The first migration wave to the Japanese islands came from Korea and China. Until 19th century the Japanese culture was influenced mainly by these two countries, although the first contact with Europeans was made already in the 16th century. After this initial connection, Japan isolated for centuries. Only in the middle of the 19th century Japan opened ports to international trade.

Opening to the West

In 1853, the United States navy forced the opening of Japan to the West. The state controlled capitalism in Japan originates from the unequal treaties with Western powers, which granted the Westerners one-sided economical and legal advantages.

In order to regain independence, Japan was determined to close the gap to the Western powers economically and militarily. With the help of Western technology and know-how, drastic reforms were carried out in practically all areas (Meiji era). However, it was the state that controlled the production and economy, not the market forces.

From Countryside to Cities

By the end of 1920s, Japanese industry had diversified and productivity had increased tremendously. Exports of both heavy and light industry were raised efficiently. At the same time, imports of raw material for refinement and processing by the industry expanded. Cities grew and agriculture changed into factory and office work. In the countryside landowners gained more and more land, while the leaseholders became poorer and poorer.

Social Problems and the War

Dependent on exports, the Japanese economy was hard hit by the Wall Street Crash and the world wide depression. Luxury items like silk stockings did not sell and exports to the United States collapsed. Pauperism tried the countryside even more than cities. Social problems multiplied and became critical.

Disappointed with the peace treaty of the First World War, Japan had occupied large areas of China and the French Indochina by the beginning of 1940s. This intensified Japan’s conflict with the United States and Great Britain and led finally to an attack against Pearl Harbor and to war in 1941.

Radical Changes of the Occupation Period

The occupation of Japan by the Allied Powers started in August 1945 and ended in April 1952. The whole operation was mainly carried out by the United States.

Radical social reforms took place during the occupation period. The new constitution of 1947 emphasized liberal democratic practices. The emperor lost all political and military power. Japan was forbidden to maintain an army. A bicameral parliament was established. Universal suffrage was introduced and human rights were guaranteed. Workers got the right to organise, and, after the land reform leaseholders got the land they had cultivated.

From Economic Miracle to Lost Decade

After the Korean War, and accelerated by it, the recovery of Japan’s economy flourished. The economic growth resulted in a quickening urbanization and rise of the living standards. Japan became a true consumer society.

A special character of the economic miracle was a close co-operation and interlocking business relationships between the producers, distributors and banks (kreiretsu). This system protected the Japanese against foreign ownership and competition. It was considered as a counterbalance against the market forces and as a guarantee of life long employment relationsip.

The period of growth came to an end with the bursting of the Japanese asset price bubble in the beginning of 1990s. This was followed by the “Lost Decade”.