5 - Capital formation in Japan

Summary

INTRODUCTION

This chapter analyses the relationship between the input of capital and economic growth in Japan during the past century. The assigned task of exploring the role of investment in Japan necessarily imposes a certain sectoral as well as temporal emphasis. Only relatively little attention will have to be devoted to agriculture, since this sector never became an important recipient of either public or private capital. In Japan, at least, an understanding of the advances created by a rising level of investment deals largely with the growth of modern nonagricultural industry. This also means that (unlike Taira and Yamamura) we must concentrate especially on the history of the twentieth century, when factories, machines, and new social overhead implements reached sizeable dimensions for the first time. Of course, no attempt will be made to slight the crucial transitional years of the Meiji era or even the preceding years of Tokugawa rule, but one should always keep at the forefront the sharp distinction between the hesitant beginnings of economic modernization in the late nineteenth century and its full flowering during the past sixty-odd years.

One further limiting item should be mentioned at the outset. We are concerned with the ‘input’ of capital – i.e. with the investment rather than the saving side of the equation. How the necessary funds were raised – by individuals, banks, the state, or foreigners – will be treated only as a side issue, but to a considerable extent this matter has been studied by other authors.