Postwar Japanese Industrial Policy and Changes in Industrial Structure (Economic, Miti).

Abstract

The Japanese government is widely believed to have used a variety of means to deliberately alter the size of some Japanese industries relative to others. Studies of the impact of these policies have generally taken a partial equilibrium approach and have usually concentrated on only one or two policy measures. This study uses a Johansen-type model to take a general equilibrium approach to analyze the impact of policy measures both individually and in combination. For this purpose the economy is disaggregated into twenty-eight sectors and a number of simulations are performed over several years. These results are compared with simulation results obtained by considering policies not generally regarded as industrial policies. The effect of industrial policy is found to vary widely both in magnitude and direction depending on the variables considered and sometimes the time period. Even using assumptions intended to exaggerate the impact of industrial policy the impact of some policies not usually regarded as industrial policies is in several cases greater than that of the industrial policies. In a concluding section the simulation results are compared with descriptions of policy goals obtained from a variety of sources. Two major conclusions emerge from this study. First, studies that take a partial equilibrium approach to the impact of industrial policy or which study only one policy or industriy can be seriously misleading. Second, Japanese industrial policy has been much less important than generally realized and has sometimes had effects quite different from those expected from an examination of the statements of policy makers.