MITI and the Japanese miracle

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to promote large-scale mergers in order to produce concentrations of economic power on a par with the United States and West Germany. It wanted to reduce the "big six" steel companies to, say, two or three, and the automobile manufacturers from ten (Daihatsu, Fuji, Honda, Hino, Isuzu, Mitsubishi, Nissan, Suzuki, Toyo * Kogyo*, and Toyota) to two (Nissan and Toyota). The problem with this approach was that it was hard to merge Japanese firms, given their company unions, lifetime employment systems, and keiretsu affiliations. Moreover, such a policy would put MITI squarely on the side of big business, or even worse, of zaibatsu business. Some observers reinterpreted MITI's old slogan of "scrap and build" (first applied to the coal industry) to mean "scrap medium and smaller enterprises" and "build Mitsubishi Heavy Industries."

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As it turned out, MITI had less to fear from medium and smaller enterprises than it did from some very big businesses themselves. And it had forgotten all about the Fair Trade Commission.

Before these problems developed, MITI got an assist from the top leaders of business, but for reasons more connected with the Sumitomo Metals Company incident than with capital liberalization itself. Inayama Yoshihiro, the president of Yawata Steel, had been so appalled by the "Sahashi, minister; Miki, vice-minister" controversy and the public squabbling over market shares in the steel industry that in January 1966 he proposed to Nagano Shigeo, president of Fuji Steel, that they merge their two companies. This would produce one steel company so large that it would create a genuine hierarchy in the industry, and, he hoped, conditions of stable oligopoly. Nagano responded favorably. In order to create a forum in which these negotiations could be pursued, in March 1966 the leaders of the main industrial federations formed a policy board, or "business general staff," named the Industrial Problems Research Association (Sangyo* Mondai Kenkyu* Kai, called "Sanken" for short). The big steel merger was Sanken's greatest achievement (it became inactive thereafter), but its formation coincided with the rise of the capital liberalization issue, and the association therefore decided to address the problem of mergers for all major industries as well as for steel.

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In its fully elaborated form Sanken brought together leaders from steel, electric power, chemicals, machinery, textiles, trading, finance, and securities, plus representatives of medium and smaller enterprises. Its guiding intellectual orientation was provided by Nakayama Sohei (b. 1906), since 1961 the president of the Industrial Bank of Japan (Nihon Kogyo Ginko*) and probably the greatest go-between of modern Japanese business. He took charge of a committee to make recommendations for the reorganization of Japanese industry in order