The History of Japan’s Fluctuating Economy

15.12.2014 | 15:26

Industrialization in Japan began in the 19th century and produced the ever evolving development concept known as dual structure. Large businesses and corporations provided the security of lifetime employment, decent wages, and stable working conditions which would attract eager and loyal employees.

Such corporations were able to thrive by carefully utilizing the resources provided by small to medium size companies and related industries or the financial industry.

This network of businesses would remain under the dictatorship of the family running the foundation company. The four most common business networks were known as Mitsui, Sumitomo, Yasuda, and Mitsubishi. These names are still common and respected today.

Nissan, Furukawa and Nomura were the other common three.

Discrimination prices against outside companies was a common occurrence. Favor of other companies could be gained through political influence and cash payments.

The smaller companies often didn’t stand a chance against these larger business networks known as zaibatsu. As a result, the smaller companies were unfortunately less attractive to stability seeking employees.

The smaller and less fortunate companies had a tendency to hire women, and workers who are unfamiliar with the trades. This trend would influence the Japanese economy to the present day.

After World War II, the concept of business networks or zaibatsu was abandoned. Some companies would still affiliate themselves with Keiretsu businesses. Keiretsu companies are businesses that share utilize the same bank.

Between 1945 in 1953, Japan was fortunate to experience a huge economic growth. This event was later called the ‘economic miracle’. In 1968, Japan quickly surpassed West Germany was quickly on the road to becoming the top second economy in the world.

For the most part the government focused on production of textiles, shipbuilding, steel manufacturing, chemical and auto manufacturing. Events such as the oil crisis that took place between 1973 and 1978 wreaked havoc, but had little impact against the yen (Japan’s currency).

Japan began experimenting with investments into foreign purchases such as Columbia Pictures or the most notable Rockefeller Center located in New York.

Between 1950 and 1970, social changes were underway. The number of people with homes in the cities skyrocketed from a staggering 38 to a jaw-dropping 72%.

Due to the growth of population densities, pollution quickly became a problem. Unfortunately the problem was ignored until later in the 1960s.

Social welfare was introduced until 1970. Still, the growing population maintained itself well and as a result, the development of an underclass was avoided.

The economic changes and the de-regulation in the 90s would have an incredible effect in the financial economy of Japan. When payments by banks and security firms were later discovered by regulators, strict regulations and severe punishments led to Yamaichi Securities being shut down.

The larger and more reputable banks would later file for bankruptcy, or were purchased by foreign companies. Between 2000 and 2001, the largest banks would form groups called megabanks. Among them were Group Holdings, United Financial of Japan, Sumitomo Mitsui Banking Corp, Mizuho Holdings, and the Mitsubishi- Tokyo Financial Group.

United Financial of Japan and Mitsubishi- Tokyo Financial Group would later form their own group. This led to Japan’s financial foundation relying on three major banking groups.

The rise of foreign business investments still on the increase and they can be observed in partnerships such as the agreement between Nissan and Renault. Deregulation gave more leeway to insurance companies and encouraged these companies to expand and previously discouraged areas. This quickly promoted an environment of healthy competition.

One of the more surprising developments has been the ease of adapting from companies that previously maintained memberships with the Keiretsu group.

Due to the thriving economy, more people are fortunate enough to be able to work part-time or even start their own companies. Unemployment rates may be concerning to some, but a quick examination of the employment rates in 1999 reveals a low 4.9%. This is surprising considering the economy as at an all-time low for at least a decade.

The other concern revolves around the quickly aging population. Japan is not the only country to face this concern.

These most recent years show potential signs of an economic recovery. Evidence can be seen in real estate prices in certain areas, especially around larger cities.

Employment rates are also on the increase in Japan. This has led to the development of a new categorization of part-time workers known as freeters or arubaitos .

Wikipedia: The word freeter or freeta was first used around 1987 or 1988 and is thought to be a portmanteau of the English word free (or perhaps freelance) and the German word Arbeiter (“labourer”). Arubaito is a Japanese loanword from German. As German (along with English) was used (especially for science and medicine) in Japanese universities before World War II, Arubaito became common among students to describe part-time work for university students.

The future of Japan’s economy is steadily growing and looks bright indeed.

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