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"Priority production policy and postwar reconstruction of the Japanese economy"(in Japanese)


  • Tetsuji Okazaki

    (Faculty of Economics, University of Tokyo)


This paper examines the drawing up process as well as implementation of the priority production policy in late 1940's, focusing on the aspect of material allocation and production. As is well-known, the priority production was extremely inward-oriented policy. However, at the starting point, the policymakers were not so inward-oriented. They negotiated with the SCAP to import many sorts of goods including the raw materials for export industries. The negative responses of SCAP obliged the Japanese government to draw up the policy, giving the top priority to coal production, which in turn made it necessary to increase steel production. The Japanese government and SCAP planed to increase steel production by importing oil. In other words, the imported oil was thought to be the prime water for the pump, which launched the virtuous cycle of steel and coal production. However, its arrival substantially delayed. Consequently, the Japanese government could not help substituting priority allocation of domestic coal and steel for the oil import. The materials demand and supply plan of 1947 reflected this policy. The effects of the priority production policy are examined through checking the assumptions of the policy makers, as well as VAR analysis of the time series data of the production. They assumed that the coal were the major bottleneck of the industrial production. This assumption can be justified, because in 1947 and 1948 elasticity of the industrial production to the coal allocation was relatively large. The VAR analysis shows that the impulse of the coal production caused positive response of the steel and machinery production, and vice versa, which implies that priority production policy launched spiral production increase of the heavy industries. At the same time, the impulse of the coal production, as well as the steel production, caused negative response of the textile production, which implies that recovery of the heavy industries was achieved at the cost of suppressing the textile industry.

Suggested Citation

  • Tetsuji Okazaki, 2001. ""Priority production policy and postwar reconstruction of the Japanese economy"(in Japanese)," CIRJE J-Series CIRJE-J-40, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:jseres:2001cj40

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    5. Ruggerone, Luigi, 1996. "Unemployment and Inflationary Finance Dynamics at the Early Stages of Transition," Economic Journal, Royal Economic Society, vol. 106(435), pages 483-494, March.
    6. repec:hrv:faseco:30723290 is not listed on IDEAS
    7. Shang-Jin Wei, 1997. "Gradualism versus Big Bang: Speed and Sustainability of Reforms," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1234-1247, November.
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