In Washington today, a familiar anxiety hangs in the air. American policymakers fear that China will leapfrog the United States in the technologies that matter most, including robotics and artificial intelligence. The United States has been here before, in the 1980s. Then, the specter wasn’t Beijing but Tokyo. Best-selling books such as Japan as Number One warned of Japanese dominance. The PBS series Frontline aired the documentary “Losing the War to Japan.” Silicon Valley looked spent after U.S. producers exited the market for memory chips such as DRAM. Detroit, humbled by the Japanese carmaker Toyota’s lean production, seemed a cautionary tale. Japan’s grip on automobiles and consumer electronics appeared unshakable.

But by 1995, when the information technology boom finally showed up in productivity statistics, the United States had pulled decisively ahead. Forecasts of relative American decline were wrong not because Japan stumbled but because the United States excelled when it mattered at the opening of the computer age. The United States didn’t beat Japan by building tariff walls or propping up national champions. U.S. leadership rested on open competition and the flexibility to rewire supply chains globally as technology shifted—in a word, dynamism.

Today, the Trump administration seems to have forgotten that lesson. Since returning to the presidency, Donald Trump has urged Intel’s chief to resign, demanded a 15 percent remittance to Washington on certain Nvidia and Advanced Micro Devices chip sales to China, and carved out a government “golden share” in U.S. Steel as part of the Japanese company Nippon Steel’s takeover. Such arbitrary, deal-by-deal interventions break with the rules-based approach that kept the United States ahead of Japan.

How the United States outcompeted Japan is more than history: it’s a guide to the China challenge. Tokyo’s economic model looked unbeatable for a time, as Beijing’s does now. But the tools that make U.S. markets more innovative and, in the end, more competitive haven’t changed—and Washington should not discard policies that have worked.

Japan’s postwar “miracle”—real GDP per capita growth averaging roughly eight percent a year from 1950 until the 1973 oil shock—has deep roots. In the Meiji era (1868–1912), Japanese leaders built a state adept at absorbing Western know-how—drawing especially on the United Kingdom—by creating a national translation bureau, importing thousands of foreign instructors, and standardizing a technical vocabulary. A highly centralized state rolled out rail and telegraph networks, guaranteed returns to investors, and spun off pilot enterprises to family-run conglomerates, or zaibatsu, that coordinated closely with the bureaucracy.

After World War II, Tokyo extended the nineteenth-century formula: a tight state-business partnership importing, adapting, and scaling frontier technologies at speed. The 1951 San Francisco Treaty, which restored friendly relations between Japan and the Allied powers, brought access to U.S. technology and technical assistance. But the Ministry of International Trade and Industry—Japan’s powerful economic bureaucracy overseeing industrial policy, trade, and technology strategy—also played a significant role in channeling foreign knowledge that firms quickly absorbed and improved. By conditioning market access on compulsory patent licensing, most notably in negotiations with the U.S. technology companies IBM and Texas Instruments, MITI ensured that cutting-edge innovations flowed to corporate Japan. In IBM’s case, Shigeru Sahashi, then the head of MITI’s Enterprises Bureau, threatened to block the company’s business in Japan unless it licensed its technologies to local firms at a royalty capped at five percent. IBM agreed.

Meanwhile, Japanese manufacturing emphasized kaizen (continuous improvement), lean production, and just-in-time delivery. Corporate restructuring helped advance those principles as interconnected groups of companies, or keiretsu, replaced the zaibatsu. By the mid-1960s, six of these groups controlled about 30 percent of corporate Japan, coordinating on complex manufacturing and raising barriers to outsiders.

By 1980, this model had produced remarkable results. Japanese autoworkers were about 17 percent more productive than their U.S. counterparts, and the American car companies Ford and General Motors posted losses exceeding $1.3 billion. In the Japanese semiconductor industry, chipmakers worked closely with equipment suppliers to wring defects out of production. By 1989, Japan had become an exporter to the world, supplying a quarter of all U.S. imports and satisfying about half of all global demand. Meanwhile, the United States........

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