THE JAPANESE MIRACLE
Miracle” refers to Japan’s phenomenal economic recovery following the
devastation of World War II. Within a few short decades of its
capitulation, Japan had joined the community of prosperous nations. In
economic terms, the nation’s recovery was miraculous indeed.
One common question
is: how much of the miracle can be attributed to the American Occupation
following the war? The answer is somewhat complex. The Occupation did
establish the fundamental conditions of constitutional democracy and
stability upon which the Japanese could build a successful peacetime
economy. In addition, Occupation authorities made sure that Japan’s
postwar constitution included a “peace clause” which prohibited the nation
from developing the means to wage war in the future. The
U.S. military subsequently provided a security umbrella for
Japan that exists to this day. With the
country protected by the U.S. military, Japan’s constitutional disarmament
precluded a significant postwar defense budget. This freed up additional
funds to use on more productive investments.
There is, however,
another side of the story. When General MacArthur landed in Japan in 1945,
his instructions from Washington were to focus on disarmament, not
economic development. In fact, his orders specifically stated that the
U.S. had no responsibility
for the rehabilitation of the Japanese economy.
Both America and Australia provided some food shipments to prevent
starvation in the early years, but the economy itself was to be “a
Japan’s productive GNP received a boost of about five percent a year because
of the country’s low defense budget. (Japan
has contributed some funds for the U.S. presence, and the country also
maintains a small Self Defense Force.) But many poor countries received
the benefit of U.S. military protection during the Cold War years, and did
not become economic miracles. The bulk of the credit for the Japanese
Miracle therefore goes to the Japanese themselves.
In 1946, Japan’s
industrial output was about 30% of 1935 levels. The Occupation authorities
(and the rest of the world) expected Japan to focus on light
manufacturing: toys, simple electronic components, clothing, etc. But
Japanese economic planners set their sights higher, choosing to focus
instead on heavy industry. Japan’s economic future would be found in
steel, automobiles and chemicals—not toys and sandals.
The postwar economy
received an early jumpstart. In 1950, war broke out on the Korean
peninsula, and Japan’s economy benefited from U.S. military contracts for
a wide range of supplies. Japan also became the preferred destination for
“rest and recreation” among American troops stationed in Korea, bringing
in still more dollars. By the end of the war, the Japanese economy had
gotten over an initial “hump.” In 1953, the U.S. was able to stop all
direct aid to Japan.
The next year, 1954,
saw average incomes return to prewar levels. Japanese business leaders and
bureaucrats now focused on developing the country’s heavy industries. They
made rapid progress throughout the 1950s. Living standards at the end of
the decade were 25% higher than they were in the middle of the decade. In
1958, a Japanese government study concluded that the nation had
“completely recovered” from the war.
Years and the Ikeda Plan
In 1960, Prime
Minister Ikeda Hayato unveiled the “Ikeda Plan.” The Ikeda Plan outlined
the ambitious goal of doubling the nation’s income in ten years. It
detailed a series of concrete steps to achieve this end: investment in
education and infrastructure, a focus on exports, and the nurturing of key
heavy industries. Economists outside Japan praised the details of the
Ikeda Plan, but claimed that no nation could double its income in just ten
years. However, the target of the Ikeda Plan was reached in only seven
The 1960s were a
decade of high growth, and the benefits were more evenly distributed than
in the past. Whereas only the cities had prospered during the 1950s, now
the rural regions were benefiting as well. Farm incomes jumped as the
population and disposable incomes increased. Farmers not only benefited
from a richer domestic market, but they also received substantial
agricultural subsidies from the government.
Japan was rapidly moving from a primarily agricultural nation to a mostly
industrial one. In 1950, half of the population was engaged in
agriculture. By the mid-1980s, the number would shrink to ten percent. The
economic growth of the 1960s lured many rural Japanese to abandon the farm
for a more lucrative job in the city.
1964 was a year of
two major milestones. Japan was welcomed into the community of “prosperous” nations as the nation
was invited to join the Organization for Economic Co-Operation and
Development. Japan also hosted the
1964 Olympics. In a gesture of intentional symbolism, leaders gave
nineteen-year-old Sakai Yoshinori the honor of lighting the Olympic flame
at the opening of the Tokyo games. Sakai had been born in Hiroshima on the
day the atom bomb was dropped.
The period from 1966
to 1970 was marked by continuous double-digit growth in economic output
and wages. Japan became a major exporter of transistor radios,
televisions, cars, and consumer electronics. Japan’s industrial output was
now greater than that of the rest of Asia combined.
High Growth Gives
Way to Slowdowns
The early seventies
were the calm before the storm, as the Japanese economy hit the skids
during two energy crises later in the decade. There were also difficulties
ahead that would be triggered by currency revaluations. Nevertheless,
Japan was now one of the world’s major economic players. No nation had
ever come so far in the short span of thirty-five years.