MITI and the Japanese miracle

Page 218

terprises Rationalization Promotion Law of 1952, on which it had spent some two years in planning, consultation, and political preparation. Its actual drafters were Ishihara and Hizume. MITI refers to it as a "completely epoch-making law."

⁴²

Its complex provisions can be reduced to three basic points: first, it provided direct governmental subsidies for the experimental installation and trial operation of new machines and equipment, plus rapid amortization and exemption from local taxes of all investments in research and development; second, it authorized certain industries (to be designated by the cabinet) to depreciate the costs of installing modern equipment by 50 percent during the first year; and third, it committed the central and local governments to building ports, highways, railroads, electric power grids, gas mains, and industrial parks at public expense and made them available to approved industries.

⁴³

The last provision was perhaps the most important because it drastically reduced production costs. It began the extensive efforts by MITI and the Ministry of Construction over the next two decades not just to build the infrastructure for industry but to rationalize it as completely as possible. The idea behind the provision was the recognition that since Japan's industries had to import most of their raw materials and to export their products, factories and port facilities should be completely integrated. The prewar Japanese steel industry had worked out the rule of thumb that it had to transport six tons of raw materials in order to produce one ton of steel.

⁴⁴

MITI planned to change that by dredging harbors, building factories at dockside, and locating intermediate processors next to final manufacturers. One of the most famous products of this policy is the Keiyo* industrial belt and petrochemical

kombinato

, which was built in Chiba prefecture on land entirely reclaimed from Tokyo Bay. The Kawasaki Steel Company alone, which in 1953 fired the first blast furnace of its new, integrated facility (pig iron to rolled steel; at the time, the world's most modern), received some 3 million square meters of free land from Chiba prefecture. Ichimada, the banks, and Kawasaki's biggest competitors (Yawata, Fuji, and Nippon Kokan*) all derided the Kawasaki effort at the time as beyond Japan's capabilities and needssomething MITI has never let them forget in view of its unexampled success.

⁴⁵

Despite MITI's own early successes with the Development Bank, the Foreign Capital Law, and the Rationalization Council and Law, Japan was still some remove from a true high-growth system. Throughout the 1950 to 1954 period economic fluctuations buffeted the country. These fluctuations were caused, first, by the Korean truce negotiations and truce and, second, by balance of payments problems, since