MITI and the Japanese miracle

Page 191

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*). Dodge once and for all ended the debate over increased production versus control of inflation by choosing the second. His policies are properly compared with the Matsukata deflation of the 1880's and with Inoue Junnosuke's deflationary lifting of the gold embargo in 1930. Moreover, just as Inoue's deflation was overcome by the war profits of the Manchurian Incident, so Dodge's deflation was overcome by the war profits of the Korean War beginning in 1950.

While these great events were taking place, and almost unnoticed by Dodge or any other SCAP official, the Japanese contributed to the nine-point stabilization plan a reform of their ownone that probably had as great an impact on the Japanese and world economies as any of Dodge's measures. They abolished MCI and the BOT and combined their former functions into a new ministry called the Ministry of International Trade and Industry. Shirasu Jiro* was the prime mover behind this development.

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In retrospect it is clear that the merging of MCI and the BOTor, more precisely, the turning of the BOT into an internal bureau of MCI and giving it a prime position in the ministry's chain of commandwas a brilliant idea. But that it was Shirasu Jiro who had the idea and he and Yoshida who supervised its execution produced some of the most anxious days that the men of the "Kishi-Shiina line" had ever known in their bureaucratic lives.

Yoshida and Shirasu were genuinely committed to SCAP's program for the restoration of Japanese international trade, but they also were motivated by political and bureaucratic interests of their own in pushing the reform. As noted earlier, Yoshida had a deep aversion to MCI and to its close association with the controlled wartime economy and the military. Shirasu shared these views, and in addition he wanted to clean up what he claimed were corrupt practices in the BOT that he had discovered after taking office as director.

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Yoshida planned to elevate both the Ministry of Finance (under his protégé Ikeda) and his own Ministry of Foreign Affairs to positions of greater influence in economic administration vis-à-vis MCI, and Yoshida as well as Shirasu believed that trusted Foreign Office people would be better at export promotion than the industrial policy bureaucrats. Thus, Shirasu's original idea was not so much to merge the BOT and MCI as it was to place a restaffed BOT inside MCI in order to reform it and keep it under control.

MCI officials were aware of these intentions of Yoshida and Shirasu, and they did what they could to forestall the worst. On February 2, 1949, they sent a comparatively young MCI official, Nagayama Tokio (class of 1935), to the BOT as chief of the Trade Section in the General Affairs Bureau; he was to keep tabs on Shirasu's plans. Unfor-