Japanese shipyards, supported by huge state subsidies and long term shipping charters from the Japanese steel mills, began with imported U.S. shipbuilding technology attracted by government subsidies and then began conducting independent research and development on the construction of larger petroleum tankers and bulk carriers and the construction of large shipyards capable of building such large ships (Chida and Davies 1990). Japanese shipping firms associated with the major industrial groups owned and operated these ships. These Japanese industrial groups control ocean shipping of raw materials on an FOB raw materials exporting port basis (shipping costs paid by the buyer from the exporting port to Japan) so that Japanese importers captured any reductions
in transport costs caused by technological improvements or changes in world shipping market conditions (Bunker and Ciccantell 1995, 2003b).
Additionally, the Japanese government provided subsidies for the construction
of Maritime Industrial Development Areas (MIDAs) in Japanese ports that eliminated the need for internal transshipment in Japan of raw materi-als imports. Japan’s coastline was ideally suited for this form of linkage and transport-based development (Kosai and Ogina 1984: 60–61). This transport pattern allowed Japanese steel mills and shipping firms to take advantage of the tremendous economies of scale available in bulk shipping to dramatically
reduce production costs of steel in Japan by capturing all of these benefits for themselves (Bunker and Ciccantell 1995, 2003b).