The Japanese Economic Miracle: Factors and Strategies
Reasons for the Japanese Miracle
A. The Population: A Strong Foundation
Japan’s population, despite its size, possesses a remarkable work ethic. The Japanese people are known for their industry, aptitude for innovation, and high educational levels, making them well-equipped for various economic activities.
Japanese workers have a deep social and moral connection to their companies. This fosters strong loyalty and restricts social interactions primarily to colleagues, family, and close friends.
Education plays a crucial role in Japan’s success, driven by a desire for a well-educated and cultured populace. The significant participation of women in the workforce, with over two-thirds of adult women employed, further strengthens the economy.
Labor System
The Japanese labor system differs from Western models in two key aspects:
- Low Mobility: Workers typically remain with a single company for most of their careers, fostering a paternalistic environment that contributes to high productivity and low labor disputes.
- Long Working Hours: The average workday is 10 hours, with minimal vacation time, further contributing to productivity.
Labor Costs
While Japanese wages are no longer considered “starvation wages,” they remain relatively low considering the long hours and high productivity.
B. A Unique Investment Strategy
Japan’s high investment rate is fueled by a strong savings culture and a policy of tax-free interest payments.
The Zaibatsu System
The Zaibatsu, large industrial conglomerates like Mitsui, Mitsubishi, Matsushita, and Daewoo, play a significant role in this investment landscape. This concentrated system allows for continuous reinvestment of profits back into businesses.
High Investment Performance
The high performance of these investments is attributed to four main factors:
- Large-scale enterprises and industrial plants.
- High concentration of industry.
- Combination of advanced capital equipment with a skilled, diligent, and disciplined workforce.
- Incorporation of cutting-edge technology into the investment process.
C. The Assimilation of Technology
The Meiji Revolution set a clear path for technological advancement, focusing on:
- Restricting foreign investment.
- Attracting highly skilled foreign technicians with competitive salaries to work for the government or large companies.
- Sending Japanese students abroad for advanced technical education.
- Imitating and improving upon foreign products through patent purchases or reverse engineering.
- Thoroughly exploiting imported technologies.
Japan’s exceptional ability to adapt and improve upon imported technology, coupled with its innovative spirit, has been a driving force behind its economic expansion.
Japanese companies are also known for their flexibility. Factories can be quickly adapted to changing industrial demands through incremental innovations, modifications, and additions to machinery.
D. The State-Industry Partnership
A key factor in Japan’s growth is the close relationship between major industrial groups and the government.
The influential Zaibatsu have significant representation in the government and benefit from a degree of state paternalism. In return, they are guaranteed a substantial share of the domestic market for industrial products.
Protectionist Policies
The government implements protectionist policies, primarily through non-tariff measures, to safeguard the domestic market while fostering the development of highly competitive domestic enterprises.
Foreign Trade
Foreign trade is vital to the Japanese economy. While the domestic market cannot fully absorb all manufactured goods, Japan relies on imports for raw materials. This necessitates a strong export sector to maintain a favorable trade balance.
Japan has strategically invested its trade surpluses from the 1970s and 1980s, solidifying its position as a leading creditor nation globally.