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Japanese Auto Industry

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In order to promote the growth and development of the Japanese auto industry the government began its involvement by obtaining military trucks in 1937 from automakers like, Toyota, Nissan, and Isuzu. General Motors (GM) and Ford had already established factories inside Japan, the low tariffs in Japan helped further the incentive to develop foreign factories inside Japan. These foreign factories really hurt Japan’s small automobile manufacturers who could not directly compete with the mass production of Ford and GM and soon disappeared. The only manufacturers who could compete were those that received subsidies under the Military Automobile Subsidizing Law (Togo, 2007).

Prior to World War II the Japanese government implemented policies in order to develop the domestic automobile industry. The first policy that was established in 1918 called the Military Automobile Subsidizing Law. Under this new policy the military provided specific automakers subsidies in order to produce vehicles during peacetime for Japanese citizens. However, in the event of a war the government could take these vehicles from the citizens for use by the military. The subsidies were handed out to manufacturers who produced more than 100 vehicles. Manufacturers were given a 3,000 Yen subsidy. Individuals who owned these vehicles were given 1,000 Yen plus about 400 Yen for a period of 5 years for maintenance (Togo, 2007). With this new law in place it gave incentive for automakers to begin manufacturing vehicles in Japan. It also gave citizens a reason to buy Japanese automobiles rather than purchasing imported goods.

In order to advance the auto industry even further and to improve the quality of automobiles produced in Japan the Ministry of Commerce and Industry formed the Rationalization Council for the Automobile Industry in 1931. The council realized that it needed to develop at least one mass produced vehicle. Subsidies again were given to automakers, but this time to those that produced more than 1,000. Isuzu was the first manufacturer to mass produce automobiles for Japan (Togo, 2007).

The Japanese government issued another law called the Automobile Manufacturing Enterprise Law. Under this new law any Japanese company that intended to manufacture over 3,000 vehicles had to obtain a license. Once licensed these manufacturers were given tax exemptions which covered company income, sales and any imported goods specifically used for the manufacturing of the vehicles for a period of 5 years under this new law. Licenses were awarded to Toyota and Nissan. This law also restricted annual production of Ford and GM vehicles to 12,360 units and 9,470 units respectively (Togo, 2007). Tariffs were also increased towards complete vehicles and auto parts to increase domestic production.

As new technologies are introduced into the world you run the risk of these technologies impacting the environment whether it is positive or negative. Unfortunately for the automobile industry it has had a negative impact. Air pollution had become so severe in most major Japanese cities that citizens had to stop at oxygen stations (Cambell & Madrid-Crost, 1992). The automobile industry has tried to curve the overall impact on the environment by setting emissions standards for manufacturers to meet. Japan emulated

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