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Japan: A Strategy for Economic Growth

Japan: A Strategy for Economic Growth. ManEc 358. Context Japan, 1945. Dependence on US for Trade Defense umbrella Sponsorship for OECD, GATT membership. Context Politics. Numerous political parties, mostly conservative Leftists in labor, intellectuals

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Japan: A Strategy for Economic Growth

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  1. Japan:A Strategy for Economic Growth ManEc 358

  2. ContextJapan, 1945 • Dependence on US for • Trade • Defense umbrella • Sponsorship for OECD, GATT membership

  3. ContextPolitics • Numerous political parties, mostly conservative • Leftists in labor, intellectuals • Open education system for better jobs, higher pay • Protected, small farms, esp. rice

  4. ContextLabor • Unions not very militant • Low wages early, higher later • High degree of job security • Loyalty of workers, lifetime employment • Unions politically active • Early retirement • Consensus vs. Conflict in employment

  5. ContextSocial Security • Underdeveloped social security system. • High rate of savings, finding new jobs after retirement • Lump-sum retirement payment of 2 to 4 years earnings.

  6. ContextJapan, 1945 • The Occupation and industry structure objectives • MITI got the Anti-Monopoly Law relaxed. • Revised law legalized cartels when necessary to avert recession or for rationalization. • 150 cartels in 1957, 836 eleven years later.

  7. Strategy

  8. StrategyJapan, 1945 • Corporate governance and investment • Industrial policy, cartel policy • Export promotion • Targeting U.S. export market • Foreign trade policies • Corporate focus • Mkt. share vs. return to equity • Profit subordinated to growth

  9. StrategyJapan, 1945 • Concern about inadequate scale greater than that about undue concentration • The Japanese government stood behind the debt position of major Japanese companies • It also tried to determine the nature and direction of growth.

  10. StrategyInstitutions • Occupation • Established banks to make public loans to key industries • Demanded a National Planning Agency • Put controls on foreign trade, etc.

  11. StrategyInstitutions • MITI • Power to sanction imports, esp. foreign technologies • Decision center on industrial policy (picking “winners”) • Power now diluted

  12. Strategy • Develop capital-intensive industries of high technology for export • Directed, rather than free trade • Laws to develop machinery and electronics industries • Protection of industries and enterprises, but let in high-tech goods

  13. Strategy • Permit mergers in steel, motor vehicles, and computers • Limit imports to essential products • Tariffs, quotas, Exchange controls • Limit foreign investment to • Balance of payments • Sophisticated technologies

  14. Performance

  15. Performance • GNP growth • Manufacturing Growth compared to U.S. • Defense expenditures • Shares for investment and consumption

  16. Performance • Social security Benefits • Savings • Fixed Capital Formation

  17. Japan, Inc.

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