The Political Economy of Japan Bradley M. RICHARDSON

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20 percent increases in the size of homes. Construction of slightly larger homes andshrinkage of family size resulted in an even greater increase in space per person.Whereas each person had a little over 7 square meters of space in 1963, by 1989 itwas 12 square meters (103). While this growth was salutary, Japan was still anextremely crowded place by comparative standards, and population pressure onhousing was a constant problem. In most years in the 1970s and the 1980s, landprice inflation considerably exceeded general inflation trends. In addition, incomparative terms, both land and housing prices were and remain extremely high inJapan. In 1979 one square meter of residential land in Tokyo cost on the average$43 thousand, roughly the cost of a typical 1500 square meter lot in an expensivesuburb in many cities in the United States in the same year. Even in remote areaslike the southern island of Kyushu, a square meter of land cost roughly $15thousand. Meanwhile, the cost of houses soared to a multiple of seven times annualincome in the late 1980s, and many married couples were unable to purchase homesuntil their mid-forties, if indeed they were able to buy them then (104).Because of the chronic shortage and high cost of homes, demand for publichousing in Japan was consistently high despite considerable national and localexpenditures on housing over the years. For example, applications for housing unitsin public projects ranged from eight to eighty-five requests for one vacancy in Tokyoin the early 1970s (with the different ratios depending on the cost and type ofhousing)(105). Housing therefore joins other social capital investments as a majorlingering problem for government in Japan.Economic Welfare, Clientelism and the Crisis and Compensation Hypothesis.Much of political economy research on Japan has described and sought explanationsfor that country's phenomenal postwar growth. However, not all of Japan's industrieshave been successful at all times. The coal industry lost competitiveness in the late1950s and one or another segment of the textile industry had problems virtuallythroughout the postwar period. Several major industries, including shipbuilding, ironand steel, petrochemicals and aluminum, were "structurally depressed" in the 1970sand sometimes later as the result of the oil crises' effects on production costs anddemand (especially the demand for ships). Competition from newly industrializingcountries including Korea and Taiwan also affected demand for some Japaneseproducts. The shipping industry was itself also intermittently in bad straits, as wasdescribed earlier (106).In each of these examples of industrial decline, the Japanese governmentresponded with measures such as capacity reductions (frequently includinggovernment purchase of excess equipment), employee retraining and efforts forregional economic renewal. In some periods, the government orchestrated remedialprograms involving labor force and facilities reductions, anti-recession cartels, andspecial recovery loans. At times, industries which employed as many as one out of
every five of Japanese workers were affected. Medium and small businesses, manyof which were chronically weak financially (although some also did quite well throughmodernization programs), also received a substantial amount of government supportthroughout much of the postwar era.The magnitude of attention given weak and sick industries by Japan'spostwar governments is shown by the numbers of major policies and amounts ofresources allocated to address their problems. Figure 6 shows the numbers of MITIplans and programs dedicated to growth industries contrasted -with proposedsolutions for problem sectors, and thus indicates in a rough sense the degree ofpolicy concern for each area. The source is annual ministry policy reports. Table 6 inturn shows the amounts of FILP program funds allocated to small business loanscompared with lending to large business. Quite a bit of the financial support givensmall business addressed temporary or long-term economic woes in particular smallfirm sectors. Substantial funds were also supplied for modernization of small firmsthrough the introduction of automated equipment and other improvements. The twogoals are not mutually exclusive.What is striking about these two sets of data is how much attention has beenpaid to less economically promising economic sectors compared with support forsuccessful industries. Almost as much attention was paid to problem industries as togrowth sectors. One hundred twenty five growth programs were cited in annualministry reports between 1955 and 1980, but there were also 109 recession policies.If the purpose of market interventions, a third category of MITI actions in ourinformation, was known in all instances, recession programs might outnumber growthframeworks (107).Quantitative data on allocations of FILP loans to "basic industries" (the largefirm growth sector) and medium and small businesses tell a similar story. By themid-1960s Japanese governments were spending twice as much or more on smallbusiness as on large firm development. Later even larger disparities could beobserved. Although it is true that not all small businesses were economic disasters,many small business programs were remedial in nature. One might conclude thatJapan's role as an "economic welfare" state is as important as its role as a"developmental state".Information from the 1960s and 1970s regarding the timing of governmentloans relative to production growth and value added in the production process (Table7) tells a similar story as to the relationship between industry success or failure andgovernment policy response. In industries like automobiles, precision instrumentsand consumer electronics the proportion of Japan Development Bank loansremained low throughout the postwar era. Borrowing from the JDB also declined inmost periods relative to both gross output and value added, which implies that firms
Page 2 and 3: Japan's economy is one of the succe
Page 4 and 5: West Germany. By 1990 both Japan an
Page 6 and 7: today although the plans are given
Page 8 and 9: percent of the Japanese government
Page 10 and 11: MCI and MITI policy development ass
Page 12 and 13: about the nature of Japanese govern
Page 14 and 15: amounts at a time when the future o
Page 16 and 17: Support for the Japanese computer i
Page 18 and 19: while most persons grant the import
Page 20 and 21: toward medium and small businesses.
Page 22 and 23: played a prominent and to some obse
Page 24 and 25: Textile makers kept obsolete machin
Page 28 and 29: needed less from government banks a
Page 30 and 31: farm. Many persons moved to city ap
Page 32 and 33: Maintenence of adequate levels of e
Page 34 and 35: Japanese economic and industrial pe
Page 36 and 37: manipulation. Some policies also fa
Page 38 and 39: Table2
Page 46 and 47: Figure1
Page 52 and 53: NOTES(1) JOHNSON, Chalmers: MITI an
Page 54 and 55: (26) SAMUELS, R.: op. cit., p. 95-1
Page 56 and 57: policy promoting inter-firm mergers
Page 58 and 59: (85) SAMUELS, R.: op. cit., chapter
Page 60: (113) Diminishment of Calder's cont

The Political Economy of Japan Bradley M. RICHARDSON

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