MITI and the Japanese miracle

Page 100

one remembers working very hard in the early years of MCI."

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Even Nakahashi Tokugoro*, who became minister of MCI in April 1927 as part of the cabinet of General Tanaka Giichi, said on taking office, "As a government agency, MCI is not a place of exciting work."

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But he was destined to help change that condition quite decisively.

Nakahashi became minister in the wake of the financial panic of 1927, which forced the resignation of the first Wakatsuki cabinet. This crisis was the culmination of all the panics that had afflicted the Japanese economy during the 1920's, and it constitutes the true dividing line between the "old testament" and the "new testament" of Japanese trade and industrial administration. It also marks the onset of the world depression for Japana period of economic stagnation and of radical attempts to find solutions to endemic problems that afflicted the rest of the world only three years later. On the significance of the 1927 panic, Nawa Taro* observes, ''MCI already existed as a body, but the financial panic brought it to life as an organization."

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One important, if deeply conservative, point of view concerning what to do about the recession of the 1920's is associated with the name of Inoue Junnosuke (18691932), a former official of the Yokohama Specie Bank, president of the Bank of Japan in 1919, and minister of finance in the Hamaguchi cabinet of 1929. (Like several other finance ministers of this era, he too was assassinated, on February 9, 1932, in the so-called Blood Brotherhood Incident, a fascist attack on the Japanese capitalist establishment.) Inoue's idea was that Japan should lift the "temporary" gold embargo that it and all other major countries had imposed at the outbreak of World War I. Japan had continued the embargo after the war because of its unfavorable balance of payments, and it was alone among major powers in not having returned to the gold standard. In Inoue's view this was the reason that efforts to revive exports had been unsuccessful. The situation was somewhat comparable to that in 1949, when Japan had to achieve a stable exchange rate for the yen in order to resume international trading, a goal that in turn required Japan to halt inflation and live within its means. In 1949 Dodge and Ikeda led the fierce deflation that was prerequisite to economic rebuilding.

In theory a nation in a situation like Japan's in the 1920'sone that imported more than it exportedwould pay out gold to cover the balance. This outflow of gold, which had been prohibited during the 1920's, would raise the value of the domestic currency and thereby lower export prices. The effect would be highly deflationary, and would drive marginal firms out of business, but it would also thoroughly shake up an economy that was living off inflation and restore