MITI and the Japanese miracle

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brought its first ever formal complaint against a restraint of trade (discussed in Chapter 8).

Antitrust legislation is a controversial subject. Western theory asserts that it is an indispensable tool of industrial policy in order to maintain competition. Former MITI Vice-Minister Sahashi Shigeru has argued, on the other hand, that Japan's industrial policy, which is hostile to antitrust legislation, has produced higher levels of both competition and growth than the economies of Japan's Western critics.

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From the point of view of the history of MITI, the major significance of the 1953 reform of the AML was that it almost completed MITI's ensemble of industrial-policy tools. The ministry now had under its control foreign exchange, foreign capital, cartels, banking keiretsu, industrial location, and direct government finance, plus the whole range of activities of the Industrial Rationalization Council. It was almost ready to put the high-growth system into operation, but it still needed some innovations on the tax front and political backing for its particular point of view. It was the harsh recession of 1954 following the Korean War that provided the opportunity to acquire both. As Kakuma has observed, the recession following the special procurements boom was as important as the Korean War itself to Japan's economic development; its influence has too long been unrecognized.

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During the four years that followed the outbreak of the Korean War in June 1950, the United States pumped some $2.37 billion worth of special procurements into the Japanese economy. This factor, plus the effects of the rationalization campaigns in putting people back to work and of the euphoria that followed the end of the occupation, led to a major consumption and investment boom throughout 1952 and into 1953. Imports of consumer goods and industrial machines skyrocketed. By the end of 1953 Japan was showing a deficit of $260 million in its balance of payments, and the prospects for 1954 looked even worse. Inventories had grown very large, but export sales were sluggish because of the comparatively high prices of Japanese goods and the slowdown in the growth of international trade following the Korean War. The Ministry of Finance and the Bank of Japan had no choice but to tighten credit and cut governmental expenditures, including disbursements from FILP and loans from the Development Bank. Their squeeze on credits and imports caused the recession.

At MITI Minister Okano Kiyohide (May 1953 to January 1954) ordered the International Trade Bureau to cut the foreign currency quotas for the import of food, chemicals, medicine, and textiles from over $8 million during the period April to September 1952, to $4 mil-