Transition to Post-WW II Era Defeat by Allied Forces in WWII, 1945  End Japanese colonial rule Taiwan— to Republic of China Korea—independent  Break up zaibatsu  keiretsu

Transition to Post-WW II Era US Occupation of Japan  US seeks to break up zaibatsu  Firms continue on as keiretsu Example: Mitsubishi

Nature of Japanese System, Post-WW II: Johnson reading What are the elements of the capitalist developmental state model, according to Johnson?

Nature of Japanese System, Post-WW II: Johnson reading What are the elements of the capitalist developmental state model, according to Johnson?  Bureaucrats are elite “Best and brightest”  Very competitive civil service exams Tokyo University (established 1877)  Educate civil servants

Nature of Japanese System, Post-WW II: Johnson reading What are the elements of the capitalist developmental state model, according to Johnson?  Bureaucracy has authority

Nature of Japanese System, Post-WW II: Johnson reading What are the elements of the capitalist developmental state model, according to Johnson?  State policy is market-conforming

Nature of Japanese System, Post-WW II: Johnson reading What are the elements of the capitalist developmental state model, according to Johnson?  Exemplified by MITI Ministry of International Trade and Industry In 2001, MITI became METI  Ministry of Economy, Trade, and Industry

Nature of Japanese Economic System, Post-WW II Central role of economic bureaucracy  Industrial policy Sector specific  Promote increasing sophistication Textiles, consumer goods Steel, machinery  Automobiles High-tech  Semi-conductors  Robotics

Nature of Japanese Economic System, Post-WW II Central role of economic bureaucracy  “Administrative guidance”  “Mercantilism”

Nature of Japanese Economic System, Post-WW II World’s 3 rd largest economy Economy is highly efficient and competitive in areas linked to international trade, but productivity is far lower in protected areas such as agriculture, distribution, and services

Review: Nature of Japanese System, Post- WW II What are the elements of the capitalist developmental state model, according to Johnson?  Bureaucrats are elite Well paid, recruited through merit, w/relevant skills  Bureaucracy has authority  State policy is market-conforming  Exemplified by MITI

Nature of Japanese Economic System, Post-WW II Close ties between government and keiretsu  “amakudari” (descent from heaven)

Nature of Japanese Economic System, Post-WW II Close ties between government and keiretsu  “Iron triangle” What are the three parts of the “iron triangle”?

Nature of Japanese Economic System, Post-WW II Close ties between government and keiretsu  “ “iron triangle” business interests /\ bureaucrats __ politicians

Recent Sources of Economic Stagnation in Japan “Close ties between economic bureaucracy and corporations (including banks) under their regulatory jurisdiction…has contributed to Japan’s problems.” Source: Daniel Okimoto, Stanford

Japan: Abe on the Brink “Suicide of one minister under a cloud of corruption (Agriculture Minister Toshikatsu Matsuoka) By July 8 even one of Abe's substitute ministers— Agriculture Minister Norihiko Akagi, named to replace the late Matsuoka—was mired in a fresh campaign-funding scandal. A recent survey by the YOMIURI SHIMBUN newspaper pegged Abe's approval rating at an anemic 32% Abe's Agriculture Minister Matsuoka, under fire for accepting questionable political donations, died on May 28 at a Tokyo hospital after reportedly hanging himself Thursday, Jul. 12, 2007 TIME

Japan's Abe takes one for the team Abe announced his resignation on Wednesday afternoon in Tokyo. While he [had] pledged to refocus in his new administration, the daily drip of scandals that forced the resignation of cabinet ministers and other party officials quickly ended any hopes for a fresh start. (There are now reports that Abe himself is involved in financial wrongdoing.) Sep 14, 2007

Japan in the 21 st Century Which theory best explains Japan’s economic stagnation ?

Nature of Japanese Economic System, Post-WW II Weak position of organized labor  Company-based unions Loyal to company not union Ties to national federation of labor weak  Compare British and Japan as of % of workers in Britain unionized 30% of workers in Japan unionized

Nature of Japanese Economic System, Post-WW II Small welfare state  Social protection  Compare British and Japan as of % of GDP spent on welfare in Britain 10% of GDP spent on welfare in Japan

Nature of Japanese Economic System, Post-WW II “Dual economy” of large and small firms  Small, “satellite” firms Employment  Women  Temporary