Industrial Policy in Japan

I. Overview: It is widely known that after World War II, and in particular in the 1950s and 1960s, the Japanese government adopted a complicated set of policy measures designed to accelerate industrial development, and that in order to do this the government worked in close cooperation with the private sector. However, it is not well known how industrial policy was in fact implemented, nor is the decision process through which it was formulated widely understood. At the time many individual measures were widely reported in newspapers and the like, but there have been few attempts by outsiders to present a clear, overall picture of "industrial policy." Thus, while many things were well known to the parties involved, there is much that is not known now, even among academics. There are furthermore relatively few studies that seek to analyze the effectiveness of the various policy measures and their impact on the national economy,1 though in the late 1970s a fair number of books and two studies were written that were perceptive and provided much information.2 From the mid-1970s, with the obvious success of Japanese industry, the content of industrial policy has changed greatly, while at the same time interest abroad in Japanese industrial policy has heightened. From the United States and Europe to the developing countries (especially East Asia—including China), there is strong interest in the lessons to be learned for their own industrial development from postwar Japanese industrial policy. Until now, however, studies by foreign scholars have either been limited to a description of policy measures or relied more heavily on a political science perspective than on economic analysis. As a result there has been a general trend abroad to overestimate the comprehensiveness and effectiveness of industrial policy.