The origins of Japanese civilization are buried in legend, with the country's first written records dating from the sixth to the eighth centuries A.D., after Japan had adopted the Chinese writing system. Early in the sixth century, Chinese Buddhism was introduced to Japan by way of Korea, and with it came many Chinese governmental and fiscal practices. A society of individual military rulers, each responsible for his own area, evolved into an imperial system codified in the Taiho-ryoritsu (Great Treasure Code) of 701. Imperial control was gradually spread throughout the main island of Honshu and eventually to all of Japan by military conquest. The leaders of these conquests were rewarded with large landholdings. By the tenth century, these military leaders had evolved into a warrior class--the bushi, or samurai--that supplanted the central authority of the emperor, and Japanese society evolved into a feudal economy in which the large landholdings of the samurai were supported by local peasants, artisans, and merchants. Beginning in the seventeenth century, the Tokugawa shoguns, like earlier military rulers under the same title, asserted control over a newly reunified Japan. They also closed the country to outside influences and developed the national premodern economy.
When Japan was reopened in the middle of the nineteenth century, the traditional political, military, and economic systems were no match for powerful foreign intruders, and the shogun's government failed. It was replaced by a new oligarchy of strong regional leaders who brought about the Meiji Restoration--the ostensible restoration of imperial power--in 1868. The Meiji rulers carried out wholesale radical reforms. The government hired thousands of foreigners to teach modern science, mathematics, and foreign languages and sent a multitude of students and envoys to Europe and North America to learn the lessons that had bypassed them during the years of exclusion. They returned to combine foreign ideology and modern methods with Japanese traditions, devising a governmental and economic system that was totally new yet uniquely Japanese. The government also built factories and shipyards to help private businesses get started. These businesses developed rapidly into large conglomerates, some of which dominated the world of business in the early 1990s. Transportation and industry were modernized; the military was reorganized and equipped with up-to-date weapons; and under the 1889 constitution, Japan took the first steps toward representative government.
For the remainder of the nineteenth century and into the twentieth century, the economy grew at a moderate rate, although it remained heavily dependent on agriculture. After the development of a strong economic and industrial base at home, successful wars annexing Taiwan and Korea, and the growth of spheres of influence over a large part of the Chinese mainland, Japan began to exert its influence throughout the Asia-Pacific region. In the late 1920s, industry outstripped agriculture, and in the 1930s industry, little affected by the Great Depression plaguing the rest of the industrialized world, continued to grow. Using the strong Japanese economy to support their imperialistic designs, ultranationalist military officers succeeded in stifling the young democracy and took control of the government in the name of the emperor. With their power unchecked, the militarist government led the nation into a series of military conflicts that culminated in the almost total destruction of the nation during World War II.
World War II destroyed nearly half of Japan's industry. Japan's economy was completely disrupted, and the country was forced to rely on United States assistance and imports of essential food and raw material. Large-scale procurements by United States armed forces during the Korean War (1950-53) revived Japanese industry, and the country invested heavily in replacing the destroyed factories with modern, well-equipped factories. By the mid-1950s, modern plants staffed by a well-educated, disciplined work force had brought the Japanese economy back to pre-World War II levels. For the remainder of the 1950s, however, Japan endured chronic trade deficits. Unhampered by large military expenditures, the Japanese economy continued to grow at a rapid pace into the next decade. Japanese trade relations improved dramatically during the 1960s, attaining a favorable balance, and Japanese industry felt confident enough to compete in the international market in such heavy industrial products as automobiles, ships, and machine tools.
The Ministry of International Trade and Industry (MITI), formed in 1949, played a major role in the 1950s and 1960s in formulating and implementing Japan's international trade policy, assisting the development of domestic industry and protecting it from foreign competition. MITI's authority gradually decreased as private industry and other ministries took more responsibility on themselves. By the late 1980s, MITI's control over international trade policy was greatly reduced. The Japan External Trade Organization (JETRO) was established by MITI in 1958 to promote Japan's external trade. Over the years, JETRO's role diversified; it went from promoting exports to fostering all aspects of Japan's trade relations and enhancing understanding with trading partners.
In the immediate postwar period, the operations of Japanese financial institutions were severely restricted. In the 1970s, controls began to loosen, and these institutions rapidly expanded their international activities. By the late 1980s, they were major international players, making Tokyo a world financial center and opening branches abroad to foster foreign investments. During the late 1980s, Japan became the world's largest creditor nation and was home to some of the world's largest banking and financial institutions. Japanese securities firms played a major role in international finances and were members of major world stock exchanges. In 1988 the Tokyo Securities and Stock Exchange became the world's largest, while the Osaka Stock Exchange ranked third behind Tokyo and the New York Stock Exchange. Beginning in 1986, the Tokyo exchange permitted foreign brokerage firms to be members. Japan also played an increasing role in international economic organizations and agreements, especially the Asian Development Bank and the General Agreement on Tariffs and Trade (GATT). Japan has a strong private enterprise economy, although public corporations played a very important role in the early postwar period. By the 1980s, however, their role was considerably decreased, and some of the largest were privatized. The thriving private enterprise sector was dominated by large corporations with affiliated smaller firms. Labor-management relations were generally harmonious, and labor productivity was high.
Japan promoted exports by developing world-class industries and providing incentives for firms to export. In the postwar period, export incentives mainly took the form of tax relief and government assistance to build export industries along with heavy import barriers. As Japanese industry regained its strength in the 1960s, the government gradually liberalized its trade policy, and tax incentives were eliminated. In the 1970s, a strong rise in the value of the yen under the new system of floating exchange rates and the oil price shocks of 1973 and 1979 brought large trade deficits. The situation spurred Japan to reduce its dependence on unreliable foreign petroleum by conservation and diversification of sources and to sharply increase its exports to offset the high cost of raw materials. In the 1980s, with the dramatic drop in the cost of raw materials, Japan developed a large trade surplus. Export policy shifted to export restraints on certain products that were causing the greatest tensions with trading partners, and Japan greatly increased its foreign investment. This trend continued through the 1980s.
Japan's foreign aid program, begun in the 1960s in the form of World War II reparations to other Asian countries, grew rapidly during the 1980s. In the late 1980s, Japanese assistance consisted of bilateral grants and loans as well as support to multilateral aid organizations.
In the postwar period, Japan concentrated on rebuilding its economy, attempted to cultivate friendly ties with all nations, and relied on the United States for military security. By the 1970s, this foreign policy began to be called into question as Japan came into its own as a world economic power. In the 1980s, Japan became a leading industrial nation, the world's largest creditor nation and largest donor of foreign aid, and a major actor in international financial institutions such as the World Bank and the International Monetary Fund. People at home and abroad expect Japan to play a diplomatic role proportionate to its economic power and its role in foreign assistance, trade, and investment. But popular sentiment in Japan and its Asian neighbors continues strongly to oppose Japan's assuming the military role expected of a world power.
Because of their tragic experience with a military-controlled government before and during World War II, the Japanese people readily accepted the military restrictions written into the 1947 constitution at the insistence of occupation forces and still generally interpret Article 9 of the constitution as forbidding the SDF from being deployed outside of the country or possessing nuclear weapons. Japan still depends on the 1960 Treaty of Mutual Cooperation and Security with the United States, which mandates that the United States will come to its aid in the event of a large-scale invasion and which allows for United States provision of a nuclear umbrella. There is little popular sentiment for change in this arrangement.
The 1947 constitution, with its stipulation of a symbolic role for the emperor, guarantees of civil and human rights, and renunciation of war, remains the operative basis for Japanese government. By pragmatic collaboration with big business, small business, agriculture, and professional groups, the Liberal Democratic Party (LDP) dominated Japanese politics from the time it was formed as a coalition of smaller conservative groups in 1955 until it lost majority power in July 1993. Although LDP fortunes have risen and ebbed over the years since its establishment, opposition parties were unable to oust it from power. However, in the early 1990s the LDP became so divided that enough factions split away to weaken the LDP majority. Despite maintaining a plurality in the House of Delegates, the LDP was forced to join a series of short-term coalitions in order to maintain a voice in government.
The LDP formed a governing coalition with the Liberal Party and Komeito Party in 1999. Prime Minister Obuchi suffered a stroke in April 2000 and was replaced by Yoshiro Mori. After the Liberal Party left the coalition in April 2000, Prime Minister Mori welcomed a Liberal Party splinter group, the New Conservative Party, into the ruling coalition. The three-party coalition made up of the LDP, New Komeito, and the Conservative Party maintained its majority in the Diet following the June 2000 Lower House elections. After a turbulent year in office in which he saw his approval ratings plummet to the single digits, Prime Minister Mori agreed to hold early elections for the LDP presidency in order to improve his party's chances in crucial July 2001 Upper House elections. Riding a wave of grassroots desire for change, maverick politician Junichiro Koizumi won an upset victory on April 24, 2001, over former Prime Minister Hashimoto and other party stalwarts on a platform of economic and political reform. Koizumi was elected as Japan's 87th Prime Minister on April 26, 2001.
SOURCES: Country Studies/Area Handbook by the US Library of Congress, U.S. Department of State
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