ABSTRACT
This chapter attempts to show that the business cycles of High Economic Growth Period (HEGP) were a combination of cyclical changes in plant and equipment investment and inventory investment, regulated by the balance of payments situation. It explains how the inflation of the 1970s was of a completely different nature to that of the 1960s. The chapter discusses how, towards 1970, world-wide inflation caused the international balance of payments ceiling to rise, so that eventually it no longer acted as a check on the expansion of the economy, and how this resulted in inflation and unemployment becoming the new ceiling and floor for the business cycle. During HEGP the balance of payments was the biggest single factor influencing economic growth and the business cycle. The investment-led growth of HEGP brought about great changes in the structure of the Japanese economy. Japanese manufacturers’ international competitiveness had improved considerably, raising the balance of payments ceiling.
