MITI and the Japanese miracle

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tation that they would receive government-guaranteed allotments of imported raw cotton; the menace of liberalization brought down on the government and the Diet a blizzard of protest from the industry.

During the late 1950's imports of raw cotton and wool took over 20 percent of the foreign exchange budget, a figure higher than that for crude oil during the 1970's. This situation had to change. Moreover, the United States was starting to object to the flood of "dollar blouses" from Japan, and on November 16, 1960, President Eisenhower promulgated his "defense of the dollar" policy, which the Kennedy administration continued. It reduced dollar payments by U.S. forces stationed overseas, put priority on the purchase of American products for U.S. foreign aid programs, and called for negotiations between the U.S. and Japan over limitations on exports of cotton textiles.

As a first step in dealing with these problems, in October 1958 Imai convened a meeting of an informal government-industry discussion group called the Textiles Overall Countermeasures Committee (Sen'i Sogo * Taisaku Kondankai). The key figure on the committee was Horie Shigeo, then president of the Bank of Tokyo (the postwar successor to the Yokohama Specie Bank and the country's main foreign exchange institution). Other members included Oya* Shinzo*, former MCI minister and the president of Teijin; Nakayama Sohei from the Industrial Bank of Japan; Inaba Hidezo*, formerly of the Cabinet Planning Board and in 1958 a leading economic commentator; and other leaders of the textile industry.

Horie spoke often to the group about the moves toward full currency convertibility among the European nations (achieved in December 1958) and of the creation of the European Common Market. He was well informed on the recent shift by Germany and England to "article 8 status" in the IMF, which required an end to restrictions on payments for current transactions and on the convertibility of currency held by nonresidents; and he said that Japan as a nation that had to trade to live could not lag far behind its trading partners and competitors. Upon becoming MITI minister in June 1959, Ikeda attended the committee meetings, where he was quoted as saying, "Mr. Horie knows what he's talking about in terms of global trends."

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In December 1959, on the basis of the committee's deliberations and Imai's recommendation, Ikeda took his first liberalization decision: he freed raw cotton and wool imports from all governmental restrictions. This was a powerful precedent. In January 1960 the government established a Cabinet Council on the Advancement of Trade Liberalization (Boeki* Jiyuka* Sokushin Kakuryo* Kaigi) to prepare liberalization plans for other industries, and this in turn led on March 8, 1960, to a