Government GNP was 22.7 % in 1955. It

learned a lesson from this experience.

In reaction to
the situation, the Government launched a series of industrial policies to
assure the domestic supply of these threatened strategic commodities. These
included machine tools, medicine, dyes, fertilizers, soda and foodstuffs. The
Government set legal frameworks to get authorization for adopting
sector-specific direct support to industries by means of R&D subsidies,
special tax exemptions and so on1. Several
national research laboratories were came into existence to promote the
development of indigenous technology resources2. The
formulation of national industrial standards was started in 1921.

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After Japan
regained authority over tariff formulation in 1899, it raised tariffs gradually
to increase revenues and to protect domestic industry. During the post-war
global trend towards protectionism, tariffs were raised again and again, with a
stronger emphasis on protection through tariff escalation. The average tariffs
(arithmetic average) were 4% (1893), 20% (1913), 11% (1924) and 30% (1938)3.

Reflecting the
increasing importance of industrial policy, the role of the Ministry of
Agriculture and Commerce was expanded and a new independent ministry, the
Ministry of Commerce and Industry (MCI, the direct precursor of the current
MITI) was formed in 1925. A variety of government / industry interaction
mechanism such as advisory councils to the Minister4, subsidy
schemes and preferential tax relief for business5 was introduced
around the same time.


The Growth of
Heavy Industry

Production and
investment by manufacturing companies continued to grow. The successful
achievement of the challenging “Income Doubling Plan” declared by the
Government led by Prime Minister Hayato Ikeda in 1960 was symbolic in the
period of high economic growth. Per capita GNP of US$378 in 1960 had jumped to
US$1,515 in 1970. Japanese industrial structure changed rapidly. The share of
primary industries in GNP was 22.7 % in 1955. It had dropped to 13.5% in 1961.
The share of secondary industries increased from 28.9% to 37.1%.

In the
manufacturing sector, the share of “light” industry declined. The share
of heavy and chemical industries grew from 66% in 1960 to 72% in 1970. The growth
of heavy industries was lead by fixed capital investment and exports. The
average yearly growth rate of exports was 16% during the same period. The share
of heavy and chemical industries exports to total exports increased from 54% in
1960 to 80% in 1970. In terms of peoples’ daily lives, income levels continued
to grow and consumer durable goods such as televisions, electric refrigerators
and cars became widely owned, which created a mass consumption society in
Japan. Consumption per capita grew by around 70% in the 1960s. In 1968,
Japanese GNP became the second largest outside the Soviet block.