Japan Economic Development H Ch 9 04 21 2015 Japan before WWII After Meiji Restoration in 1868 o Capital formation Land Tax Reform in 1873 and forced savings o Emphasis on education skillful manpower o Development of financial banking system and infrastructures railroad postal service telegraph etc o Government subsided large private companies Zaibatsu appeared e g Mitsubishi o Achieved rapid economic development modernization during 1890 to 1914 under government protection o 1915 1945 banking system change monopoly of Zaibatsu banks Production cost reduction Invasion to China sub contracting system Shift to heavy industries and militarization of industry from 1937 the second Sino Japanese War Japan The Post WWII Economy Difficulties during the late 1940 s and early 1950 s Japanese post war economic miracle late 50 s early 70 s o Increase in GNP from 1 3 billion in 1946 to 290 billion in 1972 The collapse of the bubble economy and the Lost Decade in the 1990 s Factors that contributed to Japan s economic success o A highly skilled labor force o Adoption of the latest technologies o No burden of a heavy military expenditure o A cohesive national economic development strategy Economic Characteristics Government guided capitalism Reliance on banks for financing Harmonious relationship between workers and management Relative lack of class related conflicts Stability from vertical integration among business o Being in control of every stage of production Companies dependence on borrowed money Occupation GHQ US Military government controlled Japan General Headquarters o Trade was limited the US provided large amounts of humanitarian and economic aids 1 95 billion during 1946 50 US Aide more than GNP of Japan o demilitarization and democratic reform Zaibatsu breakup new labor laws and Land reform o from 1947 the US wanted to strengthen Japan as a capitalist ally and make an anti communist base Rebuilding and High Growth Korean War 1950 1953 o The US forces used Japan as a supply base o The increase in demand on military and civilian goods the economy was recovered o The recession ended quickly and the Japanese economy began to grow o The revival of former Zaibatsu High Growth era 1955 1973 o Annual growth rate about 10 o The 2nd largest world economic power next to Japan around 1970 s o Cheap labor from agriculture high savings rate fixed exchange rate efficient government economic plans Doubling Income Plan for 1961 1971 Rapid growth in steel motor shipbuilding electronic and chemical industries Emphasized the sector and which sectors to invest o low level of public spending high growth did not accompany enhanced welfare severe pollution problems Itai itai disease o the world oil crisis in 1973 severe price inflation high energy costs negative annual growth rate Big shock to Japan s economy graph GDP growth rate 1990 s Lost Decade GDP growth rate of the US graph Japanese Asset Price Bubble 1985 1991 The bubble economy and the lost decade video of bubble economy coca cola commercial o Japan experienced an asset bubble in the late 1980 s The Nikkei index from 10 000 to 39 000 points Real estate price change in big cities 200 900 Background o Traditionally Japan encouraged people to save large trade surplus resulted from 50s 70s o Japanese Yen appreciated after 1985 Plaza Accord o Expansionary money supply to help an export industry o Investment on stock market and real estates bubble The economy entered a long period of deflation and recession as the bubble burst around 1990 South Korea Economic Development 04 21 2015 Overview of Korean economy After the Korean War GDP per capita 67 in 1953 Rapid economic growth during 1970 s and 1980 s OECD membership in 1996 Economic crisis in 1997 GDP per capita 22590 in 2012 Until the early 1960s Syngman Rhee Vicious cycles of poverty and underdevelopment o 36 years of Japanese colonial rule national division social and political chaos during 1945 1948 and the Korean War during 1950 1953 o weak material and institutional foundations o postwar inflation and high unemployment postwar reconstruction plans since 1954 o restoring expanding physical infrastructure w the US aids o import substituting industrialization strategy o Macroeconomic stability o BUT distorted resource allocation inflation unemployment corruption Park Chung Hee I 1963 1973 Needed to justify the military coup o Economic development and clean government Reduction in American economic assistance Kennedy pressure to economic liberalization from the US Economic expansion during 1963 1973 o Annual average growth rate was almost 10 exports grew by forty times o Contributing factors Export led economic growth strategy policies to spur manufacturing for export often through subsidies and incentives for export production Massive inflows of foreign capitals diplomatic normalization with Japan in 1965 The Vietnam War boom and economic assistance from the US The period of big push 1974 1979 Heavy chemical industrialization o 1973 oil crisis o five strategic sectors steel automobile electronics shipbuilding and petrochemical industries o Main Motivation national security self defense The threat of North Korea 1968 1969 1970 Nixon Doctrine 1969 and the withdrawal of 1 3 of the troops in 1971 o Over 10 of the annual average growth rate during 1974 1979 first balance of payments surplus in 1977 o Foreign loans and special favors to Chaebol business conglomerate o 1979 oil crisis bubble economy excessive investment expansionary fiscal policy massive inflows of foreign exchange Park s death first negative growth Chun Doo Hwan 1980 1986 Needed to justify the coup political legitimacy Neoliberal economic reforms o Macroeconomic stabilization fiscal austerity wage freezes devaluation realistic interest rates the removal of various subsidies o Privatization of state enterprises o Structural adjustment three new economic catchphrases Liberalization rationalization and fair trade Growth stabilization rationalization government led market led liberalization protection open economic fair trade o Successful macroeconomic stabilization o But no successful in restructuring the economy Chaebol s economic concentration continued regulations in foreign direct investment IMPORTANTLY failure in banking and financial system reform Roh Tae Woo 1987 instability Democratic opening and transition and social and political Unprecedented economic boom between 1987 1988 o Growth rate 12 percent per year o Growing balance of