In the development of capitalism in Japan the state played a vital role. For the sake of convenience this role can be divided into three phases. During the first phase the state played the role of an entrepreneur.
It not only started industries but also supervised them. In addition to this it also encouraged the private enterprise. In course of time when the industries set up by the state started working smoothly it transferred them to private enterprises, and extended government support.
This phase of government policy came to an end with the Sino-Japanese War. The second phase started after the Sino-Japanese War. During this phase the state acted as industrial financier and also rendered indirect help to the industries. It channelized resources of the nation in desired channels by controlling banking, tariff and taxation policies. The third phase set in after World War I, when the industries enjoyed a capacity far in excess of the available markets.
The state sought to check overproduction and internal competition. It also sought to deal with the problem of inflation by resort to deflation. It also took a number of other measures in the interest of country. Thus it subjected the industries to governmental control even in the face of opposition.