Japanese+Economic+Miracle

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Amy Proietti-Fox, Jesse Starkey, Jeff Schwartz
 =​Japanese Economic Miracle=

The Post-War economics-
The rise of Japan to become the dominant financial and industrial power in the global economy. In 1945 the Japanese economy was in ruins: a third of its industry and three-quarters of its shipping had been destroyed in the Second World War, there was a shortage of capital and high inflation. The Allied Occupation of japan under General macarthur had at first little interest in making Japan more prosperous but as the cold war got under way and the Chinese civil war (1946–9) ended in a communist victory, Japan was needed as a bulwark against the spread of communism in Asia. The US, therefore, helped to equip Japanese industry but it was not until the Korean war (1950–3) that the economy began to take off, as large orders were placed by the US in Japan for war supplies. ‘Special procurements’ ($930 million in 1950–3) paid for American troops in Japan, whose industry sheltered behind protectionist barriers (tariffs and exchange controls). Foreign exchange reserves were built up and used to import the latest technology, essential for the high growth of the 1950s and 1960s. Japan also benefited from the low value of the yen, fixed in 1947 at 360 to the dollar, a rate maintained until 1971, thus making Japanese goods cheap on world markets.

Japanese post-war economic miracle is the name given to the [|historical] phenomenon of [|Japan's] record period of economic growth following [|World War II], spurred mainly by [|United States] [|investment] but partly by Japanese government [|economic interventionism] in particular through their Ministry of International Trade and Industry.

In the mid- to late-1940's, [|wartime] expenses threatened economic ruin in Japan. Post-war [|inflation], [|unemployment] and [|shortages] in all areas seemed overwhelming. Japan’s immediate economic improvement was not achieved on its own. The American government, under the auspices of the [|Supreme Commander of the Allied Powers] (SCAP), played a crucial role in Japan’s initial economic recovery, although Japanese government measures fostered rapid postwar growth. SCAP officials believed economic development could not only [|democratize] Japan but also prevent the reemergence of militarism, and forfend [|communism] in [|Japan].[//[|citation needed]//] Military hostilities in the [|Korean peninsula] further boosted the economy in 1950 because the U.S. government paid the Japanese government large sums for "special procurement." These payments amounted to 27% of Japan’s total export trade."[|[1]][//[|citation needed]//] The [|United States] also insisted that Japan be admitted to [|GATT] as a "temporary member" – over British opposition. During the Korean War, SCAP departed and full [|sovereignty] was returned to the government of Japan.[//[|citation needed]//] The rise of Japan to become the dominant financial and industrial power in the global economy. In 1945 the Japanese economy was in ruins: a third of its industry and three-quarters of its shipping had been destroyed in the Second World War, there was a shortage of capital and high inflation. The Allied Occupation of japan under General macarthur had at first little interest in making Japan more prosperous but as the cold war got under way and the Chinese civil war (1946–9) ended in a communist victory, Japan was needed as a bulwark against the spread of communism in Asia. The US, therefore, helped to equip Japanese industry but it was not until the Korean war (1950–3) that the economy began to take off, as large orders were placed by the US in Japan for war supplies. ‘Special procurements’ ($930 million in 1950–3) paid for American troops in Japan, whose industry sheltered behind protectionist barriers (tariffs and exchange controls). Foreign exchange reserves were built up and used to import the latest technology, essential for the high growth of the 1950s and 1960s. Japan also benefited from the low value of the yen, fixed in 1947 at 360 to the dollar, a rate maintained until 1971, thus making Japanese goods cheap on world markets.



From the 1960s to the 1980s, overall real economic growth has been called [|a "miracle"]: a 10% average in the 1960s, a 5% average in the 1970s and a 4% average in the 1980s.[|[7]] Growth slowed markedly in the late 1990s ("[|the Lost Decade]"), largely due to the Bank of Japan's failure to cut interest rates quickly enough to counter after-effects of [|over-investment during the late 1980s]. Some economists believe that because the Bank of Japan failed to cut rates quickly enough, Japan entered a [|liquidity trap]. Therefore, to keep its economy afloat, Japan ran massive budget deficits (added trillions in Yen to Japanese financial system) to finance large [|public works] programs. By 1998, Japan's public works projects still could not stimulate demand enough to end the economy's stagnation. In desperation, the Japanese government undertook "structural reform" policies intended to wring speculative excesses from the stock and real estate markets. Unfortunately, these policies led Japan into deflation on numerous occasions between 1999 and 2004. In his 1998 paper, Japan's Trap, Princeton economics professor [|Paul Krugman] argued that based on a number of models, Japan had a new option. Krugman's plan called for a rise in inflation expectations to, in effect, cut long-term interest rates and promote spending.[|[8]] Japan used another technique, somewhat based on Krugman's, called [|Quantitative easing]. As opposed to flooding the money supply with newly printed money, the Bank of Japan expanded the money supply internally to raise expectations of inflation. Initially, the policy failed to induce any growth, but it eventually began to effect inflationary expectations. By late 2005, the economy finally began what seems to be a sustained recovery. GDP growth for that year was 2.8%, with an annualized fourth quarter expansion of 5.5%, surpassing the growth rates of the US and [|European Union] during the same period.[|[9]] Unlike previous recovery trends, domestic consumption has been the dominant factor of growth. For three decades, Japan experienced rapid economic growth, which was referred to as the [|Japanese post-war economic miracle]. With average growth rates of 10% in the 1960s, 5% in the 1970s, and 4% in the 1980s Japan was able to establish itself as the world's second largest economy.[|[5]] However, in the second half of the 1980’s sliding stock and real estate prices caused the Japanese economy to overheat in what was later to be known as the [|Japanese asset price bubble]. The ‘’bubble economy’’ came to an abrupt end as the [|Tokyo Stock Exchange] crashed in 1989. Growth in Japan throughout the 1990s was slower than growth in other major industrial nations, and the same as in [|France] and [|Germany]. From 4.5% per annum in the 1980s, real GDP rose just 1.5% p.a. in the 1990s and 0.8% p.a. in the 2000s. The problems of the 1990’s may have been exacerbated by domestic policies intended to wring speculative excesses from the stock and real estate markets. Government efforts to revive economic growth throughout the 1990’s was not very successful and when the global economy slowed in 2000-2001 the Japanese economy was in a serious economic situation. The economy began to recover under the policies of [|Junichiro Koizumi] and revived strong growth in global trade, rising an average of 2.1% a year in 2003-07. Subsequently, the global financial crisis and a collapse in domestic demand saw the economy shrink 1.2% in 2008 and 5.0% in 2009.

GDP stats chart: http://www.google.com/publicdata?ds=wb-wdi&ctype=l&met_y=ny_gdp_mktp_cd&scale_y=lin&ind_y=false&rdim=country&idim=country:JPN&tstart=-315619200000&tunit=Y&tlen=48&hl=en_US&dl=en

in Japanese Yen || current prices (billions of yen) || GDP 1990 prices (billions of yen) ||
 * ~ Gross Domestic Product in Japan
 * YEAR || GDP
 * 1987 || 349,760 || 368,906 ||
 * 1988 || 373,973 || 391,808 ||
 * 1989 || 399,998 || 410,282 ||
 * 1990 || 430,040 || 430,040 ||
 * 1991 || 458,299 || 446,371 ||
 * 1992 || 471,064 || 450,981 ||
 * 1993 || 475,381 || 452,339 ||
 * 1994 || 479,260 || 455,254 ||
 * 1995 || 483,220 || 461,951 ||
 * 1996 || 499,861 || 480,073 ||
 * 1997 || 507,271 || 484,379 ||
 * 1998 || 514,595 || 494,847 ||
 * 1999 || 495,227 || 468,421 ||
 * 2000 || 501,068 || 481,692 ||
 * 2001 || 496,777 || 482,560 ||
 * 2002 || 489,618 || 483,715 ||
 * 2003 || 490,544 || 490,788 ||
 * 2004 || 496,058 || 504,129 ||
 * 2005 || 502,457 || 513,630 ||