even took the cosmetic step of changing the name of the old Supreme Export Council to the Trade Council. Continuing protectionism by Japan also caused problems in that the government prohibited importers from spending their cash on certain commodities, such as lumber, in order to protect domestic industries.
Into this economic milieu the Tanaka government pumped money as the government had never done before, both because of its industrial dispersal program and because it believed it had to pay off industries that claimed to have been damaged by capital liberalization, the 'Nixon shocks,' or the settlement of the textile dispute. MITI itself acknowledges an increase of ?234 billion in the general account and investment budgets during the month following the Nixon shocks of 1971 (allegedly to save medium and smaller enterprises), and Tanaka cowed the Ministry of Finance's normally independent Budget Bureau into giving him everything he wanted. On Tanaka's orders Budget Bureau Director Aizawa Hideyuki increased the fiscal 1973 budget over the previous year by some 24.6 percent.
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As John Campbell argues, 'The major real effect of [Tanaka's dispersal] plan seems to have been simply to provide a justification for high spending, allowing the Liberal Democrats and even the Ministry of Finance to throw a cloak of virtue and high purpose over a budget which, in the final analysis, was little more than the largest pork- barrel in the history of Japanese public finance.'
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The resultant inflationary conditions resembled nothing so much as the price spiral during World War I that led up to the rice riots. Again, just as in 1917 the general trading companies were in the forefront of the speculative boom. Above all other enterprises, the trading companies had too much cash sitting idle and no place to spend it. They began investing in land, which caused real estate values to appreciate in an unprecedented manner. For example, Mitsubishi Trading Company purchased the old premises of the NHK broadcasting station in the heart of Tokyo for ?6 million per square meter, several times higher than the officially valued price, which brought a wave of criticism down on the trading company's head. Still, it had the money, and real estate was the best hedge against inflation.
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Serious political problems developed when the general trading companies began to speculate in daily necessities and hold them off the market in anticipation of further price rises. Just as in 1917 the press and the public began to suspect that cornering a market (kai-
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shime) and holding goods off the market (urioshimi) were the root causes of the crazy prices. When during the second half of 1973 steel prices shot up, criticism began to focus on monopolies and cartels, which were supposed to be illegal but were known to be flourishing under the protection of MITI's administrative guidance. Many consumers' groups began to argue that the 'private-sector industrial guidance model' boiled down to a 'zaibatsu guidance model,' the avoidance of which had been the original justification during the 1930's for turning industrial guidance over to the government.
On March 10, 1973, the new Price Regulation Section of the Economic Planning Agency introduced a draft law in the Diet entitled the 'Temporary Measures Law Against the Kaishime and Urioshimi of Daily Life Commodities' (Seikatsu Kanren Busshi no Kaishime oyobi Urioshimi ni tai suru Rinji Sochi ni kan suru Horitsu *) to give the government new power to control prices. The debate over this law brought forth criticism of MITI and of big business every bit as devastating as that at the time of the 'pollution Diet.' The Diet passed and began to enforce the law (number 48) on July 6, well before the oil crisis complicated these problems.
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It was also right in the middle of the period of 'crazy prices,' and only three months before the first oil shock, that MITI unveiled its organizational 'new look.' Through a basic rewriting of the MITI establishment law (number 66 of July 25, 1973), Minister Nakasone and Vice-Minister Morozumi reshuffled the ministry in a way intended to placate its critics, allow it to deal with the new problems, and protect its proven capabilities. It was the first comprehensive revision of MITI's structure since 1952 and was known within the ministry as the 'reform of the century.'
In essence Morozumi retained both the International Trade and Trade Promotion bureaus but renamed them; changed the name of the Enterprises Bureau to the Industrial Policy Bureau and gave it new sections for Industrial Structure and Business Behavior; merged the old Light and Heavy Industries bureaus into a new Basic Industries Bureau (metals and chemicals combined); created a new Machinery and Information Industries Bureau that put electronics, computers, automobiles, and general machinery under one administration (we shall return to this grouping later); transformed the old Textiles Bureau into the Consumer Goods Industries Bureau; and set up a new external agency, the Natural Resources and Energy Agency (NREA), which combined the administration of petroleum, coal, energy conservation, and public utilities (including nuclear power generation)
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into one powerful unit. (Appendix B includes a chart of MITI's 'new structure,' or 'face lift,' as some critical journalists put it.)
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Morozumi retired on the day the new structure was enacted and turned over its implementation to Yamashita Eimei (class of 1943, former first secretary in the Canadian embassy, deputy director of the Heavy Industries Bureau, and chief of the Chemical, International Trade, and Enterprises bureaus). On October 6, 1973, the 'Fourth Middle Eastern War' (as the Japanese call it) erupted. Ten days later six countries of the Organization of Petroleum Exporting Countries raised their oil prices by 21 percent, and on October 20 six Middle Eastern nations suspended shipments of oil to nations supporting Israel. The 'oil shock'a considerably more important event than what the Japanese press had called the 'Nixon shocks'hit Japan and the world with stunning force. On November 16, 1973, the cabinet enacted its 'Emergency Petroleum Countermeasures Policy,' which ordered crash conservation programs; and Japanese political leaders, including MITI Minister Nakasone, set out on trips to the Middle East to try to win friends among nations they had not paid much attention to in the past. Japan was the world's largest petroleum importer and totally dependent on the Middle East. (One of the projects that Nakasone agreed to build in the area in order to cement relations was a $3 billion petrochemical complex at Bandar ShahpurBandar Khomeini after the 1979 revolutionin Iran. Ironically enough, Vice-Minister Yamashita Eimei, who became an executive of the Mitsui Trading Company after his retirement, ended up being in charge of building it. Cost overruns, the turmoil of the revolution, and damage done during the war between Iran and Iraq may have turned it into one of the most expensive foreign-aid efforts the Japanese have ever undertaken.)
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The significance of the oil shock for purposes of this study lies in the fact that it once again reminded the Japanese people that they need their official bureaucracy. The country had had a governmental energy policy in one form or another ever since the Meiji Restoration, and the energy problems of the 1970's provided MITI, in the words of the
, with a 'once in a lifetime opportunity' to regain its previous authoritya challenge that it met with great skill and ingenuity.
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The ministry's immediate problem was the impact of the oil crisis on the already 'crazy' prices. First heating oil began to rise in price and then to disappear altogether from the market. Then toilet paper and next household detergents became scarce. The public became
