Term Paper: Post-World War II Japan

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[. . .] Although parts of the structure established by the document have been modified through administrative actions (including a reversal of the principle of decentralization in areas such as the police, the school system, and some spheres of local administration), and while Article 9 has been compromised by the decision to form a National Police Reserve that in 1954 became the Self-Defense Forces, the basic principles of the constitution have enjoyed support among all factions in Japanese politics. Executive leadership proved to be the chief asset of the new institutions, and, with the abolition of the competing forces that had hampered the premiers of the 1930s, Japan's postwar prime ministers have found themselves firmly in charge of the administration and (with limited rearmament) the armed forces as well. As a result, responsible Japanese leadership eventually replaced the more nebulous claims of imperial authority of the past.

Industrialization in Post-War Japan. In his book, The Postwar Japanese Economy (1995), Nakamura Takafusa locates the "roots" of both industrial policy and administrative guidance in the controlled Japanese economy of the 1930's and he calls the Ministry of International Trade and Industry (MITI) the "reincarnation" of similar Japanese wartime agencies. By common agreement among the Japanese, the economic "miracle" first appeared to them during the early 1960s. In its September 1 and 8, 1962 issues, the Economist of London published a long two-part essay entitled "Consider Japan." These essays were quickly translated and published in Tokyo as Odorokubeki Nihon ("Amazing Japan"). Up to this point in time, Johnson reports that the majority of Japanese simply did not believe the rate of economic growth they were achieving (a rate unprecedented in Japanese history), and their pundits and economists were writing cautionary articles about how the boom would fail, about the crises to come, and about the irrationality of government policy. "Yet where the Japanese had been seeing irresponsible budgets, 'overloans,' and tremendous domestic needs, the Economist saw expansion of demand, high productivity, comparatively serene labor relations, and a very high rate of savings" (Johnson 1982:97). As a result, there has been an enormous amount of attention, both domestic and foreign, of the postwar Japanese economy and the search for the source of the "miracle." (Johnson 1982).

Proponents of the "no-miracle-occurred" school of analysis do not literally assert that nothing happened to Japan's economy; however, they maintain that what happened was not miraculous but rather a normal outgrowth of market forces. Patrick argues, "I am of the school which interprets Japanese economic performance as due primarily to the actions and efforts of private individuals and enterprises responding to the opportunities provided in quite free markets for commodities and labor. While the government has been supportive and indeed has done much to create the environment for growth, its role has often been exaggerated" (Patrick 1977:239). However, there is a problem, Patrick concedes: "It is disturbing that the macro explanations of Japanese postwar economic performance -- in terms of increases in aggregate labor and capital inputs and in their more productive allocation -- leave 40% plus of output growth and half of labor productivity growth unexplained" (Patrick 1977:225). If it could be shown that the government's industrial policy made the difference in the rate of investment in certain economically strategic industries (for instance, in developing the production and successful marketing of petrochemicals or automobiles), then perhaps it could be said that its role has not been exaggerated (Johnson, 1982). Tabb argues that "the Japanese system replaces Taylorism and Fordism with flexible production" (p. 37); however, Moore (1997) believes this assessment falls short of the mark by viewing these approaches as primarily being production techniques without taking into consideration the fundamental differences in cultures that contributed to the process.

According to Odagiri (1992), the rapidity with which post-war Japan caught up with EuroAmerican economic standards and even surpassed them in several sectors, has naturally created considerable interest, as well as suspicion, among Westerners concerning Japan's economy and management. This interest has been further reinforced by the fact that the Japanese do not share the Protestant ethic that has been believed to be imperative to Western capitalist development (Odagiri 1992). The result has been a denial of a claim that Japan followed the same ground rules of capitalist development as the West.

From this perspective, it is little wonder that the popular explanations have stressed either cultural differences or a deliberate conspiracy undertaken by the government and industries (Odagiri 1992).

According to the culture theory, Japanese culture differs from Western culture in ways that were naturally favorable for economic development. The most frequently cited of these types of differences are the emphasis placed on harmony rather than rivalry in interpersonal relationships (frequently quoted in this connection is the first Japanese constitution established by Prince Shotoku in the year 604, which stated in its first article that harmony, "wa," should be most highly respected), and the loyalty and paternalism which operate in essentially vertical social relations (Nakane 1970). These, it has been argued, have led the Japanese to create efficient teamwork, a commitment to company or social goals, and a close collaboration between labor, business, and government (Odagiri 1992).

According to the conspiracy theory, the Japanese have united to achieve a shared national goal of economic growth. The government, it has been suggested, specifically designated which industries should be promoted, and guided the target industries in this direction through a system of subsidies, unfair trade practices, or persuasion. The businesses followed this guidance and, in return, the government was responsive to their views and coordinated them to avoid damaging competition. In sum, the whole economy has behaved like a single entity, a "Japan Inc." that pursued the mutual goals of attaining economic growth and succeeding in international markets, with the government acting as the supreme decision-maker (Odagiri 1992). Johnson (1982) agrees in part with the latter, and notes that the factors that contributed to Japans high-speed post-war growth included, on the protective side: discriminatory tariffs, preferential commodity taxes on national products, import restrictions based on foreign currency allocations, and foreign currency controls. Furthermore, on the developmental (or what the Japanese call the "nurturing") side, these initiatives also included the supply of low-interest funds to targeted industries through governmental financial organs, subsidies, special amortization benefits, exclusion from import duties of designated critical equipment, licensing of imported foreign technology, providing industrial parks and transportation facilities for private businesses through public investments, and "administrative guidance" by MITI transportation facilities for private businesses through public investments, and "administrative guidance" by MITI (Johnson 1982:29).

At any rate, heavy regulation and controls in the financial sector were instituted during the war and immediate post-war years that were carefully designed to promote economic development (Carlile & Tilton 1998). According to Black's Law Dictionary (1990), a conspiracy is "a combination or confederacy between two or more persons formed for the purpose of committing, by their joint efforts, some unlawful or criminal act, or some act which is lawful in itself, but becomes unlawful when done by the concerted actions of the conspirators" (309). It would seem that the Japanese government and big business were, in fact, closely aligned in what they wanted and how they were going to achieve it in the post-war years, but whether this collusion can be categorized as being "criminal" is questionable. For instance, Carlile and Tilton (1998) note a turning point came with the implementation of capital liberalization in the mid-1960s. "The Japanese government (that is, the Ministry of Finance [MOF] and the Ministry of International Trade and Industry [MITI]) and business leaders were determined to protect Japanese companies from the takeover bids of foreign companies that were expected once capital liberalization occurred" (39). Given Japan's diffuse ownership structure, government officials and top managements of large firms were concerned that foreign firms would quickly take control of Japan's leading companies. Fears of this type were only exacerbated after 1962 in response to a prolonged bear market. Then, the average listed share price in the first section of the Tokyo Stock Exchange (TSE) fell by almost 50% between its October 1961 peak and April 1965 trough. As a result, the Japanese government made to decision to support stock prices in response and used these operations to facilitate the establishment of a retinue of stable shareholders in Japan's leading firms. By so doing, the Japanese state's previously neutral stance toward the structure of corporate ownership shifted to a decidedly activist one (Carlile & Tilton 1998). This decision would have a profound effect on the automobile industry in particular. Initially, the big business community strongly favored the abolition of ban on holding companies found in Article 9 of the Antimonopoly Law as a way to counteract the threat of foreign takeovers of Japanese firms.

Other measures that were proposed to oppose such takeovers included raising the 10% ceiling on shareholding by financial institutions and… [END OF PREVIEW]

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