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Comparing and contrasting the Main Factors that Led to Economic Success in Japan

Comparing and contrasting the Main Factors that Led to Economic Success in Japan


In this assignment, the factors behind the economic success of Japan would be assessed. The factors for economic success in Japan would be assessed throughout the Japanese history and how they have contributed to economic well-being in Japan. The Japanese cultural practices and arts have played a major role in economic development not only in Japan but also in the Asian countries. Therefore, in this paper, economic success and factors contributing to the economic development in Japan will be discussed. Focusing on cultural beliefs, the Japanese are considered to have very strong traditional cultural beliefs ranging from clothing to traditional foods. Furthermore, the Japanese language uses three different scripts and hence seen as the form of traditional artwork rather just for written information transferring.

Japan Economy Success

The Japanese economy is considered as strong and among the most competitive in Asian countries as well as in the world. The factors behind the economic success in Japan are mainly in exportation. The Japanese economy exports most of the products ranging from the computers, cars and electronic. The Japanese economy trade with the countries such as the United States of America of which is considered the main importer of Japanese product ranging to more than a quarter of Japan exported product. The Japanese economy success is based on the ability to combine the western market with its traditional lifestyle (Hoshi & Kashyap, 2004). The economic status of Japan focusing on the free market has contributed to speedy ascension and hence ranking among the best and powerful in manufacturing and exporting electronic, cars and computers in the world.

In the arrival of the Commodore Perry in 1853, the economy of Japan was stagnated as it was isolated hence leading to huge economic blow after losing the World War II. The attributes that supported the Japanese economy range from the social class breakdown in the creation of conscript Army and also the victory gained in the manufacturing of stable and low interest stimulating capital venture (Thangavelu, Yong, & Chongvilaivan, 2009). These economic success factors attribute to the importation made from western countries such as technology, economic practices as well as the social theory. Basing on the Japanese history, the economic success can be traced in the creation of the Meiji industrial economy that led to post-war economic growth. The history indicates that in the period from 1630 to 1860, the Japanese economy has unparallel growth that was contributed by structural change (Hobday, 1995). During this period, the rules and obligation for the society contributed to the production of rapid industrialization as well as urbanization.


In the period of 1968, the old Tokugawa began to cease while the Meiji Restoration started to exist leading to changes in Japan. Industrialization was as a result of the western countries that were already industrialized. The private investment and enterprises induced industrialization in Japan. The support from the government through subsidies and benefits contributed in attracting more private investors and enterprises in participating in the Japanese economy (Kojima, 2000). The Japanese government sold factories to the private investors whereby the economic growth started slowly as Japan depended on the United States and Europe for its manufactured products and machinery. This continued until 1915 when the industrialization boomed as the World War I had started. It is during the war that Japan and Europe had been cut off and hence making Japanese manufacturer concentrate on the manufacturing opportunity (Kojima, 2000). The Japanese manufacturer went ahead and broadened its manufacturing and marketed its machinery worldwide. These manufactured Japanese products contributed to the country’s economic growth of 61.5% during 1910 to 1920s (Thangavelu, Yong, & Chongvilaivan, 2009).

During the period of 1920, the most of the manufacturing economies were in a recession, but for the Japanese economy, it experienced economic success and development. It is during this period when the Japan had a better source of electricity from the hydroelectric plant. The hydroelectric plants enhanced the electricity source compared to another form of electricity sources. In the 1920s, the manufacturing industry focused on the aircraft industries, electrical product manufacturing and radio industry (Hamilton & Biggart, 1988). Computer and information communication technologies were the most developed industries and hence contributed in greater exportation earning.

After the World War I, the Japanese economy enjoyed dual structure as the companies and organization capitalize in the latest and foreign available technologies. Availability of the latest technologies improved the workforces who are skilled and high quality. The structure of the economy earlier was opposite whereby the Japanese economy was medium with small organizations that subcontracted the bigger and advanced firms or industries (Balachandra & Friar, 1997). The country lacked latest technologies comparing to other richer countries engaging in the production of machinery and other manufacturing. Furthermore, the workforce lacked or had low skills and hence making laborer to receive low wages.

The start of the industrial rationalization process began when the Asian countries were in the war. The Japanese industry developed new policies that contributed in the modernization of the industries. This helped Japan in becoming among the competitive internationally through reducing the stated costs. In the rationalization of the industries, new developments were achieved in the economy (Hoshi & Kashyap, 2004). The companies dealing with the steel and iron contributed in the domestic appliance and car manufacturing industries. The Japanese changed the production and management approaches and hence focused on the wider implementation into large industries in the period of 1950s.

The economic development between years 1960 to 1973 was considered as Aura of golden Japan (Hobday, 1995). Tremendous growth and hence characterized this period was named as Japan Incorporated decision-making model. The period was largely bureaucratic, having big business and exercising conservative politics ideas. The three factors were essential in contributing toward cooperation and hence holding into the economic growth goals that Japanese intended to achieve. The factors contributed to the plans and coordination of the grand strategy of the Japanese economic development and hence enhancing the chances for economic bureaucracies to shape the economic feature of Japan.

Currency Exchange and Interest Rate

In the 1980s the Japan has maintained its constant economic growth through purchasing of assets and exporting products and machinery overseas. This constant importation and exportation influence the country’s exchange rate and interest rates. In the exchange rate, the Japanese yen trade perfectly with other strong currencies such as the dollar. The constant exchange rate has enabled the Japanese to focus on the international trade (Hamilton & Biggart, 1988). The Japanese yen has been performing perfectly with other international currencies and hence providing firm background for exportation of machinery, electronic and cars and importation of assets and resources. On the other hand, in trading on the local Japanese capital market, the investors depend on the interest rates. The Japanese economy provides predictable trend to focus on the valuation n terms of interest rates. The trend in the stock market performance provides clear performance in the stock market and hence attracting many local and international investors to trade on Japanese yen.

Unemployment and Deflation

In the 1990s toward the end of the century, the Japanese economy was faced by unemployment and deflation problems. In the short-terms, the rates decreased by 8.3% in the year 1991 to 0.48% in the middle year 1999 (Thangavelu, Yong, & Chongvilaivan, 2009). This led to liquidity trap effect when the interest rate cannot be lower anymore, and the assets business transaction depends on cash. The economic expansion regained back in the year 2002 whereby in the year 2003 economic growth was recorded at 1.7% (Thangavelu, Yong, & Chongvilaivan, 2009).

Japan faces many challenges in the economic development in future as a result of labor reforms. The country is at the risk of the working-age populations as it is declining and hence facing a shortage of laborers in future. The shrinking labor reforms have led to increased working hours and hence leading to one single worker working the longest amount of hours comparing to other countries in Asia.


Japan economic success in different eras has been contributed by the exportation and manufacturing for the consumer abroad. The Japanese economic success was achieved through engaging and incorporating West to Japanese traditional values. The economic management helped Japan in cooperating appropriate business policies and legal systems to support the industrial manufacturing. Therefore, the manufacturing and exportation are among economic activities that contributed to Japanese economic success.


Balachandra, R., & Friar, H. (1997). Factors for success in R&D projects and new product innovation: a contextual framework. IEEE Transactions on Engineering Management, 44(3), 276-287.

Hamilton, G., & Biggart, W. (1988). Market, culture, and authority: A comparative analysis of management and organization in the Far East. American Journal of Sociology, 94, 52-94.

Hobday, M. (1995). Innovation in East Asia: diversity and development. Technovation, 15(2), 55-63.

Hoshi, T., & Kashyap, A. (2004). Japan’s Financial Crisis and Economic Stagnation. The Journal of Economic Perspectives. 18(1), 3-26.

Kojima, K. (2000). The “flying geese” model of Asian economic development: theoretical extensions, and regional policy implications. Journal of Asian Economics, 11, 375-401.

Thangavelu, S., Yong, Y. W., & Chongvilaivan, A. (2009). FDI, Growth and the Asian Financial Crisis: The Experience of Selected Asian Countries. The World Economy, 1461-1476.