Growth of the Service Sector and Policies toward Service Industries: A historical overview of the past century

Author Name MORIKAWA Masayuki (Vice Chairman & Vice President, RIETI)
Creation Date/NO. February 2017 17-P-003
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This paper presents a historical overview of the growth of the service sector and policies toward the service industries from the 1920s to the present. Looking back since the early 20th century, the evolution of the industrial structure in Japan toward the service economy can be separated into three phases. In the first phase, from the 1920s to the early 1970s, the share of the service sector gradually increased in parallel with the growth of the manufacturing sector, with an interruption under the tightly controlled industrial activities during the wartime economy. In the second phase, from the early 1970s to the early 1990s, manufacturing share to gross domestic product (GDP) peaked out and the expansion of service sector accelerated. The third phase beginning from the "lost decade" is characterized as structural changes in the service sector stemming from the IT revolution, globalization, and deregulation. In principle, the change in the industrial structure in Japan is consistent with the pattern observed in major advanced countries. Although the service sector was unimportant as the target of industrial policy in the early stage of economic development, it has gradually attracted attention from policymakers. Change in the industrial structure toward the service economy has been closely linked with the development of socio-economic structure such as urbanization and female labor participation.