Japan being a high developed and market-oriented economy is the third-largest economy in the world by nominal GDP and is the world’s second largest developed economy, Japan recovered from devastation to become the world’s second largest economy, All of this was only possible after Japan joined World bank in 1952. The help of World Bank allowed Japan to transform their economy and to become from a borrower of the world bank to a creditor to the World Bank. This transformation interested me and therefore selected this topic.
Origin And Nature
The World Bank is an international financial institution that provides loans to countries of the world for capital programs. It comprises two institutions: the International Bank for Reconstruction and Development (IBRD), and the International Development Association (IDA). The World Bank is a component of the World Bank Group.
The World Bank’s stated official goal is the reduction of poverty,Its decisions must be guided by a commitment to the promotion of foreign investment and international trade and to the facilitation of capital investment.
The World Bank has expanded from the single institution that was created in 1944 to a group of five unique and cooperative institutional organizations. The first organization is the International Bank for Reconstruction and Development (IBRD) , an institution that provides debt financing to governments that are considered middle income. The second organization within The World Bank is the International Development Association (IDA), a group that gives interest-free loans to governments of poor countries.
The International Finance Corporation (IFC), the third organization, focuses on the private sector and provides developing countries with investment financing and financial advisory services. The fourth part of The World Bank is the Multilateral Investment Guarantee Agency (MIGA), an organization that promotes foreign direct investments in developing countries. The fifth and final organization is the International Centre for Settlement of Investment Disputes (ICSID), an entity that provides arbitration on international investment disputes.
World Bank consists of 189 member countries. Japan joined the World Bank in August 1952, the year after the signing of the San Francisco Peace Treaty. Starting in 1953, a number of projects were implemented in Japan with World Bank loans for the development of the nation’s economic foundation, such as electric power generation, basic industries development, transportation, water, and infrastructure.
Japan hosted the Annual Meetings of the World Bank Group and International Monetary Fund for the first time in 1964, a symbolic year that clearly showed Japan’s post-war reconstruction and return to the international community. In 1966, Japan signed its final World Bank loan, and graduated from borrower status in the following year.
Japan strengthened its status as a creditor in the 1970s, and became the second-largest shareholder of the World Bank in 1984, gaining a greater voice as one of the most important partners.
The world Bank, initiated informal discussions with Japan on membership in early 1950. Japan was still occupied, a peace treaty between Japan and the allied powers was under preparation, and Japan’s economy was being rebuilt. Inflation had finally been tamed with implementation of strong stabilization policies, reconstruction programs were under way, and exports and imports increased. Japan was gaining confidence in its capability to effectively manage its economy, thus feeling ready to regain full sovereignty, and was set to reintegrate internationally through membership of international organizations, such as the IMF and World Bank. In August 1951, a formal application letter signed by Prime Minister Shigeru Yoshida was transmitted to the IMF.2,3 With the peace treaty, Japan regained sovereignty on April 28, 1952, and the accession agreements with the IMF and the Bank were signed in August 1952. (Abe, Y., & Katsu, S. 2016)
2011 marks the 40th anniversary of the first public bond issue by the International Bank for Reconstruction and Development (the World Bank) in Japan. That issue, a eleven billion Japan Yen bond launched in June 1971, represented an important step in the evolution of the World Bank’s relationship with Japan. Japan became a member of the World Bank in 1952, and throughout the 1950s and 1960s, as Japan relied on capital inflows to rebuild from the devastation of World War II, the World Bank provided more than 850 million US dollars of loans to the country. In all, the World Bank made more than thirty loans to Japan during that time, funding important economic development projects throughout the country (Arima, Yoshiyuki; Bennett, Michael S.; Dore, Andrea. 2012.)
Among member nations of the World Bank Group, Japan occupies an exceptional position. Within the first 20 years of the Bank Group’s history Japan has emerged, at dramatic tempo, from the status of a war-damaged, still relatively underdeveloped economy, to that of a sophisticated modern economy at or near world leadership in some aspects of industrial technology and output, and expanding rapidly in the role of a major supplier of aid to the less developed countries. Against such a background, Japan’s current position as a leader among the group of about eighteen Bank member nations which provide the bulk of financial and technical assistance flowing to the less developed world and upon whose cooperation the World Bank must draw in pursuing its own tasks as an international development agency. Japan’s recent position as a substantial user of development assistance channeled through the World Bank into key sectors of the Japanese economy. Japan’s growth has given her a special role to play on the contributary side of international development and development financing. (World Bank. 1967)
The World Bank said advanced economies were showing signs of improvement, especially Japan and Europe, while the seven largest emerging markets – China, Brazil, Mexico, India, Indonesia, Turkey and Russia – were again helping to drive global growth. The bank boosted its 2017 growth forecast for Japan by 0.6 percentage point since January to 1.5 percent (Lawder,David.2017)
The World Bank predicts that the global economy will grow 3.1 percent this year, which would be its best showing in seven years. It foresees growth of 2.1 percent in the Eurozone and 1.3 percent in Japan.(Crutsingr,Martin.2018)