Series I
Introduction
The Japanese economy and its stunning economic success were a major topic of discussion for economics students in Australia in the 1970s. I learned with much interest about the post war Japanese economic miracle which began in the 1960’s. The dominance of Japanese in electronics and cars well into the 1980’s confirmed the appearance of continuing economic prosperity. Yet within this growth and consolidation period there was always a nagging concern ; The Japanese national debt was always relatively high and rising, partly driven the need to maintain the high growth rates . Until the 1990’s this high national debt was countervailed by the highest rate of domestic savings in the world. As a result, over the period 2060s to 1980s Japan experienced rapid economic growth, high household savings rates, and relatively low government debt. The savings rate was often above 20%, driven by cultural norms and limited social safety nets. Government debt was relatively high but fiscal policy was conservative and growth was strong. This is no longer the case. In 2025 Japanese national debt is the highest in the world 2.56 of GDP) and domestic saving rates are among the lowest at 5% These 3 short blogs examine the reasons for the current situation. It details briefly both the growth and slowdown of the Japanese economy as exemplified a case study of the electronics industry where a group of companies such as Toshiba, NEC, Sharp and especially Sony dominated the world industry to an extraordinary degree before declining. The second blog looks at the current situation slow-down in the 1990’s and the reasons behind it. The final blog looks at the outlook for the Japanese economy into the future.
Brief survey of Japanese economy
Japan’s economic boom years spanned from the mid-1950s to the early 1990.and has been in relative decline ever since. From 1965-1980 Japan averaged 10%annual growth. Chronologically, there were several distinct time periods including
Phase 1 Post-War Recovery and Rapid Growth (1950s–1973)
1950s–1960s: Japan experienced extraordinary growth, averaging around 10% annually. his period is often called the Japanese Economic Miracle. The key drivers included: U.S. aid and investment during the Korean War, Government-led industrial policy and infrastructure development bd export-oriented manufacturing, especially in electronics and automobiles All this was supported by high domestic savings and reinvestment in industry Phase 2 (Oil crisis slowdown)
During 1973: Growth slowed, initially due to the global oil crisis, but Japan remained resilient. Household savings ratio remained high but other rivals such as Korea, Taiwan and China became serious competitors in electronics and computer chips. Phase 3 Bubble Economy Peak (1986–1991) In the late 1980s: Japan entered a speculative boom known as the Bubble Economy Real estate and stock prices soared and Japan became the world's second-largest economy. Japanese firms aggressively expanded overseas, buying iconic properties like the Rockefeller Centre. GDP growth continued at around 7% and consumer affluence reached unprecedented levels. Phase 4 Collapse and the Lost Decade (1991 onward). In 1991 the bubble burst, leading to a prolonged period of stagnation known as the Lost Decade. This was characterised by
– Asset prices collapsed.
– Deflation and banking crises followed.
-Growth slowed dramatically, averaging less than 1% annually through the 1990s.
In a number of ways, the time path of the Japanese economy is mirrored in the life
cycle of the Japanese electronics industry and its iconic product the Sony Walkman.
Case study 1
When we all had a Walkman- the story of structural change and adaption in the Japanese electronics industry.
Introduction
Japan’s electronics industry rose to global dominance in the late 20th century but declined due to economic stagnation, rigid corporate structures, and fierce international competition. In many ways the experiences of the Sony Walkman illustrate the changing fortunes of the Japanese export driven economy overall, Sony’s Walkman held an estimated 50%–60% share of the global portable cassette player market during its peak in the mid-1980s to early 1990s. At that time, the Walkman went beyond being just a product to cultural icon, dominating the personal audio space in a way not before seen and redefining how people consumed music on the go. This dominance, began to be eroded due to the rise of CD players, MP3 devices, and finally smartphones. Sony officially discontinued the classic cassette Walkman line in 2010. In different ways the experience of Sony with the Walkman was mirrored across the Japanese electronics industry where dominant brands such as Panasonic, Toshiba, Hitachi, Akai and others faced increased entry from Korean and Chinese producers and responded through structural change and product differentiation. Companies rise and fall and products through life cycles as a matter of course but the Japanese electronics operated within an agglomeration of dominant companies unequalled in modern industrial history. There relatively rapid decline is a case study of the speed with which competitiveness can diminish but also provides examples of how companies adapted to changed conditions and found new markets. This blog post examines the decline of Japanese dominance in personal electronics starting with the example of the product cycle of the Walkman, the experience and restructuring of the dominant players in the industry and concludes by examining the emergence of new dominant Japanese clusters.
The Rise: Innovation and Global Leadership
Japan’s ascent in the electronics industry began in the post–World War II era, fuelled by government support, disciplined corporate culture, and a focus on quality and innovation. By the 1980s:
-Japanese firms like Sony, Panasonic, Toshiba, and Hitachi became global household names, leading in consumer electronics, semiconductors, and computing hardware.
– The country pioneered technologies such as the Walkman, VHS, and LCD screens, setting global standards.
-Japan’s semiconductor industry held over 50% of the global market share by the late 1980s, surpassing even the United States.
– In 1995, 149 Japanese companies were listed on the Fortune Global 500, many of
them electronics giants.
This dominance was supported by Japan’s kaizen philosophy (continuous improvement), meticulous manufacturing, and a strong export-driven economy.
To be continued
