Political Economy: Policymaking and Industrial Policy in Japan

Abstract

The Importance of Japan's Political Economy: The importance of Japan's political economy probably will be more obvious than any other subject concerning Japanese politics. Being the world's second largest economy and the United States' greatest overseas trading partner, and with increasing Japanese investment in America, the politics and policy-making that affect Japan's industry and economy probably have a more direct impact on the lives of more Americans than any other subject concerning a foreign country that American students can study.With increasing friction over trade and investment beginning to undermine the United States-Japan relationship, one that former Ambassador to Japan Mike Mansfield liked to call the most important bilateral relationship in the world, Japan's political economy has become the stuff of daily newspaper headlines for many Americans. How much, how, and how well the Japanese state intervenes in the economy to promote economic growth has probably received more attention in the United States in recent years than any other topic concerning Japan. Words previously unfamiliar to American ears, such as “industrial policy,” “targeting,” “MITI,” keiretsu, and so forth, are now common in the American media and in policy debates in Washington about the origins of Japan's massive trade deficit with the United States and what the United States can and should do about it. No college graduate, indeed no American citizen, can claim to be politically literate today without some knowledge of this subject.