Japan’s industrial policy has evolved through four broad phases.
The first phase spanned postwar reconstruction and the subsequent period of rapid economic growth, from 1945 through the 1960s. The government promoted the development of heavy and chemical industries through a policy approach known as “targeting,” under which specific industrial sectors were selected for support. While these policies promoted capital accumulation and industrial upgrading in the targeted sectors, policies for industrial adjustment and rationalization, particularly in coal mining and related industries, also became increasingly important from the 1960s onward.
The second phase, from 1970 to 1984, was characterized by stable economic growth and international economic friction. As growth stabilized following the period of rapid expansion, Japan faced pressure to shift toward knowledge-intensive industries. The government therefore implemented the “Technopolis” program to foster regional clusters of high-tech industries. The then Ministry of International Trade and Industry (MITI), now the Ministry of Economy, Trade and Industry (METI), continued to lead efforts to support selected industries, with the aim of developing next-generation semiconductor technologies domestically.
The third phase, from 1985 to 2008, was characterized by structural reform. External pressure prompted a policy shift toward structural reform, leading to privatization and liberalization in telecommunications and deregulation in sectors such as aviation. Under the banner of “small government,” policy focused on creating a competitive market environment and strengthening market mechanisms. At the same time, interest in traditional industrial policies aimed at supporting specific industries waned.
The fourth phase, beginning in 2009, has been marked by a focus on emergency responses to crises. Japan was struck by a series of major crises, including the global financial crisis, the Great East Japan Earthquake, and the COVID-19 pandemic. To mitigate acute demand shocks, the government introduced subsidy programs to stimulate domestic demand, along with new and expanded special provisions for employment adjustment subsidies.
Following these developments, METI introduced the “New Direction of Economic and Industrial Policies” framework in 2021, proposing a shift toward a long-term, systematic approach to industrial policy. The administration of Prime Minister Sanae Takaichi, which took office in 2025, announced a policy to promote joint public-private investment in 17 strategic sectors, including artificial intelligence (AI), semiconductors, and shipbuilding. In some respects, this approach represents a return to earlier targeting policies.
However, Japan is not alone in adopting this type of industrial policy. Policies adopted by other countries, including China and the United States, are influencing Japan’s approach to policymaking. In subsequent parts of this series, we will examine how industrial policy is evolving around the world.
>> Original text in Japanese
* Translated by RIETI.
August 4, 2026 - Published in Nihon Keizai Shimbun's " Introduction to Economics—New Trend in Industrial Policy "
