Chalmers Johnson - MITI and the Japanese miracle

During 1938, in Tokyo, the new MCI minister Ikeda and vice-minister Murase got along fine. They liked each other, and both saw the world in essentially the same (commercial) terms; they shared the belief that economic control should mean self-imposed control by civilian industrial leaders themselves. Ikeda led the fight in the government to prevent the state-control view from prevailingShiroyama calls him the leader of the "status quo faction"and he established

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the precedent of businessmen serving in the cabinet in order to restrain the military, one that his successors Fujihara Ginjiro * and Kobayashi Ichizo* continued.

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During late 1938 Ikeda clashed violently with Home Minister (Admiral) Suetsugu Nobumasa over the attempts to enforce articles 6 (labor control) and 11 (limitation on dividends and forced loans) of the mobilization law. Suetsugu took the view that if the government were going to control the people, it should also control the capitalists. Ikeda was not completely successful in preventing this, but as Tiedemann remarks, ''In the future, control over capital would become tighter, but Ikeda had set the pattern for making the controls on the business community the lightest of all in the war economy."

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A result of his battle was that Ikeda was forced to leave the cabinet, and in January 1939 the Konoe government resigned in favor of the Hiranuma government, which was conservative but not necessarily pro-state control.

In order to eliminate the defects in the TMCB system and also to make MCI conform more closely in its overall operation to the mission it had been given by the economic general staff, Murase totally reorganized the Ministry of Commerce and Industry during early 1939. Despite his lack of sympathy with the controlled economy, Murase's reform was ironically the single most important structural change of MCI in the direction of greater control until the creation of MITI. Maeda Yasuyuki argues that Murase's vertical bureaus organized according to industry were the most valuable legacy of the war years; and former MITI Vice-Minister Kumagai Yoshifumi (196869) holds that industrial policy itself is synonymous with the industrial bureaus; without them a ministry would not be close enough to industry to exercise real guidance or control and could achieve no more than general economic policy.

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MITI's

History of Commercial and Industrial Policy

says that after the reform MCI had already become a ministry of munitions, although it did not receive that name officially for four more years.

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Murase abolished the Temporary Materials Coordination Bureau, the Commercial Affairs Bureau, the Control Bureau (successor after May 1, 1937, to the Temporary Industrial Rationality Bureau), and several other units. He combined their functions into one powerful coordinating and policy-making organization, the General Affairs Bureau (Somu* Kyoku), which is the origin of the contemporary MITI Secretariat. In addition, Murase took the specialized sections of the Industrial Affairs and Mining bureaus and made each of them into

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separate bureaus (see Appendix B). The result was not yet the internal structure of MITIstill needed were the Enterprises Bureau (created in 1942), the functions of the CPB, and absolute control over tradebut MCI after 1939 was much closer in form and orientation to the industrial policy apparatus of the high-speed growth era than was MCI from 1925 to 1939.

The thanks that Murase received for these efforts from his political superiors was to be fired. During the autumn of 1939 a series of issues came to a head that caused a major realignment of MCI personnel. First, it was becoming apparent that materials mobilization planning alone was not going to overcome Japan's industrial weaknesses, which were being exposed daily in the China war. On January 17, 1939, in recognition of this fact, the new cabinet adopted a "General Outline Plan for the Expansion of Productive Capacity" (Seisanryoku kakuju * keikaku yoko*), which had been prepared in the CPB on the basis of ideas first advanced by the Manchurian planners in 1936. The result was a detailed four-year proposal for the promotion of some fifteen industries in Japan, Manchuria, and China. They were steel, coal, light metals, nonferrous metals, petroleum and petroleum substitutes, soda and industrial salts, ammonium sulfate, pulp, gold mining (to earn foreign exchange), machine tools, rolling stock, ships, automobiles, wool, and electric power. The problem with the plan was how to implement it: was it to be through industrial self-control, public-private cooperation, or state control? These issues were debated throughout 1939 and ultimately led in 1940 to the Economic New Structurepart of the Japanese version of Hitler's New Order.

Second, the outbreak of war in Europe vastly complicated Japan's import arrangements. In order to force imports from the still unconquered territories in East Asia, Japan began to advance the idea of the Greater East Asian Coprosperity Sphere; to attain their goal they undertook direct negotiations with, for example, the Dutch in the Netherlands East Indies for petroleum shipments. The development of the so-called yen trading bloc also put pressure on the rest of the nation's trade relations, because Japanese exports to Manchuria and China no longer earned foreign exchange. The government demanded that exports to hard currency areas be expanded, and prices began to explode as shortages worsened. On October 18, 1939, the government issued its famous Price Control Ordinance, based on article 19 of the mobilization law, which fixed all prices, wages, rents, and similar economic indices at the level that had existed a month earlierhence the nickname "September 18 stop ordinance." However, all this did was

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eliminate the last traces of realism in the price structure and reinforce tendencies toward budgeting in terms of commodities and barter deals. It also led to the black markets and black prices that persisted throughout the Pacific War.

Third, Japan's poorly informed diplomacy had led to the unpleasant surprise of the Molotov-Ribbentrop agreement. Since the Japanese had thought that they were allied with Germany against Soviet Russia, this inexplicable turn of events led the government to resign. Two days before the outbreak of war in Europe a new cabinet was formed. Godo * Takuo (18771956)a doctor of engineering, a former ordnance vice admiral, a recent head of the Showa* steel works in Manchuria, a connection of the Asano zaibatsu through the marriage of his daughter, and a supporter of medium and smaller enterprises as an active director of the industrial unions associationbecame minister of both agriculture and commerce. Godo first told Murase that he wanted him to remain as vice-minister, but less than a month later he shamefacedly had to say that the army had asked for Murase's resignation in order to bring back Kishi from Manchuria. The problems of the bogged-down war in China, the need for industrial expansion, and the rapidly changing world scene had combined to generate a clamor inside and outside the ministry for the return of the Manchurians. Tojo* was already serving as vice-minister of the army, and Hoshino and Matsuoka did not come back until the following year. But Kishi paid quick heed to the call and became vice-minister of MCI on October 19, 1939.

Kishi had to proceed cautiously. He was one of the best-known reform bureaucrats, and the business community was still determined to keep MCI under its own control. Its method was to withhold support of the government unless a business figure were named MCI minister. In January 1940, following another change of cabinet, the business community replaced the technocratic Admiral Godo with a real businessman, Fujihara Ginjiro*; and seven months later, when the Manchurians really began to take over the second Konoe government (Tojo as army minister, Hoshino as CPB president, and Matsuoka as foreign minister), the business leaders asked for and got Kobayashi Ichizo* (18731957).