This book is an introduction to the postwar Japanese economy. Some 64 years have passed since the end of World War II. During this period, the Japanese economy has seen rapid changes and remarkable progress, although it has also experienced the bubble economy and prolonged stagnation. What kind of changes have we had in those years? In what sense can we say that progress has been made? What lessons have we learned from the experiences?


Gross Domestic Product Rapid Economic Growth Liberal Democratic Party Gross National Product Nonperforming Loan 
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1.1 General View of the Subject

This book is an introduction to the postwar Japanese economy. Some 64 years have passed since the end of World War II. During this period, the Japanese economy has seen rapid changes and remarkable progress, although it has also experienced the bubble economy and prolonged stagnation. What kind of changes have we had in those years? In what sense can we say that progress has been made? What lessons have we learned from the experiences?

The primary aim of this book is to answer these questions. We begin with an overview of the postwar Japanese economy, which is shown by data as historical changes. Then we deal with four major economic issues in the postwar Japanese economy: economic restoration, rapid economic growth, the bubble economy, and current topics. However, our particular focus is on the meaning of economic growth and the bubble economy, and thus this book is entitled Postwar Japanese Economy: Lessons of Economic Growth and the Bubble Economy.

Relative to this issue, we must first note that economic growth does not always mean the improvement of our standard of living. This is demonstrated by showing various results of economic growth (both bright and gloomy sides). We explore the category of Gross Domestic Product (GDP),1 demonstrating that the measurement of GDP includes market failures theoretically and empirically (factually). This is important because economic growth is generally expressed in terms of the GDP growth rate.

Second, to cope with this categorical weakness, a welfare measurement was established. We deal with the measurement and its topic development. The pioneering work on this was a “Measure of Economic Welfare” (MEW, Nordhaus and Tobin 1971). Subsequently, a similar sort of measurement called the Net National Welfare (NNW, NNW Development Committee, Economic Council 1973) was developed. We investigate its properties in later chapters. Further improvement along these lines is the Genuine Progress Indicator (GPI). Further developments were broader approaches, which appeared to deal with the human satisfaction level as a whole: that is, social indicators and the measurement of happiness. These approaches are not confined to economic activities but include sociocultural activities trying to capture the total living satisfaction.

We have learned that the Japanese economy on the whole has been paying a tremendous cost due to the bubble economy and its consequences including (1) nonperforming loans in Japanese banks, (2) huge outstanding government bonds, and (3) prolonged stagnation (so-called 10 year lost age). The Plaza Accord (1985) had a critical effect on the creation of the Japanese bubble, the underlying factor mainly being a huge trade imbalance within each and between Japan and the US. Global capitalism has intrinsic instability and we do not yet know how to cope properly with this problem. In order to avoid future catastrophe and to further stabilize the economy, we may need much ingenuity to offset the damaging effects of market imperfection under the current information society.

Finally, I propose a basic design toward achieving a high satisfaction level society in the concluding chapter. That is the quality of life in the mature society which we should seek. This may be one of the important options in the future. The design is based on the discussions in the previous chapters, particularly, lessons of economic growth and the bubble economy.

The basic idea for this book dates back to 1986 when I was asked to give an open lecture to the public entitled, “Postwar Japanese Economy: Bright and Gloomy Sides of Economic Growth.” Since then, I have given similar lectures in English to overseas students. From the 2004 fall semester on, I had the opportunity to give this lecture at Momoyama Gakuin (St. Andrew’s) University as a semester course for both undergraduates and postgraduates. The lecture, which is conducted entirely in English for overseas exchange students and Japanese students, demands a wider topic coverage. Therefore, I have made an effort to provide compact and comprehensive explanations, using figures and tables as much as possible.

I was invited to speak at an international studies seminar at the University of Buckingham in the summers of 2006 and 2008 by Professor Martin Ricketts. At the first seminar in 2006, I presented part of my lecture given earlier at our university in Japan, which fortunately got a good response. This gave me great stimulus to write a book on this theme. I also presented a paper at an International Conference jointly organized by IARIW (International Association for Research in Income and Wealth) and NBS (National Bureau of Statistics, China), which was held in Beijing in September 2007. The paper was entitled “Postwar Japanese Economy: Some Cautionary Lessons for China from the Japanese Experience,” and in the latter seminar, I spoke on “The Bubble Economy and Its Consequences: The Japanese Experience,” both of which aroused the strong interest of the participants. I would like to wait for the reader’s judgment as to whether or not my attempt is successful.

The following sections are sketches of the Japanese economy. The corresponding chapter explains those in detail with data and references.

1.2 Overview of Postwar Japan

1.2.1 Political Landscape

Table 1.1 shows a brief postwar timeline of Japan and overseas events. Japan surrendered to the Allied Forces in August 1945. From 1945 to 1952 Japan was occupied by the Allied Forces under General Douglas MacArthur, the Supreme Commander for the Allied Powers (SCAP). MacArthur’s primary objectives for Japan were demilitarization and democratization. Demilitarization was achieved through the following: the suspension of military production, a ban on fleet and aircraft facilities, restrictions on heavy industries and merchant vessels, and establishment of a new constitution.
Table 1.1

Brief postwar timeline of Japanese and overseas events


Business cycle

Domestic economy

Politics, and others

Overseas events



(8)a Japan surrendered; GHQ (set up)

(10) United Nations (founded)



Three major reforms imposed by the GHQ (1946–1950)b (12) Keisha Seisan Hoshiki [Priority production system] (introduced)




(5) New Constitution of Japan (effected)

(3) IMF starts



(10) Second Yoshida administration

(11) GATT starts



(3) Dodge Plan (4) Exchange rate (fixed at $1 = 360 yen) (9) Tax reform (Shoup recommendation)


(8) NATO (North Atlantic Treaty Organization, founded)



(8) Police Reserve Force (set up at MacArthur’s direction)

(6) Korean War


(6) peak (10) trough




(8) IMF (member)

(4) San Francisco Peace Treaty; US–Japan security treaty (effected) (7) National Security Force (formed)





(1) peak (11) trough


(7) Self-defense Forces (established)




(9) GATT (member) (12) First 5-year government plan

(10) Social Democratic Party (reunified); (11) Liberal Democratic Party (formed) (LDP holds power until 1993)




(11) United Nations (member)



(6) peak



(6) trough




(1) EEC starts



(12) National Income Doubling Plan

(6) US–Japan Security Treaty (amended) (7) Ikeda Administration



(12) peak


(9) OECD starts


(10) trough





(10) peak

(4) Article VIII Party of the IMF; OECD (member), (10) Tokyo Olympics



(10) trough






(7) Basic Law for Environmental Pollution Control


(7) EC (European Community, founded)





(6) Second largest GDP nation (announced)



(7) peak

(3) Osaka Exposition



(12) trough

(7) Environment Agency (launched) (12) Revaluation of the Yen ($1 = 308 yen)

(6) Okinawa Reversion Agreement

(8) Nixon shock



(7) Tanaka administration



(11) peak

(2) Floating exchange rate system (Yen) (10) First oil crisis


(10) Fourth Middle East War




(3) trough


(11) First Summit held in France




(1) peak (10) trough






(2) Second oil crisis



(2) peak







(2) trough





(6) peak


(9) Plaza Accord


(11) trough




(10) Black Monday





(4) Consumption tax (introduced, 3%)


(11) Fall of the Berlin Wall




(2) peak

Bubble economy burst


(1) Gulf War (11) Soviet Union (resolved)




(10) trough


(6) Split of the LDP (reorganization of political parties) (8) Hosokawa administration (first non-LDP

government since 1955)

(4) 8% BIS regulation (11) EU (European Union, established)





(1) Great Kobe Earthquake

(1) WTO starts



(9) DPJ (founded)



(5) peak

(4) Consumption tax rate (rose to 5%)





(1) trough


(1) Euro (adopted)


(10) peak




(4) Koizumi administration

(9) 11 September terrorist attacks


(1) trough


(3) US-led war on Iraq










(1) peak


(8) Financial Crisis (triggered by subprime problems)





(9) DPJ government


aMonth is in parentheses. bAntitrust measures: Zaibatsu Dissolution (1946), Antimonopoly Law (1947), and Elimination of Excessive Concentration of Economic Power Law (1947). Land Reform (1946–1950). Labor Reform: Labor Union Law (1946), Labor Relations Adjustment Law (1946), and Labor Standards Law (1947)

Sources: Iwanami Shoten (ed.) (2001). Watanabe, Skrzypczak and Snowdon (eds.) (2003), Chronological Table of Japanese History and Chronological Table of World History. ESRI of CAO (b) (2001–2004), Appendix: Postwar Economic Timeline

Economic democratization consisted mainly of three reforms that were imposed by the General Head Quarter (GHQ): Antitrust measures (1946–1947) (Zaibatsu dissolution, and so on), land reform (1946–1950), and labor reform (1946–1947). Other policies that underwent democratization were the education system and the political system, including the establishment of a new constitution of Japan. Guided by the GHQ, Japan established a new Constitution of Japan (1947) instead of the prewar Imperial Constitution. Military forces were permanently banned by Article 9 of the constitution. Various forms of democracy were introduced such as voting rights to all adults aged 20 years and older, and the election introduced the House of Councillors (Upper House) as well as the House of Representatives (Lower House). Using the American model for its education system, Japan introduced a 6-3-3-4 system, and coeducation was introduced at the compulsory stage.

Reflecting the deepening of the Cold War, the GHQ’s policy changed from that of weakening the Japanese economy to making it a strong ally. For example, the GHQ issued a political order depriving government employees of the right to strike (August 1948) and acquiesced in political firings, the “red purge” in 1949. However, important reforms and changes of political and education systems strongly transformed Japan to a democratic society. The power elite was replaced by the young generation.

The San Francisco Peace Treaty restored Japan’s sovereignty on April 28, 1952. The occupation of Japan by the Allied Powers ended. The US–Japan Security Treaty (Japanese–American Security Pact) also concluded in 1952. From this date Japan became truly independent as it was able to determine economic policies by itself but continued to rely on the United States for national security.

In 1955, the LDP (Liberal Democratic Party) was formed by the merger of two major conservative parties, and the SDP (Social Democratic Party) was unified in the same year. The LDP held power until 1993 with the SDP as the main opposition. This was the so-called “Parties system since 1955.” The LDP’s policy was to protect the capitalistic economic system. The Japanese bureaucrats (particularly central government careers centered on Kasumigaseki, Tokyo) had the real power in policy decisions through legislation. They supported the conservative party, and their ideology was economy-oriented—the quest for Japan to become a great economic power.

A serious political dispute erupted among both political parties and the general public about an amendment of the US–Japan Security Treaty (1960). As a whole, however, political stability was maintained under this system under which the Japanese society and economy developed.

The LDP, after the general election (1993), precipitated reorganization of the political party. The Hosokawa administration was launched, which was the first non-LDP government since 1955. LDP returned to administration in the coalition government as a major party in 1994. Since then, except for a long-lasting Koizumi administration (5 years and 5 months), Japan has almost lost its political stability. (See also  http://Table 8.1 in  Chapter 8.)

1.2.2 Economic Landscape

In the following discussion, we roughly classify, by the average growth rate, the Japanese postwar economy into four periods: recovery period (1946–1950), rapid growth period (1950–1973, 9.3 percent), moderate growth period (including the bubble age) (1976–1991, 4.3 percent), and stagnation period (1992–2003, 1 percent) (annual average growth rate in parentheses).

This rough classification is confirmed in Fig. 1.1. We observe an event or a shock between the periods that made a great change in the growth rate. The Korean War (June 1950) took place between the recovery and the rapid growth periods. The special export demand created by this war became the springboard for the beginning of strong growth. The world economy was hit by the first oil crisis (October 1973), which terminated Japan’s rapid growth period. Since the collapse of the bubble in the early 1990 s, the Japanese economy has stagnated. We examine an economic landscape by period in the next section.
Fig. 1.1

Economic growth. Source: CAO of GoJ (2009), Long–term economic statistics obtained from homepage ( (Compiled by the author)

1.3 Economic Landscape by Period

1.3.1 Recovery Period

As we mentioned above in the political landscape, the GHQ imposed three reforms. First were three antitrust measures: dissolution of the Zaibatsu (1946–1951), the enactment of the Anti-Monopoly Law (1947), and the Elimination of Excessive Concentration of Economic Power Law (1947). Second was the land reform, by which the cultivated percentage of farmland by tenant farmers greatly declined to 10 (1950) from 46 (1946). The reform created a middle class because agricultural production increased rapidly. This contributed to income equality and political stability in the agricultural sector in Japan. Third was the labor reform, introducing the Labor Union Law (1946), the Labor Relations Adjustment Law (1946), and the Labor Standards Law (1947). As a result, labor unions spread quickly and the unionized percentage of workers jumped from 3.2 (1945) to 41.5 (1946), then 53 (1948). This increased the number of strikes and labor-management conflicts.

Tax reform was not imposed by the GHQ, which was implemented during the occupation period in accordance with the recommendations of the Shoup Mission led by American economist Carol Shoup in 1949 and 1950. A comprehensive income tax was implemented and a proportional corporate tax system was adopted. The tax reform was not only important for investment and technological innovation but also contributed to the high rate of savings for investment. These important reforms paved a way for the rapid economic growth.

With Japan’s defeat after the war, the Japanese economy had three serious problems. First was expected to be huge unemployment. Second, the material losses of the war were 25 percent of national wealth, assets, and structures. Third, a rapid inflation developed. For the first problem, large-scale unemployment never actualized. To cope with above hardship, the Japanese government set forth two important goals during the years 1946–1948: (1) To accelerate the recovery of productive capacity in major industries, the government directly planned the growth of coal and steel industries in 1947 (so-called priority production plan). (2) To tame three-digit inflation, the government took drastic action (a “new yen” conversion) and direct control of prices and resource allocations. Despite every possible effort, the Japanese government could not combat inflation.

The Supreme Commander for the Allied Powers (SCAP) appointed the American banker Joseph Dodge to work in Japan in 1948. The government implemented his recommendation in 1949. The Dodge plan included a balanced budget, suspension of new loans from the Reconstruction Bank, and the reduction and abolition of subsidies. The exchange rate was set at $1=360 yen. As a result, the economy went into a severe deflationary spiral, but severe recession was averted by the special export demand created by the Korean War (June 1950).

1.3.2 Rapid Economic Growth Period

As a result of the San Francisco Peace Treaty in 1952, Japan became politically independent. Japan’s miraculous rapid economic growth began in the early 1950 s and lasted for nearly 20 years with an average annual growth rate of about 10 percent. The international background at the time provided for the rapid growth. Such factors included the low material prices that Japan needed to import, and the establishment of the IMF (1947) and GATT (1948) that promoted world progress.

We note some reasons for the rapid economic growth. (1) Since the beginning of the 1950 s, foreign technology was introduced into Japan, bringing a high rate of continuous productivity increases. (2) The high saving rate of Japan provided sufficient funds to support the high investment rate. The Japanese tax and financial systems stressed the important role of the high rate of savings and its use; this effort was brought under the oversight of the Ministry of Finance (MoF) (called the Fiscal Investment and Loan Program, FIL). (3) The budgets for defense forces were small, and funds were directed to improve social infrastructures and government investment projects. (4) Japan’s monetary and fiscal authorities made sound policy decisions during the period 1955–1964.

Japan initiated the following policies: (1) The Economic Planning Agency (EPA) has announced 5-year plans, setting the targets for the growth rate of GNP and its demand components. The plans were indicative and more forecast-oriented than directives. The proposed plans signaled the government’s commitment to growth, giving confidence to industrial leaders. (2) The Ministry of International Trade and Industry (MITI) guided wise investment by setting target industries to identify sunrise industries and get them up and running quickly, including the allocation of foreign reserves for the purchase of capital equipment and raw materials, and the subsidization of loans for investment in structures and equipment. MITI also supplied administrative guidance (gyosei shidou) to regulate the speed of investment to avert excessive competition due to overcapacity. (3) Japan took a free trade policy; however, exceptions were the capital control against foreign capital and the infant industry protection. Japan became a member nation of OECD in 1964 (which was the year that the Tokyo Olympics were held), and decided to liberalize capital transactions. However, it was not until December 1980 that capital transactions became free in principle. The fixed exchange rate continued until the Nixon Shock or dollar shock (1971) and then the fixed exchange system moved in the float (1973).

1.3.3 Positive Effects (Economic Results)

The obvious economic results were greater increases of real GDP, per capita GDP, and real wages, to which the high growth rate of productivity largely contributed. Furthermore, the unemployment rate became extremely low at a little more than 1 percent (see  http://Fig. 2.1). As a result, living conditions were improved, the middle class-consciousness greatly increased from 72.4 (1958) to 90.2 percent (1975), and the low class-consciousness fairly decreased. Social security system was improved. Livelihood protection was largely improved in terms of aid value. The Japanese universal medical care and the pension systems started in 1961. Infrastructure was also improved. Prime Minister Ikeda adapted “National Income Doubling Plan” (1960), which was an epoch in Japan as the first case of introduction of the infrastructure into the policy terminology. Every economic plan, since Ikeda’s plan has followed the goal-setting of the infrastructure improvement by sector.

1.3.4 Negative Effects

Economic growth also brought various kinds of negative effects or distortions. Many infrastructures were rapidly improved during the rapid economic growth period; however, infrastructures fell behind production capital, and, among infrastructures, public assets related to daily life lagged further behind industrial infrastructures causing social imbalance. The negative results were more or less caused by social imbalance.

Concentration to metropolitan areas caused social maladies, pollution, congestion, and high cost of living on the one hand. On the other hand, depopulated areas faced a rapidly aging society and brought devastated places. To cope with the problem of depopulated areas, the government put the Act on Special Measures for Depopulated Areas in force and spent a large amount of money in the 1970 s and again the 1980 s. The population outflow slowed down, infrastructures were improved, but the problem remained.

The outstanding features of the environmental disruption process were (1) an extremely rapid expansion of heavy and chemical industries, (2) the progress in the degree of urbanization far in excess of demographic changes, and (3) the explosive boom in the mass consumption market, notably private cars. All of these caused woeful lags in the provision of complementary social overhead capital. The numbers of claims to pollution greatly increased. To cope with the problem, the government belatedly took various countermeasures; such was an enactment of the Basic Law for Environment Pollution Control (1967) and the establishment of the Environment Agency (1971). Then the government put the regulation into practice and fostered antipollution investment. As a result, the numbers of major claims to pollution greatly declined since the peak (1972) until 1995 (see  http://Table 6.1 and  http://Fig. 6.4).

Japan suffered from the high rate of inflation during the period from 1960 to the early 1980 s. Inflation was more or less a cost of high economic growth, which was undesirable because of its adverse effects on income distribution. The population left behind by the advancing times were large numbers of low-income groups whose income would be at less than the government aid level. Differentials of government-assisted ratios among prefectures greatly increased and remained at its high level (see  http://Fig. 6.5).

1.3.5 Moderate Economic Growth Period

The first oil crisis (1973) had a serious effect on the economy causing recession and an extraordinary price hike (see  http://Fig. 2.2). The Japanese economy experienced negative growth for the first time in the postwar period. However, it was very successful in coping with the oil crisis. From the early 1980 s Japan maintained price stability. Japan’s trade surplus was positive after the first oil shock and enormously expanded from 1981 (see  http://Fig. 2.7).

To cope with the huge trade deficit with the United States, the G5 agreed to further the dollar decline, under the Plaza Accord (1985). After this agreement, the Japanese yen greatly appreciated during the short period (from 237 to 159 yen to the dollar in terms of the monthly closing average during the 10-month period to July 1986) (see  http://Fig. 2.7). This caused a serious shock to Japanese export industries and generated depression. The impact was so serious for these industries that the Bank of Japan reduced the official rate to the record low of 2.5 percent in February 1987 (until that time). This triggered an expansion of loans for speculative trading in shares and real estate. To cope with recession, the government initiated a huge emergency spending package.

Everything seemed to be going well. The share prices began to increase from the 1983 low and escalated in the following years. Real estate price also started to improve. Participants were involved in a buy-and-sell game, believing in those price increases (see  http://Fig. 7.1). However this situation was unsustainable. Economic rationale could not explain the high transaction prices (see  http://Table 7.1).

Average share prices rose almost 4.9 times (to the peak in 1989) from the 1982 year-end price. During the same period, average land prices of commercial and residential use in six major cities rose 5.0 and 2.9 times, respectively. The nationwide (all urban) land price grew by a factor of 1.7 from 1983 to 1991, equivalent to that of GDP (nominal) growth. Local land prices were not greatly affected in the bubble years (see  http://Fig. 7.1). As a result, estimated capital gains in 1985 were enormous accounting for 601 trillion yen (1989) of corporate shares, and 1448 trillion yen (1990) of land.

During the bubble economy, we observed the following: (1) deterioration of asset and income distribution, particularly asset distribution, (2) large distortions of the resource allocation, and (3) serious housing problems.

1.3.6 Stagnation Period

The bubble economy burst in 1991. The average share price peaked in December 1989, fell 40 percent in 1990, declined until 1992, and then fluctuated to the bottom in 2002. On the other hand, the land price for commercial and residential use in six major cities increased until March 1990, and then continued to decline until 2005, which became 13 and 34 percent (1975 and 1983 levels), respectively against the peak.

From 1985 onward, capital gains of corporate shares greatly increased and then rapidly decreased in 1990 and 1992, and almost disappeared until 1998. The story was true of land also. Capital gains of land greatly increased from 1985 and then continuously decreased. The amount was possibly nil in the early 2000s (see  http://Fig. 7.2 and  http://Table 7.2).

There were serious consequences of the bubble burst. First, the transfer of factories abroad increased. The Japanese exchange rate to the dollar was 145 yen in 1990 and appreciated to 102 yen (annual average) in 1994. The dollar was shaken after the monetary and financial crises of the North American Foreign Trade Agreement (NAFTA), when the yen rate to dollar peaked at 79.75 yen in April 1995 (see  http://Fig. 7.2). This resulted in serious difficulties for Japanese export industries and caused them to transfer their factories abroad, leading to the industrial hollowing-out of Japan.

Second was the huge nonperforming loans (NPLs) in Japanese banks. NPLs became conspicuous in 1993 and the amount increased until fiscal year (FY) 2001, peaking at 52.4 trillion yen at the end of March 2002. At that period, these amounts declined and the critical period nearly ended in FY2003, at which time the cumulative disposal from 1993 exceeded 100 trillion yen (see  http://Fig. 8.2).

Third, the financial crisis (outstanding government bonds) was a result of the government policies. After the Plaza Accord, the national debt service payments ratio was about 20 percent. After the bubble burst, the dependency rate of GB issue to general accounts increased and exceeded 40 percent in 2003. As a result, GB outstanding amounted to 581 trillion yen of public bonds and some 26 trillion yen of the long-term borrowing (March-end 2010, government outlook) (see  http://Fig. 8.3).

Neither the monetary policy of the low interest rate nor the fiscal policy of expanding public investment succeeded in bringing about economic recovery. The Koizumi administration took office in April 2001 carrying out the strong “structure reforms” policy, and the long-awaited economic recovery began in 2002.

1.4 Toward a Welfare-Oriented Society: Some Lessons from Rapid Economic Growth and the Bubble Economy

We now know that the theory of equating the growth of GNP with that of economic welfare is flawed. The GNP concept had measurement failures and conceptual limitations from the welfare viewpoint. Revising GNP or GDP formed NNW and the improved GPI from the viewpoint of welfare: subtracting nonwelfare items (pollution, military expenditure, and so on) and adding welfare items by monetary assessment (housekeeping work, voluntary activities, etc.). NNW has a weakness that it is not an index based on effective demand. Both categories of GNP and NNW are complementary, both of which are needed. The current GDP should be used for the practical purpose of judging market activity, but it is not a vitally important factor.

We give top priority to GPI, so that the concrete policy should be taken based on whether the policy is GPI enhancing or not. At the same time, important findings of happiness research should be taken into consideration. Examples are threshold income for the living satisfaction level, and substantial wellbeing benefits from institutional factors.

We can draw some lessons for relaxing or weakening the influence of the bubble. As George Soros (1998) mentioned, generating the bubble economy could not be avoided. The bubble may be guided by the nature of human beings: greediness. In this respect, government regulations and restrictions over the market would be effective to some extent, but may have limitations because lessons related to people and business reactions, business ethics, and the spirit of compliance are questions for the realm of psychology, morale, and philosophy. People’s behavior depends on their value system. An important background may be on education in a broad sense, which is dealt with in the last chapter.

Our concluding comment considers lessons from the bubble economy from the viewpoint of a welfare-oriented society. The above-mentioned costs of the bubble during and after the bubble were all deteriorating effect on welfare-oriented society. Those costs were serious and extremely huge. For a whole society, the bubble economy was not a zero-sum game but everyone lost. Considering these sad situations, we offer two kinds of advice. First is to initiate policy controls and market regulations, which may relax or weaken the effect of the bubble. Second is to set a safety net for the people who need help sustaining their living standards or are victims of economic fluctuations or disaster. In this respect, we share Rawl’s (1971) idea in a broad sense.

1.5 Quality of Life in the Mature Society

Our methodological standpoint to construct a welfare-oriented society is to use GPI. Both GDP and GPI are complementary, but we give top priority to GPI. We consider a mature society as a society in advanced countries with more than GNP per capita in ppp (purchasing power parity) 1995 of about US$10,000.

Our systemic design of this society is still in an infancy stage and has three important properties. First is the safety net. Society prepares for the social security such as livelihood protection, medical insurance, and pension. The government serves a major function of this safety net, but the company and the household also serve part of the function. Second is a safe society, which has the following properties: low crime rate, no pollution, small numbers of traffic accident, safe food, and so on. Third is keeping social balance between privately produced goods and services and those of the public sector.

The most important foundation on which to build our ideal society may be education in a broad sense that includes social, family, and school education. The living satisfaction level highly depends on individual aspirations, and this desire is insatiable without a moderate sense of life (a life balance between the material and the other), which relates to the philosophy of life or the way of life.

1.6 The Plan

This book is organized as follows. The first chapter outlines my intention and gives a sketch of the book. Overview of postwar Japan includes the political and the economic landscapes; in addition, the economic landscape by period is examined. We propose a welfare-oriented society as an outcome to rapid economic growth and the bubble economy. This leads to our goal, “quality of life in the mature society.”  Chapter 2 presents historical changes in the Japanese economy from various aspects using figures and tables that will give the reader an overview of the Japanese economy during the postwar period. This includes labor force status (unemployment), price increases, income and income distribution, structural changes in the economy, and international concern.

 Chapter 3 deals with above-mentioned subject, “Recovery Period.” We examine “Rapid Economic Growth Period,” “Positive Effects,” and “Negative Effects,” in  Chapters 4,  http://5, and  http://6, respectively.  Chapters 7 and  http://8 mostly correspond to “Moderate Economic Growth Period,” and “Stagnation Period,” respectively.  Chapter 9 corresponds to “Toward a Welfare-Oriented Society: Some Lessons from the Rapid Economic Growth and the Bubble Economy.”

In  Chapters 10 and  http://11, we look at some of the important economic issues for Japan that may closely relate to a welfare-oriented society.  Chapter 10 deals with an important current issue: income distribution, asset distribution, and the relative share of income. We observe changes in the Japanese income distribution during the postwar period and discuss where Japan ranks internationally. We analyze asset distribution by distinguishing between financial assets and physical assets and present some properties of asset distribution. Then we discuss the matter of the relative share of income: estimates, properties, and the theoretical explanation.  Chapter 11 looks at Japanese household structure and the pension issue. In  Chapter 10, we examine the importance of the effect of the demographic change on income distribution, which also has a close relationship with the pension issue. For the pension issue, we deal with its brief history, serious concerns, and solutions.

 Chapter 12 summarizes the quality of life as the ultimate lesson of this research. We briefly outline a proposal for a basic design toward achieving a high satisfaction level society. That is, the “quality of life in the mature society” is the direction in which all policies should lead.

1.7 Note

  1. 1.

    We now use GDP as the conventional measurement. After World War II, Gross National Product (GNP) was used for many years, so we use this category in most of the chapters. However, the same discussion holds true for GDP. GNP is not an appropriate measure for viewing domestic economic activity when the country has a relatively large amount of net factor income received from abroad. The United States and Japan changed their reporting forms to GDP from GNP in 1991. In the 93 System of National Accounts (93 SNA) proposed by the United Nations in 1993, importance was given to the form of GDP and GNI (gross national income) was adopted instead of GNP. Japan replaced the former system with this in October 2000. GNI and GNP are the same amount in nominal terms, but are different in real terms. In real terms, GNI includes trading gains but GNP does not. Trading gains are economic gains that are brought by the change of the terms of trade expressed by “export price index/import price index.”



  1. Nordhaus, W. and Tobin, J. (1971). Is Growth Obsolete? Cowles Foundation Discussion Papers 319, Cowles Foundation, Yale University. Published in (1972) Economic Growth, Fifties Anniversary Colloquium (NBER Series No. 96E) (pp. 1–80). New York: Columbia University Press.Google Scholar

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© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.St. Andrew’s University (Momoyama Gakuin University)OsakaJapan

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