MITI and the Japanese miracle

(director).

³⁰

Page 175

had made a vital contribution to Japan's postwar economic recovery. . . . He was in charge of occupation policy toward Japanese banking from 1945 to 1948. . . . Many financial leaders, including [then] Deputy Prime Minister Fukuda Takeo, credit him with preventing the breakup of Japanese banks and insurance companies in the postwar dismemberment of zaibatsu companies in Japan.''

³²

Without wishing to detract from Beplat's award in any manner, one may suggest that from the Japanese, and especially from MCI's point of view, there was a degree of

menju

*

fukuhai

(following a superior's orders to his face while reversing them in the belly) at work during those immediate postwar years.

Sometimes Japanese officials genuinely did not understand what SCAP wanted them to do. For example, with regard to the Antimonopoly Law (number 54 of April 14, 1947), Morozumi Yoshihiko, who 25 years later became vice-minister of MITI, recalls his painful efforts during the occupation to translate article by article into legal Japanese the draft of the Antimonopoly Law that General MacArthur's headquarters had sent over to MCI for enactment. 'It seems laughable today,' he writes, 'but then we didn't really know what they were talking about.'

³³

When Morozumi showed his draft to his 'senior,' Murase Naokai, then chief of the Cabinet Legislation Bureau, Murase asked him what something he had translated meant and he was forced, much to his embarrassment, to reply that he did not know. Murase got the drift of the law only by looking at the original English text. Needless to say, the Antimonopoly Law was not something the Japanese were able to avoid or evade. As we shall see in the next two chapters, MITI spent the succeeding 30 years struggling to get around Morozumi's handiwork. The tension that developed between MITI on the one hand and the Fair Trade Commission (created by the law) on the other undoubtedly made a contribution to the favorable climate in which high-speed growth took place. This tension, unintended by either SCAP or MCI, may have been one of the occupation's greatest contributions to the economic 'miracle.'

Although SCAP's accounts are virtually silent on the subject, the Japanese characterize the first four years of the occupation by reference to two great debates over Japan's economic reconstruction and by one overwhelming factthe rise of the state as the central actor in the economy. The first of the two controversies was over whether reconstruction should give priority to expanding production (the

seisan

fukko

*

setsu

, or the theory of reconstruction through production) or to price stabilization and control of inflation (the

tsuka

*

kaikaku setsu

, or the theory of currency reform).

³⁴

The second controversy concerned

Page 176

what type of economy Japan should rebuildone oriented to light industries and Japan's comparative advantage of a large, still cheap labor force, or one oriented to heavy and chemical industries with their greater value-added potential (that is, the greater value of the products produced after the cost of materials, taxes, and depreciation have been subtracted).

The emphasis on production rather than stabilization and on heavy industry rather than light industry usually prevailed, but the advocates of the opposite positions were not necessarily wrong. They made their contribution during the 'Dodge Line' (194950) and the Korean War (195053), when the advocates of production and of heavy industries had to come to grips with controlling inflation and with Japan's dependence on international trade. It was then that MITI was born and that both sides of the occupation controversies were synthesized to form the high-growth system.

The rise of state power and its role in reconstruction dominated all of the controversies. The historian Hata Ikuhiko states flatly that 'never has the Japanese bureaucracy exercised greater authority than it did during the occupation'; and the MITI Journalists' Club refers to the occupation as MCI's 'golden era'the period in which it exercised total control of the economy.

³⁵

The government's assumption of all functions previously shared with the private sector, its recreation of the ''economic general staff' and the materials mobilization plans under new names but in much stronger forms, and its enactment of legislation that made the National General Mobilization Law pale by comparison led to an enormous growth of the bureaucracy. During 1948 and 1949 MCI came to control the third largest share of the general account budget (only the Prime Minister's office and the Ministry of Finance had larger shares); and when MITI was founded in 1949, it had a total of 21,199 employees, as compared with 13,891 in 1974 to serve an infinitely larger and more complex economy.

The growth of the public sector caused an intensification of the bureaucratic struggles for jurisdiction on which a ministry's security and even its existence depended. The Finance Ministry and the Bank of Japan fought tooth and nail over control of the banks, a struggle that Finance eventually won. Ichimada Naoto was president of the Bank of Japan and an advocate of both the currency reform theory and light industries; had he instead of Ikeda Hayato accepted Prime Minister Yoshida's offer to become minister of finance in 1949, the economic history of postwar Japan would surely have been very different from what it was.