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. From World War II through the early 1970's, the widely accepted consensus in Japan strongly supported Government efforts to reconstruct the Japanese economy by rebuilding the nation's basic industries and working to catch up to Western technology. Strict foreign exchange controls, incentives to exports and restrictions to imports, controls over foreign investment, and the acquisition of technology enabled the Government to influence the rate and direction of economic growth. Monetary and fiscal policies reinforced the effectiveness of these tools. By the mid-1960's, Japan began placing growing emphasis on technology and social development issues. As trade and investment laws were amended to remove controls over foreign trade, the Government lost an important source of its power to direct industry. A rising class of structurally depressed industries, a number of which are energy-intensive, and the attendant employment problems have led to new legislation and Government involvement in easing the adjustment process. The emphasis of industrial policy today has shifted from industry-specific to technology-specific targets such as computers, robotics, and aircraft. Joint Government-industry research and development programs are a major tool of Government assistance for technology development. In addition, waivers from Japan's monopoly law are approved for joint activities. Another form of assistance is the use of tax deductions, credits, and special depreciation allowances. The Government also attempts to promote diffusion of high technology products through its creation and support of special leasing companies. Japan has attempted to assist its declining industries by providing incentives to scrap excess production capacity and assists the workers in these industries through a number of employment and reemployment programs.
