Taxation and Economic Development among Pacific Asian Countries

By Richard A. Musgrave; Ching-Huei Chang et al. | Go to book overview
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Tax Incentives for Export
Promotion in Japan, 1953-1964

Hiromitsu Ishi

1. Introduction

Exports have played a vital role in Japan's economic performance throughout the postwar period. In terms of balance of payments, a sharp contrast can be observed between the growth of the Japanese economy during the years leading up to the early 1970s and the years since then. In the latter period, Japan's exports continued to increase rapidly, leading to huge current-account surpluses and a widening trade imbalance with much of the world. By contrast, during a decade and a half following the early 1950s, Japan suffered chronic trade deficits and a shortage of foreign exchange reserves. Particular attention is paid in this chapter to the earlier period, when the balance-of-payments situation was perceived as limiting economic expansion.

Japan possesses few mineral resources and little arable land relative to the size of its population. Rapid growth of its national income through expanded industrial production requires huge increases in imports of raw materials, fuels, and food.

As noted by Ackley and Ishi,

Given the initial absence of international reserve asset in postwar Japan, given the government's commitment . . . to the value of the yen established in 1949, given the policy decision . . . not to admit significant direct investment and a Japanese (and foreign) prejudice against appreciable long-term Japanese borrowing abroad, Japan's economic expansion could well have been limited, even short of potential output, but the extent to which its exports could expand (or its imports could be restrained). (Ackley and Ishi, 1976, p. 170)

In fact, the government often used macroeconomic policy (particu


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