Japanese Economic Growth--
A Macro Perspective
The Japanese economy has experienced considerable growth over the four decades since the 1950s. The period from 1950 to the late 1960s was characterized by active government intervention to develop certain key industries and promote the diffusion of technology among Japanese firms. Promoting exports was particularly important since the expansion of the Japanese economy was often limited by a lack of foreign exchange. Government industrial and technology policies directed resources toward targeted industries through government control over scarce foreign exchange resources.
As industries gained international competitiveness, the foreign exchange constraint became less binding. In the period from the late 1960s to the late 1970s, Japanese government industrial policies became more consistent with market mechanisms. Many restrictive laws regarding foreign exchange, foreign ownership and capital markets were liberalized. Despite downturns due to the oil price shocks, economic growth was strong through the 1970s, largely due to growing exports.
Beginning in the mid 1980s, the upward revaluation of the Japanese currency combined with government policies to emphasize domestic growth began to transform the export-driven economy into one dominated by imports, domestic consumption and investment (including foreign invest-