MITI and the Japanese miracle

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companies that reported to it had plant and equipment investment plans worth ¥1.795 trillion, a 30.3 percent increase over the ¥1.377 trillion of fiscal 1960, which was itself a 59.5 percent increase over the ¥863.4 billion of fiscal 1959. The Bureau planned to cool this down to a mere 20.4 percent (¥1.658 trillion) for 1961.

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One of the big events of the period was the 1961 "Machine Industry ¥3 Trillion Annual Production Memorial Congress," held at Harumi Pier in Tokyo with the Emperor in attendance. According to the sponsor of the Congress, Heavy Industries Bureau Chief Sahashi, the industry had already broken through the ¥4 trillion mark by the time the congress opened.

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Not everything was perfect, however. Alarm bells had started ringing in Washington and Western European capitals, and MITI officials dared not ask for whom they were ringing. In the autumn of 1959 the IMF met in Washington, and in December GATT held its general conference in Tokyo. Both gatherings resounded with demands that Japan move at once to free convertibility of its currency and open its domestic market to foreign products. MITI officials knew that their high-growth system would not work with large numbers of foreigners participating in it, and they were worried about the kind of "invasion of American capital" that appeared to have taken place in Europe. Perhaps most important, they were concerned about what role they could play in a "liberalized" economy. They did not have too much time to think about it. On June 24, 1960, as its last official act before resigning, the Kishi cabinet, beleaguered by some 300,000 demonstrators surrounding the Diet building during the security treaty riots, adopted a "Plan for the Liberalization of Trade and Exchange."

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By mid-July Kishi was gone, Ikeda had become prime minister, and the age of "liberalization'' had dawned.

Reflecting on the critical attributes of the postwar high-growth economies, Alfred Chandler concludes, "The German and Japanese miracles were based on improved institutional arrangements and cheap oil."

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It is the first of these two causes that is of interest to us here, since the second was available to any nation that was clever enough to exploit it, not just to Japan and Germany. Chandler defines institutional arrangements as formal and informal, explicit and implicit social structures "developed to coordinate activities within large formal organizations such as corporations, governmental bodies, and universities and to link those organizations to one another." This comment is refreshingly different from the numerous explanations of Japanese achievements (or failures) in terms of nature, environment, culture, or other ineluctable forces. It contributes to a long overdue