Chalmers Johnson - MITI and the Japanese miracle

Numerous individuals and organizations have helped me with this study. In Japan my primary debts are to Professors Masumi Junnosuke and Akagi Suruki of Tokyo Metropolitan University, who have guided me to materials, discussed the subject with me extensively, and indicated which topics were of greater and lesser significance. Yokokawa Hiroshi of MITI studied at Berkeley during the year 197879 and made many important contributions to my seminar on Japanese politics. In obtaining the sometimes fugitive materials on MITI's past, I have received invaluable assistance from Yutani Eiji of the East

Page x

Asiatic Library, University of California, Berkeley, and Murata Shiro * of the Murata Bookstore, Takaban 398, Meguro-ku, Tokyo. The Center for Japanese studies of the Institute of East Asian Studies, University of California, Berkeley, has supported my research with funds, a travel grant to Japan, and a superb collegial setting in which to try out some of my ideas. Since beginning this study in 1972, I have had the research assistance of several graduate students at Berkeley, including Fujimoto Tetsuya, Yasuda Ryuji*, Kawamoto Chizuko, Gotoda Teruo, Mikumo Akiko, Matsumoto Yoko, and Chang Dal-joong. My thanks also to Pauline D. Fox of Palm Springs, California, for her eight years of clipping the

Los Angeles Times

for me.

My greatest debt is to Sheila K. Johnson for her professional editing of my prose and her typing of the entire manuscript.

Despite all the generous assistance I have received, I remain responsible for all matters of fact or interpretation in this analysis of MITI and the Showa* era in Japan.

C.J.

BERKELEY

DECEMBER 1980

Page xi

Contents

One

The Japanese ''Miracle"

3

Two

The Economic Bureaucracy

35

Three

The Rise of Industrial Policy

83

Four

Economic General Staff

116

Five

From the Ministry of Munitions to MITI

157

Six

The Institutions of High-Speed Growth

198

Seven

Administrative Guidance

242

Eight

Internationalization

275

Nine

A Japanese Model?

305

Appendixes

A. The Political and Administrative Leadership of the Trade and Industry Bureaucracy, 19251975

327

B. Internal Organization of the Ministry, Selected Dates, 19251973

332

C. The Bureaucratic Careers of Vice-Ministers Sahashi and Imai

339

Notes

343

Bibliography

367

Index

383

Page xiii

Tables

1. Indices of Japanese Mining and Manufacturing Production, 19261978

4

2. Changes in the Size of the Japanese Electorate, 18901969

39

3. Numbers and Universities of Passers of the Higher-Level Public Officials Examinations, 1975 and 1976

58

4. Placement of Graduates of the University of Tokyo Law School, 1975 and 1976

61

5. Relative Rates of Promotion by Entering Class, 1975

64

6. MITI Vice-Ministers and Their Amakudari Positions, 1978

72

7. Price Fluctuations, July 1914March 1920

91

8. Indices of the World Economic Crisis, 19301935

121

9. Leaders of the Cabinet Planning Board, 19371943

138

10. The Top Ten Japanese Mining and Manufacturing Corporations, 19291972

158

11. Directors of the Economic Stabilization Board, 19461952

182

12. Government Payments of Price Subsidies and Indemnities, 19401952

184

13. Indices of Economic Activity, 1949 and 1950

187

14. Governors of the Bank of Japan, 19451975

201

15. Sources of Industrial Capital, 19531961

212

16. Japan's Business Cycle, 19501974

219

17. Plans of the Economic Planning Agency, 19551960

231

18. Growth Rates, 19551965

237

Page xv

Abbreviations

AML

Antimonopoly Law

BOT

Board of Trade

Butsudo *

Materials Mobilization Plans

CPB

Cabinet Planning Board

EDA

Economic Deliberation Agency

EPA

Economic Planning Agency

ESB

Economic Stabilization Board

FILP

Fiscal Investment and Loan Plan

FTC

Fair Trade Commission

GATT

General Agreement on Tariffs and Trade

GNP

Gross National Product

IMF

International Monetary Fund

ITB

International Trade Bureau

JDB

Japan Development Bank

JETRO

Japan External Trade Organization

Keidanren

Federation of Economic Organizations

LDP

Liberal Democratic Party

MAC

Ministry of Agriculture and Commerce

MCI

Ministry of Commerce and Industry

MITI

Ministry of International Trade and Industry

MM

Ministry of Munitions

MSEA

Medium and Smaller Enterprises Agency

Page xvi

NREA

Natural Resources and Energy Agency

OECD

Organization for Economic Cooperation and Development

RFB

Reconstruction Finance Bank

SCAP

Supreme Commander for the Allied Powers

SMRR

South Manchurian Railroad

TIRB

Temporary Industrial Rationality Bureau

TMCB

Temporary Materials Coordination Bureau

Page 3

One

The Japanese "Miracle"

By common agreement among the Japanese, the "miracle" first appeared to them during 1962. In its issues of September 1 and 8, 1962, the

Economist

of London published a long two-part essay entitled "Consider Japan," which it later brought out as a book that was promptly translated and published in Tokyo as

Odorokubeki Nihon

(Amazing Japan). Up to this time most Japanese simply did not believe the rate of economic growth they were achievinga rate unprecedented in Japanese historyand their pundits and economists were writing cautionary articles about how the boom would fail, about the crises to come, and about the irrationality of government policy.

1

Yet where the Japanese had been seeing irresponsible budgets, ''over-loans," and tremendous domestic needs, the

Economist

saw expansion of demand, high productivity, comparatively serene labor relations, and a very high rate of savings. Thus began the praise, domestic and foreign, of the postwar Japanese economyand the search for the cause of the "miracle."

First, some details on the miracle itself. Table 1 presents indices of industrial production for the entire period of this study, 1925 to 1975, with 1975 as 100. It reveals several interesting things. The miracle was actually only beginning in 1962, when production was just a third of what it would be by 1975. Fully half of Japan's amazing economic strength was to be manifested after 1966. The table also shows clearly the "recessions" of 1954, 1965, and 1974 that spurred the government to new and even more creative economic initiatives; and it demonstrates the ability of the Japanese economy to come back even more strongly from these periods of adversity. Intersectoral shifts are also recorded: the decline of mining as coal gave way to oil and the move-

Page 4

TABLE 1

Indices of Japanese Mining and Manufacturing Production, 19261978

(1975 = 100)

Manufacturing industries

Year

All industry

Public utilities

Mining and manu- facturing

Mining

All manu- facturing

Iron and steel

Non- ferrous metals

Metal finished goods

Ma- chinery

Ceramics and cement

Chem- icals

Petro- leum

and coal products

Pulp and paper

Textiles

Wood and wood products

Food

1926

2.5

54.5

1.5

4.0

1.5

0.7

4.9

17.4