MITI and the Japanese miracle

Page 267

your bank can survive even after Japan collapses? Go back and tell your president exactly what I said."

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Sahashi was particularly adept at and inclined to use this kind of defense of his administrative guidance.

The problems of administrative guidance begin when it is suspected that a ministry is not neutral in an issue it is supposed to be arbitrating, or when it has been captured by the people it is supposed to be regulating, or when its administrative guidance is really only a governmental cloak (kakuremino) hiding an otherwise illegal cartel, or when the deliberation councils in which administrative guidance is carried out have been packed with people leaning in a certain direction. There is no ready relief from such malpractices when they are suspected. Several protests against administrative guidance on these grounds erupted during the 1970's, as we shall see in the next chapter.

During the recession of 1965 the main form of MITI's administrative guidance was investment coordination done in "cooperative discussion groups." Whatever businessmen or their representatives may have said in the Diet about MITI, Sahashi, or the Special Measures Law, in private they welcomed these cartels to stave off the consequences of their own preemptive investment and the weakening of demand during the recession. On January 29, 1965, the discussion group for petrochemicals decided that new ethylene-producing facilities for fiscal 1965 and 1966 should be limited to 350,000 tons, and that firms already established in the industry should be the only ones to develop such facilities. And on March 18, 1965, the synthetic textiles discussion group agreed on a formula for new acrylic fibers facilities that would keep output below 30 tons per day. In May 1965 MITI set up a paper pulp industry discussion group, and in November 1966, one for the ferroalloys industry. Other industries employed the specialized committees of the Industrial Structure Council for the same purpose, and the council ultimately replaced the discussion groups as the place where most industrialists and financiers got together to agree on how much each was going to invest in what kinds of plants and equipment.

Another important form of administrative guidance during this period was the promotion of mergers. Sometimes this meant nothing more than MITI's bringing the parties together and endorsing their union before the FTC. The biggest such merger was the reamalgamation on June 1, 1964, of the three companies that had come into being after SCAP broke up the old Mitsubishi Heavy Industries. However, sometimes more was needed to achieve a merger than mere verbal