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From the 1950s to the 1980s, Japan's history consists mainly of its rapid
development into a first-rank economic power, through a process often
referred to as the "economic miracle". The post-war settlement transformed
Japan into a genuine constitutional party democracy, but it was,
extraordinarily, ruled by a single party throughout the period of the
"miracle". This strength and stability allowed the government considerable
freedom to oversee economic development in the long term.
Through
extensive state investment and guidance, and with a kick-start provided by
technology transfer from the U.S.A. and Europe, Japan rapidly rebuilt its
heavy industrial sector (almost destroyed during the war). Given a massive
boost by the Korean War, in which it acted as a major supplier to the NATO
force, Japan's economy embarked on a prolonged period of extremely rapid
growth, led by the manufacturing sectors. Japan emerged as a significant
power in many economic spheres, including steel working, car manufacture and
the manufacture of electronic goods. This was achieved, it is usually
argued, through innovation in the areas of labor relations and manufacturing
automation (Japan pioneered the use of robotics in manufacturing).
Throughout the period of the miracle, its annual GNP growth was over
twice that of its nearest competitor, the U.S.A. By the 1980s, Japan -
despite its small size - had the world's second largest economy. These
developments had a marked impact on its relations with the U.S.A., the
foreign nation with which it had the closest links. The U.S.A. initially
heavily encouraged Japan's development, seeing a strong Japan as a necessary
counterbalance to Communist China. By the 1980s, the sheer strength of the
Japanese economy had become a sticking point. The U.S.A. had a massive trade
deficit with Japan - that is, it imported substantially more from Japan than
it exported to it. This deficit became a scapegoat for American economic
weakness, and relations between the two cooled substantially.
There was particular friction over the issue of Japanese car exports,
as Japanese cars by this point accounted for over 30% of the American
market. The U.S.A. also criticized the closed nature of the Japanese
economy, which was marked by heavy tariff protection which made entry into
the Japanese market difficult for foreign firms. Japan throughout the 1980s
and 1990s embarked on a process of economic liberalization aimed at
appeasing American criticism. The car issue was dealt with through a series
of "voluntary" restrictions on Japanese exports.
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