A Structural Analysis of Japanese Economic Development

Discussion Papers


by Kazusuke Tsujimura and Masako Tsujimura

February 2018


Japan successfully escaped from poverty after the world war and attained prosperity in a matter of two decades. There were two keys for the success. One was the priority pr oduction system – the idea to develop the industries at the bottom of the triangulated i nput-output table first, and to climb the triangle step by step. The second key for the s uccess was the country’s unique financial system; they deliberately grew both l ong-term financial institutions for large enterprises and local credit associations for s mall businesses. When Japanese exporting manufacturers fought the appreciation of y en at the end of the 20th century, their answer was the mass introduction of industrial r obots. The exporters won the fight but the country did not. What went wrong; what lesson do we learn from it?

Keywords:  Priority production system; Specialty financial institutions; Saving- investment balance; Robotization

JEL classification: C82,E16,O11

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