Japanese Investment in the World Economy
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Japanese Investment in the World Economy

A Study of Strategic Themes in the Internationalisation of Japanese Industry

Roger Farrell

This book examines Japanese Foreign Direct Investment (FDI) in the world economy over more than five decades. It provides a unique focus on the internationalisation experience of selected industries, such as forestry, textiles, electronics, motor vehicles, steel and services as well as case studies of individual firms. Japanese Investment in the World Economy is distinctive in that it examines overseas investment by firms in the primary, manufacturing and services sectors over the period in which the Japanese economy became the second largest in the world.
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Chapter 16: Steel Industry Strategies

Roger Farrell


BACKGROUND Steel has been an important national industry since the beginning of the twentieth century, when the Meiji government established the Yawata Iron and Steel Works as a state-owned enterprise. Construction of the plant required a budget of ¥20 million, equivalent to ten per cent of the national budget in 1901. The steel works went into operation as the first Westernstyle integrated steel mill in Asia. It was an important part of the modernisation of Japanese industry, guided by technology agreements with major German producers such as Krupp Steel (Lockwood, 1970). Subsequently, Japan gave priority to the development of a steel industry to support the growth of the national economy and essential industries including railways, construction and manufacturing. Steel was recognised as ‘the rice for industries’ (tetsu wa sangyo no kome) and government support was provided to accelerate its progress. By the 1930s, steel had emerged as a key industry in Japan and had founded overseas production facilities in the colonial territories – to support the building of a railway network in Manchuria and military related infrastructure expenditure. A significant share of raw materials such as iron ore and coal needed for Japanese steel production was sourced from mines in Manchuria and Korea and steel output in these territories accounted for 40 per cent of total national production (Japan Iron and Steel Federation, 1959). These sources of raw materials were completely lost to Japan in the postwar period and domestic resources of coal and iron ore were insufficient to...

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