JAPAN INTO New
AFFLUENCE
Problems of Growth
Survey By Masao Sakizaka
FOLLOWING THE termination of World War II Japan's economy, having taken amazing strides in rehabilitation, was restored to the pre-war level around 1955. Its pace has re- mained fast since then both in industrial advancement and economic growth. During the seven years 1955-62, Japan's Gross National Product increased about 1.9 times, while indus- trial production increased about 2.8 times.
Japan today occupies sixth place in the world for GNP following the U.S., the U.S.S.R., the U.K., West Germany and France. In the scale of industry, Japan is now rated fifth edging over France. In the process of achieving such a high degree of growth, it should not be overlooked that the nation has repeatedly encountered crises in its international
Interview with
FAR EASTERN ECONOMIC REVEN
balance of payments, each of which forced the authorities to adopt a tight-money policy.
In the three years 1959-61, an almost unprecedented economic growth rate of 15% at an annual average was regis- tered. This high growth rate resulted in a sharp increase in imports which brought external payments to an unfavourable position.
Since the autumn of 1961 a tight money policy was adopted. By the application of stringent money policy, a reduction of inventory investments was at once effected and from the beginning of 1962 private investment for plant and equipment, which had increased by an average of 30% yearly for the preceding three years, was reduced. Reflecting the
Prime Minister Hayato Ikeda
Wilson: How would you define Japan's present status in the world, Sir-is she ready or not quite ready to regard herself as one of the fully advanced industrialised nations?
Ikeda: Japan's economy, which re- ceived a heavy blow in the last war, has been rapidly renovated and en- larged in scale through eighteen post- war years of unremitting effort. The high rate of growth of the Japanese economy during this period has at- tracted world attention,
In fact, Japan's industrial production has achieved fifth place in the world after those of the U.S., U.S.S.R., U.K. and West Germany. In certain com- modities such as vessels, transistor radios, motor cycles and cameras, Japan leads the world in production.
In the basic industries including electric power, iron and steel and cement, Japan is now among the world's five biggest producers. In this sense, it may be said that Japan has become one of the world's industrially advanced countries.
However, from the standpoint of per capita national income and standard of living, the level of Japan's economy may not be said to equal that of the industrially advanced countries.
In order to reach their level, Japan has to continue to maintain a healthy and steady economic growth rate by promoting measures to improve the structure of its internal economy in- chung the 7 sofication of agricul
tural production, the replenishment of social capital and the fortering of its medium and small enterprises.
In order to secure the imports ne- cessary for the growth of its economy, Japan must plan to increase its exports and seek to place its international balance of payments on a high level.
From these considerations, Japan, while pursuing measures to consolidate its domestic industries, is planning to cooperate with international economic society by pushing liberalisation of
Our Editor, Mr Dick Wil- son, on a recent visit to Tokyo posed questions to the Japan- ese Prime Minister on the economy and on foreign policy-particularly regarding China and Southeast Asia.
trade and foreign exchange.
The entry of Japan into the OECD is being arranged for the near future. This fact would seem to indicate that Japan has been recognised as an in- dustrially advanced country in the free world. But, as has been stated in the foregoing, the Japanese economy still contains various problems, so that in order to really establish its position as an industrially advanced nation, Japan must exert greater efforts in the future.
Wilson: Can Japan maintain her remarkable pace of economic growth over the next five or ten years?
Ikeda: Japan has maintained the
remarkably high rate of economic growth of 10% a year on average over the past ten years. During the period 1959-61, the annual rate of economic growth even reached as high as 15% on average.
This unprecedented feat, however, owes much to the rapid increase of private investment in equipment and, thus, is somewhat due to temporary factors. It will, therefore, not be easy to maintain such a high rate of eco- nomic growth continuously over the years to come.
Besides, the advance of trade liberalisation, which puts Japan in the worldwide 'open' economic system, necessitates that we follow a more careful and moderate course of eco- nomic growth.
On the other hand, a rapid economic growth is still a necessity for us in order to raise the level of our per capita national income, which is still quite low when compared with those of Western countries. And our eco- nomy still has the potentiality to achieve this.
Unfavourable balances of payments have often hindered Japan's economy from maintaining its high rate of growth. We must make every effort to minimise the effects of the interna- tional payments problem on the growth of our economy.
For this purpose, we must further increase the level of exports in order to obtain sufficient foreign currency
October 31, 1963
of domestic demand, production slightly tended down- ward. As a result, on one side, imports were reduced, while on the other, an increase was noted in exports, thereby bring- ing a balanced position back in inter- national payments in the summer of 1962. This was followed by a lowering of the rediscount rate in October and in Novem- ber successively ending the application of tight money measures.
Page 276.
Since the beginning of this year Japan's economy has been following a mildly expanding line maintaining an
Japan's rapid growth and imminent transition to one of the world's "open economies" have created new problems of labour shortage, rising produc- tion costs, soaring prices and neglected 'social overheads' roads, harbours and the like. Mr Sakizaka, who is Director of the Economic Planning Bureau of the Government's Economic Planning Agency in Tokyo, discusses these problems.
The last business recession, compared to those of 1954 and 1958, ended in a rather mild way. The principal reasons are not very far to seek: one was that the business adjustment period had hap pened to coincide with U.S. business' going into an ascending period, which was responsible for a sharp increase of 26% in exports to the U.S. together with other exports; and taking also into account shrinkage in economic scale and sharp decreases in imports, a balanced position was achieved in the country's international payments.
reserves which will set us free from a tight money policy at those times when our balances undergo minor deteriorations. This can be realised (it is hoped) when the current pro- grammes for the modernisation and rationalisation of equipment begin to have their effect.
In consideration of all this, I should say that Japan can maintain an average annual rate of economic growth over the period in question at around 7% or 8% as has been laid out in my in- come-doubling plan.
Wilson: Japan's chief ally is the U.S., and yet there are many stresses and strains in the alliance the "chicken war", cotton textile quotas, interest equalisation tax and China trading, for example. How is the alliance likely to develop in the future: will Japan grow closer to America or more distant from her?
Ikeda: It is true that Japan and the United States are very closely associat- ed. It is true also that there are a number of pending issues between the two countries.
As look at it, Japan-US. relations have never been closer than they are today and they will continue to be strengthened in the future. The exis- tence of such "stresses and strains" as you mentioned reflects the closeness of our relations and not the distance between us.
As Japan's economy grows, Japan will be expected to share increased burdens for the prosperity of the world, in particular to help the economic growth of developing countries. There will be, therefore, an increased need for a more frequent exchange of views
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JAPAN INTO AFFLUENCE®
Special
upcurve index for in- dustrial production and employment, in addition to orders received for machinery indicator for future business
an
trends.
on
In the Forecast for the 1963 Economy prepared by the Government and sub- mitted to the National Diet, while the real growth rate was set at 6.1%, pri- vate research organisations are tending to give a higher rate based recent business trends. Japan's economy, hav- ing gone through such repeated vicissi- tudes, is now beginning to revitalise after overcoming the late recession. We find at the present stage some new elements unlike those experienced in the past. These are considered to form a factor liable subtly to affect the future
to understand the aspiration of these countries.
and a greater degree of cooperation between Japan and the United States.
Wilson: What role is Japan likely to play in Southeast Asia in the com- ing years? Is this an area where Japan feels a special responsibility for pro- moting political stability and economic development?
Ikeda: It is widely recognised that no one country can prosper nor enjoy
Mr Hayato Ikeda
security when other countries, especial- ly its neighbouring countries, suffer from poverty and instability.
It goes without saying that Japan has a special concern over political stability and economic development of Southeast Asian countries. Because of her historical and cultural background as well as her geographical propinqu- ity, Japan may be in a better position
In this sense Japan feels a special responsibility in making this special ability available to their advantage. As to Japan's ability in promoting political stability and economic development, there is a limitation,
However, since they have a direct bearing upon Japan's security and progress, as mentioned above, Japan wishes to contribute as much as she is able towards promoting these desirable aims.
Wilson: Japan follows the Ameri- can line on China, with some reserva- tions, but is apparently increasingly at- tracted to the so-called "British line" of recognition and trade. How will Sino-Japanese relations develop over the next few years, in your opinion?
Ikeda: Japan, as a neighbour just a few hundred miles of water away from the mainland of China, has a long history of at least more than one thousand years of close relations with it in political, economic and cultural fields.
At present, Japan has no diplomatic relations with mainland China. How- ever, there exist cultural and trade con- tacts between us. Geographical pro- pinquity makes it impossible to sever these kinds of relations.
The Japanese Government re- cognises these trade relations with the mainland as inevitable but has no in- tention to conduct such trade relations beyond those on a commercial basis. This is the policy of the Japanese Gov- ernment and will remain so for years to come, no Paareehaw suchf 13 policy
may be called.
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