Japanese economic history

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The economic history of Japan is considered to be the time from the 9th century, from which the first economic activities are documented. The interdependence between the East Asian neighbors Japan, China and Korea marks the beginning of long-distance trade . The first contacts to European seafarers were made from the 15th century. The development of Japan into an industrial nation began before the country opened in the middle of the 19th century. The economic history of Japan in the 20th century was primarily determined by Japan's path as an imperialist regional power , the subsequent defeat in World War II and the ensuing occupation of Japan by the USA.

After the Second World War , Japan , like Germany , experienced a phase of economic boom. In just a few decades Japan became a high-tech nation. Since the 1960s, the Japanese economy has grown between four and ten percent annually. The so-called bubble economy , which was speculated on in the Japanese stock and real estate market, began in the mid-1980s and ended in the early 1990s. Economic growth in Japan has not reached the same high levels as in the past since the 1990s. After a long period of stagnation, it is in the low single-digit range.

Until the 15th century

Agriculture began in Japan in the Yayoi period , around the 9th century BC , before hunting and fishing were mostly used. In agriculture, production was very labor-intensive without the use of any aids worth mentioning. Barter trade was carried out among the individual tribal associations. Improved techniques in agriculture resulted in population growth. 600 BC the population was about five million. Trade and business relations can be spoken of from the Yamato period onwards, as from that time a policy was followed in which markets were protected by institutions. The first references to the exchange of gifts between Japan and China come from the same period, which are both recorded in Chinese historiographies and documented by finds of Chinese coins in Japanese graves. The coins found are dated to the time of Wang Mang's reign during the Later Han Period. A first edict of 646 AD refers to the existence of "market controllers" who supervised trade routes and markets and collected taxes. Silk was often used as a means of payment .

8th century wado coin, silver

In the Wadō period (708–715), the first coins were minted in Japan, the originals of which came from China. The government forced an economic downward spiral through mismanagement of the coinage. Between 708 and 958 coins were devalued several times by various edicts, so that they had almost no value. This development led to the fact that Chinese coins from the Song Dynasty were mainly used in the Heian period . The brisk trade between Japan and China led to a trade deficit on the Japanese side. In addition, the inflation of Chinese coins and an inflationary price spiral towards the end of the 12th century led to the destabilization of market prices, whereupon the use of coins from the Song Dynasty was initially prohibited. However, the ban could not be implemented as desired, so that the use of coins was allowed again about a decade later.

With the Heian period, market days were held on specific calendar days until around 1470 markets were held up to six times a month. The medieval markets were controlled by the landowners on whose land these markets took place. Fees were charged for the organization. Merchants' guilds also emerged at this time. The development of the markets led to the importance of cities and in the 14th and 15th centuries to the emergence of wholesaling. Trade with China has been brisk since the Tang Dynasty , which was repeatedly interrupted due to changes in rulers, and which flourished particularly during the Song Dynasty. Trade with Korea began, mainly importing cotton.

In the period from 1280 to 1600 there was a population growth, with about 10 million and 1600 between 15 and 17 million people living in Japan in 1450. These were politically uncertain times when a lot of money was spent on warfare. These costs hampered economic development.

First contacts with Europe

The first Europeans (Portuguese) first met Japan in the 1540s. The Portuguese took the route via China and brought goods with them that they sold in Japan. This is also called the era of the Namban trade , which ended in 1639.

Trade relations with Portugal and Spain

A Portuguese carrack in Nagasaki (16th / 17th century)

Portuguese landed in 1543 by ship on Tanegashima , an island south of Kyûshû , on the way from Siam to Ningbo . A storm had blown them away. During this first encounter, they sold two western firearms ( Tanegashima arquebus ). After the Portuguese landed on the island of Japan for the first time, the port city of Nagasaki served as a travel destination for the annual Portuguese voyage to Japan from 1549. The common trade was in the foreground, the Japanese side was very interested in the knowledge and skills of the West in the areas of cartography, geography and navigation as well as in shipbuilding and astronomy . Although Portugal and Spain united under Philip II in 1580 , both peoples retained special rights in Japan for their overseas territories.

After Hideyoshi's death , the first ruler of the Tokugawa family tried Ieyasu to further expand Japanese foreign trade. He wanted to exchange goods not only with Portuguese, but also with Spaniards, Dutch and English. However, the persecution of Christians initiated by Tokugawa in 1612 led to the fact that relations between Spain and Japan deteriorated so much that they were broken off entirely in 1624. In 1633 the first "Isolation Act" was passed, which forbade foreign trade.

The relationship between Holland and Japan

After the English withdrew and the Spanish and Portuguese were expelled, the Dutch were the only connection between Japan and Europe from 1639 onwards. The Shogun's government took action to get regular information about Europe from the Dutch. Every year a Dutch delegation had to travel to Edo to report on political and economic developments in Europe. Although they formed an important basis for the later modernization of Japan, this was not enough to get these reforms in motion.

Edo period

Characteristic features of the Edo period are the control measures that the shogun introduced to consolidate his position of power. This strongly influenced the economic development of Japan. These measures were the class system ( Shi-nō-kō-shō ), changing waiting ( Sankin kōtai ), the tax system ( Honbyakushō ) and the closure policy ( Sakoku ).

The class system (shinōkōshō)

The Japanese population was divided into four different classes during the Edo period. These are, in descending order of precedence, the samurai ( daimyos , their vassals and advisers), craftsmen, farmers and the traders. There are also smaller groups that were not included, such as priests, doctors and court nobility. One only becomes a member of a class at birth, and no ties outside of the caste may be formed. Every organization has a tribal leader whose title could only be inherited or passed on through adoption.

Changing Waiting (Sankin kōtai)

→ Main article: Sankin kōtai

Tokugawa introduced Sankin kōtai in order to have better control of the daimyos under him. All daimyos, regardless of their place of residence, had to settle in Edo and live there for half of the year. In this way, the Shogun was able to stop potential uprisings in good time. This had a major impact on the centralization and importance of Edo as a center of the economy. Edo experienced a great economic boom due to the gathering of large crowds, which consisted of the followers of the daimyos. Roads and waterways were built from all areas of Japan towards Edo and Osaka, affirming Edo as the center of Japan's economy.

Tax system

The Edo period had a special tax system: the farmland and the responsible farmers ( Honbyakushō ) were noted in writing, as in an early cadastral system, and a village and family internal control system ensured that everyone paid their taxes. Taxes were usually paid in the form of rice and similar goods, depending on the season's yield.

Japan Closure (Sakoku) Policy

→ Main article: Closure of Japan

At the beginning of the 17th century the shogunate had a very strict closure policy. On the one hand, this had the goal of preventing potential alliances of insurgent daimyos with foreign powers, on the other hand, suppressing the growth of Christianity and finally protecting the trade monopoly in Japan.

Economic development

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During this time there was an increase in population (in 1600 there were 20 million people, in 1700 already 30 million). However, this changed from the 17th century onwards as urban migration decreased. The reason for this was that from 1600 to 1700 the daimyos were able to charge more and more taxes; but by the end of the 17th century, agricultural production had reached its limits. The population hardly changed until 1850, as the population was decimated due to disease and famine. While the traders experienced a heyday until the 18th century, the daimyos and samurai experienced their first financial difficulties. The main source of income was agricultural production. With falling income from this source and the resulting impoverishment of the peasants, there were first uprisings among the population. The government implemented several tax reforms in the late 18th century to the 19th century, but the financial situation could not be improved.

In the last 30 years of the Tokugawa, the shogun had to deal with the peasant and samurai uprisings, as well as financial difficulties. Eventually, these factors led to the form of government being questioned. In 1860 the people demanded a restoration of imperial power. A unification of the country was called for. The last shogun was Yoshinobu in 1867, who was succeeded by the Meiji ruler.

Proto-industrialization and opening up of Japan

Early 19th century

In the 19th century Japan was at an advanced stage of proto-industrialization and already had all the features that are considered necessary for the development of a modern market economy: a fully developed money economy, closely networked market structures, considerable capital assets, already extensive investments, a well-developed infrastructure, a considerable level of commercial and agricultural production, a disciplined workforce that had long been used to working for their own account, generated surpluses and was interested in the constant development of their incomes.

US Naval Commission under Commodore Perry

Commodore Perry's fleet on its second mission to Japan in 1854 .

The trade between Russia, America and Europe with China meant that, besides Dutch or Chinese, more and more foreign ships made contact with Nagasaki . Between 1792 and 1832, both Catherine II and former US President Andrew Jackson sent naval envoys with the request to trade with Japan. However, they were not successful. 20 years later, another US president, Millard Fillmore, tried and sent Commodore Matthew C. Perry . He reached Uraga in 1853 and presented the American demands with a promise to return with an answer next year. Perry's visit proved fatal to Bakufu authority and sparked a political crisis. In 1858 representatives of the shogunates signed the Harris Treaty . Later that year, England, France, Russia and the Netherlands signed similar unequal treaties with Japan.

Industrialization since the Meiji Restoration

Since the Meiji Restoration , Japan has developed within a few decades from a rather backward agricultural state to a modern industrial nation that caught up with the West and very quickly showed itself colonial ambitions.

New government - rule of the Tenno

In 1867, the end of the shogunates seemed inevitable. Thus the new government of the Meiji era was established. In the following year, almost all of the daimyo surrendered their lands to the new ruler and surrendered their property and privileges. The Japanese peasants now paid their taxes, now regular taxes, to the state and no longer to their former landlords. The power of the Tenno was once again considerably strengthened. This did not end the power of the feudal lords. Rather, it turned out that the old elite was also the new one. The daimyo received high severance payments and pensions from the state for the lands that were now under the state. The new entrepreneurial elite soon developed out of parts of the feudal nobility, which no longer owned land, but owned capital and continued to rule the country. The old rulers had modernized, and the Meiji Restoration enabled them to continue to take on the leadership role under changed conditions.

Colonial rule Japan

Japan was a colonial power between 1895 and 1945. The colonization of Japan was motivated by the fear of falling victim to the colonization of western countries and the desire for political significance. After Japan's victory over China in the first Sino-Japanese War 1894–1895 and over Russia in the Russo-Japanese War 1904–1905, Japan gained influence over southern Manchuria and Korea. Shortly thereafter, Japan began its colonization with the aim of bringing Southeast Asia under their control. As early as 1942, Japan controlled large parts of East and Southeast Asia. This control gave rise to anti-Japan movements in many parts of Asia. On April 28, 1952, the San Francisco Peace Treaty came into effect, and included the cession of Japan. This ended the time of Japanese colonial rule in 1952.

Economy during the First and Second World Wars

After the turn of the century, the Japanese economy developed in a dual structure. While industry, above all the textile industry and heavy industry (iron, steel production and shipbuilding), expanded and showed strong growth, development in the agricultural industry was very sluggish. Although important branches of industry were modernized and new, state-of-the-art production facilities were built, the agricultural industry remained in a premodern leasing system. Although the number of large, modern factories owned by the Zaibatsu , such as B. Mitsubishi , grew and there was a need for more and more workers, there were still a large number of small and medium-sized companies that still employed half of the available workforce.

After 1900 the industry experienced a sharp increase in many areas. In the textile industry, the export of cotton and silk products exceeded the imported quantities in 1907. The first large production plants in the iron and steel industry were built and with government support and with many efforts by some Zaibatsu, Japan worked its way up to one of the three largest shipbuilders in the world by 1918.

Economic boom in the First World War

During the First World War , the economy experienced a rapid upswing, and many of Japan's competitors, such as Europe and America, fell away on the international market, which paved the way for Japanese products internationally. This led to an export boom that was particularly evident in the cotton and armaments industries, but also in heavy industry. The production of goods such as iron, steel, ships and raw silk was expanded for export. The Zaibatsu also took advantage of the upswing and increased their influence on mining, shipbuilding, iron and steel production, and banking.

With the end of the war, the strong economic growth decreased again. From 1919 the number of exported goods began to decline and international competition returned. Inflation occurred in 1920 after prices soared and there was a wave of speculative deals in 1919. The decline in the economy after the end of the war and the devastating Kanto earthquake that shook the Tokyo region in 1923, in which many production facilities were destroyed, led to a severe depression of the economy.

Shōwa financial crisis 1927 and Great Depression 1929

The depression since 1923 plunged the economy into a financial crisis in 1927, after investment and speculation during the economic boom during World War I to a so-called " bubble economy " (economic bubble) led and destroyed them. These developments led to the bankruptcy of many companies. The Showa financial crisis is a pioneer of the global economic crisis are considered, the Japan 1929/1923 met.

Recovery phase

Takahashi Korekiyo

The economic policy of the Japanese finance minister Takahashi Korekiyo planned to lead the economy out of the crisis again. Manchukuo , after Manchuria was occupied by Japan during the Manchuria crisis in 1931 and expanded into a state-of-the-art heavy industry location, ensured a rapid upswing. This was mainly shaped by the armaments industry and the preparation for war.

The manufacture of automobiles and shipbuilding for military purposes were also subsidized by the state from 1932 to 1934, and the oil industry received state tax breaks. Zaibatsu, newly formed since 1930, adapted to the new economic structures, but were less influential than their predecessors.

One company that should support the economic interests of Japan was Nanyo Kohatsu . The company was mainly active in Micronesia and Southeast Asia . In addition to other production goods, for example, sugar cane plantations and sugar refineries were built in Micronesia. Nanyo Kohatsu became the largest company in Micronesia and determined the trade there.

Second Sino-Japanese War and World War II

During the second Sino-Japanese War , the economy continued to be strongly promoted by the state. Due to increasing expenditures for the military and war armaments, the production of heavy industry grew enormously. Until 1944, the production of war materials, as well as weapons and military vehicles, continued to increase despite sea blockades.

After 1944 the demand for the products needed and required for the war increased so much that industry could no longer meet them. The Allied air raids on Japan in 1944 were aimed primarily at the industrial production facilities and largely destroyed them. As a result, with the surrender of Japan on August 15, 1945, the upswing caused by armament and the war came to an abrupt end. Production in mining and industry fell rapidly and so at the end of 1945 the production level was only a fraction of the pre-war level. Although the economy experienced a strong boom in heavy industry and especially in the armaments industry during the Sino-Japanese War and the Second World War, other economic sectors such as agribusiness and textile industry had come to a standstill. At the end of the war in 1945, capacity in these industries was only a small proportion of the pre-war capacity.

During the Second World War, Korean, Taiwanese and Chinese civilians in particular were used for forced labor. These forced laborers had to work in mines or were recruited into the military as forced soldiers. Women were also often forced into sexual slavery.

Occupation 1945–1952

Reform period (August 1945 – February 1947)

During the occupation of Japan , the SCAP carried out several reforms which were later summarized under the name "Economic Democratization". They were largely agricultural, labor, and industrial reforms. To prevent massive famines, the US set up an aid program under the leadership of GARIOA and EROA (Economic Relief in Occupied Areas) that paid part of Japan's import costs and supplied petroleum as a substitute fuel. In addition, a so-called “economic cleansing” was carried out among Japanese executives, which particularly affected the Japanese business elite. Instead of reparation payments, machine tools worth US $ 35 million were sent, but reparations payments were made after the occupation in accordance with the San Francisco Peace Treaty . The SCAP also carried out a currency reform and introduced the “new yen ”, but this reform soon failed due to its excessively strict implementation.

Meanwhile, the Japanese government dealt with the revitalization and modernization of Japan, but soon found itself confronted with excessive unscheduled expenditure that could not cover the tax revenue. Commercial banking in Japan also found itself in trouble after currency reform and inflation caused a banking storm. The inflation was mainly reflected in sales bottlenecks and doubling prices, which should be counteracted by a combination of price controls, SCAP's “new yen” and subsidies. In 1946 two important agencies were established, the ESB (Economic Stabilization Board) and the RFB (Reconstruction Finance Bank). They ran a program of price controls, subsidies (ESB) and long-term loans (RFB) under SCAP supported by the Bank of Japan .

Countercurrent period (February 1947 - December 1948)

In 1947, the SCAP replaced all free collective bargaining with a 3-point wage control program to further counter inflation. Due to increasing complaints, including those relating to excluded private trade, the SCAP relaxed its laws. The ESB-RFB combination continued to campaign for loss-financed reconstruction and thus also, for example, for accounting for the overall Japanese budget in order to reduce financial pressure from the Bank of Japan. In addition, higher taxes should be collected more often to balance the budget, which after failed professionalism led to “anti-tax demonstrations” and complaints from opposition politicians. This increasing criticism finally led the Japanese government to call in economic experts, and banker Joseph M. Dodge was appointed director of finance for the SCAP. Dodge supported the free market economy, put private companies before public ones, and saw price controls and subsidies as not useful. He also advocated low tax rates, the principle of budget equalization and strict regulation of the flow of money. His approach was later referred to as the " Dodge Line ".

Dodge Line Period (December 1948-June 1950)

The Dodge program required a uniform exchange rate (360 yen = US $ 1), which was eventually endorsed by the Japanese government and facilitated capital transactions. It was also intended to prevent emigration from Japan and the purchase of cheap Japanese equipment by foreign companies. An unexpected drop in demand in 1949 led to corporate bankruptcies and unemployment. Smaller firms sometimes left out entire pay slips to the state in order to pay their workers, while Japanese farming families suffered from the low prices of agricultural products. The recession triggered an excess of unsalable inventory that blocked production. Potential customers were waiting for a price swing, but the Japanese government feared panics and bankruptcy and avoided the general price swing by increasing loans from commercial banks. The newly elected parliament under Prime Minister Yoshida Shigeru (and Finance Minister Ikeda Hayato ) in 1948 argued that the recession would only strengthen the opposition and weaken the Liberal Party. They strived for the liquidation of the GARIOA-EROA investments, the postponement of the local tax increase and the authorization of loss-financed business. As a result, the relationship between SCAP and Ikeda deteriorated significantly.

Korean War Period (June 1950 – April 1952)

Headquarters of the Bank of Japan in Nihonbashi, Tokyo

The outbreak of the Korean War was completely unexpected for the Japanese authorities and the SCAP, which led to the partial decline of the previously established power position of the SCAP. The Japanese economy was booming, especially due to the surge in demand from the US forces stationed in Korea, and as a result was heavily export-oriented. The cash flow for Japanese use was boosted by the GARIOA-EROA investments and the Dodge program. The program itself left three basic measures: budget accounting, the yen-dollar exchange rate, and the liquidation of price control. There was also the problem of over-indebtedness, with commercial banks lending more than they had in deposit. The Bank of Japan offset this debt by lending its own reserves as an investment, something the SCAP was rather critical of, and this unorthodox method was only advocated because Japan was in a time of hostility with Korea.

Economic growth in the 1950s and 1960s

In 1951, the Ministry of International Trade and Industry ( MITI , later merged to form METI ) was founded, which drew up economic and industrial plans under the Japanese government. Several five-year plans were drawn up between 1950 and 1980 as part of this process . In addition, the global marketing of Japanese products was strategically supported and promoted, which allowed Japan's export companies to rise in the world market. The strategy dealt with different business areas and was henceforth a model for western management schools and also, for example, for the economic planning of the tiger states .

The strong economic growth from 1955 to 1961 based on the change from the industrial structure to the heavy and chemical industry paved the way for the "golden 60s". After the economy recovered after World War II, the United States in particular urged Japan to open and liberalize its market. In June 1960, the newly elected Prime Minister Ikeda Hayato presented plans to liberalize international trade (also known as the “Ikeda plans”), in which the liberalization rate was to increase from 40% to 80% in three years. This course was income doubling plan adopted, which should double the national income. By October 1962 the rate of liberalization had risen to 88%. In addition, Japan became a member of the International Monetary Fund (IMF) in 1963 and a member state of the OECD, founded in 1961, in 1964 .

In the mid-1960s there was a change in the industry, no longer relying so heavily on the textile industry as the largest export factor, but placing more emphasis on heavy industry and the developing automotive industry. At the beginning of the 1970s, Japan stepped up its efforts to liberalize its economy. Within a 4-step system, the markets of numerous industries were liberalized by 50% or even 100%, including shipbuilding, the automotive and steel industries. The liberalization plans created a wave of new investment and production facilities in industry and were one of the main factors in accelerating the economy. Liberalization also brought the Japanese economy closer to a market economy after the government reduced control over foreign trade.

Economic crisis from 1973

The economy continued to grow as a result of the investment boom, but the inflation rate also rose and currency depreciation happened at an ever faster pace. When OPEC quadrupled oil prices in the winter of 1973 (see 1973 oil price crisis ), Japan found itself in trouble. Three quarters of Japan's energy supply was covered by oil (85% of which came from the Middle East ) and as a result, the oil bill increased by over 250% in 1974 and thus claimed more than a third of export earnings where it had previously been only about 15%. The threats from OPEC to drastically cut production and exports raised uncertainties and fears.

The further rise in costs slowed the growth rate of the economy and was reflected in strict financing plans in the investment and demand areas from 1974 to 1975. This ultimately led to the worst economic downturn in the Japanese economy after the Second World War. The Depression was associated with only a modest fall in inflation, deficits in the balance of payments and trade, and increases in the unemployment rate, wholesale prices and the cost of living. After the 1973 crisis, Japan could not find its way back to its previous economic growth of the 1960s. Although export growth was not greatly affected, capital formation and private investment did not deal with the crisis until the late 1970s. Although Japan's industry now (after the second oil crisis in 1978 ) was more energy and raw material efficient (for example through the use of nuclear energy ) and was able to generate some savings, the financing of imports remained a major problem. In addition, the 1974/75 crisis left unutilized capacities as a result of the investment boom that had occurred before, and thus insufficient capacity utilization and little willingness to invest, coupled with sharply increased labor, material and credit costs.

The industries that flourished in the "Golden Sixties" were also influenced, especially the iron and steel industry, shipbuilding, the petrochemical and textile industries. There were various reasons for this, but above all the effects of the declining demand, the rise in crude oil prices and the cheaper sales prices in the new developing countries of Southeast Asia. However, the Japanese economy now focused more on technology development and research, which resulted in growth in the electrical and machine industries.

In the late 1970s, Japan learned that "it can be more difficult to rebuild an advanced, technology- and capital-intensive industrial economy to meet the requirements of world markets than to build such an advanced, technology- and capital-intensive industrial economy based on foreign models and with outside help". Although this finding seemed to have been processed more quickly than by comparable western economic powers, it was still questionable to date whether Japan would ever find its way back to the economic growth of the 1950s to 1960s.

Economic crisis of the 1980s

Way into the economic crisis

In the years after the war, the Japanese government started protecting domestic markets to give the economy a chance to recover. Attempts were made to create a protected zone by closing off the Japanese market from imports . In the 1950s and 1960s, the Japanese economy grew almost twice as fast as other industrialized nations . It was a time of intense savings and high investments .

That big difference in growth was leveled out when Japan suffered the aftermath of the first crude oil crisis in 1973 . In addition, Japan has had immense economic growth so far, as it has imported know-how from other countries and this know-how z. B. used in heavy industry. The economy shifted from 1955: While in 1955 just under 40% of the working population was still active in agriculture , by 1970 this proportion had been reduced to 17%. This catch-up effect could no longer continue when Japan caught up with the USA and other industrialized nations and became competitive. They no longer benefited from the slipstream of the big ones and the strong growth declined.

As a result, Japan developed a large budget deficit relative to its GNP , the second largest among the G7 after Italy. The national debt of Japan increased twelvefold by 1979. The Japanese Ministry of Finance therefore came to the conclusion that one should try to reduce the national debt through a current account surplus . With this plan, the Japanese economy weathered the second crude oil crisis in 1979 better: there was low inflation and economic growth did not decline as much as in other nations.

At the end of the 1970s, however, the focus of the Japanese economy shifted again. The economy was steered in a more service-oriented direction. The tertiary sector was expanded and grew to 59.2% by 1990. Despite the increase in the tertiary sector, the secondary sector remained stable and hardly fell.

Japan developed a leadership position in telecommunications and high technology . This came about, among other things, because Japan in the years after the war, not in the field of the arms industry , such as. B. the USA, but researched in the field of technology. Trading and processing information has become an important key element of the Japanese economy. Long competitive and taking a pioneering position in the field of high technology, the Japanese economic principle of barriers to import came under increasing criticism, especially by the USA. There was pressure to liberalize the Japanese market. This led to a deregulation of the markets in Japan: among other things, government-set ceilings on interest rates were lifted and companies were allowed to borrow money privately and abroad.

This caused stock prices to skyrocket in Japan. The Nikkei's average quadrupled, with the Dow Jones only tripling in New York . Equity financing had become cheap for Japanese and foreign firms. The reason for this was the high price / income ratio combined with a low dividend yield . The principle of keiretsu (literally: 'row', 'line') and because companies held each other's shares, benefited all the more from the rise in shares. But not only large companies benefited from the stock market; small businesses and private households also emerged as beneficiaries.

In 1985, the Plaza Agreement resulted in the yen appreciating from approx. 230 to approx. 160 yen in relation to the dollar . As a result, a large amount of capital flowed into the Japanese real estate and stock market, and prices for stocks and land continued to rise.

The economic bubble

The economic boom from around 1985–1990 is referred to as the bubble economy . The Japanese refer to them as Baburu Keiki ( バ ブ ル 景 気 , dt. "Bubble boom").

Motions and requests for macroeconomic reform received additional support from Japan from former President of the Bank of Japan , Haruo Mayekawa . A research group was set up to “adapt economic structures for the purpose of international cooperation”. It also acted as a personal advisory body to Prime Minister Nakasone and proposed structural changes to expand domestic demand in order to reduce or prevent current account surpluses .

Through numerous investments and the strengthening yen, Japanese goods became cheaper and cheaper. Attempts were made to counteract the economic downturn by lowering the key interest rate . Between 1987 and 1989 this was reduced to up to 2.5%. The strong yen stimulated investments, which aimed to improve the quality of goods in order to be able to compete with them at a higher price level. Foreign investments seemed worthless to the Japanese. Domestic investments became more and more attractive. Price speculation quickly arose, especially on the stock exchange and on the property market. The Nikkei stock index reached its highest level to date on December 29, 1989 with a daily high of 38,957.44. The supply of real estate, stocks and government bonds grew so quickly that the government even briefly sold 100-year bonds. Bank employees were urged to encourage customers to put more deposits into the banks. That money was quickly spent back in the form of real estate loans. As long as customers owned land, banks were willing to provide secured loans for property of any kind. In addition, the banks gave high-risk loans to anyone who inquired, as credit checks were neglected. There was a misconception that land prices could only rise but not fall.

Land prices rocketed inexorably to the point where they hit $ 1.5 million per square meter in Tokyo's luxury Ginza district and were extremely overvalued. In 1989 the total value of all properties was four times that of the United States. As a result, even after the bubble burst in 2004, property prices in Tokyo's financial districts were among the most expensive in the world.

In order to contain further increases, the Japanese central bank raised interest rates in 1991 and severely restricted the granting of loans for land and construction projects. A year later, the restriction was removed again because infrastructure projects were not carried out. The demand for land fell rapidly. The banks were left with loans whose collateral was only a fraction of the value at which the loan had been granted. With the collapse of the markets, trillions of dollars were vanished. Entrepreneurs and company managers panic and wanted to withdraw from the market as quickly as possible. Since the Japanese economy was largely driven by reinvestment, it was particularly hard hit by the bubble burst. Companies went bankrupt or were kept alive with government subsidies to avoid laying off employees. These unprofitable zombie companies , formerly “too big to fail”, later played a major role in the economic stagnation .

Shortly before the bubble burst, private individuals had sometimes invested more money than they could have earned in their entire lives. Investments were made abroad and Japan lost its position as a technology leader . Japanese products became less and less competitive and consumption declined. This caused the deflationary spiral that followed - also known as Ushinawareta (Ni) Jūnen (engl. The lost decades).

deflation

Price development from 1980 to 2008

The bursting of the bubble and the drastic change in Japanese monetary policy led to a severe recession . First, this concerned the share price and then the real estate price. While the increase in wealth and the demand for Japanese goods in the 1980s was still enormous due to the boom, the following recession was in no way inferior in scope. The loss of wealth forced consumers in Japan to rethink their purchasing behavior. This manifested itself in a sharp decline in consumption and contributed to the stagnation of the economy.

The tiger states , which were increasingly gaining in importance and economic power, also forced the Keiretsu to react to the fall in prices. Japanese companies began to produce in countries with a lower price level than Japan. The ever increasing drop in prices and the import of cheaper products from other Asian countries led to a boom in the discounter industry. They undercut the Japanese price level by bypassing existing Japanese trade structures. Japanese production facilities were nowhere near full and this led to deflation as consumption fell . In this context one can speak of a deflationary spiral .

The Japanese government tried to counteract deflation with a pronounced fiscal policy . This initially had an effect, but on the recommendation of the OECD and the IMF , Japan began with a contractionary fiscal policy . Despite these measures, the extent of the deflation persisted. A saving paradox emerged. Even a further lowering of the interest rate by the central bank and the buying up of private securities could not motivate private consumers to spend more . It wasn't until the government started a program to restructure market economy processes and the Japanese central bank started buying bad loans in 2003/4 that the situation improved.

The 2007 economic crisis plunged Japan back into deflation. In 2009 it was 2.4% and had thus exceeded the value of deflation in the lost decade. Due to the deflation, which has now lasted for two decades, we are now talking about Ushinawareta Nijūnen (“Two lost decades”).

Relation to the Asian crisis

To avoid rising wage costs, Japanese companies set up production facilities in Southeast Asian countries such as B. Indonesia, Malaysia or the Philippines. This contributed to the strong economic growth of the tiger states . The financial liberalization of the financial sectors in these countries caused a credit boom in Asia in the 1990s. The very low interest rate level in Japan in the mid-1990s was seen as a factor that led Asian banks to take out foreign currency loans in yen. Out of greed, however, the lending banks saw no need to hedge their collateral against a sudden change in the dollar exchange rate. Loans in foreign currencies were short-term, with the loans granted by the domestic banks being long-term and in local currency. Until 1995 it was thus possible to benefit from the strength of the yen and the weakness of the dollar. The Southeast Asian countries were internationally competitive and recorded growth that was strongly influenced by exports.

When the dollar suddenly rose against the yen and European currencies, it created a large current account deficit . The serious differences in terms and currencies between the loans taken out ensured that the loans could not be repaid on time and high foreign debts arose.

Similar to Japan in the late 1980s, little emphasis was placed on creditworthiness in lending. Many investors saw a future market in Southeast Asia in which they financed their participation with little equity and cheap yen loans. When the Asian currencies fell, this capital was quickly withdrawn. The investors sold their systems and the Asian countries were downgraded in their credit ratings. The Japanese economy has not yet recovered from the Asian crisis.

literature

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Web links

Commons : Japanese Economic History  - Collection of Images, Videos, and Audio Files

Individual evidence

  1. ^ AHK Japan: Economy. (No longer available online.) Archived from the original on January 26, 2017 ; accessed on January 27, 2017 . Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.japan.ahk.de
  2. ^ Farris, William Wayne, Japan to 1600. A social and economic history. Honolulu, 2009, pp. 9ff.
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  4. ↑ Toyoda, Takeshi, A history of pre-Meiji commerce in Japan , Tokyo, 1969, p. 2.
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  7. ^ Farris, William Wayne, Japan to 1600. A social and economic history. Honolulu, 2009, pp. 95f.
  8. ↑ Toyoda, Takeshi, A history of pre-Meiji commerce in Japan , Tokyo, 1969, pp. 12f.
  9. ↑ Toyoda, Takeshi, A history of pre-Meiji commerce in Japan , Tokyo, 1969, pp. 16ff.
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  11. ^ Farris, William Wayne, Japan to 1600. A social and economic history. Honolulu, 2009, p. XVIII.
  12. ^ William M. Tsutsui: A companion to japanese history . Wiley-Blackwell, 2009, ISBN 978-1-4051-1690-9 , pp. 58-59 .
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  34. ↑ Hentschel, Volker, Economic History of Modern Japan 1. Japanese Industrialization, Requirements, Fundamentals, Implementation (1600-1929) , Steiner Verlag, 1986, p. 130, p. 139, p. 141, p. 145 ff.
  35. ^ David Flath: The Japanese Economy . 3. Edition. Oxford University Press, Oxford 2014, ISBN 978-0-19-870240-5 , pp. 53 ff .
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  47. ↑ a b c d e f g h i j k Solomon, Robert, 1921-: The transformation of the world economy, 1980-93 . Macmillan, 1994, ISBN 978-0-333-58580-1 .
  48. ^ Miyazaki, Isamu, 1923-2016 .: The Japanese economy: what makes it tick . Simul Press, 1990, ISBN 4-377-50850-4 .
  49. ↑ Murphy, R. Taggart .: Japan's policy trap: dollars, deflation, and the crisis of Japanese finance . Brookings Institution Press, 2002, ISBN 0-8157-0222-1 .
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  51. ↑ Kanamori, Hisao: Japanese Economy: Fundamentals . Oldenbourg, 1997, ISBN 3-486-23436-6 .
  52. ↑ a b c d Gotemba, Goro .: Japan on the upswing: why the bubble burst and Japan's economic renewal . Algora, 2006, ISBN 0-87586-461-9 .
  53. ↑ a b c d e Garside, WR: Japan's great stagnation: forging ahead, falling behind . Edward Elgar, 2012, ISBN 978-0-85793-821-3 .
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