MITI and the Japanese miracle

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scene. The tools of implementation themselves are quite familiar. In Japan during high-speed growth they included, on the protective side, discriminatory tariffs, preferential commodity taxes on national products, import restrictions based on foreign currency allocations, and foreign currency controls. On the developmental (or what the Japanese call the "nurturing") side, they included the supply of low-interest funds to targeted industries through governmental financial organs, subsidies, special amortization benefits, exclusion from import duties of designated critical equipment, licensing of imported foreign technology, providing industrial parks and transportation facilities for private businesses through public investments, and "administrative guidance" by MITI (this last and most famous of MITI's powers will be analyzed in Chapter 7).

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These tools can be further categorized in terms of the types and forms of the government's authoritative intervention powers (its

kyoninkaken

, or licensing and approval authority) and in terms of its various indirect means of guidancefor example, its "coordination of plant and equipment investment" for each strategic industry, a critically important form of administrative guidance.

The particular mix of tools changes from one era to the next because of changes in what the economy needs and because of shifts in MITI's power position in the government. The truly controversial aspect of these mixes of toolsone that greatly influences their effectivenessis the nature of the relationship between the government and the private sector. In one sense the history of MITI is the history of its search for (or of its being compelled to accept) what Assar Lindbeck has called "market-conforming methods of intervention."

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MITI's record of success in finding such methodsfrom the founding of the Ministry of Commerce and Industry (MCI) in 1925 to the mid-1970'sis distinctly checkered, and everyone in Japan even remotely connected with the economy knows about this and worries about MITI's going too far. MITI took a long time to find a government-business relationship that both enabled the government to achieve genuine industrial policy and also preserved competition and private enterprise in the business world. However, from approximately 1935 to 1955 the hard hand of state control rested heavily on the Japanese economy. The fact that MITI refers to this period as its "golden era" is understandable, if deeply imprudent.

Takashima Setsuo, writing as deputy director of MITI's Enterprises Bureau, the old control center of industrial policy, argues that there are three basic ways to implement industrial policy: bureaucratic con-