What is Japan’s Postwar Enterprise System?

Japan’s Postwar Enterprise System

A majority of the firms in Japan were classified in the sole-proprietorship enterprises. There were as many as 4 million sole-proprietor firms in Japan in the 1980s. But, corporations happened to be the most dominant and extensively found enterprise system in the country. In the late 1980s, approx 2 million corporations hired up to 30 million laborers i.e., half the workforce in Japan at that time. The country has small, medium, and large scale corporations with joint-stock companies being the most popular types of business in Japan.

After the Second World War, the United States supported Japan’s economy. Japanese economy witnessed tremendous growth post the world war.

During the postwar period, the central holding firms in Japan were closed, and the firm owners, as well as the families of these organizations, received compensation from the government. This was the time when the Japanese government introduced the Fair Trade Commission policy, and the sole-proprietors were given the right to operate their firms independently.

The labor movements, as well as land reforms, played a pivotal role in bringing competition in the Japanese commercial market, which were missing before the war period. Soon after the end of the war, the corporations in Japan reemerged, and the competition between the firms re-started. The corporations started competing against their counterparts in Japan and brands outside the nation. The following are the significant reforms the Japanese government introduced post-war:

Postwar Reforms in Japan

During the first phase of the postwar in Japan, the primary purpose of the Japanese government, households, and businesses were to develop a Japanese style market system. The primary goal was to get closer to the European and American industrial economies.

- Zaibatsu Dissolution

Zaibatsu is a broad term, which refers to the financial and industrial corporations that dominated the economy of Japan before the world war period. After the Second World War, 16 Zaibatsu were wholly dissolved. However, the country could not achieve the complete dissolution of all the Zaibatsu groups. This was considered one of the significant reforms of the post-world war II.

Even today, Zaibatsu organizations are found in Japan. These financial and industrial corporations are associated with the pre-war Zaibatsu groups. But, the experts suggest that the dominance and power these groups enjoyed in the pre-war era is longer seen in the current times.

- Fair Market Rules

To bring transparency in the Japanese businesses and corporations, Fair Market Reform was introduced. The fair market rules were passed by the Japanese government in 1947. Japan had decided to follow the American market rules to transform the enterprise system in the country after the Second World War. This was when the vigorous competition between the major corporations in the country began. Securities Exchange Law, as well as Anti-trust Law, were considered two of the famous laws.

- Agricultural Reform

The agricultural reform, which took place in 1945, resulted in an increase in the number of independent farmers in the country. The government granted the agricultural lands, bought from the landlords, to tenant farmers at a low price. With the tenant land percentage coming down to 10 from 46 in the pre-war period, the agricultural reform brought a major revolution in the agrarian sector of Japan.

- Education Reform

The mandatory education for students, which was six years before the war, got extended to 9 years. The reform happened in 1947.

Growth in the Business Sector without Inflation

The most crucial element of Japan’s post-war enterprise system was the growth of the industries without inflationary pressure. Usually, in such conditions, the inflation pressure grows tremendously. The country utilized long-term loans instantly for business growth and investment. This resulted in an increase in the production capacity of the industries in a short period.

Over-lending is the most common reason for bankruptcy issues in financial institutions. But, Japan’s strong government policy played a crucial part in protecting the financial sectors from unexpected collapse and fierce competition. The banks that went through the financial issues were amalgamated with the wealthier and renowned banks before they could go bankrupt. Perhaps, this policy of the Japanese government helped the financial sectors of the country to proliferate. As a result, there were no cases of bankruptcies reported between 1950 and 1990.

Due to the shortage of capital, businesses had no other option than borrowing a large sum from the banks. This resulted in over-borrowing from the city banks. As mentioned above, the government not only allowed the banks to over-lend money to the industrial sectors but implemented the preventive measures that protected these financial institutions from going bankrupt. Perhaps, this new lending law led to the formation of the corporations, namely Keiretsu. This was when the country allowed the conglomerates to compete with each other and give a tough competition to the international brands.

Japanese Miracle Period

The Japanese economic miracle took place post the Second World War. Even though the major parts of Nagasaki and Hiroshima were destroyed by the nuclear bombs, Japan managed to secure the second position in the world’s largest economies. By 1960, the major reforms in the industrial and financial sectors of the country led to the growth of the Japanese economy. From the increase in the employment rate to tremendous growth in exports, Japan had become the second-largest economy in the world after the United States.

The Inclined Production Mode contributed to the major revolution in the Japanese economy. The policy mainly focused on the manufacturing of the raw material in large amounts. This included the increase in the production of coal, cotton, steel, and other such products. The country managed to overcome destruction by introducing new and effective labor laws, which included female laborers. Moreover, the country got significant support from the United States.

Today, Japan is recognized as the first Asian country to be counted among the developed nations in the world. With an advanced enterprise system and competitive industrial sectorsJapan’s Postwar Enterprise System, Japan’s economy has indeed witnessed rapid growth. 


Reference URL

https://en.wikipedia.org/wiki/Japanese_economic_miracle

https://www.gsid.nagoya-u.ac.jp/sotsubo/Postwar_Development_of_the_Japanese%20Economy(Otsubo_NagoyaU).pdf

http://www.esri.go.jp/jp/archive/e_rnote/e_rnote030/e_rnote027.pdf

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Jun 10, 2020

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