Growth, stagnation, and resilience–the Japanese manufacturing industry in the post-Cold-War period

This article describes and analyzes the economic growth and stagnation of postwar Japan, focusing in particular on its manufacturing industry during the post-Cold-War period, when it faced intense global competition and explosive digitalization. Both semi-macro statistics and field survey results are used for historical analysis. In addition, the combination of a classical economics (Ricardian) industry study and modern design theories is adopted. Our empirical research shows that Japan’s manufacturing industry continued to grow slowly between the1990s and the 2010s. The number of its employees shrank to about two thirds, while value-added productivity doubled during the same period. After China’s entry into the world market with extremely low wages, Japan’s average wage rate almost stopped growing in the 1990s–2010s, but it started to increase again in the 2020s. Many Japanese manufacturing firms disappeared during the wave of global competition and digitalization, but many survived thanks to significant improvements in physical labor productivities, achieved by introducing advanced production systems/technologies, such as the Toyota-style production system. The Japanese manufacturing industry tended to accumulate coordinative manufacturing capability in the Cold War period of rapid economic growth (economy of scarcity), and it later retained its design-based comparative advantage in coordination-intensive or integral-architecture products, e.g., highly-functional automobiles, as predicted by the CAP (capability-architecture-performance) approach to industry studies. Overall, for Japan’s manufacturing industries, firms, and factories, the post-Cold-War period was characterized not simply by stagnation and decline, but by multifaceted interactions among stagnation, struggles, and resilience.