The late Meiji period sees a rise in party influence through the elected House of Representatives, but key decisions are still made by an oligarchy in the name of the emperor. Meiji rulers mostly support a market economy, only occasionally intervening. Having recently achieved the first Asian victory over a Western nation -- Russia -- in 1905, Japan is ready to step up its international profile.
A political crisis ushers in the Taisho (Great Righteousness) period, straining but not ending the influence of the genro (unelected elder statesmen). Having undergone several decades of modernization already, Japan heeds the first world war's demand to industrialize further and emerges an important economic power, participating in negotiations on the Versailles Treaty and the League of Nations.
A two-party system strengthens under "Taisho democracy," as do small parties and voting rights. But when a railway worker assassinates Prime Minister Takashi Hara in 1921, fears of Western and socialist influence lead to a crackdown on leftist parties. A postwar slump is met with increased public works spending, and the economy shifts as manufacturing and mining overtake agriculture.
The democratic experiment ends with a nationalist revival as Emperor Hirohito takes power and launches the Showa period. Assassinations and coups lead to a more militarized state. Expansionary policies stave off the worst of the Depression, but unemployment and poverty still lead to the economy's militarization. World depression and barriers cause Japan to look to Asia for trade and conquest.
The military consolidates power, and parties are dissolved in 1940. War in China and with the Allies boosts support from both left and right for a planned military economy, and the state now shapes markets and businesses. After Pearl Harbor, wartime deprivation and Allied bombing make daily life difficult. It worsens drastically after the dropping of the atom bomb and eventual Japanese surrender.
Following the Japanese surrender, the U.S. occupation government takes over the ruined nation, drafting a constitution and beginning land, labor, and antitrust reforms. Inflation and shortages are met with price freezes and rationing until the Dodge Plan, introduced by the U.S. in 1949, cuts inflation and ends price controls. Demand spurred by the Korean War heads off recession in 1950.
Independence for Japan comes on April 28, 1952. Splits in the conservative parties lead to minority governments and a brief rise in socialist popularity. The economy completes its recovery phase, setting the stage for a remarkable period of growth.
The Liberal Democratic Party (LDP) begins 38 years in power. The powerful Ministries of Finance and of International Trade and Industry (MITI) forge strong government-business ties, and the economy, buoyed by growing world trade, shifts from recovery to sustained growth. By the decade's end, a labor consensus ends years of bitter strikes, further enabling a unified national objective: growth.
Investment and export growth help Prime Minister Hayato Ikeda realize his 1960 pledge to double the gross national product in 10 years. As of 1965, Japan sees steady trade surpluses and rapid growth. The car and electronics industries take off in both quality and quantity, altering the public's perception of cheap Japanese goods. Success invites criticism of the focus on growth at home and abroad.
Trade disputes, the floating exchange rate, and the 1973 and '79 oil shocks challenge the economy, but growth resumes, albeit at lower levels. The state reduces its role in industrial policy. Relaxation of the rules leads to increased overseas investment directed toward raw materials, energy, and low-cost labor. Prime Minister Kakuei Tanaka steps down in a bribery scandal but remains influential.
Shifts to lower oil prices and a knowledge economy help restore growth and trade surpluses. Trade disputes hinder Prime Minister Yasuhiro Nakasone's efforts to improve ties with America through summits and a stronger defense role. A bubble economy builds as real estate and stock prices soar, and the Tokyo Exchange passes New York's. MITI's power declines as trade expands and becomes more complex.
Stock and land prices collapse, leaving banks riddled with bad loans. By 1992 the economy is in crisis, causing many to question assumptions made about the economy, politics, and Japan's role in the world. The Gulf War provokes further debate on Japan's role in the international community.
Losing its position after 38 years as the absolute majority party, the LDP returns to lead a series of coalition governments after less than a year in opposition. The sputtering economy raises questions about government-industry ties. A weak economy and shifting alliances produce seven prime ministers in as many years, many of whom pledge reform. Bankers and bureaucrats resist.
A popular politician, Junichiro Koizumi, becomes prime minister in a relative surprise: His dynamism and charisma contrast with his predecessors. But his reform promises result in little concrete change, and the economy remains mired in deflation and bad debt. Japan's society has changed deeply as a result of the decade-long slump, and it remains unclear how it will return to growth.
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