Japan: A time where the Red Sun (nearly) rose

By Shaan Goli (Year 10)

Background: Hiroshima after being atomically bombed (1945)

In contemporary society, Japan is a well-known and well-respected country with the 3rd largest economy; a strong soft power through its anime, manga, and cuisine; and one of only two developed countries in Asia. However, it was not always like this, she had rough beginnings after the Second World War, which saw her capital, Tokyo being firebombed into dust and later suffer the tragic landing of the two atomic bombings in Hiroshima and Nagasaki which still have adverse consequences on generations of Japanese people even today... Absolutely no one at the time expected to see such a strong, rich Japan, which now has the possibility of overtaking the United States in GDP in the decades to come. From dust to diamond; from underdog to unrivalled, a tale of sheer brilliance and planning from the Japanese.

September 2nd, 1945 was the date that Japan officially signed to surrender. Approximately 2.6 million Japanese perished during the Second World War. As a result of the war, Japan had to concede its territories such as the Kuril Islands, the Ryukyu Islands (Okinawa was given back to Japan in 1972), the island of Taiwan, the Korean Peninsula, and the puppet state of Manchuria and was not allowed to build another Empire. The United States, led by General Douglas McArthur, started the occupation of Japan for 7 years. The emperor lost all political power and was meant to be a symbolic figure and zaibatsus, which were family conglomerates, were dissolved. The aim for the Americans was to rebuild Japan, from a militaristic society to one of democracy. The United States needed a strong, prosperous power in the East to act as counterbalance towards the Soviet Union and a Communist China, following Mao’s revolution.

The first step towards Japan’s rise was the Korean War. The War was fought between two authoritarian nations, a communist north backed by China and the Soviet Union, and a capitalist south backed by the United States and a UN coalition. The United States however, faced a huge logistical problem: Asia is a whole continent away and shipping supplies and resources there is not ideal. So, the USA invested huge amounts of money to Japanese industrialists, and then Japan produced munitions, food, fuels and many other supplies. Japan was used as a stop and go station. Whilst the war may have been satisfactory for the Americans, for Japan this was the first step... the first step to becoming a manufacturing supergiant!

By 1952, America helped Japan enter onto the world markets and restructured the economy of Japan, ending its occupation. Japan also started a policy of Inclined Production Mode by the Ministry of International Trade and Industry (MITI). This focused on the production of steel, coal, and cotton. However more importantly, we move onto the Ikeda administration. Hayato Ikeda practiced a policy of heavy industrialisation and over-loaning which essentially was where the Central Bank of Japan issues loans to city banks who then loan back to industrial conglomerates. However, due to little capital in Japan, they borrowed so much from the city bank which then borrowed so much from the central bank, which meant that the central bank had complete control. The government also relaxed anti-monopoly laws which led to a re-emergence of conglomerate groups that behaved like repackaged zaibastus: the keiretsu. These keiretsu groups helped Japan become competitive on world markets and become more globalised.

Picture to the right: Japan unveils first ever high speed rail to the world (1964)

However, whilst this was going on, there was a specific keiretsu, called the Tokyo Telecommunications Engineering Corporation, founded by Masaru Ibuka and later Akio Morita. This was an electronics shop in the Nihonbashi Area of Tokyo, which built Japan’s first tape recorder, the Type G. This keiretsu will become more famously known as Sony Corporation. In general, the keiretsus worked closely with the MITI, cross placing shares with each other and making sure it protects against foreign take-overs. For instance, 83% of Japan's Development Bank's finances went toward strategic industries: shipbuilding, electric power, coal, and steel production. The keiretsu also planned for the long term and placed priority upon maximised market shares over short term profits, both of which were able to happen. The Ikeda administration also added one more policy, the Foreign Exchange Allocation Policy, which were import controls to further help Japan markets not fall to foreign goods. This also helped Japan’s export-oriented policies.

By now we have reached the Golden Sixties for Japan. Ikeda, now the Prime Minister, made an ambitious Income Doubling Plan. The plan had an aim of doubling the size of Japan's economy in ten years through a series of tax breaks, targeted investment, an expanded social safety net, and increase exports and industrial development. To achieve this, Japan had to hit an economic growth target of 7.2% per annum. However, Japan did more than expected and the economy increased by 10% each year and doubled in size. With this Income Doubling Plan, Japan improved the citizen’s lifestyle by building megaprojects like highways, railways, subways, ports, dams and helped urbanise Japan. They become a huge producer of automobiles. Another factor was Ikeda’s push for trade liberalisation. With the added motivation of the Olympics being held in Japan 1964, he used that to show the world Japan’s soft power and unveiled the first ever high-speed rail, the Shinkansen, colloquially known as the bullet train. Trade liberalisation reached 41% in 1965 but the ambitious aims for 80% were scrapped due to protests. His founding of foreign aid agencies allowed Japan to enter the OCED in 1964. In the span of twenty years, destruction and chaos in Japan was all but eradicated, despite rising on the global stage once more.

In 1973, Japan faced its first massive crisis, the oil shock crisis where the production of raw materials decreased by 20%. What’s more, it faced further oil shocks in 1978 and 1979 where the price of a barrel of oil significantly increased. This put an end to rapid Japanese economic growth, but it made Japan turn towards a technologically focused economy and this soon made the Japanese rise steadily once more. Even till today, Japan’s production of transistors has been so high for a while, with Sony leading from the front. However, Japan needed to produce something complex and something that can really put it out there next to the USA. They were the second largest economy and wanted more.

The Japanese started to produce popular media such as the Godzilla movies and other forms of media which are shown left and below:

At the start of the 1970s, the Japanese focused closely on semiconductors. Soon they started a VLSI project which linked five of the largest Japanese computer industries, NEC, Toshiba, Fujitsu, Mitsubishi, and Hitachi, most commonly rivals, came together to put down foreign lead in high-tech. Started in 1976, this group made over 1000 patents for the micro-fabrication process which helped boost Japan’s semiconductor industry. This soon became in the middle of the 1980s, Japan’s domination. They overtook USA in production of semiconductor products, producing 90% of the number of D-RAMs in the world at that time. The thought that Japan, a country that came from the rubbles and ruins of the Second World War, now have the possibility of overtaking the United States in technology and economy, started to cause worry for the USA. The trade deficit for USA with Japan was at around 90 billion USD .

However, with all this going on, the United States along with Western Europe and Japan signed the Plaza Accord in 1985. This made the yen and other European currencies appreciate for the dollar. This made the yen seem unattractive for investment and for an export-oriented economy, that is a huge loss. So, the Central Bank cut interest rates and set off on the biggest bubbles. Japanese citizens went on a spending spree and Tokyo was a huge party. The Imperial Castle was worth as much as the entire state of California at the peak of the bubble. Although in 1991, the bubble popped, and this led to the Lost Decades of Japan. However, all was not to be blamed on the Accord as the demographics of Japan started to show signs of ageing, the trade war with the USA had a huge effect on Japan’s export, and, simply, the once invincible system of Japan’s model of hard-work and effort has shown cracks and inefficiency. However, the Plaza Accord marked the decline of Japanese exports as the rising demand for other Asian economic miracles began. So, Japan went through a period known as the Lost Decades which really put the nail in the coffin for Japan’s chances of reaching number one and caused Japan lots of demographic, social and economic issues.

So, present day Japan really has undergone the whole journey. The devastation of WW2, being a small archipelago with limited raw materials and unfriendly neighbours, no one expected a nation like Japan to reach its peak on par with the United States and being so close to becoming the upmost economic power. But the bubble and later the Lost Decades has restricted Japan to third place and the yen is currently facing troubles. But even with all that considered, Japan is still third place, still has huge soft power and influence, has the respect of many nations. So, the Land of the Rising Sun is still rising over the world in many cases and the once underdog country is now a global player in manufacturing and technology.