economic future, despite the bad press he has received from MITI officials because of his opposition to heavy industrialization. During the Dodge Line and Korean War periods, Ikeda and Ichimada each invented one tier of the two-tiered Japanese system of industrial financinga wonderful instrument on which MITI would become a virtuoso player.
Ikeda was not precisely an inflationist in the mold of Ishibashi Tan-
*
In order to follow Ikeda's activities, the following dates should be kept in mind. While serving as minister of finance in the third Yoshida cabinet, Ikeda also held the concurrent post of minister of MITI from February to April, 1950. Yoshida then named him MITI minister in his fourth cabinet, but he was forced to resign after only a month in office (Oct.Nov. 1952) because of his 'slip of the tongue' in the Diet (discussed below). Between 1952 and 1956 he held various Liberal Party posts, including that of secretary-general. From December 1956 to July 1957 he returned to the cabinet as minister of finance. His last cabinet post (June 1959 to July 1960) before becoming prime minister was again as minister of MITI. References to Ikeda's 'own' ministry of course refer to the Ministry of Finance, in which he served as a bureaucrat from 1925 to 1948.
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zan, but he was also not a typical fiscal conservative of the Finance Ministry. During the late 1950's he fought as hard against his own ministry to get his ideas of 'positive finance' accepted as he had earlier against the deflationists of the central bank.
6
He believed that the government was the only available source of capital for industry, and he was a supporter of the activities of such governmental financial institutions as the Industrial Bank before and during the war and the RFB during the occupation. Although his name is associated with so-called low-posture politics because, as prime minister after Kishi and in the wake of the 1960 security treaty riots, he shifted the focus of government from politics to economics, he was very outspoken in internal debate.
7
On November 27, 1952, in a famous incident, Ikeda was forced to resign as MITI minister and accept a temporary setback in his political career because he had said too candidly in the Diet, 'It makes no difference to me if five or ten small businessmen are forced to commit suicide' as a result of the heavy industrialization efforts.
8
Ikeda must be recorded as the single most important individual architect of the Japanese economic miracle.
Ichimada held almost directly contrary financial views. He had served in Germany before the war and was personally acquainted with the German inflation, so he strongly agreed with SCAP's opposition to Ishibashi's inflationary policies of 1947. Throughout the occupation, with most senior zaibatsu executives purged and the commercial banks virtually the only institutions left unscathed, Ichimada wielded enormous powers over the banks and their borrowers through his decisions on how much the Bank of Japan would let them borrow. After Dodge launched his deflation and the 'stabilization panic' hit, Ichimadanow known to the press as 'Pope Ichimada'came to exercise life-or-death powers over businesses. Partly as a result of his German experiences and partly because most of the inflationists were concentrated in the Finance Ministry, Ichimada came to stand for a deflationary, balanced-budget fiscal policy and for a mildly expansionist monetary policy. During the capital shortage Ichimada upped the tempo of government loans to city banks (the twelve national banks to which the Bank of Japan extends loan privileges), who in turn distributed the funds to the industrialists who were clamoring for money to expand their facilities. He never went as fast as Ikeda and MITI would have liked, but he started the process of central bank 'overloaning' that led to the nexus between the city banks and industry that persists to the present day. In the process he virtually insured that SCAP's proposal for a capital market for industrial financing (a stock exchange) would remain stillborn for at least twenty years.
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After only a few years of the Bank of Japan's monetary expansion, the Japanese industrial system took on one of its most distinctive characteristicsthe pattern of dependencies in which a group of enterprises borrows from a bank well beyond the individual companies' capacity to repay, or often beyond their net worth, and the bank in turn overborrows from the Bank of Japan. Since the central bank is the ultimate guarantor of the system, it gains complete and detailed control over the policies and lending decisions of its dependent 'private' banks. This so-called indirect financing formula (
*
*) is really only indirect in appearance. As Ito* explains, 'Unlike prewar enterprise which was founded on the basis of its own capital, postwar enterprise has been dependent on loans from commercial banks for about 7080 percent of its capital; and in the final analysis these loans are provided on credit from the Bank of Japan, Japan's central bank.'
9
The opposite side of this coin, of course, is a relatively slight dependence on equity. 'In 1935,' writes Broadbridge, '68 percent of industrial funds raised, apart from reserves and depreciation, were derived from sales of stock; in 1963, the figure had fallen to 10 percent.''
10
At least in terms of its financing and ownership structure, Japan was a more capitalist country in the 1930's and 1940's than it was in the 1950's or 1960's.
Ichimada himself appears to have been reluctant to see the system of overloaning expand as far as it did. He regularly declared that the limits of central bank underwriting had been reached, and that a capital crisis was imminent.
11
Also, in order to protect himself and his bank, he became increasingly dependent on guidelines supplied by MITI's Enterprises Bureau on the amounts of capital various industries would need for a given period, and above all on the industries that other branches of the government were protecting and promoting.
12
