ABSTRACT
This chapter analyzes the role of the Liberal Democratic Party (LDP) in the economic development of Japan following World War II. It proposes a theory of the political party system based on the OMO framework and describes how the characteristics of the party system influence economic growth. Following World War II, the Japanese economy experienced rapid economic growth. OMO view the ruler of the governance structure as a rational selfinterest maximizing agent. The chapter reviews the political party system as an intermediary institution that writes and enforces governance contracts between the ruler and the state. The party system is an intermediary institution that writes and enforces the governance contracts. The political party system is viewed as an intermediary institution to write and enforce governance contracts between the ruler and the state. A potential problem that the LDP faced during the high growth period resulted from the dynamic changes occurring in the economy.
