Economic Development of Japan

Kenichi Ohno
National Graduate Institute for
Policy Studies (GRIPS)
Addis Ababa, August 2014

Topics• Overview: why Japan could catch up with the West
– Cumulative and evolutionary history– Private dynamism and policy support• Meiji Period (late 19th-early 20th century)– Gosho, zaibatsu and super-businessmen/policy support• Post WW2 high growth (late 1950s-60s)– Kaizen movement/MITI’s industrial policy, etc.
For more information, please see:• Textbook: Kenichi Ohno, The Economic Development of Japan:
The Path Traveled by Japan as a Developing Country, GRIPS
Development Forum, 2006; free softcopy available atwww.grips.ac.jp/forum/pdf06/EDJ.pdf• Lecture slides: www.grips.ac.jp/teacher/oono/hp/index.htm

I. Emperor’s Rule

II. Samurai’s Rule
1603

X

III. Modern-ization

PP.16-17
IV. Postwar

1867
Rapid
recoveryandgrowthNARA
Centraliz
ation

MEIJI
EDO

Jinshin War × 671
Taika Reform × 645

ClanfightsHEIAN
Nobles,Decentralization

KAMAKURA
MUROMACHISENGOKU

Hunting &gatheringInternalwars,
dynamic& fluidsociety

Tokugawa
Shogunate
Peace,
isolation,conserva
tive classsociety

xxxx

xxxx

Chinese culture &Rice
Buddhism political system

WEST: guns &Christianity

Westerniz
ation,
industriali
zation,militariliza
tion

WAR
1937-45

xxx
WEST!!!

US occupation
1945-52

Japan’s Multi-layered Identity

P.4

先史時代の日本
Pre-historic
Japan

Rice cultivation

Buddhism, China
Heian & Samurai
CultureGuns & Christianity
Edo Culture
Western influence

Note: Colored areas indicate
external impacts

Dr. Umesao’s View of the World

P.9

Eurasian Continent
Umesao Tadao
1920-2010

RussiaThe
Western
MeditterraEurope
nean and(UK)
Islamic
StatesDry Area China Japan

India

History: Evolution vs. Repetition
High technology& civil society
Industrial
revolution
Rise of commerce &merchant classFeudalism
Fights among
local powers

External stimuli

Centralizeddynasty

Dynasty A Dynasty B Dynasty C

X
Destruction

X

X

Neo-patrimonial
Dynasty D Colonialism state?

X

X

P.56

Cumulative history, Edo achievements,
national unity and nationalism

Japan’s economic growth was driven mainly by private
dynamism while policy was also helpful
Private-sector dynamismand entrepreneurship(primary force)

Policy support(supplementary)

Rapid
industrializationesp. Meiji andpost WW2 period

Policy was generally
successful despite criticisms:--Power monopoly & close
linkage with big businesses--Privatization scandal, 1881--Excessively pro-West--Unfair by today’s standard

Introducing Proper Mindset & Method for
Industrialization
Differences: fast-rising countries vs. stagnant ones
 Private dynamism (individuals and enterprises) National leader (wisdom, decisiveness, action-orientation)
 Policy method (procedure, organization, documentation)
 Policy content

Policy learning Study international best (& worst) policy practices—analyze
commonalities, national differences, implementation details,
pitfalls, capability matching… Acquire general capability to
produce policies most suitable for each local context.
 Avoid: copy & paste others’ policies; no learning “because
our country is unique”; the same advice in all countries;
recommend too many actions without considering feasibility.

Meiji Period (1868-1912)• Forced opening of ports by West (1854-); free trade (1859-)• Rapid transformation from agro-based feudalism toWesternization and Industrialization• Industrial revolution (textile) attained in 1890s, overtaking
British cotton industry by early 20th century• Strong government with clear goals– Introducing Western style constitution & parliamentary politics– Industrialization– Building strong military forces

Pre-conditions for Industrial Take-off

P.23(17th-mid 19th century)
•
•
•
•
•
•
•

Political unity and stability
Agricultural development and commercialization
Development of transportation and nationally unified markets
Rise of commerce, finance and wealthy merchant class
Rise of pre-modern manufacturing
Industrial promotion by local governments
Samurai police and merchants
High level of education
City girls

Daimyo in his castle

P.44

Iwakura Mission (Dec.1871-Sep.1873)--Organized quickly after abolishing feudal political system--Half the cabinet - Iwakura (leader), Okubo, Ito, Kido, Yamaguchi,
and other high officials (46); attendants (12), students (49);
total 107 members
Purpose 1: Renegotiate unequal commercial treaties (failed)Purpose 2: Inspect Western systems and technology
Valuable insights gained for policy making, both politically(Western political system) and economically (industrial
technology and factories, esp. British)

PP.44-45

Toshimichi Okubo(1830-1878)• Minister of Home Affairs; top-down promoter ofindustrialization and technology import• Policy measures:--Supporting zaibatsu (business conglomerates, esp. Mitsubishi)
for industrial promotion and import substitution--Establishment of SOEs and research institutes--Trade & industry exhibitions (for Japanese products)--Set up new ministries, police and local governments“The strength of a country depends on the prosperity of its people
which, in turn, is based on the level of output. To increase output,
industrialization is essential. However, no country has ever initiatedthe process of industrialization without official guidance andpromotion.” (Okubo’s back-to-office report, 1874)

Rich Merchants in Edo Period (Gosho)
Mitsui Family

Sumitomo Family-17c From Matsuzaka-Kimono trade & money exchange in
Edo, Kyoto, Osaka – huge success-16c Adopt Western copper refining,copper trade (Kyoto)-17c Move to Osaka-Besshi Copper Mine (under Bakufu’scommission)<Transition to Meiji>Manager: Minomura Rizaemon-Cope with bakufu policy
to protect Mitsui business-Support and work withnew government-Internal reform:
from gosho to zaibatsu-1876 Establish Mitsui Bank & Mitsui
Trading Company<Transition to Meiji>Manager: Hirose Saihei-Avoiding gov’t confiscation-Introducing Western mining
technology to renovate Besshi-Business diversification

Konoike-Sake making, trading, loans to daimyo-No serious internal reform in Meiji-Failed to form zaibatsu (Sanwa Bank)Yataro Iwasaki (1835-85)

PP.45-46
三菱• Seisho (politically well-connected big business),founder of Mitsubishi Zaibatsu• Shipping company--grew fast with government
support (receiving gov’t ships, contract for military transport)• Established Nippon Yusen (NYK Line), fierce battle with
Kyodo Unyu (anti-Mitsubushi company), 1883-85• Expanded to many sectors: trade, banking, shipbuilding, coal,mining (later, more)
Mechanical factory in Nagasaki, ca 1885
Bakufu’s Steel Mill in Nagasaki, transferred to Mitsubishi in 1884

Eiichi Shibusawa (1840-1931)

P.46

From Saitama

Tomoatsu Godai (1836-1885)
From Satsuma

Super business promoters -- but they did not form zaibatsu-Initially, anti-bakufu fighter-Next, assistant to last shogun-Works vigorously for MOF(invited by Meiji Government)-President of First “National”
Bank”-Company builder and businesscoordinator for many years-Social contributions-Studies and builds human
network in Nagasaki-Visits UK; realizes need toindustrialize, writes report-In Osaka, helps to create
copper co., railroad, shippingco., rice & stock exchanges,
cham. of commerce, university,
test centers, trading center, etc-SOE privatization scandal

P.47

Rise and Fall of Merchants and Enterprises
Q: Who were the main drivers of Meiji industrialization?
A: All types of entrepreneurs including Edo gosho, Yokohama
merchants, Meiji zaibatsu, and company boom millionaires.
Persons

250

Millionaires of Edo period

New millionaires in company
boom period

200
New millionaires of Late Edo

150► Japan’s industrial
revolution: from
1880s to 1900s

New millionaires
in early Meiji

100
50
0
1849

1864

1875

1888

► Survival gamewas severe: many
entries, many exits

1902

Source: Computed from Miyamoto (1999）, p.53. Each line shows how many of
the new millionaires emerging each period survived in later periods.

► Japan-China War,Japan-Russia War
also accelerated
industrialization

First6000
Company 5000
4000
Boom

Banking
Transport
Commerce
Industry
Agriculture

3000

Number ofjoint stockcompanies

2000

Legal capital

350(million yen)

300

1000

1892

1891

1890

1889

1888

1887

1886

1885

1884

0

250

Banking
Transport
Commerce
Industry
Agriculture

200
150
100
50

1892

1891

1890

1889

1888

1887

1886

1885

0

1884

Yoshio Ando ed,
Databook on Modern
Japanese Economic
History, 2rd ed, Tokyo
Univ. Press, 1979.

Parallel development or“hybrid technology”

Manufacturing: Share of Output
100%

Indigenous
industries

80%
60%

Factory size

Employment Str uctur e of Pr ewar Japan
100%

Indigenous (trade &service)80%
60%

Indigenous(manufacturing)40%

Modern industries

20%

Agri, forestry,
fishery

1930-35

1925-30

1920-25

1915-20

1910-151905-10

1900-05

1895-00

1890-95

1885-900%1935-40

1930-35

1925-30

1920-25

1915-20* indicates hybrid status

1910-15M

1905-10M*

1900-05

Modern0%

1895-00

I*

20%

1890-95

I

Indigenous

Modernindustries

Large

1885-90

Technology

Small

40%

PP.65-67

Examples of Subsidies & Support for
Targeted Industries• Navigation Promotion Law (1896) – subsidizing
maritime transport operators if they:- Operate international routes- Use large ships over 1,000 tons
- Use fast domestic ships
These targets were raised in steps offering more incentives• Shipbuilding Promotion Law (1896) – subsidizing
building of steel ships over 700 tons (later 1000 tons)• Domestic production of railroad locomotives – The
Ministry of RR provided blueprints, engineers,technical assistance and market to designated privatecompanies.

Ship Production

Financial Structure of Nippon Yusen

Tons

Million yen
1886-90
1891-95
1896-00
1901-05
1906-10
1911-15

Revenue Subsidy
21.8
4.4
33.0
4.5
59.6
14.9
94.5
18.9
108.3
26.0
145.5
24.0

Cost
21.3
28.3
63.1
92.6
118.9
141.7

Profit
4.9
9.2
11.4
20.8
15.4
27.8

Subsidies Received by Shipbuilders
Thousands of yen
No. ofSubsidies received for
ships
HorsepoTotal Tonnage ShipEnginebuilt
wer
Mitsubishi
43 6055.5
207.4 5146.4
181.8
909.0
Kawasaki
34 2379.0
96.7 1912.0
93.4
467.0
Osaka
30 618.7
30.5
478.3
24.1
140.4
Ishikawajima
2
53.0
2.5
43.0
2.0
10.0
Ono
1
12.2
0.8
9.5
0.5
2.7
Uraga
2
47.8
2.7
47.8
0.0
0.0
TOTAL
113 9166.2
340.6 7637.0
301.8 1529.1
Source: Yoshio Ando (ed), Databook on Modern Japanese Economy, 2nd ed., Univ. of Tokyo Press, 1979.

Technology Transfer (see Uchida 1990)

PP.62-65

1. Foreign advisors (public and private sector) – very expensive

2. Engineering education (studying abroad, Institute ofTechnology; technical high schools)
3. Copy production, reverse engineering, technical cooperationagreements (esp. automobiles, electrical machinery); sogo shosha(trading companies) often intermediated such cooperation
Technical Experts

Private-sector experts, 1910
Mining513 (18.0%)
Textile300 (10.6%)
Shipbuilding 250 (8.8%)
Power & gas 231 (8.1%)
Trading
186 (6.5%)
Railroad
149 (5.2%)
Food
149 (5.2%)
TOTAL
2,843 (100%)(Graduates of Technical Univs. & High Schools)

16000
14000
12000

Private sector
Public sector

10000
8000
6000
4000
2000
0
1880

1890

1900

1910

1920

P.64

Studying Abroad (Early Engineers)• First students: bakufu sent 7 students to Netherlands
in 1862 (naval training)• By 1880s, 80 Japanese studied engineering abroad(shipbuilding, mechanics, civil engineering, mining& metallurgy, military, chemistry)• Destination: UK (28), US (20), France (14), Germany(9), Netherlands (8)• They received top-class education and could easily
replace foreigners after coming back• They mostly worked in government (no modern
private industries existed at first)—Ministry ofInterior, MoF, Army, Navy, Ministry of Industry

Kobu Daigakko 工部大学校(Institute of Technology)• 1871 Koburyo of Ministry of Industry; 1877 renamed
to Kobu Daigakko; 1886 merged with Tokyo Imperial
University (under Ministry of Education)• Theory and practice--preparatory course (2 years),
specialized studies (2 years), internship (2 years)• First Principal: Henry Dyer (UK)• 8 courses: civil engineering, mechanical engineering,shipbuilding, telecommunication, chemistry,architecture, metallurgy, mining (classes in English)• Educating top-class engineers (import substitution)• Additionally technical high schools were establishedto produce middle-level engineers on factory floor

P.64

Post WW2 High Growth (late 1950s-60s)• After war defeat in 1945, planning method was used to jump
start the economy (production of coal & steel); inflation was
stopped and prices & trade were liberalized around 1950.
• High growth was unleashed by strong private dynamism,
supported by investment in new technology, kaizen, andgradual trade liberalization• The Ministry of International Trade and Industry (MITI) wasa super-ministry for industrial catch-up, working closely withprivate firms and business associations.

P.162

Post WW2 Real Growth
14%
12%
10%
8%

Stable growth period

6%
4%
2%
0%
-2%
-4%

No growth period

Shift from political toeconomic agenda

Yen floats

2nd Oil Shock

1st Oil Shock

Bubble collapses

2004

2001

1998

1995

1992

1989

1986

1983

1980

1977

1974

1971

1968

1965

1962

1959

1956

1953

High growth period

Priority Production System (1947-48)
Recover real economy first, then adopt austerity to stop inflation(1936 = 100)160

Stopping
inflation

140
120

Industrial
Production
Index

100
80

Steel

60

Coal

40

Korean War

All industry

20

Source: Historical Statistics
of Japan, vol.2, 1988.

1952

1951

1950

1949

1948

1947

1946

1945

1944

1943

1942

1941

1940

1939

1938

1937

1936

0

Basic Problems of Japan’s Economic Reconstruction (MoFA
Report, 1946)• Long-term goals must be set for Japan’s recovery and global
industrial positioning.
• Concrete real-sector strategies to attain these goals, sector
by sector.

Rural Life Quality Improvement Movement
M. Mizuno and H. Sato, eds, Development in Rural Society: Rethinking Rural Development,
IDE-JETRO, 2008, in Japanese.

• In 1948, GHQ (American Occupying Forces) ordered theMinistry of Agriculture to initiate nationwide “Life
Improvement & Dissemination Movement.”• Many local governments (Yamaguchi, Kagoshima, etc) also
launched similar programs with enthusiasm.
• Official directives + grass-root village activities organized bylife improvement dissemination staff (=village housewives).
• Daily life improvement: cooking, nutrition, meals, clothing,bedding, cleaning, washing, child raising, public morals,
weddings/funerals, superstition, feudal habits, etc.
• Staff training in Tokyo and major cities; universities andresearch institutions providing information and techniques.
• Similarly, “New Life Improvement”, “Life without Mosquitoes
and Flies Movement,” etc. up to the 1950s and 1960s.

Monozukuri (Manufacturing) Spirit

PP.65, 179-181• Mono means “thing” and zukuri (tsukuri) means “making” inindigenous Japanese language.
• It describes sincere attitude toward production with pride,skill and dedication. It is a way of pursuing innovation andperfection, often disregarding profit or balance sheet.
• Many of Japan’s excellent manufacturing firms were foundedby engineers full of monozukuri spirit.

Sakichi Toyota
1867-1930

Konosuke Matsushita
1894-1989

Soichiro Honda
1906-1991

Akio Morita (Sony’s
co-founder)
1921-1999

Quality and Productivity (Kaizen) Movement at
Factories were Private-sector Driven• Private sector, not government, led quality and productivity
improvement; private absorptive capacity was very strong.
• NPOs were created by the initiative of top executives ofprivate firms with nationwide networks for dissemination• Cooperation between managers & workers within factories• Collaboration among government-industry-academia• Productivity techniques imported
from the US (mostly top-down,
statistical) were revised to fit
Japanese production environment(bottom-up, mindset change,
continuous effort by teamwork)

Core NPOs for Quality and Productivity
Improvement
Japan Productivity Center (JPC)Established in 1955 as a public-interest foundation; received US
support during 1955-61
Tripartite collaboration: govt., business, and labor unions
Main role: productivity improvement (leading Productivity Movement)(supporting Singapore’s Productivity Movement under JICA project)

Union of Japanese Scientists and Engineers (JUSE)
Established in 1946, as an incorporated foundation
Main role: quality improvement (“Deming Prize”, QC Circles)(supporting Burkina Faso (QCC) under WB/Japan PHRD fund project)

Japan Management Association (JMA)Established in 1942, as an incorporated association
Main role: noritsu (efficiency) improvement, management innovation

Role of Private Sector Organizations in Introduction,
Development and Diffusion of Foreign Technologies
US & European
Countries

Private Sector
Organizations

Private Companies(JPC, JUSE, JMA, etc.)(Technology Transfer)(Technology Transfer)•Dispatch of study
missions to US & Europe•Invitation of foreign
advisors•Translation of foreign
literature into Japanese•Study on adaptability of
new technology (bycommittees and working
groups: industry-govt.academia joint research)•Trial application andmodification of technology (pilot projects)•Guidance and advices•Education and training•Qualification andcertification system•Award system•Enlightenment andmovement<To Learn><To Test & Modify><To Diffuse>

Source: Adapted from Tsuyoshi Kikuchi “The Roles of Private Organizations in the Introduction, Development
and Diffusion of Production Management Technology in Japan” (original paper published in the Bulletin of
the Graduate School of International Cooperation Studies No. 4, 2011, Takushoku University).

Study Missions Sent Abroad by JPC (1955-60)
 A large number of study missions were sent abroad and their findings
were disseminated widely.
 Different types of missions were organized for top management, industry
groups, special professions, labor unions, SMEs, etc.
Of which SMEs
Fiscalyear

Missions

Participants

1955
1956
1957
1958
1959
1960

15
27
43
62
75
84

Total

306

Mission de- Participants ofbriefingde-briefing
seminarsseminars

Missions

Participants

174
307
430
652
749
821

5
0
4
12
13
15

58
0
46
141
137
154

33
130
180
98
74
11

10,02033,96027,42012,177
7,894
1,740

3,133

49

536

526

93,211

Source: History of Trade and Industry, Vol. 6, Edited by the Ministry of Trade and Industry(original data come from various reports of the Japan Productivity Center)

MITI and Industrial Policy

PP.170-74• Foreign scholars depicted MITI as the command post ofJapanese industries—Johnson (1982), Okimoto (1991).
• Japanese officials and researchers often deny this view;
MITI was only supplementing the market mechanism.
• Empirical studies on MITI policies are inconclusive.
• Some issues for today’s developing countries:--Government’s lack of knowledge and political capture (thedoctrine of neoclassical political economy)--Excess competition under increasing returns, copy production--Impossibility of infant industry promotion under accelerated
integration, WTO and FTAs/EPAs--State capability building and the scope of industrial policy--New search for the sources of growth (esp. Africa) vs.
traditional IMF/WB policies, governance emphasisIndustrial Policies in Japan(From Prof. Akira Suehiro’s 2006 presentation)(1) The fiscal investment and loan program (FILP, p.165fn)
promoted trade and industry until early 1960s(2) Loans by Japan Development Bank and Exim Bank wererelatively small, but had two important effects--Catalyst for larger commercial bank loans--Information sharing between business and government(3) Cooperative policy formulation and implementation(4) The “return match game” and learning effect—firms could apply
many times for JDB and SME loans Japan’s industrial policy contributed to development of themarket mechanism rather than distorting the market.

Fiscal Investment & Loan Program (FILP)
Mobilization of people’s small savings and funds to invest or lend fordevelopment purposes,
usingchannels(butbudgetaccount)
Table
1 % official
Distributionof the FIL
by notMonetary
Sources,
1955-1990 (%)
Sources of fund (%)- Postal savings- Pension & insurance
contributions

Uses of fund (%)- Housing- SMEs- Infrastructure- Industrial & tradepromotion

1955
14
52

1965
4
66

1975
1
84

1985
0
78

1990
0
78

Special AccountTrust Fund Bureau*
Postal Deposit
34
23
42
24
20
Pension Funds
10
23
22
15
15
Postal Life Insurance
16
7
11
10
17
Government Bonds,
15
24
4
12
6
Borrowings
Total
100
100
100
100
100
(Notes) Trust Fund Bureau was set up for the purpose of managing public funds andTablethe2 Distributionof andthe loans.
FIL byPurposes,
implementing
fiscal investment
It wasabolished1955-1990
in Jan. 2001. (%)(Source) Japan Development Bank, Zaisei Toyushi-Nihon no Keiken , 1993.
Purposes
1955
1965
1975
1985
1990
Infrastructure for
45
53
64
70
71
people's life*
Housing
14
14
21
25
30
Small & Medium firms
8
13
16
18
16
Infrastructure for
32
32
25
22
22
Industries
Transport
12
14
13
8
8
Regional
97323Promotion of
23
15
11
8
9
Industries, Tradefor Industries
16
8
3
3
3
for Trade
7
8
8
5
6
Total
100
100
100
100
100
(Notes) Infrastrucutre for people's life include housing, environment improvement,

Official finance through Japan Dev. Bank & Exim Bank was only asmall part of Japan’s investment funds, but it had catalytic effects
on commercial bank loans for industry.
Table 3 Distribution of Outstanding Loans by Type of
Financial Institutions 1955-1990 (%)
1955
1965
1975
1985
Private Financial Institutions 87
90
89
86
Commercial Banks
62
54
48
50
①City Banks
36
30
27
26
②Local Banks
17
15
11
15
Finance for SMEs
9
15
17
16
Fiscal Finance
13
10
11
14
JDB*
8
3
2
2
EIBJ*
1
1
2
1
Total
100
100
100
100
(Notes): JDB: Japan Development Bank
EIBJ: Export-Import Bank of Japan(Source) Japan Development Bank, Zaisei Toyushi-Nihon no Keiken , 1993.

1990
88
57
27
15
9
12
1
1
100

Industrial Policy Formulation & Implementation
MITI’s policy planning
•
•
•

•

Deliberation councils were regularly used for making
policies for targeted industries and strategic issues.
Bottom-up policy making, from study group  joint groupwithin ministry  deliberation council
Effective information sharing among ministries (MITI,
MOF, etc.), business associations, Liberal Democratic Party(ruling party), experts, and related organizations.
Policy objective: modernization of specific industries andimprovement of international competitiveness.

Enterprise support: division of labor••

Japan Development Bank for loans, management advice,accounting, cost control
MITI’s Machine Industry Bureau, for advice on technology

Figure 4 Mechanism of FLI andthe Role of MITI and JDB

PolicyImplementation

Ministry of International
Trade and Industry(MITI)

Ministry of Finance(MOF)
Fiscal Fund Bureau

Department of Heavy
Industry
technology advice

Japan Development
Bank
managerial advice

Individual Firms
applied to fiscal finance

Policy Making

Business Associations
for each industry

Government Officers,
Academicians,
Specialists

Industrial Council on SpecificIndustry or Target
Source: Drafted by Akira Suehiro

Fiscal FinanceMITI
Minister

Organizational Structure

Main Bureaus

Politically appointed VM
Administrative VM

Minister’s Secretariat(incl. Research & Statistics)

Deputy VMs

Int’l Trade Policy Bureau

Special assistants

Int’l Trade Admin. Bureau

Industrial Policy Bureau
Industrial Location &Environment Protection Bureau
Basic Industries Bureau

Machinery & Information Industries
BureauAttached Organizations
and External Bureaus
Agency of National Resources＆Energy
Patent Office
SME Enterprise Agency
Agency of Industrial Science& Technology
Trade & Investment Training
Other

Consumer Goods Industries Bureau
Deliberation Councils
Industrial Structure
Export Insurance
TextilePetroleum
Electrical Works.........

Int’l Trade Transaction
Industrial Location & Water
Product Safety & Household Goods Quality Indication
Aircraft & Machinery Industry
Traditional Crafts Industry..........
Source: adapted from Okimoto (1989), p.117.

MITI: Junior Staff’s Role and Deliberation Council
Conduct survey,
compile data

MITI junior staff
study group
Prepare draft
MITI research group(subcommittee)

Feedback

Hearings:
Learned individuals
Interested parties
Overseas employees
Local representatives
Others
Outside lecturers

Briefings, subcommittee reports

Deliberation council

Final report

Source: Ono (1992).

Public relations:Publications
Explanatory meetings
Lectures
OthersConcluding Remarks• Japan’s industrialization was made possible by strong
private dynamism (primary) supported by reasonable policy(secondary).
• Japan’s cumulative history with frequent opportunities toimport foreign factors, without being destroyed, was critical.
Through this process, both private and public sectors weremade capable and resilient.
• Countries without private dynamism or good policy must
create them. For this, both spiritual revolution and technicallearning are required.
• National leaders, public officials and business leaders mustbear great responsibility for the nation in coping with
developmental challenges and globalization pressure.

Introducing Proper Mindset & Method for
Industrialization (Recap)
Differences: fast-rising countries vs. stagnant ones
 Private dynamism (individuals and enterprises) National leader (wisdom, decisiveness, action-orientation)
 Policy method (procedure, organization, documentation)
 Policy content

Policy learning Study international best (& worst) policy practices—analyze
commonalities, national differences, implementation details,
pitfalls, capability matching… Acquire general capability to
produce policies most suitable for each local context.
 Avoid: copy & paste others’ policies; no learning “because
our country is unique”; the same advice in all countries;
recommend too many actions without considering feasibility.