Moving Up the Market

Transformation of Industrial Structure
  • Shinichi Ichimura


Once economic development is under way, the industrial structure must be constantly transformed to ever higher stages of industries. The unprecedented growth of Japanese economy materialized itself with the accompanying changes of industrial composition as Table 10.1 shows. Since the Japanese economy is basically a free private enterprise system, this change of industrial composition has been realized by market mechanism under competition. The Japanese government has intervened, however, into the activities of private enterprises in many ways. Industrial Policy was such an intervention. Industrial Policy may be defined as the government polices designed to influence the behaviors and activities of private businesses.1 In the following we pay attention mainly and exclusively to the government policies and far less to the positive action or behaviors of private enterprises themselves or their responses to the market conditions and government policies. It should not be forgotten, however, that almost all the significant changes of industrial activities have been brought about mainly by the initiatives of private enterprises and additionally by the cooperation or coordination by the government and private sectors. Those policies called Industrial Policy are often attributed to the policies of the Ministry of International Trade and Industry (MITI). But those policies are not exclusively the ones of MITI. There are many policies taken by other ministries. For example, the foreign exchange control, the restrictions on the import of capital are the policies of the Ministry of Finance and undoubtedly influence the activities of private businesses. In this sense, they are part of Industrial Policy.


Private Enterprise Industrial Policy Industrial Structure Japanese Government Private Business 
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  1. 1.
    Industrial policy is defined by some economists as the government policies to overcome the market failures. But it is too narrow, because when there is no industry, there is no market failure.Google Scholar
  2. 2.
    This chapter is based on Ichimura’s two papers and is meant to supplement a paper: “Japanese Industrial Policies: An Overview”, by F. Gerard Adams and myself. See Ichimura, “The Japanese Industrial Restructuring Policies, 1945–1979,” Discussion Paper No. 106, The Center for Southeast Asian Studies, Kyoto University, 1981; “Moving Up the Market: Transformation of Industrial Structure and Economic Policies,” Discussion Paper No. 113, Center for Southeast Asian Studies, Kyoto University, 1982Google Scholar
  3. 3.
    There are several documents on Industrial Policy by OECD: Enquiry into the Regulations and Conditions Governing Certain International Capital Movements in Japan, 1967; United States Industrial Policies, 1970; The Industrial Policy in Japan, 1972. But the earliest contribution on the argument was to my knowledge M. Shinohara’s, “Sangyo Kozo to Toshi Haibun,” (Industrial Structure and Allocation of Investment), Keizai Kenkyu (Economic Review), 1957.Google Scholar
  4. 4.
    The loan of the Bank of Japan to commercial banks beyond the amount of deposits is called “over loan” in Japan.Google Scholar
  5. 5.
    See the reports listed in references for this Chapter.Google Scholar
  6. 6.
    See, for instance, Chalmers Johnson, MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925–1975, Stanford University Press, 1982Google Scholar
  7. 7.
    Y. Ojima, “Basic Philosophy and Objectives of Japanese Industrial Policy,” a statement presented at the Committee on Industry, OECD in Tokyo, June 24, 1970.Google Scholar
  8. 8.
    OECD undertook some studies on Industrial Policies in several countries including Japan. Industrial Policies in 14 Member Countries, 1971. It is regarded as unsatisfactory in Japan. Professor Ueno undertook a detailed study of the practice of Industrial Policy in legal and administrative steps. He lists up 58 laws and 50 kinds of administrative guidance as effective industrial policy measures for the period of 1952 to 65. See Hiroya Ueno, “The ideas and Evaluation of Industrial Policies,” Gendai Keizai, (Contemporary Economics), Winter, 1975; Nihon no Keizai Seido (The Economic Institutions in Japan), Ninon Keizai Shinbun, Tokyo, 1978; “The Conception and Evaluation of Japanese Industrial Policy,” in Industry and Business in Japan, edited by K. Sato, Croom Helm Ltd., 1980Google Scholar
  9. 9.
    As for land itself, strangely enough, no public policies were introduced until as late as 1969. Then were enacted Urban Redevelopment Law in 1969, Refsorm of Land Taxation in 1970, Industrial Relocation Act in 1972, and National Land Planning Act in 1973. This is probably due to the Japanese Constitution’s strong protection of private property ownership in Article 29. As the result, the price of urban land in 1972 went up 20 times as much as that in 1955. This is about 19 times as high as the whole-sale price index in the same period.Google Scholar
  10. 10.
    The Inter-industrial Table is available in Japan every five years, but the adjusted table is produced for every year. In addition inter-regional input-output tables are available. Input-output tables are produced in most East Asian countries. Internationally linked input-output tables are also available for Asia-Pacific economies.Google Scholar
  11. 11.
    The documents listed in the references for this chapter entitled the Long Term Vision of Industrial Structure, MITI are full of such studies and information. They offered an excellent guidance to Japanese industrialists to obtain the perspectives of their positions relative to the competitors as well as within the framework of developing Japanese economy.Google Scholar
  12. 12.
    The estimated values of income elasticity for the 60’s and the 70’s can be seen in M. Shinohara’s works and H. Ueno’s article quoted above. There are high correlation between income elasticity of consumption and that of exports with respect to income.Google Scholar
  13. 13.
    The earliest discussion of optimizing the industrial structure in Japanese context was offered by Yuichi Shionoya, “Sangyo Kozo no Sakutei Kijun,” (Criteria for Programming the Industrial Structure), in Sangyo Kozo (Industrial Structure), edited by Miyohei Shinohara, Shunju-sha, Tokyo, 1959. This article presents various criteria to be used in the practical selection of industries. The arguments are still useful for practical purposes. Similar arguments are given by M. Shinohara in this book, and his new volume, Nihon Keizai no Kozo to Seisaku (The Structure and Policies of the Japanese Economy), Chikuma Shobo, Tokyo, 1987.Google Scholar
  14. 14.
    Tokaido was a road connecting Edo (Tokyo) and Kyoto. Now the railroad between Tokyo and Osaka is called the Tokaido Line. More than half of manufacturing industrial establishments and population are located or live along this line. The area along this line is the backbone of Japanese economy called the Tokaido Megalopolis.Google Scholar
  15. 13.
    The interested reader should read the following two books on the details of the policies taken and the effects on various industries: Komiya, Ryutaro, Masahiro Okuno and Kotaro Suzumura (eds.) Industrial Policy of Japan, Academic Press, New York, 1988; H. Ueno, op. cit. Google Scholar
  16. 16.
    This is what I wrote in 1979. Now almost twenty years later the farmers’ cooperatives and other business associations are exposed to open competition and required to compete openly.Google Scholar
  17. 17.
    As for the financial sector of Japan and the tight regulations in the sector, see S. Ichimura, “The monetary policy in Japan,” in Handbook of Monetary Policy in the World, (ed.) M. Fratiani, West Press, New York, 1992Google Scholar
  18. 18.
    Sec for instance Chencry, Mollis B, Sherman Robinson, and Moshe Syrquin, Industrialization and Growth, Oxford University Press, New York, 1986Google Scholar
  19. 19.
    Yasuhiko Torii, “Structure of Protectionism: a view from development theory” Docki to Kanzci (Trade and Customs), February, 1981Google Scholar

Copyright information

© Springer Japan 1998

Authors and Affiliations

  • Shinichi Ichimura
    • 1
  1. 1.International Center for the Study of East Asian DevelopmentKokurakita, Kitakyushu, FukuokaJapan

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