MITI and the Japanese miracle

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disputes between Minister Ogawa and Vice-Minister Yoshino in 1936 and between Minister Kobayashi and Vice-Minister Kishi in 1941.)

Sahashi was embarrassedhe and Miki had a good relationshipbut he stuck to his guns and won. On January 11, 1966, Sumitomo claimed that it had not rebelled against administrative guidance but had only sought an exception because of its superior export performance, and said that it would go along with the others. Its imports of an indispensable raw material were promptly restored. Leaders of the steel industry had worked behind the scenes to achieve this compromise, and Sumitomo's export quota was also raised.

There were several consequences of this famous incident. Most important, the contretemps had so rattled the entire steel industry and business community, as well as exposing to public view procedures that were normally secret, that the elders of business and government determined to alter the structure of the industry itself by merging the Yawata and Fuji steel companies into one clear industry leader. In March 1970 New Japan Steel, the world's largest steel company, came into being after a lengthy and often fierce fight with the Fair Trade Commission. We shall return to MITI's role in this famous merger in the next chapter.

A less important but no less revealing consequence was Sumitomo Metals' acceptance of its first amakudari bureaucrat. Three years after the incident, in 1969, Hyuga * invited retiring MITI Vice-Minister Kumagai Yoshifumi to join Sumitomo Metals' board of directors. Kumagai had worked briefly for Sumitomo before entering MITI and therefore was more acceptable to the firm than a bureaucrat it did not know. In June 1978 Hyuga moved up to the chairmanship, and Kumagai became president of Sumitomo Metals. Hyuga had obviously learned that his otherwise excellent company lacked one important capability in its executive suite: the bureaucratic skills of a MITI insider.

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Only three months after his victory over Sumitomo, Sahashi himself decided that he had exhausted his usefulness. He declared, however, that he would not take any of the three paths of amakudari normally followed by high-ranking officials in retirement. He did not want to enter private enterprise because the presence of an outsider only annoyed the long-service employees and interfered with their own chances for promotion. He did not want to enter politics because he was disillusioned with politicians. And he did not want to go to a government corporation, because there he would have to take orders from some vice-minister, and that did not suit him. Sahashi therefore spent the next six years doing economic research and writing a series