Transcript Japanese Economy A 2011 Fall

Japanese Economy A
2012 Fall
Seinan Gakuin University
Noriaki EZOE
Professor Ph.D.
Economics Department
Seinan Gakuin University Japan
Mail address: [email protected]
Homepage address: https://w3.seinan-gu.ac.jp/~ezoe/
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Chapter 3 Economic History, Part2:
From Meiji to War Period
What you will learn in this Chapter
1 Meiji Industrial development.
2 WW1 and 1920s
3 World Deflation and War economy
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Japanese history: 1912—1945
Key Historical Events
Meiji(明治) 1868-1912
1868 Meiji restoration.
1872 First railway line between Tokyo and Yokohama.
1889 The Meiji Constitution is promulgated.
1894-95 Sino-Japanese War.
1904-05 Russo-Japanese War.
1910 Annexation of Korea.
1912 Death of emperor Meiji.
Taisho(大正) 1912-1926
1914-18 Japan joins allied forces in WW1.
1923 The Great Kanto Earthquake devastates Tokyo and Yokohama.
Showa(昭和) 1926-1945
1931 Manchurian Incident.
1937 Second Sino-Japanese War starts.
1941 Pacific War starts.
1945 Japan surrenders after two atomic bombs are dropped over Hiroshima and
Nagasaki.
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1 Meiji Industrial development
the Meiji Restoration: 1868
- The resignation of the shogun led to the Boshin War and the
establishment of a centralized state nominally unified under the
Emperor .
Adopting Western political, judicial and military institutions, the
Cabinet organized the Privy Council, introduced the Meiji
Constitution, and assembled the Imperial Diet.
- The Meiji Restoration transformed the Empire of Japan into an
industrialized world power that pursued military conflict to expand
its sphere of influence.
- After victories in the First Sino-Japanese War (1894–1895) and the
Russo-Japanese War (1904–1905), Japan gained control of Taiwan,
Korea, and the southern half of Sakhalin.
- Japan's population grew from 35 million in 1873 to 70 million in
1935.
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Table1 Conditions at the start of economic
growth (Flath 2005 P.39)
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Macroeconomy of Late Meiji (1890s-1900s) Ohno
Trade, Budget & Finance, Saving Mobilization
• Aggressive public spending continued for militarization and
industrialization, causing budget deficit and gold reserve loss.
• Cotton industry succeeded in import substitution. Trade
exhibited dual structure—exporting light industry goods to
Asia and importing machinery from the West.
• Yen initially floated down, but was fixed at $1=2 yen after
joining the gold standard in 1897.
• Banks and stock exchanges were set up, but main source of
saving remained self-finance and joint stock companies
within the private business sector.
• Japan relied relatively little on FDI. But foreign bonds were
issued to execute the Japan-Russia War, local public
investments and budget financing.
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Ohno P.56
Cumulative history, Edo achievements, national unity
and nationalism
Japan’s economic growth was driven mainly by private
dynamism while policy was also helpful
Private-sector dynamism
and entrepreneurship
(primary force)
Policy support
(supplementary)
Rapid industrialization
esp. Meiji and post
WW2 period
Policy was generally
successful despite criticisms:
--Power monopoly by former
Satsuma & Choshu politicians
--Privatization scandal, 1881
--Excessively pro-West
--Unfair by today’s standard
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Ohno P.47
Rise and Fall of Merchants and Enterprises
Q: Who were the main drivers of Meiji industrialization?
A: All types of entrepreneurs including Edo gosho, Yokohama merchants, Meiji zaibatsu,
and company boom millionaires.
Persons
250
Millionaires of Edo period
New millionaires in company
boom period
200
New millionaires of Late Edo
150
► Survival game was
severe: many entries,
many exits
► Japan’s industrial
revolution: from 1880s to
1900s
New millionaires
in early Meiji
100
► Japan-China War,
Japan-Russia War also
accelerated
industrialization
50
0
1849
1864
1875
1888
1902
Source: Computed from Miyamoto (1999）, p.53. Each line shows how many of
the new millionaires emerging each period survived in later periods.
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The hallmark of economic growth is the expansion of industry.
Manufacturing
Manufacturing output was
growing at a faster rate than
agriculture. (Flath P.35)
Many of Japan’s excellent manufacturing firms were founded by engineers.
Sakichi Toyota
1867-1930
Konosuke Matsushita
1894-1989
Soichiro Honda
1906-1991
Akio Morita (Sony’s
co-founder)
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1921-1999
Manufacturing: Share of Output
Parallel development or
“hybrid technology”
100%
Indigenous
industries
80%
60%
Factory size
Employment Str uctur e of Pr ewar Japan
100%
1935-40
1930-35
1925-30
1920-25
1915-20
* indicates hybrid status
1910-15
M
1905-10
M*
1900-05
Modern
0%
1895-00
I*
20%
1890-95
I
Indigenous
Modern
industries
Large
1885-90
Technology
Small
40%
Ohno
PP.65-67
Indigenous (trade &
service)
80%
60%
Indigenous
(manufacturing)
40%
Modern industries
20%
Agri, forestry,
fishery
1930-35
1925-30
1920-25
1915-20
1910-15
1905-10
1900-05
1895-00
1890-95
1885-90
0%
10
Meiji
Ohno
PP.60-61
Exports by Commodity (%)
100
80
Other
Manufactured
Textile (incl. silk)
Food
Primary com.
60
40
20
1980s
1970s
1960s
1950s
1940s
1930s
1920s
1910s
1900s
1890s
1880s
1870s
0
Imports by Commodity (%)
100
Shifts in
Trade Structure
80
Other
Manufactured
Light industry
Primary com.
60
40
20
1980s
1970s
1960s
1950s
1930s
1920s
1910s
1900s
1890s
1880s
1870s
1940s
NA
0
Source: Ryoshin Minami, The Economic
Development of Japan, 1986.
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Government was relatively small
Meiji
Ohno P.47
Composition of Domestic Demand
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1988
1980
1970
1960
1954
1938
1930
1920
1910
1900
1888
Gov invt
Priv invt
Gov cons
Priv cons
Source: Ryoshin Minami, The Economic Development of Japan, 1986.
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Tax Revenue Structure
Meiji
100%
Other
80%
Sugar tax
In dir e c t
t axe s
60%
Customs
duties
Liquor tax
40%
Other
Corp. tax
20%
Income tax
Land tax
Dir e c t
t axe s
1925
1920
1915
1910
1905
1900
1895
1890
1885
1880
1875
0%
Source: Management and Coordination Agency, Historical Statistics of Japan, vol.3, Japan Statistical
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Association, 1988, pp.268-269.
Japanese Economy and Foreign Capital, 1858-1939
Simon Bytheway, 2005 (in Japanese, PhD dissertation at Tohoku Gakuin Univ.)
• After 1858, foreign trading firms came, but their
activities were confined to foreign settlement areas.
• Japan prohibited FDI until 1899 (revision of
commercial law). Even after that, policy and popular
opinion remained hostile to FDI.
• During Meiji period, foreign debt issue was much
larger than FDI
Share in foreign saving mobilization--gov’t bonds 82.5%,
municipal bonds 7.8%, corporate bonds 9.0%, FDI 0.7%
• However, FDI played important roles in some
industries (see below), esp. technology transfer
through patents.
Ex. light bulbs: bamboo filament  tungsten filament
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Central Government Bonds Outstanding
Billion yen
7
Foreign
6
Domestic
5
4
3
2
1
1930
1925
1920
1915
1910
1905
1900
1895
1890
1885
1880
1875
1870
0
Source: Management and Coordination Agency, Historical Statistics of Japan, vol.3, Japan Statistical
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Association, 1988, pp.278-279.
2 WW1 and 1920s
• WW1 brought a huge export-led boom to Japan. This
solved fiscal and BOP problems (for the moment).
• The bubble burst in 1920 and a recession period began.
• FDI and import substitution in heavy industries
proceeded, and new zaibatsu emerged.
• Taisho Democracy and the rise of social movements
(labor, farmers, women, “outcasts,” socialism)
• Shidehara Diplomacy—use non-military means
(diplomacy) to secure trade benefits, Japan-US
friendship and Chinese interests.
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2.1 Economy : Real GNE Growth (5-year moving average)
8%
Taisho
Late Meiji
7%
Early Showa
6%
5%
4%
3%
2%
WW1
1%
1920s
1935
1933
1931
1929
1927
1925
1923
1921
1919
1917
1915
1913
1911
1909
1907
1905
1903
0%
Estimate by Ohkawa, Takamatsu, Yamamoto
• WW1 Bubble burst and recessionary period begins
• Machinery, chemical, heavy industries expands
• Electrification (hydraulic power generation) rises
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Ohno PP.100-02
World War I and Export-led Boom
• Export-led demand pushed up prices, profits and
production—artificial acceleration of import
substitution, esp. in machinery and chemicals.
• BoP crisis (gold reserve loss) was solved.
• Narikin emerged (Suzuki, Ship Narikins). They
spent money on big villas, parties, women.
Trade (bil yen)
Production
Ship rental (yen/ton)
New ship (yen/ton)
Nippon Yusen profit
(mil yen)
1914
3
50
1917
45
1000
4.84 86.31
Ship Narikin
3
2
Export
1
Import
0
1914 →18
1904
1912
1914
1916
Silk
+60%
Cotton
+8%
Domestic Supply Ratio
Iron
+193%
Iron
Shipbuilding +700%
Industrial production
Steel
Dye
+1600%
1918
1920
1924
1928
1913 1919
47% 65%
34% 47%
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Ohno
PP.104-5
New Zaibatsu (Konzern)
• Heavy & chemical industries (not banks, textiles, trade)
• Backed by political connection and support
• Active investment in Korea and Manchuria (NE China)
Name
Nissan 日産
（Japan Industry）
Riken 理研
Nicchitsu 日窒
Nisso 日曹
Mori 森
Features
Current firms
Cars, chemicals, machinery,
fishery, mining;
Raising fund in stock market;
Invest in Manchuria
Hitachi, Nissui,
Nissan Motors,
Sompo Japan,
Japan Energy
Chemical, medical research
Riken（Res. Inst.)
Fertilizer, medicine, metals
Chisso
Sodium hydroxide (NaOH)
Nihon Soda
Aluminum, ammonia, iodine
Showa Denko
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2.2 Taisho Democracy
Universal suffrage
movement
The Taisho period ( 1912 - 1926) is considered the time of the liberal
movement known as the "Taisho democracy"
-- It is usually distinguished from the preceding chaotic Meiji Era and the
following militarism-driven Showa Era.
Background:
Voters/Population
Social: Emergence of new middle mass
(professionals, salaried workers)
-Labor movement and May Day (1920)
Politically: the movement of parliamentary democracy spread
throughout Japan.
-In 1925, all males of twenty-five and older were given the right to
vote. Protests were legal and there were many of them.
-Landless farmers’ riots and formation of farmers’ union (1922)
-Women’s movement (1920)
-Rise of socialism and Marxism
Culture: The influence of western culture in the Meiji era continued.
-Writers : many wrote the famous works of modern Japanese
literature.
-Media : Radio broadcasts started in 1925,
magazines and publications were started.
-Art : paintings, music ,dancing and sports were prospered.
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2.3 Shidehara Diplomacy
Ohno
P.106-9
Kijuro Shidehara, 1872-1951
Foreign Minister, 1924-27, 1929-31
Prime Minister 1945-46
His policy was more moderate than before or after him
• Maintain good relations with US and UK
• Respect Washington Naval Disarmament Treaty (1921-22)
• Hamaguchi Cabinet signs London Naval Disarmament Treaty
despite objection from military (1930)
• No military intervention in China; secure Japan’s economic
interest through diplomacy and negotiation
• When China protests and resists, his diplomacy breaks down
• Domestically, criticized as Coward Diplomacy
• Failed to stop Manchurian Incident (1931) started by Kantogun
(Japanese Army stationed in China)
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Japan-US Relationship
• Largest trading partner: US share in Japan’s trade—
export 44%, import 26% (in 1925)
• In China--Japan asserts its “special interests” in China,
US wants open door policy (esp. for bank loans)
• Immigration Problem
1890s Japanese economic immigrants to US West Coast;
Anti-Japanese movement begins
1907 Gentlemen’s Agreement to curb Japanese immigration
1913 Anti-Japanese legislations in California
1924 Ban on Japanese immigration
1942 Japanese Americans are sent to
concentration camps
Manzanar Camp, California
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3 World Deflation and War economy
3.1 Showa Financial Crisis
WW1 Bubble and Burst
• WW1 boom greatly increased fund demand
--Some large banks tried to modernize management
--Many kikan ginko lent to narikin for speculation
--Total number of banks remained about the same
• Speculation fever continued in 1919-1920
• 1920—stock market fell, prices plummeted, credit
crunch began.
Bankruptcies—Mar (7) Apr (45) May (106), Jun (127)
Bank runs—169 (21 closed), Apr-Jul 1920
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3.2 1930s and global depression
Showa Economic Crisis
Causes
GNP(bil yen)
(1) Impact of global depression
1929 : the Wall Street Crash.
(2) Austerity policy initiated and continued by FM Inoue
Consequences
(1) Severe price deflation
(2) Rural impoverishment, coupled with famine
(3) Cartelization and rationalization (“free market doesn’t work”)
(4) Rise of fascism (army, navy, right-wing groups)
--Rejection of party politics
--“Reform” movement
1/ Military readiness for total war
2/ Totalitarian state for the benefit
of farmers and workers
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Takahashi Budget and Recovery 1932-36
• Korekiyo Takahashi, Finantial Minister in the
cabinets (1932-36)
• Japanese Keynesian. He directed the first
Keynesian policy.
Expanded government expenditures
But, he never managed to constrain the
Japanese military forces.
Takahashi was assassinated by rebellion army in 1936
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3.3 War Economy 1937-45
Ohno P.136-39
Increasing expansionism and militarization.
From July 1937 Japan was at war with all of China,
and after December 1941 was at war with the United
States, Britain, and their allies
The end of democracy
• During the 1920s, Japan changed its direction toward a
democratic system of government. However, parliamentary
government was not rooted deeply enough to withstand
the economic and political pressures of the 1930s, during
which military leaders became increasingly influential.
• 1925: when communism and socialism were banned, some
of the protests became illegal.
• Political debate and democracy completely suppressed.
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Manchurian Incident (1931)
Ohno PP.133-35
(Sep. 18 Incident)
• Kantogun (関東軍 Japanese army stationed in China) initiates
well-planned invasion of Manchuria without informing Tokyo
• Tokyo Government and Army HQ try to stop it but fails
 Kantogun is now uncontrollable
 Violating “open door, equal opportunity” principle
• US Secretary of State Stimson’s press statement undermines
FM Shidehara (regarding Jinzhou bombing)
• Seiyukai (Inukai) Government declares the “independence” of
Manchuria (1932).
• The League of Nations determines that Manchuria is not an
independent state and Japan’s action is not self-defense
 Japan withdraws from the League of Nations (1933)
Northeastern China today
Military Government
Beginning in 1937, government appropriations for arms purchases had
increased dramatically, and comprehensive economic controls over foreign
exchange, bank loans, and production and pricing in selected industries were
all coordinated so as to divert resources away from civilian goods and toward
weapons.
Economic planning to mobilize people and resources under private
ownership (no nationalization).
1937-39
Law
1939-41
1941-44
Act
1944-45
Planning Board, National Mobilization Law; State Power Management
Control over civil life becomes pervasive
Total war with US--Ministry of Military Demand; Military Needs Company
Economic collapse due to lack of inputs
War with China prolongs  Resource shortage within Yen Bloc
 Invade SEA for more resources  Total war with US and
rest of the world
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Military Production
Consumer Product Supply
(1937=100)
(1933=100)
2500
160
Weapons & ammunition
2000
Food
120
Planes (navy)
Battleships
1500
Total
140
Planes (army)
Clothing
100
80
1000
60
40
500
20
1953
1951
1949
1947
1945
1943
1941
1939
1937
1935
1945
1944
1943
1942
1941
1940
1939
1938
1937
1936
1935
1934
1933
1932
1931
1933
0
0
Million tons
25
Other
Oil from SEA
Nonferrous metals
Iron ore
Coal
20
15
10
Maritime Transport
during Pacific War
1941-1945
5
0
1942:H1
1942:H2
1943:H1
1943:H2
1944:H1
1944:H2
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1945:H1
World War Ⅱ
1940 : Japan occupied French Indochina (Vietnam). These actions intensified
Japan's conflict with the United States and Great Britain. The United States placed
an oil embargo on Japan. This was expected a resulting oil shortage. Japan decide to
capture the oil rich Indonesia and to start a war with the US and Great Britain.
1941 : On December 7, 1941, Japan attacked the Pearl Harbor. Japan was able to
expand her control over a large territory that expanded to the border of India in the
West and New Guinea in the South within the following six months.
1942 : The Japanese had conquered Burma, Siam, the Indonesia, and the
Philippines. The turning point was the Battle of Midway in June.
1944 : Intensive air raids started over Japan.
1945: In spring, US forces invaded Okinawa. On July 27, the Allied powers requested
Japan in the Potsdam Declaration to surrender unconditionally.
US forces dropped two atomic bombs on Hiroshima and Nagasaki on August 6 and 9.
On August 8, the Soviet invasion of Manchuria .
the atomic bombings of Hiroshima and Nagasaki in on August 15, Japan agreed to
an unconditional surrender.
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Pacific war ; 1941 - 1945
Map of Japanese Empire
1941
1942
33
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War time economy
Flath(2005): Figure 3.5
(P.64)
Wartime Production
Possibility Curb shows the
trade off between
weapons and civilian goods.
Producing more military
goods diverted resources
away from the production
of civilian goods.
Flath(2005)conclusion : Japan’s war leaders had
miscalculation badly,
sacrificing much of the nation's material wealth
on a losing bid for foreign conquest.(P.66)
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The war cost
• The war cost Japan and the rest of the Greater East
Asia Co-Prosperity Sphere millions of lives and left
much of the nation's industry and infrastructure
destroyed. The Allies (led by the US) repatriated
millions of ethnic Japanese from colonies and military
camps throughout Asia, largely eliminating the
Japanese empire and restoring the independence of
its conquered territories.
• The Allies also convened the International Military
Tribunal for the Far East on May 3, 1946 to prosecute
some Japanese leaders for war crimes.
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References
Dadid Flath [2005],The Japanese Economy, Oxford
University Press.
Takatoshi Ito[1992], The Japanese Economy, MIT
Press.
Morishima, M [1982], Why Has Japan Succeeded?
Cambridge University Press.
Kenichi Ohno[2006], The Economic Development of
Japan, GRIPS Development Forum.
Reischauer, E.[1988], The Japanese today, Harverd
University Press.
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