MITI and the Japanese miracle

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control, and production dropped precipitously. It was under these circumstances that the Japanese government began to take its own initiatives to revive the economy.

On June 25, 1946, the cabinet finally ended wartime compensation payments, but a month later it took the first steps to restore them under new names. The government set up the Reconstruction Finance Committee (Fukko * Kin'yu* Iinkai), with Ishibashi as chairman, to prepare the way for the Reconstruction Finance Bank (RFB), created on January 24, 1947. It was one of a set of institutions that the Japanese created after the war to try to pull themselves out of the postwar economic collapse and to restore production to prewar levels regardless of the fierce inflation it generated.

⁴³

SCAP derided these institutions as perpetuations of the old cozy relationship between government and business, and the specific acts of Ambassador Joseph Dodge in 1949, which came to be known as the "Dodge Line," were to terminate all further RFB lending and to order the government to balance its budget. Nonetheless, key Japanese leaders contend that the so-called priority production system of 1947 actually worked in that it restored the production of commodities such as coal and steel to levels close to those of the prewar period. The priority production system is significant because it and its institutions were clearly based on prewar and wartime precedents and because, except for the fiscal innovations made in 1949 and 1950 to control inflation, it was the prototype of the high-growth system that MITI and other ministries were to forge during the 1950's.

The specific institutions of the priority production system, in addition to the RFB, were the Coal Agency, the Economic Stabilization Board, the fifteen

kodan

* (public corporations for rationing of materials and products; they were modeled after the wholly governmental eidan rather than the zaibatsu-dominated control associations), and the Temporary Materials Supply and Demand Control Law (Rinji Busshi Jukyu* Chosei* Ho*, number 32 of September 30, 1946) that empowered these institutions to control all commodities.

At the end of the war coal production all but collapsed, plunging Japan into an acute energy crisis. Output fell from better than 4 million tons per month during the war to only 554,000 tons per month in November 1945. The reason was SCAP's immediate repatriation of about 9,000 Chinese and 145,000 Korean miners, many of whom Kishi had imported as virtual slave laborers when he was MCI minister. On December 6, 1945, on cabinet orders, the new MCI transformed its old Fuel Bureau into an enlarged semi-detached agency, the Coal Agency (Sekitan Cho*). Destined to become one of the biggest units of