Chalmers Johnson - MITI and the Japanese miracle

MITI was humiliated. Vice-Minister Kumagai was forced to call on business leaders and say that if private enterprise wanted to enter into tie-ins with foreigners, MITI would offer no objections. MITI had thought that it had a merger between Mitsubishi and Isuzu all wrapped up as a result of an agreement initialed on June 19, 1968. That naturally fell through given the new developments, and Isuzu promptly accepted another 65:35 joint venture with General Motors. MITI had more leverage over Isuzu than it did over the financially and politically powerful Mitsubishi, and it therefore rewrote the Isuzu-GM agreement in order to ensure that GM did not obtain control of the company. But MITI's plans for reorganizing the automobile industry were clearly in a shambles.

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From a broader perspective MITI was probably lucky that these developments took place when they did. Toyota and Nissan, MITI's chosen leaders of the industry, were never in any danger of losing their positions; the joint ventures eased some of the American pressure on Japan to liberalize; and the capital that flowed to Mitsubishi and Isuzu energized them both, providing more jobs for auto workers, suppliers, and trading companies alike (C. Itoh is Isuzu's trading company, while Mitsubishi Shoji* serves Mitsubishi Motors). But regardless of how one judges the outcome of this famous incident, credit for liberalizing the automobile industry in Japan must go to Mitsubishi and not to MITI or any other element of the Japanese government.

The Mitsubishi coup led to a period of genuine confusion and turmoil within the ministry. On May 26, 1969, in an interview with the

Nihon keizai

newspaper, MITI Minister Ohira* Masayoshi said that the ministry would not interfere with what it perceived to be a new "private-sector industrial guidance model" (

minkan

shudo-kata

*), as distinct from the old "governmental industrial guidance model" (

seifu shudo-kata

).

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This comment set off a debate within MITI and the industrial world that lasted until the oil shock in the autumn of 1973. Officials within MITI were divided on the proposed new formula for industrial policy; retired "seniors'' expressed their dismay; business leaders said that it was high time; and commentators of every hue and description contributed their opinions. Some argued that MITI had been "bitten in the hand by its pet dog," that "the grown son [industry] tends to

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forget to thank his parents [MITI] for their loving care" (this comment from Sahashi), and that the ministry was in danger of being reduced to the status of the U.S. Department of Commerce (in a word, a mere handmaiden of big business; this according to MITI, which has always claimed to represent the national interest and not the interests of industry).

On the other hand, numerous critics arose to reply that MITI had become "neurotic," that it was acting like industry's "overprotective mama," that it had become nothing more than a bureaucratic

sokaiya

* (a bully or claque hired by some managements to prevent stockholders from asking annoying questions at annual meetings), that it had shown appalling bureaucratic apathy toward the pollution problem, and that it was time for enterprises to stop "weeping in front of MITI's gate."

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Within the ministry Amaya Naohiro, the head of the Planning Office in the Secretariat (October 1968 to June 1971), published an important treatise answering many of the ministry's critics but also calling for a "new MITI" and a "new approach to industrial policy." Amaya is MITI's best-known "house theorist." In January 1962, while serving as assistant chief of the General Affairs Section in the Secretariat, he became famous for a paper entitled "What Do the Times Require of Us?'' This was a forcefully argued defense of Sahashi's "public-private cooperation formula" and of the ministry's new emphasis on reform of the "industrial structure" as its basic policy line. Because he was then a young official, the "first Amaya thesis" struck some senior officials as a little too strong for their tastessome called him a "cheeky squirt" (

kozo

*)and he was quietly transferred to the Japanese consulate in Sydney until 1966. By 1980 he was vice-minister for international affairs, a new post created in 1976 directly under the MITI vice-minister.

The "second Amaya thesis"formally entitled "Basic Direction of the New International Trade and Industry Policy" (Shin Tsusan* Seisaku no Kihon Hoko* of June 1969)argued that the ministry must respond to changes in the public's values concerning further high-speed growth. In Amaya's view this change had occurred because Japan was beginning the transition from an advanced industrial society to a postindustrial society, and the country therefore required a change of industrial structure every bit as profound and as difficult to achieve as the heavy and chemical industrialization of the 1950's and 1960's.

Some of the characteristics of this new industrial structure would be (1) the growth of the tertiary sector (services) and the systematic

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enlargement of consumer goods enterprises, (2) robot-operated factories for the processing of raw materials, (3) the pyramidization of enterprises serving the high-technology assembly industries, (4) a technological revolution in the medical and educational sectors, and (5) many other developments associated with "knowledge-intensive industries." He candidly acknowledged that the ministry should lead the campaign toward internationalization, the fight against pollution, and efforts to raise the levels of product safety and consumer protection. He also accepted the "private-sector industrial guidance model," although he did not spell out what this implied.

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The second Amaya thesis contains the nucleus of what would eventually emerge as MITI's policies governing the shift of the industrial structure during the 1970's. The first in-house reactions to it, however, were mixed. The "private-sector industrial guidance model" seemed to imply the abandonment of the vertical industrial bureaus oriented to micro policy in favor of horizontal functional bureaus oriented to macro policy. This many officials were unwilling to concede. Vice-Minister Kumagai held that industrial policy itself meant governmental intervention at the micro level; anything else was mere economic policy.

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His view ultimately prevailed, although the vertical bureaus were much better camouflaged after the reform of 1973 than they had been during high-speed growth.

Other officials preferred their own euphemisms for what Amaya had spelled out. For example, Morozumi insisted that economic growth should continue but that what should now be stressed was not speed but the "utilization of growth" for the good of the whole society. He was concerned that the new MITI policy not become so oriented to social issues that it neglect the nurturing of new industries. He also recognized that too great a social welfare commitment by MITI would raise unmanageable jurisdictional disputes with other ministries. He also explicitly rejected any European or American notion of a static international division of labor; Japan, he said, would have to compete in the computer, aviation, and space industries, and he was not willing to concede these to any other country.

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In light of all the comment on the "private-sector industrial guidance model," the ministry asked the Industrial Structure Council to recommend a new industrial policy for the 1970's. Not surprisingly, since he was in charge of the research efforts, the council confirmed and expanded many of Amaya's ideas. The new policy was published in May 1971. It acknowledged that high-speed growth had caused such problems as pollution, inadequate investment in public facilities, rural depopulation, urban overcrowding, and so forth. It proposed