Japanese Economic Miracle Case Study

Title: Was economic miracle of post-war Japan largely caused by American aids during the American Occupation period (1945-52)?

Introduction and background The Japanese economic miracle refers to the historical phenomenon of the astonishingly rare and rapid growth in the Japanese economy in the post-Second World War era, from 1953 to 1970s.1 This economic boom emerged after the post-war reconstruction and restoration of the country’s damaged socio-economic structure as well as the destructed infrastructure and worn-out manpower due to massive casualties. The remarkable development process Japan experienced after the devastation in WWII lasted for roughly two decades, only slowed down in 1973, and eventually came to an end in

In the seven years’ time from 1945 to 1952, Japan received a number of American aids in different areas, particularly in the economic sector. Aiming at demilitarizing and democratizing Japan completely, the General Head Quarter (GHQ) headed by the USA imposed three important reforms—the Antitrust Measures, Land Reform and Labour Reform.1 In order to combat inflation given that the Japanese government was unable to make much progress despite many attempts and efforts, the SCAP also carried out the Dodge Plan to guide plans of fiscal and monetary policies. 1To sum up, the important economic reforms and policies constructed by the SCAP and GHQ during the recovery period aims to democratize and demilitarize Japan economically, but eventually achieved the unexpected outcome—paving a way for the rapid economic growth thereafter. Such systematic reforms supported by the enforced laws have brought a competitive and efficient economy to

2This Plan was put in effect in 1949. Exchange rate was fixed and Japan was brought back to international trade by lowering inflation. Even the severe deflationary spiral and recession were averted by the special and large export demand created by the Korean War which from 1950 to 1953. 9 The spread of the Cold War and start of the Korea War affected American policy towards Japan. The country was used as a major military and supply base for the US and UN troops in the Asia-Pacific region due to its identity as US’s valuable anti-communist ally in East Asia and its proximity to Korea. 3This contributed greatly to its economic recovery as Japan’s production rose rapidly and companies began profit-making. The close diplomatic and trading partner relations between the two countries even enabled Japan to become a springboard from which the economic miracle could