Japanese Economic Development

Development is often described as the social transformation from traditional ways into embracing modernity. In the 1960s, many of the states in Southeast Asia experienced an accelerated social and economic growth which was pioneered by Japan. The Japanese economy was considered number one and its economic model was hailed as an example for other developing countries to follow. This essay will describe and analyze the economic changes Japan has gone through in the last century.

Japan’s modern economic history has its roots in the founding of the Meji government in the 1860s which emphasized the westernization of the previously closed-off country. Japanese industrialism started with the textile industry, the most popular industry for developing

During the early stages of Japan’s economic growth, the economy grew moderately and relied on agriculture to finance modern industrialization. In world war one, Japan used the absence of major European countries in the world market to accelerate its economic growth since most of its main competitors were taking part in the ongoing battles of the war; and for the first time since it was an isolated country during the Edo Period ( ), it generated a trade surplus. By the 1920s, the manufacturing and mining, transportation and communications industries had all grown into substantial factors of development; however, most of the industrial growth was leaning towards the growth and expansion of its military

The Japanese applied the concept of “Comparative Dynamic Advantage” in which future growth areas were picked; the selection criteria included anticipated high value-added, global income elasticity of demand and positive domestic income and employment impact. These criteria were carefully considered by Japan’s Ministry of International Trade and Industry(MITI) to determine the structure of industry, guiding the development of targeted industries, managing Japanese foreign trade and supervising areas such as small business policies, patents and area specific development. To emphasize its industrial targeting policy, MITI engaged in many areas of intervention such as domestic protection for its industries, finance policies for guidance, reduction of “excess” competition, technology assistance and development to give Japan an edge as a competitor in the technological market and finally, tax policies that gave incentives and motivation to the Japanese to invest in certain industries. MITI also had heavy influence on the Japan Development Bank, and therefore directed loans and funds to the industries that it specifically targeted. The influential support from MITI encouraged domestic investment entry into these industries. The ministry also reduced excess competition, in the form of too many small firms, through activities