skyrocketed. The effect on the global economy was one of stagflation as a result of the post-oil crisis prices, but Japan became an efficient energy user that was able to cut its imports of other raw materials from three percent of GNP over the 1960s to 1.6 percent by 1984. It suffered inflation during the mid-1970s, but recovered more quickly than the rest of the world, and rapidly drew ahead in the world economy (5).
As for the yen, it more than doubled against the dollar from 1985 to 1988, and the Japanese economy, as expected did fall into a recession. But internal demand began to grow, and the economy grew at its fastest rate in more than six years. Unemployment increased briefly, then fell back again. The stock market crash of October 1987 also had Western analysts convinced that the Japanese stock market would suffer the greatest losses, but the Nikkei came through that experience relatively unscathed, or at least not damaged nearly to the level that others expected.
Part of the reason that the nation is able to enjoy the strong economy that it does is its lack of concentration on military and defense spending. While this makes up a considerable segment of the American and Western economies, for example, contributing significantly to GNP, Japan has almost no military spending. This frees resources for use in the private and commercial sector.
While Japan's economic strength has come about largely because of its ability to exploit foreign technology and foreign markets, its foreign policy remains tangled. Its economic position has moved the country forward to the point that it carries significant political weight on the world stage, and as a result, its foreign ministers have had increased presence on the world's key foreign policy issues.
Economic strength has long been a basic foundation of power. Britain, France and the former Soviet Union are all powerful forces on the global scene today, yet their econom...