MITI and the Japanese miracle

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lion for AprilSeptember 1953. In October 1953 he abolished the quota for these imports altogether, which immediately caused the closing of hundreds of stores in the Tokyo area dealing in consumer goods and led to the reappearance of black markets. Under these circumstances many bureaucratic organizations began to think about how to overcome Japan's dependence on U.S. special procurements, and even Prime Minister Yoshida had to recognize that his piecemeal approach to the economy was not working.

The first important plan came from the Economic Deliberation Agency, where MITI Minister Okano (a former president of the Sanwa Bank) was serving concurrently as director-general and Hirai Tomisaburo * of MITI was working as his deputy director (May 1951 to November 1953). Known both unofficially as the "Okano Plan" (Okano koso*) and by its formal title of "On Making Our Economy Independent" (Waga kuni keizai no jiritsu ni tsuite), the plan outlined a new effort to expand exports. However, in order to do this Okano and Hirai called not just for more rationalization campaigns but also for efforts to restore economic ties with Southeast Asia, a rationalization of the tax system, and a vigorous program to develop import-substitution industries.

The Okano Plan also reflected the view within MITI that the only way to break out of Japan's inevitable balance of payments constraints was through "heavy and chemical industrialization," by which was meant the building of an industrial structure whose export products would have a much higher income elasticity of demand than Japan's traditional light industries. Income elasticity of demand refers to the ratio of the percentage change in the quantity of a product demanded to the percentage change in the income of a group of purchasers. Okano and Hirai were among the first to recognize that as a people's income goes up their demand for food and textiles changes very little but their demand for products such as appliances and automobiles increases proportionally. Their conclusion, even though it flew in the face of Japan's so-called comparative advantages (chiefly a large, cheap labor supply), was that these products were what Japan should be manufacturing if it ever hoped to break out of its dependent position.

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Prime Minister Yoshida rejected the Okano Plan out of hand, not because of its contents but because it was an instance of "planning," which he felt was appropriate only for socialist countries. Okano left the government, and Hirai returned to MITI as vice-minister (November 1953 to November 1955). But during 1954, as the recession continued and worsened, the ideas of the Okano Plan reappeared in