MITI and the Japanese miracle

by Chalmers Johnson

  14

  Yoshino also recognized that the admission of military officers on detached service into MCI, a practice he had authorized for the Fuel Bureau and several other new units, affected the ministry's personnel affairs. The militarists regularly used their political power to block promotions of young officials whom they considered insufficiently "reformist." Most of the officials working in industrial administration, as distinct from commercial administration, became reform bureaucrats to some extent, and this led to a factional alignment under Yoshino's successors and under Kishi that would affect the ministry for decades to come.

  The military equivalent of the reform bureaucratsthe

  kakushin

  bakuryo

  *, or "reform staff officers"looked on the reform bureaucrats as possible civilian replacements for the old political party leaders, whom they held to be corrupt and to constitute prime obstacles to the building of a "national defense state" in Japan. In October 1934 the Army Ministry published an inflammatory pamphlet calling for national mobilization, opposition to "classes that live by unearned profit," and the expansion of production and trade under state control. To implement this program the army advocated that its cadres make alliances with ''new bureaucrats," and the term thereby entered popular parlance.

  15

  One important source of reform bureaucrats was officials who had served in Manchuria as transferees after the proclamation in March

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  1932 of the new state of Manchukuo. Since the army actually ran Manchukuo, those who were invited to work there had to be in sympathy with the military's ideas for the renovation of Japan itself. The MCI contingent that served in Manchuria is particularly important for postwar industrial policy because, as Shiina Etsusaburo * wrote in 1976, Manchuria was "the great proving ground" for Japanese industry.

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  We shall identify them and describe their activities below.

  Some important reform bureaucrats in MCI and in closely related economic bureaucracies were Kishi Nobusuke, Shiina Etsusaburo, Uemura Kogoro*, Kogane Yoshiteru (director of the Fuel Bureau in 1941 and a postwar Diet member), Hashii Makoto (who served in the postwar Economic Stabilization Board and then became president of Tokyo Gauge Company), Minobe Yoji* (Minobe Tatsukichi's nephew, chief of the Munitions Ministry's Machinery Bureau and postwar vice-president of Japan Hydrogen Industries), Wada Hiroo (from the Agriculture Ministry and postwar minister of agriculture in the first Yoshida cabinet), Sakomizu Hisatsune (from the Finance Ministry and postwar director-general of the Economic Planning Agency and postal minister in the Ikeda cabinets), Aoki Kazuo (from the Finance Ministry, president of the Cabinet Planning Board, and postwar member of the House of Councillors of the Diet), and Hoshino Naoki (from the Finance Ministry, president of the Cabinet Planning Board, and postwar chairman of the Tokyu* hotel chain and the Diamond Publishing Company). Not surprisingly, a few of the reform bureaucrats turned out to be not rightists but left socialists and cryptocommunists; their presence on the "economic general staff" produced a major scandal in 1941, as we shall see later in this chapter.

  Before the second Konoe cabinet was established in 1940, the mainstream factions in most ministries tried quietly to check the influence of the reform bureaucrats, whom they regarded as excessively ambitious. The promilitary bureaucrats therefore often sought transfers to Manchuria or to the cabinet-level bureaus of the economic general staff, where military influence was strong. In May 1935, when the Cabinet Research Bureau was set up, Minister Machida of MCI suggested that Yoshino take the post as first director of the bureau, but he did not insist when Yoshino refused.

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  Instead, the prime minister chose Yoshida Shigeru (18851954), who must be carefully distinguished from the Foreign Ministry bureaucrat of exactly the same name who became prime minister after the war. This Yoshida was a Home Ministry bureaucrat, a member of the ultranationalist Society for the Maintenance of the National Prestige (Kokuikai), and minister of munitions in the Koiso cabinet of 1944.

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  At the time of its establishment, Yoshida's Research Bureau brought together officials from the Army, Navy, Home, Finance, Commerce, Agriculture, and Communications ministries, plus two cabinet officials serving concurrently in the Resources Bureau.

  18

  MCI sent two officials, Hashii Makoto and Fujita Kuninosuke (from January 1934 to May 1935 chief of Department One of the TIRB and after the war first a member of the American-sponsored Securities and Exchange Commission and then a professor at Chuo* University). Yoshida asked Kishi to join, but he had bigger fish to fry in MCI and in Manchuria and therefore declined. One of the two Agriculture Ministry officials at the Research Bureau was Wada Hiroo, a prominent leader of the left socialists in postwar politics.

  The pronounced "new bureaucrat" coloration of both the deliberation council and the Research Bureau in the Okada cabinet produced strong denunciations by some political party and business leaders. The deliberation council soon became a dead letter and was quietly abolished when the government changed. The Research Bureau, however, persisted and became embroiled in one of the historic controversies of the early controlled-economy era. A plan like the Petroleum Industry Law of 1934 was sponsored by the Cabinet Research Bureau for the reorganization and state control of the electric power generating and distributing industry. In this instance, however, the owners of the companies resisted fiercely, and business leaders denounced the bureau for its advocacy of "bureaucratic fascism" and ''state socialism."

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  After two years of bitter debate in and out of the Diet, the bureaucrats finally achieved control over electricity through the Electric Power Control Law of 1938. They had wanted to nationalize the electric power industry, but they had to settle for public management and private ownership in order to get any law at all. Several revisions were needed, but when the law was fully implemented in September 1941, it forcibly merged 33 generating companies and 70 distributing companies into 9 public utilities under the control and supervision of the Electric Power Bureau of the Ministry of Communications. It was one of the most impressive reforms of "industrial structure" of the prewar period. The Electric Power Control Law is important to the history of MITI because the creation of the Ministry of Munitions in 1943 moved the Electric Power Bureau from the Ministry of Communications into MITI's line of descent. All nine companies created by the 1938 law exist today, except that they are now private utilities (Tokyo Electric Power is the world's largest privately owned utility), and all are still under the supervision and guidance of MITI.

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  If the Teijin case of 1934 marked the beginnings of the reform bureaucrats, the abortive military coup d'etat of 1936 transformed the political system and brought them into prominence. It also initiated the struggle between bureaucrats who favored state control of the economy and private industrialists who favored self-imposed control, a struggle that would last until the end of the Pacific War. Within MCI the military uprising alarmed many otherwise complacent bureaucrats; Yoshino acknowledges that in the wake of the incident he lost control of the ministry. Before the year was out he and Kishi would be fired. The military was riding high in the cabinet, but within the ministries some passive resistance to the militarists and their friends was developing. Business leaders also began to turn cautiously against the Yoshino-Kishi line, but they could not speak out openly because of the fear of assassination. However, in order to obtain the cooperation of industry, the military found that it had to compromise on whom it recommended for MCI minister and to tolerate ministers who came from or were acceptable to business.

  One such compromise choice as minister of MCI was Ogawa Gotaro * (18761945), a former Kyoto University professor of economics and an elected member of the House of Representatives since 1917.

  *

  Ogawa made it known that he intended "to eliminate the control faction in MCI," and he had several reasons for wanting to do so. First, he was fr
om Kansai and reflected the Osaka business world's hostility to the controlled economy. Second, he was worried about working with a vice-minister who had been in office for five years and who might try to upstage him. Third, as a leader of the Minseito*, he did not like Yoshino's Seiyukai* leanings or Kishi's ties with Choshu* political and industrial figures (for example, with Matsuoka Yosuke*, then president of the South Manchurian Railroad, foreign minister at the time of the Axis alliance, and the uncle of Sato* Hiroko, the wife of Kishi's brother Eisaku). Finally, Ogawa evidently distrusted both Yo-

  *

  Ogawa became MCI minister in the Hirota cabinet following the death after only a few weeks in office of Kawasaki Takukichi. Kawasaki had originally been selected as home minister, but the army vetoed him because he was one of Machida Chuji's* lieutenants, and he went instead to MCI.

  Interestingly enough, Ogawa died on April 1, 1945, in the torpedoing of the

  Awa Maru

  in the Taiwan Straits by a U.S. submarine. The

  Awa Maru

  was supposed to be carrying noncombatants and relief supplies for Allied prisoners of war, but some Americans believed that the Japanese were using the passage of the

  Awa Maru

  to return gold and important people to the home islands. About 2,045 passengers were killed. In April 1949 the

  Awa

  incident became a political issue when the Yoshida government abandoned efforts to obtain an indemnity from the United States because of U.S. aid to Japan's postwar reconstruction. Ogawa was, in fact, returning to Japan after serving as supreme adviser to the Burmese government.

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  shino and Kishi, but particularly Kishi because of his involvement in the protests against pay cuts a few years earlier.

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  Ogawa offered Yoshino the presidency of the newly established Tohoku* (Northeast) Industrial Development Company, a Japanese version of the Tennessee Valley Authority for the development of a backward region. And Ogawa said to Kishi that the Kwantung Army had strongly requested Kishi's services in the Manchurian government (which was true). Yoshino contemplated refusing to resign on grounds that as an Imperial official he could not be dismissed, but he thought better of it. He realized that he had remained as vice-minister too long and was aware that junior officials in the ministry were holding meetings about the political situation from which he was excluded.

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  On Yoshino's birthday, September 17, 1936, he and Kishi jointly submitted their letters of resignation. Yoshino went to Tohoku, where he had been born, and Kishi became the deputy director of the Industrial Department of the government of Manchukuo.

  In strict accordance with custom Ogawa asked Yoshino to name his successor. Yoshino recommended Takeuchi Kakichi, class of 1915, and at the time director of the Patent Bureau. Takeuchi had never been popular with Kishi, who apparently believed that Takeuchi should have been sent to the Agriculture Ministry when MAC was divided in 1925. Nonetheless, Takeuchi served in many important, typically reform bureaucratic posts in MCI and elsewhere in the government: he was a department chief in the TIRB from 1930 to 1935, president of the Cabinet Planning Board from January to July 1940, and vice-minister of munitions from July 1944 to April 1945. In 1936 Ogawa appointed him vice-minister of commerce and industry but made clear that he distrusted him as a follower of the Yoshino-Kishi line. Under these circumstances Takeuchi resigned two months later, and after a short interval in Manchuria took up the post of director of the semidetached Fuel Bureau, where he felt much more comfortable. As his successor Ogawa selected Murase Naokai, an official much more to Ogawa's liking and the vice-minister who led MCI through the first years of the China war and through its total reorganization in 1939.

  Murase Naokai (18901968) entered MAC from Todai* Law in 1914. He had not had much experience in MAC or MCI, since from 1919 to 1933 he had worked as a transferee in the Cabinet Legislation Bureau (Hosei* Kyoku). This bureau was the most prestigious post for a prewar bureaucrat, and its directorship was the pinnacle of the Imperial service. By 1933 Murase had become a councillor in the bureau, and

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  the only post still ahead of him was the director's. Because he was considered too junior for that, although he was regarded as an excellent legal technician, the bureau asked Yoshino to take him back as a bureau chief in MCI. Yoshino was glad to oblige, and in September 1933 he appointed Murase chief of the Commercial Affairs Bureau. Murase held that post until Yoshino's resignation.

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  Murase thus had no experience in industrial administration or in the TIRB. He leaned toward the commercial wing of MCI, which was oriented to medium and smaller enterprises, the insurance business, the stock exchanges, and tradeand which reflected the business world's wary approach to the controlled economy. Murase's greatest achievement as chief of the Commercial Affairs Bureau was securing the passage in 1936 of the Commercial and Industrial Cooperatives Central Depository Law, the enabling legislation for the Shoko* Chukin* Bank. This was and is today the leading governmental financial organ devoted exclusively to support of medium and smaller enterprises. Murase became known as a champion of the small businessman, and after the Pacific War he served from February 1953 to February 1958 as chairman of the bank he had founded in 1936.

  *

  While Murase was settling in at Kobiki-cho*, Kishi was in Hsinking greeting old friends and colleagues. Kishi himself had been directly responsible for sending most of them there. During his service as Industrial Policy Section chief and as Documents Section chief (193235), Kishi had received many requests from the Kwantung Army for MCI officials to staff its new government of Manchukuo. This government was divided into a series of departments (

  bu

  ) equivalent to the ministries in Japan, each with a Manchurian as director and a Japanese as deputy director. The General Affairs Agency (Somu-cho*), whose director and deputy director were both Japanese, supervised the whole puppet structure. The army asked the ministries in Tokyo to send reform bureaucrats to serve temporarily in these "guidance" posts, and Kishi was only too willing to oblige. The first director of

  *

  When Murase was forced from the vice-ministership in October 1939 by the "return of the Manchurians," Ikeda Seihin, the Mitsui leader and minister of MCI during the second half of 1938, arranged for his appointment as director of the Cabinet Legislation Bureau. He remained there until the appointment of the Tojo* cabinet, when he resigned from the government. On April 7, 1945, Prime Minister (Admiral) Suzuki Kantaro* asked him to return as director of the Cabinet Legislation Bureau in order to assist in terminating the Pacific War. He stayed in the post until after the surrender. On August 28, 1946, the occupation authorities purged him, and on October 13, 1950, they depurged him. He became an adviser to MITI on March 1, 1953. After heading the Shoko* Chukin* Bank, a public corporation under MITI's control, he became president between 1961 and 1967 of the Japan Electronic Computer Company, one of MITI's main instruments for promoting the domestic computer industry.

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  the General Affairs Agency was Komai Tokuzo * of the Kwantung Army's Special Affairs Department, but his successor was Hoshino Naoki of the Ministry of Finance. Kishi later served as Hoshino's deputy at the General Affairs Agency.

  The first MCI official sent to Manchuria was Takahashi Kojun*, a former Documents Section chief, who went in June 1933 and became deputy director of the Industrial Department (Jitsugyo-bu*, which changed its name during 1937 to Sangyo-bu*). During the autumn of 1933 Takahashi returned to MCI to recruit more officials, and Kishi strongly recommended that he approach the young TIRB official, Shiina Etsusaburo* (Kishi was Shiina's sempai by three years). This established a relationship between Kishi and Shiina that was as long lasting as that between Yoshino and Kishi. If the Yoshino-Kishi line prevailed in the ministry during the first half of the 1930's, the Kishi-Shiina line dominated it during the 1940's, 1950's, and well into the 1960's. Shiina served in the Indus
trial Department of Manchuria from 1933 to 1939. In addition, Kishi sent Okabe Kunio (chief of MITI's Trade Promotion Bureau in 1951 and, after retirement as a bureaucrat, the managing director of JETRO and a director of MITI's Electrical Resources Development Company). In his memoirs Yoshino refers to both Shiina and Okabe as members not of his faction but of "Kishi's faction."

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  Others whom Kishi sent or Ogawa expelled to "the wilds of Manchuria" between 1933 and 1936 included Minobe Yoji* (whose active duty at MCI lasted from 1926 to 1945), Koda* Noboru (1925 to 1943), and Shiseki Ihei (1930 to 1952, a member of the House of Representatives since May 1953, and one of MITI's key supporters in the Diet). However, the MCI official the army wanted all along was Kishi himself. His predecessor as deputy chief of the Industrial Department, Takahashi Kojun*, had not proved to be effective in the post, and in 1936 the army was insisting that Kishi come over to help get its faltering industrialization campaign underway. Thus, with an added push from Ogawa, Kishi went to Manchuria to replace Takahashi as deputy director of the Industrial Department.

  The situation in Manchuria was changing significantly just at the time Kishi arrived. From 1933 to 1936 the army and the South Manchurian Railroad (SMRR) had attempted to apply a radical, state-controlled, antizaibatsu development plan, but they had failed due to a lack of capital and to amateur management of heavy and chemical industries. The reputation of the SMRR had suffered considerably as a result. By 1935 the Kwantung Army had begun to reconsider its earlier anticapitalist line and was now trying to create a much sounder