A Structural Analysis of Japanese Economic Development

Discussion Papers

No.695

by Kazusuke Tsujimura and Masako Tsujimura

February 2018

ABSTRACT

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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