Japan’s New Industrial Policy

Once hailed for implementing an industrial policy so effective that it transformed Japan into a model 'developmental state,' from the 1980s Japan steadily liberalized its economy and Japanese firms increasingly shifted production abroad via outward foreign direct investment. Yet industrial policy did not just fade away. With the emergence of new competitors in South Korea and Taiwan, and especially the rise of China as a security threat, the Japanese government strove to enhance the viability and competitiveness of Japanese firms as a means to strengthen economic security and reduce reliance on imported energy. Using newly compiled data on Japan's policy apparatus, political environment, and policy challenges, this Element examines how Japan, once an exemplar of 'catch up' industrialization, has struggled to 'keep up' with new challenges to national economic security, and more briefly considers how its policy evolution compares to those of its East Asian neighbors.