This paper explores the unprecedented technological growth, and its attendant effects, realized by the Japanese economy since World War II. The importation of foreign technology played a key role in Japan’s rapid economic growth, 10.7 percent per annum in terms of real GNP, between 1953 and 1971. Technological advancements have improved the quality of manufactured goods and strengthened the competitiveness of Japan’s exports. While cheap labor, the free trade position of the United States, and an undervalued Yen have all been important, it is clear that improved technology has been indispensable to Japan’s economic success.
The postwar Japanese economy has relied on what have been called “absorptive” strategies. In most cases, core technology has been transferred from abroad, and the volume of technological imports has shown an increasing trend since 1950. The major technological imports have been concentrated in the chemical, electrical machinery, nonelectrical machinery, and iron and steel industries.
The Japanese government has played a crucial role in facilitating technological development. Most measures related to industrial technology have been determined and managed by the Ministry of International Trade and Industry (MITI). The government through MITI has assisted industry through special temporary arrangements, such as direct subsidies, tax relief, restrictions on imported manufactured goods, etc. The enactment of laws, such as the Foreign Exchange and Foreign Trade Control Law which governs remittances of all royalties and fees, and the Foreign Investment Law under the terms of which all Japanese firms’ purchases of foreign “know-how” require government approval, has also been beneficial. In sum, MITI has been an important vehicle promoting technological innovation and the rationalization of special technology-intensive industries.
A survey by the Japanese Science and Technology Agency demonstrates that indigenous Research and Development (R&D) efforts have not been isolated from technological imports. In fact, the two have nicely complimented each other. Approximately one-third of those firms surveyed allocated R&D expenditures for the importation of foreign technology. This form of cooperation is all the more significant because since the 1950’s more than two-thirds of all R&D expenditures have been made by private industry.
The study concludes by pointing out two crucial components of Japanese technology innovation: 1) The efficient combination of imported foreign technology and successful indigenous R&D efforts have produced rapid technological innovations; 2) Favorable government policies have encouraged private enterprises to both absorb advanced technology and to undertake R&D work, thus reinforcing the first factor.
