Theme II 2a Transformation of East Asian Economies (Japan)

Theme II 2a: Transformation of East Asian Economies (Japan) “The best way to grow rapidly is to have the country bombarded” -Milton Friedman

A. Japan’s Economic Recovery Ai, Government Intervention 1. To rebuild Japan’s essential industries, the government created strategies and supportive mechanisms that emphasised on industries. By receiving preferential treatment from the government, these industries development were boosted, enabling Japan’s industrial basis to grow a. Reconversion Finance Bank (RFB) set up to selectively loan to firms essential to recovering production. The RFB was essential due to a scarcity in capital from the war, hence RFB provided capital that enabled steel and coal entrepreneurs to reinvest and increase production capability and capacity. Steel production grew from 40% to 70% pre-war level in a year b. Economic Rehabilitation Plan emphasised government control of the economy to promote activities of key industries (coal and steel). With government focus and resources, their development was accelerated. Instrumental for Japan’s industrial production, their growth enabled Japan’s industrial production to recover to 80% prewar levels in 1949 Aii. International Developments 1. Deemed as a strategic location due to its proximity to both US’s pacific interests and vulnerability to communist threat, Japan and US entered a cooperative relationship in which America leverages on Japan’s strategic geographical location in exchange from economic benefits from American activity. a. After UN entered the Korean War in 1950, Japan became the supply depot for Un forces. US placed orders of 7000 trucks worth 13 million with Japanese firms, reviving Japanese automobile industry. Japan’s support against containment and rollback stimulated its economy with war-related goods and services. b. Japan’s proximity to China and USSR+ North Korea’s aggression made America fearful of communist attacks against Japan, thus establishing Anpo, giving legal basis to the hosting of military bases and US troops for maintaining peace and stability. free ride’ (Japan was able to consistently keep its military spending under 1% of GNP and concentrate on generating economic growth under an American security umbrella) B. Japan’s Economic Miracle and Growth Criteria for Singnificance 1. Rapid Industrialisation- Change to its industrial exports 2. Economic Growth (Characterised by high growth rates and other economic indicators Rapid Industrialisation - Japan’s industrial productivity increased at the fastest rate in the world Economic Growth - 1970-1980s Annual GNP growth rates ranged from 4%-5% - Inflation was modest and unemployment remained below 2 - Represented 10% of the world’s GNP and later increased to 15% - Provided for 30% of world’s FDI flow and it was the world’s largest single foreign investor

Bi. International Development 1. Growth of global economy gave Japan’s economy multiple chances to l