If we measure by nominal GDP, the three largest economies in the world belong to the United States, China, and Japan. Japan, though, didn’t always have the foundation to be such an economic powerhouse. The country has had an interesting journey from being an imperialist theocracy that fought against the Allied powers in World War II, to near economic annihilation, to surprising success in the post-war period. Here is some surprising information about Japan’s period of economic evolution that they have experienced in the time since WWII…
Right after World War II, Japan’s economy was devastated by an expensive war that left lots of infrastructure destroyed. The previous government was in shambles, and the country was subject to several deals that would hamper its ability to function sovereignly throughout the globe. However, the economic intelligence of their new government (which utilized a proper amount of interventionism), as well as the aid of the United States, allowed Japan’s economy to quickly flourish. This was largely due to the emergence of Cold War, as the United States required Japan’s help to stay the growth of the Soviet Union in the South Pacific. This period is often called Japan’s “post-war economic miracle”. The 1950’s were filled with extremely good trade deals, conducted by the Ministry of International Trade and Industry, that allowed Japan to build its GDP.
Japan’s economy is notably built upon its technological advancements. Japan, as a country, fills out more general patents than any other country on the planet. This trend largely began in the 1960’s, which were considered a golden age in Japan’s economy. This saw a technological and industrial evolution in Japan, which allowed the country to shift to an export-based economy, making it much more of a global player in world economics. Japanese technology quickly became known for its reliability and innovation. This is a trend which continues today, as the manufacturing industry in Japan is built around high-end technology, such as luxury vehicles and robotics.
Currently, the Japanese economy is ran by a principle that is popularly known as Abenomics, named after the current Prime Minister, Shinzo Abe. This collection of economic actions has led to great success within the country. However, it is entirely dependent on the currency of Japan, the yen, remaining weak, due to higher inflation. Any level of deflation in the yen will lead to corporate profits in the country to drop, and is sure to slow down the Japanese velocity of currency. This is what is happening now, as other currencies in the world are dropping in value, which is causing the value of the yen to rise.