In 1998 Japan produced less than it did in 1991. Between 1953 and 1973, Japan in the space of two decades became the world’s largest exporter of steel and automobiles. However, in the early 1970 growth slowed from the record level growth of 9% too less than 4% after 1973. Bank loans and import licenses flowed to favor industries and firms; the economy’s growth was at least partly channeled by government’s strategic designs (MITI). The second factor influence Japanese affluence was keiretsu. Members of the Japanese keiretsu – a group of allied firms organized around a main bank – typically owned substantial quantities of each other’s shares, making management largely independent of the outside stockholders. However, if the loans looked unstable, wouldn’t the banks start lose depositors? But in Japan, depositors believed the government would never allow them to lose their savings. One by one the Japanese government targeted strategic industries that could serve as engines of growth. The strategy was to create an export drive that initially ignored profitability and meanwhile built market share and at the same time drove foreign competitors into the ground. The Japanese government was accumulating massive debt in a race to the top. At the beginning of the 1990s, Japan hot economy was experiencing a speculative real estate boom. Speculative investments in real estate almost caused a banking crisis in the 1970s.[Learn More ...]

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