Between 1937 and 1945, during the war years, Japanese economy received rapid development. Production indices showed increases of 24 percent in manufacturing, 46 percent in steel, 70 percent in nonferrous metals, and 252 percent in machinery. Much of the increasingly militarized economy was diverse and sophisticated in ways that facilitated conversion to peacetime activity. On the automobile industry, for instance, of the 11 major auto manufacturers in postwar Japan, ten came out of the war years: only Honda is a pure product of the postwar period. Three of the ten: Toyota, Nissan, and Isuzu, prospered as the primary producers of trucks for the military after legislation passed in 1936 had driven Ford and General Motors out of the Japanese market. Other corporate giants on the postwar scene gained comparable competitive advantage during the war years. Normura Securities, which is now the second wealthiest corporation in Japan after Toyota, was founded in 1925 as a firm specializing in bonds. Its great breakthrough as a securities firm, however, came through expansion into stocks in 1938 and investment trust operations in 1941. Hitachi, Japan's largest manufacturer of electrical equipment, was established in 1910 but emerged as a comprehensive vertically integrated producer of electric machinery in the 1930s as part of the Ayukawa conglomerate that also included Nissan. Similarly, Toshiba, which ranks second after Hitachi in electric products, dates back to 1904 but only became a comprehensive manufacturer of electric goods following a merger carried out in 1939 under the military campaign to consolidate and rationalize production. Whole sectors were able to take off in the postwar period by building on advances made during the war. (this paragraph is based on John Dower, 1992, pp.54-55).
After the war was over, many of the wartime companies and much of the technology used during the war were converted to peaceful economic development. Japanese private companies expanded quickly and fearlessly. They borrowed massive amounts from banks and took on large debts. The private companies developed rapidly, against the conservative advice of the government that they merge so as to compete more effectively against Detroit's Big Three. Instead, Toyota, Nissan, Isuzu, Toyo Kogyo (Mazda), and Mitsubishi all decided to produce full lines. An upstart motorcycle company founded by Honda Soichiro defied bureaucratic warnings and entered the auto market in 1963 with great long run success. In 1953, two young mavericks, Morita Akio and Ibuka Masaru, struggled for months with reluctant state officials before winning permission to purchase a license to make transistors. Beginning with the radio in the 1950s, their infant company, Sony, soon emerged as the global leader in quality an innovation in consumer electronics goods. (Gordon, 248-49)
Nationalism and the desire to catch up with the West persisted after WWII, but now the efforts were focused on economic and industrial goals. For example, machine gun factories were converted to make sewing machines; optical weapons factories now produced cameras and binoculars.(Pyle, p.242)
The great devastation of the Japanese economy during the war and the need to rebuild it from scratch often led to the introduction of new technology and new management styles, which gave these companies a chance to update and upgrade themselves. Their changes were met with a friendly international environment of free trade, cheap technology and cheap raw materials. During the Cold War years, Japan was the client and friend of the advanced U.S. economy and Japanese markets were allowed to be closed while the American market was open to Japanese goods.
