Economic Development in Japan since World War II
The Japanese post-war economic miracle and the development in business in Japan is the name given to the historical phenomenon of Japan’s record period of economic growth following World War II, spurred mainly by Japanese economic policy, in particular through the Ministry of International Trade and Industry. Ministry of International Trade and Industry (MITI), which coordinates national industrial policies consistent with economic and social growth. In unique government-industry collaboration sometimes referred to overseas as “Japan, Inc.,” MITI selects and nurtures industries targeted as important to Japan’s future economic growth and business in Japan. Industries so targeted have included chemicals, iron and steel, shipbuilding, and transistor radios in the 1960s; automobiles and electronics in the 1970s; and computers, computer chips, and other high-technology industries for the 1980s. In addition to stimulating new industries, MITI also smoothes the way for plant closings and worker retraining in industries targeted for de-emphasis, such as textiles in the 1970s and the ailing coal-mining and shipbuilding industries in the 1980s. Most recently, MITI has also assumed an active role in lessening Japan’s positive trade imbalances through a variety of import promotion measures, in collaboration with both domestic companies and foreign firms.
For three decades from 1960, Japan experienced rapid economic growth. Business in Japan was flourishing . With average growth rates of 10% in the 1960s, 5% in the 1970s, and 4% in the 1980s, Japan was able to establish and maintain itself as the world’s second largest economy from 1968 until 2010, when it was supplanted by the People’s Republic of China. However, in the second half of the 1980s, rising stock and real estate prices caused the Japanese economy to overheat in what was later to be known as the Japanese asset price bubble. The economic bubble came to an abrupt end as the Tokyo Stock Exchange crashed in 1990–92 and real estate prices peaked in 1991. Growth in Japan throughout the 1990s at 1.5% was slower than growth in other major developed economies, giving rise to the term Lost Decade.
The problems of the 1990s may have been exacerbated by domestic policies intended to wring speculative excesses from the stock and real estate markets. With government efforts to revive economic growth throughout the 1990s unsuccessful, Junichiro Koizumi adopted policies to promote exports, effectively raising GDP on an average of 2.1% annually from 2003 to 2007. Subsequently, the global financial crisis and a collapse in domestic demand saw the economy shrink 1.2% in 2008 and 5.0% in 2009. Japan has the world’s highest gross sovereign debt amounting at 225% of GDP or US$10.55 trillion.