Japan Determinants of Growth 1945 73

In the late 1800s when Japan became an open economy, there existed a huge gap between its economy and that of the Western powers resulting from its long history of isolation from the rest of the world (Chenery, Hollis, Shishido & Watanabe, 1962). This gap was however narrowed through the development of agricultural technology that occurred during the Tokugawa Period. The gap was further narrowed by the series of modernization measures that were carried out during the Meiji Period by the central government which facilitated the importation of ideas and technology from the western countries. The country’s economy was thus set on the path of modern economic growth. It is these remarkable achievements that provided the basis and skills that facilitated the rapid economic growth in the country after its massive destruction in the Second World War.

One of the major challenges that Japan’s economy faced after the defeat in the war was unemployment. During the war, Japan had employed millions as either military troops or other military-related jobs. When the war came to an end in 1945, more than 7 million who had served as military troops and another 4 million who engaged in other military-related jobs were rendered jobless (Aliber, 1973). Additionally, more than 1. 5 million Japanese who had been living abroad were forced to return to their country bringing the number of unemployed people to approximately 13 million. Reforms by the Allied Powers Since the economy of Japan badly needed reconstruction, and the country was nearly helpless, the government of the time allowed Allied Powers, mostly American forces to occupy Japan.

Since there was a Japanese government in place, the occupation by Allied Powers took the form of indirect rule (Chenery et al. The Allied powers however set forth reform policies that were more of a direct rule. The occupation was led by General Douglas MacArthur who acted in the capacity of the supreme commander of the Allied Powers. Demilitarization of Japan’s Economy Before commencing the implementation of the reform policies, the Allied Powers under the leadership of General Douglas MacArthur initiated economic demilitarization aimed at stopping and closing down the production of all military materials. The anti-monopoly law facilitated the reform by prohibiting all cartel activities. The decentralization law, on the other hand, facilitated the reform by forcing firms to downsize in case they had market control (Yamamura, 1997).

The dissolution of the zaibatsu was another significant determinant of the rapid growth in the Economy of Japan between 1945 and 1978. Their existence had been unfair to the smaller upcoming companies and the workforce. With their dissolution, competition became fierce in all industries, and more jobs were created marking another milestone in the growth of Japan’s economy. By 1950, the percentage of Japanese farmers who owned the lands they cultivated had risen to 90% (Yamamura, 1997). The rapid abolishment of the feudalistic state of land ownership was due to the eagerness of both the landlords and the nation as a whole to modernize the country and bring it to recovery. The land reform was another important determinant of the rapid growth in Japan’s economy witnessed between 1945 and 1978.

The reform revolutionized agriculture and allowed more arable land to be brought under cultivation. Farmers also felt more motivated with the elimination of land rates and the betterment of tenancy practices for those who did not acquire lands. This reform marked yet another significant determinant of the rapid growth in the economy of Japan between 1945 and 1978. The labor unions established through this reform achieved better working conditions and better pay for the Japanese workforce. These better working conditions and higher wages motivated workers and significantly expanded the domestic consumption markets thereby laying the foundation for the rapid growth in the economy of Japan. Policies of the Japanese Government The role of political factors in the rapid growth of Japan’s economy after the devastating effects of the Second World War cannot be underrated.

The political factors created by the Occupation of Japan by the Allied Powers created a favorable environment for the growth of the economy through the initiation and implementation of various policies as discussed in the previous sections. The U. S. , therefore, had to save itself from the effects of the Cold War. One of the actions taken by the U. S. Through this policy, the central government increased its investment in both public and private firms. The government also increased the amount of foreign trade between Japan and other countries. The aim of the increased investment by the government as well as the increased foreign trade was to double Japanese workers’ income and set higher standards of life from 1961 to 1970 (Ohkawa, Kozuchi & Rosovsky, 1997).

Even though the accompanying heavy industrialization of the plan caused massive pollution that had to be addressed, the plan was an important determinant of the rapid growth of Japan’s economy. In the late 1960s, the plan contributed to an average growth rate of 10. The approach targeted four major industries; shipbuilding, machinery, chemical, and steel industries. These industries were identified to have the potential for long-term success since their world markets were large and rapidly growing. The Ministry of International Trade and Industry, therefore, focused on these industries as a way of entering international markets and growing the economy of Japan Rapidly (Ohkawa et al. With the large amounts of financial aid and new technology that the ministry offered these industries, there was exponential growth which translated into rapid growth of the entire economy since economic sectors are interrelated.

The Korean War The outbreak of the Korean War resulted in rapid growth of economies around the world. Much of the technology in Japan that contributed to the rapid growth of the economy was created through a combining various technologies imported from other countries (Kosai, 1997). This importation is facilitated by the unique character of the Japanese people which allows them to not only imitate skills but also improve them and apply them to different systems. The importation and combination of foreign technology with domestic innovation as was facilitated by the unique character of the Japanese people translated into tremendous industrial strength which was critical in spearheading the rapid growth of the country’s economy as witnessed between 1945 and 1978. This is because improvements in technology spread across all industries.

Conclusion When Japan became an open economy, there existed a huge gap between its economy and that of the Western powers. Policies advanced by the Japanese government include the Yoshida doctrine, the Dodge plan of 1948, the income doubling plan of 1960 and tight monetary policies. Another political factor that contributed to the rapid economic growth in Japan was the Korean War. The nature of the Japanese people contributed to the rapid growth since their unique ability to imitate, improve and apply technology from other countries translated into a significant industrial strength that increased the production capacity of the economy. References Aliber, Robert Z. (Jan. 1962), “The Pattern of Japanese Growth, 1914-1954”, Econometrica, Vol. 30, No. 1, pp. Flath, David, (2005), “Postwar Recovery (1945 – 1964), in The Japanese Economy, pp 71 - 92.