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Japan Industrial Policy
After World War II and especially in the 1950s and
1960s, the
Japanese government devised a complicated system of
policies to
promote industrial development, and it cooperated closely
for this
purpose with private firms. The objective of industrial
policy was
to shift resources to specific industries in order to gain
international competitive advantage for Japan. These
policies and
methods were used primarily to increase the productivity
of inputs
and to influence, directly or indirectly, industrial
investment.
Administrative guidance (gyosei shido) is a
principal
instrument of enforcement used extensively throughout the
Japanese
government to support a wide range of policies. Influence,
prestige, advice, and persuasion are used to encourage
both
corporations and individuals to work in directions judged
desirable. The persuasion is exerted and the advice is
given by
public officials, who often have the power to provide or
to
withhold loans, grants, subsidies, licenses, tax
concessions,
government contracts, import permits, foreign exchange,
and
approval of cartel arrangements. The Japanese use
administrative
guidance to buffer market swings, anticipate market
developments,
and enhance market competition
(see Foreign Trade Policies
, ch. 5).
Mechanisms used by the Japanese government to affect
the
economy typically relate to trade, labor markets,
competition, and
tax incentives. They include a broad range of trade
protection
measures, subsidies, de jure and de facto exemptions from
antitrust
statutes, labor market adjustments, and industry-specific
assistance to enhance the use of new technology. Rather
than
producing a broad range of goods, the Japanese selecte a
few areas
in which they can develop high-quality goods that they can
produce
in vast quantities at competitive prices. A good example
is the
camera industry, which since the 1960s has been dominated
by Japan.
Historically, there have been three main elements in
Japanese
industrial development. The first was the development of a
highly
competitive manufacturing sector. The second was the
deliberate
restructuring of industry toward higher value-added, highproductivity industries. In the late 1980s, these were
mainly
knowledge-intensive tertiary industries. The third element
was
aggressive domestic and international business strategies.
Japan has few natural resources and depends on massive
imports
of raw materials. It must export to pay for its imports,
and
manufacturing and the sales of its services, such as
banking and
finance, were its principal means of doing so. For these
reasons,
the careful development of the producing sector has been a
key
concern of both government and industry throughout most of
the
twentieth century. Government and business leaders
generally agree
that the composition of Japan's output must continually
shift if
living standards are to rise. Government plays an active
role in
making these shifts, often anticipating economic
developments
rather than reacting to them.
After World War II, the initial industries that policy
makers
and the general public felt Japan should have were iron
and steel,
shipbuilding, the merchant marine, machine industries in
general,
heavy electrical equipment, and chemicals. Later they
added the
automobile industry, petrochemicals, and nuclear power
and, in the
1980s, such industries as computers and semiconductors.
Since the
late 1970s, the government has strongly encouraged the
development
of knowledge-intensive industries. Government support for
research
and development grew rapidly in the 1980s, and large joint
government-industry development projects in computers and
robotics
were started. At the same time, government promoted the
managed
decline of competitively troubled industries, including
textiles,
shipbuilding, and chemical fertilizers through such
measures as tax
breaks for corporations that retrained workers to work at
other
tasks.
Although industrial policy remained important in Japan
in the
1970s and 1980s, thinking began to change. Government
seemed to
intervene less and become more respectful of price
mechanisms in
guiding future development. During this period, trade and
direct
foreign investment were liberalized, tariff and nontariff
trade
barriers were lowered, and the economies of the advanced
nations
became more integrated, as the result of the growth of
international trade and international corporations. In the
late
1980s, knowledge-intensive and high-technology industries
became
prominent. The government showed little inclination to
promote such
booming parts of the economy as fashion design,
advertising, and
management consulting. The question at the end of the
1980s was
whether the government would become involved in such new
developments or whether it would let them progress on
their own.
Data as of January 1994
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