How the west was won

Few civilisations have changed as fundamentally and irreversibly as Japan did during the 20th century. GG VAN ROOYEN examines how this isolated, feudal nation became one of the powerhouses of the modern vehicle industry.

Were it not for the passiveaggressive gunboat diplomacy of the United States, the modern business world might have looked very different. When Commodore Matthew Perry of the US Navy forced his way into the bay at Edo (now Tokyo) and put the power of his ships’ cannons on display, he unknowingly triggered events that would eventually lead to Japanese companies like Toyota, Nissan, Mitsubishi and Isuzu becoming immensely powerful global economic players. But at that stage, there was little to indicate that Japan – or any Japanese company for that matter – would ever exert much power internationally.

ECONOMIC DEVELOPMENT

Until 1853 – when Perry barged into Edo – Japan had little interest in the rest of the world. In fact, it had had very limited contact (and certainly no meaningful economic relationship) with America or Europe for over 200 years.

The reason for this was that Japanese leaders had begun to view the influx of European traders and missionaries in the early-17th century as a precursor to an inevitable military conquest of Japan by European powers. Afraid that they were setting themselves up for an easy fall, they expelled the majority of foreigners – a policy that would last from 1635 to 1853.

It has to be said, however, that Japan was not as isolated as many believed and certainly never embraced the paranoid isolationism that one associates with modern-day North Korea. Dutch merchants, for instance, were tolerated and acted as a source of information on topics such as science, mathematics and technology, but the country’s knowledge (and interest) in the Western world remained limited.

But this all changed dramatically in the second half of the 19th century. Japan quickly developed an insatiable thirst for Western knowledge, and from 1868 onwards, implemented a fully fledged Western-based education system for all young people. To aid in this endeavour, 3 000 Westerners were brought in to teach in Japan, while thousands of young Japanese were sent to Europe and the United States to study there.

Accompanying this newfound craving for Western knowledge was a desire to become a significant international economic power. Reversing its policies of isolationism completely, Japan now did everything to stimulate its economy and place it on par with that of Western powers.

While government didn’t get involved in business directly, it did create an economic environment in which businesses could flourish. In fact, it went so far as to build modern facilities such as shipyards and factories that were then sold to private enterprises at a fraction of the cost, all in aid of economic growth.

And it paid off. By the start of the 20th century, Japan had become a significant industrial power with a modern, unified currency; sophisticated banking, commercial and tax laws; stock exchanges; communication networks; and profitable industries.

THE POST-WAR MIRACLE

To be sure, Japan’s economic growth between 1852 and the Second World War was nothing less than meteoric, but the era that played the biggest part in forming modern-day Japan occurred just after the war.

Driven by investment from the United States and governmental economic interventionism, the period after the war saw incredible economic growth. The Japanese government (primarily in the form of the Ministry of International Trade and Industry) motivated cooperation between distributors, suppliers, manufacturers and banks through tightly knit groups that were called keiretsu. Individual company profits were not the primary concern; instead, all members of industry worked together to grow the Japanese economy.

Other interventions were also put in place: powerful unions came into being, very close relations between government bureaucrats and industry were fostered and lifetime employment within large corporations and unionised factories were guaranteed.

Although many of the initiatives have since been abandoned in an effort to increase profitability, they were groundbreaking at the time and assisted greatly in rebuilding – and expanding – the country’s economy after the war. Within 20 years, Japan had become a very powerful nation and one of the world’s biggest exporters.

THE AUTO INDUSTRY

The period after the Second World War also saw the rapid expansion of Japan’s auto industry. In the first few years directly after the war, however, the industry struggled. The massive reconstruction programme created a huge demand for trucks, but expansion was hampered by a lack of raw materials.

Furthermore, tight finance and banking policies that were implemented by the government in an attempt to stifle inflationary tendencies led to a major recession in 1949 that severely damaged the auto industry. Between June 1949 and June 1950, auto manufacturers had to slash jobs by 23%. In fact, it was even suggested that Japan should abandon its auto industry. Hisato Ichimada, the then-chairman of the Bank of Japan, stated that it was “meaningless for Japan to develop its automobile industry with the present international division of labour”. In other words, Japan could never hold its own against the well-established European and American manufacturers.

But manufacturers refused to accept this and, as a direct consequence of this statement, implemented initiatives that have led to the auto industry we know today. The Ministry of International Trade and Industry issued guidelines in October 1952 that overhauled the industry and introduced new technologies through technical collaborations with foreign manufacturers, as well as improved production technologies, and focused on manufacturing vehicles that would be competitive in the export market.

GLOBAL DOMINATION

The effects of these changes are clear. With reliable, affordable vehicles that are produced quickly and efficiently, Japan has, over the last few decades, become the dominant force in the global vehicle industry.

And it has accomplished this in large part by paying close attention to the specific needs of a given market. Hino is a good example of this: its vehicles aimed at the American market are very different to those of any other area, and because of this sensitivity to the needs of customers, it has become the fastest-growing medium-duty truck company in America.

In the rest of the world, it fares equally well. It had an incredibly good year in 2008, selling 109 113 trucks and buses – 45 765 in Japan and 63 348 in the rest of the world. But Hino isn’t the only Japanese truck manufacturer that dominates many foreign markets. Mitsubishi Fuso (now owned largely by Daimler AG) sold a massive 188 700 trucks globally in 2007. Nissan Diesel (owned by the Volvo Group) is active in over 70 countries and has sold over 60 000 units in South Africa since 1962. And Isuzu – the fourth prominent Japanese truck manufacturer – has led the pack with its N-Series (called the ELF in Japan) for decades in America and at home. It has been the market leader in the domestic 2- to 3-t cab-over truck segment for 30 years in Japan and has led the 3- to 4-t imported cab-over truck segment in the US for 21 consecutive years.

Overall, Japan is the global leader in vehicle production. According to the Organisation Internationale des Constructeurs d’Automobiles (OICA), it produced a total of 11 563 629 vehicles in 2008, far more than any other country. In terms of commercial vehicle production it ranks third, topped only by China and the United States.

And if one considers that this is a country that led an isolated existence until the second half of the 19th century, and was utterly decimated by the Second World War, one can’t help but marvel at this astonishing achievement.