（Until the rise of South Korea and, later, China, Japan’s economic development was a major focus of attention for developing countries and former socialist nations seeking economic reform. This was because Japan was the only non-white country to have achieved industrialization.
Although Japan’s economy is not currently attracting much global attention, there will likely come a time when interest returns. In preparation for that time, I would like to discuss the realities of Japan’s economy in a series of articles. In this installment, I will argue that the term “Japanese Model” is a mirage.）
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The Myth of the “Japanese Model”
Akio KAWATO
Stereotypical views on the nature of Japan’s economy are many. A common belief is that Japan somehow leaped overnight from a backward feudal society into an economic superpower after World War II. Others explain the so-called “Japanese economic miracle” by claiming that Japanese workers blindly obeyed their companies and the government. Still others imagine that the Japanese state controlled the economy almost as tightly as the Soviet Union.
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Japan was the first non-Western nation to achieve large-scale industrial success. Before the World War II, it competed with the European colonial powers, and after the war its exports flooded world markets, dealing painful blows to many Western industries. Not surprisingly, Japan became both admired and distrusted.
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Many people in the West have argued that Japan’s success was due to unfair competition resulting from low wages or the country’s underdeveloped society, which led companies to be subservient to the government and workers to be obedient to their employers.
From such point of view, Japan’s present economic stagnation is simply the inevitable result. A backward society, they argue, eventually failed to adapt to globalization.
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Reality, however, is far more complicated.
Japan did not suddenly emerge from centuries of darkness. One could even argue that Japan was destined to become a developed nation. In the Middle Ages, Japan was already part of the East Asian trading system centered on China. It was said to be one of the world’s largest exporter of gold and the world’s largest importer of sugar.
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Historians still debate why Japan adopted its policy of national isolation in the seventeenth century. Whatever the reasons, the result was that Japan learned to produce almost everything domestically. Internal commerce expanded rapidly. Although the country remained feudal in form, it had already developed something resembling a unified national market.
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Urban culture flourished in Edo and Osaka. When major events occurred, special news sheets were printed and sold on the streets. Many ordinary families sent their children to terakoya schools, where they learned reading, writing, and arithmetic. These schools taught Confucian ethics, the dignity of honest work inter alia.
One influential thinker was Ishida Baigan, whose philosophy blended Shinto, Buddhism, and Confucianism. His teachings remind us in many ways of the Protestant work ethic in Europe. He argued that a person’s place in society is justified only through honesty and diligent work. That belief remains deeply rooted in Japanese society even today.
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Japanese craftsmanship was probably among the finest in the world. Gardening also reached remarkable levels. Contemporary accounts describe Edo as a city almost buried in greenery—something like an ecological city centuries before the term existed.
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If a samurai killed a commoner without good reason, public opinion often condemned the act. This surprisingly egalitarian spirit can be seen in the comic stories of rakugo and in the writings of Ihara Saikaku.
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What people now call the “Japanese model” was not created overnight. It gradually evolved after the Meiji Restoration. Nor was it designed by a single visionary leader, as some people in the West or Russia seem to imagine.
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In less than seventy years before World War II, Japan had built a modern heavy industrial base, became an urban society, and created a large middle class. Anyone who watches Japanese films from the 1930s can see this quite clearly. Many foreigners assume that modern Japan only appeared after the war, as if it had magically transformed itself from feudalism into capitalism. In reality, Japan had already become a modern society before 1945.
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Perhaps that is why the war itself felt, for many ordinary Japanese, like a natural disaster. It suddenly burst into peaceful homes, took away fathers and sons, and sent them to die in distant places few had ever heard of.
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When the war finally ended, people felt they had become free again. They worked with extraordinary determination—not because they blindly obeyed their bosses, but because they wanted to rebuild the lives they had lost.
Japanese employees do not work hard because they worship their companies. They work because if the company succeeds, their wages rise, bonuses increase, and their families enjoy a better life. There is another reason as well. Someone who does not do his share soon loses the respect of colleagues—and eventually his own self-respect.
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Ingredients of the “Japanese model“
Much has been written about the so-called “Japanese model” that supposedly collapsed under globalization. Yet no one has ever agreed on exactly what that model is.
When foreigners discuss it—often critically—they usually mean lifetime employment, seniority-based promotion, family-like relationships inside companies, decision-making by consensus after extensive informal consultation, the ringi approval system, and supposedly strict government guidance of the economy.
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Lifetime employment and seniority-based promotion became firmly established around the time of World War II. But lifetime employment has never been uniquely Japanese. Even in Japan, fewer than half of all workers ever enjoyed that level of security.
People everywhere prefer to know what their future will look like. For that reason, even in the United States, companies such as IBM and many large banks traditionally offered careers that, in practice, were very close to lifetime employment.
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Why, then, have Westerners and Russians often viewed Japan’s lifetime employment system with suspicion? Probably because they believe it has made Japanese society bureaucratic, stagnant, and excessively obedient to corporations.
It is true that Japanese tend to behave very politely toward their superiors. Foreign visitors often see only that. What they usually miss is that once a meeting begins, discussions inside Japanese companies can become surprisingly frank and lively (there are exceptions, though).
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To say that Japan’s economic miracle was created solely by the “Japanese model” is an exaggeration. After the war, the real driving forces were the explosive growth of domestic demand and a favorable international economy.
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If one element truly deserves the label “Japanese model,” it is probably Japan’s well-developed financial and credit system. Most of the other features—such as lifetime employment and seniority-based promotion—were not the causes of rapid growth but its consequences. Only prosperous companies can afford to maintain such expensive employment practices.
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Finally, regarding the Japanese government’s industrial policy: There certainly was an industrial policy. However, it was not a Soviet-style planned economy. While the government did set goals and support companies through loans from government-affiliated financial institutions and tax incentives, the fundamental mechanism was that large private banks channeled public deposits into corporate loans, and competition among private companies generated dynamism.
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This differs from modern-day China, where excessive production is achieved through massive government subsidies.
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