The exponential growth of Japan’s economy over a relatively short period of time has been a topic of study by economists worldwide. Japan has developed from a feudal system into a major world economic power with an efficiency that is typical of the Land of The Rising Sun.
So how did they pull off this impressive feat? Let’s explore Japan’s history and culture for answers.
How Japan Became a World Power
The history of Japan is a fascinating one. Japan closed its borders to all foreigners in the 1600s and they remained closed until the arrival of American Commodore Matthew Perry in 1853 (obviously this is a different Matthew Perry than the guy who played Chandler in Friends). This meant that during the closed times, there was very little influence from other countries on how the nation was led.
The system that was established during this period was unique. An emperor sat on the throne in Kyoto, but there was also a shogun (a kind of warlord) in place in Edo, which is now Tokyo. The shogun commanded the emperor on how to run the country.
A feudal system was in operation, with wealthy landowners living in grand castles and owning slaves. The Samurai were the military nobility at this time, and although they were officially abolished in the 1870s their legacy very much lives on in Japanese martial arts techniques.
The Arrival of the Americans
When Commodore Perry arrived with a fleet of US battleships in Edo Port, the Japanese were shocked at how much more advanced the American ships were. Perry demanded that American ships be allowed access to Japanese ports for coal and water – which the shogun conceded to. Soon, other Western countries began to follow suit. America imposed a low tax on imports to Japan and established a law whereby Japanese courts could not try American citizens.
It became abundantly clear to the Japanese just how easily they could be taken advantage of by their foreign powers. Citizens became disenchanted with the shogun, who signed treaties with numerous foreign nations in an attempt to appease them. A schism began to appear between the shogun’s actions and the emperor’s preferences – the emperor did not want to sign what he consider unequal and humiliating treaties with Western powers.
Citizens loyal to the emperor began to attack foreigners, who they referred to as barbarians. When the emperor died in 1867 and his son took the throne, many saw this as an opportunity to completely abolish the shogun. A battle broke out between a group of rebels and the shogun’s army. The rebels were ultimately victorious, and the reign of the shogun ended. Once again, the emperor was the sole ruler of Japan. A national distrust towards foreigners was firmly established.
Many hoped that the new emperor would banish all foreign influence and restore Japan to what it was before Perry’s arrival. In fact, he took a very different approach. In 1868, the emperor proclaimed the Charter Oath. This was a document guiding the modernization of Japan – recognizing the necessity to catch up with the Western powers in order to retain power over the country.
The Charter Oath made provisions for a representative assembly and a national school system, amongst others. The oath was clear in its intention to abolish the class system under which feudalism had flourished and enable Japanese people of all backgrounds to fulfill their personal aspirations.
Significantly, this document set out a clear strategy for the creation of a wealthy country with strong arms. Attention was turned into building the Japanese military and developing industry. The intention to send Japanese people all around the world in order to glean how other countries operated was also set out in this document.
Gone were the days when closed borders meant Japan could be blissfully ignorant to international affairs – if they wanted to reverse the established treaties they needed to be strong enough to withstand the inevitable backlash from America and other Western powers.
Special study groups were sent to Western countries from Japan to report back on the ways of the West. These groups met with state leaders and immersed themselves in various aspects of each country’s culture and industries. The groups reported back with their findings, and a plan was put in place for modernizing Japanese society that incorporated elements of a variety of Western countries.
Japan began to bring in foreign experts in various industries to build infrastructure and train up a Japanese workforce. German military personnel came to train the Japanese army, and American public school teachers were brought in to teach in Japanese schools (we still see strong American influences on the Japanese school system today – read more about this here).
In essence, Japan created a smorgasbord of the elements of each country that they particularly admired. This was done not out of aspiring to be like the West, but out of necessity to build Japan up as an equal power to the West. Because of this underlying philosophy, Japan managed to incorporate the recommendations of the special study group, while remaining faithful to a proud and distinctly Japanese culture.
One of the final pieces of establishing Japan as a world power was to instate a national constitution. The emperor had taken the name Meiji, and as such, this constitution was referred to as the Meiji Constitution. This in essence laid the groundwork for Japan’s first formalized political system. It was modeled largely from the Prussian constitution, which the study groups found particularly impressive on their international tours.
The constitution oversaw the creation of a parliament, known as a diet, and a cabinet of ministers. However, it recognized the emperor as being divinely ordained and gave the emperor ultimate power above all other state bodies.
As previously mentioned, a large focus for Japan was building the strength of their army in order to change how other countries perceived them. The Japanese military cut their teeth with two victories in minor wars (against China and Russia respectively), and this success gave them the confidence to eventually do away with the unequal treaties that were such a bone of contention for citizens.
During World War II, the Japanese launched the famous Pearl Harbor attack against US forces – entering into a full-scale war with the Americans. This ultimately ended in the notorious Hiroshima and Nagasaki atomic bombings – the effects of which are still felt in Japan to this day. Japan surrendered to America shortly following this attack.
Following the surrender of Japan, America sent General McArthur to the country to assist in reformation. Under McArthur’s reign, the Japanese were punished for numerous war crimes, and their army was completely disbanded. A new constitution was drawn up during Allied occupation, which reduced the powers of the emperor and placed more power in the hands of a constitutional parliament.
For obvious reasons, Japan was in a very bad place economically after World War II. What had seemed to be such a rapidly developing country had hit a stumbling block that threatened to plummet them back into a struggle, undoing all the excellent work of Hirohito's predecessors.
During his time in Japan, McArthur openly praised the nation for qualities such as quick understanding and willingness to learn – which is perhaps part of the reason why Japan managed to bounce back from this setback stronger than ever.
How did Japan Become a Rich Developed Country?
We all know of course that Japan managed to recover from World War II in a major economic way – widely referred to as the “Japanese Economic Miracle”. This recovery began during the Allied occupation.
Part of the role of McArthur and the Allied partners was to assist in rebuilding the Japanese economy. Concerns about Japan being taken over by communist China meant that Western forces had a vested interest in getting Japan back on its feet financially.
Measures such as tax reforms and pushes for industrial production began to stimulate the Japanese economy once again. Incentives were put in place to attract new people to enter the workforce – in particular, women.
It seems strange to say that a war was a welcome development, but this was exactly how the Korean War of 1950 was perceived by those assisting Japan. All of a sudden, Japan was in an enviable position – geographically, it provided the perfect base for a supply depot for UN forces.
US military defended the Japanese borders while the UN forces pumped money back into the Japanese economy by purchasing supplies and equipment on Japanese soil – allowing for a period of intensive economic recovery with very little risk to the country.
It was in the interests of the UN forces for Japan to achieve full industrialization, as they needed an efficient supply of resources during the Korean War. This led to a number of extremely successful economic reforms being put in place that far outlasted the war and indeed McArthur’s time in the country.
The Japanese now had industries that ran smoothly and efficiently, and workers enjoying the security of lifetime contracts. This allowed for the Japanese economy to grow at levels that even the most optimistic person couldn’t have predicted.
Strict import policies also meant that markets were supplied primarily by locally made goods and brands, keeping the income generated by the boom within the Japanese economy. As the economy improved, Japanese people naturally became more wealthy with increased amounts of money for discretionary spending – which enabled the economy to continue to grow.
Flying Geese Paradigm
During this period of vast economic growth, Japanese economic scholars coined the term “flying geese paradigm”. This refers to how the growth of one nation’s economy can spur the growth of surrounding nations. As nations become more developed, they tend to pass on much of their “unskilled” labor to less-developed nations – who then experience a growth in their economy and follow a similar trend. This model is how Japan intended to prop up the Asian economy as a whole following its own period of intense growth.
There is much debate about whether or not the flying geese paradigm worked in practice amongst Asian countries – if you’re an economics buff you will thoroughly enjoy this paper which goes into it in great detail.
Due to excessive lending designed to kick start industrial growth, a bubble economy developed in Japan that was unsustainable. The Bank of Japan was forced to drastically increase their lending rates in 1989 to prevent massive inflation, and this inevitably led to the crash of the Japanese stock market.
Companies who had borrowed big amounts were suddenly unable to repay debts with high-interest rates and needed to be bailed out. The bailout payments allowed them to do little more than simply survive for an extended period of time, and this extremely slow recovery was what gave the period from the early 1990s onwards the colloquial name of “the lost decade” in Japan.
While the Japanese economy slowly built itself up following the stock market crash, it did not return to its previous levels. The social impact of the lost decade is still felt in modern-day Japan – for example, the security of lifelong work contracts is largely a thing of the past, with temporary contracts now legal in Japan. Many consider the Japanese preference for minimalism in home décor a hangover from the lost decade – when suddenly it became tasteless and garish to own flashy items while so many of your fellow citizens struggled to make ends meet.
However, despite the adversity of the lost decade Japan still boasts the world’s third-largest economy, after the US and China.
How is the Japanese Economy Doing Now?
Despite the slow and steady recovery, Japan’s economy had enjoyed since the cessation of the lost decade, 2018 saw a marked economic dip. This was further confounded by escalating trade tensions between Japan and the US and China in 2019.
The scheduled 2020 Olympics in Tokyo was set to pump money into the Japanese economy – we all know at this point that this will probably not happen. Unfortunately, the ongoing (at the time of writing) coronavirus pandemic has tipped Japan’s economy into a recession.
See here for predictions on how Japan might fare in recovering economically from the pandemic over the next two years.
Why are the Japanese so Efficient?
The answers to this question are deep rooted, and lie in both the history and the culture of Japan.
Japanese culture puts great value on precision. Look at the uniform Japanese arts of calligraphy and origami to give you an example – these simply don’t work if a person cannot perfect the craft. Japanese people are therefore used to the idea of patiently perfecting things – they will put in the work to learn techniques to the letter, which leads to increased efficiency down the line.
In addition, Japanese culture has a collectivist focus, rather than an individualistic one. This means that everyone is striving to do things for the good of their community as a whole, rather than for the good of themselves individually. This provides motivation to work in a consistently productive way – everybody must contribute equally to a collectivist society, leaving little room for lazy efforts.
When we look at Japanese history, we see how much pressure there has been in the past for Japan to act collectively and efficiently. Consider the Meiji Period – when Japan was forced to transform the country’s structure entirely in order to be a power match for Western forces. This was achieved with a calm and calculated logic that set a model for future transformations – indeed, this remarkable national attitude to efficient change was commented on by General McArthur in the post-war years.
As a nation, Japan is an excellent problem solver. They are well-versed in using everything they have creatively. As mentioned in the history section, Japan’s borders were once completely closed – they built a society based on just the raw materials available in their island nation. At various times in history, Japan has faced significant shortages – be it of oil, raw materials, or money. In all of these situations, Japan has managed to craft clever solutions to problems that would have had other nations on their knees.
Look at the 1973 Arab oil embargo, for example – this shortage prompted Japan to completely revise its energy efficiency policies and become a world leader in sustainable energy practices. Think of all the fuel-efficient cars that are exported from Japan to environmentally conscious consumers worldwide – these came about as a result of needs must.
Discipline and punctuality are values hardwired into the Japanese psyche. Just look at the public transport system for proof – trains in Japan keep to their schedules with a precision that is almost frightening to an outsider. When you compare this with the public transport schedule of other developed countries, where it’s not unheard of for a train to simply not turn up, you see just how different the Japanese attitude to efficiency is.
Japanese Rules for Success
So what can we learn from all of this information about how Japan became so successful? Here are a few takeaway rules for success that we can glean from this country’s incredible journey towards becoming a global superpower.
1. Refine Your Discipline
Self-restraint and discipline are hallmarks of Japanese society. These values translate themselves into tangible qualities in Japanese citizens – punctuality, reliability, and calmness. Japanese people are generally law-abiding citizens who strive to behave in a way that brings honor and success to their communities.
2. Build Resilience
Japan has had its fair share of setbacks. World War II, for example, had disastrous consequences for the nation – but it was also the precursor to the most dramatic economic growth the country had ever seen. This same culture of resilience brought Japan out of the lost decade, and will doubtless see them through the aftermath of the coronavirus pandemic too.
3. Prioritize Politeness
Visitors to Japan frequently gush about the politeness of the locals. Japanese people are generally helpful, welcoming, and respectful. While the traditional qualities that one might associate with success are ruthlessness and forcefulness, Japan has proven that you can become just as successful with a smile and a bow as you can with a harsh exterior. Something we could all learn from!
4. Practice Precision
As previously mentioned, Japan likes attention to detail. The old adage about the devil being in the detail has certainly rung true for the nation – Japanese products are considered amongst the most reliable in the world.
6. Show Consistency
We all know logically that true success depends on consistent performance – but many of us don’t have the patience to plug away as we wait for success to materialize. Luckily, logic and patience are two things that Japan has always had by the bucket load.
7. Embrace Change
Going right back to the Meiji Period, Japan has shown its willingness to embrace change. Concerns about needing to catch up with Western nations led to the formation of international study groups which made recommendations for national policy based on the most suited foreign examples. This willingness continues into modern days –Japan consistently shows how eager it is to move with the times.
8. Be Faithful to What Makes You Unique
While Japan has always embraced the need to match the power of other international giants, they have never done so at the expense of what makes them a unique nation. Japanese culture and values have withstood the test of time even as the country rapidly develops. The fact that Japan has stayed loyal to what makes them special as a nation is a part of what has captured the world’s imagination about this incredible country.
9. Play the Long Game
Japan doesn't rush things – they’re happy to make plans that span over decades for the improvement of the country. Indeed, businesses in Japan aren’t considered a success until they have had at least ten years of good turnover – early successes are simply considered beginner’s luck.
Japan’s astonishing rate of growth might leave economists gobsmacked – but when we consider all the ingredients that have gone into their success, it really is no mystery.