*) designed to prevent a collapse of steel prices. The ministry 'recommended' (ordered) that for the second quarter of fiscal 1965 (July to September) each company cut its production by 10 percent based on its share of total output during the second half of fiscal 1964 (October 1964 to March 1965). All of the 'big six,' including Sumitomo, went along with this. Then, on November 9, 1965, MITI ordered that this reduction be continued into the third quarter (the trough of the recession hit in October). Sumitomo refused to accept this administrative guidance on the grounds that it was the only company among the big six that had met its MITI-assigned export quota for the first half of the fiscal year, and it charged that the biggest operators, Yawata, Fuji, and Nippon Kokan, had diverted some of the steel supposedly produced for export into the domestic market. Sumitomo argued that MITI's base for determining market shares failed to take account of export performance of the various companies and was biased against the newer, better-managed firms in the industrysuch as Sumitomo.
The president of Sumitomo Metals, Hyuga* Hosai*, was an old hand at this sort of thing. He had served Sumitomo continuously since his graduation from Todai* Law in 1931 and had gained experience in the governmental bureaucracy at first hand as secretary to Minister of Finance Ogura Masatsune (of Sumitomo) in the third Konoe cabinet (1941). During 1965 he was the leading figure in the Osaka branch of
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Keizai Doyukai *. He had no difficulty whatsoever in controlling his enthusiasm for MITI's intervention in the steel industry, which he believed had always favored Yawata and Fuji.
On November 18, 1965, after Hyuga's* initial opposition, MITI Minister Mikihimself an LDP faction leader, holder of the record as the longest continuously elected member of the Diet, and a future prime ministergot on the telephone and, according to Hyuga*, promised that if Sumitomo would go along with the production cut through at least the third quarter, he would act favorably on Sumitomo's investment plans for its big Wakayama steel works (the company intended to add a fourth blast furnace and a fourth and fifth rotary furnace, or converter). Sahashi had not been directly involved in this dispute until Hyuga's defiance of MITI, and both he and Miki are vague on whether they consulted each other before Miki's call.
*
However, on November 19, the day after Miki's call, Sahashi also contacted Hyuga and told him that unless Sumitomo backed down, he would use the Import Control Ordinance (Yu'nyu* Boeki* Kanri Rei, cabinet order 414 of 1949) to restrict imports of coking coal for the company to precisely the amount necessary to produce its authorized quota and not a shovelful more. Sahashi here revealed MITI's most authoritarian side, and when the whole matter became public, the press generally backed Sumitomo as the underdog. Hyuga held a press conference in Osaka where he said that since it was his company that was spending the money and taking the risks, he did not see that it was any concern of the government how much the company produced. (This was, of course, not entirely candid, since Sumitomo had profited as much as any other company from government-backed financing and government-guaranteed loans from the World Bank.) More pointedly, however, Hyuga added that MITI favored firms that had ex-MITI bureaucrats working for them, and that it appeared to him as if Vice-Minister Sahashi had overruled Minister Miki. 'Which one of them is the minister?' he asked the gathered Osaka reporters. This was promptly transformed by the national press into big headlines
SAHASHI, MINISTER; MIKI, VICE-MINISTER
that stuck in the public mind as a slogan. (This case is similar to the
*
According to Sahashi, Miki's telephone call was merely a matter of courtesy from a senior politician to an influential constituent. His 'promise' was extremely vaguean example of what is called
*
*.(literally, 'official jargon,' but meaning a government official's saying yes to a citizen's request as a matter of politeness but with the implication that the official has no intention of doing anything about the request). Hyuga, in Sahashi's view, deliberately misunderstood Miki's meaning. See Matsubayashi Matsuo, ed.,
*
(Memoirs: postwar MITI policies; Tokyo: Seisaku Jiho* Sha, 1973), p. 141.
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disputes between Minister Ogawa and Vice-Minister Yoshino in 1936 and between Minister Kobayashi and Vice-Minister Kishi in 1941.)
Sahashi was embarrassedhe and Miki had a good relationshipbut he stuck to his guns and won. On January 11, 1966, Sumitomo claimed that it had not rebelled against administrative guidance but had only sought an exception because of its superior export performance, and said that it would go along with the others. Its imports of an indispensable raw material were promptly restored. Leaders of the steel industry had worked behind the scenes to achieve this compromise, and Sumitomo's export quota was also raised.
There were several consequences of this famous incident. Most important, the contretemps had so rattled the entire steel industry and business community, as well as exposing to public view procedures that were normally secret, that the elders of business and government determined to alter the structure of the industry itself by merging the Yawata and Fuji steel companies into one clear industry leader. In March 1970 New Japan Steel, the world's largest steel company, came into being after a lengthy and often fierce fight with the Fair Trade Commission. We shall return to MITI's role in this famous merger in the next chapter.
A less important but no less revealing consequence was Sumitomo Metals' acceptance of its first amakudari bureaucrat. Three years after the incident, in 1969, Hyuga * invited retiring MITI Vice-Minister Kumagai Yoshifumi to join Sumitomo Metals' board of directors. Kumagai had worked briefly for Sumitomo before entering MITI and therefore was more acceptable to the firm than a bureaucrat it did not know. In June 1978 Hyuga moved up to the chairmanship, and Kumagai became president of Sumitomo Metals. Hyuga had obviously learned that his otherwise excellent company lacked one important capability in its executive suite: the bureaucratic skills of a MITI insider.
46
Only three months after his victory over Sumitomo, Sahashi himself
