Japan

Economic Miracle of Japan

1950s to 1980s

0.3% of World Land Area

3.0% of World Population

Economy
% of World Economy
Year
Japan
US

1950

1980

10

35

20

Economy

Economy

Year

Average Growth
Rate

Year

% of Primary
Sector

1960

10%

1950

25%

1970

5%

1980

10%

1980

4%

Note: Primary sector consists of Agriculture,

Forestry and Fisheries

Economy

Sri Lanka

GDP By Sector [1999]

SL

Japan

US

Agriculture

21%

2%

2%

Industry

19%

35%

18%

Services

60%

63%

80%

GDP Per Capita

[Purchasing Power Parity]

Industrial Sector in Japan

1999

US$

1950

1980

Japan

23,400

Labour Intensive

Capital Intensive

US

33,000

Low Value-added

Technology
content added

SL

2,600

Largest Company in Japan

Year
1955
1965

1975
1985

Company

Industry

Textiles
Kanebo and
Toyobo
Mitsubishi Ship Building
Heavy
Industries
Nippon Steel
Steel
Toyota

Autos

Industrial Sector in Japan

In 1960, 30% of exports from Japan were

textiles.
Textile Industry was characterized by
labour-intensity, low technology and low
value-addition.
An industry suitable for a developing
country.
In 1985, textiles comprised less than 5%
of exports.
Today Japan is a large importer of
textiles.

Industrial Sector in Japan

Japan imported basic raw materials such

as petroleum, petrochemicals & nonferrous metals, and processed them in
Japan.
By 1970s, these industries became
inappropriate under several pressures.
These industries were pollution-intensive
and capital cost of complying with
stringent pollution prevention measures
was high.

Industrial Sector in Japan

These industries were land-intensive

and land prices were soaring in Japan.
Raw-material producing countries
were increasingly eager to add value
before exporting.
Japanese response was off-shore
processing with Japanese capital and
technology.

Role of Government

Higher level of education.

High savings rate.
Competent bureaucracy which can
take a long term view of the
economic issues.
Study the prospects and direction of
the economy and provide a vision.

Role of Government

Identify technologies to be
developed.
Electronics
Biotechnology
Aerospace
Robotics
New Material

Policy towards Declining

Industries

Key Perspectives of Kaisha

Public money is not spent to shore

up.
Assistance is given to the prompt
and effective closing down of
capacity.

Theories on Japanese
Success

Benign Conspiracy

Benign Conspiracy

Sinister Conspiracy

Market share is the key index of

performance
Investments in facilities must at least
keep pace with growth of the market.
Price is the principal competitive weapon.
New products must constantly be
introduced.

Japanese society is believed to have

traits that give its members
inherent advantages when
competing with Western companies.
Key traits include homogeneity of
society, non-confrontational mode
of discussion and decision making,
and a national sense of purpose.

Sinister Conspiracy

Japanese government, corporations and

other groups cooperate closely to further
their shared interests.
The participants managed by MITI
targets segments of the industry and
subsidize the efforts of companies with
grants, tax relief, tariff protection and
market sharing agreements and then
press forward into Western markets.

A Bias Towards Growth

Wholesale lay-offs by a company in
response to a weakening demand was
very rare in Japan.


Task of the management is to increase
the demand or find another product.
Eg: Canon started as a camera company.
Today, printers, computers, fax
machines, copiers etc.

A Bias Towards Growth

Prices are set as low as necessary to

expand the market.
Physical and human capacity is
added in anticipation of demand.
Costs are programmed to come
down to support the pricing
policies.

A Bias Towards Growth

Strong growth bias can be risky. Yet

the risk of falling behind a
competitor is considered a far
greater risk.
Be better, not behind
If not better, be different

The Drive Towards

Technological Leadership

A Bias Towards Growth

Japanese companies whose

competitive advantage was based on
low wage rates have faded in
importance.
Focus is on creating competitive
advantage through product line
variety, quality and technological
innovation.

Competitive strength of Kaisha

Price
Quality
Flexibility
Innovation

The Drive Towards

Technological Leadership
US Patents Issued 1960-1982

The Drive Towards

Technological Leadership

GE

IBM

Philips

Siemens

Hitachi

Toshiba

1960

773

296

234

96

1965

1063

537

321

161

14

14

1970

1000

631

290

231

102

80

1975

839

519

411

451

386

90

1980

770

386

332

369

409

257

1982

741

439

386

477

544

301

Japan had a long-sustained role as a

copier and adapter of Western
technology.
Since 1980s, high R&D expenditure in
Steel, Autos, Electronics and
Pharmaceuticals.
These increased R&D efforts were
primarily from private sector initiatives.
Japanese economy grew to its present
level not on self-developed technology but
on technology imported from abroad.

The Drive Towards

Technological Leadership
Japans Technological Trade

The Drive Towards

Technological Leadership

Payments for
Receipts from Technology
Technology ($Mn) Sales ($Mn)

1951-54

47

1955-59
1960-64

206
613

1
6

1965-69
1970-74

1278
2926

11
13

1975-79
1980-83

5086
7025

23
30

The Drive Towards

Technological Leadership
Yet at that time the sell decision had
a logic.

Japanese market was small.

Japan was far away.

Income from the sale of technology
contributed to profits.

This massive transfer of technology from

US and Western Europe provided the
technological basis for nearly all the
Japans modern industries.
No amount of capital and labour could
have moved Japan to the present
competitive position so rapidly.
From the sellers point of view,
technology sold have come back in
improved forms to create competitive
nightmares.

The Capacity to Absorb

New Technology

This is the critical variable in

technological progress.
Success of Japanese companies in
assimilating technology has been a
main source of competitive strength
Sometimes the capacity to absorb
technology is called copying and
dismissed.

The Capacity to Absorb

New Technology

1.

There are three characteristics of

kaisha that make a high rate of
technological assimilation possible.
The high rate of capital investment:
Rapid investments in new plant and
machinery means rapid introduction of
production technology.

The Capacity to Absorb

New Technology
2.

3.

The Case of Robotics

The first industrial robots were

developed in US in 1950s, with
much of the work subsidized with
government funds.
The first commercial robot was
marketed in US in 1959.
The first sale of a US robot to Japan
took place in1967.

The pattern of personal practices:

High degree of job security,
Compensation largely determined by
length of service, bonus payments
related to overall success of the
company.
Quality of the Japanese work force:
Among the best educated in the world.

The Case of Robotics

Japan (Kawasaki Heavy Industries)

licensed the technology from US in 1969.
By late 1970s, nearly 200 Japanese firms
were in production of robots, 85
universities and institutions were
conducting research in increasing speed,
size reduction, weight reduction, and
computer controls.

Key Elements of TT to
Japan

The Case of Robotics

o
o

It was in 1980s that government

programs in support of development of
robots began:
Accelerated depreciation
Leasing of robots with Japan
Development Bank.
Joint govt-industry programs for
development of highly intelligent robots.

Technology pioneered in US with

government support.
A Japanese company brought the technology
into Japan through licensing.
Large number of Japanese competitors
attracted to the field due to growth
prospects.
GOJ puts programs to facilitate and
accelerate development.
Some Japanese companies emerge as World
Leaders.

A High Technology Bias

A High Technology Bias

High technology became the

dominant phrase in business
circles, just as the Growth was the
earlier theme.
Relative rank is now not judged only
by relative size but also by relative
technological position.

o
o
o
o
o
o
o
o

In Japan High technology means

knowledge-intensive technologies such
as:
Semiconductors
Computers
Telecommunication
Office Automation
Robots and unmanned operations
Aerospace
New materials
Bio-technology

10

Conclusion

Japanese history suggests that imitation

followed by more and more innovative
adaptation leading eventually to
pioneering and creating innovation form
the natural sequence of economic and
industrial development.
Those who try to re-invent the wheel will
lose out in the innovation race.

Development Indicators - 2014

Country
United States

GDP (US$
Billions)

GDP per Capita

(US$)

17,420

54,625

Japan

4,601

36,200

Germany

3,868

47,818

South Korea
China
India
Sri Lanka

1,410

27,965

10,350

7,588

2,049

1,582

78

3,818

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