Japan’s surrender brought an Allied occupation that reshaped the economy and dismantled many wartime institutions. Early postwar conditions included severe shortages and tight government control over foreign trade because Japan lacked foreign currency and needed to manage essential imports.
To stabilize prices and the balance of payments, Japan adopted a single fixed exchange rate of 360 yen to the U.S. dollar. This helped create a predictable framework for exports and imports, but it also reinforced the need for strict control over scarce foreign exchange.
Japan established the Ministry of International Trade and Industry (MITI) to coordinate industrial recovery and trade policy. MITI became a central actor in Japan’s “industrial policy,” using licensing, standards, and other tools to promote targeted sectors while limiting disruptive import competition.
Japan enacted the Foreign Exchange and Foreign Trade Control Act, creating a legal basis for licensing and managing foreign exchange and trade transactions. In practice, this framework supported a protectionist and scarcity-driven approach: imports and payments were controlled to conserve foreign currency and protect priority industries.
The Japan Development Bank was created to provide long-term financing for infrastructure and industrial modernization. Along with administrative guidance, policy lending helped channel investment toward sectors the government viewed as strategic for growth and export competitiveness.
Japan joined the International Monetary Fund (IMF), a step toward re-entering the postwar international economic system. Membership supported Japan’s gradual shift from emergency controls toward rule-based external economic relations, while maintaining many controls during recovery.
Japan formally joined the General Agreement on Tariffs and Trade (GATT), committing to a multilateral framework for trade. This increased external pressure for more open markets, even as Japan continued to use non-tariff tools and phased liberalization to shield sensitive industries.
Japan created the Japan External Trade Organization (JETRO) to strengthen export promotion and overseas market intelligence. This institutionalized a key side of Japan’s strategy: protect and nurture domestic industry while aggressively expanding exports to earn foreign currency and scale up manufacturing.
Prime Minister Hayato Ikeda launched the Income Doubling Plan to raise living standards through rapid economic growth. The plan encouraged targeted investment, export expansion, and continued modernization—reinforcing the policy mix of industrial upgrading plus selective protection and managed liberalization.
Japan became the first Asian country to join the OECD, signaling that it was moving closer to advanced-economy policy norms. OECD accession increased expectations for trade and capital-account liberalization, even as Japan continued to manage the pace to protect domestic adjustment.
As the Bretton Woods system broke down, Japan moved away from defending fixed exchange rates and shifted to a floating yen. The change altered the policy environment for trade and industry: exchange-rate movements became a major new factor affecting export competitiveness and import costs.
Under U.S. pressure, Japan announced voluntary restraints on passenger car exports to the United States, a major departure from purely tariff-based trade rules. The episode highlighted the limits of Japan’s export-led model in an era of rising trade friction and pushed firms toward overseas production strategies.
Japan joined other major economies in the Plaza Accord, which aimed to bring down the U.S. dollar against key currencies, including the yen. The resulting yen appreciation intensified pressure on Japan’s trade model and contributed to shifts toward domestic-demand policies and further market-opening debates.
Japan and the United States signed an agreement addressing semiconductor trade disputes, including concerns about dumping and access to Japan’s market. It became a high-profile example of how Japan’s industrial structure and informal barriers could become international flashpoints, not just tariffs.
The United States and Japan launched the Structural Impediments Initiative (SII) to address “behind-the-border” issues—such as distribution practices, land policy, and business relationships—seen as limiting imports and investment. This marked a turning point: debate shifted from border protection to domestic structures and the long-run role of industrial policy.
The SII Final Report summarized agreed actions and follow-up, signaling sustained pressure for more open and competitive markets. By 1990, Japan’s postwar protection-and-promotion system had evolved: many formal controls had eased, but industrial policy and market-structure debates remained central to trade relations.
Japan's Postwar Trade Protection and Industrial Policy (1945–1990)