personnel policy was the appointment of Miyazawa Tetsuzo*, who had a background in heavy industry but no overseas service, to be director of the International Trade Bureau; and his appointment of Morozumi Yoshihiko, whose background included service in Paris and the Enterprises Bureau, to be chief of the Mining Bureau.
These policies worked well enough for the time being, but bickering within the ministry continued about Sahashi's policies. Old industrial-policy cadres insinuated that the new leaders were not true 'raised-in-the-ministry samurai' (like Sahashi) and that they were inclined to pursue a 'foreign appeasement' policy in the face of the demands for capital liberalization. These charges often caused early leaders of the 'international faction' to go out of their way to be tough, as for example in the United StatesJapan textile negotiations, in order to refute the accusations that they were predisposed to pla-
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cate foreigners. After Yamamoto retired and Kumagai became vice-minister, the leaders of the ministry decided that the old Sahashi faction had to go. Kumagai appointed Morozumi chief secretary (May 1968 to November 1969), and he carried out a thorough purge of Sahashi's younger associates. No member of the Sahashi faction prospered in the ministry (with the possible exception of Ojimi *, who was really an independent) after Sahashi himself left the scene.
It is important to understand that this internal factional struggle interacted with and influenced MITI's various policies during this period. The new leaders of the ministry did not differ much from Sahashi on fundamentals, but most of them had served overseas, were well versed in the 'culture' of international commerce (which involved institutions such as the IMF, GATT, and the OECD, and trends such as capital liberalization), and they were sensitive to the new, high- technology industries that were shortly to succeed steel, chemicals, and textiles. In contrast to men such as Sahashi, they are accurately described as 'cosmopolitan nationalists.' They were also the leaders who reformed the ministry in 1973 and who led Japan out of the oil shock.
However, at the time they were establishing their supremacy, they were extremely vulnerable to internal charges that they were caving in to politicians, consorting with foreigners, or otherwise letting down MITI's old traditions. To the extent that they responded to these internal complaints, they left themselves open to external attack from politicians and bureaucrats in other ministries, to charges that they were out of touch with the times, arrogant as the reform bureaucrats of the old school, in favor of policies that were damaging to Japan's foreign relations, and subservient to big business. Nonetheless, when Miki passed over Sahashi's chief of the Enterprises Bureau, Shimada Yoshito, for vice-minister and named Yamamoto instead, a new mainstream was established within the ministry. It produced a clear line of descent among the vice-ministers that was markedly more internationalist in orientation than the line of descent Sahashi had set up for the 195566 period. This new lineage went from Yamamoto to Kumagai to Ojimi to Morozumi to Yamashita Eimei to Komatsu Yugoro*.
During the spring of 1966 Vice-Minister Yamamoto had welcomed the ideas for mergers, particularly the big steel merger, coming from Sanken; and he had set out to prepare the way for them with the Fair Trade Commission. On November 28, 1966, he received formal FTC assent to mergers that breached the commission's rule against combinations giving a single enterprise more than a 30 percent market share in an industry. The commission also accepted the necessity of
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'investment coordination' as an exception to the Antimonopoly Law in order to confront the threats coming from abroad.
10
Yamamoto justified these measures in terms of the need to improve the industrial structure before the full force of capital liberalization hit the economy. He was delighted when, in January 1968, Yawata and Fuji came to terms. It looked like the 'merger of the century' and was, of course, also the recreation of the prewar and wartime Japan Steel Corporation.
On April 17, 1968, however, thanks to a slip of the tongue by President Nagano of Fuji Steel, the
and the
* newspapers broke the story that a Yawata-Fuji merger was in the works. This scoop generated a public furor that was rivaled only by the controversy over the Special Measures Law four years earlier. A group of economists at Tokyo University led by Professor Uchida Tadao met and issued a formal statement arguing that the proposed steel merger was economically unsound and would lead to monopolistic price increases. Uchida also contended that 'what is really significant about the case is the absence of concern for the legal, economic, and social implications of so large a merger, as well as the widespread belief that the acts of private enterprises are not based on their own independent decisions but on the administrative guidance of MITI.'
11
Uchida was particularly concerned that the Japanese public did not understand the economic need for competition and for defending it through the legal system.
The Fair Trade Commission listened to all of this and on January 27, 1969, clarified its position on the legal requirements for mergers. The commission did not necessarily oppose mergers that resulted in the formation of the largest enterprise in an industryso long as it could be convinced that the new corporation would be unable to compel its competitors to follow its pricing decisions simply because of its size. On this basis, a month later (February 24) the commission formally declared that it would approve the Yawata-Fuji merger only if each company divested itself of certain key subsidiaries that, if retained, would give the new company price control over the steel industry. Inayama and Nagano resisted this decision, even though Sanken's Nakayama had already warned them that sales of some facilities would be unavoidable, and tried to mobilize political influence against the FTC. As a consequence, on May 7, 1969, the FTC for the first time in its existence went to the Tokyo High Court and got a restraining order against a merger. The fat was now definitely in the fire.
During June 1969 the Tokyo High Court held public hearings on the merger; the FTC presented its position, as did the professors, the companies, consumer groups, and related industriesand MITI in
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the person of Sakon Tomosaburo *, chief of the Steel Industry Section in MITI's Heavy Industries Bureau, who made the unfortunate public comment that in this court the 'laymen are judging the professionals.' The press covered the hearings extensively. On October 30, 1969, the court finally ruled that the merger could proceed only if Fuji sold one of its plants to Nippon Kokan* and Yawata turned over one of its installations to Kobe Steel. Both companies reluctantly complied, and New Japan Steel, the world's largest steel company, formally came into being on March 31, 1970. Three years later, on May 30, 1973, former MITI Vice-Minister Hirai Tomisaburo*, who had retired in 1955 and entered Yawata, became president of the country's largest enterprise. Although Hirai was widely respected as a leader of the steel industry, this elevation of a former bureaucrat to the top position of a company long associated with the government led some to see a trend toward excessive bureaucratic influence in the economy.
12
MITI, of course, was totally identified with the steel merger, if for no
