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Introduction From the mid-19th century, when the government opened doors for western commerce and trade, Japan has experienced two economic growth periods one was between 1868 to World War I; the other between 1945 to1980. Impact of World War I: When World War I started in 1915, many of the European countries were involved. The supply of raw materials and manufactured goods were halted as most of the countries could not participate in international trade. Japan’s economy was on the line as they depended on Europe for industrial imports and for good quality machinery. During this period, the United States economy was growing and was importing a lot from Europe. Now that this war was on and the imports from Europe were not available, Japan’s fewer quality goods became the substitute for the United States and the globe in general. The demand by America moved from Europe to Japan. Japan was to enjoy a broad-based export boom. Various industries were developed as they all benefited: from transport and communication, marine, shipbuilding, manufacturing and also agriculture. What brought about this export boom was primarily lack of participation in World War I. In this great depression, Japan’s economy was less affected compared to other European countries and America. In 1920, Japan could produce most of the machines domestically. Chemical ad manufacturing industries were growing steadily. This included steel, silk (rayon) and electrical. The Japanese government advocated for industrial cartels to prevent unnecessary competition.
Power was available at low prices thus helping the expansion of electricity-intensive industries, for example, ammonium sulphate production. Starting from 1937, the Japanese government searched for important natural resources in order to ensure economic independence. This included coal from china, sugarcane in the Philippines, and petroleum from East Indies. During this expansion, the economy grew considerably. Production doubled from 1937 to 1943, steel production rose by 30%in the same period. Production of aircraft and vessels increased by 94% Pacific war Japan’s economy and its territories suffered a lot. High inflation rates existed. By 1944, the prices had more than tripled compared to 1936. The industries dedicated most of their production to military needs neglecting the commercial requirements. The local industries could not produce enough quantities in order to avoid shortfalls. In any case, the sea trade (maritime trade) which was the main means of transport was highly reduced as most of the merchant fleets were destroyed during this war. By 1944, Japan was operating with a fleet of two million tons of supply from six million in 1941. As this war ended, transport was almost unavailable, high inflation rates prevailed, and a weak currency. This brought the Japanese economy to its knees. (Yasushi pg 1 & 2). Post war period. The gains enjoyed since 1868 were destroyed by this war. More than 40% of the industries and infrastructure were brought down but the people realized this and begun to rebuild their nation. They started to build modern factories.
The soldiers joined the highly educated force in rebuilding their nation. Between 1945 -1952 the Americans came to assist through a grand of about 1.9 United States billion dollars. The grants consisted of food, industrial materials, and also transport equipment. During this period, the US helped the Japanese in implementing various reforms. Japan also benefited from the trade that existed between them as they were able to export more and import technology and other needs without getting into deficit. Rebuilding In the early years after WW I, heavy investments were done. These included chemical industries, electric power, and also coal and steel industries. In the 1950s, the economy had started to recover and actually surpassing the rates before the war. By 1965, these industries had recruited more than 41% of the available labor force. The high technological advancement was achieved due to the high standard of the education system. Discipline was key in schools which was another plus in creating an effective workforce. In the mid-1960, the production of automobiles, machine equipment, and also ships expanded. Between the years 1965-1975, more than 15% growth was experienced in mining and manufacturing. In the early 1970s, service industries such as finance and real estate; streamlined their operations. Oil crisis Japan was highly dependent on foreign petroleum. The oil crisis of 1973 made it faces economic setbacks. There was reduced industrial production marked by price inflation. The nation had to look for alternative energy sources which involved high investment costs. Most of these energy-intensive industries in the end managed through the crisis. Microcircuits and semiconductors in the late 1970s led to growth in electronics and computers and also high production in the existing industries. There was increased energy efficiency. In the 80s, the economy grew between 4% and 6%.
These were good rates considering the existing petroleum prices and the unavailability of domestic resources. The growth was slow but many industries were revived. Domestic demand helped in transforming the economy. This demand was increased by the need for high technology products, health and high living standards. Due to the information-based economy, heavy investments in the research were made. In the 1990s, Japan came up with policies that encouraged savings. The currency, the Yen appreciated against other currencies. Local companies invested in capital investments. Speculation went high in the stock exchange and real estate due to a lot of money available for investments. Eventually, investments were moved to other countries and some firms lost their technological dominance. The products lost their competitive edge and the effect brought about deflationary spirals. Other reasons for the deflation were: insolvent companies, insolvent banks and fear of banks getting insolvent. (Kyoji PDF pg 5 & 6)
Conclusion: The economic history was contributed by: first, the quality of investments in the 1980s. They imported the latest technologies avoiding trial and error experienced by other countries. They used the technology to do research which brought about a lot of innovation. The second was the labor force which was available and literate. The wages were reasonable and matched with production. This was facilitated by the cooperation shown by the labor unions. Thirdly was the productivity growth. The skilled labor together with high rates of savings and investments and low population growth were of great impact. Fourthly were the economies of scale. Many companies consolidated and formed groups that were more efficient and productive. Lastly, the international conflicts worked to their advantage except World War I.
References
- Fukao, Kyoji (PDF).Real GDP in pre-war EastAsia: A1934-36 Benchmark purchasing power parity comparison with the US.
- Takafusa, Nakamura; Konosuke, Odaka, Oxford economic history of Japan, New York: Oxford University, 2003
- Toriumi, Yasushi, Nihon no Kindai: Kokumin Kokka no Keisei Hatten to Zasetsu Modern Japan: The Formation, Development and Collapse of the Nation State), Japan University of the Air Press, 1996.
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