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The Secret of Japan’s High Economic Growth

The Secret of Japan’s High Economic Growth

Japan made a high economic growth from 1954 to 1973. The average growth rate was over 10% per year. Western people called it “Japanese miracle”. In 1968, Japan became to have the world second highest GNP (gross national product) and it continued for 42 years until China surpassed Japan in 2009. There are many different factors for this success explained as follows.

Expansion of domestic market by the rapid population growth

After the decrease of the population in Japan by the WWII, the population started increase again. In 1950, the population was 83 million, and reached to 112 million in 1975. Nearly 30 million people increased in 25 years. The average birthrate was 2.13 from 1960’s to early 1970’s. According to the increase of the population, the economy made a big development because of the expansion of the domestic market. People were very eager to have home electrical appliances such as TV, refrigerator and washing machine. These three are called “Three sacred treasures” named after the three sacred imperial treasures.

Inexpensive high-quality labor force

The salary of the workers in Japan compared to the western workers was low. And the currency exchange rate was fixed, 1 USD was 360 JPY until 1971. So Japan could produce the products relatively cheaper and have an advantage to export.

There was another factor. Japanese people are known as workaholic people. They are loyal to the company and don’t mind to work for long hours. That’s because of the unique systems introduced to Japanese companies such as “Lifetime employment system” and “Seniority system”. They made the companies grow and also the national economy accordingly.

Now, 1 USD is about 110 JPY. The value of the Japanese yen has increased more than three times, and Japan have been losing the advantage of export because many newly industrialized countries such as China, South Korea and countries in Southeast Asia have lower wage workers and the quality of the products have been increasing.

Improvement of technology

Japanese people may not be the inventors, but Japanese companies are surely good at making improvement. For example, car industry had developed in the USA and in the early 20th century, Japan imported or imitated American cars, but they are too big for the narrow Japanese roads. So, Japan started to make smaller cars together with the improvement of the technology. It was same in the field of electronic products. American tape recorder was too big, so SONY made Walkman, which made a big success in selling to all over the world.

Success in export

As explained above, Japan made high quality products and started to export. These products were accepted in the western countries because of the quality. Japan doesn’t produce almost no natural resources such as petroleum and gas. So Japan needs to import natural resources and exports industrial products to get foreign currency especially US dollars. It has become typical style of Japanese business.

Infrastructure development

Japan has developed infrastructure such as expressway and Shinkansen known as bullet train. The Shinkansen started the service in 1964 between Tokyo and Osaka, and now, you can go to Hokkaido and Shikoku riding on it. Its fastest speed is 320km/h, so you can go to Osaka from Tokyo only in 2 hours and a half. Because of these networks, manufacturers can distribute the products throughout Japan very quickly and sufficiently.

High saving rate

The saving rate of Japan between 1964 and 1968 was 36.2% while the digit in the USA was 15.7%. These figures are the percentages of the saving in the GNP. Japanese people used to save more money than other countries because of the following reasons. The ratio of young people who earned money than spent in the population structure was high. Other reasons are that Japanese people tend to prefer stability by having savings in preparation for the unexpected matters and people also didn’t rely on the social security system.

This high saving rate enabled to have enough money in the bank to lend to the companies. And the companies could borrow money to expand their business relatively easily.

Now, the situation has changed. The saving rate has dropped to less than 5% in these ten years.


By these factors explained above, Japan made a big success in economy until 1990’s.

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