In the last two decades, Japan has successfully overcome energy and environmental constraints despite a fragile energy and environmental structure, while maintaining a high rate of economic growth. Much of this success can be attributed to the substitution of an unconstrained production factor (technology) for a constrained production factor (energy) stimulated by MITI's industrial technology policy. With the recent fall of international oil prices and the succeeding 'bubble economy', Japan again faces the prospect of energy and environmental constraints. This paper reviews Japan's path and MITI's efforts to overcome energy and environmental constraints by substituting technology for energy. It also analyzes the sources of the current fear concerning energy and environmental constraints.
Keywords: Environmental constraints; Technology development; Industrial technology policy