5
In its fully elaborated form Sanken brought together leaders from steel, electric power, chemicals, machinery, textiles, trading, finance, and securities, plus representatives of medium and smaller enterprises. Its guiding intellectual orientation was provided by Nakayama Sohei (b. 1906), since 1961 the president of the Industrial Bank of Japan (Nihon Kogyo Ginko*) and probably the greatest go- between of modern Japanese business. He took charge of a committee to make recommendations for the reorganization of Japanese industry in order
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to end 'excessive competition' and to prepare to meet the challenges of capital liberalization. The Nakayama Committee, augmented by bureaucrats from MITI and the EPA, worked on its report between July 1966 and June 1967. When it was completed, the report called for either mergers or 'cooperation' in seven industries: steel, automobiles, machine tools, computers, petroleum refining, petrochemicals, and synthetic textiles. The committee's main contribution was to provide a rationale for the Yawata-Fuji merger, but its influence can be seen in many other areas, including both MITI's ultimately abortive efforts to reorganize the automobile industry and its very successful measures to link the electronics and machine tool industries.
6
While these analytic activities were underway, MITI was also busy preparing countermeasures to hold off liberalization until the basic phases of the reorganization could be accomplished. In January 1967 the ministry set up a Capital Transactions Liberalization Countermeasures Special Committee (Shihon Torihiki Jiyuka* Taisaku Tokubetsu Iinkai) within the Industrial Structure Council to hear and endorse what it proposed to do. This committee joined with another special committee set up by the Ministry of Finance's Foreign Capital Council (Gaishi Shingikai) and came up with a vast tangle of rules and procedures that had the effect of turning Japan's capital 'liberalization' into a strictly pro forma acquiescence in international conventions.
Some of these rules included the 100 percent liberalization of only those industries in which foreign competition was unlikely (sake brewing, motorcycles, and the manufacture of
, or Japanese wooden clogs, are the famous examples), the limitation of direct investment in other industries to joint ventures with at least 50 percent Japanese participation, the limitation of equity ownership in established firms to 20 percent, the selective designation of industries to be liberalized, the omission of vital segments from allegedly liberalized industries (the television industry was declared liberalized, except that foreigners could not produce color sets or use integrated circuits; the steel industry possessed eight of the ten largest blast furnaces on earth, but foreigners were prohibited from supplying the precise kind of steel needed by the automobile industry), the requirement that at least half of the directors in a joint venture must be Japanese nationals, and so forth endlessly. As if these measures were not enough, all proposed joint ventures or wholly owned subsidiaries remained subject to screening and approval by MITI under either the Foreign Exchange and Foreign Trade Control Law or the Foreign Capital Law if they involved the introduction of foreign technology into Japan.
7
(It is hard
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to imagine a joint venture or subsidiary that would not include the introduction of some form of technology or know-how).
On June 6, 1967, the cabinet adopted these principles and with great fanfare proclaimed the 'first round' of capital liberalization on July 1. This opened up some 50 industries, 17 at 100 percent and 33 at 50 percent, to foreign participation. There can be no doubt that this initial effort was a purely cosmetic public relations gesture. All the industries liberalized were ones in which a Japanese enterprise controlled more than 50 percent of the market, or in which most of the products were sold exclusively to the Japanese government (railroad cars), or for which no Japanese market existed (corn flakes). Genuine capital liberalization came to Japan only slowly, and not through MITI's initiative but as a consequence of the weakening of the ministry and the growing realization on the part of industry that it had to 'internationalize' if it was to avoid isolation. Ironically enough, by the time the economy was fully liberalized in the late 1970's, the big investors were not the Americans or the Europeans but the Arab oil sheiks.
8
MITI was engaged on many fronts during this period. The Yawata-Fuji merger, which Sanken and MITI kept totally secret until 1968, required all the influence the ministry could muster to get past the FTC and the other steel companies. MITI also had its difficulties in bringing off mergers in such competitive fields as automobiles and textiles, and the foreigners were not kept quiet for long by the limited liberalization of 1967. However, MITI's abilities to deliver on its policies during the late 1960's were attenuated by internal factional struggles. Sahashi's wrangle with Sumitomo Metals was the true cause of his retirement as vice- minister, but some politicians who wanted him out made a public issue of another incident that they contended showed MITI's arrogance and Sahashi's unsuitability.
As vice-minister, Sahashi had appointed Kawahara Hideyuki (class of 1941) as chief secretary. Kawahara had been one of Sahashi's closest associates for many years and an outstanding MITI official (he was one of the first to identify the pollution problem as serious). On February 27, 1966, Kawahara suddenly took ill and died, and Sahashi authorized a formal, state- financed funeral for him at Tokyo's Tsukiji Honganji (a major Buddhist temple). This led to some petty complaints in the Diet about the small funerals provided for politicians as compared to the elaborate rites for Kawahara. The incident embittered Sahashi but also put the ministry on notice that the politicians were gunning for him and for the type of MITI official he represented.
9
Before his retirement Sahashi was able to name Kawahara's replace-
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ment as chief secretary, but Minister Miki made it clear that he himself would choose Sahashi's own successor. The next chief secretary was Ojimi * Yoshihisa (March 1966 to May 1968), a transitional figure in that he was sometimes thought of as a member of the 'Sahashi faction' (he had headed the Industrial Structure Investigation Office in the Secretariat at the time of the Special Measures Law), but he was also more oriented than Sahashi to the problems of Japan in the world economy. He became the last vice-minister (196971) to have some claim to represent the old 'Kishi-Shiina' orientation. For the position of vice-minister after Sahashi, Miki chose Yamamoto Shigenobu, a former chief of the International Trade Bureau and an official who, having served overseas in the Bangkok embassy, was in 1966 director of the Medium and Smaller Enterprises Agency. When Yamamoto took over as vice-minister, he in turn selected Kumagai Yoshifumi as his chief of the Enterprises Bureau, and for the period May 1968 to November 1969 Kumagai succeeded Yamamoto as vice-minister.
In addition to all their pending policy problems, this post-Sahashi team of Yamamoto, Kumagai, and Ojimi had to devote a great deal of attention to the internal problems of factions and lowered morale that had persisted since the Sahashi-Imai fight. By all accounts Yamamoto performed brilliantly; he is one of the most fondly remembered vice-ministers. He set out systematically to put industrial faction officers in international faction posts and vice versa, a policy that also reflected his own background as a specialist in promoting Japan's export trade in heavy machinery and high-value-added products rather than textiles and sundries (he was, significantly, the first vice-minister whose amakudari was to the automobile industry, where he became in 1968 the executive director of Toyota Motors). Typical of Yamamoto's
