CHAPTER III - Capital Formation in Japan

Summary

Introduction

This chapter analyses the relationship between the input of capital and economic growth in Japan during the past century. Our presentation follows the broad framework set forth by Solow and Temin in the introductory chapter and is complementary to the next two chapters (by Taira and Yamamura), which deal with the inputs of labour and entrepreneurship.

The assigned task of exploring the role of investment in Japan necessarily imposes a certain sectoral as well as temporal emphasis. Only relatively little attention will have to be devoted to agriculture, since this sector never became an important recipient of either public or private capital. In Japan, at least, an understanding of the advances created by a rising level of investment deals largely with the growth of modern non–agricultural industry. This also means that (unlike Taira and Yamamura) we must concentrate especially on the history of the twentieth century, when factories, machines, and new social overhead implements reached sizeable dimensions for the first time. Of course, no attempt will be made to slight the crucial transitional years of the Meiji era or even the preceding years of Tokugawa rule, but one should always keep at the forefront the sharp distinction between the hesitant beginnings of economic modernization in the late nineteenth century and its full flowering during the past sixty–odd years.