MITI and the Japanese miracle

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to end "excessive competition" and to prepare to meet the challenges of capital liberalization. The Nakayama Committee, augmented by bureaucrats from MITI and the EPA, worked on its report between July 1966 and June 1967. When it was completed, the report called for either mergers or "cooperation" in seven industries: steel, automobiles, machine tools, computers, petroleum refining, petrochemicals, and synthetic textiles. The committee's main contribution was to provide a rationale for the Yawata-Fuji merger, but its influence can be seen in many other areas, including both MITI's ultimately abortive efforts to reorganize the automobile industry and its very successful measures to link the electronics and machine tool industries.

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While these analytic activities were underway, MITI was also busy preparing countermeasures to hold off liberalization until the basic phases of the reorganization could be accomplished. In January 1967 the ministry set up a Capital Transactions Liberalization Countermeasures Special Committee (Shihon Torihiki Jiyuka* Taisaku Tokubetsu Iinkai) within the Industrial Structure Council to hear and endorse what it proposed to do. This committee joined with another special committee set up by the Ministry of Finance's Foreign Capital Council (Gaishi Shingikai) and came up with a vast tangle of rules and procedures that had the effect of turning Japan's capital "liberalization" into a strictly pro forma acquiescence in international conventions.

Some of these rules included the 100 percent liberalization of only those industries in which foreign competition was unlikely (sake brewing, motorcycles, and the manufacture of

geta

, or Japanese wooden clogs, are the famous examples), the limitation of direct investment in other industries to joint ventures with at least 50 percent Japanese participation, the limitation of equity ownership in established firms to 20 percent, the selective designation of industries to be liberalized, the omission of vital segments from allegedly liberalized industries (the television industry was declared liberalized, except that foreigners could not produce color sets or use integrated circuits; the steel industry possessed eight of the ten largest blast furnaces on earth, but foreigners were prohibited from supplying the precise kind of steel needed by the automobile industry), the requirement that at least half of the directors in a joint venture must be Japanese nationals, and so forth endlessly. As if these measures were not enough, all proposed joint ventures or wholly owned subsidiaries remained subject to screening and approval by MITI under either the Foreign Exchange and Foreign Trade Control Law or the Foreign Capital Law if they involved the introduction of foreign technology into Japan.

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(It is hard