MITI and the Japanese miracle

by Chalmers Johnson

  17

  During the war, however, the Teikoku Nokai became more of a pressure group than an agrarian improvement society. Its interests were in rising prices for domestic rice and high tariffs on imports, which profited both landlords and their tenants.

  The new industrialists, on the other hand, wanted prices to fall, both to relieve the pressure on them for wage hikes and to maintain industrial peace. Their organization was the Japan Industrial Club (Nihon Kogyo* Kurabu), which held a preliminary meeting in December 1915 and was formally established on March 10, 1917. Its first officers reflected the club's zaibatsu sponsorship: the chairman of the board was Dan Takuma of Mitsui; the chairman of the council was Toyokawa Ryohei* of Mitsubishi; and the managing directors were Nakajima Kumakichi of Furukawa and Go* Seinosuke, formerly of MAC and then chairman of the Tokyo Stock Exchange.

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  TABLE

  7

  Price Fluctuations, July 1914March 1920

  (July 1914 = 100)

  Month

  Index

  July 1914

  100

  March 1919

  267

  June 1919

  295

  December 1919

  381

  March 1920

  425

  SOURCE

  : Fujiwara Akira et al., eds.,

  Kindai Nihonshi no kiso chishiki

  (Basic knowledge of modern Japanese history), Tokyo, 1972, p. 278.

  Both the agricultural and industrial groups attempted to influence the government directly and to shape policies in the Diet through their support of political parties. The landlordsled by their president, Matsudaira Koso *, a descendant of the daimyo of Fukui prefecture, and their vice-president, Kuwata Kumazo*, a member of the House of Peersput their faith in the Seiyukai* party and in the upper house, where landlords with large holdings were entitled to seats because of the high taxes they paid. The industrialists were less vocal on the subject of rice prices, but they exercised their influence through their members who were appointed to the various cabinets as minister of agriculture and commerce. The most important of these men was Yamamoto Tatsuo of Mitsubishi, who served as minister in both the Yamamoto Gonnohyoe* cabinet of 191314 and the Hara cabinet of 191821.

  The issue of rice prices for city dwellers versus rice prices for farmers came to a head in 1918 when the combination of a bad harvest and the need to supply increased provisions to the armed forces for the Siberian Expedition led to a panic of rice speculation and profiteering. On September 1, 1917, the Terauchi government issued its famous Profiteering Control Ordinance (Bori* Torishimari Rei), which made crimes of both attempting to corner a market (

  kaishime

  ) and holding goods off the market in anticipation of price rises (

  urioshimi

  ). The result, however, was a chilling of all markets as producers held back goods until the uncertainty was over. Whether Mitsui Trading Company and Suzuki Trading Company were actually engaged in cornering the market, or whether they were importing rice from the colonies and evading the duties on it in order to sell it at the higher domestic prices, or whether Mitsui was primarily intent on driving Suzuki out of business are all relevant issues, but they need not be

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  settled here.

  18

  The public's fears and suspicions were enough to cause the ''rice riots." (The events of 1918 are similar to the panic of 197374 during the first "oil shock," when the economic bureaucracy again had to intervene to stop speculation in kerosene, toilet paper, soap powder, and other products.) Rice prices soared during 1918, and in July fishermen's wives in Toyama rioted over shortages. The panic spread to consumers elsewhere, and riots occurred through September in some five hundred different localities. The Terauchi cabinet was forced to resign in disgrace.

  The new Hara cabinet, representing the Seiyukai* party, had to deal promptly with the matter. Hara made Yamamoto Tatsuo minister of agriculture and commerce for the second time, and Yamamoto pushed the Rice Law of 1920 through the Diet. It removed duties on imported rice and initiated a program for developing rice cultivation in the Japanese colonies of Taiwan and Korea. The law also established a system of price controls over rice that has persisted in one form or another to the present day. Yamamoto's policy thus secured food supplies at reasonable prices for Japan's growing industrial labor force, but in combination with the postwar recession of the entire economy that began in the spring of 1920, it also worsened the agricultural depression and tenant unrest that wracked Japan throughout the 1920's.

  19

  These developments were a severe economic and political setback for the Teikoku Nokai*, the landlords' association, and it reacted in anger. What the association had previously requested it now demandeda separate Ministry of Agriculture uncontaminated by commercial and industrial concerns and devoted exclusively to agricultural interests. The Hara government rejected these demands, but in 1923 the earthquake again focused government attention on relief of the cities of Tokyo and Yokohama, and again it seemed to farmers that the efforts undertaken on behalf of the cities were much more forthcoming than anything ever done for them. The following year a series of unusually propitious circumstances allowed the Teikoku Nokai's* petition to succeed.

  Hara Kei, the first prime minister of Japan to head the government because he was president of the dominant political party in the lower house of the Diet, had been assassinated on November 4, 1921. His successor as president of the Seiyukai party and as prime minister was Takahashi Korekiyo (18541936), one of the truly outstanding figures of Japan's modern economic and political history and not incidentally the first minister of commerce and industry. Born the illegitimate child of an artist and his 16-year-old maid, Takahashi was

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  adopted by a lower-status samurai of the late Tokugawa Sendai

  han

  . The feudal han sent him to America in the late 1860's to study English, and in 1873, at the age of 19, he obtained a position in the new Meiji government. In 1886, at the age of 32, he became the first chief of the Patent Bureau in the new Ministry of Agriculture and Commerce, thus obtaining an intimate knowledge of the ministry he came to head in 1924. Three years after becoming a MAC bureau chief, he resigned to enter business, at which he was unusually successful. During the Russo-Japanese War he emerged as one of the key financiers of Japan, and by 1907 he was an appointed peer and a baron. In 1911 he became president of the Bank of Japan, and after that he went into politics.

  In 1913 Takahashi became minister of finance in the same cabinet in which Yamamoto Tatsuo served as minister of agriculture and commerce. After the assassination of Hara in 1921, Takahashi briefly became prime minister (192122). However, antiparty forces were attempting to reestablish their supremacy, and they organized a series of nonparty bureaucratic governments. In order to resist this movement, Takahashi took the unusual step of resigning his title (he was a viscount by then) and his legal position as head of his family, thereby again becoming what of course he had been borna commoner. He then stood for election to the House of Representatives in the district of the late Hara Kei in Iwate prefecture. After a difficult campaign he won. He and his colleagues forced the bureaucratic government of Kiyoura to resign, a government was formed based on a coalition of all the political parties, and in June 1924 Takahashi again accepted a ministerial portfolio, that of agriculture and commerce. It was as the last minister of MAC that Takahashi presided over the split. (After this term in office Takahashi went on to serve as minister of finance in four more cabinets, until he also was assassinated on February 26, 1936, in the abortive military coup d'etat.)

  20

  When Takahashi took up the MAC post in 1924, he was known to favor the commercial side of the ministry. He held positive views about the need for governmental promotion of international trade and protection of Japan's growing industries (such as steel)views that were anathema to the landlords and therefore to
their association, the Teikoku Nokai*, which opposed imported food but at the same time wanted no duties on imported fertilizer. Because a coalition government was ruling at the time, and because Takahashi was still president of the Seiyukai* party, it was possible to act on the Teikoku Nokai's* petition for a separate agricultural ministry without the political divisions in the Diet that had frustrated action in the past.

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  On March 31, 1925, with Takahashi's backing, the government issued Imperial Ordinance Number 25 establishing a Ministry of Agriculture and Forestry and a Ministry of Commerce and Industry.

  During late 1924, while the preparations for this event were taking place, Nakai Reisaku, class of 1903 and former chief of the Forestry Bureau, became vice-minister of MAC. Shijo * Takafusa, class of 1904 and Takahashi's main internal ally, remained as chief of the Industrial Affairs Bureau.

  *

  Takahashi would have preferred Shijo as vice-minister, but he had no control over internal bureaucratic developments. Then an unusual opportunity developed.

  Yoshino was out of the country during the spring and summer of 1924, when the party coalition government came to power. He had been sent to America and Europe to investigate the chemical industry and protective tariff policies. Yoshino was then chief of the Industrial Policy Section in the Industrial Affairs Bureau, having been appointed to that post at the youngest age in the history of MAC by his bureau chief, Shijo. Upon Yoshino's return, Shijo told him that the ministry was to be split. He also told him that Vice-Minister Nakai intended to appoint Yoshino chief of the Silk Section in the Agricultural Affairs Bureau but that Yoshino should turn down the job in order not to be trapped in agricultural administration when the division of personnel between the two new ministries took place.

  In December 1924, however, Nakai was suddenly obliged to give up the vice-ministership in order to deal personally with a corruption scandal at the Yawata steel works.

  **

  Shijo, next in line in seniority to

  *

  Shijo was chief of the Industrial Affairs Bureau of MAC from 1920 to 1924. He came from an aristocratic background. Born in Kyoto as an illegitimate son of the Nijo* clan, he was adopted by Shijo Takahira, who sent him to Todai* Law, where he graduated in 1904. One of his classmates was Yoshino Shinji's illustrious elder brother, Yoshino Sakuzo* (18781933), a Tokyo University professor,

  Asahi

  journalist, and advocate of democratic government for Japan. After Shijo entered MAC, he became a personal aide to the former Satsuma samurai and Restoration politician, Oura* Kanetake, who was minister of MAC from 1908 to 1911. Oura saw to Shijo's* rapid rise in the bureaucracy, and by the 1920's, Shijo had caught the attention and won the respect of Takahashi Korekiyo.

  **

  The incident that led to Nakai's giving up the vice-ministership and "sideslipping" (

  yokosuberi

  ) to the post of chief of the steel works originated in the corruption scandals of 1917 and 1918. When the minister of justice's procurators began to investigate the Yawata operations, the chief of the steel works, who was also a MAC bureaucrat, committed suicide. In order to clean up the mess, a tough Home Ministry official was appointed to replace him, but he was forced to resign a few years later after having antagonized the entire staff and work force. During 1924 MAC decided internally to appoint Sakigawa Saishiro*, then chief of the Mining Bureau, as a replacement. However, Sakigawa had earlier headed the politically sensitive Fukuoka Mine Inspectors Bureau, and in that post he had made enemies of the big coal mine operators in the area. They did not want him back at Yawata, and they appealed to Noda Utaro*, vice-president of the

  (footnote continued on next page)

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  Nakai, thus became the last vice-minister of agriculture and commerce. He in turn promptly appointed Yoshino chief of the Documents Section, where all personnel matters are handled. Yoshino was assisted by a young official in his new section, Kishi Nobusuke, whom Yoshino was watching over and pushing ahead. According to Kishi's memoirs, Shijo * and Yoshino sent all the stubborn and dull bureaucrats to the new agriculture ministry and kept in commerce the flexible and bright onesalthough Kishi thought they had made a mistake in keeping the later vice-minister Takeuchi Kakichi.

  21

  Shijo and Yoshino also arranged one other thing. The Agriculture Ministry moved to new quarters in Kasumigaseki, but Commerce retained and rebuilt on the property it had occupied since 1888. This was located in old Kobiki-cho* ("the sawmill quarter") adjacent to the Kabuki theater and about midway between the Tsukiji fish market and Shimbashi station. Every MAC or MCI bureaucrat who has written his memoirs has recalled the actors, geisha, and "teahouses" in the neighborhood, and some of them have blamed their slow careers on too much

  asobi

  ("play") being readily available.

  22

  MCI remained in Kobiki-cho until Tojo* moved it as his new Ministry of Munitions to Kasumigaseki.

  With the split into two ministries, the "old testament" days of trade and industrial administration (as MITI historians call it) came to an end. Shijo became the new vice-minister of commerce and industry, a post he held until April 1929, when he resigned and with the assistance of Takahashi entered the holding company of the Yasuda zaibatsu. He also took up the presidencies of the Yasuda Life Insurance Company and the Tokyo Fire Insurance Company (note that MAC-MCI was the governmental organ supervising the insurance business). As a descendant of the Nijo* family he was also created a baronet, and he therefore assumed his seat in the House of Peers. Before leaving MCI, Shijo arranged for the promotion, on July 30, 1928, of Yoshino to Shijo's* old position as chief of the Industrial Affairs Bureau. Three years after that Yoshino became vice-minister.

  The internal organization of the new Ministry of Commerce and Industry perpetuated without change the commercial and industrial

  (footnote continued from previous page)

  Seiyukai* and Diet member from Fukuoka, who in turn protested to Takahashi, president of the Seiyukai and minister of MAC. To settle the whole unpleasant affair, Takahashi asked Nakai to go to Yawata as head of the steel works, and he agreed. Nakai remained at Yawata until 1934, when he became the first president of the new Japan Steel Corporation, of which the Yawata works were the main component. Noda Utaro*, who had intervened with Takahashi, succeeded him as minister of MCI (April to August 1925).

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  wing of the old MAC (see Appendix B). However, the economic environment in which the new ministry worked was changing rapidly. The "rice riots" were only the first signs of serious imbalances in the Japanese economy, both in its internal structure and in its relations with other economies. The more important sign was the postwar recession that began in the spring of 1920 and lasted throughout the 1920's until the world depression of 1930, when it got worse. The stock exchange index (1913 = 100) fell from 254.1 in February 1920 to 112.6 in September, and the total value of all exports and imports shrank from ¥4.5 billion in 1919 to ¥2 billion in 1920.

  23

  All sectors of the economy were hit hard, but the farming sector was hit the hardest. In the business and industrial sectors, the established zaibatsu banks and enterprises had greater financial resources than other enterprises, and their conglomerate structure dampened some of the shocks. The war-bred zaibatsu were hurt, but they were able to petition the government for special relief measures through their access to the politicians whom they financed. Small businessmen and tenant farmers were in serious trouble.

  For MCI and the other economic bureaucracies the problems were conceptual. What was causing the recession to persist so long? Should anyone, including the government, do something about it? Why was the international balance of payments in chronic deficit? Why were corporate profits so low? What should be done? Numerous theories circulated. Japan was different from all other economies because of its "dual structure" (zaibatsu versus thousands of medium and smaller enterprises). Japan wa
s experiencing an "overproduction crisis" because of the war boom. Japan was a victim of "destructive competition" because of the unrestricted growth in the numbers of banks and enterprises. And Japan was simply entering the "stage'' of "monopoly capitalism" as foretold by the German Marxists.

  The government did not have the answers to these questions, nor did it have a single policy. It did undertake ad hoc relief measures in response to each of the "panics" that were occurring regularly, spending money recklessly to bail out failing enterprises (for example, in the case of steel, it purchased private steel firms that had been started up during the war to meet the so-called steel famine and that now faced steeply declining demand).

  24