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The Foreign Exchange Allocation Policy in Postwar Japan: Its Institutional Framework and Function

In: Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues (NBER-EASE volume 7)

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  • Tetsuji Okazaki
  • Takafumi Korenaga

Abstract

In this paper we will make clear the institutional framework and function of the foreign exchange allocation system in 1950's Japan. Until trade liberalization progressed in the first half of 1960's, MITI executed de facto import quota by means of this system, which generated substantial amount of rent. In order to restrain rent-seeking activities, MITI set clear and objective criteria for foreign exchange allocation by firm, which were in many cases based on export performance and production capacity of each firm, and announced them publicly. This method caused competition to acquire rent thorough foreign exchange allocation among private enterprises, and promoted export and investment. We will quantify the criteria using firm-level data of foreign exchange allocation and also analyze their function through estimating export and investment functions.

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This chapter was published in:

  • Takatoshi Ito & Anne O. Krueger, 1999. "Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues (NBER-EASE volume 7)," NBER Books, National Bureau of Economic Research, Inc, number ito_99-1, October.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 8624.

    Handle: RePEc:nbr:nberch:8624

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    Cited by:
    1. Okazaki, Tetsuji & Takafumi Korenaga, 1998. ""Foreign Exchange Allocation and Productivity Growth in Postwar Japan: A Case of the Wool Industry"," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo 98-F-9, CIRJE, Faculty of Economics, University of Tokyo.
    2. KIYOTA Kozo & OKAZAKI Tetsuji, 2013. "Effects of Industrial Policy on Productivity: The case of import quota removal during postwar Japan," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 13093, Research Institute of Economy, Trade and Industry (RIETI).

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