MITI and the Japanese miracle

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The zaibatsu had made it clear in the TIRB's Control Committee that they were less interested in cartels on the model of the industrial unions for medium and small enterprises than they were in easing competition through mergers and in the reduction of the number of competitors. Many mergers followed in the wake of the law: in May 1933 three companies merged to form Oji * Paper, in December the Sanwa Bank came into being as a result of a three-way merger, in January 1934 Yawata and five private companies united to become Japan Steel, in June Mitsubishi Heavy Industries appeared, and the following year Sumitomo Metals was created. Each of these cases fostered concentrations of economic power that came close to being monopolies rather than cartels. The zaibatsu believed that cartels did not allow for change and would prove unworkable over time. They would have preferred an individual industrial development law for each industry (for example, the Petroleum Industry Law of 1934 and the Automobile Manufacturing Law of 1936), that would also protect them from international competitors. As it turned out, this kind of law became more important than the original control law as the thirties progressed, but for reasons the zaibatsu did not foresee; the militarists wanted them, and even though they did not like working with the zaibatsu, they had no other choice.

At the time the control law was deliberated and enacted, Yoshino clearly stood for self-imposed control in industry and for government cooperation with private control agreements. However, the year 1931 ended up giving self-control a bad name, particularly insofar as it involved the zaibatsu, and this led to powerful demands for its opposite, namely, state control (

kokka

tosei

*). The reason was the "dollar-buying" scandal. On September 21, 1931, England announced that it was leaving the gold standard because of the depression. This should have signaled the failure of Inoue's policy; Japan could not maintain the gold standard if its main trading competitor did not also abide by it. However, the Japanese gold embargo was not reimposed until three months later, and in the interim the zaibatsu banks engaged in an orgy of dollar buying, using yen they knew were soon to be devalued. Mitsui alone is said to have made $50 million in international currency transactions. The speculation ended in December with the return to power of the Seiyukai* (the last political party regime until after 1945) and Takahashi's reversal of Inoue's policy.

The effect on Japanese public opinion of the zaibatsu's dollar buying during the height of the depression was one of outrage. Many groups concluded that the zaibatsu were so irredeemably avaricious they were quite prepared to debase their own country's currency in the