= The Japanese Economy = '''The Japanese Economy''' (ISBN: 9780262534147) was written by Takatoshi Ito, published by The MIT Press in 1992. A second edition was published in 1996. The Tokugawa Economy was characterized by... * sakoku * shinoo-kooshoo (''lit.'') (''caste system'') * peasants produce rice; 37% of harvest paid as taxes * 10%-30% of land is cultivated by tenants; tenants pay 20%-28% of harvest to daimyoo (''lit.'') * rice market emerged with 3/4 provided by daimyoo (''lit.'') * rice futures market in Osaka by 1730 * sankin-kootai (''lit.'') (''court attendance'') * gold, silver, and copper coins with daily exchange rates * paper bills in use by private merchants were set to silver standard * port of Dejima opened to Dutch and Chinese after currency began flowing out of country (to correct balance of payments) Opening the country led to rapid economic changes. * gold, silver coins were exchanged 1:1 by weight * domestic exchange rate for gold and silver was 1:5, while international rate was 1:15; government forced to adjust domestic rate after 7 years * 500% inflation from 1859 to 1868 Meiji era characterized by... * industrialization and military seizure * government seized foreign industry in reaction to tariffs, sanctions (esp. U.S.) * government built infrastructure and used industry subsidization policies * exported silk, tea; gradually moved to manufacturing economy * banking was centralized into a national bank * shifted between gold and silver standards for expansive monetary policy * silver standard preferred by Pacific trade (esp. Mexico and Argentina) * gold standard preferred by European industrial powers * Finance Minister Korekiyo Takahashi left gold standard for expansive monetary policy in reaction to Great Depression * Great Depression largely did not affect the economy (see above) * Indonesian oil was a major goal for involvement in World War 2 Post-war Japan saw rapid economic growth. Some factors for this: * ratio of exports to GNP remained constant * fixed exchange rate (as mandated by Dodge Line) halted inflation and kept Japanese exports cheap * Economic Planning Agency (EPA, organized under MITI) published 5-year plans that thoroughly communicated targets and changes to monetary/fiscal policy * EPA monitored recession with diffusion indices rather than aggregated economic data, enabling them to more quickly react * typical Keynesian business cycle management theory * raise interest rates to cool down the economy until balance of payments was corrected (i.e. imports fell back to the target proportion) * MITI boosted industrial economy (esp. coal, steel, shipbuilding) * plenty of examples exist for industries that defied MITI yet prospered (esp. automobiles) * culture of lower salary with the expectation of a high bonus means that firms can react to a slowing business cycle by reducing the bonus In the 1970s, the economic state worsened. Some factors for this: * oil shocks hit aggregate supply and... * caused uncontrollable inflation, leading to the abandonment of the fixed exchange rate (and thereby also of Keynesian policy) * diminished returns on capital investment, slowing private investment * government debt accumulated, crowding out private investment * monetary market was liberalized, allowing private investment out of Japan * firms attracted investment through keiretsu * publicly traded corporations with supermajority held by a parent holding company, effectively keeping full control * also keeps most shares off-market, stabilizing stock price * MITI's full employment schemes led to many distribution systems featuring redundant middlemen Viewing this era through a [[Economics/CobbDouglasProductionFunction|supply-side production function]]: * rapid growth in all input factors but the economy as a whole saw most return from capital * in other words, Japan's economic growth was susceptible to capital shocks... * "more than half of Japan's growth is attributed to 'technological progress and residuals'" Viewing this era through a demand-side production function: * real investment grew consistently * the balanced budget (as mandated by the Dodge Line) protected private investment * Korean War drove aggregate demand ---- CategoryRicottone