Japan’s Economic Development after World War II

Japan achieved a significant growth after World War II as its economy developed from the remnants of an industrial infrastructure that had gone through massive destruction during the war. Japan was less developed at the end of the Allied Occupation in 1952 when its per capita consumption was about one fifth that of the United States. Within the next two decades, the country realized a tremendous improvement as its growth rate had averaged an annual of 8 percent, hence making it the first to have moved from less developed to developed status in the entire postwar era. To understand the reasons behind the growth of Japan’s economy, it is important to examine the factors that facilitated its steady growth to the point that the country became the second largest economy worldwide in the 1980s. Moreover, the United States played a special role in aiding economic growth in Japan. This discussion regards postwar economic growth in Japan as a dependent variable that is influenced by factors such as American policies, Japan’s industrial capacities, government policies in Japan, and the international market that are the independent variables. The underlying assertion is that the postwar economic growth in Japan was influenced by American policies, Japan’s industrial capacities as well as government policies, and the international market among others.

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Relationship between Variables

Dependent variables are subject to change due to manipulation from the independent ones. In this case, postwar economic growth in Japan is regarded as a dependent variable since it is influenced by factors such as the international market, Japanese government policies and industrial capacities among others. To that effect, it is believed that the factors are directly responsible for the current economic development that has been realized in Japan. As opposed to the dependent variable that is prone to change, independent variables are not affected by other measured characteristics. Factors such as the international market, Japan’s industrial capacities, American policies and Japanese government policies are the independent variables in this case as they are not subject to change resulting from an influence by the measured variable.

Wartime Experience

Japanese economy realized a drastic development in the period between 1937 and 1945. According to the production indices, the country realized an increment of 24 percent in its manufacturing industry and 252 percent development in its machinery (Albert, 2015). The economy continued becoming militarized, diverse and sophisticated in ways that enabled its conversion to peacetime activity. For example, the country’s automobile industry experienced a big growth during the period. Feasel (2015) states that out of the 11 main auto manufacturers in Japan, ten resulted from the war years with only Honda being a product of postwar era. The automobile sector took off in the postwar period by developing the advances that the country made during the war.

At the end of the war, the technology and a high percentage of the wartime companies were successfully converted into economic development. According to Francks (2015), the private organizations in Japan managed to expand quickly and fearlessly as they were able to get big loans from banks, hence taking large debts. The leadership of the companies was brave enough to take risks as evidenced by the decision of an upstart motorcycle company that was under the sponsorship of Honda Soichiro to join the auto market in 1963 (Feasel, 2015). The company realized a great success that inspired other private firms to ignore the challenges of startup ventures.

The spirit of nationalism alongside the pursuit to rival the West was very high in Japan after the war. The government mainly focused on industrial and economic goals. Hermwille (2016) states that several changes were made in the economy following the conversion of machine gun factories to be used in producing sewing machines as factories that originally made optical weapons were converted to the manufacture of binoculars and cameras. The Japanese were concerned about development of new technologies as they adopted new management styles that enabled the existing companies to upgrade and update their operations in line with the shifting market demands. It was necessary to rebuild the Japanese economy from scratch; hence, the people actively brainstormed on the viable technologies. The changes that took place in Japan after the war were effectively implemented due to the supportive international environment that was characterized by free trade, readily available raw materials, and cheap technology. The U.S. economy was friendly to Japan during the Cold War years. At the time, it was acceptable for Japanese markets to get closed with the American markets remaining open to Japanese goods.

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U.S. Policies toward Japan after 1947

Due to the strategic interest that the US had during the Cold War, it allowed Japan to export its manufactured goods while protecting its domestic market. Consequently, cartels and non-market driven factors were formed in Japanese economy as Japan successfully developed asymmetrical relationship with the US. Hermwille (2016) states that Japan developed an export-driven economy that gained significantly from the available international market which set very low tariffs. In addition, the country took advantage of low oil prices and that of other raw materials used in manufacturing. Japan has also remained under U.S. military protection because its constitution does not allow rearmament. As such, the country does not spend much in an attempt to boost its defensive abilities. The low expenditure in military defense helps Japan to save much money that it could have spent on self-defense if it was militarily on its own.

Financing the Japanese Economy

Japanese leaders who were in the ruling party and the bureaucracy worked in close cooperation with the corporate executives for effective management and development of the economy. Within 23 years after 1950, the gross national product of Japan realized an expansion of at least 10 percent annually with an exception of minor downturns (Huang, 2013). The period also saw much investment in technology that enabled Japan to develop an export-oriented economy. A higher percentage of goods that were manufactured in Japan found their markets abroad. The foreign currency that was obtained from the sale of products in international markets was used to buy raw materials, technology, and energy for use in fueling further industrial development (Iyoda, 2010). Although Japan is not rich in raw materials for use in industrial development, the country currently exports at least 70 percent of its manufactured goods. At the start of the export-based economy, Japan enjoyed a favorable international environment.

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Moreover, Japanese government also established regulations in the form of loans that facilitated the Growth of Japan’s economy. Public institutions and private banks focused on using individual savings to provide capital to businesses. Between 1950s and 1960s, 1/3 of the total bank loans in Japan were derived from private savings (Iyoda, 2010). Movchan, Zotin and Grigoryev (2017) state that to date, the Japanese households continue saving in excess of 20 percent as compared to the early days. The funds deposited in commercial banks’ savings account or in the postal savings systems that were managed by the government provided a big pool of capital that was availed to investors. More importantly, the government developed steps that were aimed at avoiding competition by creating monopolies that also contributed to Japan’s economic development after World War II.

Social Mobilization

Japanese consumers were socially mobilized to avoid focusing on their personal benefits and shoulder the cost of Japanese companies’ competition in the international market by buying the country’s consumer goods at a higher price. After the end of the World War II, the consumers of Japanese goods were educated on how best they can redirect their commitment to the country while shifting from military to economic expansion (Ohno, 2014). They were made to believe that they are homogenous people who could hardly be rivaled by other Asian and Western countries. Consumers were persuaded to ignore the high costs that they had to pay for consumer goods which they could purchase cheaply abroad. They were required not to demonstrate individualism but to support the country’s economic expansion by purchasing its products irrespective of the prices.

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This discussion has revealed that there were several factors in play that facilitated the development of Japan’s economy. Among the main factors are technological advancements, successful conversion of wartime companies into economic development, the spirit of nationalism among the Japanese, and the friendly U.S. policies towards Japan. Other factors include social mobilization and availability of a welfare society. Moreover, it is evident that availability of free market abroad enabled Japan to find ready market for its manufactured goods. Japanese also have an entrepreneurial culture that enabled them take the risk of starting new companies as seen with the automobile industry.


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