Japanese Industrialization and Economic Growth

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Japan achieved sustained growth in per capita income between the 1880s and 1970 through industrialization. Moving along an income growth trajectory through expansion of manufacturing is hardly unique. Indeed Western Europe, Canada, Australia and the United States all attained high levels of income per capita by shifting from agrarian-based production to manufacturing and technologically sophisticated service sector activity.
Still, there are four distinctive features of Japan 's development through industrialization that merit discussion:
The proto-industrial base
Japan 's agricultural productivity was high enough to sustain substantial craft (proto-industrial) production in both rural and urban areas of the country prior to industrialization. Investment-led growth
Domestic investment in industry and infrastructure was the driving force behind growth in Japanese output. Both private and public sectors invested in infrastructure, national and local governments serving as coordinating agents for infrastructure build-up. * Investment in manufacturing capacity was largely left to the private sector. * Rising domestic savings made increasing capital accumulation possible. * Japanese growth was investment-led, not export-led.
Total factor productivity growth -- achieving more output per unit of input -- was rapid.
On the supply side, total factor productivity growth was extremely important. Scale economies -- the reduction in per unit costs due to increased levels of output -- contributed to total factor productivity growth. Scale economies existed due to geographic concentration, to growth of the national economy, and to growth in the output of individual companies. In addition, companies moved down the "learning curve," reducing unit costs as their cumulative output rose and demand for their product soared.
The social capacity for importing and adapting foreign technology improved and this contributed to total factor productivity growth: * At



References: Denison, Edward and William Chung. "Economic Growth and Its Sources." In Asia 's Next Giant: How the Japanese Economy Works, edited by Hugh Patrick and Henry Rosovsky, 63-151. Washington, DC: Brookings Institution, 1976. Horioka, Charles Y. "Future Trends in Japan 's Savings Rate and the Implications Thereof for Japan 's External Imbalance."Japan and the World Economy 3 (1991): 307-330. Japan Statistical Association. Historical Statistics of Japan [Five Volumes]. Tokyo: Japan Statistical Association, 1987. Johnson, Chalmers. MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975. Stanford: Stanford University Press, 1982. Maddison, Angus. Monitoring the World Economy, 1820-1992. Paris: Organization for Economic Co-operation and Development, 2000. Minami, Ryoshin. Economic Development of Japan: A Quantitative Study. [Second edition]. Houndmills, Basingstoke, Hampshire: Macmillan Press, 1994. Mitchell, Brian. International Historical Statistics: Africa and Asia. New York: New York University Press, 1982. Mosk, Carl. Japanese Industrial History: Technology, Urbanization, and Economic Growth. Armonk, New York: M.E. Sharpe, 2001. Nakamura, Takafusa. The Postwar Japanese Economy: Its Development and Structure, 1937-1994. Tokyo: University of Tokyo Press, 1995. Ohkawa, Kazushi. "Production Structure." In Patterns of Japanese Economic Development: A Quantitative Appraisal, edited by Kazushi Ohkawa and Miyohei Shinohara with Larry Meissner, 34-58. New Haven: Yale University Press, 1979. Ohkawa, Kazushi and Henry Rosovsky. Japanese Economic Growth: Trend Acceleration in the Twentieth Century. Stanford, CA: Stanford University Press, 1973. Smith, Thomas. Native Sources of Japanese Industrialization, 1750-1920. Berkeley: University of California Press, 1988. Uriu, Robert. Troubled Industries: Confronting Economic Challenge in Japan. Ithaca: Cornell University Press, 1996. United Nations Development Programme. Human Development Report, 2000. New York: Oxford University Press, 2000. Citation: Mosk, Carl. "Japan, Industrialization and Economic Growth". EH.Net Encyclopedia, edited by Robert Whaples. January 18, 2004. URL http://eh.net/encyclopedia/article/mosk.japan.final

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