2.The High Growth Period, the First Stage (1955-1962)

(1) High Growth and Dual Structure

Through the Reconstruction Period and by the low 1950s, the Japanese economy recovered almost to the pre-War level and SMEs became very active. Capital investments called for further capital investment. The favorable economic cycle resulted in surging national income, to achieve High Economic Growth.

In the course of the economic recovery and high growth, however, large-scale enterprises and SMEs went with two different paces of growth to very different levels of productivity, wages, technology and financing ability. Thus arguments began to prevail on the “Dual Industrial Structure” of “advanced large-scale enterprises” and “delayed SMEs.”

(2) Measures for Solving the Dual Industrial Structure

<Financial Resources>

The Law on Financial Assistance for Promoting Small and Medium Enterprises was enacted in 1956 to support improvement in productivity by applying modern equipment. Municipal governments began to loan under the said Law such funds as were necessary for modernizing equipment.

<Cooperatives>

In 1957, the Law Concerning the Organization of Small and Medium Enterprises Organizations was enacted. This law was designed to strengthen SME organizations and to establish a organization which adjusts business activities.

<Management Consulting and Guidance>

In this area, the Law on Organizing Commerce and Industry Association (Commerce and Industry Association Law) was enacted in 1960 in order to improve and better the management of small-scale enterprises through management consulting, which meant that better management programs were broadly diffused by the government.

As for guidance programs, the Small and Medium Enterprise Guidance Law was enacted in 1963 to prepare a systematic and efficient scheme of guidance for the rationalization of management and improvement in technology for SMEs, whereby municipal governments can plan and efficiently undertake the guidance.

(3) Countermeasures for the Diffusion of the Subcontracting Division of Labor Structure

Through the first and second stages of the High Growth Period, stratification of enterprises developed to such an extent that stratified structure (subcontracting division of labor structure) became evident, with a parent enterprise at the top. Japanese SMEsÕ industries then became incorporated in such division of labor structure, which was typified in the electrical machinery manufacturing and transportation machinery industries. The improvement of efficiency and progress in technology with this division of labor and specialization typify the Japanese SMEs.

In combination with the said move, on the other hand, many parent enterprises, taking advantage of their predominant position over subcontractors, would increasingly enforce unfair practices such as delaying or reducing payment for subcontractors, infringing their benefits. As countermeasures to the unfairness, and to control the abuse of power by large-scale enterprises, the Law on the Prevention of Delay in the Payment of Subcontracting Charges and Related Matters (the Subcontractors’ Payment Law) was enacted in 1956.