The Political Economy of Japan Bradley M. RICHARDSON

(15) However, Japan was third in the free world after the united States and Germany in per-capitaoutlays on defense. ALMOND, Gabriel and POWELL, Bingham: Comparative Politics Today: AWorld View Glenview, IL, Scott, Foresman, 1988, p. 124.(16) The current national pension plan was started in 1961, and began to mature only in the 1970sand 1980s as contributors reached retirement and drew their pensions. Because of the rapidincrease of older persons as a percentage of the population, future pension and health care outlayswill place increasing pressure on public expenditures as Japan moves into the 21st century.(17) Economists have pointed out that in the early postwar era Japanese monetary policymakersraised interest rates only when the economy overheated and demand for imports exceeded theamounts of exports so as to create a negative trade imbalance. See ACKLEY, Gardner and ISHI,Hiromitsu: "Fiscal, Monetary and Related Policies" in PATRICK, H and ROSOVSKY, H.: op. cit., p.153-247, especially p.161 and 187ff.In the 1970s a mores conventional monetary policy was followed and interest rates were raised tosnub inflationary pressures. Recent liberalization of the financial system has further eroded theJapanese government's capability to independently control interest rates so as to stimulate growth.There is also controversy over the extent to which the Japanese interest rates were lower in realterms than in other countries. A comparison of U.S. and Japanese rates in the 1970s and 1980sand related policies indicates that real rates were lower in Japan in some periods and higher inother. See LINCOLN, Edward. J.: Japan, Facing Economic Maturity. Washington, DC, Brookings,1988, p.258-260(18) WATANABE, Tsunehiko: National Planning and International Growth in Japan in Hickman, Bert (ed)., Quantitative Planning of Economic Policy A Conference of the Social Science ResearchCouncil on Economic Stability Washington, DC, Brookings Institution, 1965, p.233-251(19) Savings deposits in both post office and commercial institutions are exempt from taxation inwhat is known as the "maruyu" system. Efforts to eliminate this system in the 1980s were notsuccessful. in addition to their tax-free status, individuals can open many small accounts under theirown and other names without fear of prosecution.Henry and Mable Wallich have considered multiple hypotheses about the sources of Japan's highlevels of consumer savings and conclude that the semi-annual bonus system, the limited availabilityof housing credit and the low level of social security were important factors encouraging saving inthe early postwar era. They discount most other hypotheses, including the effects of Japan's dualeconomy / where persons who own small businesses might save as part of their management oftheir firms). See PATRICK, H. and ROSOVSKY, H.: "Banking and finance", op. cit., p.258-259.However, the Wallich and Wallich interpretation is by now dated. Access to housing credit hasincreased in recent years, and pensions are more adequate than in the past. After peaking in themid-1970s, private savings ratios have declined as well, which obviously may reflect these changesin potential needs. See SATO, Kazuo: Savings and Investment in YAMAMURA, Kozo andYASUBA, Yasukichi: The Political Economy of Japan: Vol. 1. The domestic Transformation.Stanford, Stanford University Press, 1987, p.148-151.(20) KEIZAI KOHO CENTER : Japan 1992, an International Comparison. Tokyo, 1992, p. 85.(21) JOHNSON, Ch. : op. cit., chapter 9.(22) Among the scholars who study industrial policy, Marie Anchordoguy is close to the Johnson viewthat a market conforming state guides important aspects of growth through supportive policies. SeeANCHORDOGUY, M. : op. cit.(23) PATRICK, Hugh and ROSOVSKY, Henry : Japan's Economic Performance: An Overview inPATRICK, H. and ROSOVSKY, H. : op. cit., p. 6-62 especially p. 47-48.(24) FRIEDMAN, D. : op. cit.(25) At some point this view is accompanied by a corporatist interpretation of interest group politics.See Chapter 6 and WADE, Robert: Governing the Market Economic Theory and the Role ofGovernment in East Asian Industrialization. Princeton, Princeton University Press, 1990, p. 27.