489 Japan’s post-war economic success: Deming, quality, and contextual realities

T
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le I.
Jap
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sus USA:
immediate p
ost-war
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Japan’s post-war
economic
success
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aggression to purchase goods and services from Japan and helped to
re-establish Japan’s pre-war economic dominance over the region. This policy
also helped to finance direct Japanese competition with Western exporters
(Voorhees, 1950, p. 2). As US military programs in Asia expanded through the
1950s, tied aid financed 10 percent of Japan’s exports to South-East Asia,
peaking at $147 million in 1960 alone.
Tying [U.S.] aid to purchases from an industrial competitor, would … tax American
companies to subsidize their Japanese counterparts. This concern with placing Japanese
economic interests over short-term American interests derived from the supreme paradox of
American postwar diplomacy: the very economic supremacy of the United States was the
giant obstacle to world capitalist recovery and multilateral trade. Hence American officials
responsible for Japanese and European recovery abandoned the traditional role of government
agents, to promote the interests of American exporters and investors, and develop plans to
subsidize European and Japanese export earnings to preserve chances for a multilateral
world system (Redford, 1978, p. 281).
The outbreak of the Korean War on June 25, 1950 proved a godsend for
Japanese industries and exporters. NSC Directive 68 launched a worldwide
rearmament program. 
The American military implemented the Yoshida-MacArthur plan to activate Japan’s arms
industry when it placed $149 million in emergency procurement orders for its Korean
intervention in the second half of 1950. The powerful external stimulation provided by the war
orders and the world economic boom that the war sparked temporarily reversed Japan’s
recovery programs. The war boom profoundly improved Japan’s international trade position
and wiped out at a stroke many of the external obstacles to trade recovery. As the American
economy expanded with the rise in war production, American imports rose and temporarily
eliminated the world dollar gap. The stockpiling of strategic materials by the United States
provided Southeast Asia with its first significant dollar earnings in the postwar period. Japan
was able to earn many of these dollars through increased exports to its southern neighbors.
North American and European production was diverted from exports to arms, thus freeing
markets for Japan, and the world buyer’s market shifted to a seller’s market (Redford, 1978,
p. 282).
Japan, with the largest excess plant capacity in the world, took advantage of
these developments. Japanese industrial and export indices set new post-war
records each month in late 1950 and rose from 90 points to 140 and provided the
first substantial post-war stimulation of Japanese heavy industry and laid the
foundation for future Japanese export competitiveness. By forcing the
expansion of industrial production, US military procurements set in motion the
expansion of electric power capacity, employment, and plant modernization
that facilitated later Japanese growth, which “was instrumental in bringing the
final achievement of Japan’s economic recovery, and also in making it possible
for Japan’s industry to undertake the technological transformation” (Oriental
Economist, 1960, p. 314) that buttressed the rapid industrial development of the
1970s and 1980s.