Unlocking the miracle: Understanding Japan’s remarkable postwar economic recovery

Unlocking the miracle: Understanding Japan’s remarkable postwar economic recovery | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Unlocking the miracle: Understanding Japan’s remarkable postwar economic recovery Harutaka Takahashi This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-6517275/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This paper explores optimal recovery paths for economies devastated by disasters or war, using Japan's post-World War II recovery as a case study. Japan experienced severe destruction, including infrastructure loss, starvation, and high inflation. Yet, within 10 years, it achieved significant economic recovery, suggesting an optimal recovery path exists. Key features of such recovery are: 1) fixed production technology and 2) a greater capital intensity in the capital goods sector compared to the consumer goods sector. We analyze this using a two-sector growth model with Leontief technologies, adapting it into a continuous-time optimal growth model. Focusing on nonlinearity and interior-point solutions, we identify two critical points: an unstable focus and a saddle. Transversality conditions indicate that the saddle-point stable point is the optimal solution and recovery path. Numerical analysis based on historical data reveals that postwar Japan's economic reconstruction started with an initial capital stock per capita near an unstable fixed point, and that government intervention was essential to guide the economy on the only solution trajectory that would lead to an optimal steady state, meaning a return to the prewar economic level. Thus, Japan's rapid recovery can be seen as a remarkable achievement. JEL Classification O22, O41, O53 Japanese postwar economic recovery Leontief two-sector optimal growth model capital intensity condition saddle-path stability unstable focus Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-6517275","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":467670063,"identity":"45d15efc-1691-4d60-b072-95dd280c2769","order_by":0,"name":"Harutaka Takahashi","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAABEklEQVRIiWNgGAWjYBACAxDxAco5IAHkSjAwNoB5UAqrFsYZJGth5kEWkSDkMHP2s8+kbSrs5BjEDh88YFFQKy85I7ntAUONHQPzbOzWWPakm0nnnEk2ZpBOSwA67LjhbInEdgOGY8kMjHMOYHfYgTQ26dy2A4kN0jkGQC3HGOdJJLZJMLAdAHoxAbuW88/YpC3/gbTkfwBpsYdo+YdHyw2gLYwNYFtAIVaTOBukhbENn5ZnzJY9x5KN2aTTQA47kDyz52GbRGJfMg9Ov5xPY7zxo8ZOjl86+fFniT91tjOOpz+T+PDNTs4QR4jBARsQM0swHIbwgE7iMZyBTz0UMH5gqEPw5AlG6igYBaNgFIwQAADL4FuXIeKpTQAAAABJRU5ErkJggg==","orcid":"","institution":"Kobe University","correspondingAuthor":true,"prefix":"","firstName":"Harutaka","middleName":"","lastName":"Takahashi","suffix":""}],"badges":[],"createdAt":"2025-04-24 05:38:18","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-6517275/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-6517275/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":84269084,"identity":"57c75270-a4b9-4228-b965-784800108b7d","added_by":"auto","created_at":"2025-06-10 03:30:43","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":1097889,"visible":true,"origin":"","legend":"","description":"","filename":"JEGtakahashi.pdf","url":"https://assets-eu.researchsquare.com/files/rs-6517275/v1_covered_c5fb88d2-a4f1-4d83-8ab5-a5d77fa709ce.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Unlocking the miracle: Understanding Japan’s remarkable postwar economic recovery","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Japanese postwar economic recovery, Leontief two-sector optimal growth model, capital intensity condition, saddle-path stability, unstable focus","lastPublishedDoi":"10.21203/rs.3.rs-6517275/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-6517275/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThis paper explores optimal recovery paths for economies devastated by disasters or war, using Japan's post-World War II recovery as a case study. 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