Early on in the postwar years, the Japanese government helped domestic companies get access to foreign technologies. Did it work? On balance, yes. But not without some complications. The Japanese auto industry benefited from direct financial support in the 1950s and 1960s. Government support for the steel and machine tool industries also ensured that the Japanese auto industry had a reliable, domestic supply of critical materials.
Thriving Auto Industry
On the other hand, in many cases, the Japanese auto industry thrived despite government intervention. In the 1950s and 1960s, the Japanese Ministry of International Trade and Industry (MITI) was deeply concerned that domestic automakers were too small to compete with US rivals.
The government wanted to reduce the domestic industry from ten players to two. Toyota and Nissan would absorb the other eight, including Honda, Subaru, and Mazda. Those smaller companies survived despite government plans.
And by the 1970s, when Japanese cars flooded the US market, the Japanese auto industry was already internationally competitive, and government interventions were largely negative. For example, auto exports to the United States surged during the 1970s because Japanese cars were fuel-efficient and met US pollution standards. And that happened despite the Japanese government not because of it.
Environmental Crisis in the US
Here’s the backstory. The public health impact of pollution—particularly auto emissions—became a major concern all around the world during the 1960s. In the United States, there were three catalytic events: the New York City smog crisis of 1966; the oil spill off Santa Barbara, California, in 1969; and the fire on the Cuyahoga River in Cleveland in 1969 (when a river full of industrial waste burst into flames).
The sense of environmental crisis was so severe that New York’s Museum of Natural History produced an exhibit for its centennial celebration called, ‘Can Man Survive?’ That sense of peril led Congress to enact the National Environmental Policy Act of 1969 and the Clean Water Act of 1972, and create the Environmental Protection Agency in 1970.
Japan’s Environmental Crisis
There were parallel problems in Japan. In fact, the Japanese case was arguably worse, with two large cases of mercury poisoning. The most famous of these occurred in the late 1950s in the small coastal factory town of Minamata. That gave rise to the term ‘Minamata disease’ for severe mercury poisoning.
There was also an epidemic of lung disease in the 1960s and early 1970s caused by sulfur dioxide pollution from a petrochemical plant in Yokkaichi, near Osaka. And across Japan, people living near major highways had alarmingly elevated blood levels of lead which was a result of breathing the exhaust from leaded fuels.
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US Emission Standards
So, enormous public pressure developed both in the United States and Japan for more regulation. Japanese industry—as in the United States—tended to resist such regulation, arguing that it was impossible to lower pollutants, or that the costs were too high. And Japan’s MITI tended to take the industry’s side.
But when the United States began announcing emissions standards, MITI shifted. Japanese industry would need to meet US standards to compete in the export market. So, it made sense to adopt US standards. And then something strange happened. US carmakers successfully lobbied the US government to postpone the new emission standards. They insisted it was impossible to meet the targets.
Honda and Mazda Break Ranks
In Japan, MITI and the major carmakers wanted similar delays. But there was huge pushback from citizen groups and the mayors of major cities. And then two upstart carmakers, Honda and Mazda—two smaller companies that MITI wasn’t sure should even exist—broke ranks with the big carmakers and declared that they were ready to meet the new pollution standards.
For Honda and Mazda, the new standards presented an opportunity to gain market share. And then the big companies Toyota, Nissan, and Mitsubishi agreed they had the technology to reduce emissions; they just hadn’t wanted to bear the expense. And all Japanese automakers met US standards on the original schedule.
Unfortunate Lobbying, Fortunate Conclusions
So, Japanese carmakers actually won by losing—by failing to lobby the Japanese government as well as the US, carmakers lobbied the US government. Here’s another irony. Japanese automakers succeeded at lowering emissions by improving fuel economy, and they did so largely by adapting existing technologies—things like high-compression engines and fuel injection. American automakers had used those, too, but mostly on luxury and muscle cars.
But Japanese cars—because they used those technologies for fuel efficiency and because of the Japanese environment movement—were perfect for the US market in the 1970s. Exports to the United States surged from fewer than 200,000 in 1968 to almost two million in 1980.
But that boom was as much in spite of MITI and the Japanese government as because of MITI.
Common Questions about When the Japanese Auto Industry Flooded the US Market in the 1970s
The Japanese government directly supported the Japanese auto industry financially in the 1950 and 1960s. Also, the government’s support of steel and machine tool industries proved beneficial for the auto industry as well since it had access to a reliable, domestic supply of crucial materials.
Despite initial resistance in the industry, the Japanese auto industry needed to meet the emission standards set by the US because of its goal to compete in foreign markets, especially the US market.
At first, the Japanese auto industry, just like in the US, tried to lobby the government into postponing the emission standards. But there was much resistance from citizen groups and mayors of large cities. When Mazda and Honda broke ranks and agreed to meet the standards that were set, other manufacturers followed suit.