Chalmers Johnson - MITI and the Japanese miracle

More important than the mobilization law to an understanding of postwar industrial policy was the work of department four of the CPB, which was responsible for formulating the materials mobilization plans (

busshi

doin

*

keikaku

, abbreviated

butsudo

*).

39

Despite their being top secret (only during the 1960's were full details about them published), their influence on postwar economic management cannot be overstated. All analysts agree that the experience and methods of the wartime materials mobilization plans reappeared in the Temporary Materials Supply and Demand Control Law (Rinji Busshi Jukyu* Chosei* Ho) of October 1946, which was MCI's basic control law dur-

Page 140

ing the occupation, and in the "foreign currency budgets" of 1950 to 1964, which were MITI's main instruments of control during the high-speed growth era. The plans also reflected the strong influence during the 1930's in Japan of Stalinist economicsparticularly economic analysis in terms of the direct supply of commodities to industry rather than the attempt to reconcile supply and demand through prices and other market forcesand of the Soviet five-year plans as a means of rapid industrialization, regardless of their effects on consumption and welfare.

40

The initial materials mobilization plan, not yet so named, took the form of a report dated November 9, 1937, from the president of the CPB to the prime minister estimating that there was a total of ¥470 million in currency reserves to pay for emergency military imports during the last quarter of 1937. The report also offered a budget for spending this amount. With the China Incident continuing to expand, Uemura's Industrial Plans Department set up a General Affairs Unit for Materials Mobilization Plans (Butsudo* Somuhan*) and charged it with designing a similar budget for the calendar year 1938. This was the first true materials mobilization plan. Prepared in two months, the plan took as its basic assumption that there would be an import capability of ¥3 billion for the year. It then calculated the military and civilian needs that this amount had to cover and specified the exact quantities of some 96 commodities that it authorized for import. The plan also calculated the supplies of each commodity that would be available from domestic production, from Manchuria and China, and from stockpiles. After approval by the cabinet on January 16, 1938, the plan was transmitted to MCI for implementation, using as a legal basis Yoshino's foreign trade law of September 1937. The CPB itself had no operational authority or capability.

By midyear the planners discovered that they had overestimated foreign exchange by about ¥600 million, and on June 23, 1938, they therefore issued a revised plan. Both the first and second plans of 1938 necessitated structural changes within MCI and also incorporated the first steps in the program to convert some industries, forcibly if necessary, to munitions production. This program affected primarily textile industries and medium and small enterprises (discussed in Chapter 5). The plan also led to the so-called link system (a system revived again for the same purposes during the mid-1950's) in which raw materials imports were authorized only for those civilian industries that manufactured goods for export and that earned more foreign exchange than they spent. The link system also caused a reor-

Page 141

ganization of the Trade Bureau into vertical departments for each market and commodity.

The 1939 plan was considerably more elaborate than the one for 1938. Calculated on the basis of quarters of the fiscal year rather than the whole calendar year, it covered about four hundred commodities grouped into ten master categories (steel, nonferrous metals, chemicals, and so forth), and it established an eightfold priority list for the distribution of raw materials:

41

A

army munitions

B

navy munitions

C

1

military reserves (C

1A

army and C

1B

navy)

C

2

materials for the expansion of productive capacity

C

3

nonmilitary governmental requirements

C

4 i

materials for use in Manchuria and China

C

4 ro

materials for export goods

C

5

materials for the general population

Even though this plan was more carefully thought out than the first, several factors combined to make it go as haywire as its predecessor. Perhaps the most persistent problem was fighting between the control officers of A and B materials. They regularly interrupted conferences with accusations of plots, and this ultimately led to the military police's arresting some CPB military officers on charges of corruption. Other disputes often had to go to the cabinet for settlement. In addition, after the outbreak of war in Europe on September 1,1939, the British embargoed exports from India, Canada, and Australia, which ruined all import forecasts; and the 1939 drought in western Japan and floods in Taiwan and China forced the government to allocate some 10 percent of its total import capability for food. Until then the planners had assumed that Japan was self-sufficient in food at least. The drought also cut hydroelectric power output and thus caused a decline in domestic production of munitions and export goods.

42

Officials involved with the planssuch as Kaya Okinori (minister of finance during early 1938), Inaba Hidezo* (arrested by the military police in the Cabinet Planning Board incident of 1941, discussed below, and a leading planner of Japan's postwar reconstruction), and Tanaka Shin'ichi (Inaba's successor as the highest-ranking civilian official in the General Affairs Unit)have all written, in regard to the early years of materials mobilization planning, that their concepts and methods were primitive, that their statistical base was supplied by the industries they sought to control, and that competition between

Page 142

the military services for allocations made their lives almost intolerable.

43

Tanaka Shin'ichi divides the planning into two periods: 193840, during which the determining element in the plans was the amount of foreign currency reserves; and 194144, during which the determining element was marine transport capability. The leader of the General Affairs Unit during the first period was an army officer, and during the second period a naval officer.

Although there were many interesting technical problems of conceptualization and procedure in these plans, by far the most lasting influence they were to exercise on later Japanese industrial policy came from the experience gained by MCI in trying to implement them. On May 7, 1938, in order to deal with its new rationing function, MCI created a powerful external unit called the Temporary Materials Coordination Bureau (TMCB; Rinji Busshi Chosei* Kyoku, based on Imperial ordinance 324). The minister of commerce and industry was concurrently its director-generalto signify its importancebut its deputy director was actually in charge. Yoshino was still minister and therefore the first director, although he was dropped from the cabinet less than three weeks after the bureau was created. Its first deputy director and actual leader was Murase Naokai, who served at the same time as vice-minister of MCI.

The Fuel Bureau was the first unit in MCI to be devoted exclusively to a commodity, but the TMCB was the first unit to adopt the principle of vertical organizations classified by materials for its internal organization. The TMCB was divided into six departments and fourteen sections, ranging from department one, section one (in charge of steel and manganese), through department four, section nine (in charge of chemical textiles, paper, and pulp), to department six, section fourteen (in charge of import plans and funds to pay for imports). All commodities covered in the materials mobilization plan were assigned to one or another section, which then had to decide how to meet the targets and had to negotiate with other bureaus and with industries about terms, delivery dates, and so forth. The TMCB was heavily staffed with military officers, and all the civilian MCI officials who worked there became intimately familiar with the plan and with its authors in the Cabinet Planning Board.