The Yale Undergraduate Research Journal


Today, Japan’s auto industry is renowned for its dominance of foreign markets. Japanese cars are cheap and fuel-efficient, undercutting larger, more expensive automobiles from Europe and America. Scholarship on recent Japanese industrial development tends to prioritize a ‘developmental state’ and robust industrial policy in shielding Japanese manufacturers from trade liberalization. This paper will argue that, while the industrial policy steered by the Ministry of International Trade and Industry (MITI) played a significant role in advancing the interests of the Japanese auto industry, it was ultimately the unique trust-based keiretsu conglomerate structure that gave Japanese auto producers a comparative advantage vis-à-vis their American counterparts. Cost reduction on the firm level allowed major Japanese automotive companies to skirt free trade measures, simultaneously insulating their business model from the American led trend towards globalization and trouncing the American automakers, for whom union politics and steeper production costs encumbered coordinated and strategic growth.