The Conception and Evaluation of Japanese Industrial Policy

A nation's economy is a living matter that functions according to national and natural conditions, historical institutions, culture, and customs. Because national and natural conditions do not change easily, and initial historical conditions have a historicist effect over a long period, it is natural that countries differ in economic structure and economic behavior. This chapter evaluates the merits and demerits of industrial policy by means of our attempt at a macroeconomic efficiency analysis of the system that clarifies the systemic realities of industrial policy. Industrial structure shows how labor, capital, and other resources are allocated among various industries and what are the demand-supply relations of outputs and inputs in individual industries. Japan's industrial-structure policy or industrial policy attempts to achieve the goals of industrial structure through the govenment-enterprise interaction in planning, intervention, and competition, namely, through mutual stimulus and response.