Module Code & Module Title

EC4001NI Economics and Society

Assessment Weightage & Type

60% Individual Coursework

Year and Semester

2019-20 Spring

Student Name: Jenish Budhathoki

College ID: NP01BA4S200025

London Met ID: 19033632

Assignment Due Date: 11-September-2020

Assignment Submission Date:11-September-2020

Word Count (Where Required): 2096 words

I confirm that I understand my coursework needs to be submitted online via Google Classroom under the
relevant module page before the deadline in order for my assignment to be accepted and marked. I am fully
aware that late submissions will be treated as non-submission and marks of zero will be awarded.
Table of Contents
Introduction.................................................................................................................................. 2
Impact of WW2............................................................................................................................ 3
Post War Reforms....................................................................................................................... 3
New Yen...................................................................................................................................... 3
Dodge Plan.................................................................................................................................. 4
Korean War................................................................................................................................. 4
Economic Plans........................................................................................................................... 5
Technological Growth.................................................................................................................. 5
Olympics impact.......................................................................................................................... 6
Sustaining growth........................................................................................................................ 6
Oil crisis....................................................................................................................................... 7
Conclusion................................................................................................................................... 7
Bibliography................................................................................................................................. 8

Introduction
Japan's economic miracle was remarkable in modern economic history. Japan suffered huge
losses from WW2 yet it managed to become one of the greatest economic powers on the planet
in such a short time. When Japan was defeated, its economy was shattered and the Japanese
had suffered unimaginable damage. Not only were they immersed in extreme poverty, nearly 3
million died and recovery was something that was hard to see. Despite the fact that Japan was
left with waste and demolishes of industrial facilities and foundations, Japan was able to remake
its economy from a new beginning by expanding on its prewar economic experience and
gaining knowledge from the rest of the world. There were various factors that gave Japan a
huge capacity to recover, grow and create a lot of wealth and some of them were the outbreak
of Korean War and Dodge Plan. Also, Japanese had huge ability and predilection for savings,
pushing the educational system even further and their huge capacity for and willingness to work
for longer hours. Japan went through different stages for the economic miracle to happen.
Impact of WW2
After WW2 had ended, Japan was devastated. Before 1945, Japan spent their whole strength to
gain power through war which later led to destruction. All the huge urban areas, the industries
and the transportation systems were seriously harmed. The remaining parts of Japan's war
machine were crushed, crime trials were held and more than 500 military officers committed
suicide directly after Japan surrenders. The major problems the people faced were
unemployment, shortages of energy and food, inflation. An extreme deficiency of food
proceeded for quite a long while.
So right after war they focused on rebuilding the industries mostly focused on cotton, steel and
coal industries. Then Japan experienced a high-development period for about 20 years, from
the mid1950s to the early 1970s. The GDP/GNP growth rate regularly was increased by 10%
during this period. In 1953 productions had already surpassed the levels they’d been at right
before war and the political class had a new main priority: boosting economic growth through
business. The Japanese education system helped in producing highly skilled and disciplined
workers which was a huge competitive advantage. During this economic boom, Japan quickly
turned into the world's second biggest economy.[ CITATION OTS07 \l 1033 ]

Post War Reforms

Reforms were made to eliminate or at least reduce the power of oligarchs who'd supported
Japanese expansionism and militarism. There were various reforms such as land reform, fair
market rules, Zaibatsu dissolution, agriculture reform, labor reform and educational reform.
Since Japan was occupied by the United States established General Headquarters, the US tried
to democratize Japan by establishing free markets and empowering the middle class by
dissolving Zaibatsu (due to the fear of rise of communism) which led to emergence of many
small and medium enterprises. An antitrust law that outlawed monopolies was passed in 1947
and the unionization of workers was promoted. The government purchased and sold land to
independent farmers. Due to this land distribution they managed to turn many farmers into
owners. This was done to achieve an economic power change.
One of the major economic reforms was to adopt the "Inclined Production Mode" which focused
on production of raw material including steel, coal and cotton. The new recruitment of labor,
particularly female labor was upheld by the government due to which Japan managed to
recover from destruction. [ CITATION OTS07 \l 1033 ]

New Yen
There was an unexpected peak in currency circulation due to securities that Japan had given
during the war that matured when soldiers who had been paid in the military currency went into
trade with them for real cash. However, Japan's industries hadn't yet recovered from the war, so
there was a lack of general goods. A lot of money however no accessible goods lead to
hyperinflation. To manage its inflation Japanese banks accomplished something remarkable.
They requested a stop on people’s deposit while declaring that they were going to transit to a
new currency called the new yen. Since the old yen deposits were frozen and individuals
couldn't withdraw but only sum of cash and after the transit time frame old yen would lose its
worth. In any case, what wound up happening was that the out of reach cash individuals had in
their accounts would lose its worth. Additionally, wealth tax was introduced where on the off
chance that we would have more than 100,000 yen in the account they were subject to tax of
20-90% relying upon the amount. So fundamentally this was the government defaulting on its
debt on the expense of its people. Following a few years, the deposit freeze was lifted and with
it the inflation returned.

Dodge Plan
The US economist Joseph Dodge created an austerity- policy package called “Dodge Plan” in
1948. Dodge introduced a set of economic stabilization referred to all in all as the Dodge Line.
The fundamental approach was to reduce the cash supply so as to bring inflation under control,
also tightening spending, ending all subsidies and raising utility price and balance budgets. This
forced the Japanese economy into deflationary recession. However, clearing the economy of
bad debt and the reconstruction helped to create a foundation for companies to grow. The goal
to accelerate the economy in such a short period of time with these three policies were almost
impossible to achieve due to sudden adjustments, but with the start of the Korean War in 1950,
the economy boomed. [CITATION Toy \l 1033 ]

Korean War
The Korean War also helped Japan turn into one of the alliance forces suppliers thereby
boosting their exports and production. When the Korean War started (1950-1951), the total
world trade was expanded by 34%. Japan's production increased by almost 70% and also
business firms were concerned, it provided a greater boost than anything else to its economic
recovery, since numerous organizations were with the weights of reconstruction. The following
Korean War, created demand for Japanese companies which helped boost the economy,
creating the first stepping stone for the Japanese economic miracle. With the demand from the
US troops fighting in the Korean War, Japanese industries started to recover and grow.
Employment in the manufacturing industry increased and with the help of labor unions, so did
worker wages. This led to increased consumption leading to a virtuous cycle that stimulated
Japanese (wages raised leading consumption rise and production rise cycle) domestic demand.
Two quick and exceptional highlights of this change were the new demands made by the "direct
procurement" program of United Nations forces for the Korean War and increase in exports and
slackening of imports, which remarkably improved Japan's international balance of payments.
Furthermore, the Korean War had expanded the impact on plant and equipment investment and
technical innovation. Because of these fast increases in production and economy all in all, full
recovery and stabilization was clearly accomplished well past the end of the war and Japan re-
established its freedom with the signing of the Japanese-American Security Pact in 1952.
[CITATION Mor \l 1033 ]

Economic Plans
The market economy consists essentially of four divisions: households, corporation,
government, and foreign sectors. The aim of government intervention is mainly to resolve
market failure or to improve resource allocation in microeconomic aspects and to balance out
macroeconomic fluctuations. Among the economic policies completed by the government and
the central bank, fiscal policy is most important containing these functions:
 resource allocation
 income distribution
 stabilization of macroeconomic fluctuation.

In Japan's after war economy, a few strategy measures were accessible to promote economic
activities, to modernize economic structure, and to balance out macroeconomic fluctuation.

Implementing diet approved “over balanced” budget for both FY 1949 and 1950 which are:
 Balance of budget
 Reinforcement of tax collection
 Restriction on credit extension
 Wage stabilization
 Price control
 Control on foreign trade and exchange
 Material allocation for promotion of exports
 Reinforcement of food collection.
The initial budget went from ¥414.4 billion in FY 1948 to ¥704.9 billion in FY 1949, a hefty
70.1% increase. [CITATION Shi \l 1033 ]

Technological Growth
One of the reasons the Japanese economy grew was by improving and practical use of
technologies and technological know-how imported from foreign countries. There were ample
applicable seeds of product/business innovation that Japan gained from overseas due to the
technological gap with industrial economies. Japan has made new technology, for example, the
low-cost mass production systems, by combining numerous technologies imported from abroad.
The most important thing to know about Japan's import of technology was that it was translated
into industrial strength only because it was joined with domestic innovation. Technological
upgrades in Japan contributed incredibly to its economic development, since enhancements of
technology in a single industry influenced the development of numerous different industries. For
example, Japan’s steel industry successfully improved the quality of the special steel used in
automobiles and as a result of technological progress in the casing of parts, the automobile
industry, too, grew into an industry to be able to compete in international markets for the first
time.
[ CITATION Mas99 \l 1033 ]

Olympics impact
This was the beginning for an era of outstanding growth. Washing machines, refrigerators and
TV became new household staples. Also, when we look at Japan experienced a big growth
during the Tokyo Olympics of 1964. During these years the average real GDP growth was a
whopping 9.1%. The Olympic Mania encouraged a series of public work projects such as the
famous Shinkansen bullet train and many new highways. This mania also extended the stocks
and securities in which from 1957 to 1961. In only 4 years the amount in investment funds grew
10 times. [ CITATION Pau \l 1033 ]

Sustaining growth
The policies and strategies were set to protect and sustain the growth. Japanese political
system also had a major role in its development. Yoshida Doctrine policy was developed which
aimed to set economic reconstruction and development as the nation’s immediate goals while
saving on military expenses by leaving defense to the U.S. army and to increase the amount of
foreign trade with other countries. This critical decrease on military spending has permitted
Japan to put all its strength and money exclusively on reconstructing the economy and it was
influential to the quick recovery after the defeat. In 1960, the National Income Doubling Plan
was adopted and projected an annual growth rate of 7.2% between 1960 and 1970, aiming for a
doubling of real GDP in this decade. The Japanese economy had in fact grown at a much faster
pace. [ CITATION Mas99 \l 1033 ]
This critical decrease on military spending has permitted Japan to put all its strength and money
exclusively on reconstructing the economy and it was influential to the quick recovery after the
defeat. Likewise, Ministry of International Trade and Industry (MITI) affected the development by
giving support and guidance to the initiatives of private business: making a suitable un-level
playing field which would give that critical advantage to industries identified by government as
having potential for long term success. MITI was the most remarkable government organization
during the time of rapid expansion, and was mostly responsible for the industrial growth in
Japan. The primary focuses that MITI centered for development were in the ventures of steel,
ship building, chemicals and machinery. These industries were thought of as having large and
quickly developing world markets and that expanding these ventures were the way to enter into
the global markets and helping the economy to grow quicker. Another job that MITI needed to
clarify that they had distributed new technologies to companies to promote even growth within
industries. [ CITATION Mas99 \l 1033 ]
Oil crisis
The oil crisis (1973) bought the costs of oil triple in both instances in 1979. The crisis was
brought about by the organization of Arab Petroleum Exporting Countries on countries that
appeared to be supporting Israel during the 1973 Arab-Israeli War. In spite of the fact that the
approval shook the economies of different countries, Japan's economy kept on developing.
Due to the rising oil price Japan first restructured its production, reducing its dependence on oil
by shifting to nuclear energy and producing more fuel-efficient cars.
This is also the period when Japan started to mass semiconductors and computers that would
find its way to all corners of the world. This exporting had netted Japan a huge trade surplus,
and its economy grew to the size of third biggest in the world in 1970.[ CITATION Mas99 \l 1033
]

Conclusion
The miracle of the economic growth of Japan was its ability to work with their skilled knowledge
which they had gained from foreign countries and implementing their economy. Their ideas of
turning their industry according to the needs of people and technological growth upgraded
Japan. Japan had planned before WW2 for their growth so it was more beneficial for Japan to
grow faster with all the help of reforms and other incidents which occurred and with the policies
and strategies which were developed over time.

Bibliography
Droubie, P. (n.d.). aboutjapan.japansociety.org. From aboutjapan.japansociety.org:
https://aboutjapan.japansociety.org/japans_rebirth_at_the_1964_tokyo_summer
Kawasaki, S. Y. (August 2016). Japan’s High-Growth Postwar Period:The Role of Economic
Plans. pp. 5-95.
Morris, T. (n.d.). Japan and the Korean War. Japan and the Korean War: A Cross-Border
Perspective, pp. 1-12.
OTSUBO, P. S. (April 2007). Post-war Development of the Japanese Economy. Post-war
Development of the Japanese Economy-― Development, Japanese/Asian Style, 73.
Takada, M. (March 23, 1999). Japan’s Economic Miracle. Japan’s Economic Miracle:Underlying
Factors and Strategies for the Growth, 4-18.
Toyotal-Global. (n.d.). www.toyota-global.com. From www.toyota-global.com:
https://www.toyota-
global.com/company/history_of_toyota/75years/text/taking_on_the_automotive_busines
s/chapter2/section6/item6.html