During this period of varied and intense military activity, Japan’s industrial progress was steady but slow. The country was short of capital and did not wish to depend on foreign sources. Industrial investment was accordingly limited. Also, Japan had little to sell in the way of exports to pay for new industrial equipment. Since the country had so few natural resources, it had to use exports to pay for the needed raw materials such as cotton, coal, iron and steel, oil, rubber, and tin. But during World War I, while the Western nations were busy producing vast amounts of munitions instead of commercial products, Japan was able to increase its foreign trade and shipping so that it became a creditor nation. With its great fund of foreign credits, Japan was able to invest heavily in industrial capacity and to enter the ranks of the leading industrial countries.
During the war japan joined with the Allies and furnished some help in defeating the Central Powers. In doing so, Japan also extended its empire by capturing the German possessions in the Pacific Area. During the 1920’s, Japan’s foreign policy was largely in the hands of Baron Kijuro Shidehara, who believed that Japan would gain more by developing trade than by resorting to forceful aggression, and Japanese military activities were minimal. However, by 1930 problems had arisen between Japan and China over Manchuria which led to the Japanese Army taking affairs into its own hands and starting a war with the Chinese. After the Japanese occupation of Manchuria, growing preparations for war greatly stimulated Japanese industry. The index of industrial production doubled from 1929 to 1939. At first this great increase, which was planned and directed by the state, was opposed by leading financiers and industrialists concerned with international trade, but the militarists were too strongly in power to be dislodged by argument and parliamentary procedures. Opposition soon became “subversion,” and what police suppression could not accomplish, assassination did.
Indeed, no one in Japan during the 1930’s was safe from assassination. Members of the Peerage, government Ministers, Premiers, newspaper editors, labor leaders, intellectuals, opposition political leaders, anyone who stood in the way of the right-wing militarist group, even military men, were killed or intimidated. The central government in Tokyo could hardly control the Japanese Army in Manchuria and was always under the threat of military usurpation. Everything in the country from education to farming to industry was made to serve the interests of the militarists, who twisted Japanese pride and patriotism to their own misguided ends.
Seen from the perspective of history, Japanese military aggression during the early period of industrialization seems more inevitable and unfortunate than either right or wrong. The world of the times was a jungle world full of stalking tigers. Aggression was everywhere, and in imitation of other powers, Japan turned into a predatory nation. If free trade had been allowed and territorial integrity guaranteed by all nations, perhaps the Japanese military tradition would have passed with the feudal past. However, it was an age of imperialism. Nineteenth century and even older mercantilist concerns formed the thinking of those times, and the bayonet was never far behind the bank draft. Nevertheless, probably 97 percent of the Japanese people had no control of their destinies during those times. Even so, it is difficult to imagine the ruling class of any other nation choosing otherwise during those economically difficult times.
In the Pacific War, Japan’s military leaders not only caused the deaths of countless innocent victims and billions in property damage, but also led the nation to its ruin. Forty percent of Japanese factories and machinery was destroyed, and 80 percent of the ships sunk. Nine million people in the nation were made homeless, and 1.8 million others were killed. Millions of men had for years done no useful or constructive work. But with the political realignments due to the war and with what could be termed the “Pax Americana,” Japan was rid of its militarists and released from its need for protection and for aggression. It returned to business enterprise.
Since its defeat in the Pacific War, Japan has channeled all resources into economic growth of a peaceful nature. What was once a rural, agricultural society based on strong family ties, the small-scale production of everyday items, and a heavy industry in the service of the military, has been transformed during the past twenty years into an urbanized, consumer society of factory workers and commercial employees devoted to industrial production. Because of Japan’s single-minded effort in the direction of this new industrialization, its economic growth has been fantastic.
Beginning with a subsistence level of economy in 1950 and a Gross National Product of only $10 billion, the Japanese have reached a GNP figure of over $200 billion in only two decades. The Japanese Gross National Product reached third highest in the world in 1968, and in 1971 totaled $225 billion. In 1972, the GNP topped $250 billion and totaled more than $320 billion in 1973.
In the decade of 1960-70, the Japanese economy had an annual growth rate which averaged an exceedingly high 12.5 percent. Production increased 450 percent over 1960. At the end of 1970, the Japan Economic Research Center optimistically predicted that the GNP would total $400 billion in fiscal 1975. However, the recession which began in 1970 and continued through 1972 caused the Prime Minister’s National Overall Development Council to place that level of production in 1985. The Japanese economy, however, is extremely sensitive to political and market conditions throughout the world, and it is difficult for anyone to predict its future with much certitude. For example, the “Nixon shock” of 1971 wherein the United States Government imposed a ten percent surcharge on imports, and the “dollar shock” of the devalued, non-convertible dollar cost Japanese business over $1 billion in losses. Although Japanese business was adversely affected, it reached new highs. Nevertheless, the very size of the Japanese economy and its needs for prodigious amounts of raw materials is becoming a limiting factor in its own development. Also, the Japanese home market cannot absorb the increased productivity of industry fast enough and the Japanese are flooding their export markets. Foreign governments are showing increased consternation over their unfavorable trade balances. The entire situation has reached a critical state. Despite present problems, indications point to continuing though not fantastic economic success for Japan, and the conservative Ministry of Finance predicts that by 1988 Japan will have the highest per capita national income in the world, a figure of $11,400.
During the past twenty years, the Japanese government wisely restricted foreign investment in order to ensure local control of industry and to achieve economic autonomy. Between 1950 and 1966, for example, France was able to invest only $1 million in Japan, West Germany $4 million, England $22 million, Switzerland $34 million, and the United States $207 million. In contrast, during 1961-66 alone, the American investment in France totalled $735 million, in West Germany $1.4 billion, and in England $1.8 billion, resulting in a veritable financial invasion of Europe. Though the Japanese economy was helped by about $2.1 billion worth of aid, chiefly American, during the Occupation years of 1945-51, the Japanese economic growth has been financed largely by the Japanese themselves. From 1954 to 1963, the average yearly investment in capital by the Japanese was a phenomenal 34 percent of the Gross National Product. For the decade of the 60’s the share of private consumption in Gross National Expenditures fell from 59 to 49 percent. Such a fantastic belt-tightening investment subsequently led to a burgeoning productive plant and a rapid rise in personal incomes. During that time the per capita GNP figure rose from $460 to $1,900. In recent years, Japanese investment in plant and machinery has remained substantial. In 1967 it totalled $21 billion, in 1968 $26.9 billion, in 1969 $33.6 billion, and in 1970 $40.7 billion. But due to the recession of the past few years, industrial investment fell to $38 billion in 1971, and to approximately $35 billion in 1972. In comparison, the United States, which has twice the size of the Japanese population and over four times the GNP, invested $82 billion in 1971 and about $90 billion in 1972.
Not all of Japanese industrialization has been due to state capitalism or large funds of private venture capital, however. Sony Corporation, Japan’s well-known and world-wide electronics manufacturer was started by two penniless engineers in a Tokyo shed in the early 1950’s. Morita Akio, now the company president, and Ibuka Masaru, who manages the technical end of the business, begged and borrowed $500 to start the business. By