Understanding Japan's Economic Success: Key Factors

Reasons for the Japanese Economic Miracle

The following factors contributed significantly to Japan's rapid economic growth:

1. The Population

Japan's population has been its main asset. The Japanese people are characterized by their ambition, hard work, aptitude for innovation, and high educational levels. Every person entering a company in Japan is aware of their social and moral participation. Japan's education system has consistently trained highly qualified personnel. Notably, the incorporation of women into the workplace has been significant, with over two-thirds of adult women working.

2. Labor System and Costs

The labor system in Japan is characterized by two key aspects:

• Low Labor Mobility: Workers tend to remain with the same institution for most of their working lives. This fosters strong work habits and paternalistic behavior, leading to higher productivity and fewer labor disputes.
• Long Working Hours: The average workday is 10 hours, with limited holidays and short vacation periods.

Despite long hours, wages remain relatively low when considering the high productivity. Large companies, employing the majority of the workforce, have significant flexibility in personnel management without reducing yields.

3. Unique Investment Strategy

Japan's high investment rate is fueled by a high level of savings, supported by a tax-free interest payment system. This allows for significant reinvestment of profits back into businesses. The high performance of these investments is due to:

• Large size of companies and industrial plants
• High industrial concentration
• Association of capital equipment with a trained workforce
• High levels of technology

4. Assimilation of Technology

Since the Meiji Revolution, Japan has focused on:

• Barriers to foreign investment
• Attracting foreign experts
• Sending Japanese students abroad
• Imitating the best foreign products and patents
• Funding the import of advanced techniques

This strategy was first demonstrated in the steel industry and later in the automotive sector, where Japan disrupted the global market. The electronics and computing industries further showcased Japan's technological prowess, driven by advancements in miniaturization, initially developed in the watchmaking sector. Japan now dominates the global market for electronic components and transistors.

5. Interconnection Between State and Industry

Large zaibatsus (industrial and financial conglomerates) have significant representation in the government, while also accepting a degree of state paternalism. This ensures a large portion of the domestic market for industrial products. The government implements a protectionist policy, supported by non-tariff measures.

This protectionism has drawn criticism from GATT (General Agreement on Tariffs and Trade) countries, leading to provisions allowing contracting parties to withhold tariff concessions from Japan. Despite this, Japan remains the largest creditor nation, with significant economic ties to China.