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Japan's Economic Development

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In the following paper I will be examining the process of economic development in Japan. I begin with their history in the Meiji period and how that effected their great success in the postwar development. Then I will go through the different economic stages of economic development in postwar Japan. I will examine the high periods and low period in Japan economics, and the factors behind these shifts in development. Last I will give a conclusion and where I believe Japan economy will be in the future.

To understand Japan economic boom after the war you must also look at there history. Without the creation of the industrial economy during the Meiji Japan this economic growth after postwar could have not happened. To look even closer lets examine the period before called the Tokugawa period, from 1630's until the 1860's. Smith explains that "during this period Japanese economy experienced unparalleled growth and structural change" (Smith, Page 4). The system was set up on rules and obligations on all sections of society. These systems of control helped rapid urbanization.

Education is also a factor in the economic development in Tokugawa period. Tokugawa Japan abapted Confucianism belief system from there neighbors China. This became important because "one of the distinctive traits of Confucianism was reverence for education and learning" (Smith, Page 5). This spread of education was dramatic. Not

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Only did the knowledge seep the upper class (such as the samurai and merchants) but in order to expand business it filtrates down to the peasants and artisans also. During this period up to forty percent of boys and ten percent of girls were educated by the 1850's. These are great numbers compared to other societies. The Tokugawa period in turn developed an economy familiar to bureaucratic direction and directed by the well-educated people stated Dennis Smith.

In 1869 the Tokugawa shogunta was bought down and Meiji restoration began. Japan was under great change. Meiji Japan began to industrialize. This was due to the western countries that have already industrialized. It was through private investment and enterprise that Japan began this process. The backbone of industrialization was the zaibatsu. Zaibatsu were industrial and financial conglomerates. They were given government support including benefits from government subsidies and sell-off of government factories. The first of these zaibatsu were Mitsui, Mitsubishi, Sumitomo, and Yasuda. Growth of industrialization began slowly. In the beginning they still depended largely on United States and Europe for most specialized and worldly machinery and manufactured goods. It was not till the 1915 that industrialization began to take off for Japan. Why did this happen? The explanation is that the World War I began.

During World War I Japan was cut off from most European manufacturer goods. This was the needed opportunity for Japanese manufacturers. Now they were able to broaden what they manufactured and move into the markets that they normally imported

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from Europe. The demand for these manufactured goods ended up resulting in a net domestic product growth by 61.5 percent between 1910 to 1920.

By the 1920's the wartime boom was over and Japan's economy went into a recession. Yet the 20's were important to economic development. During this period economic development began to shift into a different role. Important changes in industry began to take place. One was a more efficient source of electric power. This was called the hydroelectric plant. Hydroelectric plants took better advantage of Japanese geography then their pervious source of electricity. It also developed relatively cheap electrical power. With cheaper power now new industries began to develop (including aircraft and radio and electrical appliances). But the most important change I feel is "laboratories that government, universities and private companies set up in the 1920's Ð'...they were the basis of Japan's development expertise in computers and information technology." (Smith, Page9).

Soon after the First World War, Japanese economy was that of a dual structure. This still holds true of Japan today. What does a dual structure mean? It is when you have companies that are capitalized and have access to the best available foreign technology. Their workers are very well skilled and receive high wages. Yet, opposite to that, Japan also has a different side to their economy structure. This side of the economy is small and medium sized enterprises. Their duties are more then likely subcontracting for more advanced companies. They are not able to have the latest technology that the larger companies have because they do not have large amounts of capital. The jobs they

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provide are low skilled jobs so workers receive low wages also. The majority of worker in Japan today works in small and medium enterprises. Patrick Smith describes this as a satellite manufacturing system. He says it was invented to maximize production. Smith displays a good picture of how the system runs. He says that beneath corporations are subcontractors and beneath them "are front parlor factories - households where parts are assembled, stamped, or cut and packed off up the production ladder." (Smith, Patrick, Page 114)

In 1929 to 1930 the world was in a depression. This threat set off yet another change in the Japanese economy. As a result of the depression Japan became a more militarized state. The economy soon began to shape around miniaturization. As a result "the growing demand for goods and services from the military stimulated a growth in manufacturing industry, both in the production and in technology." (Smith, Page 11). Yet over half of the manufacturing was in heavy industries. This would later have negative effects on Japan. New zaibatsu developed in this period (one of them being Nissan). However there were many flaws to this economy as I said earlier. Most noticeable of them was the fact that it was based so largely on military expansionism. The national budget was spending an exceeding amount of capital in the expansion of the military.

Japan soon became an allied force in World War Two. After the war Japan had been defeated and there were large cost. World War II had a devastating effect on Japan and its economy. At the end of the war 8,000,000 Japanese were either dead or wounded




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