Made in Japan
If you were a consumer living in the United States in the 1950s and 1960s, you frequently observed the phrase “Made in Japan” stamped on your purchases. In the aftermath of massive destruction in the Second World War, rebuilding of Japan’s economy created a bulwark against expansion of communism. During the Korean War Japan became a major supplier to the U. S. military for firearms and equipment. Government-industry cooperation, led by the Ministry of International Trade and Industry (MITI), produced increased foreign trade, lower unemployment rates and increased consumer spending.
In 1950, 48.3% of Japan’s workforce labored in agriculture. By the mid-1990s that percentage had declined to 5.2%, and to 3.4% in 2018. Textile products were Japan’s main export in the 1950s. Post-war industrial planning by MITI and the Economic Planning Agency led an economic shift from agriculture to manufacturing. Japan became a major trader, with quality brands such as Nikon cameras, Sony Walkman and television sets, Seiko watches and Toyota Coronas. (Toyoda Loom Works had transformed itself into the Toyota Motor Corporation.) Regulations protected Japanese businesses from competitive imports. Economic growth of 9.3% in the late 1950s and 10% in the 1960s put Japan’s economy second to the U.S. According to the World Factbook growth decreased to 5% in the 1970s and 4% in the 1980s.
Japan’s balance of trade (more exports than imports) grew, and with it, Japanese investments overseas. To circumvent import restrictions, Japanese cars for the U.S. market were built in U.S. factories, as well as exported from Japanese factories. In the mid-1990s, capital for construction of projects in Asia were estimated to be 40% to 60% sourced from Japan. With sustained economic growth, by 1991 Japan attained the world’s highest Gross National Product per capita.
After three decades of unprecedented growth, Japan’s economy slowed in the 1990s. Rapidly rising real estate and stock prices did not respond to monetary tightening by the Bank of Japan, and in 1991 asset prices plummeted, ushering in what has been known as Japan’s “lost decades.” Some of Tokyo’s best real estate lost 90% of its value, and some banks holding bad loans were allowed to go under. The unemployment rate shot up and the long-standing tradition of life-time employment declined. Economic growth in the 1990s averaged 1.7%. The World Factbook reported “Modest economic growth continued after 2000, but the economy has fallen into recession four times since 2008.” Even so, in 2017 Japan was the world’s fourth largest exporting country, following China, the U.S. and Germany.
Japan has the world’s second highest median age and near the lowest birth and fertility rates, coupled with no net migration. Its current population of 126 million is projected by the United Nations Population Division to decrease to 109 million by 2050 and 85 million by 2100. In his speech to the World Economic Forum on January 23, 2019, Japan’s Prime Minister Shinzo Abe described how his government was responding to these trends, and to the loss of 4.5 million working-age population since he took office six years earlier.
The next blogpost will compare Japan’s experience to that of China.