of the steel industry to the possibilities of earning foreign exchange through the export of Japanese motion pictures.
36
Perhaps the council's least known but later most applauded activities were in the areas of the reform of management, the institutionalization of the lifetime employment system, and the raising of the productivity of the Japanese industrial worker. Noda Nobuo, a former Mitsubishi executive and chairman of the council's Management Committee, has always contended that the committee got its ideas for quality control and the measurement of productivity from the United Stateseven though, ironically, during the 1970's the Japanese began to export some of these same ideas back to the United States.
37
The Management Committee borrowed speakers on industrial management from SCAP and the U.S. Air Force, many of whom it sent around the country to lecture to managers and newspaper reporters; and it was so impressed by the ideas concerning statistics and industrial engineering of the American professor W. E. Deming that it named a prize after him. The 'Deming Prize' for quality control, established by the Union of Japanese Scientists and Engineers and the newspaper
, was first awarded in 1951 to the Showa* Denko* Company, Yawata Steel, and Tanabe Pharmaceuticals. Deming became a popular lecturer for his close friend Ishikawa Ichiro, who was then president of Keidanren, head of the Industrial Rationalization Council, chairman of the Showa Denko Company, and a champion of industrial standards and the certification of products by independent testing institutions.
38
Excited by the American concept of 'scientific management,' the Industrial Rationalization Council churned out publications and sponsored speakers, leading during the mid-1950's to what was called the 'business administration boom' (
*) and to making bestsellers of books such as Peter F. Drucker's
(published in 1954 and translated into Japanese in 1956). Equally significant (particularly for those who contend that the contemporary
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Japanese employment system derives from traditional practices), the Council's Labor Subcommittee met some 22 times during 1951 alone to produce standards for the wage system and promotion system, for the organization of work sites and measures to avoid strikes, and for employee training programs; these were subsequently recommended to all Japanese firms. The Industrial Rationalization Council had no legal authority to force its proposals on a particular enterprise, but it should be recalled that the council's sponsor, MITI, could and did cut off the access to foreign exchange of any firm that it felt was wasting valuable resources. Not surprisingly, the Council's educational programs were well attended and their suggestions widely adopted.
39
After setting up the Council, the Enterprises Bureau's next big initiative was the enactment of the Foreign Capital Law (Gaishi Ho*, number 163 of May 10, 1950). The Foreign Exchange and Foreign Trade Control Law of 1949 had already given the government the power to concentrate all foreign exchange earned from exports (by law such foreign exchange had to be sold to a foreign exchange bank within ten days of its acquisition), and this power made possible the control of imports through the use of a foreign exchange budget. MITI made every effort to suppress imports of finished goods, particularly those that competed with domestic products, but it urgently sought imports of modern technology and machinery. The problem was to keep the price down and to 'untie the package' in which such foreign technology normally came wrappedto separate the foreign technology from its foreign ownership, patent rights, know-how agreements, proposals for joint ventures, capital participation, voting rights, and foreign managers on boards of directors.
The Foreign Capital Law dealt with this problem. It established a Foreign Investment Committee and stipulated that foreign investors wanting to license technology, acquire stock, share patents, or enter into any kind of contract that provided them with assets in Japan had first to be licensed (kyoka) by the committee. (At the end of the occupation, the powers of this committee were transferred to the Enterprises Bureau). SCAP approved the law in order to guarantee the availability of foreign exchange for license payments, but the Japanese were more interested in restricting the import of foreign technology to those cases deemed necessary for the development of Japanese industries. As SCAP wrote, 'Restrictive provisions of the law were to be relaxed and eliminated as the need for them subsided.'
40
But restrictions did not even begin to be relaxed until 1968, long after Japan's balance of payments constraints had been overcome.
41
The next big accomplishment of the Enterprises Bureau was the En-
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terprises Rationalization Promotion Law of 1952, on which it had spent some two years in planning, consultation, and political preparation. Its actual drafters were Ishihara and Hizume. MITI refers to it as a 'completely epoch-making law.'
42
Its complex provisions can be reduced to three basic points: first, it provided direct governmental subsidies for the experimental installation and trial operation of new machines and equipment, plus rapid amortization and exemption from local taxes of all investments in research and development; second, it authorized certain industries (to be designated by the cabinet) to depreciate the costs of installing modern equipment by 50 percent during the first year; and third, it committed the central and local governments to building ports, highways, railroads, electric power grids, gas mains, and industrial parks at public expense and made them available to approved industries.
43
The last provision was perhaps the most important because it drastically reduced production costs. It began the extensive efforts by MITI and the Ministry of Construction over the next two decades not just to build the infrastructure for industry but to rationalize it as completely as possible. The idea behind the provision was the recognition that since Japan's industries had to import most of their raw materials and to export their products, factories and port facilities should be completely integrated. The prewar Japanese steel industry had worked out the rule of thumb that it had to transport six tons of raw materials in order to produce one ton of steel.
