MITI and the Japanese miracle

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its international competitive capacity. This is what Inoue and the Minseito * party wanted to do.

Before any attempt to lift the gold embargo could be undertaken, however, the government had to get its own financial house in order, and this meant resolving the matter of the outstanding earthquake bills. During the 52nd Diet (December 1926 to March 1927), the Wakatsuki (Minseito) government introduced two bills that would convert the outstanding earthquake bills into ten-year government bonds. The opposition parties complained bitterly that the government wanted to use the people's tax revenues to aid the capitalists, and during the course of a heated Diet debate the minister of finance accidentally revealed just how shaky the nation's entire banking structure really was. Runs began on banks, although they temporarily cooled after the Diet passed the bills on March 23.

The debate did not cool, however. It had revealed that two institutions, the Suzuki Trading Company and the government-owned Taiwan Bank, were in serious financial difficulties. Suzuki Shoten*, the biggest of the wartime nouveaux riches, controlled some sixty companies, many of which were in the heavy and chemical industries and had been badly affected by the postwar recession. The China trade, in which Suzuki had invested heavily, had also stagnated due to anti-Japanese boycotts and the rising competitive ability of new Chinese firms. The Taiwan Bank had the mission of helping Japanese firms advance into China and Southeast Asia; it had lent Suzuki over ¥350 million, and it also held some ¥100 million in earthquake bills. Rumors spread that the real intent of the new laws was to save Suzuki and the Taiwan Bank, and when Suzuki's competitors, beginning with the Mitsui Bank, began withdrawing their deposits from the Taiwan Bank, the public run on all banks revived.

As a result of the panic, the Wakatsuki government fell, the Seiyukai* party came to power, some 37 banks went under, and the zaibatsu renewed their strength. Finally, the Suzuki zaibatsu collapsed, with Mitsui and Mitsubishi picking up the surviving firms. (One strong firm, Teijin, or Imperial Rayon, came back to haunt the government again in 1934, when a scandal erupted over the covert sale to high government officials of Teijin shares held by the minister of finance as collateral for the Taiwan Bank's debts.) Loans to medium and smaller enterprises became much harder to obtain, but access to capital for large zaibatsu enterprises was enhanced. Disastrous though it was, the 1927 panic produced one of the first "reforms" of the industrial structure in Japan: a large number of competing banks and enterprises were weeded out, and the economy's limited capital was con-