MITI and the Japanese miracle

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for his unusually sharp memory, and the press nicknamed him the "computerized bulldozer." He also had a lot of money of his own, received more of it because of his powerful positions within the party and government, and spent it effectively to enlarge his faction in the Dietall of which ultimately led to his downfall.

Shortly after Tanaka took over at MITI, the "Nixon shocks" occurred. It is unclear to this day whether President Nixon and National Security Adviser Kissinger were retaliating against Prime Minister Sato * because of his failure to deliver on the textiles-for-Okinawa deal, or whether they simply overlooked Japan in the midst of their other troubles (Kissinger has acknowledged that it took him five years to gain some understanding of Japanese political processes).

³¹

Nixon and Kissinger did feel that they had reason to be irritated with Japan: capital liberalization was proceeding at a snail's pace, demands that Japan revalue its obviously undervalued currency were consistently rebuffed, the Vietnam War was causing the American balance of payments to hemorrhage, the textile dispute simmered on, and the American press was becoming sharply critical of Japan (see, for instance, the

Time Magazine

of March 2, 1970, on Japan's "hothouse economy," and the

Business Week

of March 7, 1970, on "Japan, Inc.").

Whatever the case, in July 1971 the Nixon administration unveiled its basic shift in United States' policy toward the People's Republic of China without coordinating this démarche in any way with its leading East Asian ally; and on August 16, 1971, it suspended convertibility of the U.S. dollar into gold and put a 10 percent surcharge on imports into the American market. On August 28, 1971, the Bank of Japan cut the yen free from the exchange rate that Dodge had created in 1949; and on December 19, 1971, following conclusion of the Smithsonian agreement ending fixed exchange rates, revalued the yen upward by 16.88 percent to US$1 = ¥308. Even before these dramatic developments, Japanese analysts were publishing books on the "Japanese-American Economic War" and saying that "the age of Japanese-American cooperation will never return." This turned out to be vastly overstated, but no one knew that during 1971 and 1972.

Tanaka capitalized brilliantly on the Nixon shocks. He openly championed Japanese recognition of Pekinghis slogan was "Don't miss the boat to China"and this ruined Prime Minister Sato's* chances of continuing in office. It also effectively blocked Sato's intended successor from becoming prime minister: Fukuda Takeo had suffered the misfortune of being appointed Foreign Minister only a fortnight before the dramatic shift in Washington-Peking relations. (The Chinese communists indirectly helped Tanaka by launching a strident cam-