Japan’s economic take-off Luis, Jiwon, Eric Tsai

After the war 3 million war dead Quarter of national wealth lost

How did Japan become the 2nd largest economy by 1980? Wartime Experiences Favourable US Policies towards the Japanese Economy “Welfare Society” Government Regulation in the form of loans Steps to Avoid Competition: Zaibatsu and the Keiretsu Labour Unions, Part Time Workers, and Small Companies Social Mobilisation of the Japanese people

Wartime experiences 24% increase in manufacturing 46% in steel 70% in nonferrous metals 252% in machinery wartime technology -> peace time technology e.g. optical weapons -> binoculars and cameras, machine guns -> sewing machines Expansion into stocks and investment trust operations allowed mergers between companies and created larger conglomerates Bureaucrats advised to merge companies after war, but companies instead all decided to rapidly expand by taking large debts and produce full lines, and infant companies such as Sony were greatly successful. devastation from war in fact became a signal for companies to update themselves and innovate

US Economic policies towards Japan asymmetrical trade relationship (Japanese policies and U.S. willingness to cooperate allowed Japan to only export and not import as much) The US accepted a trade deficit with Japan Japan was not allowed to create an army – allowed them to save money that might otherwise have been spent on the military

Welfare society Welfare society rather than a welfare state full employment – less money wasted on welfare of unemployed citizens; instead the money was spent in bank loans Dodge Plan - the Japanese government loans money out to companies in order to prevent bankruptcy, and this promotes full employment; less tax revenue can be used for unemployment/retirement benefits despite annual support of $500 million Japan was in a recession early on Dodge, a Detroit Banker was dispatched to Japan. He decided to increase the value of yen in order to stabilise development. But Japanese economy which mainly depended on exports did not see much advantages from the plan

Government regulation in the form of loans Private banks, as well as public institutions such as the  Industrial Development Bank, drew on individual savings to channel capital to businesses from the 1950s to 1960s,  1/3 of the bank loans came from private saving The average household saved under 10 per cent of its income in the early 1950s, but savings rate soared steadily as the economy grew and reached 15 percent by 1960 and topped 20 percent by 1970. "brokered capitalism": government made private banks reinvest on businesses with private savings MITI (Ministry of International Trade and Industry) stimulated the movement of capital and labour out of declining industries such as coal and textiles and into promising new industries with high growth potential--first into electronics, steel, petrochemicals, and automobiles, and later into computers, semiconductors, and biotechnology

Steps to avoid competition: monopolies (zaibatsu) and the Keiretsu SCAP tried to dismantle all zaibatsus onset of the Cold War and Korean War discouraged Americans from reinforcing legislation to compete more aggressively internationally the Japanese government amended the Anti-monopoly Act and loosened Occupation- imposed restrictions on cartels MITI did not support Fair Trade Commission's acts - cartels' collusion - high price level and high profits were able because the market was closed to foreign producers - the companies were able to grow to the size that would eventually be competent enough with foreign countries

Kieretsu Japanese government also condoned the building of a more flexible business alliance of different companies, either horizontally or vertically, called the keiretsu "horizontal keiretsu" comprised several dozen members including a main bank, large financial institutions, the largest manufacturing firms, and a large general trading company long-term stability, efficiency, reduced risk, and mutual support "vertical keiretsu" organized in the automobile, electronic, and other industries organized huge numbers of subcontractors and suppliers of services allowed long term reciprocal benefits for a parent company and its suppliers networks allowed manufacturers to prevent price competition among retailers and maintain the high profit model in the domestic market

Social Mobilisation Social mobilization of the Japanese: sacrifice for the nation's place in international economy high consumer costs, because of aforementioned export-only structure Willingness to sacrifice individual well-being to establish their national position in the postwar world They thus accepted the high costs of consumer goods Resulting from the export-only structure