MITI and the Japanese miracle Read online

  MITI and the Japanese miracle

  Chalmers Johnson

  title

  :

  MITI and the Japanese Miracle : The Growth of Industrial Policy, 1925-1975

  author

  :

  Johnson, Chalmers A.

  publisher

  :

  Stanford University Press

  isbn10 | asin

  :

  print isbn13

  :

  9780804712064

  ebook isbn13

  :

  9780585107622

  language

  :

  English

  subject

  Japan.--Tsusho Sangyosho--History, Industrial policy--Japan--History

  publication date

  :

  1982

  lcc

  :

  HD3616.J33J643 1982eb

  ddc

  :

  354.520082/06

  subject

  :

  Japan.--Tsusho Sangyosho--History, Industrial policy--Japan--History

  Page i

  Miti and the Japanese Miracle

  Page ii

  It is only managersnot nature or laws of economics or governmentsthat make resources productive.

  Peter F. Drucker

  , Managing in Turbulent Times

  Page iii

  Miti and the Japanese Miracle

  The Growth of Industrial Policy, 19251975

  Chalmers Johnson

  Page iv

  Stanford University Press, Stanford, California

  © 1982 by the Board of Trustees of the Leland Stanford Junior University

  Printed in the United States of America

  Cloth ISBN 0-8047-1128-3

  Paper ISBN 0-8047-1206-9

  Original printing 1982

  Last figure below indicates year of this printing:

  07 06 05 04 03 02 01 00 99 98

  Page v

  To the memory of

  William W. Lockwood

  (19061978)

  who pioneered this subject

  Page vii

  Preface

  Perhaps the oldest and most basic subject in the study of political economy is the relationship between governmental institutions and economic activity. The distinctions in this field lie at the heart of all modern political analysis: free trade versus mercantilism, socialism versus capitalism, laissez faire versus social goal setting, the public sector versus the private sectorand, ultimately, a concern with procedures (liberty) versus a concern with outcomes (equality). Japan occupies a preeminent place in this discussion as both a model and a case. Japan's postwar economic triumphthat is, the unprecedented economic growth that has made Japan the second most productive open economy that has ever existedis the best example of a state-guided market system currently available; and Japan has itself become a model, in whole or in part, for many other developing or advanced industrial systems.

  The focus of this book is on the Japanese economic bureaucracy, particularly on the famous Ministry of International Trade and Industry (MITI), as the leading state actor in the economy. Although MITI was not the only important agent affecting the economy, nor was the state as a whole always predominant, I do not want to be overly modest about the importance of this subject. The particular speed, form, and consequences of Japanese economic growth are not intelligible without reference to the contributions of MITI. Collaboration between the state and big business has long been acknowledged as the defining characteristic of the Japanese economic system, but for too long the state's role in this collaboration has been either condemned as overweening or dismissed as merely supportive, without anyone's

  Page viii

  ever analyzing the matter. With this book I hope to contribute to such an analysis.

  The history of MITI is central to the economic and political history of modern Japan. Equally important, however, the methods and achievements of the Japanese economic bureaucracy are central to the continuing debate between advocates of the communist-type command economies and advocates of the Western-type mixed market economies. The fully bureaucratized command economies misallocate resources and stifle initiative; in order to function at all, they must lock up their populations behind iron curtains or other more or less impermeable barriers. The mixed market economies struggle to find ways to intrude politically determined priorities into their market systems without catching a bad case of the "English disease" or being frustrated by the American-type legal sprawl. The Japanese, of course, do not have all the answers. But given the fact that virtually all solutions to any of the critical problems of the late twentieth centuryenergy supply, environmental protection, technological innovation, and so forthinvolve an expansion of official bureaucracy, the particular Japanese priorities and procedures are instructive. At the very least they should forewarn a foreign observer that the Japanese achievements were not won without a price being paid.

  As a particular pattern of late development, the Japanese case differs from the Western market economies, the communist dictatorships of development, or the new states of the postwar world. The most significant difference is that in Japan the state's role in the economy is shared with the private sector, and both the public and private sectors have perfected means to make the market work for developmental goals. This pattern has proved to be the most successful strategy of intentional development among the historical cases. It is being repeated today in newly industrializing states of East AsiaTaiwan and South Koreaand in Singapore and other South and Southeast Asian countries. As a response to the original beneficiaries of the industrial revolution, the Japanese pattern has proved incomparably more successful than the purely state-dominated command economies of the communist world. Since the death of Mao Tse-tung even China has come to acknowledge, if not yet emulate, the achievements of the capitalist developmental state.

  This study proceeds historically for reasons that are elaborated in Chapter 1. Its time frame of 1925 to 1975 is significant in that it begins with the creation of the official industrial-policy bureaucracy, covers the period in which the main issues of industrial policy were dis-

  Page ix

  covered and debated, and reflects the direct continuity that exists between the prewar and postwar periods in terms of personnel and organizations. As a prologue to this history, the first two chapters are devoted to an explication of the controversies surrounding industrial policy itself and Japan's bureaucratically dominated government. In a final chapter I sketch some of the broader themes raised throughout the book and attempt to abstract a model of the Japanese political economy.

  In this history and analysis I attempt also to reveal some of the Japanese language of bureaucracyits concepts, euphemisms, and slogans. For readers who do not know Japanese, the parenthetical recurrence of Japanese terms in romanization may be annoying. If so, I apologize, but it must be stressed that the language of all bureaucracy is euphemistic and often opaque; students of Japan who have mastered the language will want to know precisely what I have translated, particularly since titles of laws and organizations in Japan are often rendered in English in several different ways. At the same time, for the reader who is interested in Japan but does not read Japanese, all terms, laws, book titles, and names of associations have been translated into English. Japanese personal names are given in the Japanese manner, surname followed by given name. A full list of cabinets and of ministers and vice-ministers of MITI for the period 1925 to 1975 is presented in Appendix A. Some readers may also have difficulties in distinguishing among the numerous names of Japanese people that occur in this book. Nakamura, Nagamura, Nakayama, and Nagayama are all quite distinctive names whe
n written in Japanese, but in English they tend to blur. I do not apologize for this. Too many studies of bureaucracies and state policies read as if they were dealing with disembodied abstractions with little reference to the way things actually happened. This book is in part about working bureaucrats, and their names naturally occur often.

  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.