Twentieth-Century Japanese Commerce and Industry

Abstract

The modern Japanese business system evolved through three periods of expansion and retraction in the twentieth century. The first period began in 1896 after Japan’s success in the Sino-Japanese War of 1894–95. A large portion of the $75 million Chinese war indemnity was used by the Japanese government to set up model industrial plants and to provide entrepreneurs in selected strategic industries with subsidies. Industries that benefited most from this early investment included metallurgy, electrical equipment and electrical wire manufacturing, and machinery and machine tool production. With her current account in balance, Japan went on the gold standard in 1897, further stabilizing the modern financial system. This period came to a close in 1920 when, after the end of World War I, foreign producers returned to peacetime economies, resulting in a global glut of consumer and industrial goods. This glut drove down prices and profits in Japan as well as elsewhere, forcing many firms to merge or fail.