MITI and the Japanese miracle

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in Japanese firms. This amendment of course also spurred MITI to enact the Foreign Capital Law in order to give the Japanese government control over who licensed what patents and how much they paid for them in royalties.

These various challenges to and changes in the AML were all preliminary to MITI's actions of 1952. As noted in the preceding chapter, from 1946 on MCI, the ESB, and their subsidiary public corporations (kodan *) exercised absolute control over all commodities in the domestic economy under the terms of the Temporary Materials Supply and Demand Control Law. This lawapproved by SCAP as an emergency replacement for the wartime National General Mobilization Lawwas due to expire on April 1, 1948; but SCAP extended it for two more years because of the continuing shortages and consequent need for rationing. In 1950, when the government wanted to extend it again, SCAP balked: "To SCAP this proposal looked very much like a bid by the Government to continue the controls system as a government institution instead of ending it."

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However, SCAP finally went along with a one-year extension because the Japanese feared that abandoning the materials supply-and-demand plans would destabilize the economy. During April, 1951, the effects of the "truce recession" that followed the beginning of negotiations in Korea were just being felt, so SCAP extended the law for yet another year. But SCAP and Yoshida were both determined to let it lapse on April 1, 1952.

MITI has often contended that its acquiescence in the expiration of the Temporary Materials Supply and Demand Control Law demonstrated that it is a more liberal and less control-oriented ministry than either Finance or Agriculture, whose control laws (over the banks and rice production) have never ended.

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Professor Maeda, on the other hand, believes that the expiration of the Supply and Demand Law merely ushered in a "second control era" based on MITI's use of the foreign exchange budgets to carry out its policies, a phase that lasted until 1964.

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Whatever one thinks about this issue, the fact that the law was coming to an end in the spring of 1952 had a major unsettling effect on several industries, particularly those in which there were many firms, strong competition, and damage due to the decline in American procurements. Under these circumstances MITI took its first totally independent action as a new ministry. On February 25, 1952, it informally advised ten big cotton spinners to reduce production by 40 percent, and the ministry assigned quotas to each individual firm. To enterprises that rejected this "administrative guidance," MITI mentioned (again verbally and informally) that foreign currency al-