Economic Development of Japan

No.4 Meiji 2&3Meiji Mura

Cum

ula

tive

his

tory

, E

do a

chie

vem

ents

,

nat

ional

unit

y a

nd n

atio

nal

ism

Private-sector dynamism

and entrepreneurship

(primary force)

Policy support

(supplementary)

Japan’s economic growth was driven mainly by private

dynamism while policy was also helpful

Policy was generally

successful despite criticisms:

--Power monopoly by former

Satsuma & Choshu politicians

--Privatization scandal, 1881

--Excessively pro-West

--Unfair by today’s standard

Rapid

industrialization

esp. Meiji and

post WW2 period

P.56

Chronology of Meiji Industrialization

1870s - Monetary confusion and inflation

US banking system adopted with little success

Printing money to suppress Saigo’s Rebellion (1877)

Early 1880s - Matsukata Deflation

Stopping inflation, creating central bank (Bank of Japan)

Landless peasants & urban poor (“proletariat”) emerge

Late 1880s - First company boom

Osaka Spinning Company and its followers

Series of company booms (late 1890s, late 1900s, WW1)

Postwar management (after J-China War & J-Russia War)

Fiscal spending continued even after war BoP crisis

Active infrastructure building (local gov’ts) & military buildup

Masayoshi Matsukata

(Councilor of Finance)

PP.57-58

P.230

Rice Price per Koku (Yen/150kg)

0

5000

10000

15000

20000

2500018

73

1876

1879

1882

1885

1888

1891

1894

1897

1900

1903

1906

1909

1912

Matsukata deflation

Source: Management and Coordination Agency, Historical Statistics of Japan, Vol.4, 1988.

Inflation in Meiji Period

0

50

100

150

200

2501873

1874

1875

1876

1877

1878

1879

1880

1881

1882

1883

1884

1885

1886

1887

1888

1889

1890

Money in ci rculation(mi l l i on yen)

R ice price

(1868=100)

Matsukatadef l ati on

Saigo's Rebel l i on

Money and Inflation in Early Meiji

0

1000

2000

3000

4000

5000

6000

1884

1885

1886

1887

1888

1889

1890

1891

1892

Banking

Transport

Commerce

Industry

Agriculture

0

50

100

150

200

250

300

350

1884

1885

1886

1887

1888

1889

1890

1891

1892

Banking

Transport

Commerce

Industry

Agriculture

First

Company

Boom

Number of

companies

Legal capital (million yen)

Yoshio Ando ed,

Databook on Modern

Japanese Economic

History, 2rd ed, Tokyo

Univ. Press, 1979.

Technology Transfer

Technical Experts(Graduates of Technical Univs. & High Schools)

0

2000

4000

6000

8000

10000

12000

14000

16000

1880 1890 1900 1910 1920

Private sector

Public sector

PP.62-65

1. Foreign advisors (public and private sector)

2. Engineering education (studying abroad, Institute of

Technology; technical high schools)

3. Copy production, reverse engineering, technical cooperation

agreements (esp. automobiles, electrical machinery); sogo shosha

(trading companies) often intermediated such cooperation

Private-sector experts, 1910

Mining 513 (18.0%)

Textile 300 (10.6%)

Shipbuilding 250 (8.8%)

Power & gas 231 (8.1%)

Trading 186 (6.5%)

Railroad 149 (5.2%)

Food 149 (5.2%)

TOTAL 2,843 (100%)

Studying Abroad (Early Engineers)

• First students: bakufu sent 7 students to Netherlands in 1862 (naval training)

• By 1880s, 80 Japanese studied engineering abroad (shipbuilding, mechanics, civil engineering, mining & metallurgy, military, chemistry)

• Destination: UK (28), US (20), France (14), Germany (9), Netherlands (8)

• They received top-class education and could easily replace foreigners after coming back

• They mostly worked in government (no modern private industries existed at first)—Ministry of Interior, MoF, Army, Navy, Ministry of Industry

P.64

• 1871 Koburyo of Ministry of Industry; 1877 renamed to Kobu

Daigakko; 1886 merged with Tokyo Imperial University (under

Ministry of Education)

• First President: Henry Dyer (British engineer) with philosophy

“judicious combination of theory and practice”

• Preparatory course (2 years), specialized studies (2 years), internship (2

years) + government-funded overseas study for top students

• 8 courses: civil engineering, mechanical engineering, shipbuilding,

telecommunication, chemistry, architecture, metallurgy, mining (classes

in English)

• Producing top-class engineers (import substitution)—Tanabe Sakuro

(designer of Biwako-Kyoto irrigation canal & power generation);

Tatsuno Kingo (builder of Tokyo Station, BOJ, Nara Hotel, etc.)

P.64Kobu Daigakko 工部大学校

(Institute of Technology)

Parallel development or

“hybrid technology”

Employment Structure of Prewar Japan

0%

20%

40%

60%

80%

100%

1885

-90

1890

-95

1895

-00

1900

-05

1905

-10

1910

-15

1915

-20

1920

-25

1925

-30

1930

-35

Indigenous (trade &service)

Indigenous(manufacturing)

Modern industries

Agri, forestry,fishery

Manufacturing: Share of Output

0%

20%

40%

60%

80%

100%

1885

-90

1890

-95

1895

-00

1900

-05

1905

-10

1910

-15

1915

-20

1920

-25

1925

-30

1930

-35

1935

-40

Modernindustries

Indigenousindustries

PP.65-67

Small Large

Indigenous I I*

Modern M* M* indicates hybrid status

Tec

hnolo

gy

Factory size

Neoclassical Labor MarketDuration of Male Employment in Manufacturing

0

5

10

15

20

25

30

35

< 1 1 2 3-4 5-6 7-9 10>

Years

Perc

ent

1902

1912

PP.79-80

Japanese workers:--Too much job hopping, do not stay with

one company

--Lack of discipline, low saving

--Barrier to industrializationSource: Ministry of Agriculture and Commerce, Survey of Industrial Workers, 1901.

Female domestic workers:--Urban industrialization and rural poverty and labor surplus

female migration from villages to cities

--End of Meiji to early Showa were the peak period of jochu (housemaid)

--17.5% of non-farm female workforce, second largest after textile workers (1930)

--5.7% of households hired jochu (1930)

--There were both young and old jochu, some living-in and others commuting

--International comparison (female non-farm employment share): UK 1851

(11.4%), US 1910 (11.8%), Thailand 1960 (10.6%), Philippines 1975 (34.3%)Source: Konosuke Odaka, “Dual Structure,” 1989.

Wage: Gender Gap

Farm employment Textile weavers Domestic servants

Sen per day Sen per day Yen per month

Male Female F/M % Male Female F/M % Male Female F/M %

1885 15.1 9.7 64.2% 12.3 7.5 61.0% 1.38 0.75 54.3%

1892 15.5 9.4 60.6% 12.0 8.4 70.0% 1.55 0.82 52.9%

1895 18.5 11.3 61.1% 18.3 11.6 63.4% 1.64 0.90 54.9%

1900 30.0 19.0 63.3% 33.0 20.0 60.6% 2.70 1.56 57.8%

1905 32.0 20.0 62.5% 34.0 13.0 38.2% 3.22 1.79 55.6%

1910 39.0 24.0 61.5% 49.0 27.0 55.1% 4.56 2.96 64.9%

1915 46.0 29.0 63.0% 46.0 30.0 65.2% 4.97 3.13 63.0%

1920 144.0 92.0 63.9% 175.0 95.0 54.3% 28.86 22.68 78.6%

Source: Ministry of Agriculture and Commerce, "Table of Wages."

Note: 1 yen = 100 sen.

Konosuke Odaka: World of Craftsmen,

World of Factories (NTT Publishing, 2000)

• In Japan’s early factories, traditional shokunin (craftsmen) and modern shokko (workers) coexisted.

• Craftsmen were proud, experienced and independent. They were the main force in initial technology absorption.

• Workers received scientific education and functioned within an organization. Their skills and knowledge were open, global and expandable.

• Over time, craftsmen were replaced by workers. Experience was not enough to deepen industrialization.

Prof. Odaka proves these points by examining the history of concrete firms in metallurgy, machinery and shipbuilding.

Prof. Odaka’s Working Hypotheses

• In the early years of factories, Japan’s traditional craftsmen in mechanics and metal working played key roles in absorbing new technology. Farmers and merchants were not suitable for factory operation.

• However, trained engineers, not craftsmen, created a modern production system suitable for Japan.

– Adaptation of imported system to Japanese context

– Production management system, including hired labor

– Skill formation system based on formal education and OJT

• The gap between craftsmen’s skill and modern technology had to be bridged. Hired foreigners, then Japanese engineers, provided this bridge up to WW2.

Monozukuri (Manufacturing) Spirit• Mono means “thing” and zukuri (tsukuri) means “making” in

indigenous Japanese language.

• It describes sincere attitude toward production with pride,

skill and dedication. It is a way of pursuing innovation and

perfection, often disregarding profit or balance sheet.

• Many of Japan’s excellent manufacturing firms were founded

by engineers full of monozukuri spirit.

PP.65, 179-181

Sakichi Toyota

1867-1930

Konosuke Matsushita

1894-1989

Soichiro Honda

1906-1991

Akio Morita (Sony’s

co-founder)

1921-1999

Meiji Mura (Meiji Village) is an

open-air museum of Meiji

architecture and culture, Inuyama

City, Aichi Prefecture www.meijimura.com/english/index.html

Toyota Techno Museum in Nagoya

displays textile machines in actual

operation, including Sakichi Toyota’s

1924 invention. It also explains

Toyota’s car history.www.tcmit.org/english/index.html