MITI and the Japanese miracle

Page 222

As originally drafted, the law prohibited collusive activities among entrepreneurs to set prices, restrict the volume of production or sales, divide markets or customers among themselves, limit the construction or expansion of facilities, or refuse to share new technologies or methods of production. Article 9 of the lawas famous in its own right as article 9 of the constitution, which outlaws the use of armed forcebanned holding companies, and this article has survived intact to the present day. Holding companies in fact do not exist in the postwar Japanese economy; the zaibatsu were rebuilt on another basis entirelythat of the banking keiretsu discussed above. The law also created the Fair Trade Commission, composed of seven members who are appointed by the prime minister with the consent of the House of Representatives for five-year terms.

Modifications to the law began almost as soon as it had been passed. SCAP discovered that firms could evade the law by creating "trade associations" as noncommercial unions or foundations (

kumiai, shadan

, or

zaidan

) under the terms of the Civil Code. Because of this, SCAP ordered the Japanese government to enact the Trade Associations Law (number 191 of July 29, 1948), which required any association of two or more businessmen to register with the FTC within thirty days of its establishment. MITI had this law abolished in 1953.

Another problem was that ever since Yoshino's industrial unions law of 1925, medium and smaller enterprises had depended on their cartels to remain in business without resorting to dumping. SCAP agreed that they needed some special help, but rather than authorize their cartels as exceptions to the Antimonopoly Law (AML), it sponsored the creation on August 1, 1948, of the Medium and Smaller Enterprises Agency (MSEA) as an external agency first of MCI and subsequently of MITI. This organ was supposed to gather, analyze, and freely distribute information on the procurement of materials, marketing possibilities, business methods, and so forthin effect, to act as a cartel headquarters for the small business sector. The first director of the MSEA, Ninagawa Torazo * (former dean of economics at Kyoto University), fought vigorously with both SCAP and the Yoshida government to get more powers and a secure budget for his unit; he particularly wanted governmental financing for small businesses.

After SCAP pressured the government to do as Ninagawa asked (law number 108 of April 24, 1950, amending the MITI Establishment Law), he resigned and was elected mayor of Kyoto, a city with many medium and smaller enterprises. Backed by the socialists and communists, Ninagawa served from 1950 to 1978 as mayor of Kyoto,