The managed economy was the leading paradigm in Japanese industrial policy during what Tsurumi Shunsuke calls the “fifteen-year war.” This period began with the Manchuria Incident on September 18, 1931, in which the Japanese army occupied northeast China, and ended with Japan's surrender to the Allies on August 15,1945. The period 1931–45 was one in which “history was geared to social change; the fate of nations was linked to their role in an institutional transformation” (Polanyi [1944] 1957:28). Responding to the Great Depression, fascism, socialism, and the New Deal emerged as three “live forces” in writing the most important page of human history in this century. During this period, the Japanese economy experienced some profound changes that strongly influenced its postwar development.

Writing about the significance of the Japanese experience from this period to its postwar history, Itō Takashi (1976:16–20) pointed out that many distinctive phenomena in postwar Japan cannot be understood properly without reference to the Japanese experience over these 15 years. Nakamura Takafusa (1974a:164) wrote that “the system established to control material and money directly during the war has almost disappeared. Many of its variants, however, have remained as legacies of the war and constitute the foundation of the economic institutions even today.” One of the most important parts of this foundation, states Chalmers Johnson (1982), was the industrial policy practiced by the Japanese state. According to Ryutaro Komiya (1986:23), the Japanese economists who lived through that experience “were influenced both consciously and unconsciously by the socialist planned economy and by their wartime experience of economic controls.”