MITI and the Japanese miracle

Page 295

the danger of foreign protectionism the old relief valve of an export drive was also not as readily available as it had been ten years earlier. On March 31, 1970, the government even took the cosmetic step of changing the name of the old Supreme Export Council to the Trade Council. Continuing protectionism by Japan also caused problems in that the government prohibited importers from spending their cash on certain commodities, such as lumber, in order to protect domestic industries.

Into this economic milieu the Tanaka government pumped money as the government had never done before, both because of its industrial dispersal program and because it believed it had to pay off industries that claimed to have been damaged by capital liberalization, the "Nixon shocks," or the settlement of the textile dispute. MITI itself acknowledges an increase of ¥234 billion in the general account and investment budgets during the month following the Nixon shocks of 1971 (allegedly to save medium and smaller enterprises), and Tanaka cowed the Ministry of Finance's normally independent Budget Bureau into giving him everything he wanted. On Tanaka's orders Budget Bureau Director Aizawa Hideyuki increased the fiscal 1973 budget over the previous year by some 24.6 percent.

³⁶

As John Campbell argues, "The major real effect of [Tanaka's dispersal] plan seems to have been simply to provide a justification for high spending, allowing the Liberal Democrats and even the Ministry of Finance to throw a cloak of virtue and high purpose over a budget which, in the final analysis, was little more than the largest pork-barrel in the history of Japanese public finance."

³⁷

The resultant inflationary conditions resembled nothing so much as the price spiral during World War I that led up to the rice riots. Again, just as in 1917 the general trading companies were in the forefront of the speculative boom. Above all other enterprises, the trading companies had too much cash sitting idle and no place to spend it. They began investing in land, which caused real estate values to appreciate in an unprecedented manner. For example, Mitsubishi Trading Company purchased the old premises of the NHK broadcasting station in the heart of Tokyo for ¥6 million per square meter, several times higher than the officially valued price, which brought a wave of criticism down on the trading company's head. Still, it had the money, and real estate was the best hedge against inflation.

³⁸

Serious political problems developed when the general trading companies began to speculate in daily necessities and hold them off the market in anticipation of further price rises. Just as in 1917 the press and the public began to suspect that cornering a market (kai-