Business and Industry: Manufacturing

Western industrialization began with the development of capitalist institutions in Europe in the 1500s, then evolved to more complex levels with the British industrial revolution beginning in the late 18th century, and culminated a century later in the industrial capitalist system of Europe and the United States. The Japanese had a much different experience in that the country quickly changed, between the years 1868 and around 1900, from a primarily agrarian-based economy to one with an already domestically important and growing industrial manufacturing sector.

During the rest of the 20th century, Japan further evolved into an economic world superpower, largely on the strength of manufacturing, and the Japanese experience constituted an economic development model for both other Asian economies and developing countries throughout the world. Because of Japan’s rapid rise relative to the West and Japanese cultural propensities, Japan’s manufacturing industries, while drawing from the West, are different than their European counterparts, and manufacturing is still more important to Japan’s economy than is the case in the United States and some of the more advanced European economies that have moved further toward a ‘‘postindustrial’’ economy. In postindustrial economies, services and high-tech manufacturing are increasingly important.

It is indeed difficult to think of Japan without the notion of manufactured products coming to mind. Manufacturing still accounted for more than 26 percent of the GDP in 2005 (Facts and Figures 2007, 89). Japan ranked second in the world behind China in the production of crude steel, trailed only the United States in the production of four-wheeled motor vehicles, and was the world’s leading producer of machine tools (Tanaka 2007, 42–43). Today, Japanese products are famous throughout the world even though the much larger American economy still produces more manufactured goods annually than Japan. Japan now leads the world in car and robot production and is among world leaders in a wide variety of manufacturing sectors including steel, semiconductors, shipbuilding, and consumer electronics.

In developed countries, and especially in the United States, Japanese products have been present in large quantities throughout most or all of the lives of the majority of citizens. Honda motorcycles, Canon cameras, and Sony radios, televisions, and the Walkman were a part of life decades ago, and these companies as well as other Japanese firms continue to be responsible for originating or continuing to manufacture innovative and reliable products ranging from karaoke equipment to PlayStations. Manufacturing productivity gains have been a major reason why Japan has recovered from the economic doldrums of the 1990s.

The scope, variety, and productivity levels of Japanese manufacturing are quite diverse. There are a large number of local industries that rely on local capital and labor to make a specific product. A few examples of these products include lacquerware, bamboo ware, ceramic goods, wire, fans, handbags, and gloves. These industries are widespread throughout Japan. Such large industries as Nippon Steel, Toyota Motor Corporation, Hitachi Engineering, and Asahi Chemicals that employ thousands of workers are located in what began as company towns—Toyota is one example—and in great clusters in industrial districts in several locales primarily in central and southern Honshu near the Pacific coast. Many of these industrial districts are on reclaimed coastal land, and the firms that locate there have domestic and international markets. The location, particularly for multinational manufacturing industries on or near the coasts, means that major firms can cut their international shipping costs because of their location and still supply their domestic customers.

Construction and food processing are significant industries that employ large numbers of workers, serve primarily national markets, and are found throughout Japan. As noted earlier, these two industries are important not only because they employ so many people but also because they share the dubious distinction of needing substantial restructuring and much higher productivity. Japan’s construction and food processing industries consistently have low productivity rates relative to their foreign counterparts.

High-technology industries are considered to be a key asset for Japan’s continuing economic prosperity. Examples of these knowledge-intensive industries include microelectronic fibers, industrial robots, medical electronics, aerospace, and information technology. These industries depend on such sources for research and development as universities and other research institutes. Also, employees of these industries are highly educated and have clear preferences regarding residence locales and cultural amenities. Although these industries are located throughout Japan, they tend to be concentrated in metropolitan and urban areas like Tokyo and Osaka because of specific industry and employee requirements most in evidence in high-technology firms. The northern part of Kyushu has also grown into a home for important semiconductor producers.