MITI and the Japanese miracle

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lar with almost everyone, either because military influence over them was strong or because they had to compromise with private business interests. This led first to calls for a government of national unity and then to its formation under the leadership of Prince Konoe on June 4, 1937. In view of the imbalance in international payments and the need for the military to import at least some of what it wanted, the selection of the minister of finance in the new government was a major issue. Konoe named Kaya Okinori, who was not a reformist but a fiscally conservative Finance Ministry bureaucrat. Kaya in turn recommended Yoshino to be minister of commerce and industry on grounds that he needed to be backed up by that ministry if he were going to bring army spending demands under control. As it turned out, the coming of war in China a month after the Konoe government came into being upset all of these plans. Nonetheless, Yoshino returned from his position in the northeast to become minister of the organization he had left as vice-minister only a few months earlier. He was the first MCI-bred bureaucrat to become minister of commerce and industry. Interestingly enough, Yoshino's and Kishi's careers are similar in that both were fired as vice-minister and then returned as minister in less than a year.

On June 4, 1937, the day the new cabinet was sworn in, Finance Minister Kaya and MCI Minister Yoshino issued their famous joint statement of "three fundamental principles" of economic policy: production must be expanded, the country must live within the limits set by the international balance of payments, and the government must control economic activities in order to achieve coordination between the first two principles.

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The first principle was aimed at meeting military demands, the second was in response to the demands of business leaders, and the third put the whole country on notice that changes were needed in order to do what the military wanted and still avoid bankruptcy.

The intent behind the statement (to bring military spending under control) was clear enough in Japan, but it was misunderstood abroad as a declaration of aggression. American newspapers reported the Kaya-Yoshino statement as preparatory to a war with China, and in 1945 the International Military Tribunal for the Far East investigated Yoshino's radio speech on the three principles as possible evidence of his involvement in a war plot.

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Yoshino and Kaya were in favor of expanded productive capacity, but they also stood for fiscal integrity and joint public-private management, principles that clearly distinguished them from their immediate predecessors.

When fighting broke out in China, the initial view of the cabinet