about liberalization than Imai, but he too recognized that it was an inevitableeven a desirabledevelopment if Japan was to continue to expand its overseas markets and economic growth. The basic problem was virtually the same as that confronted by Yoshino Shinji during the late 1920's and early 1930'stoo many protected enterprises in too many small factories engaged in too vigorous and economically unproductive competition. Liberalization was going to expose this situation to international commercial pressure, which would thoroughly disrupt
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the Japanese economy, possibly see a good part of it pass into foreign ownership, and very likely leave MITI without any continuing function.
20
For Sahashi the essence of the problem was to find some way to bring the financial and investment decisions of enterprises into the framework of control and nurturing (ikusei) that MITI had developed. The Ministry of Finance (which controlled the banks) and the Fair Trade Commission (which administered the Antimonopoly Law) were sure to object to any encroachment on their territory. And the intervening decades notwithstanding, the answer to these structural problems seemed, mutatis mutandis, to be the same one Yoshino and Kishi had discovered during the 1930'scartels, enforced mergers, pressure on medium and smaller enterprises, converting some businesses to other lines of activity, something like the old 'enterprise readjustment' movement but under a different name. Sahashi's new terms for these old activities were public- private cooperation (
*); consolidation of the industrial order (
*
); and structural finance (
*), meaning government loans and tax breaks to encourage mergers.
A much more difficult problem was how to do it. The old debates between state control and laissez faire were still quite familiar to the seniors of the industrial world, and they were agreed that they did not like state control. In order to try to deal with such objections, Takashima Setsuo, Sahashi's deputy director of the Enterprises Bureau (June 1962 to October 1963), published a skillfully argued article in the May 1963 issue of the journal
* (Economic review). He patiently dissected the weaknesses of 'bureaucratic control'he did not find many, but he acknowledged that people did not like it. And he discussed 'self-coordination''It does not achieve the results desired by the people.' And then he introduced MITI's proposed resolution of the dichotomy, 'administration by inducement.'' In Takashima's view, although this leaves to the government the determination of the direction industry is to take, it avoids the worst problems of policy implementation.
21
As a practical matter, administration by inducement came to mean committees of cooperating bureaucrats, industrialists, and financiers that would set investment rates, promote mergers, discourage new firms from entering given industries, and in general try to build an industrial structure on a par with those of the United States and West Germany, the two prime external reference economies.
To draft a law encompassing these goals and methods, Sahashi brought together in the Enterprises Bureau an extremely talented
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group of MITI officers. Shortly after taking over as bureau chief, he sent a personal letter to Morozumi Yoshihiko, who was then working in the Japanese Embassy in Paris (June 1956 to August 1961), telling him that liberalization was inevitable, that a new industrial policy to deal with it was mandatory, and asking him to join the Enterprises Bureau. Morozumi represented a new breed of officer in the ministry, men who combined overseas service, primarily in continental Europe rather than in the Anglo-American countries, with industrial policy expertise. Many of them, including Morozumi, became vice-ministers during the 1970's. They were the authorities within the ministry on the Common Market, on the so-called invasion of Europe by American capital, and on such ideas for industrial development as the French concept of
, or what the Japanese call the 'mixed economy' (
*
).
*
In addition to Morozumi, MITI men with this sort of experience included Hayashi Shintaro* (director of the JETRO office in Hamburg, 196165), Komatsu Yugoro* (Japanese Embassy, Bonn, 196065), and Masuda Minoru (Japanese Embassy, Brussels, 196266).
22
Before Sahashi's downfall, these officers were strong supporters of his proposed law, but during the late 1960's they shifted to the so-called international faction.
Morozumi was a major author of the Special Measures Law, contributing to it his experience gained in General de Gaulle's Paris, his fear of 'American capital,' and his knowledge of French precedents for what Sahashi wanted to do in Japan. On August 25,
