Post War Japan International And Domestic Factors For Economic Growth

POST WAR JAPAN: INTERNATIONAL AND DOMESTIC FACTORS FOR ECONOMIC

GROWTH

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POST WAR JAPAN: INTERNATIONAL AND DOMESTIC FACTORS FOR ECONOMIC

GROWTH

The paper serves to discuss and evaluate the international and domestic factors

surrounding the economic growth of the post-war Japan. At the close of World War II, Japan was

an ailing country due to the millions of persons dead. An estimated 1.85 million inhabitants died

while another 680 injured or went missing according to Economic stabilization report of 1949.

After the war, Japan’s economy snowballed leading to it being the second largest economy after

the United States by the 1960s. The ability of Japan to rise from its ashes is very remarkable. To

understand the postwar economic growth then the economic development history of Japan should

be put to account during the 1800s and the 1900s. Japan closed the gap through agricultural

development and assistance of the central government, which made it possible for its nationalities

to import ideas from the western countries easily.

A series of both international and domestic factors led to the booming growth of the

postwar Japan economy. After the war, Japan needed to reconstruct the economy considering the

numerous devastating effects the war had brought which lead to its occupation by the Allied

forces, which comprised of mostly the American forces.

Through General Douglas Mc Arthur as

the supreme commander of allied powers came a series of economic policies. To begin with, was

the establishment of economic demilitarization aimed at stopping the production of military

Andrew Gordon, Postwar Japan As History (ACLS Humanities E-Book. Berkeley: University

of California Press, 1993)

materials and the imminent complete closure of companies that were doing the same.

Later the

Japan constitution was promulgated.

Due to the demilitarization by the allied power, expenditure was less, which provided an

opportune window for the rapid growth of the Japan economy immediately after the war.

This

international influence proved to be of importance in ensuring the rising of Japan to its feet

economically. The influence from the international front did not stop as new series of policies

were enacted starting with the dissolution of the Zaibatsu to land reforms and finally labor

democratization. Zaibatsu was composed of mainly business conglomerates that were favored by

the government, and its dissolution was primarily targeting to destroy Japan’s military power

both institutionally and psychologically.

The government offered lowered taxes for the Zaibatsu

and provided more funds in the expansion of their companies, which provided for unequal

competition in business. The monopolistic state by the Zaibatsu led to a semi-feudal relationship

between the wage front and the labor front.

The imminent control of the markets by the Zaibatsu blocked the creation of independent

firms by independent entrepreneurs, development of labor unions and hugely hindered the rise of

the middle class in Japan. To achieve fairness in the markets, legislators created two laws namely

the Decentralization law and the Anti-Monopoly law.

Legislators created the Anti-Monopoly

law to stop any cartel activities all over Japan while they created the Decentralization law to

reduce the size of companies, which were big and could have control of the markets.

The laws

Ibid.

Yamamura, Economic policy in postwar Japan: growth versus economic democracy.

Kozo Yamamura (Berkeley: Los Angeles, University of California Press, 1967)

Ibid.

enacted provided for stiff competition within the markets, which sparked the rapid postwar

economy.

The Lands reform provided that landlords who farmed and owned the lands would sell their

holdings to the public. The government bought these lands for redistribution to tenant farmers

hence a significant landmark as most of the land owned by the landlords proved to be oppressive

to the tenant farmers.

Most of the landlords had bought the lands from the farmers and later

rented these lands to the farmer tenants to benefit from them regarding rent. Due to this

imbalance, the democratization policy stipulated immediate transfer of lands to the farmers who

tilled the soil and the improvement of tenancy practices widely for those who wished to remain as

tenants.

The lands reform was vital in the rapid growth of the economy. Before the reforms, co-owned

land stood at 54%, but after the reforms, the figures rose to 90% near the close of 1950.

These

reforms were also significantly embraced by the landlords who were in agreement that Japan’s

economy was in jeopardy and had to be incubated through collective national unity. Recognition

of landlords as a social class over the farmers and the tenants ceased, and this was of great

significance as it helped speed up the rapid growth of Japan’s economy.

The other reform used by the allied forces was the labor democratization reform aimed at

creating labor unions across Japan. The quick growth leading to the formation of labor unions

Ryu

taro

Komiya Conference on Japan's Postwar Economic Growth, Postwar Economic Growth

in Japan: Selected Papers of the First Conference of the Tokyo Economic Research

Center (Berkeley, Calif: University of California Press, 1966)

Ibid.

was partly brought about by the dissolution of Zaibatsu and the poor working conditions and poor

wages.

The trade union law provided for the rights of workers.

The workers are now protected against unfair treatment from their employers, and have

had a significant increase in wages. Moreover, the improvement of their working conditions has

been catered for.

With these broad improvements by the trade unions right from the growth in

the salaries and the improvement of the working conditions, the economy started growing

significantly and at a rapid rate.

With the reforms in place, the economy of Japan was on its way to recovery. The tension

was brought about by the cold war, which meant that plans to ensure that economy stabilizes

were to be in place during the birth of the Dodge plan. The idea was proposed by the president of

Detroit bank Joseph Dodge whose purpose was to see Japan grow to its full economic strength

and the overall cease of aid from America in preparation for the cold war.

He laid out three

policies that were meant to help with the problem of inflation and ensure stabilization of the

Japanese economy. The first reform was a balanced budget, the second was the suspension of

new loans and thirdly reduction and abolition of subsidies. The changes proved challenging to be

achieved within such a short period, but with the start of the Korean war, the economy multiplied.

Domestically, the growth of the economy not only was it brought about by the

government policies but through the hard work of the people. The Japanese’ ability to imitate and

recreate a better version of the skills learned and applying them to their system proved to be

Ibid.

Laura Elizabeth Hein, Fueling Growth: The Energy Revolution and Economic Policy in

Postwar Japan (Cambridge, Mass: Council on East Asian Studies, Harvard University, 1990)

Ibid.

vital.

A high domestic investment and significant savings mobilization, in turn, geared the fast

growth of the economy. Most of the youth relocated from the rural areas to the cities creating a

younger generation workforce through ‘collective employment’(Shudan Shushoku).

Japan has created his technology from the numerous ideas it brought from the outside world.

Making of low-cost mass production systems translated Japan to an industrial giant but greatly

due to its combination of foreign ideas and domestic innovation. Technological advancements

greatly steered the economic growth of Japan.

In account, the various industries such as the

steel industry lead to improvement in the quality of steel used in automobiles. This advancement

made Japan competitive in the world markets.

The rapid growth of the Japanese economy can be narrowed down to the immense efforts

that were made by the people of Japan. They recreated and made better the ideas that they gained

from foreign countries to fit and satisfy their system. International factors such as the onset of the

Korean war and the stay of the Allied power which came up with reforms in a wider extent

helped gear the country towards economic growth. Domestic factors especially the people of

Japan, internal investments, central government and efforts proved critical for the rapid economic

growth of postwar Japan.

Ibid.

Deborah J Milly, Poverty, Equality, and Growth: The Politics of Economic Need in Postwar

Japan (Cambridge, Mass: Harvard University Asia Center, 1999)

Bibliography

Conference on Japan's Postwar Economic Growth, Ryu

taro

Komiya. Postwar Economic Growth

in Japan: Selected Papers of the First Conference of the Tokyo Economic Research

Center. Berkeley, Calif: University of California Press, 1966.

Gordon, Andrew. Postwar Japan As History. ACLS Humanities E-Book. Berkeley: University

of California Press, 1993.

Hein, Laura Elizabeth. Fueling Growth: The Energy Revolution and Economic Policy in

Postwar Japan. Cambridge, Mass: Council on East Asian Studies, Harvard University,

1990.

Milly, Deborah J. Poverty, Equality, and Growth: The Politics of Economic Need in Postwar

Japan. Cambridge, Mass: Harvard University Asia Center, 1999.

Yamamura, Ko

. Economic policy in postwar Japan: growth versus economic democracy.

Kozo Yamamura. Berkeley: Los Angeles, University of California Press, 1967.

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