Economic Development of Japan - PowerPoint Presentation

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Economic Development of Japan

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Introduction

Overview—Why Japan could catch up quickly with the West- Japan’s cumulative and evolutionary history

- Private dynamism and effective policy supportMeiji Period (late 19th-early 20th century)

Gosho, zaibatsu & super-businessmen  Policy supportPost WW2 high growth

(late 1950s-60s)- Active investment & technology absorption, kaizen (productivity) MITI’s industrial policy

For more information, please see:

Textbook: Kenichi Ohno, The Economic Development of Japan: The Path Traveled by Japan as a Developing Country

, GRIPS Development Forum, 2006; free softcopy available at www.grips.ac.jp/forum/pdf06/EDJ.pdf Lecture slides: www.grips.ac.jp/teacher/oono/hp/index.htmSlide3

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I. Emperor’s Rule

II. Samurai’s Rule

X

III. Modern

-ization

WAR

IV. Postwar

Clan fights

×

645

NARA

Centralization

HEIAN

Nobles,

Decentralization

Internal wars, dynamic & fluid society

Peace, isolation, conservative class society

EDO

Tokugawa Shogunate

KAMAKURA

MUROMACHI

SENGOKU

1867

MEIJI

Westernization,

industrialization,

militarilization

Rapid recovery and growth

Hunting & gathering

Taika Reform

Rice

Chinese culture &

political system

Buddhism

WEST: guns &

Christianity

WEST!!!

US occupation

1945-52

1603

PP.16-17

×

671

Jinshin War

1937-45Slide4

Integration Viewed from Outside

WTO, WB, IMF, FTAs,

USA…

P.5Slide5

Integration Viewed from InsideInteraction of domestic & foreign systems

Base Society

Internal systemic evolution

Foreign

Systems

Conflicts and adjustments

Government must manage

Imported from outside by:

Invasion, colonization

Migration

Trade & FDI

Aid

WB, IMF,

WTO

P.6

“Translative adaptation”

（

Prof.

Keiji

Maegawa)Slide6

Japan’s Multi-layered Identity

先史時代の日本

Rice cultivation

Heian & Samurai Culture

Western influence

Edo Culture

Guns & Christianity

Pre-historic Japan

Buddhism

& China

Note: Colored areas indicate external impacts

P.4Slide7

Dr. Umesao’s View of the World

Western

Europe (UK)

Japan

Dry Area

Russia

China

India

The Meditterra-nean and Islamic

States

Eurasian Continent

P.9

Umesao Tadao 1920-2010Slide8

History: Evolution vs. Repetition

Dynasty A

Dynasty B

Dynasty C

Dynasty D

Colonialism

Developmental state or neo-patrimonial state?

X

X

X

X

X

Destruction

Centralized dynasty

Fights among local powers

Feudalism

Rise of commerce & merchant class

Industrial revolution

High technology & civil society

External stimuliSlide9

The Shape of This NationA series of historical essays 1986-1996

by Shiba Ryotaro

(Historical Writer, 1923-1996)

Shiba asked What is Japan and What shaped Japanese people. The two key elements are:

Island NationThe people of an island nation is curious about foreign ideas and objects (not conservative), and absorb them eagerly while adjusting them to Japanese tastes and mindset.Bushi (Samurai)The spirit of samurai (warrior class) permeates Japanese life. The highest value is

honor, not personal gain or family prosperity. Japanese people want to live and die honorably, avoiding shame.Slide10

Characteristics of

Japanese People

As a Result of Cumulative & Evolutionary History

Strong curiosity over foreign ideas, products & technology

Translative adaptation

—accepting foreign things with local adjustments so they will fit Japanese contextPragmatism & diversity—living comfortably with multiple principles which may be mutually inconsistentHonor over

profit—pursuit of discipline and correct action without being forced by government or God’s orderDedication to nation, society, etc. (something greater than self)

Hard work in pursuit of excellenceLack of logical consistencyGroup orientation and weak individualism

Cultural uniqueness and isolation—inability to communicate Japan to the rest of the world

 Samurai spirit, pre-WW2 militarism, industrializationSlide11

Cumulative history, Edo achievements, national unity and nationalism

Private-sector dynamism

and entrepreneurship

(primary force)

Appropriate

policy support

(supplementary)

Japan’s economic growth was driven primarily by private dynamism while policy was also helpful

Policy was generally successful despite criticisms:

--Power monopoly & close linkage with big businesses

--Privatization scandal, 1881

--Excessively pro-West

--Unfair by today’s standard

Rapid industrialization especially in Meiji and post WW2 period

P.56Slide12

Evolutionary history

—alteration of external influences

and

internal evolution, which pushed

a centrally controlled society to feudalism and decentralization, then a rise and autonomy of regions.Japanese mindset

—dedication and attention to quality & details, which are suitable for manufacturing.Dual engine of growth—development driven by strong private dynamism, and supported by

(mostly) appropriate policies.

Social changes

and new problems

caused by rapid

industrialization, which interact with

growth dynamism.

A rise of militarism

in

an emerging industrial economy (up to 1945)—why and how.

Summary: Our ViewpointsSlide13

Differences: fast-rising countries vs. stagnant ones

Private dynamism (individuals and enterprises)National leader (wisdom, decisiveness, action-oriented)

Proper policy method (procedure, organization, documents)

Proper policy contentLessons from Japanese experience?Japan in the 19th century & post-WW2 period had both private dynamism and proactive national leaders. However, most latecomer countries lack these conditions.

If both businesses and government are weak, initial drive for development must come from the leader/government that sets national goals, elevates popular mindset, and engages in serious policy learning and implementation.

Proper Mindset & Method for IndustrializationSlide14

Meiji Period (1868-1912)

Forced opening of ports by West (1854); free trade (1859-)Rapid transformation from agro-based feudalism to Westernization and IndustrializationIndustrial revolution (textile) attained in 1890s, overtaking British cotton industry by early 20th century

Strong government with clear goals- Introducing Western style constitution & parliamentary politics

- Industrialization- Building strong military forcesSlide15

Post WW2 High Growth (late 1950s-60s)

After war defeat in 1945, planning method was used to jump start the economy (production of coal & steel); inflation was stopped and prices & trade were liberalized around 1950.High growth was unleashed by strong private dynamism, supported by investment in new technology, kaizen, and gradual trade liberalization.

The Ministry of International Trade and Industry (MITI) was a super-ministry for industrial catch-up, working closely with private firms and business associations.Slide16

Toshimichi Okubo　(1830-1878)

Minister of Home Affairs; top-down promoter ofindustrialization and technology importPolicy measures:

--Supporting zaibatsu (business conglomerates, esp. Mitsubishi) for industrial promotion and import substitution--Establishment of SOEs and research institutes

--Trade & industry exhibitions (for Japanese products)--Set up new ministries, police and local governments

PP.44-45

“The strength of a country depends on the prosperity of its people which, in turn, is based on the level of output. To increase output, industrialization is essential. However, no country has ever initiated the process of industrialization without official guidance and promotion.” (Okubo’s back-to-office report, 1874)Slide17

Rich Merchants in Edo Period (Gosho)

Sumitomo Family

-16c Adopt Western copper refining, copper trade (Kyoto)

-17c Move to Osaka

-Besshi Copper Mine (under Bakufu’s commission)

<Transition to Meiji>

Manager:

Hirose Saihei

-Avoiding gov’t confiscation

-Introducing Western mining technology to renovate Besshi

-Business diversification

Mitsui Family

-17c From Matsuzaka

-Kimono trade & money exchange in Edo, Kyoto, Osaka – huge success

<Transition to Meiji>

Manager: Minomura Rizaemon -Cope with bakufu policy to protect Mitsui business-Support and work with new government-Internal reform: from gosho to zaibatsu

-1876 Establish Mitsui Bank & Mitsui Trading Company

Konoike-Sake making, trading, loans to daimyo-No serious internal reform in Meiji-Failed to form zaibatsu (Sanwa Bank)Slide18

Yataro Iwasaki (1835-85)

Seisho (politically well-connected big business),founder of Mitsubishi Zaibatsu

Shipping company--grew fast with government support (receiving gov’t ships, contract for military transport)Established Nippon Yusen (NYK Line), fierce battle with Kyodo Unyu (anti-Mitsubushi company), 1883-85

Expanded to many sectors: trade, banking, shipbuilding, coal, mining (later, more)

Bakufu’s Steel Mill in Nagasaki, transferred to Mitsubishi in 1884

Mechanical factory in Nagasaki, ca 1885

PP.45-46

三菱Slide19

Eiichi Shibusawa

(1840-1931)From Saitama Tomoatsu Godai

(1836-1885)

From Satsuma　Super business promoters -- but they did not form zaibatsu

P.46

-Initially, anti-bakufu fighter

-Next, assistant to last shogun

-Works vigorously for MOF

(invited by Meiji Government)

-President of First “National” Bank”

-Company builder and business coordinator for many years

-Social contributions

-Studies and builds human network in Nagasaki

-Visits UK; realizes need to industrialize, writes report

-In Osaka, helps to create copper co., railroad, shipping co., rice & stock exchanges, cham. of commerce, university, test centers, trading center, etc

-SOE privatization scandalSlide20

Monozukuri (Manufacturing)

SpiritMono means “thing” and zukuri (tsukuri

) means “making” in indigenous Japanese language.It describes sincere attitude toward production with pride, skill and dedication. It is a way of pursuing innovation and perfection, often disregarding profit or balance sheet.

Many of Japan’s excellent manufacturing firms were founded by engineers full of monozukuri spirit.

PP.65, 179-181

Sakichi Toyota

1867-1930

Konosuke Matsushita

1894-1989

Soichiro Honda

1906-1991

Akio Morita (Sony’s co-founder)

1921-1999Slide21

GM & Ford began knock-down production in Japan in the 1920s.

Kiichiro Toyoda (1894-1952) was the son of Sakichi

Toyoda, the founder of Toyota Textile Machine. Aftervisiting UK & US, he wanted to create a competitive car

maker in Japan, but his company did not approve the idea.He visited many factories, universities & ministries; purchased equipment from Germany & US; and test produced small engines.In 1933 he reverse-engineered the latest GM Chevrolet, analyzing all components and identifying Japanese companies that could produce them. The Toyota Board finally recognized his effort.

In 1934, US cars were further analyzed & a large factory was built. The engine was modeled after GM, the chassis was Ford-based, and the design was copied from Chrysler. Kiichiro’s engineer friends helped him. After many failures, the engine was finally completed.The first Toyota car rolled out in May 1935.

How Toyota Started Car Production