Political and economic opening as a post-crisis strategy for Japan

In economics literature, the sources of economic growth in general and in Japan in particular have been appraised either from the supply-side, with the emphasis on capital accumulation, labour, total factor productivity and – given the advent of the new growth models – on technological change, or from the demand side. The study on Japanese growth by Chenery et al. (1962) was an early demand-based study that looked at the drivers of economic growth and structural change over the period 1914-1954. Using input-output methods and taking into account the contribution of technological change11 over this long-time period, the authors found two distinct early sub-periods of economic growth: the 1914-1935 and the 1935-1954 sub-periods. The first (1914-1935) is characterised by a rise in domestic income (by 4.5 per cent per annum) with large increases in exports. The second (1935-1954) is marked by the loss of colonial supplies of raw materials and by a substantial fall in exports; this second sub-period is also marked by import substitution policies and by the rising importance of technological change. The findings for the first sub-period mirror Japan’s emergence as an economic and geostrategic power, affirming first its colonial ambitions in East-Asia through the development of its many manufacturing networks, in the region as a whole and in Korea in particular (Inkster, 2001).