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Industrial Policy, Innovation Policy, and Japanese Competitiveness


  • Marcus Noland

    (Peterson Institute for International Economics)


Japan faces significant challenges in encouraging innovation and entrepreneurship. Attempts to formally model past industrial policy interventions uniformly uncover little, if any, positive impact on productivity, growth, or welfare. The evidence indicates that most resource flows went to large, politically influential “backward” sectors, suggesting that political economy considerations may be central to the apparent ineffectiveness of Japanese industrial policy. Rather than traditional industrial or science and technology policy, financial and labor market reforms appear more promising. As a group, Japan's industrial firms are competitive relative to their foreign counterparts. Japan falls behind in the heavily regulated service sector. The problems are due less to a lack of industrial policy than to an excess of regulation. Japan may have more to gain through restructuring the lagging service sector than by expending resources in pursuit of marginal gains in the industrial sector.

Suggested Citation

  • Marcus Noland, 2007. "Industrial Policy, Innovation Policy, and Japanese Competitiveness," Working Paper Series WP07-4, Peterson Institute for International Economics.
  • Handle: RePEc:iie:wpaper:wp07-4

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    Cited by:

    1. Spyros Roukanas & Emmanouil Karakostas, 2019. "Is Japan a Pioneer in High Technology Exports?," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 22(73), pages 2-18, September.
    2. Liu, Feng-chao & Simon, Denis Fred & Sun, Yu-tao & Cao, Cong, 2011. "China's innovation policies: Evolution, institutional structure, and trajectory," Research Policy, Elsevier, vol. 40(7), pages 917-931, September.
    3. Gupta, Avnesh Kumar, 2014. "Industrial Policy for Inclusive Growth: An Analysis of Experiences of India and China," MPRA Paper 80035, University Library of Munich, Germany, revised 01 Mar 2014.
    4. E. Moreva L. & ЕВГЕНИЯ Морева ЛЬВОВНА, 2017. "Индексы международной конкурентоспособности и структурные реформы Японии // The International Competitiveness Indexes and the Structural Reforms in Japan," Управленческие науки // Management Science, ФГОБУВО Финансовый университет при Правительстве Российской Федерации // Financial University under The Government of Russian Federation, vol. 7(3), pages 100-105.
    5. Inderjit Kaur & Nirvikar Singh, 2013. "China, India, And Industrial Policy For Inclusive Growth," China Economic Policy Review (CEPR), World Scientific Publishing Co. Pte. Ltd., vol. 2(01), pages 1-27.
    6. Georgy Idrisov, 2016. "Towards modern industrial policy for Russia," Research Paper Series, Gaidar Institute for Economic Policy, issue 169P, pages 157-157.
    7. repec:ilo:ilowps:455097 is not listed on IDEAS
    8. Marcus Noland, 2018. "Comment on “Has Abenomics Succeeded in Raising Japan's Inward Foreign Direct Investment?â€," Asian Economic Policy Review, Japan Center for Economic Research, vol. 13(1), pages 169-170, January.
    9. CONNELL, Sean, 2012. "Innovation and Growth Policies in Japan-U.S. Economic Relations:Considering areas for new engagement," Policy Discussion Papers 12018, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item


    Japan; industrial policy; innovation policy;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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