Causing quite a stir, these statements had the effect of stimulating the exact opposite opinion. In particular, the influential Ministry of International Trade and Industry (the successor to the former Ministry of Commerce and Industry) favored the protection of domestic automobile manufacturers, and this line of thinking set the general tone for government policy. Specifically, MITI set up guidelines (issued in October 1952) aimed at introducing new technologies to Japan through technical collaborations with foreign automobile manufacturers, improving production technologies for passenger cars, and manufacturing automobiles that would be competitive in the export market.

Rationalization of the Industry
The Industry Rationalization Promotion Law adopted in March 1952 marked the first implementation of the new government policy discussed above. Through this law, the automobile, steel, machine tool, and electric communications equipment industries were designated as key industries that ought to be rationalized. The provisions of this law gave those industries tax advantages and also made low-interest government loans available to them. The cost reductions thus gained by the automobile industry, together with improvements in the quality of their product, allowed manufacturers to produce cars with export competitiveness.

Meanwhile, rationalization of the auto parts industry was also being accomplished, through the creation of the Japan Industrial Standards (JIS) regulations in 1951 and an industrial subsidies system that was introduced in 1952. These measures, too, made important contributions to improved product quality and cost reduction in Japanese automobile manufacturing.

Deregulation
As economic and industrial reconstruction progressed, regulations imposed in the aftermath of the war were gradually eased. In October 1949, GHQ lifted its restrictions on passenger car production, and in November all controls on sales were abolished.

Deregulatory measures also applied to the export of automobiles. The exchange rate of $1=\360 was established in April 1949, and in May 1950 new legislation for the promotion of exports and capital transactions was passed, paving the way towards the growth of an international economy.

Automobile exports from Japan totaled 301 units in 1948 and 1,137 units the following year. In March 1949, the Yokohama Trade Exhibition displayed cars produced by Japanese manufacturers eager to export their automobiles overseas.

In 1951, MITI launched the publication of a promotional catalogue in English providing detailed information on the Japanese automobile industry and its products.

The Impact of the Korean War
The Korean War broke out in June 1950, while economic and industrial deregulation was being implemented in Japan. As a result, there was an urgent need to furnish the U.S. Army, engaged in battle on the Korean peninsula, with munitions and supplies. Once again, Japan found itself in a "special procurements boom" and a "special demand economy". The automobile industry was no exception. One year after the conflict started, special procurement contracts with Japanese industries amounted to a total of $340 million, with $22.7 million allocated for the provision of trucks and $7.64 million for automobile parts.

Automobile manufacturers received orders not only for automobiles but also for engines, spare parts, military vehicle repairs, fuel tanks for aircraft, and so on. To meet these special demands, the output of manufacturers expanded enormously, spurring on the growth of the parts industries on which they depended.

First Major Automobile Show in Japan
The "special procurements boom" helped revitalize and modernize the Japanese economy, with tremendous expansion leading rapidly to a consumer economy. By 1953, per capita consumption exceeded the pre-war level.

Strong economic growth stimulated the demand for automobiles. Excluding special procurements, 25,435 standard size cars were produced in 1952, up 9.5% from the previous year, as well as 16,058 smaller-sized passenger cars (up 34% from 1951), 47,917 three-wheelers (up 53.3% from 1951), and 28,263 two-wheelers (up 230% from 1951).

In this very favorable sales environment, Japan's first major automobile exhibition, the 1st Tokyo Motor Show, was held in 1954 in Hibiya Park. Sponsored by various automobile-related organizations, the show drew 550,000 visitors and was a great success.

Technological Tie-Ups with Foreign Manufacturers
Domestic passenger cars at this time were manufactured by mounting passenger car bodies onto the chassis of small trucks, a technically irregular way of building cars to say the least. Soon, however, automobile manufacturers began to focus on developing cars that would meet international standards and on implementing mass production systems which could not have been created before the war.

One approach they adopted was to enter into technological tie-ups with foreign automobile manufacturers, as mentioned earlier. In May 1953, Nissan began selling the first Austin A40 vehicles assembled in Japan and started complete domestic production of the car in May 1956. Following suit, Isuzu started complete domestic production of the Hillman in September 1957 and around the same time, Hino launched a completely domestically manufactured Renault. Mitsubishi, too, was producing a jeep as of June 1956 as a result of a tie-up with Willys Overland.

On the other hand, Toyota and Fuji Seimitsu, using their own technologies, chose to develop cars independently which would meet international standards. As a result of their efforts, Toyota produced the Toyopet Crown (1500cc) in January 1955, and Fuji, aiming to become exclusively a manufacturer of luxury cars, produced the Prince Skyline (also 1500cc) in April 1957.

Motorcycles and Three-Wheelers
In the early postwar years, with passenger car production restricted by GHQ, motorcycles and three-wheelers played an enormous part in meeting the demand for motorized vehicles in Japan. Three-wheeler production started up in late 1945, and the manufacture of motorcycles was resumed in 1946. Three-wheelers, in particular, were appreciated by small and medium-sized companies and independent enterprises for their economy and convenience. The demand for motorcycles began to grow significantly from 1951, and in 1953 production leapt to 166,429, making Japan the fifth largest motorcycle-producing country in the world.

Establishing an Infrastructure for a Motorized Society
With the signing of the San Francisco Peace Treaty in September 1951, Japan was recognized internationally as an independent and sovereign nation. Once again, the formulation of road development and traffic policies was in the hands of the Japanese government.

Postwar road development began full-scale with the adoption of an initial five-year road construction plan in 1954, but in 1956 only 2% of Japan's entire road network was paved (17% for national roads). That same year, a World Bank survey team headed by Ralph J. Watkins arrived in Japan to conduct a preliminary survey on highway construction. On its completion in October 1956 and submission to the Ministry of Construction, the team noted harshly that "there is no other industrialized country besides Japan that has neglected its road network so badly".

As a result of recommendations in that survey, road construction and national highway legislation was passed in 1957. In October 1958, a groundbreaking ceremony launching the construction of the Meishin Highway marked the beginning of Japan's "highway era".

Other important developments in the postwar motorization of Japan were the creation of an automobile tax in 1950 and an automobile insurance system in July 1955.