ABSTRACT
Since World War II, Japan has very quickly gone through different stages of economic development, particularly in terms of the balance of payments constraints and the composition of industrial output and exports. Different stages determined correspondingly different sets of regulations and liberalizations at micro- and macroeconomic policy levels. Until the mid-1960s, the basic constraint on economic expansion was the shortage of foreign reserves. Whenever domestic demand became strong together with strong import demand, larger deficits on the current account and the consequent decline in external reserves forced the authorities to tighten domestic demand management policies. In the 1950s, the initial import control measures consisted of foreign exchange allocations and quantitative import quotas. Meager foreign reserves were allocated to targeted heavy and petrochemical industries by allowing them easier access to imports of raw materials, capital goods, and advanced technologies. Regulations on foreign direct investment into Japan were also restrictive to protect domestic industries from being dominated by foreign companies.
