Factors of Production: Capital

Abstract

Japan’s capital has played a vital role in economic growth. During the period when the raising of capital from overseas was restricted, the effective utilisation of domestic savings was the key to economic growth. One of the factors that drove Japan’s rapid economic growth was the linkage of abundant domestic savings with vigorous capital investment. However, a high level of savings does not necessarily translate into high economic growth. Since the transition to low economic growth and the start of financial liberalisation in the 1980s, the efficient utilisation of Japan’s massive savings at home and overseas has become a vital issue for the Japanese economy. In this chapter we will examine the structure of Japanese capital and the mechanisms that linked capital to high economic growth. We will also evaluate the role played by capital in Japan’s economic growth.