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Japanese Shipbuilding - Post-War Recovery

During the late 1940's, as part of its postwar efforts to rebuild basic industries, the Japanese Government established a shipbuilding program to encourage growth in the industry. The huge Kure naval yard was where the Yamato - the largest battleship ever - was built. In that neighborhood was located a major Japanese shipbuilding company. The naval yards at Kure were part of the industrial complex of Japan that had been designated as reparations to the various claimants against Japan during World War II. Fortunately the US didn't behave like the Russians, who denuded Korea. The US said to the allies, “Look, we designated all this stuff for reparations and if you want it, come and get it.” But how are you going to move a major shipyard? So the naval yard in Kure sat from the time of the end of the war until the Korean War broke out, more or less abandoned.

An outfit called National Boat Carriers, an American company [probably owned by Greeks but registered as American], was involved in tankers and the transportation of petroleum products. The Korean War put an enormous demand for tankers. One minute World War II oilers were a dime a dozen and the next minute they were gold and the demands for them jumped by leaps and bounds. National Boat Carriers wanted to start building tankers to service the Korean War. The National Boat Carriers saw this opportunity and decided they would like to build them in Japan with cheap labor and marvelous facilities.

This required the occupation to release the naval yards at Kure from reparation designation and, among other things, the United States to release steel because the Japanese steel industry was not producing sufficient steel for this kind of thing. The next thing that came up, of course, was that National Boat Carriers decided they didn't want to build tankers of riveted construction, they wanted to build welded ships. This put an entirely different light on things because the Japanese steel industry was not producing any welding steel ship plate and they would have to get everything they needed from the United States. So this required special exceptions. The purpose for which the shipyard was released from reparation designation was to permit the employment of Japanese in the area and benefit the growth of the Japanese economy and the Japanese steel industry. The whole thing looked like a very good deal for the Japanese economy which was still in pretty sad shape. National Boat Carriers turned to Yawata, a big Japanese steel company, and helped Yawata invest money to produce steel of the quality they required. That is one of the foundations that later became a major industry in Japan, namely, shipbuilding.

In the years following World War II, Japan focused on rebuilding basic industries considered central to economic reconstruction and development. The shipbuilding industry was one of those industries accorded priority, and the government instituted a number of measures to encourage the industry's growth. As early as 1947, Japan embarked on a "planned shipbuilding" program. The government announced annual ship tonnage to be constructed under the plan, and those shipyards selected to construct the vessels were then provided with loans from the Japan Development Bank at highly favorable terms; ship purchasers also had access to favorable financing from the Japan Development Bank. This program provided the industry with a stable source of demand and in the 1950s and 1960s accounted for a significant portion of all ships built in Japan for the domestic market. Government support was by no means limited to arranging favorable loans to shipbuilders.

The industry had access to significant tax benefits, including special depreciation allowances and incentives to invest in developing overseas markets. To encourage demand, interest rates were subsidized for shipping companies in Japan to purchase Japanese ships. Perhaps of key importance were the measures employed to encourage exports, notably the financing provided by the Japan Export-Import Bank and the more unusual "link trading" arrangement. Under the latter scheme, shipbuilders were licensed to import raw sugar, which, because of the then-prevailing exchange and import restrictions, could be sold at a lucrative profit on the domestic market. These profits in effect subsidized the shipbuilders' exports of ships.

The shipbuilding industry's access to advantageous financing and other government support, coupled with the availability of relatively low-cost steel and labor, the major cost components in ship construction, contributed substantially to the industry's rapid growth and strong competitive position. In the space of two decades Japan had become the world's lowest cost producer of ships and by the mid-1960s was launching close to 50 percent of all shipping tonnage constructed worldwide.

As a result of government programs, the 1950's and 1960's were a period of growth and stable demand for Japanese shipbuilders. By the mid-1960's, Japan had become the world's lowest cost producer of commercial ships and held close to 50 percent of new shipping tonnage. The availability of low cost steel and labor contributed to this success. Japan dominated the world's shipbuilding market for the next 20 years. The Japanese national commitment to stability within the industry, combined with an efficient vertically interrelated material support structure, has contributed to Japan's leadership position in merchant-ship construction. By 1974, Japan's ship production reached a peak of 15 million gross tons. However, the 1973-74 oil crisis led to a worldwide recession, and shipbuilding orders fell into a slump. The full impact of the crisis was not felt until 1978 and 1979. Between 1975 and 1978, 45 small shipbuilders filed for bankruptcy or requested Government protection.

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Page last modified: 04-08-2012 19:03:24 ZULU