The Growth of the Japanese Electric Power Industry and the World Bank’s Request to Increase Depreciation Costs Between 1951 and 1973

Abstract

This study investigates the growth of the Japanese electric power industry following increases in the ratio of the depreciation cost to fixed assets and the construction of new electric power stations which employed depreciation cost as a funding mechanism. In addition, it reveals the determinant of the increase in the ratio of depreciation cost to fixed assets by using multiple regression analysis. This analysis shows that the World Bank’s request to increase depreciation costs contributed to the increase in the ratio of depreciation cost to fixed assets; however, the actual loan experience of companies borrowing from the World Bank did not. Thus, the World Bank’s request was effective only in the execution of loans. The role of the World Bank was significant for the growth of the Japanese electric power industry between 1953 and 1961, but was minimal after 1962. On the other hand, the increase of revenue from the demand increase and the fall of the ratio of cost to revenue contributed to the continuous increase of the ratio of depreciation cost to fixed assets.