JASP1090A Understanding Japan

透視日本
Fall 2023

Instructor: Dr. Simon Tu

TA: Joann Guann
 Week 03:
Economic Miracle and Recession
 Overview

After WWII, social life in Japan was shaped by the

country’s fast economic growth, and subsequent
stagnation and crisis. In this lecture, we shall
examine several key episodes in Japan’s postwar
economic history, and the social implications.
 Overview

Bubble
Economy

Asian
Financial
Crisis

Nixon Shock Lehman

First Oil Shock Shock

Scanned from Ohno (2018, 131)

 The High-Growth Era
After the WWII, Japanese economy was first boosted
by U.S. procurement during the Korean War (1950-
53).

From 1955 to 1973, Japan’s Gross Domestic Product

(GDP) recorded an annual rate of growth of almost 10
percent.

In 1968, Japan’s GDP became the second highest in

the world, a position overtaken by China in 2010.
 Yoshida Doctrine
Shigeru Yoshida (吉田茂) was
Japan’s Prime Minister in 1946-47
and 1948-54 .

When U.S. President Dulles came to

Japan in 1950 to negotiate a peace
treaty and to suggest Japan’s
rearmament amidst the cold war,
Yoshida insisted on the opposite...
 Yoshida Doctrine
“1. Japan’s economic rehabilitation must be the
prime national goal. Political-economic
cooperation with the United States. was
necessary for this purpose.

2. Japan should remain lightly armed and avoid

involvement in international political-strategic
issues. Not only would this low posture free the
energies of its people for productive industrial
development, it would avoid divisive internal
struggles – what Yoshida called ‘a thirty-eighth
parallel’ in the hearts of the Japanese people.

3. To gain a long-term guarantee for its own

security, Japan would provide bases for the U.S.
army, navy, and air force” (Pyle 1996, 25).
 Income Doubling Plan
In 1960, Prime Minister Hayato Ikeda
( 池 田 勇 人 ; in office 1960-64)
announced a ten-year “Incoming
Doubling Plan.” To achieve his goal,
Japan needed an average GNP
growth of 7.2% for ten years; in reality,
Japan’s average rate of GNP growth
from 1953 to 1971 was 10%.
 The High-Growth Era

Politicians of the “Yoshida School” advocated for

an economy-first Japan, but what were the factors
that contributed to Japan’s postwar economic
success?
 The High-Growth Era
- Postwar technology (old plants were destroyed...)
- Highly educated population
- International economic growth
- Minimal military expenditure (0.8% of GNP in
1968, comparing with 16% of GNP in 1938)
- Proactive industrial policy
- Work ethic: work hard, save hard ⇒ high saving
rate (23% of disposable household income by
1970s)
- Pent-up consumer demand (save hard, but also
spend hard!)
 Postwar Industrial Policy
Japanese postwar economic growth was guided by
government ministries, such as Ministry of International Trade
and Industry 通商産業省 (MITI), Ministry of Finance, and
Ministry of Construction.

Selected industries were supported: electric power, steel,

shipbuilding, coal production, oil refining, chemical fertilizers,
plastics, petrochemicals, machine tools, electronic goods,
automobiles, artificial fibers, etc.
- Some of these industries have been successful (steel,
shipbuilding, and more), others were not (coal).
- Older industries, such as textiles, were not supported, and
losing importance in Japanese economy.
- In early 1950s, 30%of Japanese exports consisted of fibers and
textiles, and 14% was machinery; in early 1960s, 39% was
machinery, 26% was metal products, and only 8% was fibers and
textiles.
“The government did not normally give directly orders to businesses, but
those businesses that listened to the signals coming from the
easy access
government and then responded were favored with
to capital, tax breaks, and approval of their
plans to import foreign technology or establish
joint ventures. But a firm did not have to respond to the
government. The business literature of Japan is filled with descriptions
of the very interesting cases of big firms that succeeded without strong
governmental ties (for example, Sony and Honda), but there are not
many to describe” (Johnson 1982, 24).
Corporate Capitalism: The Enterprise Groups
(Keiretsu 系列)

菊池浩之（2017）『三井・三菱・住友・芙蓉・三和・一勧 日本の六大企業集団』東京： KADOKAWA。

 The High-Growth Era:
“The Bright Life”
- Getting a white-collar “salary man” job at one of the
large companies became the ideal middle-class
lifestyle
- Postwar employment system, characterized by lifetime
employment and seniority-wage system, emerged in the
1950s
- Education at prestigious universities was seen as the
key to favorable job and middle-class status
- “Examination hell” (試験地獄) ensued
- In 1960, the average worker in firms with more than 30
employees earned JPY24,000 per month; by 1970 it
had tripled to JPY75,700
- In 1965 72% of Japanese public thought that their
living standard was “in the middle;” by 1973 90% did.
The High-Growth Era:
“The Bright Life”

Captured from Duus (1998, 310)

 Japan’s Imperial Regalia
(三種の神器)

https://zh.cn.nikkei.com/politicsaeconomy/politicsasociety/35389-2019-04-30-10-05-25.html

https://mainichi.jp/articles/20140421/mul/00m/040/029000c
The New “Three Sacred Regalia”

https://www.city.shinagawa.tokyo.jp/PC/shinagawaphotonews/shinagawaphotonews-2015/hpg000026002.html
 Consumption
as Marker of Middle-Class Status

Scanned from Ohno (2018, 151)

 The Price of Affluence:
“Iron Triangle”
- Comprised of LDP politicians, interest groups (local businesses and
national business federations), and central bureaucracies
- Closed-door negotiations, unknown to general public
- Gift-giving, kickbacks, briberies...

Chances for
political career

Captured from Oyama Kenkyukai (2020, 171)

 The Price of Affluence:
Environmental Issues

「水俣病」

Chances for
political career

Scanned from Ohno (2018, 146)

Movie poster, Minamata (2020)

 Video
https://www.bbc.com/news/av/magazine-31156620
BREAK
 Nixon Shock and Oil Shock
- After WWII, the Bretton Woods system was dominant in world’s finance; many
currencies had a fixed exchange rate with USD and gold. The dollar-yen rate was
JPY360=USD. Japanese goods could be sold cheaply at this rate, and American
businessmen complained.
- In 1971, U.S. President Nixon’s administration announced that the fixed
international exchange rate and USD’s convertibility into gold were scrapped;
10% surcharge was imposed on all imports.
- The value of JPY rose immediately, and Japanese manufacturers were panic
- In 1973, Arab oil-producing countries placed an embargo on oil exports amidst
the Fourth Middle East War (Arab countries vs. Israel); the resourceless Japan
was in panic
- By late 1970s, Japanese government responded by borrowing, and big spending
on public works; companies streamlined by encouraging “voluntary retirements”
and hiring irregular employees.
- Some heavy industries (steel, shipbuilding, etc.) declined, but other “knowledge-
intensive” industries grew successfully: electrical and precision machinery, clocks
and watches, cameras, medical equipment, etc. Japan entered the 1980s known
for its high-quality, high-tech products.
 1980s: The Bubble Economy
- In early 1980s, Japan’s Minister of Finance decided
to liberalize the financial sector; strict regulations on
Japanese banks were lifted
- Banks competed, lending to risky and untested borrowers

- In 1985, The Plaza Accord was signed between U.S.,

U.K., France, West Germany, and Japan. USD was to
depreciate (i.e. other currencies were to appreciate)
- JPY appreciated sharply. In response, Bank of Japan
lowered short-term interest rates and increase money
supply (a high yen is never good for exports)

⇒The asset bubble

1980s: The Bubble Economy

Scanned from Ohno (2018, 164)

 The Burst of Bubble Economy
- By the end of 1980s, officials of the Ministry of
Finance felt that the stock and land prices (which
were supported by risky lending) had reached
dangerous heights
- Credit tightened, borrowing rates raised
⇒ stock prices plummeted
- High interest rates rendered development projects
infeasible ⇒ land prices plummeted
- In response, the Bank of Japan incrementally
dropped the borrowing rate to 1% in 1995, but
investment remained stagnant
- Banks have been frightened by bad loans, and unwilling to
take the risk to lend
 The Lost Decades
- To stimulate business, the Government became
a big spender again and initiate new
infrastructure projects
- Government debt increased
- Originally set at 3% in 1989, Japan’s consumption
tax was increased to 5% in 1997
- Consumers further discouraged to spend; a
prolonged recession ensued

(Note: Japan’s consumption tax was increased to 8% in

2014, and 10% in 2019)
The Lost Decades

Scanned from Ohno (2018, 170)

 Prime Minister Koizumi and
Japan’s Structural Reform
Prime Minister Junichiro Koizumi (小泉純一郎;
in office 2001-06) is a major figure who
reformed Japan’s political system, social and
economic policies in the early twenty-first
century. A follower of neoliberal approach that
liberates corporate flexibility and lessens
government’s responsibility, Koizumi is praised
by some (such political scientists Margarita
Estevez-Abe and Hiroshi Kaihara) but criticized
by others (such as anthropologist Anne Allison).
 Prime Minister Koizumi and
Japan’s Structural Reform
Three Main Pillars of Koizumi’s Reform:

1.) Privatization
- Japan Post, Expressway Companies, Tokyo Metro, etc.

2.) Deregulation and Marketization

- Deregulation of dispatch workers (派遣社員), allowing contract work to be
extended from one to three years
- Advocated results-based employment over seniority-based employment
- Allowing private companies to compete with the government to provide
public services

3.) Decentralization
- Reducing the central government’s burden over local issues
 Prime Minister Koizumi and
Japan’s Structural Reform
Effects:

Aurelia George Mulgan predicted that the results pf Koizumi’s reform would be
limited, as the former prime minister “is pitted against too many opposing power
structures that represent profoundly anti-reform interest” (2002, 239). However,
Koizumi’s reform yielded some countable results: government’s expenditure was
cut, Japan’s GDP growth reached approximately 2% under his administration.

Issues:

Koizumi’s reform is accused by many of contributing to Japan’s social inequality.

In 1990, 20.2% of Japanese workforce was irregular workers; the figure
increased to 26% in 2000, and 33.2% in 2006 (Uchiyama 2010, 140-1). In 2012,
one-third of all workers but half of all youths were irregular workers (Allison
2013). Deprived of corporate welfare and security while working at a low wage,
many irregular workers are described as “working poor.”
~HKD105,946 “Working Poor”

Asashi Shimbun Weekly AERA 2022.7.4. pp.19.

https://www.jcp.or.jp/akahata/aik17/2017-09-30/2017093002_03_1.html
Social Inequality
and
Aging Population Gini Coefficient

In 2017, Japan’s Gini coefficient is 0.5594

before redistribution, and 0.3721 after
redistribution.

For comparison, in 2016 Hong Kong’s Gini

coefficient stood at 0.539 before
redistribution, and 0.473 after redistribution.

Issue: An aging population means that a

declining workforce will be responsible for
the welfare of an expanding group of people
who may be in need after retirement.
In the twenty-first century, depopulation
becomes one of the key factors that determine
the future of Japan’s economy. What should
Japan do to survive amidst rigorous regional
and global competitions?
To rely on tourism?

https://www.mlit.go.jp/kankocho/siryou/toukei/in_out.html
Or, to attract short-term foreign labour,
international students, and long-term migrants?

Vietnam

The Philippines

Brazil

https://globe.asahi.com/article/13996571
References
Allison, Anne. 2013. Precarious Japan. Durham: Duke University Press.

Duus, Peter. 1998. Modern Japan. Boston: Houghton Mifflin.

Gordon, Andrew. 2014. A Modern History of Japan From Tokugawa Times to the Present, Third Edition. New
York, New York: Oxford University Press.

Johnson, Chalmers. 1982. MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975.
Stanford, Calif.: Stanford University Press.
Mulgan, Aurelia George. 2002. Japan's Failed Revolution: Koizumi and the Politics of Economic Reform.
Canberra: Asia Pacific Press, Asia Pacific School of Economics and Management.

Ohno, Kenichi. 2018. The History of Japanese Economic Development: Origins of Private Dynamism and
Policy Competence. Abingdon, Oxon; New York, NY: Routledge.

Pyle, Kenneth. 1996. The Japanese Question: Power and Purpose in a New Era, Second Edition. Washington,
DC: AEI Press.

Uchiyama, Yū. 2010. Koizumi and Japanese Politics: Reform Strategies and Leadership Style. London; New
York: Routledge.

大山研究会 (2020) 「なぜ水道法改正による水道コンセッション方式は自治体に広がらないのか ―宮城

県、浜松市の実態から―」『政治学研究』(62号) 頁167-200。

菊池浩之（2017）『三井・三菱・住友・芙蓉・三和・一勧 日本の六大企業集団』東京： KADOKAWA。