Institutions, Industrial Upgrading, and Economic Performance in Japan
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Institutions, Industrial Upgrading, and Economic Performance in Japan

The ‘Flying Geese’ Paradigm of Catch-up Growth

  • New Horizons in International Business series

Terutomo Ozawa

Terutomo Ozawa examines Japan’s once celebrated post-war economic success from a new perspective. He applies a ‘flying geese’ model of industrial upgrading in a country that is still catching-up, to explore the rise, fall and rebound of Japanese industry with its evolving institutions and policies.
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Chapter 3: Scale-Driven Stage – and Logic – of Modernizing Heavy and Chemical Industries: A High Growth Period

Terutomo Ozawa

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3. Scale-driven stage – and logic – of modernizing heavy and chemical industries: a high growth period 3.1. PUSH FOR JU-KO-CHO-DAI In Japan, the heavy and chemical industries such as steel, heavy machinery, ships and basic chemicals are popularly called Ju-ko-cho-dai [heavy-thicklong-big] because of such physical characteristics of their goods produced – in sharp contrast to, say, consumer electronics goods which are identified as keihaku-tan-sho [light-thin-short-small]. In the prewar period Japan’s push for heavy and chemical industrialization was motivated to produce armaments and infrastructure goods for industrial development under the twin policy of Fukoku Kyohei (rich nation, strong army), a national policy that had been established at the start of the Meiji government in 1868. On the other hand, Japan’s postwar efforts to reconstruct and modernize its war-shattered heavy and chemical industries were driven by the desire to raise its standard of living beyond the level achievable during the immediate postwar phase of labor-driven industrialization centered on light industry manufacturing. The modernized heavy and chemical industries would naturally be higher value-added in production, requiring far more human capital than labor-intensive light industry (hence, more suitable for educated and skilled labor which was unemployed or underemployed in the immediate postwar days). Furthermore, they are more generative of linkage economies for other industries through input supplies – and most of all, conducive to increasing returns to scale. Japan’s initial reliance on low value-added light industries such as textiles and clothing as an export-competitive sector should be only a transitory step, since they are the dead-end industries...

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