Chalmers Johnson - MITI and the Japanese miracle

*

Shijo was chief of the Industrial Affairs Bureau of MAC from 1920 to 1924. He came from an aristocratic background. Born in Kyoto as an illegitimate son of the Nijo* clan, he was adopted by Shijo Takahira, who sent him to Todai* Law, where he graduated in 1904. One of his classmates was Yoshino Shinji's illustrious elder brother, Yoshino Sakuzo* (18781933), a Tokyo University professor,

Asahi

journalist, and advocate of democratic government for Japan. After Shijo entered MAC, he became a personal aide to the former Satsuma samurai and Restoration politician, Oura* Kanetake, who was minister of MAC from 1908 to 1911. Oura saw to Shijo's* rapid rise in the bureaucracy, and by the 1920's, Shijo had caught the attention and won the respect of Takahashi Korekiyo.

**

The incident that led to Nakai's giving up the vice-ministership and "sideslipping" (

yokosuberi

) to the post of chief of the steel works originated in the corruption scandals of 1917 and 1918. When the minister of justice's procurators began to investigate the Yawata operations, the chief of the steel works, who was also a MAC bureaucrat, committed suicide. In order to clean up the mess, a tough Home Ministry official was appointed to replace him, but he was forced to resign a few years later after having antagonized the entire staff and work force. During 1924 MAC decided internally to appoint Sakigawa Saishiro*, then chief of the Mining Bureau, as a replacement. However, Sakigawa had earlier headed the politically sensitive Fukuoka Mine Inspectors Bureau, and in that post he had made enemies of the big coal mine operators in the area. They did not want him back at Yawata, and they appealed to Noda Utaro*, vice-president of the

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Nakai, thus became the last vice-minister of agriculture and commerce. He in turn promptly appointed Yoshino chief of the Documents Section, where all personnel matters are handled. Yoshino was assisted by a young official in his new section, Kishi Nobusuke, whom Yoshino was watching over and pushing ahead. According to Kishi's memoirs, Shijo * and Yoshino sent all the stubborn and dull bureaucrats to the new agriculture ministry and kept in commerce the flexible and bright onesalthough Kishi thought they had made a mistake in keeping the later vice-minister Takeuchi Kakichi.

21

Shijo and Yoshino also arranged one other thing. The Agriculture Ministry moved to new quarters in Kasumigaseki, but Commerce retained and rebuilt on the property it had occupied since 1888. This was located in old Kobiki-cho* ("the sawmill quarter") adjacent to the Kabuki theater and about midway between the Tsukiji fish market and Shimbashi station. Every MAC or MCI bureaucrat who has written his memoirs has recalled the actors, geisha, and "teahouses" in the neighborhood, and some of them have blamed their slow careers on too much

asobi

("play") being readily available.

22

MCI remained in Kobiki-cho until Tojo* moved it as his new Ministry of Munitions to Kasumigaseki.

With the split into two ministries, the "old testament" days of trade and industrial administration (as MITI historians call it) came to an end. Shijo became the new vice-minister of commerce and industry, a post he held until April 1929, when he resigned and with the assistance of Takahashi entered the holding company of the Yasuda zaibatsu. He also took up the presidencies of the Yasuda Life Insurance Company and the Tokyo Fire Insurance Company (note that MAC-MCI was the governmental organ supervising the insurance business). As a descendant of the Nijo* family he was also created a baronet, and he therefore assumed his seat in the House of Peers. Before leaving MCI, Shijo arranged for the promotion, on July 30, 1928, of Yoshino to Shijo's* old position as chief of the Industrial Affairs Bureau. Three years after that Yoshino became vice-minister.

The internal organization of the new Ministry of Commerce and Industry perpetuated without change the commercial and industrial

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Seiyukai* and Diet member from Fukuoka, who in turn protested to Takahashi, president of the Seiyukai and minister of MAC. To settle the whole unpleasant affair, Takahashi asked Nakai to go to Yawata as head of the steel works, and he agreed. Nakai remained at Yawata until 1934, when he became the first president of the new Japan Steel Corporation, of which the Yawata works were the main component. Noda Utaro*, who had intervened with Takahashi, succeeded him as minister of MCI (April to August 1925).

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wing of the old MAC (see Appendix B). However, the economic environment in which the new ministry worked was changing rapidly. The "rice riots" were only the first signs of serious imbalances in the Japanese economy, both in its internal structure and in its relations with other economies. The more important sign was the postwar recession that began in the spring of 1920 and lasted throughout the 1920's until the world depression of 1930, when it got worse. The stock exchange index (1913 = 100) fell from 254.1 in February 1920 to 112.6 in September, and the total value of all exports and imports shrank from ¥4.5 billion in 1919 to ¥2 billion in 1920.

23

All sectors of the economy were hit hard, but the farming sector was hit the hardest. In the business and industrial sectors, the established zaibatsu banks and enterprises had greater financial resources than other enterprises, and their conglomerate structure dampened some of the shocks. The war-bred zaibatsu were hurt, but they were able to petition the government for special relief measures through their access to the politicians whom they financed. Small businessmen and tenant farmers were in serious trouble.

For MCI and the other economic bureaucracies the problems were conceptual. What was causing the recession to persist so long? Should anyone, including the government, do something about it? Why was the international balance of payments in chronic deficit? Why were corporate profits so low? What should be done? Numerous theories circulated. Japan was different from all other economies because of its "dual structure" (zaibatsu versus thousands of medium and smaller enterprises). Japan was experiencing an "overproduction crisis" because of the war boom. Japan was a victim of "destructive competition" because of the unrestricted growth in the numbers of banks and enterprises. And Japan was simply entering the "stage'' of "monopoly capitalism" as foretold by the German Marxists.

The government did not have the answers to these questions, nor did it have a single policy. It did undertake ad hoc relief measures in response to each of the "panics" that were occurring regularly, spending money recklessly to bail out failing enterprises (for example, in the case of steel, it purchased private steel firms that had been started up during the war to meet the so-called steel famine and that now faced steeply declining demand).

24

The government's overall monetary policy was deflationary, but many of its particular policies fed the price inflation that was making many Japanese products uncompetitive on world markets.

The most notorious among these policies was the government's response to the catastrophic Kanto* earthquake of September 1923. In

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order to avert immediate financial collapse at the time of the earthquake, the government ordered all banks closed for a month. When they reopened, the Bank of Japan instructed the banks to refinance all debts that had fallen due in the interim, with the Bank of Japan itself guaranteeing them against losses from these transactions. The government implemented this policy through "earthquake bills," of which it discounted a staggering ¥438 million. Included in this amount were many bad debts that had existed since the end-of-the-war recession. By the spring of 1927, some ¥231 million of these bills had been redeemed, but the outstanding balance of ¥207 million looked irrecoverable and also stood in the way of reconstructing the country's public finances on a sound basis. There was, however, considerable public sentiment against writing off this debt, which would amount to a major subsidy of big business while smaller firms and farmers were allowed to go bankrupt.