High economic growth
From about 1955 to 1973 Japan's economy grew about 9 to 10 percent every year. In 18 years it became about 4.8 times bigger. This period is called the high economic growth era. In 1960 Prime Minister Ikeda announced a plan to double incomes in ten years, and in 1968 Japan became the second biggest economy in the world after the USA.
Why so fast?
- People saved a lot and banks lent the money to factories.
- Workers were well educated and worked hard.
- Firms bought new technology and improved it (steel, ships, cars, electronics).
- Oil was cheap, the exchange rate was fixed at 360 yen to a US dollar, and the world market was open to Japanese goods.
Daily life changed. TVs, washing machines and fridges, and later cars and air conditioners, entered homes. Many people moved from farms to cities. The Tokyo Olympics and the opening of the Tokaido Shinkansen (bullet train) in October 1964 showed the world that Japan had recovered.
The price: factories poured waste into air and rivers, causing serious illnesses such as Minamata disease (mercury in fish) and Itai-itai disease (cadmium in rice). Cities became crowded and villages lost young people. After public protests came the 1967 Basic Law for Pollution Control and the Environment Agency (1971).
Okinawa's return and normalisation with China
Okinawa. After the fierce 1945 battle, the Okinawa islands stayed under US administration even after the rest of Japan became independent in 1952. In the 1960s people in Okinawa and in the rest of Japan asked for return. After talks led by Prime Minister Sato, Okinawa was returned to Japan on 15 May 1972. Many US bases remained, which is still a big local issue.
China. After 1949 Japan had no official relations with the People's Republic of China. In the early 1970s the world changed: the USA also began to talk to China. On 29 September 1972 Prime Minister Tanaka visited Beijing and the two countries normalised relations in a joint statement. In 1978 they signed a Treaty of Peace and Friendship. Trade and travel between them grew fast.
Oil crisis and globalisation
In October 1973 oil prices jumped (see the lesson on the changing world order). Japan has little oil, so in 1974 its economy shrank slightly. The era of 9 to 10 percent growth was over. Japan saved energy, and growth settled at around 4 to 5 percent in the late 1970s and 1980s.
Globalisation means that trade, money, people, ideas and companies move across the world more and more. For Japan it meant:
- Exports of cars, machines and electronics to the world.
- In 1985 the yen became stronger after the Plaza Agreement, so firms set up factories abroad.
- In the late 1980s share and land prices rose far too high (the bubble). It burst in the early 1990s and growth became slow (about 1 percent).
- Japan became a big donor of aid and investor in Asia, and a member of world trade groups.
Try it: the four bars
In the last 3D step, put the slider on 1970: which bar is highest? Move to 1975. Which one fell and why? Now go to 1995. How big is the economy compared with 1955? At home: ask your family what electrical item first came into their home and in which year. How long did it take to become common?
Key formulas and definitions
- High growth era: about 1955 to 1973, about 9 to 10 percent a year, economy about 4.8 times bigger
- Key dates: 1960 income-doubling plan · 1964 Tokyo Olympics and Shinkansen · 15 May 1972 Okinawa returned · 29 Sept 1972 Japan-China normalisation · 1973 oil crisis · 1985 Plaza Agreement
- Growth of an economy over n years: size after n years = start size × (1 + rate)^n
- Globalisation: more and more trade, money, people and ideas moving across the world
Worked examples
1. An economy grows by 10 percent a year. If it starts at 100, what is it after 2 years?
Year 1: 100 × 1.10 = 110. Year 2: 110 × 1.10 = 121.
2. Japan's economy became 4.8 times bigger between 1955 and 1973. If it was 100 in 1955, what was it in 1973?
100 × 4.8 = 480.
3. List two causes and two costs of Japan's high growth.
Causes: high savings and good education; cheap oil and open world markets. Costs: serious pollution diseases such as Minamata disease; crowded cities and emptying villages.
Common mistakes
- Saying the high-growth era lasted until the 1990s. It ended with the 1973 oil crisis.
- Thinking Okinawa was returned in 1952. It stayed under US administration until 15 May 1972.
- Mixing 1972 events: Okinawa returned in May, relations with China were normalised in September.
- Saying growth caused no harm. Pollution caused serious illnesses and led to new laws.