Economic Overview
Japan started to go industrialised about 80 old ages ago and is now know as the most to the full developed industrial state in Asia and is one of the taking industrialised states in the universe. the celerity of Japan s postwar economic growing has been a slightly singular exclusion in modern economic history.
Japan s postwar and past development record along with some jobs it has overcome throughout the continuance were definite factors taking toward it s economic success today, and this new industrialisation has brought on some new jobs of today. Japan s economic growing has been leveling away over the past old ages with the other major industrialized states in the universe. The accent of this paper is on how Japan came to be what it is today from it s dropping off degrees during the 2nd universe war to it s postwar enlargement.
The informations above starts at 1952 and shows five twelvemonth growing rates up to 1980. Over this 28-year period ( 1952-1980 ) , the addition in GNP per individual employed amounted to 6.7 per twelvemonth compounded. This rate of growing shows a twofold sum of end product per individual employed about every 10 old ages and a doubling of end product every 8 old ages during the period of rapid growing from 1957-1972. Furthermore, the rates of growing in Japan in entire and per individual employed were higher during the postwar period than in any of the major industrialised states during the same clip period.
Postwar Growth Factors
General Growth Factors The rapid rate of Japan s industrialisation is non simply a postwar phenomenon, but one that started some clip ago triggered by such events as the Meiji Restoration in 1868 and other foundations, nevertheless certain postwar factors may be acknowledged as lending to the postwar recovery and the long term criterion growing in Japan. Industrial production had fallen in 1946 to 27.6 per centum of the prewar degree ( 1934- 1936 ) figure, but regained this same degree of production in 1951 making 350 per centum by 1960. In add-on there was a crisp lessening of Japan s military disbursement, and this money was so used for postwar Reconstruction and betterment in the domestic markets of its place land.Japan s economic system was steadily reconstructing.
Improvements of Domestic Markets After the war, certain actions were taken toward Reconstruction and betterment in Japan s place ( domestic ) markets, under the economic democratisation policy pursued by the business forces, such as the disintegration of fiscal groups ( Zaibatsu ) , agricultural land reforms introduced and labour brotherhoods organized. These three major reforms have on the whole contributed to the enlargement of the place markets in Japan, which in bend stimulated investing in general.
The disintegration of Zaibatsu was an effort to decentralize large concern in the western sense and open up the trade markets to smaller companies. The land reforms virtually expropriated non-cultivation landholders from their tenant-operations, cut downing tenanted land from 46 per centum to 9 per centum of the cultivated country, and reassigning ownership of about three fourths of agricultural land owned by landlords to the renters, therefore bettering the economic place of the husbandmans in Japan. This was a alleged transferrance of income from the rich to the hapless and husbandmans were able to make concern as independent endeavors.
The legalisation of trade brotherhoods after the war increased the distribution portion of labour income in the value of production. With the debut of the +Wagner Act in Japan, in 1946 more than 6 million workers were organized into brotherhoods about over dark and the Numberss are far more than 8 million today.4 In add-on to the legalisation of trade brotherhoods, other authorities intercessions after the war helped Japan s economic system to spread out.
Government Intervention In adverting authorities intercessions in the postwar period on must besides understand the function of the business forces, because Japan was non free of the business until 1952. Prior to this day of the month, much assistance and aid was given in the signifier of nutrient and basic natural stuffs by the business forces and chiefly by the U.S. The occupied authorities of Japan contributed to the economic system in two major countries. The authorities contributed greatly to capital accretion and high capital investing after the war in taking natural stuffs. Other major parts were in the field of revenue enhancement through a re-valuation of assets, an extraordinary depreciation system and a system of assorted reserves.
These and other authorities intercessions nevertheless will be mentioned in the right chronological order and elaborated on subsequently. II. Time periods of Economic Change A. The Occupation Period Economy The American-led business of Japan after World War II lasted 80 months from August 14, 1945 to April 28, 1952 and helped reconstruct Japan and its economic system until Japan could stand on its ain pess once more. During this clip, there were some smaller categorised periods of aggression such as the reform period right after the war ( 1945-47 ) , the rearward class period ( 1947-48 ) , the Dodge line period ( 1948-50 ) and the Korean War ( 1950-52 ) .
Immediate Postwar Economy
The immediate postwar period of the American-led business includes the reform and the contrary class periods enduring about 3 old ages. In 1945, the war s terminal found the state shattered, particularly the major metropoliss. Of Japan s physical capital stock, 25.3 per centum was lost to direct war harm. Of the prewar imperium, 45 per centum of the land country was cut off both politically and economically. Extra losingss included the impairment of land and other natural resources and the reducation of entree to angling evidences. Population additions compounded the economic jobs. There were besides two smaller jobs to cover with during the same period. One was dismanteling of the wartime control, rationing, and allotment system, which had mostly replaced the free market as the footing of economic organisation.
The second was the +bomb-shock of the civilian signifier of godly intercession to forestall the duplicate shames of resignation and business, antecedently unknown in Japan s history. The Dodge Line Period ( 1948-50 ) Another major period of alteration under the U.S. business of Japan was the Dodge Line period ( 1948-50 ) . At that clip, the ultimate aims of Japan were the rapid rehabilitation of the Nipponese economic system and the constitution of a fixed exchange rate. the immediate job facing Japan was to come up with an effectual anti-inflationary policy.
On December 18, 1948, the State Department and the Department of the Army published a joint declaration titled the +Nine-Point Economic Stabilization Plan for Japan. The program can be summarized as follows:
To accomplish a balanced budget at the earliest possible day of the month by a rigorous curtailment ofgovernment disbursement and an addition in gross ;
- To speed up and beef up revenue enhancement aggregation, including condemnable prosecution of taxevaders ;
- To strictly cut down the extension of recognition by fiscal establishments ;
- To set up an effectual plan to accomplish pay stableness ;
- To beef up and, if necessary, spread out the coverage of bing monetary value controls ;
- To better the operation of foreign trade and exchange controls ;
- To better the effectivity of the bing system of stuffs allotment and rationing with a position to maximising the enlargement of exports ;
- To spread out the production of all cardinal natural stuffs and manufactured merchandises ;
- To better the efficiency of the nutrient supply system.
In february 1949, Joseph Dodge, a former Detroit banker who had played a cardinal function in the postwar currency reform in Germany, was sent to Japan as an embassador with the authorization to implement the new program. Shortly after his reaching to japan, Dodge presented his diagnosing of the state s economic jobs in a celebrated pres
s conference with japanese reporters and later presented his prescription for dealing with these problems as a list of directives concerning the fiscal budget for 1949, and these directives consisted of five basic elements:
- An Overbalaned Budget. The government had been covering its large deficits by issuing short-term bonds and rolling them over. The Dodge Plan forced the government to redeem these bonds as quickly as possible, even about the legally established rate, and proved to be a deflationary budget policy.
- The Reduction and Elemination of Subsidies. All price subsidies, subsidies guaranteeing protection against losses, and others paid from the government s general or special accounts were to be reduced as quickly as possible.
- Suspension of New Loans From the Reconstruction Finance Bank. All new lending from the above-mentioned bank would be suspended, and the government would redeem as quickly as possible all Reconstruction Finance Bank bonds issued from the general account.
- A Fixed Exchange Rate and Elimination of Hidden Trade Subsidies. A fixed exchange rate for the yen would be established immediately, and all hidden subsidies paid by the government for export and import trade through its Special Account for Trade funds abolished.
Establishment of the Counterpart Fund Special Account. The counterpart Fund Special account would be funded by the sale of American relief supplies in Japan and would take the place of the Special Account for Trade Funds as well as the subsidies eliminated by the second item of Dodg s policies. In other words, funds from the Counterpart Fund Special account would be supplied to key industries for plant and equipment investment, and to exporting and importing industries for acquiring foreign capital.
These policies provided the framework for Dodg s economic policy for Japan, however debate continues as to whether the inflation could have been brought under control without it. the Dodge line was a truely drastic deflationary policy forced on Japan and, for all its success in curbing inflation, it threw the economy into a crises including widespread anxiety concerning the overall impact of deflationary fiscal policies and threw business into the so-called stablization panic.
On the other hand, issues of new currency by the Bank of Japan, which had increased by more than five times in 1946, more than nine times in 1947, actually declined 0.4 percent in 1949. the Dodge Line was quite effective in its original goal of curbing the intense inflation of the immediate postwar period.9 3. The Korean War (1950-55) The other major period before Japan s independence from the occupation forces and before japan s contemporary economy got under way was the Korean War (1950-52).
After the war began on June 25, 1950, with the approaching end of the Occupation of Japan, the economic policy of Japan was pursued by the simi-military economy that Japan almost immediately became for the United Nations forces in Korea. the accumulated inventories of the previous year were sold either directly for Korea or for other world-wide shortages and Japan s economy returned to full capacity, bood conditions and high measured growth.
The money supply was free from the Dodge Line constraints and inflations reappeared however three main achievement remained from the Dodge Line efforts balanced budget, the unified yen dollar exchange rate, and the dissolution of the price-control and rationing machinery. Japan however at the time was regarded as a marginal, or last resort, supplier of world markets, whose output was called upon in periods of scarcity especially in wartime and the Japanese revivial after the Dodge Line Constraints that were removed was clearly export-led and businesses began to rebuild themselves and move into the technology revolution.
The Technology Revolution After the removal of the occupation, a quick take off towards modernization occured in Japan as it became more industrialized and moved into the technology revolution (1955-60). In the fall of 1955, the two leading conservative parties, the liberals and the democrats, united to form the Liberal Democratic Party (LDP), which has ruled the country ever since.
Real per capita consumption returned to prewar levels in 1953, and by 1955, most of the key economic indicators had already risen higher than prewar levels. This was followed by a spectacular growth in private plants and equipment in 1956 and 1957, which permitted the entire economy to step into a new period of postwar modernization and there was a sudden rise of new industries and new products .
