Planned growth rate
5.0%
6.5%
7.2%
Realized growth rate
9.1%
10.1%
10.4%
Rate for 196167.
things. By 1975 it operated some 24 trade centers and 54 reporting offices in 55 different countries.
During the 1950's there were actually three JETROs. The first was set up in 1951 in Osaka on the initiative of the mayor, Akama Bunzo * (an old MCI cadre, 192547), and Sugi Michisuke, chairman of the Osaka Chamber of Commerce and Industry. Kansai industrialists and the individual prefectures put up the money for this early organization, and MITI merely approved its activities. In 1954 MITI took it over, provided more national funds for it, and greatly expanded its operations. Finally, in 1958, in recognition of the fact that national funding now heavily outweighed that of the prefectures and that MITI wanted to bring it more securely under the ministry's control, JETRO was transformed into a public corporation with all of its capital coming from the central government (Japan External Trade Organization Law, number 95, of April 26, 1958). From 1951 on MITI also began providing key executive personnel for JETRO, notably its managing director (from 1951 to 1954 he was Okabe Kunio, the recently retired director of MITI's Trade Promotion Bureau; and from 1954 to 1965, Nagamura Teiichi, who had ended his MITI career as vice-minister of the EDA). Virtually all of JETRO's overseas personnel are MITI transferees.
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Except during its earliest days, when it was the brainchild of Osaka business leaders, JETRO has always been an operating arm of MITI. However, its post-1958 legal status as a public corporation rather than as an agency of the government has sometimes gotten it into trouble in the United States. During the late 1950's JETRO set up in Washington an organization wholly staffed by Americans called the United StatesJapan Trade Council but failed to register it under the Foreign Agents Registration Act of 1938. As a result of this oversight, in 1976
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the U.S. Department of Justice sued the Trade Council for civil fraud, charging that 90 percent of its funds actually came from MITI via the New York office of JETRO. The Council settled out of court. It also agreed to file as a foreign agent and to identify its publications as coming from Japanese government sources. The issue in this case was not JETRO's lobbying efforts on behalf of Japanese interests but possible American confusion over just whom, exactly, JETRO represented.
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One of the more innovative aspects of the early JETRO was its funding. During the 1954 recession MITI raised the money for it from the import of bananas. Under the system of foreign exchange quotas, licenses to import bananas and sugar had become the most valuable in the country; supplies of both commodities were in such short supply that any amounts that could be brought to market commanded exorbitant prices. In the case of bananas, the government charged importers a tax on their profits and turned the proceeds over to JETRO. The organization's funds grew from slightly under ?3 million in 1954 to over ?100 million in 1955, all because of bananas. This scheme was similar to the sugar-link system for subsidizing ship exports. Between 1953 and 1955 MITI would issue import licenses for sugar to trading companieswhich were then selling Cuban sugar in Japan at from two to ten times the import priceonly if they had allied themselves with a shipbuilder and could submit an export certificate showing that they had used 5 percent of their profits to subsidize ship exports. For the two years it was in effect, the sugar-link system supplied some ?10 billion to the shipbuilding industry. It ultimately had to be stopped because too many other industries wanted subsidies from the sugar and banana fees and because the IMF frowned on the practice.
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The sugar and banana links were only two of the more spectacular tax breaks that Ministry of Finance and Enterprises Bureau officials invented in this era to aid industries and to help commercialize particular products. Nakamura Takafusa argues that tax exemptions replaced direct subsidies as early as 1951 as the main means by which the government pursued its industrial policy.
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And it is certainly true that after Dodge cut off subsidies created through price differentials and RFB loans, MITI's Enterprises Bureau moved decisively into the tax field in search of alternatives.
The main obstacle to its work was the lingering influence of SCAP's special tax mission, which Prof. Carl S. Shoup of Columbia University had headed, and which included such experts as Jerome B. Cohen of the City College of New York. In the spring of 1949 the Shoup mission accompanied Dodge to Japan, and it delivered its report in September. The Ministry of Finance held the mission in high regard, and its
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advice on the proper system of national and local taxes in Japan still carried great weight during the period 1950 to 1955. In essence, Shoup had called for a simplification of the tax system that would aggregate all types of income of a taxpayer (whether an individual or a 'juridical person') and eliminate to the greatest degree possible the special tax benefits that were contained in the Taxation Special Measures Law (Sozei Tokubetsu Sochi Ho *, number 15 of 1946) and its numerous amendments.
Some of Shoup's proposals, such as a locally controlled value-added tax, were simply too advanced for the time; businessmen were outraged at the thought that they might have to pay a tax even when operating at a deficit, and it was quietly abandoned. But Shoup's ideas were not necessarily hostile to the use of the tax system to stimulate the economy. For example, his advocacy of a revaluation of assets in the light of Japan's inflation as a way to enhance the capitalization of enterprises met with a very favorable response and resulted in the passage of the Capital Assets Revaluation Law (Shisan Saihyoka* Ho, number 110 of April 1950). This statute literally created capital where none had existed before by a (downward) reassessment of industrial assets for tax purposes, a process that was conducted some three different times between 1950 and 1955.
But the main problem with the Shoup system was its hostility to the preferential treatment of strategic industries. Ikeda felt that Japan had to go in this directionalthough of course it meant an increasingly inequitable distribution of tax burdens throughout the societyand many of his Finance Ministry colleagues followed his lead because they preferred tax exemptions to subsidies on practical grounds. As Yoshikuni Jiro* (former director of the National Tax Agency and vice-minister of finance) has put it, taxes are better than subsidies, even though they are the same thing in theory, because a tax advantage is valuable only after an enterprise has done what the government wants it to do, whereas a subsidy is paid prior to performance and sometimes does not produce any improvement in performance.
