INTRODUCTION
An economy can be seen as any specified collection of inter-related set of marked and unmarked productive activities (Upset 1983). Thus, the Japanese economy can be referred to as all such economic activities taking place in the geographical domain of Japan (domestic economy) or all such economic activities of Japanese residents anywhere they happen to perform such activities in the world Parkin, 1982).
The structure of an economy can be referred to as a complex organizational framework, interlaced network and an outline of logical connectivity through which the activities of an economy are coordinated. An economy’s structure may also refer to those aspects which are basic and long lasting and underpin more transitory aspects of economic life. Structural variables are therefore deep-seated and only change rather gradually.
HISTORY OF JAPANESE ECONOMY
Japan is a country located in the pacific, off the eastern coast of Asia with its capital in Tokyo. According to the 1989 population reports, Japan has 123 million people.
The Japanese economy experienced two periods of rapid development. First in the 19th century after a long interval of national seclusion and the second after the World War II in 1945.
Between 1603 and 1869, the Tokugawa era (a military dictatorship in a feudal setting who brought peace, law, order and isolation), Japan was faced with poverty, low technology and little natural resources endowment.
In 1868, the Meiji Restoration ended 250 years of self-isolation for Japan and introduced an era of rapid economic change. At this time, Japan had no modern machinery, postal systems, railroads or even newspapers. It had no business institutions such as banking and public corporations. Its main resource was a population that was highly literate for a pre industrial economy.
The Meiji reforms however rejuvenated the Japanese economy through certain policies which include:
- Allowing for foreign trade
- Equality of classes
- Division of agricultural estates among the peasants
- Institution of monetary taxes
- Support of private industries through loans and subsidies
They inaugurated a western-based education system for the young, sent thousands of students to the United States and Europe and hired more than 3,000 westerners to teach Maths, science, technology and other foreign languages in Japan.
In order to promote industrialization, the government provided and allocated resources to the private sector, they built factories and ship yards which were sold to entrepreneurs at a fraction of their value. These businesses grew to become large conglomerates.
The country’s takeoff was explosive. Between 1890 and 1938 Japan’s GDP grew at 3.3% each year far faster than the United States and the countries of Western Europe at that stage of development. Manufacturing grew rapidly from 8% GDP in 1888 to 32% by 1938.
The worldwide economic slump of the 1930’s led Japan to increasingly centralize and militarize its economy. The government gave itself control over imports, power to direct private bank was to priority industries and authority to promote heavy industries needed by the military such as petroleum, machine tools, aircraft, iron and steel and automobiles. Heavy industry rose from 35% of manufacturing in 1930 to 65% in 1940. The legacy of the period was a pattern of corporate organization and government business relations that remains influential today.
After this economic make overcame the World War II which pulled down the Japanese economic pillars. They were faced with the problem of reconstruction and economic recovery after the war. Their recovery was initially slow until the Korean War which increased demand for Japan’s exports and made the United States see Japan as an ally.
In the 1980’s, Japanese economic growth was discouraged by the United Sates recession. This left an indelible mark on the Japanese economy even after the United States recovered. Japan progressed but with an imbalance in trade which led to a decrease in export and rise in prices of real estate and stock in 1985. From the 1960’s to the 1980’s Japan had experienced retardation of economic growth with 10 percent average in the 1960’s, 58 averages in the 1970’s and a 4% average in the 1980’s.
Growth was slow in the 1990’s largely due to the Bank of Japan’s failure to cutout interest rates quickly enough to counter the after-effects of over-investment during the late 1980’s. This caused the Bank of Japan to shift to a more restrictive monetary stance in May 1989 thereby spear heading a fall in prices of real estate stock by 50% from 1989 to 1996.
THE NATURE OF THE JAPAN’S ECONOMY
The Japan’s economy is the world’s second largest economy after the United States. Its nominal GDP was put at about US $4.53 trillion compared to $12.42 trillion of the United States. It ranks third after the United States and China when adjusted for purchasing power parity (PPP). Its Central Bank has the second largest foreign exchange reserves after China.
Japan’s per capita GDP rose from 21% of the U.S. level in 1955 to 56% in 1970. It has a well educated work force. Majority of the workers are free from personal income taxes while value added rate is only 5%. A greater portion of taxes are paid by corporate bodies.
The Japan’s economy has been on the recovery lane growing at 2% per year in 2003 and 2004 and 2.8% in 2005 unlike previous recovery trends, domestic consumption has been the dominant factor in leading the Japan’s economic growth.
As predicted, the economic recovery continued in 2006 and 2007.
REFERENCES
1. Fukao, Kyoji (2007) (PDF), Real GDP in Pre-War East Asia: A 1934 – 1936 Benchmark Purchasing Power Parity Comparison with the US.
2. Liu, Ta – Chung (1946). China’s National Income 1931 – 1936, An Exploratory Study.
3. Maddison, Angus (2003) The World Economy: Historical Statistics.
4. Powell, Benjamin (2002) “Explaining Japan’s Recession”.
5. “Economic Survey of Japan 2008: Bringing an end to deflation under the new monetary policy framework.
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