Summary: Testimony was given on two GAO reports which traced the development of industrial policy in Japan since World War II, attempted to describe changes in the goals adopted and the tools used, and discussed how monetary and fiscal policies have contributed to achieving industrial policy goals. Japan has been quite flexible in its policies to different industries. In addition, there have been changes in the Government's influence over the direction of the nation's economic growth. Japanese Government support for individual industries has been tailored to meet the specific needs and objectives of a given industry. In the computer industry, manufacturers conduct more of their own research and development, because rapid technological advances require that firms remain competitive. On the other hand, the Government supports international collaboration in research and development in the aircraft industry because it is very costly and the domestic market does not provide sufficient demand for new products. In robotics, Government involvement trails industry development, and diffusion of technology to small- and medium-sized firms has been the most important form of Government assistance. The Government has supported the development of leading-edge technologies as well as the diffusion of advanced technology throughout the economy. Direct subsidies to joint industry-Government research and development projects and tax credits for research and development help to provide the resources to develop new technology. The Japanese Government has also used preferential tax treatment, credit, and Government-supported leasing companies to encourage the diffusion of new technology.
