The great increase in consumption stimulated the growth in GDP as it incentivized production.


Vast export: Golden Sixties and shift to export trade

The period of rapid economic growth between 1955 and 1961 paved the way for the Golden Sixties, the second decade that is generally associated with the Japanese economic miracle. In 1965, Japan's nominal GDP was estimated at just over $91 billion. Fifteen years later, in 1980, the nominal GDP had soared to a record $1.065 trillion. Under the leadership of Prime Minister Ikeda, former minister of MITI, the Japanese government undertook an ambitious . The plan called for doubling the size of Japan's economy in ten years through a combination of tax breaks, targeted investment, an expanded social safety net, and incentives to increase exports and industrial development. To achieve the goal of doubling of the economy in ten years, the plan called for an average annual economic growth rate of 7.2%. In fact, Japan's annual growth averaged more than 10% over the course of the Plan, and the economy doubled in size in less than seven years. Ikeda introduced the Income Doubling Plan in response to the massive Anpo protests in 1960 against the US-Japan Security Treaty, as part of an effort to shift Japan's national dialogue away from contentious political struggles toward building a consensus around pursuit of rapid economic growth. However, Ikeda and his brain trust, which most notably included the economist
Osamu Shimomura was a Japanese organic chemist and marine biologist, and professor emeritus at Marine Biological Laboratory (MBL) in Woods Hole, Massachusetts and Boston University School of Medicine. He was awarded the Nobel Prize in Chemistry in 2008 for ...
, had been developing the plan since mid-1959. Under the Income Doubling Plan, Ikeda lowered interest rates and rapidly expanded government investment in Japan's
infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and pri ...
, building
highway A highway is any public or private road or other public way on land. It includes not just major roads, but also other public roads and rights of way. In the United States, it is also used as an equivalent term to controlled-access highway, or ...
s, high-speed
railways Rail transport (also known as train transport) is a means of transport using wheeled vehicles running in tracks, which usually consist of two parallel steel rails. Rail transport is one of the two primary means of land transport, next to roa ...
, subways,
airport An airport is an aerodrome with extended facilities, mostly for commercial Aviation, air transport. They usually consist of a landing area, which comprises an aerially accessible open space including at least one operationally active surf ...
s,
port A port is a maritime facility comprising one or more wharves or loading areas, where ships load and discharge cargo and passengers. Although usually situated on a sea coast or estuary, ports can also be found far inland, such as Hamburg, Manch ...
facilities, and
dam A dam is a barrier that stops or restricts the flow of surface water or underground streams. Reservoirs created by dams not only suppress floods but also provide water for activities such as irrigation, human consumption, industrial use, aqua ...
s. Ikeda's government also expanded government investment in the previously neglected communications sector of the Japanese economy. Each of these acts continued the Japanese trend towards a managed economy that epitomized the mixed economic model. The Income Doubling Plan was widely viewed as a success in achieving both its political and economic objectives. According to historian Nick Kapur, the plan "enshrined 'economic growthism' as a sort of secular religion of both the Japanese people and their government, bringing about a circumstance in which both the effectiveness of the government and the worth of the populace came to be measured above all by the annual percentage change in GDP." Besides Ikeda's adherence to government intervention and regulation of the economy, his government pushed
trade liberalization Free trade is a trade policy that does not restrict imports or exports. In government, free trade is predominantly advocated by political parties that hold economically liberal positions, while economic nationalist political parties generall ...
. By April 1960, trade imports had been 41 percent liberalized (compared to 22 percent in 1956). Ikeda planned to liberalize trade to 80 percent within three years. However, his liberalization goals met with severe opposition from both industries who had thrived on over-loaning and the nationalist public who feared foreign enterprise takeovers. The Japanese press likened liberalization to "the second coming of the
black ships The Black Ships (in , Edo period term) were the names given to both Portuguese merchant ships and American warships arriving in Japan in the 16th and 19th centuries respectively. In 1543, Portuguese initiated the first contacts, establishing a ...
," in reference to the black ships Commodore Matthew C. Perry had sailed into Tokyo Bay in 1853 to open Japan to international trade via a show of military force. Accordingly, Ikeda moved toward liberalization of trade only after securing a protected market through internal regulations that favored Japanese products and firms, and never achieved his ambitious 80 percent goal. Ikeda also set up numerous allied foreign aid distribution agencies to demonstrate Japan's willingness to participate in the international order and to promote exports. The creation of these agencies not only acted as a small concession to international organizations, but also dissipated some public fears about liberalization of trade. Ikeda furthered Japan's global economic integration by negotiating for Japan's entry into the
OECD The Organisation for Economic Co-operation and Development (OECD; , OCDE) is an international organization, intergovernmental organization with 38 member countries, founded in 1961 to stimulate economic progress and international trade, wor ...
in 1964. By the time Ikeda left office, the
GNP The gross national income (GNI), previously known as gross national product (GNP), is the total amount of factor incomes earned by the residents of a country. It is equal to gross domestic product (GDP), plus factor incomes received from n ...
was growing at a phenomenal rate of 13.9 percent.


The end of the Japanese economic miracle (1973)

Japan's economic miracle ended in 1973, when the first oil-price shock struck Japan (
1973 oil crisis In October 1973, the Organization of Arab Petroleum Exporting Countries (OAPEC) announced that it was implementing a total oil embargo against countries that had supported Israel at any point during the 1973 Yom Kippur War, which began after Eg ...
). The
price of oil The price of oil, or the oil price, generally refers to the spot price of a barrel () of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPEC ...
increased from 3 dollars per barrel to over 13 dollars per barrel. During this time, Japan's industrial production decreased by 20%, as the supply capacity could not respond effectively to the rapid expansion of demand, and increased investments in equipment often invited unwanted results—tighter supply and higher prices of commodities. Moreover, the
Second Oil Shock A drop in oil production in the wake of the Iranian revolution led to an energy crisis in 1979. Although the global oil supply only decreased by approximately four percent, the oil markets' reaction raised the price of crude oil drastically o ...
in 1978 and 1979 exacerbated the situation as the oil price again increased from 13 dollars per barrel to 39.5 dollars per barrel. Despite being seriously impacted by the two oil crises, Japan was able to withstand the impact and managed to transfer from a product-concentrating to a technology-concentrating production form. The transformation was, in fact, a product of the oil crises and United States intervention. Since the oil price rose tenfold, the cost of production also soared. After the oil crises, to save costs, Japan had to produce products in a more environmentally friendly manner, and with less oil consumption. The biggest factor that invited industrial changes after the oil crises was the increase in energy prices including crude oil. As a result, Japan converted to a technology-concentrating program, ensuring the steady increase of its economy, and standing out beyond other capitalist countries that had been significantly wounded during the oil crises.


Government contributions

The Japanese financial recovery continued even after
SCAP SCAP may refer to: * S.C.A.P., an early French manufacturer of cars and engines * Security Content Automation Protocol * '' The Shackled City Adventure Path'', a role-playing game * SREBP cleavage activating protein * Supervisory Capital Assessm ...
departed and the economic boom propelled by the
Korean War The Korean War (25 June 1950 – 27 July 1953) was an armed conflict on the Korean Peninsula fought between North Korea (Democratic People's Republic of Korea; DPRK) and South Korea (Republic of Korea; ROK) and their allies. North Korea was s ...
abated. The Japanese economy survived from the deep recession caused by a loss of the U.S. payments for military procurement and continued to make gains. By the late 1960s, Japan had risen from the ashes of World War II to achieve an astoundingly rapid and complete economic recovery. According to Knox College Professor
Mikiso Hane Mikiso “Miki” Hane (January 16, 1922 – December 8, 2003) was a Japanese American professor of history at Knox College, where he taught for over 40 years. He wrote and translated over a dozen books, wrote many articles, and was appointed a me ...
, the period leading up to the late 1960s saw "the greatest years of prosperity Japan had seen since the Sun Goddess shut herself up behind a stone door to protest her brother
Susano-o __FORCETOC__ Susanoo (, ; historical orthography: , ), often referred to by the honorific title Susanoo-no-Mikoto (), is a in Japanese mythology. The younger brother of Amaterasu, goddess of the sun and mythical ancestress of the Japanese i ...
's misbehaviour." The Japanese government contributed to the post-war Japanese economic miracle by stimulating
private sector The private sector is the part of the economy which is owned by private groups, usually as a means of establishment for profit or non profit, rather than being owned by the government. Employment The private sector employs most of the workfo ...
growth, first by instituting regulations and protectionism that effectively managed economic crises and later by concentrating on trade expansion.Hane, Mikiso. Eastern Phoenix: Japan Since 1945. Boulder: Westview Press, 1996.


Role of the Ministry of International Trade and Industry

The
Ministry of International Trade and Industry The was a Ministry (government department), ministry of the Government of Japan from 1949 to 2001. The MITI was one of the most powerful government agencies in Japan and, at the height of its influence, effectively ran much of Japanese industri ...
(MITI) was involved in Japan's post-war economic recovery. According to some scholars, no other governmental regulation or organization had more economic impact than MITI. "The particular speed, form, and consequences of Japanese economic growth," Chalmers Johnson writes, "are not intelligible without reference to the contributions of MITI" (Johnson, vii). Established in 1949, MITI's role began with the "Policy Concerning Industrial Rationalization" (1950) that coordinated efforts by industries to counteract the effects of SCAP's deflationary regulations. In this way, MITI formalized cooperation between the Japanese government and private industry. The extent of the policy was such that if MITI wished to "double steel production, the neo-''
zaibatsu is a Japanese language, Japanese term referring to industrial and financial vertical integration, vertically integrated business conglomerate (company), conglomerates in the Empire of Japan, whose influence and size allowed control over signifi ...
'' already has the capital, the construction assets, the makers of production machinery, and most of the other necessary factors already available in-house". The Ministry coordinated various industries, including the emerging ''keiretsu'', toward a specific end, usually toward the intersection of national production goals and private economic interests. MITI also boosted the industrial security by untying the imports of
technology Technology is the application of Conceptual model, conceptual knowledge to achieve practical goals, especially in a reproducible way. The word ''technology'' can also mean the products resulting from such efforts, including both tangible too ...
from the imports of other goods. MITI's Foreign Capital Law granted the ministry power to negotiate the price and conditions of technology imports. This element of technological control allowed it to promote industries it deemed promising. The low cost of imported technology allowed for rapid industrial growth. Productivity was greatly improved through new equipment, management, and standardization. MITI gained the ability to regulate ''all'' imports with the abolition of the Economic Stabilization Board and the Foreign Exchange Control Board in August 1952. Although the Economic Stabilization Board was already dominated by MITI, the Yoshida Governments transformed it into the Economic Deliberation Agency, a mere "
think tank A think tank, or public policy institute, is a research institute that performs research and advocacy concerning topics such as social policy, political strategy, economics, military, technology, and culture. Most think tanks are non-governme ...
," in effect giving MITI full control over all Japanese imports. Power over the foreign exchange budget was also handed directly to MITI. MITI's establishment of the
Japan Development Bank is a Japanese development bank incorporated on 1 October 2008 under the Development Bank of Japan Inc. Law (Law No. 85 of 2007). Current ownership structure of DBJ is solely owned by the Government of Japan through the Minister of Finance. Ov ...
also provided the private sector with low-cost capital for long-term growth. The Japan Development Bank introduced access to the Fiscal Investment and Loan Plan, a massive pooling of individual and national savings. At the time FILP controlled four times the savings of the world's largest commercial bank. With this financial power, FILP was able to maintain an abnormally high number of Japanese construction firms (more than twice the number of construction firms of any other nation with a similar GDP).


See also

*
Developmental state Developmental state, hard state, State-led developmentalism or in some cases Neo-developmental state, is a term used by international political economy scholars to refer to the phenomenon of state-led macroeconomic planning in East Asia in the la ...
*
Dodge Line The Dodge Line or Dodge Plan was a financial and monetary contraction policy drafted by American economist Joseph Dodge for Japan to gain economic independence and stamp out inflation after World War II. It was announced on March 7, 1949. The D ...
*
Economic history of Japan The economic history of Japan refers to the Economy, economic progression in what is now known as modern-day Japan across its different periods. Japan's initial economy was primarily Agriculture, agricultural, in order to produce the food requi ...
*
Four Asian Tigers The Four Asian Tigers ( the Four Asian Dragons or Four Little Dragons in Chinese and Korean) are the developed Asian economies of Hong Kong, Singapore, South Korea, and Taiwan. Between the early 1950s and 1990s, they underwent rapid industrializ ...
*
Hayato Ikeda was a Japanese politician who served as prime minister of Japan from 1960 to 1964. He is best known for his Income Doubling Plan, which promised to double the size of Japan's economy in 10 years, and for presiding over the 1964 Tokyo Olympics. ...
*
Income Doubling Plan The was a long-term economic development plan initiated by Japanese prime minister Hayato Ikeda in the fall of 1960. The plan called for doubling the size of Japan's economy in ten years through a combination of tax breaks, targeted investment, ...
*
Italian economic miracle The Italian economic miracle or Italian economic boom ( or ''il boom economico italiano'') is the term used by historians, economists, and the mass media to designate the prolonged period of strong economic growth in Italy after World War II to th ...
*
Miracle on the Han River The Miracle on the Han River () was the period of rapid economic growth in South Korea, following the Korean War (1950–1953), during which South Korea transformed from one of the least developed countries into a highly developed country. The ...
*
Post-war economic boom A post-war or postwar period is the interval immediately following the end of a war. The term usually refers to a varying period of time after World War II, which ended in 1945. A post-war period can become an interwar period or interbellum, w ...
*
Spanish miracle The Spanish miracle () refers to a period of exceptionally rapid development and growth across all major areas of economic activity in Spain during the latter part of the Francoist regime, 1959 to 1974, in which GDP averaged a 6.5 percent gr ...
* Taiwan Miracle *
Trente Glorieuses ''Les Trente Glorieuses'' (; 'The Thirty Glorious (Years)') was a thirty-year period of economic growth in France between 1945 and 1975, following the end of the Second World War. The name was first used by the French demographer Jean Fourast ...
*
Wirtschaftswunder The ''Wirtschaftswunder'' (, "economic miracle"), also known as the Miracle on the Rhine, was the rapid reconstruction and development of the Economy, economies of West Germany and Austria after World War II. The expression was first used to re ...


References


Further reading

* * * * * * * * * * * * * * * * {{DEFAULTSORT:Japanese Post-War Economic Miracle 1940s in economic history 1950s in economic history 1960s in economic history 1970s in economic history 1980s in economic history 1990s in economic history 1940s in Japan 1950s in Japan 1960s in Japan 1970s in Japan 1980s in Japan 1990s in Japan Economic booms Economic history of Japan Cold War history of Japan Post–World War II economic booms