Power and Progress in Japan: The Past, Present, and Future of Japan as a Tech Powerhouse

Abstract

This paper analyzes Japan’s economic and technological history since the Meiji Restoration through the framework of Power and Progress proposed by Acemoglu and Johnson (2023), focusing on the concepts of direction of technology and productivity bandwagon. A historical review reveals that technological progress and the distribution of its benefits were not determined solely by market mechanisms or technological inevitability, but were shaped by the power dynamics among governments, companies, workers, and others. Periods when workers held strong bargaining power and inclusive social institutions were in place saw the emergence of a virtuous cycle, in which the direction of technology moved toward broad-based innovation and the productivity bandwagon functioned effectively. Conversely, after the collapse of the bubble economy, a shift in the power balance in favor of companies led to a rise in short-term cost-cutting, resulting in a divergence from inclusiveness and innovation in the direction of technology, as well as a breakdown of the productivity bandwagon. This ultimately undermined Japan’s ability to leverage the strengths of its production system and led to a decline in technological capabilities. Currently, a new wave of technological innovation centered on AI is emerging. However, its impact remains heavily dependent on existing employment practices and corporate behavior models, making a short-term shift in direction unlikely. In the medium-to-long term, however, the societal will and collective action may create an opportunity to rebuild a virtuous cycle. This paper proposes action guidelines for companies, workers, and the government, and argues that realizing true prosperity from technological progress requires reassessing existing power structures and actively choosing new pathways as a society.