Chalmers Johnson - MITI and the Japanese miracle

Asahi

printed the names of 50 former MITI officials, including 5 former vice-ministers, who were employed as amakudari executives throughout the oil industry.

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On May 28, 1974, the prosecutors indicted the Petroleum Association, the twelve companies, and seventeen of their executives, charging that they had criminally violated articles 3 and 8 of the Antimonopoly Lawto wit, that between December 1972 and November 1973 the executives had met some five times and concluded illegal

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agreements among themselves to raise prices and withhold products from the market. MITI was not charged, nor was administrative guidance mentioned in the indictment, but the defendants made it clear that both would form the heart of their defense. The executives each faced a maximum penalty of three years in jail or a ¥500,000 fine.

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So began the famous "black cartel" (

yami karuteru

) case. According to the press the women of the Housewives' Federation repeatedly shouted "banzai" on hearing the news of the indictments, but Keidanren was definitely displeased. FTC Chairman Takahashi said that the indictments should serve as a warning to others. MITI indicated that its administrative guidance had been ''betrayed" by the oil companies, and that it planned to review the entire matter for future policy action. In a press conference Vice-Minister Yamashita also said that he hoped Japanese industrialists would not "lose their motivation" and become "desperate" as a result of the indictments.

The case was the first criminal prosecution for a violation of the Antimonopoly Law since its enactment, and the first instance of a government official criticizing administrative guidance in the line of duty since the practice had begun. However, more important than the case itselfwhich dragged on in the courts until 1980, when the Tokyo High Court finally ruled that MITI was not authorized to cause companies to restrict production through administrative guidancewas FTC Chairman Takahashi's attempt to strengthen the Antimonopoly Law. On September 18, 1974, the FTC published its proposed revisions, including one giving the FTC power to order companies to desist from cartels and to lower prices (under the AML as it then stood, the commission could only issue warnings). It also proposed strengthening the rules on splitting companies that had achieved near monopoly control over their industries, authorization of prosecutions for price fixing on the basis of circumstantial evidence alone, and several other changes.

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Even though Keidanren and MITI bitterly opposed the AML revision, the FTC case was given a boost when in November a scandal broke over Prime Minister Tanaka's expenditures of huge sums of money in the July election for the upper house and over charges that he had profited personally from his tenure in officeand, worse, that he had not reported the details to the tax authorities. No legal action was taken against him, but on November 26 he resigned as prime minister. Because the LDP had fallen to a new low in public esteem, Vice-President Shiina Etsusaburo* of the LDP turned to Miki Takeo (MITI minister when Sahashi was vice-minister); among politicians Miki was known to the public as "Mr. Clean." Among his several

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efforts to refurbish the party's tarnished image in the wake of Tanaka's rule by money-power politics (

kinken seiji

), Miki championed Takahashi's law in the Diet.

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Unfortunately for Miki and Takahashi, the prime minister's sponsorship was not enough. The lower house passed the AML revision bill in order to save the prime minister's face, but it did so only on the understanding that Shiina would arrange to have it killed in the upper house, which he did. In February 1976, Takahashi resigned because of frustration and illness. However, as he left the scene, economic critics hailed him as the most colorful and effective chairman in the history of the FTC; and the LDP, now suffering from the thinnest of majorities in both houses, discovered that his proposed revision of the Antimonopoly Law was popular with the public. Thus, on June 3, 1977, a much watered-down version of Takahashi's law was enacted; the law made it somewhat harder for companies to operate blatantly illegal cartels, and it gave the FTC limited authority to break up monopolies.

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The effect on MITI of the black cartel case and the revision of the Antimonopoly Law was to put the ministry on notice that administrative guidance must be used in the interests of the nation and the people, and that the ministry should guard against abuses of its power. MITI had some trouble accepting this message, but it eventually got the point. As former Vice-Minister Morozumi said in a lecture to his juniors in the bureaucracy, as irritating as it can sometimes be, officials are duty bound to act within the law and on the basis of law.

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Under the pressure of all these external events and of its own internal reform, the ministry at last began to internationalize. During 1974 the new Industrial Structure Section in the Industrial Policy Bureau, led by the partly Harvard-educated economist Namiki Nobuyoshi, wrote new plans for the industrial structure that went well beyond both Amaya's 1969 thesis and the Industrial Structure Council's 1971 plan. The new plans also took account of the oil crisis, the economic conflicts with the United States and Europe, the public's changed attitude toward economic growth, and the current recession.

On November 1, 1974, the ministry published its first "long-term vision" of the industrial structure, a document it revised annually for the rest of the decade and published for public discussion. The statement set stringent standards for energy conservation and petroleum stockpiling, spelled out in detail what a "knowledge-intensive industrial structure" would look like, identified protectionism as a serious threat and demanded that Japan "internationalize" for its own good, and in general explained to the public and the politicans where Japan

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stood economically and where it had to go in order to continue to prosper. The vision also introduced the concept of a "plan-oriented market economy." This is essentially Sahashi's old "public-private cooperation formula" as institutionalized within the government; it gives the Industrial Structure Council the responsibility for annual coordination of budget priorities, investment decisions, and research and development expenditures.

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Capital liberalization was finally achieved in the years following the first "vision" statement. On May 1, 1973, the government had announced that Japan was "100 percent liberalized"except that it still protected some 22 industries as exceptions, still applied all the old rules about joint ventures and subsidiaries, and still maintained numerous administrative restrictions on both trade and capital transfers ("nontariff barriers," as they are called). Four of the exceptional industries were the standard "sacred cows" of all countriesagriculture, mining, oil, and retail tradeand one was leather goods, included in order to protect the livelihood of a Japanese underclass, the burakumin. But the other 17 were the new strategic industries that MITI was nurturing.

Computers were the best-known case. Since the late 1960's MITI had poured money into domestic computer research, pushed companies into keiretsu, licensed foreign technology, and held off the competitionin short, MITI had formulated and administered a standard development program on the pattern of the 1950's. Its creation of the Machinery and Information Industries Bureau reflected this campaign: the bureau specifically linked computers and machines in order to prepare the way for the industries that the ministry had identified as export leaders after automobilessemiconductors, numerically controlled machine tools, robots, and advanced consumer electronic goods such as videotape recorders. However, by the mid-1970's MITI realized that protectionism could no longer be used as one of its policy tools, and it therefore scheduled full liberalization of the computer industry for April 1, 1976. Most of the other 17 exceptional industries were opened at the same time, as was retail trade.