MITI and the Japanese miracle Page 14

  As for the EPA itself, it has come to be known as a "colony agency," or a "branch store of MITI." It has no operating functions, but only writes reportshence its other nickname of the "composition agency."

  101

  EPA's forecasts and indicative plans are read not so much for their accuracy or econometric sophistication as for official statements of what industries the government is prepared to finance or guarantee for the immediate future. Some Japanese economists believe that it is precisely this EPA function of indicating the government's intentions regarding the economy that gives rise to the "typically Japanese phenomenon" of excessive competition: excessive competition does not exist in all industries but only in those industries in which the government has expressed an interestand in which, as a result, the risks are greatly reduced.

  102

  However, the quality of the EPA's main product, the annual Economic White Paper, has been affected by its colony status: in 1970 MITI prevented it from saying that the Yawata-Fuji steel merger (which produced New Japan Steel) could lead to monopolistic price increases, and in 1971 the Finance Ministry stopped any mention of the inflationary effects of the Bank of Japan's dollar buying following the Nixon shocks.

  103

  Page 77

  The Defense Agency illustrates a different facet of the struggle for the outposts. Japan's postwar armed forces originated late in the occupation era as the National Police Reserve Force; in 1954 the Police Reserve was expanded, placed under the newly created Defense Agency, and renamed the Self-Defense Forces. In the same year a new national Police Agency was established. Since the civilian leaders of the Police Reserve had come from the old Home Ministry line of descent, and since the new Police Agency inherited the old Home Ministry's national police functions, it was natural that the Police Agency should continue supplying the civilian bureaucrats to staff the new Defense Agency. The first chief of the Police Reserve and the first vice-minister of the Defense Agency was Masuhara Keikichi, who held the post from August 1952 to June 1957. Masuhara was an old Home Ministry bureaucrat (Todai * law, 1928; chief of the Yamagata prefectural police in 1940). The top positions in the uniformed service of Japan's new armed forces went to former military officers, but until the 1970's all the top Defense executive positions were held by Police Agency transferees.

  However, the Police Agency ran into trouble holding on to its bureaucratic turf because its predecessors did not recruit many new officials during the key class years of 1948 to 1952. The Ministry of Finance, on the other hand, took in about 50 successful examinees in 1947 and 1948 each, and from 40 to 50 during each of the years 194953. By the middle of the 1970's the Finance Ministry was under heavy pressure to find positions for some of these now high-ranking officials, and the Defense Agency looked promising. In June 1974 the Finance Ministry finally succeeded in placing Tashiro Kazumasa, formerly of the Finance Ministry's Secretariat, as the vice-minister of defense. Even though defense issues were becoming increasingly important to the Japanese during the 1970's, the Defense Agency itself was preoccupied by the Police-Finance struggle. The real losers in this fight, as at the EPA, were the pure defense bureaucrats, those who went to the Defense Agency directly from the university.

  104

  MITI maintains a modest but choice portfolio at Defense: it controls the chief of the Equipment Bureau position and the main defense equipment section. The Welfare, Postal Services, Labor, and Foreign Affairs ministries also have one or two section chief positions under their control in the Defense Agency.

  The case of the Environment Agency (Kankyo-cho*), set up in 1971 after the famous "pollution Diet" of 1970 had greatly strengthened the environmental protection laws, is a classic of the established ministries staking out claims in newly opened-up territory. The Environ-

  Page 78

  ment Agency's staff was fixed initially at 500 officials, and some twelve different ministries and agencies supplied them. The Welfare Ministry headed the list with 283, then Agriculture with 61, MITI with 26, the Economic Planning Agency with 21, and so forth. The fighting over the leadership posts was fierce. Welfare won it when the vice-minister of Welfare himself transferred to the new agency as its vice-minister. Welfare also captured two bureau chief positions and the position of chief of the Secretariat. Finance and Agriculture split the two remaining bureau directorships, and MITI got only a councillor's slot (

  shingikan

  ). Of the 21 sections in the Environment Agency, Welfare names the chief of 7, MITI 3, Economic Planning and Agriculture 2 each, and Finance, Construction, Home, Labor, Police, Transport, and the Prime Minister's Office 1 each.

  105

  Watanabe notes that ''this pattern is true for all newly created agencies."

  106

  The struggle for nawabari (literally, "roped-off areas") is one of the passions of the Japanese bureaucracy. However, this may well be one of the hidden, if unintended, strengths of the Japanese system. As Hollerman argues, "If 'the government' of Japan were actually a highly coordinated set of agencies, its powers could be applied with overwhelming force. Instead, partly as a result of sheer ambition for status and partly as a result of divergent interests within the society itself, there is intense rivalry and jealousy among the ruling agencies and their personnel. In competing for power, they tend to neutralize one another's authority to some extent."

  107

  On the other hand, Sakakibara, himself an ex-bureaucrat, defends what he calls the vertical organization of the bureaucracy because of the discipline and solidarity it instills in officials. Rather than committing themselves to some abstract ideal, they join a "family" when they enter an old-line ministry. Given its semilifetime employment system and its vertical organization, each ministry must create sufficient public corporations, affiliated associations of clients (

  gaikaku dantai

  ), and colonial outposts for its retired and soon-to-retire seniors. These commitments cause a ministry to become a "welfare community," which in turn becomes an object of affection for its members and not merely an impersonal office.

  108

  Efforts at administrative reform in Japan have occasionally produced a reduction in personnel or the abolition of a grossly superfluous unit, but they have never affected the vertical structure.

  MITI itself, as the descendant of one of the original ministries dating back to 1881, is certainly a "welfare community," but it also has several characteristics that distinguish it from the other economic bu-

  Page 79

  reaucracies. It is the smallest of the economic ministries in terms of personnel, and it controls the smallest share of the general account budget. This last feature is important because it frees MITI from the commanding influence of the Finance Ministry's Budget Bureau, which all the other ministries must cultivate. MITI exercises control over money through its ability to approve credit or authorize expenditures by the Japan Development Bank, the Electric Power Development Company, the Export-Import Bank, the Smaller Business Finance Corporation, the Bank for Commerce and Industrial Cooperatives, the Japan Petroleum Development Corporation, and the Productivity Headquarters, all of which are public corporations that it controlsor in which its views are decisive.

  109

  Although MITI's official budget in fiscal 1956, for example, was only ¥8.2 billion, the MITI Press Club concluded that the ministry actually supervised the spending of some ¥160.9 billion.

  110

  MITI's internal pecking order is different from that in other ministries. Although most of its vice-ministers have served as chiefs of one of the sections in the Secretariat, the Secretariat itself is not the final spotor "waiting room" (

  machiai-shitsu

  )for the vice-ministership, as it is in other ministries. The internal MITI rank order is as follows:

  1. vice-minister

  2. chief, Industrial Policy Bureau (before 1973, the Enterprises Bureau, which was created in 1942)

  3. director-general, Nat
ural Resources and Energy Agency

  4. director-general, Medium and Smaller Enterprises Agency

  5. director-general, Patent Agency

  6. chief, International Trade Policy Bureau

  7. chief, Machinery and Information Industries Bureau

  8. chief, Minister's Secretariat

  9. chief, Basic Industries Bureau

  10. chief, Industrial Location and Environmental Protection Bureau

  11. chief, Consumer Goods Industries Bureau

  12. chief, Trade Bureau (the old Trade Promotion Bureau)

  111

  The high status of the Industrial Policy Bureau is a reflection of the internal factional fighting that has gone on continuously within the ministry since it was reorganized in 1949. In this fighting, which was between the industrial faction (also called the "control" or "domestic" faction) and the international faction (also called the "trade" or "liberal" faction), the industrial faction and its policies dominated the ministry until 1966, and its headquarters was the Industrial Policy Bureau. During the 1970's a new breed of internationalists took over the

  Page 80

  ministry and ended the earlier disputes, but the management of industrial policy has remained the hallmark of MITI. It is because of this that the directorship of the Industrial Policy Bureau is the last step before the vice-ministership.

  MITI also differs from other ministries in the degree of internal democracy it supports and in the authority it gives to younger officials. The ministry believes that the most fertile time in the life of a bureaucrat for generating new ideas is when he serves as assistant section chief (

  kacho-hosa

  *). MITI tries to tap this capacity through a unique institution known as the Laws and Ordinances Examination Committee (Horei* Shinsa Iinkai). It is composed of the deputy chiefs of the General Affairs or Coordination sections in each bureau throughout the ministry. All major policies of the ministry are introduced and screened at this level, and no new policy can be initiated without its approval. For a young assistant section chief to be named chairman of this committee is a certain sign that he is on the "elite course" toward becoming a bureau chief and, possibly, the vice-minister.

  Above this committee are review groups at the section chief levelthe General Affairs Section Chiefs' Conference (Shomu Kacho* Kaigi)and at the bureau director levelthe Operational Liaison Conference (Jimuren). The bureau director level is the court of last resort for approval of a policy initiated by the assistant section chiefs; anything that must go up to the vice-minister's and minister's level is by definition political. But the most substantive of all these internal coordinating groups is still the first.

  112

  In addition to these formal groups, there are numerous informal brainstorming institutions in MITI. During the late 1960's one was called the "Komatsu Bar," the conference room and liquor cabinet of Komatsu Yugoro* when he was chief of the General Coordination Section in the Secretariat. Young officials gathered there around 10 o'clock at night for a drink and lively discussionoften about OECD, GATT, and European developments, topics that had interested Komatsu since his service as first secretary in the embassy in Germany. Komatsu, of the class of 1944, became vice-minister in 1974. In addition to the Komatsu Bar, a young MITI bureaucrat could also visit the "Yoshimitsu Bar" (Director Yoshimitsu Hisashi of the Medium and Smaller Enterprises Agency) and the "Takahashi Bar" (Chief Secretary Takahashi Shukuro*).

  113

  Japanese analysts usually characterize the basic outlook of MITI officials as "nationalistic." Kakuma observes that they like to use expressions such as

  joi

  * (expulsion of the foreigners) and

  iteki

  (barbar-

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  ians) that date from the last decades of the Tokugawa shogunate. They see their function in life as the protection of Japanese industries from "foreign pressure."

  114

  When he was chief of the Trade Promotion Bureau from November 1969 to June 1971, Goto* Masafumi liked to use the derogatory term

  keto

  * ("hairy Chinese," by extension "unpleasant foreigner") to refer to Japan's competitors.

  115

  A different perspective is suggested by the former vice-minister Sahashi Shigeru's habitual use of the literary prefix

  hei

  , meaning "our" in a humble sensea form of expression associated with an

  obanto

  *, the chief clerk of an old mercantile house or a prewar zaibatsu holding company. When Sahashi spoke of

  heikoku

  (our country) as if he were a clerk referring to

  heisha

  (our company), many Japanese thought of him as the obanto* of Japanese capitalism.

  116

  Nagai Yonosuke* sees still another historical parallel: "With its self-assertiveness, its strong native nationalism, its loyalist posture, . . . and its terrific 'workism,' MITI reminds us of the General Staff Office of the defunct army.''

  117

  Whatever its roots, MITI's "spirit" has become legendary.

  A part of the MITI perspective is impatience with the Anglo-American doctrine of economic competition. After the war MITI had to reconcile itself to the occupation-fostered market system in Japan, but it has always been hostile to American-style price competition and antitrust legislation. Sahashi likes to quote Schumpeter to the effect that the competition that really counts in capitalist systems is not measured by profit margins but by the development of new commodities, new technologies, new sources of supply, and new types of organizations.

  118

  MITI is highly competitive internationally, but it is often irritated by the disorderly competitive scramble among its domestic clients. As Robert Ozaki says, "Sometimes it is assumed [by MITI] that the adverse effects of private monopoly will not arise if the monopolists are Japanese."

  119

  During the 1970's many of these old MITI attitudes were modified by a new "internationalism." Nonetheless, Japanese commentators such as Kakuma have some reservations about the depth of the change; he calls the new MITI leadership the "nationalist international faction" and refers to the coming of the "age of the cosmopolitan nationalists."

  120

  MITI men are powerful and outspoken, and the Japanese public enjoys reading about them. Several best-selling novels have been written about them, the best of which is Shiroyama Saburo's*

  The Summer of the Bureaucrats

  (

  Kanryo-tachi

  *

  no natsu

  ) of 1975. English novelists sometimes choose bureaucrats as subjects (examples are Maugham's

  Ashenden

  or le Carré's

  Smiley's People

  ), but economic bureaucrats in

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  America or Britain are rarely as interesting as spies or politicians. The opposite is true in Japan, where the power and influence of economic bureaucrats make fictional portrayals of their lives and struggles intriguing. In order to understand in greater depth why the Japanese find such people worth reading about in their newspapers and novels, we turn next to a history of the men and accomplishments of MITI.

  Page 83

  Three

  The Rise of Industrial Policy

  Old trade and industry bureaucrats, looking back on their extraordinary history, like to note that the number 14 has figured prominently in their karma. The Ministry of Agriculture and Commerce (MAC; Noshomu-sho *) was created in the fourteenth year of Meiji, or 1881; the Ministry of Commerce and Industry (MCI; Shoko-sho*) was created in the fourteenth year of Taisho*, or 1925; and the organization of MCI into vertical bureaus, one for each strategic industry, was introduced in the fourteenth year of Showa*, or 1939.

  During December 1924, on the eve of the second of these landmark dates, three men sat working in the temporary quarters of MAC in the offices of the Japanese Chamber of Commerce and Industry in Otemachi*, Toky
o. Their regular offices had been leveled by the earthquake of 1923. The highly political and bureaucratic task they were attending to, and even the fact that these three men were in charge of it, had as much to do with karma as with any policies or intentions of their own. They were dividing the old Ministry of Agriculture and Commerce into two new ministriesAgriculture and Forestry (Norin-sho*) and Commerce and Industry. The three men were Shijo* Takafusa (18761936), then vice-minister of agriculture and commerce; Yoshino Shinji (18881971), chief of the Documents Section (Bunsho-kacho*); and Kishi Nobusuke (b. 1896), a young official in the Documents Section who had entered the ministry only four years earlier after graduating at the head of his class at Tokyo University's Law School.

  These were three very different men, but each would have a significant impact on Japan, particularly through the influence he would have on his juniors. Shijo was one of Yoshino's most important pa-