anufacturing countries in this business environment. Fourth, Japanese government and industry needed to accept and institute policies to deal with the changing environment of competition resulting from a recovery by the U.S. industries of their competitiveness. And fifth, the economy would need to deal with the effects of the global shift from an industrial technological to more information integrated and knowledge integrated types of technologies.
JapanÆs economy was devastated by World War II. Thus, in the 1940s, the government instituted a policy of ôcatch-upö to make JapanÆs economy equal to and competitive with the larger industrialized Western nations. This catch-up process involved a process of economic and industrial development in which Japan followed the West's advanced economies as its target. It involved, in particular, a level of government intervention into the economy that, while productive in the past, may now be hindering JapanÆs economic progress.
Growth in the post-war period was driven by exports and public investment. Japan has had a trade surplus since the 1960s. Since the 1980s, however, other countries have applied increasing pressure on Japan to limit its export growth and open its domestic markets to foreign competition. The institutional structure of the Japanese economy is controversial, given the role it has played in country's economic development. On the one hand, unique features of the Japanese economy were the driving force behind its catch-up with other industrialized nations in the post-war period. However, on the other hand, many mainstream economists in the United States and in Japan maintain that Japan developed in the post-war period not due to but despite of what they consider to be a "backward institutional structure," which was characterized by too strong emphasis on long-term relationships and too much government regulation at the expense of market competition and econom...