, 1982 Overall real economic growth was called
a "miracle", with a 4% average during the 1980s. Throughout the 1970s, Japan had the world's second largest gross national product (
GNP)—just behind the United States— and ranked first among major industrial nations in 1990 in
per capita GNP at US$23,801, up sharply from US$9,068 in 1980. After a mild economic slump in the mid-1980s, Japan's economy began a period of expansion in 1986 that continued until it again entered a
recessionary period in 1992. Economic growth averaging 5% between 1987 and 1989 revived industries, such as
steel and
construction, which had been relatively dormant in the mid-1980s, and brought record salaries and employment. Unlike the economic booms of the 1960s and 1970s, when increasing exports played the key role in economic expansion, domestic
demand propelled the Japanese economy in the late 1980s. This development involved fundamental economic restructuring, moving from dependence on
exports to reliance on domestic demand. The boom that started in 1986 was generated by the decisions of companies to increase private plant and equipment spending and of consumers to go on a buying spree. Japan's imports grew at a faster rate than exports. Japanese postwar technological
research was carried out for the sake of economic growth rather than military development. The growth in high-technology industries in the 1980s resulted from heightened domestic demand for high-technology products and for higher living, housing, and environmental standards; better
health, medical, and
welfare opportunities; better
leisure-time facilities; and improved ways to accommodate a rapidly aging society. Japan introduced the national
consumption tax of three percent in 1989.
Finances Tokyo became a major financial center, home of some of the world's major
banks, financial firms,
insurance companies, and the world's largest
stock exchange, the Tokyo Securities and Stock Exchange. Even here, however, the recession took its toll. In the decades following
World War II, Japan implemented stringent
tariffs and policies to encourage the people to
save their income. With more money in banks, loans and credit became easier to obtain, and with Japan running large
trade surpluses, the
yen appreciated against foreign currencies. This allowed local companies to
invest in capital resources much more easily than their competitors overseas, which reduced the price of Japanese-made goods and widened the trade surplus further. And, with the yen appreciating, financial assets became very lucrative. With so much money readily available for investment,
speculation was inevitable, particularly in the
Tokyo Stock Exchange and the
real estate market. The
Nikkei stock index hit its all-time high on December 29, 1989, when it reached an intra-day high of 38,957.44 before closing at 38,915.87. The rates for housing, stocks, and bonds rose so much that at one point the government issued 100-year bonds. Additionally, banks granted increasingly risky
loans. The
Plaza Accord was signed in September 1985. This agreement between the governments of France, West Germany, Japan, the United States and the United Kingdom, was to
depreciate the US dollar in relation to the Japanese yen and German
Deutsche Mark by intervening in currency markets. The
exchange rate value of the dollar versus the yen declined by 51% from 1985 to 1987. Most of this devaluation was due to the $10 billion spent by the participating central banks.
Currency speculation caused the dollar to continue its fall after the end of coordinated interventions. The recessionary effects of the strengthened yen in Japan's export-dependent economy created an incentive for the expansionary monetary policies that led to the
Japanese asset price bubble of the late 1980s. The
Louvre Accord was signed in 1987 to halt the continuing decline of the US Dollar. The signing of the Plaza Accord was significant in that it reflected Japan's emergence as a real player in managing the international monetary system.
Health care National health expenditures rose from about 1 trillion
yen in 1965 to nearly 20 trillion yen in 1989, or from slightly more than 5% to more than 6% of Japan's national income. The system has been troubled with excessive paperwork, assembly-line care for out-patients (because few facilities made appointments),
over medication, and abuse of the system because of low
out-of-pocket costs to patients. Another problem is an uneven distribution of health personnel, with rural areas favored over cities. By the early 1980s, pensions accounted for nearly 50% of social welfare and social security expenditures because people were living longer after retirement. A major revision in the public pension system in 1986 unified several former plans into the single
Employee Pension Insurance Plan. In addition to merging the former plans, the 1986 reform attempted to reduce benefits to hold down increases in worker contribution rates. It also established the right of women who did not work outside the home to pension benefits of their own, not only as a dependent of a worker. Everyone aged between twenty and sixty was a compulsory member of this Employee Pension Insurance Plan. Despite complaints that these pensions amounted to little more than "spending money", an increasing number of people planning for their retirement counted on them as an important source of income. Benefits increased so that the basic monthly pension was about US$420 in 1987, with future payments adjusted to the
consumer price index. Forty percent of elderly households in 1985 depended on various types of annuities and pensions as their only sources of income. Some people are also eligible for
corporate retirement allowances. About 90% of firms with thirty or more employees gave retirement allowances in the late 1980s, frequently as lump sum payments but increasingly in the form of annuities. In the late 1980s, government and professional circles were considering changing the system so that primary, secondary, and tertiary levels of care would be clearly distinguished within each geographical region. Further, facilities would be designated by level of care and referrals would be required to obtain more complex care. Policy makers and administrators also recognized the need to unify the various insurance systems and to control costs.
Manufacturing During the 1980s, the Japanese economy shifted its emphasis away from primary and secondary activities (notably
agriculture,
manufacturing, and
mining) to processing, with telecommunications and computers becoming increasingly vital. Information became an important
resource and
product, central to wealth and power. The rise of an information-based economy was led by major research in highly sophisticated
technology, such as advanced computers. The selling and use of information became very beneficial to the economy. Japanese cars had a 33% hold on the American automobile market at that time and then-current U.S. President
Ronald Reagan waged a price war against the new Japanese automobiles. As a result, Japanese auto manufacturers took advantage of their vehicles' superior
MPG (miles per gallon) rating.
Real estate , Tokyo in 1985 At the height of the bubble, real estate values were extremely over-valued. Between 1955 and 1989, land prices in the six largest cities increased 15,000% (+12% a year). Urban land prices generally increased 40% from 1980 to 1987; in the six largest cities, the price of land doubled over that period. For many families, this trend put housing in central cities out of reach. The result was lengthy commutes for many workers; daily commutes of two hours each way are not uncommon in the Tokyo area. Prices were highest in Tokyo's
Ginza district in 1989, with choice properties fetching over
US$1.5 million per square meter ($139,000 per square foot). Prices were only slightly less in other areas of Tokyo. ==Environment==