The Poli ical Economy o Japan
B adley M. RICHARDSON
Ohio S a e Uni e si y
Wo king Pape n.81
Ba celona 1993
Japan's economy is one o he success s o ies o he pos -Wo ld Wa II e a.
Li e ally ising om he ashes o wa ime des uc ion and neglec , he Japanese
economy is oday he second s onges economy in he wo ld. Gi en his success,
he ole o he Japanese go e nmen in economic g ow h and he na u e o s a e-
socie y ela ionships in economic policymaking is a subjec o conside able in e es . I
is also a subjec o much con o e sy. Japan is o en seen as he wo ld's mos
success ul example o go e nmen di ec ed economic de elopmen (1). Admi e s o
Japan's success look o he "ma ke - ollowing" go e nmen s a egies and alleged
s ong go e nmen -business coope a ion as a solu ion o p oduc i i y and
compe i i eness lags in o he coun ies (2). Elsewhe e, c i ics o Japanese policy
asse ha hese same endencies a e a h ea o he su i al o he wo ld's o he
leading economies (3). Bo h o hese g oups belie e ha he Japanese go e nmen
had a s ong, di ec i e ole in ha coun y's economy.
Some Japan specialis s a ibu e a di e en , less dominan ole in economic
a ai s o he Japanese s a e. These pe sons see Japanese economic policy as an
a ena o go e nmen -p i a e sec o nego ia ion and some iew go e nmen inpu s as
seconda y in impo ance o p i a e sec o beha io as a d i e o he economy (4).
Fo example, many economis eel ha he go e nmen ’s main con ibu ion o
Japan’s economic dynamism was encou agemen o high sa ings and in es men ,
and ha Japan’s economy is mo i a ed mainly by p i a e sec o compe i ion like ha
in o he ad anced coun ies (5).
Ob iously he e a e many iews o Japanese economic de elopmen . All
obse e s ag ee ha Japan's economy has come a since Wo ld Wa II's end, e en
while di e ing on he causes and signi icance o he go e nmen 's ole in his g ow h.
The di e ences in in e p e a ion e lec di e en ini ial assump ions and di e en
esea ch conce ns in an a ea o conside able complexi y. S udies which asse a
s ong go e nmen ole no mally ha en' examined policymaking and policy
implemen a ion p ocesses and igno e he inpu s o p i a e in e es s o his eason.
Some s udies which downg ade he go e nmen ole e lec no ma i e p e e ences
o ee compe i ion.
In his chap e , I will e iew di e en explana ions o Japanese economic
g ow h and a emp a syn hesis o di e en iews. I will also examine he implica ions
o a gene al model o Japanese poli ics -con lic amids coope a ion and s uc u e- o
pa e ns in poli ical economic beha io . We an icipa e ha we will ejec he simple,
bu eauc a ic dominance model o Japanese economic policy. I is likely ha Japan's
economic policymaking will o en be plu alis ic despi e pe iodic e o s o s uc u e
ela ionships and make compe i ion o de ly and ha economic policies will be he
esul o nego ia ion be ween public and p i a e sec o ac o s. Re lec ing he
impo ance o in e -ac o nego ia ions, policies will include elemen s o bo h minis y
ideology and p i a e i m conce ns o p o i s and ma ke sha es. Despi e s ong and
edundan pe sonal and ins i u ional ies be ween p i a e in e es s and s a e
minis ies, and equen in e -ac o consul a ion, he e will also be equen
disag eemen s in hese p i ileged channels. Finally, many policy decisions will be
poli icized and public policies se ing poli ical clien s may be quan i a i ely as
impo an as incen i es o de eloping indus ies (6).
Japan's Economic Mi acle: The Reco d. Japan's economic pe o mance
since Wo ld Wa II is one o he uly d ama ic ends in ecen wo ld economic
his o y. S a ing wi h an economy d as ically dis up ed by Wo ld Wa II and mo e
dependen on o eign aw-ma e ial sou ces han ha o any o he majo powe ,
Japan in some yea s egis e ed he highes annual g ow h a es e e expe ienced in
he de elopmen o he wo ld's majo economies.
The eco d is jus as imp essi e om he pe spec i e o Japanese his o y.
Japan made majo s ides in economic g ow h be o e Wo ld Wa II. In 1939 Japan
was he mos ad anced indus ialized na ion ou side o Wes e n Eu ope and No h
Ame ica, bu s ill had some cha ac e is ics -among hem, ex ensi e u al po e y and
s ong ligh indus ies expo s- ound in some " hi d wo ld" economies oday. Six
yea s la e and de as a ed by wa , Japan's economic po en ial was educed o less
han one hi d o i s o me capaci y. Ye by he 1950s Japan had eco e ed p ewa
p oduc ion le els and by 1990 economic ou pu in cons an p ices was o e six imes
ha o 1960; nominal GDP inc eased 24 imes in his same pe iod. The pe o mance
o he economy in indus ial sec o s such as i on and s eel, au omobiles, machine y
and elec onics was especially s ong.
T ends in he g oss na ional p oduc p o ide a good beginning poin o
measu e Japan's pos wa economic success. In 1955 ( oughly he beginning o he
high g ow h pe iod) Japan's nominal GNP was $24 billion. By 1978 he GNP igu e
had eached $963 billion and by 1991 Japan's GNP was assessed a $3.4 illion
(Table 1)(7). As pa o his pa e n, Japan expe ienced e y high g ow h a es in
some indi idual yea s. The peak yea s in his end we e 1960, 1961 and 1964, when
13-14 pe cen eal g ow h was obse ed. G ow h in 1968-1969 was almos as apid.
These igu es we e d ama ically highe han g ow h a es in o he economies up un il
ha ime (8).
When he Japanese igu es a e compa ed on a pe -capi a basis wi h hose
om o he indus ialized coun ies, Japan's economic success can be seen e en
mo e clea ly (Table 1). In 1952, Japan's pe -capi a GNP was $188, oughly
one- wel h ha o he Uni ed S a es and one-hal ha o Wes Ge many. By 1960,
Japanese pe -capi a GDP had g own o $458, while by he mid-1970s i was well
o e $4,000 and nea ly 60 pe cen o Ame ican and Ge man le els. By 1980,
e lec ing changes in cu ency alues as well as con inued g ow h in mos yea s, he
Japanese igu e soa ed e en close o he le els egis e ed in he Uni ed S a es and
Wes Ge many. By 1990 bo h Japan and Ge many had passed he Uni ed S a es.
Pe -capi a nominal GDP in Japan had inc eased 31 imes om 1952 o 1990(9). In
sligh ly o e one cen u y Japan was ans o med om being a p edominan ly poo ,
ag icul u al coun y o be one o he wo ld's mos success ul economies.
Pos wa g ow h in p oduc ion in speci ic indus ies p o ides a u he g aphic
es imony o Japan's success. Inc eases in s eel p oduc ion a e an excellen indica o
o pos wa indus ial g ow h. Japan was al eady unique in he non-Wes e n wo ld
be o e Wo ld Wa II by i ue o i s hen high le els o s eel p oduc ion ela i e o
o he coun ies ou side o Eu ope and No h Ame ica. In 1896 Japanese s eel ou pu
was only an es ima ed 100 ons, bu by 1936 s eel p oduc ion had eached 3.6 million
ons. By 1960, in he middle o he high g ow h pe iod, he igu e o Japan had g own
o a much g ea e 22 million ons and in 1973, Japan eached i s peak pos wa s eel
ou pu o 119 million ons (10). Since hen Japan has anked second in he wo ld in
c ude s eel ou pu behind he USSR.
G oss p oduc ion and c ude s eel igu es a e good indica o s o Japan's
o e all pos wa economic pe o mance. GDP and GNP es ima es indica e he
gene al shape o economic g ow h, and c ude s eel is one o he mos basic o
indus ial commodi ies because o i s use in many o he manu ac u ed p oduc s. S ill,
hese gene al pe o mance igu es do no ell he whole s o y. Qui e a bi o Japan's
pos wa success has been due o g ow h and eno mous expo sales o speci ic
indus ies. In he 1950s and ea ly 1960s hese indus ies included shipbuilding and
s eel. La e , he au omobile, elec onics and machine ool indus ies eplaced hese
p oduc s as expo leade s.
The au omobile indus y is a s iking example o Japanese g ow h and
ela ed expo success. In he ea ly pos wa e a, Japan's au omobile p oduc ion was
e y small, ac ually minuscule in compa ison wi h he Uni ed S a es and Eu ope. In
1960, o example, Japan p oduced only 165 housand au omobiles and 308
housand ucks. By 1970, howe e , au omobile p oduc ion alone had inc eased o
o e 3 million uni s, and by 1990, he igu e was nea ly 10 million uni s, a
six y- wo- old inc ease in p oduc ion o e a wen y eigh yea pe iod. By 1980
Japanese passenge ca p oduc ion exceeded ha o he Uni ed S a es, he wo ld
leade up un il hen (11). In ecen yea s oughly hal o he au omobiles p oduced in
Japan we e expo ed, wi h a la ge sha e o hese expo s going o No h Ame ica.
P oduc ion da a o se e al o he mode n manu ac u es indica e simila ly
success ul ajec o ies, as do also igu es o Japan's o eign ade. As is well known,
Japan is cu en ly he wo ld's la ges expo e o au omobiles and consume
elec onics, as well as a majo expo e o many o he indus ial commodi ies.
Japan's economic mi acle was all he mo e imp essi e in iew o ha
coun y's adi ional dependence on o eign impo s o many o he aw ma e ials
needed o indus ial p oduc ion. Cu en ly Japan impo s nea ly all o i s ene gy
needs; impo ed c ude oil con ibu es 99.5% o Japan's equi emen s, while he igu e
o coal is 92%. O he mine als a e also sca ce in Japan: he dependency a io o
i on o e is 100%, while ha o coppe – he only me al o impo ance mined in Japan-
is 98.9%. O e hal o Japan's ood needs a e also me by impo s, wi h eed g ains,
co n, whea and soybeans leading he way (12).
Japanese Go e nmen s Economic Plans. Japan's economy was se e ely
weakened du ing Wo ld Wa II: plan s and acili ies we e damaged o des oyed, and
wo k was dis up ed by mobiliza ion and ligh om he ci ies. Many o he ini ial
policies o Japanese go e nmen a e he end o he wa we e conce ned wi h epai
o physical acili ies and he mo e complex ask o e i ing an economy whose basic
ins i u ions we e dis up ed and diso ganized. In he ea ly pos wa e a Japan also
su e ed om loss o o me sou ces o c i ical aw ma e ials. In con as wi h he
immedia e pos wa yea s, he decades o he 1950s and 1960s we e gene ally a
pe iod o consolida ion and g ow h. Th oughou he 1950s and mos o he 1960s, he
Japanese go e nmen was suppo i e o economic g ow h, a imes a he expense
o al e na i e policy choices.
F om he 1950s on, he Japanese go e nmen endea o ed o p omo e
economic g ow h h ough a ious mac o-economic policies and by sec o al p og ams
aimed a de elopmen o speci ic indus ies. An al e na i e policy commi men o a
majo ea mamen was essen ially ejec ed a e an in ense deba e. Speci ic
go e nmen economic ools, including go e nmen bank loans, ax incen i es and
ade p o ec ion, we e de eloped and deployed o os e mode niza ion and g ow h.
Indica i e economic planning began in Japan in he 1950s (13). Fi e majo
plans we e de eloped and p omulga ed by he Economic Planning Agency be ween
1955 and 1967 (Figu e 1), and o he plans ha e ollowed o e ime. Indica i e plans
se economic goals and do no p o ide sanc ions o non-compliance. Like hei
F ench coun e pa s, he Japanese plans se ed as b oad ou lines o guidance o
public and p i a e economic ac i i y a he han as compulso y p og ams. Japan's
plans we e essen ially la ge-scale de elopmen o ecas s bu essed by elabo a e
s a is ical e e ences and supplemen ed by p og ams o g ow h in speci ic sec o s in
qui e a ew cases. The plan documen s con ained speci ic a ge igu es o
e e y hing om a m c ops o he ou pu om speci ic majo indus ies. The plans
also con ained sec ions on in as uc u e, public wo ks and social p og ams needs.
Each o he plans had a special ocus and a ge slogans, such as ca ching up wi h
B i ain (1953-1957) o he doubling o incomes (1960-1967). As ime wen on and he
economy p ospe ed, and new needs in en i onmen p o ec ion o social secu i y
became ob ious, he conce ns add essed by he plans shi ed mo e o non-economic
goals in he quali y o li e and wel a e a eas. The planning p ocess con inues e en

oday al hough he plans a e gi en much less public a en ion han in he ea ly
pos wa e a.
Indus y " a ionaliza ion" and de elopmen policies and go e nmen o eign
ade policies supplemen ed he gene al economic plans in he e o o p omo e
economic g ow h and shape i s di ec ions in speci ic indus ies. The Minis ies o
In e na ional T ade and Indus y and T anspo a ion o ches a ed a wide ange o
suppo s o encou age de elopmen and compe i i e iabili y in in e na ional ma ke s.
Mos o he laws and plans de eloped as pa o hese p og ams we e e y gene al
and can bes be seen as policy amewo ks. Gene al goals we e indica ed by hese
amewo ks. Mo e speci ic p og ams and policy ools we e de eloped and deployed
unde he "umb ella" p o ided by he amewo k laws and policies. As can be seen
om he examples in Figu e 1 he emphases on di e en indus ies changed o e
ime. The 1950s p og ams add essed in a-s uc u e needs and hea y indus ies,
namely powe , coal, shipping, s eel and pe ochemicals (especially e ilize ). La e
in e es shi ed mo e o au omobiles, machine ools and elec onics.
Speci ic policy ools such as go e nmen bank loans, accele a ed ax
dep ecia ion allowances o equipmen pu chases, special ax ese e unds o
expo ma ke de elopmen , and ax deduc ions o income ea ned o e seas we e
designed o os e g ow h and p omo e expo s in pa icula a eas ollowing he
gene al di ec ions indica ed in he " amewo k" documen s. MITI con ol o e aw
ma e ials and echnology impo licenses pe mi ed alloca ion o c i ical ma e ials and
p ocesses o indus ies sla ed o de elopmen , especially in he 1950s and ea ly
1960s. In he 1960s, in e - i m me ge s we e also encou aged on he assump ion
ha concen a ion would lead o g ea e in e na ional compe i i e powe . O he policy
ins umen s included p o ec i e a i s and impo quo as and he sanc ioning o
in e - i m ca els. In o ma ion in Figu e 2 shows he clus e o policy ools de eloped
o suppo he compu e and "in o ma ion" indus y unde speci ic amewo k
legisla ion and se es as an example o he mul i- ace ed go e nmen e o s.
Mac o-Economic Policy and Japan's Fiscal In es men and Loan P og am.
Japan's mac o-economic policies gene ally suppo ed he go e nmen 's
commi men o g ow h in he 1950s and 1960s. Mone a y policy sough o main ain
economic s abili y and o educe p essu e on cu ency ese es when in e nal
demand led o inc eased impo s. On some occasions indus ial a ge ing plans
we e held back in de e ence o coun e -cyclical mone a y policies.
One o he mos impo an con ibu ions by he Japanese go e nmen o he
suppo o economic de elopmen du ing his pe iod was i s commi men o iscal
es ain . Japan in he 1960s had he lowes le el o axa ion o any majo indus ial
powe . In 1965 o al axa ion in Japan (excluding social secu i y con ibu ions)
amoun ed o 18 pe cen o g oss domes ic p oduc , in con as wi h 27-35 pe cen o
he Uni ed S a es, B i ain, Ge many and F ance. Public expendi u es om he annual
budge s in Japan also ca ied ou a heme o limi ed go e nmen . In he 1950s and
1960s go e nmen ou lays on cu en accoun ep esen ed only 13-14 pe cen o
g oss domes ic p oduc in Japan, whe eas in o he indus ialized coun ies hey
anged as high as 30 pe cen . Cons ained go e nmen expendi u es we e one way
o acili a e sa ings and in es men . Less was ex ac ed om na ional income and
alloca ed o public expendi u es in Japan han in o he indus ialized na ions (Table
2), which pe mi ed alloca ions o unds o o he pu poses.
A majo eason o he compa a i e di e ences in go e nmen expendi u es
we e lowe Japanese ou lays on social p og ams and de ense. A e an in ense
deba e in he ea ly 1950s o e de ense ou lays s. economic de elopmen , Japan's
go e nmen decided o place g ow h a he op o i s agenda. A es ic ed
de ense- o ce concep was de eloped a his ime wi h he esul ha subsequen
de ense ou lays ho e ed a ound 1 pe cen o he na ional income in much o he
pos wa e a (14). In con as , Uni ed S a es spen a ound 6 pe cen o i s GDP on
de ense in mos yea s while o he coun ies in he NATO alliance no mally spen
be ween 3 and 6 pe cen on hei mili a y e o s (15). In he mid-1960s Japan also
spen a li le less on social wel a e ou lays han he Uni ed S a es and oughly one
hi d o he amoun s commi ed o social p og ams by Eu opean coun ies. The
pic u e is much he same oday, wi h he excep ion ha Japanese expendi u es on
social secu i y a e much highe because o policy changes in he 1970s and he
ma u ing o he pension sys em. Japan’s go e nmen pension and heal h ca e
p og ams a e now as comp ehensi e as hose in some Wes e n Eu opean coun ies.
Expendi u es will con inue o g ow in his a ea as ime passes (16).
In addi ion o a cons ained iscal policy, he Japanese go e nmen
encou aged in es men by main aining low in e es a es in some pe iods (17). The
OECD es ima ed by he la e 1960s ha g oss ixed in es men in Japan a e aged
38 pe cen o g oss domes ic p oduc each yea ; he compa able igu es o o he
majo indus ialized coun ies anged be ween 16 pe cen o he Uni ed S a es and
26 pe cen o F ance (18). In addi ion o wha e e e ec s ensued om go e nmen
policy, in es men was acili a ed by high pos wa indi idual and co po a e sa ings
a es ela i e o o he coun ies. An indi idual disposi ion o sa e was i sel u he
encou aged by ax exemp ions o small sa ings deposi s, including hose made
h ough he as pos al sa ings sys em (19). E en a e a shi owa d g ea e
consump ion Japanese sa ings le els a e oday s ill sligh ly highe han hose in
Ge many and F ance and wice hose o he Uni ed S a es (20).
Pe sonal sa ings deposi ed in Japan's pos al sa ings sys em a e unneled
in o capi al in es men s by he go e nmen - un Fiscal In es men and Loan P og am
(FILP), an unusual bu also highly signi ican ins i u ion. The FILP also d ew unds
om social secu i y deposi s. The FILP has anged in size be ween 27 and 55
pe cen o he Japanese go e nmen budge in di e en pe iods. Since mos o he
FILP’s unds come om non- ax sou ces, he FILP canno s ic ly be compa ed wi h
he budge e en hough some o i s uses o unds a e compa able o budge
expendi u es elsewhe e.
E en hough budge s we e hemsel es cons ained in Japan compa ed wi h
o he indus ialized coun ies, he exis ence o he FILP is e y impo an . The FILP
p og ams make he Japanese go e nmen ole mo e signi ican han is indica ed by
budge in o ma ion alone. The FILP has in es ed in ields such as oads, ailways,
po s, housing, and o he social and indus ial in as uc u e p ojec s as well as
suppo ing di ec loans o indus ies ia ins i u ions such as he Japan De elopmen
Bank. In 1955 h ough 1962 be ween 11 and 21 pe cen o he FILP's unds we e
designa ed o basic indus ial de elopmen . Since ha ime he FILP's di ec ole in
unding indus ial g ow h has s eadily dec eased. Cu en ly only 2,5 pe cen o he
FILP's subs an ial unds go o di ec suppo o la ge scale indus y (see also Table
6). FILP's ole in inancing medium and small business and in as uc u e
de elopmen has g own subs an ially h ough p og ams which con ibu e o o e all
economic g ow h in di e en channels om high-p o ile indus ies. These p og ams
a e discussed u he below.
E alua ions o he Go e nmen 's Role. The combina ion o apid economic
g ow h, sha p p oduc ion gains in impo an indus ies and expo successes wi h
ex ensi e mac o- and mic o-economic planning has sugges ed o many pe sons ha
he Japanese s a e played a la ge ole in economic de elopmen . Japan has been
seen as a uniquely success ul example among majo economies o go e nmen
s imulus o p i a e sec o i ms o mode nize p oduc ion p ocesses because o he
coincidence be ween policy and dynamic g ow h. This iew and pe cep ions ha he
Japanese ma ke is closed has led U.S. and EEC poli icians o accuse Japan o
engaging in economic p ac ices which " il ed he playing ield". In con as , qui e a ew
academic s udies o Japanese economic policies and hei impac p esen a mo e
quali ied iew o he s a e's ole in he economy han he opinions jus ci ed. The
au ho s o hese accoun s see s a e-economy linkages as complex and go e nmen
ac ions as ha ing mixed e ec s (Figu e 3).
One o he bes known cha ac e iza ions o Japanese go e nmen economic
policy om he dominan s a e iewpoin is he wo k o Chalme s Johnson. In his
pionee ing s udy o MITI, Japan is seen as a "de elopmen al s a e" ha ing special
p io i ies and in luence. In Johnson's wo ds (21):
"The p io i ies o he Japanese s a e de i e i s and o emos om an
assessmen o Japan's si ua ional impe a i es…These...include la e
de elopmen , a lack o na u al esou ces, a la ge popula ion, a need o ade
and he cons ain s o he in e na ional balance o paymen s.... Nu u ing he
economy has been a majo p io i y o he Japanese s a e because any o he
cou se o ac ion implied dependency, po e y and he possible b eakdown o
he social sys em.
A s a e (mainly MITI) de elopmen al "ideology" is seen by Johnson as he
majo d i ing o ce in indus ial plans. By imposing hei own e sion o economic
a ionali y, o by basing economic policies on a syn hesis o go e nmen echnoc a ic
o mulae and ma ke in o ma ion, he Japanese go e nmen minis ies a e said o
ha e been capable o success ully guiding economic g ow h. Johnson's iew has
become he mains ay o popula knowledge abou he Japanese go e nmen 's
economic ole, bo h among admi e s and c i ics o Japanese policy(22).
Some economis s ake a adically di e en iew o he Japanese
go e nmen 's impo ance o economic g ow h. Fo example, Hugh Pa ick and Hen y
Roso sky ha e w i en ha he s a e's ole as less impo an han p i a e sec o
ini ia i es and ha Japan is much like Eu opean mixed economies as he esul (32).
Se e al in es iga o s also s a e iews o Japan's go e nmen al ole which lie
somewhe e be ween he wo ex emes ep esen ed by Johnson's s ong
in e en ionis s a e and a iew o he s a e as using mainly con en ional iscal and
mone a y ools o s imula e he economy. Thei in e p e a ions o Japanese
go e nmen economic policy emphasize ha (a) mos impo an economic decisions
a e poli icized, (b) policy inpu s by in e es g oups and i ms a e o en mo e
in luen ial han hose o he go e nmen and (c) indus y in e es s and go e nmen
a ionales a en' always complemen a y. The ends o s a e policy a e also seen as
being sub e ed by i ms, beha io o unan icipa ed ma ke ends. Among his g oup
Richa d Samuels is he leading p oponen o a iew ha poli ical in luence om i ms
and indus ial associa ions in luences Policymaking. Samuels also holds ha he e
a e many depa u es om go e nmen minis y in en ions in he policies which
eme ge om go e nmen -in e es g oup nego ia ions. Samuels is joined by Da id
F iedman in he asse ion ha he e a e o en unan icipa ed aspec s o policy
implemen a ion (24).
In e p e a ions o Japanese go e nmen economic policy oles o m a ough
con inuum which includes wo closely ela ed dimensions. The i s dimension is he
deg ee o which he s a e domina es economic policymaking and implemen a ion.
The second is he cha ac e o he a ionales employed in economic policymaking. A
one pole, expe s see a dominan s a e which o ches a es economic p og ess
ollowing i s own g ow h ideology (25). A he o he ex eme, he s a e's ole is
cons ained. Occupying he middle o he con inuum a e iews ha economic policy
is a nego ia ed blend o minis y economic ideology and p i a e in e es s;
policymaking pa icipa ion is plu alis ic.
In ou own iew, bo h poles o he con inuum o in e p e a ions o he
Japanese go e nmen economic ole a e unsa is ac o y. Johnson's ich his o y o
Suppo o he Japanese compu e indus y is also e alua ed as ha ing
posi i e e ec s on he indus y's de elopmen by some pe sons. Ne e heless, he
o e all e alua ion o go e nmen compu e policy is somewha mixed like ha o
indus ial policy in gene al. Ea ly in he de elopmen o he compu e indus y he
go e nmen allowed IBM o en e he Japanese ma ke in exchange o sha ing o
echnology wi h Japanese i ms (53) . Ea ly suppo o echnology induc ion was
accompanied by es ablishmen in 1969 o a quasi-go e nmen i m (JECC) o lease
Japanese compu e s o end use s (54). This measu e was a di ec esponse o IBM's
majo ins umen o ma ke de elopmen o main ame compu e s and esul ed in a
s able, p edic able demand o Japanese-made compu e s. Go e nmen
p ocu emen o Japanese compu e s o public o ices and uni e si ies had a simila
e ec . Go e nmen suppo o high isibili y coope a i e go e nmen -p i a e sec o R
and D p ojec s is also seen as ha ing been gene ally bene icial o he compu e
indus y and i s a ious spino s (55). Ne e heless, on he nega i e side, a
go e nmen emphasis on ha dwa e de elopmen a he expense o p omo ion o
sys ems design and so wa e inno a ion has been seen as con ibu ing o Japanese
indus y lags in hese a eas.
Some app aisals o indus ial policy asse as a gene al p inciple ha he
Japanese go e nmen did well in g owing indus ies bu poo ly in hose which we e
declining. The s a e o coal and shipping a e se e al yea s o go e nmen p io i y
suppo seems o suppo his iew. Impo ed c ude oil became cheape han coal
p oduced in Japan beginning in he la e 1950s. Subs an ial go e nmen loans and
o he incen i es we e p o ided he coal indus y a e ha ime in e o s o aise
p oduc i i y o le els which would make coal compe i i e wi h oil so as o educe he
p essu e o demand o oil impo s on o eign cu ency ese es. The coal p og ams
we e also a esponse o poli ical p essu es on he behal o labo , he mining dis ic s
and he mining i ms (56). In coal's waning days in he 1960s and 1970s, unds we e
hus alloca ed in pa as a social policy esponse o unemploymen in coal mining
egions.
The long and somewha o uous oad aken by Japan's pos wa shipping
and shipbuilding indus ies was gene ally a simila s o y o ha o coal. Ini ial
go e nmen policies helped Japanese shipping ge back on hei ee a e hea y
wa ime losses. The belie ha Japan should ha e i s own me chan ships was s ong
on bo h secu i y and economic g ounds. Shipbuilding was helped by his p og am
and was o wo decades a wo ld leade due o i s low p oduc ion cos s (57).
Howe e , om he 1970s on shipping was usually an ine icien , high cos and,
he e o e, uncompe i i e indus y. Go e nmen suppo s he ea e we e a esponse
o poli ical p essu es and he desi e o main ain a Japanese lag me chan lee (58).
Shipbuilding also declined in compe i i eness in he 1970s, in pa because o
compe i ion om low-cos shipbuilde s in Ko ea and elsewhe e. Go e nmen
shipbuilding policies in he 1970s and 1980s ollowed a ecessed indus y mo e han

a de elopmen model as a esul (59). Business, labo and LDP poli icians we e
ac i e in seeking unds o bo h indus ies. Policies in hese wo declining indus y
sec o s also indica e he p esence o al e na i e go e nmen goals o g ow h.
O he indus ies a ge ed o suppo in he 1950s and 1960s elec ic powe
is no no mally e alua ed in e ms o success o ailu e. Elec ici y ou pu s kep up
wi h g ow h in mos pe iods, and he indus y can be seen as pe o ming i s
in as uc u e ole c edibly o his eason. I was his in as uc u e a gumen plus he
high cos s la e o nuclea powe de elopmen which led he Japan De elopmen
Bank o con inue disp opo iona ely high le els o suppo o his indus y. Howe e ,
Japan s ill has highe elec ici y a es han o he indus ialized coun ies (60).
Suppo i e Economic, Social and Poli ical Ins i u ions. In a ecen s udy o
B i ish, F ench and Ge man economic policy, Pe e Hall a ibu ed dis inc i e policy
e ec s in he di e en coun ies o b oad "ins i u ional" pa e ns in hei espec i e
poli ical economies. Ins i u ions in his ins ance a e pa e ns o beha io in
go e nmen and economic ma ke s and also in socie y i sel (61). A simila
ins i u ional in en o y can be sugges ed o Japan. Se e al aspec s o Japan's
socie y, economy and poli ical expe ience seem on logical g ounds o ha e a o ed
he coun y's high g ow h. Al e na i ely, hey did no ac as an obs acle o
de elopmen e en i hey did no play a speci ically suppo i e ole. Econome ic
esea ch suppo s he impo ance o g ow h o some o he ins i u ional pa e ns o be
discussed; o he s a e mo e specula i e (62):
a) Sa ings and In es men . Japan's sa ings a e was e y high du ing mos
o he pos wa e a as was al eady discussed. Al hough ai ly low in he yea s
immedia ely ollowing Wo ld Wa II, pe sonal sa ings a es inc eased o a peak o
15% in 1970-1974. Co po a e sa ings ollowed mo e o less a simila ajec o y, bu
peaked in he 1960s high g ow h e a (63). So did g oss sa ings which includes
go e nmen and co po a e sa ings in addi ion o indi idual sa ings (see again Table
2)(64).
In es men was also e y high in Japan in compa ison wi h o he coun ies,
e en hough e en Japan's high sa ings we e some imes inadequa e o in es men
needs (65). Co po a e sa ings we e di ec ly applied o in es men s in plan ,
equipmen o echnology, o in some cases educ ion o a i m's inancial dependency
on bank loans (66). Indi idual sa ings we e hemsel es ma shalled h ough pos al
sa ings o bank accoun s o p o ide unding oppo uni ies h ough he
FILP-go e nmen bank connec ion o he comme cial banking sys em.
The ela i e abundance o sa ings and he ela edly high le els o in es men
a e no mally seen as one o he mos signi ican o ces in pos wa Japanese g ow h.
Some schola s see hese win ac o s as he leading ac o in de elopmen . Howe e ,
while mos pe sons g an he impo ance o in es men and sa ing, disag eemen is
common as o he go e nmen ole in hei s imula ion. Nobody would a gue agains
he idea ha he Japanese go e nmen s' conse a i e iscal policies inc eased he
sha e o weal h which could be po en ially alloca ed o sa ings and in es men . Bu
he asse ion by some expe s ha go e nmen policy s imula ed in es men by
lowe ing in e es on loans o indus y below le els in o he coun ies has been
challenged by economic esea ch. In e es a es on loans in Japan ha e been lowe
in some pe iods bu his is said o e lec an abundance o sa ings mo e han
go e nmen mone a y policy (67). Also, go e nmen au ho ized ax exemp ions on
sa ings deposi s a e simila ly said o ha e had li le e ec acco ding o ecen
economic s udies, despi e widesp ead asse ions o he con a y (68).
The go e nmen ole in lending o indus y is ano he example o policies
whose impo ance and impac a e deba ed. Gi en he cen al ole o bo owing
ela i e o equi y in Japanese co po a e p ac ice, he ole o bank lending in
in es men s leading o mode niza ion and expansion was c i ical. Howe e ,
comme cial ins i u ions p o ided mos o he in es men unds in mos indus ies a
mos imes, as we ha e seen. This ac no wi hs anding, go e nmen indica i e
lending could s ill ha e had an unusual le e age e ec , gi en co po a ions' ypical
dependence on deb a he han equi y (69). Se e al schola s ha e asse ed ha his
is wha ook place. Go e nmen bank loans a e belie ed o ha e been o special
indica i e signi icance, especially in he ea ly pos wa yea s (70).
Many economis s judge ha go e nmen lending did no play a di ec
indica i e ole. We ha e al eady ci ed he limi ing e ec s on go e nmen bank lending
p oduced by an ea ly bias o powe , coal and shipping. O he ac o s such as he
complexi y o bank lending decisions and he inc easing a ailabili y o loans o all
indus ies as g ow h ad anced ha e also been ci ed as e idence in a gumen s
agains seeing go e nmen bank loans as ha ing indica i e e ec s (71). In addi ion,
FILP ela ed unds we e used inc easingly o e ime o suppo gene al in as uc u e
de elopmen ( oads, po s, indus ial pa ks, e c.) and o he p io i y conce ns. Lending
o " a ge ed" g ow h indus ies gene ally ailed o each signi ican indica i e le els,
o he hings being equal, as a esul .
The alleged limi a ions on he go e nmen 's di ec ole in lending o indus y
seem c edible. Howe e , e alua ing Japanese economic policy is much like he
p o e bial peeling o an a ichoke; as each lea is emo ed, s ill ano he laye is
disco e ed. In his case, one o Japan's leading economis s has a gued ha
go e nmen bank bo owing was seen by i ms as a sa e y ne , and ha co po a e
in es men s a egies we e unusually da ing as a esul (72). Fi ms could in e ec
ake isks on he assump ion ha he go e nmen would bail hem ou i his led o
p oblems, In his sense, he FILP and ela ed go e nmen lending ins i u ions could
ha e had a subs an ial, posi i e impac on g ow h.
b) A second signi ican ins i u ional pa e n in pos wa g ow h was he high
le el o compe i i eness o Japanese i ms. Agg essi e in e - i m compe i ion is ci ed
equen ly as a causal ac o in economic analyses o indus y successes, e en
hough i is no easily measu ed o he han by anecdo al in o ma ion (73). Howe e ,
some aspec s o Japanese expe ience, such as he subs an ial equency among
bo h small and la ge en e p ises o de ia ions o de ec ions om in e - i m ca el
ag eemen s ega ding capaci y alloca ion and o he ma e s sugges hemsel es as
indica o s o compe i i eness. Da id F iedman o e s he ollowing example o he
di icul ies in ge ing i ms o coope a e in he machine ool indus y (74):
"Though his d a was subs an ial p og ess owa d an ag eemen , some
gyokai membe s balked again... In e company mis us was he main
obs acle...changes in gyokai membe ship u he con used
ma e s...Ou side s, o cou se, we e unde no obliga ion o obse e he
es ain ag eemen ...In some segmen s o he machine ool ma ke ou side
i ms we e he la ges single manu ac u e s".
High le els o in e - i m compe i ion a e said by some o e lec pos wa
s uc u al change, especially he b eakup o he zaiba su holding companies and he
new An i-Monopoly Law's sanc ions agains excessi e concen a ion and illegal
ca els (75). Indi idual companies' desi e o he bene i s acc uing om ma ke
domina ion is ano he likely co ela e o compe i i eness. These included angible
bene i s such as g ea e economies o scale and pe haps g ea e ce ain y as o he
demand o a i m's ou pu . Less angible ewa ds such as he highe s a us assigned
o dominan i ms also exis in hie a chy conscious Japan. Fi m compe i i eness may
also ha e e lec ed o he o ces. O he ac o s such as s ong in-g oup a achmen s
in a socie y whe e in and ou -g oup (uchi-so o) dis inc ions a e impo an , company
loyal ies e lec ing li e ime employmen in he same i m and kei e su adi ions o
eudal clan-like loyal ies o g oupings o i ms a e also some imes ci ed as
explana ions o high compe i ion le els. Li e ime employmen also means ha
signi ican po ions o he la ge en e p ise wo k o ce depend on i ms' su i al and
g ow h, ano he po en eason o agg essi e i m beha io .
In e - i m compe i i eness a a ime o high economic expec a ions was likely
a majo ac o in g ow h, and may help explain he Japanese economy's endency in
some pe iods o quickly su pass planned ou pu goals. Howe e , compe i i eness
also had po en ially nega i e e ec s. Compe i i e capaci y expansion in he s eel
indus y ul ima ely led o excess capaci y in ha sec o . The same o ces appea a
wo k in he Japanese au omobile indus y oday. The endency o s ong in e - i m
compe i i eness was igh ly o w ongly one o he mo i a ions (in addi ion o a desi e
simply o c ea e la ge i ms) behind MITI planne s' e o s in he 1960s and 1970s o
p omo e me ge s in he au omobile and compu e indus ies (76). Con olling
allegedly des uc i e compe i i eness was also a go e nmen conce n in policies
owa d medium and small businesses.
c) The cha ac e o Japan's labo ma ke s has been ele an in a ious ways
o Japan's de elopmen po en ial. Un il he la e 1960s he e we e enough pe sons in
he labo ma ke , including young people who le pa en al homes in he
low-e iciency ag icul u al and small i m sec o o jobs in la ge i ms, o pe mi apid
economic expansion wi hou accompanying s ong p essu e on wages (77). Money
sa ed on labo cos s could, ce e pa ibus, be in es ed o imp o e i m p oduc i i y o
expand capaci y, a condi ion which ob iously acili a ed economic g ow h. Howe e ,
since he la e 1960s he e ha e been pe iodic labo sho ages. A a ie y o p ac ices,
including employmen o la ge numbe s o middle-aged women, pos ponemen o
he e i emen age, and illegal immig a ion, ha e alle ia ed labo sho ages a a ious
junc u es. O e he long e m, he sho age o labo will p obably be an impo an
ac o limi ing g ow h in i s adi ional o ms and a o ing s uc u al change in he
Japanese economy.
The ela i e quiescence o p i a e sec o labo ela ions should also be seen
as con ibu ing o Japan's g ow h po en ial. En e p ise unionism and li e ime
employmen a e pa s o a sys em in which labo 's a e was iden i ied wi h he
success o ailu e o he i m. These p ac ices and he associa ed endency o
wo ke s o engage in mainly sho "symbolic" s ikes made i possible o i ms o
adop long- e m s a egies wi h some ce ain y as o he a ailabili y and cos o labo
in he o eseeable u u e (78).
Economy-wide "pa e ned ba gaining" is a s anda d p ac ice in Japan. S ill,
he exis ence o en e p ise unions encou aged sensi i i y o a speci ic i m's condi ion
in labo -managemen nego ia ions. Inclusion o lowe le els o managemen in
en e p ise unions also made i possible o union membe s o know he i m's ac ual
economic si ua ion, which was ano he ac o pe mi ing labo demands o be " ine
uned" o company condi ions. Unde such condi ions, sus ained labo dis up ions
which would unde mine a company's ma ke iabili y we e usually a oided. Li e ime
employmen also made echnological change less o a h ea o he wo k o ce, which
could in imes o expanding ma ke s and p oduc ion coun on con inued employmen
while bene i ing om i m g ow h. P ocess inno a ions such as quali y ci cles, which
a e belie ed o ha e acili a ed aining and p oduc i i y g ow h, we e also acili a ed
by labo coope a ion (79).
d) Japan has long been known o i s dual economic s uc u e, whe ein small
i ms a e mo e nume ous and occupy a la ge ole in he economy han in o he
indus ialized coun ies (80). O en he small i m sec o is seen as ine icien ,
Howe e in some indus ies small i ms a e belie ed o ha e excelled in lexible
manu ac u ing. Acco ding o he lexible manu ac u ing hypo hesis, small i ms in
indus ies like machine ools ha e been able o apidly adjus hei ou pu o changing
condi ions and o lexibly p oduce di e en p oduc s o ake ad an age o ma ke
"niches" o a ying kinds (81). Elsewhe e in he economy, small supplie i ms a e
said o se e as a cushion o la ge i ms by allowing he la ge i ms o educe labo
cos s. This is o en said o be he p ac ice in such assembly domina ed indus ies as
au omobiles. In some cases small supplie i ms a e said o also abso b he e ec s o
economic down u ns, albei his is ecognized o occu a conside able social cos
(82).
e) Rapid pos wa economic g ow h in he indus ialized wo ld plus an
in e na ional commi men o ee ade also acili a ed Japanese g ow h in he 1950s
and 1960s. Japan's g ow h in he en i e pos wa e a depended on he abili y o sell
su icien amoun s o p oduc s ab oad o pay o aw ma e ial impo s needed o a
g owing economy. A ee ade egime made his possible. Also, while Japan's ea ly
pos wa g ow h e lec ed he pull o in e nal demand o indus ial equipmen and
consume du ables, in some la e yea s expo s we e he locomo i e o g ow h (83).
This was he case du ing he sus ained domes ic ecessions o he 1970s (84).
) Japan's dynamic g ow h may in some a eas also e lec he Japanese
go e nmen 's limi ed di ec owne ship ole in he economy compa ed wi h pos wa
Eu ope. All o Japan's elecommunica ions and he majo in e na ional Japanese ai
ca ie we e go e nmen owned un il he p i a iza ion o he mid-1980s. So was much
o he Japanese ailway sys em. All long-dis ance lines we e publicly owned,
al hough he e we e p i a e ail and subway ope a ions in he la ges ci ies. Bu
compa abili y wi h Eu ope s ops a his poin . Unlike he F ench go e nmen , Japan
had no na ionalized banks. No did Japan's go e nmen own o manage
manu ac u ing and p oduc ion acili ies in economic sec o s such as i on and s eel,
elec ic powe , pe oleum e ining and au omobiles, whe eas one o ano he o hese
indus ies was wholly o pa ly publicly owned and ope a ed a some ime in pos wa
F ance, B i ain, Ge many and I aly (85). The modes di ec ole o he Japanese s a e
is no well app ecia ed ab oad, whe e a much mo e subs an ial le el o go e nmen
in e en ion is usually assumed o exis .
Le els o go e nmen owne ship we e hus limi ed in Japan compa ed wi h
o he majo economies (86). (The Uni ed S a es is an excep ion, and Japan looked
somewha mo e like a ypical Eu opean go e nmen un il ecen ly. Bu he Uni ed
S a es is a no able ou lie among ad anced na ions on he dimension o public
owne ship). A e he mid-1980s he Japanese go e nmen 's di ec ole in he
economy was u he limi ed by p i a iza ion o he na ional ailways, Japan Ai Lines
and Nippon Telephone and Teleg aph. (The go e nmen s ill owns majo po ions o
he s ock in he di es ed companies. Comple e de ac o sepa a ion has been slow
due o lack o ma ke in e es in he p i a ized i ms' s ocks. S ill, he managemen o
he i ms, hei ela ionships wi h labo and hei ies wi h o he i ms a e adically
di e en om be o e p i a iza ion.) Finally, while he Japanese go e nmen has

played a p ominen and o some obse e s ai ly impo an ole in echnology
de elopmen since he ea ly 1970s h ough sponso ship o high p o ile esea ch
p ojec s, go e nmen in es men s in "R and D" a e also lowe han hose in mos
o he majo indus ialized coun ies (87). To he ex en ha Japanese go e nmen
in e en ion was (a) con ined o "no mal" in a-s uc u e de elopmen and
main enence, and (b) ollowed he ma ke as o indus ial policy, Japan a guably
p o i ed om he absence o he ine iciencies some imes a ibu ed o Eu opean
public owne ship.
g) Japan's poli ical s abili y unde conse a i e ule c ea ed a a o able
en i onmen o g ow h. Fi s and o emos , s able conse a i e ule in he 1950s
assu ed p i a e sec o leade ship ha he economy would no be na ionalized o
coope a i ized, as was ad oca ed by he Socialis and Communis pa ies a ha
ime. Conse a i e dominance also assu ed business ha poli ical leade ship would
possess alues gene ally ecep i e o business in e es s iewed b oadly (88). S able
poli ical expec a ions u he made i possible o i ms o de elop long- e m business
s a egies wi hou ea s ha impo an go e nmen egula ions and ax policies would
suddenly change. The impo ance o all o hese condi ions could be seen in equen
business g oup condemna ions o conse a i e pa y leade ship when his suppo i e
en i onmen seemed o be on he b ink o poli ical collapse h ough conse a i e
pa y inep i ude (89).
h) Japan's social homogenei y is also a plausible ac o con ibu ing o
economic g ow h. Social class has ne e been as impo an a clea age in Japan as
in Wes e n Eu ope. A a ie y o easons, among hem egali a ianism in educa ional
oppo uni y and mili a y se ice da ing as a back as he la e 1800s, can be ci ed o
his s a e o a ia s. The pa ochial na u e o Japanese socie y may also be ele an ,
since ou b eaks o class con lic in u al communi ies du ing he Tokugawa and
p e-wa pe iods ne e de eloped in o na ional mo emen s. Clea ages based on
eligious di e ences ha e been simila ly mu ed in he modem pe iod, while
egionalism declined signi ican ly as a majo poli ical o ce a e he Meiji e o ma ion
(90).
Pos wa Japan hus did no ha e he p o ound social clea ages o in e -wa
Eu ope - he mo e ele an poin o compa ison in e ms o ela i e poli ical
de elopmen . Pos wa Japanese go e nmen s we e able o ocus on he goal o
g ow h ela i ely unimpeded by he kinds o majo poli ical con lic s such as occu ed
a imes in o he mo e clea age idden poli ical sys ems (91). The Socialis and o he
opposi ion pa ies and hei ade union allies ied alian ly o a ouse a widesp ead
class consciousness in Japan. While hei mobiliza ional e o s suppo ed a
pa liamen a y opposi ion o he dominan conse a i es, class s uggles did no
domina e policy agendas as hey did a imes in in e -wa Eu ope, o e en pos wa
B i ain in he 1970s. Rela i e social homogenei y and he absence o a class
clea age, plus conse a i e ule, was also one o se e al ac o s allowing he
Japanese s a e o pos pone some o he cos s o a modem social wel a e sys em
un il a e high g ow h was well on i s way. The eno mous social and poli ical cos s o
an Ame ican-s yle unde -class ha e also ob iously been a oided.
i) Economic models o Japan's g ow h ecognize ha Japan's high li e acy
and educa ion le els a he end o Wo ld Wa II we e hemsel es impo an inpu s in
ini ial pos wa g ow h. La e , as households became mo e a luen , g ea e numbe s
o sons and daugh e s we e able o inish high school and/o college, which u he
enhanced he ski po en ials o he labo o ce (92).
Unan icipa ed Consequences: Sub e sion, Non-Compliance and “I a ional”
Ou comes. Japanese go e nmen economic policies some imes had unin ended
consequences. Business cycles in e ened o upse he calcula ions o pa icula
plans and indus ial policy amewo ks (93). Fu he mo e, despi e high le els o
business-go e nmen communica ion and an asse ed co po a is consensus on
economic policy, case s udies indica e equen p i a e sec o esis ance o
go e nmen policy p oposals and p og ams, P i a e i ms also exploi ed and
manipula ed go e nmen policies in ways ha we e no congenial o go e nmen
in en ions. Companies in some ins ances o ally e aded go e nmen policy
di ec i es. As a esul , many o he Japanese go e nmen 's indus ial suppo s
canno be seen as ully success ul om he poin o iew o go e nmen in en ions.
Examples o p i a e sec o exploi a ion o go e nmen p og ams a e easy o
ind in he cases whe e de ailed policy analysis has been conduc ed. Fo example,
subsidies p o ided coal companies unde he 1947 P io i y P oduc ion P og am did
li le o imp o e mine e iciency, which was one o he goals o he p og am. Coal
i ms mined ma ginal ields because he highe p oduc ion cos s he e we e paid by
he go e nmen unde he exis ing p og ams. Mining i ms sa ed hei be e ields o
u u e use when cos s would no o be subsidized (94). Unde he same p og am,
go e nmen unds o encou age coal i ms o ins all p oduc i i y enhancing
equipmen we e di e ed o s ockpile new equipmen un il a e cos -based
enume a ion ended (95). La e , he 1955 coal a ionaliza ion plan goal o e i ing
ine icien mines was sub e ed when i ms sold old, deple ed mines o he
go e nmen while simul aneously opening new acili ies wi hou ega d o hei
e iciency (96). Mo eo e , in some pe iods, la ge mining companies e en bough coal
om small-scale, less e icien i ms in o de o ake ad an age o high p ices while
simul aneously ecei ing go e nmen suppo s designed o enhance hei own
e iciency (97).
O he indus ies displayed simila pa e ns o hose in coal. In he ex ile
indus y, go e nmen p og ams se up o pu chase old equipmen o he pu pose o
cu ailing capaci y we e sub e ed in much he same way as in he coal indus y.
Tex ile make s kep obsole e machine y which hey would ha e no mally abandoned
in he hope ha i would be pu chased by he go e nmen unde pu chase-and-sc ap
p og ams (98). Elsewhe e, go e nmen di ec i es o machine ool make s ega ding
p oduc concen a ion and o he kinds o coope a ion we e o en igno ed while
p oduc ion esponded much mo e o ma ke demand han go e nmen plans (99).
Resis ance o MITI's plans o indus ial e-s uc u ing in he au omobile and
compu e indus ies is also well-known. So a e de ec ions om MITI supe ised s eel
capaci y plans in bo h he 1950s and 1960s (100). Capaci y inc eases in he s eel
indus y hus e lec ed in ense in e - i m compe i ion o ma ke sha e a he han
go e nmen suppo ed coope a ion. O he examples o de ec ions om policy
in en ions a he i m le el indica e ha Japanese economic policymaking usually
encompasses a ich di e si y o mo i a ions and o en has mul iple unin ended
consequences. I has long been hough ha go e nmen policies should be easie o
implemen whe e he numbe o i ms is small (as in s eel, au omobiles and
compu e s) ela i e o hose like machine ools whe e he e a e many i ms. Howe e ,
i is equally ob ious ha i ms in all indus ies esis go e nmen echnoc a s when i
sui s hem o do so.
I is also impo an o ealize ha go e nmen endo sed economic g ow h had
nega i e e ec s on he quali y o Japanese li e in he pos wa e a as well as making
posi i e con ibu ions o eal incomes and sha ed a luence. Japan is a c owded
na ion wi h ex emely li le space, and anks wi h Ko ea, Indonesia, he Ne he lands,
and Belgium as one o he mos hea ily popula ed places on ea h. Japan's
popula ion concen a ion is especially bu densome in la ge ci ies and hei
su ounding egions. Fo example, Tokyo p e ec u e's popula ion densi y in 1990 was
5,430 pe sons pe squa e kilome e , a igu e d ama ically highe han he na ional
a e age o 332. Popula ion mo emen o he ci ies and de elopmen o egional
indus ial cen e s in he 1950s and 1960s b ough eno mous c owding o al eady
o e c owded a eas.
U ban o e c owding was one majo consequence o high g ow h abou which
no e y much can be done beyond egional de-concen a ion o indus y and se ice
cen e s. Popula ion inc eases in he ci ies and subu bs had many consequences.
Japan has one o he bes u ban apid ansi sys ems in he wo ld, and made many
imp o emen s in ain and subway lines in he 1960s and 1970s. Ye g ow h and
u baniza ion mean no end o o e c owding o ains and long commu ing imes.
S a is ics a e inadequa e indica o s o he scale o his p oblem. Pe sons li ing as a
as wo hou s om Tokyo mus sc amble o s anding space on ains du ing he ush
hou . Roads and highways a e also eno mously o e c owded much like u ban apid
ansi . E en hough Japan's go e nmen has spen a g ea deal on highway
cons uc ion, he p opo ion o pa ed oads in Japan s ill anks subs an ially below
ha o o he majo indus ialized coun ies.
Japan's was e disposal and u ili ies sys ems a e also ha d pu o keep up
wi h demand, and showed signs o s ess well be o e hose in he Uni ed S a es.
Compa ed wi h o he indus ialized coun ies, Japan also lags in sewage disposal
acili ies. In 1973 only 31 pe cen o Japanese homes had lush oile s, in con as
wi h igu es abo e 90 pe cen in B i ain, he Uni ed S a es, F ance, Sweden and
Wes Ge many. E en in 1989, only 42 pe cen o homes in Japan we e connec ed o
sewe lines, whe eas he igu es o o he ad anced indus ial coun ies we e
subs an ially highe (101).
Condi ions in Osaka, Tokyo and o he majo ci ies a e much be e han he
na ional a e age, bu he na ional compa isons a e s ill impo an indica o s o
na ionwide lags in pe o mance. Finally, Japan's ci ies ha e ela i ely li le space o
pa ks, and he g ow h o u ban popula ions b ough e en lowe a ios o pa k land
pe -capi a han had been he case p e iously. In 1989, he e we e only 2.5 squa e
me e s o pa k space pe esiden in Tokyo, compa ed o 37 in Bonn, 30 in London,
and 24 in Chicago (102).
De iciencies in anspo and social capi al we e ma ched by a g owing
pollu ion p oblem which su aced in he na ion's a en ion in he la e 1960s. Wi h mos
o i s popula ion and all o i s indus ialized cen e s concen a ed on only 20 pe cen
o i s land, Japan by he ea ly 1970s had he highes concen a ion o indus ial
ou pu and ene gy use pe kilome e in he indus ialized wo ld (Table 5). The igu es
we e subs an ially g ea e han in Eu ope, which is also c owded, and d ama ically
highe han in he mo e spa sely popula ed Uni ed S a es. Japan also had se e e
wa e pollu ion p oblems a imes, including some e en in he nine een h cen u y.
The pain ul consequences o o e c owding o Japan's u ban and indus ial dis ic s
became e y ob ious by he la e 1960s and ea ly 1970s, as high g ow h b ough
mo e ac o ies, ca s, and homes o he coun y's mos hea ily popula ed a eas and
e en began o sp ead he pollu ing e ec s o indus ial g ow h o emo e pa s o he
a chipelago h ough egional indus ializa ion. As ees died and as bi ds led he
ci ies and as people su e ed om ai , wa e , noise, and e en "sunshine pollu ion"
- he shu ing o o di ec sunligh by cons uc ion o high- ise apa men s- a my iad o
local ci izen mo emen s opposed o pollu ion and egional g ow h sp ung up a ound
he coun y.
One o he immu ables o Japan's physical se ing is he sho age o usable
land and space. The land-popula ion a io is e lec ed e y di ec ly in pollu ion
p oblems. I is also a he oo o se e e o e c owding and as onomical land p ices.
Land specula ion has made he cos s o land e en highe . Nei he o hese p oblems
we e new o Japan, bu du ing he high g ow h pe iod hey became much mo e
acu e. In 1963, he a e age dwelling had jus unde ou ooms and a o al a ea o
72.5 squa e me e s ( oughly 24 by 27 ee ). Twen y i e yea s la e he e had been a
Main enence o adequa e le els o expo s o pay o aw ma e ial and ene gy
impo s has long been a go e nmen and p i a e sec o conce n, as has also been a
conce n o dependable sou ces o supply, Japan's o eign ade policy in he 1950s
was o ien ed owa d secu ing adequa e supplies o o eign aw ma e ials and
main enance o expo le els su icien o pay o hese needed impo s. As he
pos wa Japanese economy g ew, and impo s o e en la ge olumes o o eign aw
ma e ials became necessa y, he conce n o ha ing secu e o eign sou ces o
supply accele a ed. The wo 1970s oil c ises b ough u he acu e ealiza ion o he
impo ance o secu e sou ces o needed esou ces among policymake s. In a
signi ican shi in p io i ies, he Minis y o Fo eign A ai s announced in 1973 ha
hence o h secu e access o aw ma e ials would be a d i ing conce n in Japan's
diplomacy. In a ela ed se ies o e en s, he economic minis ies joined he o eign
minis y and p i a e sec o in e es s o p omo e policies aimed a de elopmen o
o e seas sou ces o aw ma e ials. Japan signed ag eemen s wi h he USSR on (a)
na u al gas de elopmen in he Yaku sk basin in 1973, (b) de elopmen o Sibe ia in
1974, and (c) igh s o o -sho e oil deposi s nea Russian Sakhalin in 1975. Simila ly,
Japan made loans o oil- ich Abu Dhabi, len money o de elopmen o na u al gas in
Indonesia, and signed an economic coope a ion ag eemen wi h I an, ollowed la e
by a go e nmen -suppo ed oil e ine y p ojec in ha coun y. Righ s o e o -sho e
oil deposi s in he Eas China Sea and elsewhe e also became majo issues be ween
Japan, he Republic o Ko ea, he People's Republic o China, and he Republic o
China go e nmen on Taiwan as all o he coun ies in he No hwes Paci ic ealized
he u gency o hei ene gy needs. Elsewhe e e o s we e made o secu e access o
mine als and coal om Aus alia and o he coun ies h ough p i a e sec o
in es men s and ini ia i es.
Japan's policy suppo o indus ial g ow h, s uc u al change and echnology
induc ion h ough policy amewo ks and go e nmen incen i es declined o e ime
as he economy g ew and o he p io i ies eme ged. Time ables o indus ial policy
change ha e been in luenced by o eign p essu e a imes, bu he e we e usually
also domes ic easons o change as well. Many o he indus ial suppo s
cha ac e is ic o he 1950s and 1960s ha e dwindled in impo ance as a esul . As
Table 9 indica es, FILP lending o "basic" indus y (including indus ial echnology)
has declined subs an ially and cu en ly o als only abou one- en h o mid-1950s
sha es o FILP lending. The o e ing o ax incen i es o indus ial sec o
de elopmen has aken a simila downwa d ajec o y. So ha e ca el ag eemen s
be ween i ms, al hough ca els con inue as a p e e ed ins umen o ma ke
coo dina ion du ing down u ns in he economy. In addi ion, ca els ha e been
employed mo e in he medium and small en e p ise sec o ecen ly han in ma ke s
domina ed by la ge i ms, and hei use has been common in ecessed mo e han in
de eloping indus ies. A p esen , Japan's go e nmen con inues o suppo esea ch
p ojec s designed o insu e he coun y's de elopmen as a high echnology, high
alue-added 21s cen u y economic powe . Wi h only a ew excep ions, indus ial

policy o encou age g ow h and new indus y de elopmen is a hing o he pas .
Conclusion
The Japanese economy g ew d ama ically be ween he 1950s and he
p esen . Du ing he i s wo decades o his g ow h, he Japanese go e nmen
p oduced ba e ies o indus ial policies wi h he goal o de eloping in as uc u e and
achie ing p oduc i i y gains in pa icula indus ies. In he 1970s and la e ,
go e nmen aid was p o ided he compu e indus y and "high" echnology
de elopmen . Indica i e economic plans which called o g ow h o he o al economy
we e also o mula ed. Because o he coincidence be ween go e nmen suppo and
economic success, Japan became known ab oad as a success ul example o
go e nmen -led high g ow h.
E alua ions o he di ec ole o indica i e planning and so-called indus ial
a ge ing ha e a ied depending on schola ly biases and me hodology choices.
Unde s anding go e nmen policy impac is di icul in he ace o hese di e gences.
Assessing he sepa a e con ibu ions o go e nmen policy amewo ks, comme cial
bank decisions, gene al demand d aw and o he ac o s adds o he di icul ies, as
does also he absence o sa is ac o y coun e - ac uals. Howe e , i can be said wi h
con idence ha :
(a) ax incen i es, lending and some o he ins umen s equi ed by
key-indus y de elopmen plans likely helped acili a e g ow h by c ea ing a o able
condi ions o in es men in long- e m capi al imp o emen s, i on and s eel ad o a
lesse deg ee in o he indus ies;
(b) he amoun s o go e nmen in es men in mos indus ies we e oo small
ela i e o p i a e bank unding o ha e he indica i e e ec s o en a ibu ed o hem;
(c) since comme cial bank lending decisions depended on many di e en
ac o s, go e nmen lending likely played only a limi ed ole a e he ea ly 1950s,
wi h he excep ion o he shipping, coal and elec ic powe indus ies, whe e
go e nmen lending o en ma ched p i a e bank pa icipa ion;
(d) go e nmen p io i ies also a o ed declining o p oblem indus ies in he
case o coal and shipping wi h he esul ha conside able amoun s o go e nmen
unds we e mis-alloca ed om an economic poin o iew (118);
(e) when he ex ensi e suppo s gi en ecessed indus ies, medium and
small indus ies and a me s a e conside ed, Japan appea s o be as much an
economic wel a e and clien elis s a e as a de elopmen al s a e.
Japanese economic and indus ial pe o mance also e lec ed he in luence
o a iables no clea ly subjec o he di ec con ol o go e nmen . Japanese
companies ha e o en compe ed in ensely o ma ke sha e which in u n a o ed
long- ange planning and in es men . A e y high na ional sa ings a io was i sel o
i al impo ance as a suppo o capi al in es men and g ow h and usually was
su icien o p o ide he unds needed o capi al expansion. E en hough he image
o he Japanese wo ke as a docile, highly mo i a ed p oduce is o e d awn, labo 's
ole in g ow h was i sel a om insigni ican . The pe manen employmen sys em in
la ge co po a ions encou aged de elopmen o wo kplace discipline and s ong
company loyal ies. The p esence o en e p ise a he han indus y unions in he
p i a e sec o was one o se e al ac o s encou aging s able labo condi ions.
Imp o ed p ocess echnologies such as he highly ou ed "jus in ime" au o
pa s supply sys em ha e also made a big con ibu ion o p oduc ion e iciency and o
g ow h, Japan's educa ional sys em was i sel undoub edly a majo ac o
encou aging g ow h. On he supply side, i p o ided o high le els o li e acy and
basic ma hema ics and science aining, which ensu ed a high quali y labo o ce,
o he hings being equal. On he demand side, mass educa ion is one o many
ac o s in he de elopmen o modem communica ions sys ems and consume -
ma ke de elopmen .
All o his is no o say ha he Japanese go e nmen played no ole in he
economy's success. The go e nmen was usually a pa icipan in high le el
discussions o g ow h po en ials and p o ided leade ship o g ow h a a ime when
p i a e i ms also saw ha g ow h was bo h possible and p o i able. The go e nmen
was, in e ec , a chee leade o g ow h, and sha ed as amoun s o in o ma ion wi h
indus y in he p ocess. The go e nmen also p o ided a s able and suppo i e
en i onmen o business g ow h. Businesses could in es wi hou undue ea o
ei he na ionaliza ion o indus ies (as a o ed by he opposi ion in he 1950s) o o he
majo changes in he poli ical en i onmen . Go e nmen bank loans and policies also
c ea ed he pe cep ion in many i ms ha he go e nmen would s and behind
pa icula indus ies, which led i ms in u n o make "da ing" in es men s acco ding
o some accoun s.
The o al e ec o hese condi ions was o c ea e a "policy egime" which
a o ed g ow h. Japanese go e nmen de elopmen o indus ial zones adjacen o
deep wa e po s has also helped educe he p ices o some aw ma e ials o as li le
as one hal o compa able p ices in he Uni ed S a es, wi h i s highe cos s due o
dependence on land anspo a ion (119). Indeed, he Japanese go e nmen 's
in es men s in in a-s uc u e ha e been eno mous and may cons i u e i s single
mos impo an con ibu ion o g ow h om he 1960s o wa d.
Go e nmen policies also played a di ec bu also ha d- o-measu e ole in
speci ic indus y de elopmen . The s eel indus y, o example, wen h ough wo
majo eno a ion plans du ing he ime ha i was " a ge ed" o mode niza ion, wi h
he esul ha Japan had he mos ad anced s eelmaking equipmen in he wo ld by
he beginning o he 1960s. Go e nmen lending and leade ship appea o ha e
acili a ed his de elopmen . The Japanese au omobile indus y was p o ec ed om
o eign compe i ion in i s pos wa pe iod o in ancy and was able o impo o eign
echnology a a c i ical junc u e in i s own de elopmen , e en hough i didn' ecei e
much in go e nmen loans. Go e nmen suppo ed " a ionaliza ion" in he au omobile
pa s indus y also may ha e had bene icial e ec s o he au omobile indus y. La e ,
when de elopmen o au oma ed machine y was a go e nmen p io i y in he 1960s
and 1970s, he au omobile indus y had highe le els o au oma ion han indus ies in
o he coun ies because o hea y in es men s in obo s and o he ypes o au oma ed
equipmen . These in es men s in imp o ed acili ies in some indus ies acili a ed
apid and d ama ic inc eases in labo p oduc i i y, esul ing in Japan's leading he
indus ialized wo ld in p oduc i i y inc eases in mos ecen yea s.
F equen Japanese go e nmen policy adjus men s in esponse o changing
ma ke si ua ions we e also a plausible s eng h in some cases. Plans we e e iewed
be o e hei e minal da es and new plans we e p omulga ed as g ow h ou paced
plan a ge s, o o he planning pa ame e s changed. An allededly equen
adjus men o a ge s acco ds wi h a iew which sees p agma ic, ma ke ollowing
beha io as a majo ad an age o Japanese go e nmen planning egimes (120).
La ge amoun s o ma ke in o ma ion we e collec ed and used o de ine and
ede ine a ge s and his ex ensi e dependence on ma ke indica o s is also seen by
qui e a ew pe sons as one o he mos posi i e con ibu ions o he go e nmen 's
policy-making (121). In essence, he policy en i onmen i sel became a componen
in he o e all en i onmen o which indi idual i ms and indus ies esponded in hei
own co po a e s a egies.
In some "mac o" sense, he go e nmen p o ided a ne wo k o suppo i e
amewo ks which may ha e acili a ed indus y success. Howe e , he e we e also
many o he ac o s in luencing economic pe o mance besides go e men ac ions,
and he go e nmen ole should no be seen as he sole o e en single s onges
in luence on success in mos ins ances. Indeed, as esea ch shows, decisions a he
i m le el e lec many conce ns, and go e nmen policy is only one (a imes la ge, a
imes small) pa o such en i onmen s. I Richa d Samuels' indings on ene gy
indus ies a e gene alizable, he eal issue o businesses in go e nmen -business
policy ela ionships is (a) how much he go e nmen can be pe suaded o do wha
he p i a e sec o s p e e s and (b) how much go e nmen policy ools can be
exploi ed o p i a e en e p ise ad an age. We ha e ci ed many examples o
unin ended policy consequences e lec ing p i a e sec o sub en ion, a oidance and
manipula ion. Some policies also ailed comple ely as he esul o ad e se economic
condi ions o o he ac o s including de ious beha io by i ms. The go e nmen ole
in indus y "guidance" has i sel also declined in i ually all sec o s om he ea ly
1950s onwa d. This decline has o en been igno ed by he o eign p ess and eli e
opinion ab oad, wi h usually un o una e policy implica ions.
While assessmen s o he go e nmen 's ole in e ms beyond hose
discussed al eady a e di icul , he e is no doub as o he ole o go e nmen as
ocus, chee leade and in o ma ion p o ide . In ima e go e nmen -business
communica ions in ad iso y commi ees and go emmen -business g oup mee ings,
ex ensi e nego ia ions o economic goals and he accumula ion o la ge olumes o
s a is ics o suppo go e nmen planning ac i i y mus ha e had a subs an ial e ec
in aising consciousness in he p i a e sec o abou ongoing economic condi ions and
oppo uni ies. The ex eme geog aphical cen aliza ion o Japanese big business in
Osaka and Tokyo, and he p in media's concen a ion in hese same ci ies,
undoub edly u he enhanced he low o ele an in o ma ion. The ac i i y o
go e nmen indica i e planning likely made impo an con ibu ions o he hinking
and mo i a ions o poli ical and economic ac o s, e en while he plans and a ge s
we e no always di ec ly e lec ed in GNP o a ge ed indus y ou comes.
Pos wa Japan was a coun y o high economic expec a ions, especially in
he la e 1950s and 1960s. Expec a ions o high g ow h led i ms o expand, which ed
g ow h i sel . The policy egime o high g ow h expec a ions may ha e been he
go e nmen 's majo con ibu ion.
Table1

Table2
Table3
Table4
Table5
Figu e3

Figu e4
Figu e5
Figu e6
NOTES
(1) JOHNSON, Chalme s: MITI and he Japanese Mi acle: The G ow h o Indus ial Policy, 1925-75.
S an o d, S an o d Uni e si y P ess, 1982, chap e 9.
(2) ANCHORDOGUY, Ma ie: Compu e s Inc.: Japan's Challenge o IBM. Camb idge, Ha a d
Uni e si y P ess. 1989, chap e 6. See also OKIMOTO, Daniel: Be ween MITI and he Ma ke ;
Japanese Indus ial Policy o High Technology. S an o d, S an o d Uni e si y P ess, 1989, p. 226-
228, o an in e p e a ion ha emphasizes he impo ance o he socie al s a e, i.e. densely
s uc u ed in e ac ions be ween p i a e sec o in e es s and go e nmen minis ies.
(3) PRESTOWITZ, Clyde: Changing Places: How We Allowed Japan o Take he Lead. NewYo k,
Basic Books, 1988 and FALLOWS, James: Con aining Japan, The A lan ic Mon hly 261/1989, p.40-
54
(4) SAMUELS, Richa d: The Business o he Japanese S a e: Ene gy Ma ke s in Compa a i e and
His o ical Pe spec i e. I haca, NY, Co nell Uni e si y P ess, 1987 is he bes example o an
in e p e a ion o indus ial policy which s esses public-p i a e sec o in e -dependency, and, ela ed
o his heme, he occasional p esence o unin ended consequences o e en policy ailu es.
Da id FRIEDMAN makes somewha simila commen s on he ailu e o go e nmen p og ams while
s ill seeing he ins i u ional se ing as a o ing small i m mode niza ion and lexible manu ac u ing
echniques. See The Misunde s ood Mi acle: Indus ial De elopmen and Poli ical Change in Japan.
I haca, NY, Co nell Uni e si y P ess, chap e 3 and 6.
(5) PATRICK, Hugh and ROSOVSKY, Hen y: Asia´s New Gian : How he Japanese Economy Wo ks.
Washing on, DC, B ookings, 1976, chap e 1. See also TREZISE, Philip H. and SUZUKI, Yukio:
Poli ics, go e nmen and Economic G ow h in Japan, p. 753-812 in he same olume.
(6) See also CALDER, Ken : C isis and Compensa ion: Public Policy and Poli ical S abili y in Japan.
P ince on, P ince on Uni e si y P ess, 1988.
(7) KEIZAI KOHO CENTER : Japan 1992: an In e na ional Compa ison. Tokyo, 1992, p.13.
(8) PRIME MINISTER'S OFFICE : Japan S a is ical Yea book. Tokyo, 1989, p.792.
(9) The inc ease igu e was calcula ed in ye. A sha p inc ease in he alue o he yen ela i e o he
dolla a e he 1986 Plaza Acco d con ibu ed o he high dolla alue o Japan's GDP in ecen
yea s. This is he no mal poin o e e ence in in e na ional compa isons.
(10) Japan's pos wa s eel ou pu igu es no longe e lec he con ibu ion o he la ge s eel mills in
he no he n Chinese egion o Manchu ia which Japan had buil in he yea s a e 1931 bu los a
he end o Wo ld Wa II.
(11) KEIZAI KOHO CENTER : Japan 1981, An In e na ional Compa ison. Tokyo, 1981, p.20.
(12) KEIZAI KOHO CENTER. Japan 1991, An In e na ional Compa ison, p. 65.
(13) Howe e , he e we e p eceden s o comp ehensi e indus ial p oduc ion p og ams du ing he
wa and pos wa . Occupa ion pe iod. See JOHNSON, Ch.: op. ci ., chap e s 3 and 5 and
SAMUELS, R.: op. ci ., chap e s 3-5.
(14) De ense ou lays we e ai ly ola ile and anged as high as 6 pe cen in he 1950s, du ing he
egime o p o-de ense P ime Minis e Ha oyama. Howe e , expendi u es la e s abilized in he
icini y o 1% o he o al budge and ha e emained a ha le el in mos yea s. P ime Minis e Miki
(1974-76) o mally commi ed he go e nmen no o exceed he one pe cen le el, a commi men
which was usually hono ed, wi h he excep ion o he mid-1980s, when pe sonnel expendi u es
o ced he pe cen age up sligh ly.
(15) Howe e , Japan was hi d in he ee wo ld a e he uni ed S a es and Ge many in pe -capi a
ou lays on de ense. ALMOND, Gab iel and POWELL, Bingham: Compa a i e Poli ics Today: A
Wo ld View Glen iew, IL, Sco , Fo esman, 1988, p. 124.
(16) The cu en na ional pension plan was s a ed in 1961, and began o ma u e only in he 1970s
and 1980s as con ibu o s eached e i emen and d ew hei pensions. Because o he apid
inc ease o olde pe sons as a pe cen age o he popula ion, u u e pension and heal h ca e ou lays
will place inc easing p essu e on public expendi u es as Japan mo es in o he 21s cen u y.
(17) Economis s ha e poin ed ou ha in he ea ly pos wa e a Japanese mone a y policymake s
aised in e es a es only when he economy o e hea ed and demand o impo s exceeded he
amoun s o expo s so as o c ea e a nega i e ade imbalance. See ACKLEY, Ga dne and ISHI,
Hi omi su: "Fiscal, Mone a y and Rela ed Policies" in PATRICK, H and ROSOVSKY, H.: op. ci ., p.
153-247, especially p.161 and 187 .
In he 1970s a mo es con en ional mone a y policy was ollowed and in e es a es we e aised o
snub in la iona y p essu es. Recen libe aliza ion o he inancial sys em has u he e oded he
Japanese go e nmen 's capabili y o independen ly con ol in e es a es so as o s imula e g ow h.
The e is also con o e sy o e he ex en o which he Japanese in e es a es we e lowe in eal
e ms han in o he coun ies. A compa ison o U.S. and Japanese a es in he 1970s and 1980s
and ela ed policies indica es ha eal a es we e lowe in Japan in some pe iods and highe in
o he . See LINCOLN, Edwa d. J.: Japan, Facing Economic Ma u i y. Washing on, DC, B ookings,
1988, p.258-260
(18) WATANABE, Tsunehiko: Na ional Planning and In e na ional G ow h in Japan in Hickman, Be (
ed)., Quan i a i e Planning o Economic Policy A Con e ence o he Social Science Resea ch
Council on Economic S abili y Washing on, DC, B ookings Ins i u ion, 1965, p.233-251
(19) Sa ings deposi s in bo h pos o ice and comme cial ins i u ions a e exemp om axa ion in
wha is known as he "ma uyu" sys em. E o s o elimina e his sys em in he 1980s we e no
success ul. in addi ion o hei ax- ee s a us, indi iduals can open many small accoun s unde hei
own and o he names wi hou ea o p osecu ion.
Hen y and Mable Wallich ha e conside ed mul iple hypo heses abou he sou ces o Japan's high
le els o consume sa ings and conclude ha he semi-annual bonus sys em, he limi ed a ailabili y
o housing c edi and he low le el o social secu i y we e impo an ac o s encou aging sa ing in
he ea ly pos wa e a. They discoun mos o he hypo heses, including he e ec s o Japan's dual
economy / whe e pe sons who own small businesses migh sa e as pa o hei managemen o
hei i ms). See PATRICK, H. and ROSOVSKY, H.: "Banking and inance", op. ci ., p.258-259.
Howe e , he Wallich and Wallich in e p e a ion is by now da ed. Access o housing c edi has
inc eased in ecen yea s, and pensions a e mo e adequa e han in he pas . A e peaking in he
mid-1970s, p i a e sa ings a ios ha e declined as well, which ob iously may e lec hese changes
in po en ial needs. See SATO, Kazuo: Sa ings and In es men in YAMAMURA, Kozo and
YASUBA, Yasukichi: The Poli ical Economy o Japan: Vol. 1. The domes ic T ans o ma ion.
S an o d, S an o d Uni e si y P ess, 1987, p.148-151.
(20) KEIZAI KOHO CENTER : Japan 1992, an In e na ional Compa ison. Tokyo, 1992, p. 85.
(21) JOHNSON, Ch. : op. ci ., chap e 9.
(22) Among he schola s who s udy indus ial policy, Ma ie Ancho doguy is close o he Johnson iew
ha a ma ke con o ming s a e guides impo an aspec s o g ow h h ough suppo i e policies. See
ANCHORDOGUY, M. : op. ci .
(23) PATRICK, Hugh and ROSOVSKY, Hen y : Japan's Economic Pe o mance: An O e iew in
PATRICK, H. and ROSOVSKY, H. : op. ci ., p. 6-62 especially p. 47-48.
(24) FRIEDMAN, D. : op. ci .
(25) A some poin his iew is accompanied by a co po a is in e p e a ion o in e es g oup poli ics.
See Chap e 6 and WADE, Robe : Go e ning he Ma ke Economic Theo y and he Role o
Go e nmen in Eas Asian Indus ializa ion. P ince on, P ince on Uni e si y P ess, 1990, p. 27.

(26) SAMUELS, R.: op. ci ., p. 95-102. We exagge a e he simplici y o eal-wo ld policy p ocesses in
igu e 4. Al hough he pa e ns we induce a e clea ly p esen , alignmen s and issues in many policy
p ocesses a e seldom con ined o a single pa e n. Ins ead, i is mo e common o seen a se ies
policy s ages in which di e en aspec s o he main issue a e nego ia ed, and in which di e en
elemen s o he p o- and con a- coali ions play majo oles. Mo emen om sub-issue o sub-issue,
nego ia ion and e-nego ia ion and eme gence o di e en ac o s as dominan playe s in di e en
policy s ages is common. he s ages o policymaking as ini ia ion, d a ing, deba e/ nego ia ion and
decision would indica e. E en pa adigms which desc ibe policymaking in e ms o bu eauc a ic,
pa y, cabine and Die s ages ail o cap u e he equen e e sals o mo emen and a ena
o e laps common o eal-wo ld policymaking.
(27) SAMUELS, R. : op. ci ., p. 108-112.
(28) See, o example, he discussions o he p ocesses leading o he i s Coal P og am as ela ed
in SAMUELS, R. : op. ci ., p. 113-116. In se e al o he majo pos wa ene gy policy decisions, he
s a e ac ually a i ied decisions made wi hin p i a e sec o policy bodies such as Fede a ion o
Economic O ganiza ion commi ees.
(29) See also FUKUI, Ha uhi o: Economic Planning in Pos wa Japan: A Case S udy in Policy Making
in Asian Su ey. 12 Ap il/1972, p. 327-348. Jou nalis ic accoun s o economic policymaking also
documen he p esence o poli ical pa y and business sec o inpu s o mac o-economic policy
design.
Since Samuels wo k deals wi h ene gy indus ies, he ex en o which his indus y is a ypical needs
o be conside ed. One o he a iables a ec ing he shape o ene gy policy baha io is he
consume - p oduce clea age; i may be ha policy a enas lacking his basis o disag eemen
display di e en pa e ns o con lic . also, poli ical con o e sy may be g ea e in a declining indus y
like coal ( one o Samuels h ee cases) han in he case o in an indus ies. Indeed, whe he
indus ies ace de elopmen o decline, a e heal hy o ecessed o a e domina ed by a ew la ge
i ms s. many small companies all may be e y ele an o he deg ee o con lic and accep ance
o ejec ion o go e nmen p og ams. Pe haps Samuel´s bigges con ibu ion is o poin ou ha
i ms espond o go e nmen on he basis o hei own in e es . his o he wise ob ious elemen o
i m beha io is gene ally igno ed by ad oca es o he dominan bu eauc acy-de elopmen al s a e
hypo hesis.
(30) Examples a e d awn om SAMUELS, R.: op. ci ., chap e 3-6.
(31) LONG: The Local Communi y as an Ecology o Games. Ame ican Jou nal o Sociology 44/1958
p. 251-261.
(32) JAPAN ECONOMIC INSTITUTE: Japan´s Indus ial Policies. Wha A e They, Do They Ma e
and A e They Di e en o m Those in he uni ed S a es?. Washing on, DC, 1984, p. 41.
(33) JOHNSON, Ch.: op. ci ., p. 207 .
(34) Elsewhe e, MAGAZINER, I a and HOUT, Thomas: Japanese Indus ial Policy. London. Policy
S udies Ins i u e, 1980 w o e ega ding he s eel indus y ha " he g ea e pa o in es men capi al-
oughly 65 pe cen - was inanced by deb , p ima ily h ough go e nmen ins i u ions al hough
supplemen ed by p i a e ins i u ions". We show ha go e nmen lending accoun ed o jus o e 12
pe cen o he s eel indus y's bo owing in peak pe iods (Table 4), al hough we don' dispu e he
ule o deb in gene al.
(35) See also OGURA, Se i su and YOSHINO, Naoyuki: "The Tax Sys em and he Fiscal In es men
and Loan P og am" in KOMIYA, Ryu a o, OKUNO, Masahi o and SUZUMURA; Ko a u (ed):
Indus ial Policy o Japan. San Diego. CA, Academics P ess, 1988, p. 121-123.
(36) The disc epancy be ween Johnson's igu es and ou own is appa en ly due o he misleading
inclusion o lending o ag icul u e and small business in he go e nmen 's agg ega ed da a on
equipmen loans. Go e nmen equipmen loans a e no mally s a ed as a o al igu e which includes
lending o small i ms and a me s o m he People's Finance Co po a ion, he Medium and Small
Business Finance Co po a ion, he En i onmen al Sani a ion Finance Co po a ion ( a e 1968) and
he Ag icul u e, Fo es y and Fishe y Finance Co po a ion as well as loans o la ge i ms om he
Japan De elopmen Bank and Expo Impo Bank. Ve y la ge amoun s o loans we e di ec ed o
he small business sec o , o en o mainly social policy pu poses o because o LDP in e en ion on
he behal o clien s. This lending should no be seen as go e nmen suppo o a ge ed g ow h
indus ies. See Table 3 sou ces.
(37) Shipbuilding was also encou aged indi ec ly by lending o domes ic shipping companies which
placed o de s o new ships, and la e by addi ional unding om he Expo -Impo Bank o expo s
o Japanese made ships. Bo h shipping and shipbuilding needed e y la ge loans o become and
s ay iable.
(38) In he 1970s , he powe indus y ecei ed subs an ial JDB loans as pa o na ional e o s o
con ol indus ial pollu ion. See OGURA, S. and YOSHINO, N.: op. ci ., p. 145.
(39) KOMIYA, Ryu a o e al. : op. ci ., chap e 5 and 16.
(40) MUTOH ;Hi omichi,: "The au omo i e Indus y" in KOMIYA, R.: op. ci ., p. 307-332 and OGURA,
S. and YOSHINO, N. : op. ci ., p. 146-147.
(41) KOMIYA, R. e al. : op. ci ., speci ically, OGAWA, Se i su and YOSHINO, Naoyuki: "The Tax
sys em and Fiscal In es men and Loan P og am" p. 121-154, YAMAWAKI, Hideki: "The S eel
Indus y" p. 281-306, and SHINJO, Koji: "The compu e Indus y" p. 333-368.
(42) JAPAN ECONOMIC INSTITUTE: op. ci ., p. 42.
(43) As is well known , he e we e also close ies be ween powe and shipping indus y igu es and
leading conse a i e poli icians including Shige u Yoshida, and sizable money con ibu ions om
he ele an indus y associa ions. Newspape s in he 1950s ca ied many accoun s o hese
ma e s. Fo example, Mainichi epo ed on Feb ua y 4, 1954 ha he Elec ic Indus y Managemen
Council and he Shipbuilding Associa ion we e he bigges con ibu o s o he Libe al Pa y du ing
he i s six mon hs o 1953, ollowed closely by he Coal Associa ion. To al 1953 conse a i e pa y
con ibu ions om powe we e said o be 22 million yen, a subs an ial sun o con ibu ions in hose
imes. These igu es we e om o icial epo s. Elsewhe e, Tokyo Nichinichi on June 18 and 20,
1954 desc ibed Tagakichi Aso (p esiden o Aso Mining Company and Kyushu Elec ic Powe
Company ) and Ji o Shi asu (p esiden o Tohoku Powe Company) as close con idan s o Yoshida.
(44) A he end o each o he i s i e plan pe iods nominal GNP was 168, 166, 280, 182 and 156
pe cen o a ge ed g ow h espec i ely.
(45) FRIEDMAN. D.: op. ci ., p. 79-97, and SAMUELS, R.: op. ci ., p. 112 and 124.
(46) See "The Rapid G ow h E a" in KOMIYA, R. E al.: op. ci ., p. 83.
(47) YAMAKAWA, Hideki: "The S eel Indus y" in KOMIYA, R. e . al.: op. ci ., p. 302-304. Howe e ,
Yamakawa also emphasizes he impo ance o in e - i m compe i ion, s a ing in conclusion. This
was a e lec ion o he ou wo king o igo ous in es men compe i ion by he indi idual s eel
make s....wi hou eal compe i ion, such a o able ma ke pe o mance du ing his pe iod could no
ha e been expec ed. Yamakawa also c i icizes wha he eel was MITI´s o e emphasis on indus y
coo dina ion and i s conce n o la ge-scale me ge s. The o me led o ine icien esou ce
alloca ion in his iew while he la e was el o lead o p ice disc imina ion be ween o eign and
domes ic ma ke s.
(48) YAMAWAKI, H.: op. ci ., p. 302-304. Howe e , despi e he 1950s successes, by he 1970s
compe i ion (and some say MITI policy) had also p oduced o e -capaci y in he s eel indus y.
(49) MAGAZINER, I. and HOUT. Th.: op. ci ., p. 44.
(50) MUTOH, Hi omichi: "The Au omo i e Indus y" in KOMIYA, R. e . al.: op. ci . p. 314. I is possible
ha au omobile i ms sough ewe suppo s han some o he indus ies Indus y esis ance o MITI
policy p omo ing in e - i m me ge s is well known, and symbolizes he gene al independence o
ou look among some indus y i ms. Some success ul au omobile companies such as Honda
consis en ly dis ance hemsel es om he go e nmen . KAPLAN.: op. ci ., p. 120-128. JOHNSON.
Ch.: op. ci ., p. 24 and con e sa ion wi h Soichi o Honda.
(51) MUTOH, H.: op. ci . in KOMIYA, R. e . al.: op. ci ., p. 323-324.
(52) KAPLAN : op. ci ., p. 116-120. Howe e , YOKOKURA, Takashi: Small and Medium En e p ises
in KOMIYA, R. e . al.: op. ci ., p. 531-534 discoun s much medium and small indus y policy as
being gene ally unselec i e, so i is possible ha he au o pa s e o s we e less success ul han
Kaplan s a es.
(53) KAPLAN : op. ci ., p. 83-86.
(54) ANCHORDOGUY, M.: op. ci . 59-91.
(55) SHINJO, Koji: "The Compu e Indus y" in KOMIYA R. e . al.: op. ci ., especially p. 354-356.
Ga y Saxenhouse belie es ha coope a i e R and D p ojec s play a ole some hing like in e - i m
job mobili y in he Uni ed S a es, i. e. di usion o knowledge ac oss i ms. See "Tampe ing wi h
Compa a i e Ad an age in Japan", Tes imony o he Uni ed S a es In e na ional T ade Commission,
July 13/1983, p. 4.
(56) SAMUELS, R.: op. ci ., especially p. 116-134.
(57) Se e al ac o s a o ed he success o he Japanese shipbuilding indus y in he ea ly pos wa
e a, in addi ion o go e nmen subsidies o shipowne s and la e lending o expo o ships. Labo
cos we e low in he Japanese shipbuilding indus y in he ea ly pos wa e a. The cos o s eel
inpu s we e also lowe han hose o Eu opean and Ame ican compe i o s in he la e pa o he
1950s and la e . Capaci y and p oduc ion know-how also exis ed as he esul o p e-wa and
wa ime policies. See, o example, YONEZAWA, Yoshie: "The shipbuilding Indus y" in KOMIYA,
R. e . al.: op. ci ., p. 443.
(58) YONEZAWA, Y.: op. ci ., p. 433 .
(59) GENERAL ACCOUNTING OFFICE: Repo o he Chai man, Join Economic Comi ee, Uni ed
S a es Cong ess, Indus ial Policy: Case S udies in he Japanese Expe ience. Washing on, DC,
1982, p. 58-68.
(60) Acco ding o he Economic Planning Agency, elec ici y a es a e 24 pe cen highe in Tokyo
han in New Yo k, 15 pe cen highe han in London and nine pe cen highe han in Pa is. See
KEIZAI KOHO CENTER : Japan 1992, An In e na ional Compa ison. p. 74. High cos s o impo ed
oil a e a majo ac o in high elec ic powe a es. See SAMUELS, R.: op. ci ., p. 183.
(61) HALL, Pe e : Go e ning he Economy: The Poli ics o S a e In e en ion in B i ain and F ance.
New Yo k, Ox o d Uni e si y P ess, 1986, especially p. 17-20 and 229-283.
(62) Howe e , gi en conside able complexi y and he need o ca e ully designed coun e - ac uals,
assessmen o he ole o hese ins i u ional pa e ns in Japanese economic de elopmen mus
emain en a i e.
(63) BRONFENBRENNER, Ma in and YASUBA, Yasukichi: "Economic Wel a e" in YAMAMURA, K.
and YASUBA , Y. (ed): op. ci ., p. 138
(64) DENISON, Edwa d and CHUNG, Willian "Economic G ow h and I s Sou ces" in PATRICK H.
And ROSOVSKY, H. (ed) op. ci ., p. 116-119.
(65) SATO, K.: op. ci ., p. 142.
(66) One well known case, Toyo a, had no bank indeb edness by he la e 1980s. See KEIZAL, Toyo:
Kigyo Kei e su So an. Tokyo. Toyo Keizai Shimposha, 1987, p. 362.
(67) LINCOLN, E.J.: op. ci ., p. 11.
(68) PECHMAN, Joseph and KAIZUKA, Keimei: "Taxa ion" in PATRICK. H. and ROSOVSKY, H.
(ed): op. ci ., p. 317-382.
(69) HAMADA; Koichi and HORIUCHI, Akiyoshi: "The Poli ical Economy o he Financial Ma ke " in
YAMAMURA, K. and YASUBA, T.: op. ci ., p. 232-235 and 249-250. The Japanese pos wa
co po a e p ac ice o hea y dependence on bank loans declined somewha a e he 1970s.
(70) JOHNSON, Ch.: op. ci ., p. 211.
(71) As Edwa d LINCOLN s a es ega ding he indica i e ole o he JDB. "This s a emen could be
ue....bu i emains a piece o unexamined my hology abou Japan.... he ma ke o comme cial
loans is no mo e han ma ginally unde he con ol o he Japan De elopmen Bank". Op. ci ., p. 41.
(72) NAKAMURA. Taka usa: The Pos wa Japanese Economy. I s De elopmen and S uc u e.
Tokyo. Uni e si y o Tokyo P ess. 1981, p. 66.
(73) HADLEY, Eleano : U.S. T ade P oblems wi h Pa icula Re e ence o Japan in HOLLERMAN;
Leon (ed.) : Japan and he Uni ed S a es Economic and Poli ical Ad e sa ies. Boulde , CO,
Wes iew, 1980, p. 71; KOMIYA, R. e al.: op. ci ., p. 14 NAKAMURA, T.: op. ci ., p. 63-74.
(74) FRIEDMAN, D.: op. ci ., p. 97-99.
(75) See commen s by KOMIYA, Ryu a o and KOSAI, Yuka a espec i ely, in KOMIYA, R. e , al.: op.
ci ., p. 14 and 26.
(76) The conce n o c ea ing ma ke o de and highe le els o concen a ion was he main heme o
he "New Indus ial O de " policy o he 1960s. This policy has been discussed in many o he
sou ces ci ed in his chap e . See, o example TSURUTA, Toshimasa: "The Rapid G ow h E a" in
KOMIYA, R. e . al.: op. ci ., p. 63 .
(77) GALENSON, Wal e and ODAKA, Konosuke: "The Japanese Labo Ma ke " in PATRICK, H.
ROSOVSKY, H.: op. ci ., p. 589 .
(78) LEVINE, Solomon B: "Labo Con lic " in RICHARDSON , B adley and UEDA, Taizo (ed): op. ci .,
p. 48. Li e ime employmen is ound mo e in la ge i ms han in Japan's medium and small business
sec o , and is belie ed o os e high le els o company loyal y. See GALENSON, W. and ODAKA,
K.: op. ci ., p. 613-627.
(79) Howe e , g ow h was o some deg ee also an essen ial componen o suppo o Japanese
labo p ac ices, as bo h employmen e-s uc u ing du ing he 1970s ecessions and mo e ecen
wo k o ce cu ailmen es i ies. Main enance o a pe manen labo o ce was in pa dependen on
economic g ow h, o a leas main enance o economic s abili y.
(80) CALDER, K.: op. ci ., p. 314. In some pa s o he Japanese economy he e a e wice as many
employees pe uni o ou pu o sales as in he Uni ed S a es.
(81) FRIEDMAN, D.: op. ci ., chap e s 4-6. See also PATRICK. Hugh and ROHLEN, Thomas: "Small
Scale Family En e p ises" in YAMAMURA; K, and YASUBA, Y.: op. ci . p. 346-347.
(82) CAVES, Richa d and UEKUSA, Masu : "Indus ial O ganiza ion" in PATRICK H. And
ROSOVSKY, H (ed) op. ci ., p. 511-513.
(83) KRAUSE and SEKIGUCHI: op. ci ., p. 398 s a e unequi ocally he now well accep ed iew ha
he domes ic economy was he main d i e o high g ow h in he 1950s and 1960s.
(84) MURAKAMI, Yasusuke: "The Japanese Model o Poli ical Economy" in YAMAMURA, K. and
YASUBA, Y. (ed) op, ci ., p. 74-75.