Growth Strategy in Japan: analysis of the current Japanese industrial policy in light of the theoretical discourse and historical experience

Abstract

The objective of this research is to establish a comprehensive framework for industrial policy, present a reconstruction of the historical experience of Japan with industrial strategy after the Meiji Restoration in 1868, focusing with particular attention on the period of high growth after the Second World War, and analyze, based on these results, the current industrial strategy in Japan, known as Abenomics, a set of economic, industrial, and fiscal policy implemented during the second Abe administration from 2012 to 2020. Navigating the complex landscape of the industrial policy discourse, the paper aims to redefine industrial policy by highlighting its multidimensional nature and advocating for a strategic, rather than tool-specific, approach. It refrains from treating industrial policy as a fixed set of policies or a universal prescription, emphasizing its role as an evolving exchange of insights among major societal stakeholders. This research also underscores the contradictions within neoliberalist theories, revealing that today’s industrialized and rich countries have extensively relied on strategic industrial policy involving government support and protectionism to promote the manufacturing sector. This research delves into Japan's historical experience with industrial policy, showcasing its success in constantly designing strategies for growth. Despite occasional setbacks, the government was effective in identifying growth potential sectors and implementing different strategies, such as Import-Substitution Industrialization (ISI) and Export-Oriented Industrialization (EOI), during the high-growth era, demonstrating a high degree of adaptability and dynamism. Finally, the research on Abenomics, conducted on the study of official cabinet decision papers published on governmental websites, wishes to shed light on the most recent phase of industrial policy following a prolonged period of stagnation. This research finds that Abenomics, while generally aligning with the proposed framework and historical experience, falls short of achieving ambitious targets, failing to address core challenges, namely the aging population, regional disparities, and labor shortage that seriously hampers Japan’s economic performance.