In the spring of 1945 the fall of Iwo Jima, the invasion of Okinawa, and the great March 10 air raid on Tokyo precipitated the resignation of the Koiso cabinet. The new government of Admiral Suzuki was charged to bring the war to an end, which it did. For his munitions minister, Suzuki chose a fellow admiral, the ubiquitous Toyoda Teijiro*, who was then working as head of the Iron and Steel Control
*
Again it should be remembered that this is not the Yoshida Shigeru who became prime minister after the war.
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Association. Toyoda, in turn, appointed Shiina Etsusaburo * as vice-minister, the same position Shiina had held in MCI before it became MM. It was Shiina who actually presided over his ministry's end-of-the-war arrangements, and in retrospect he must be given credit for taking quick action at a time of major confusion.
On August 15, 1945, the nation heard the
gyokuon
hoso
*the Emperor's broadcast announcing the surrender. Two days later the Suzuki cabinet resigned and was replaced by the transitional government of Prince Higashikuni. Nakajima Chikuhei, the famous aircraft industrialist, was asked to hold the portfolio for MM, which ironically put Nakajima back in nominal control of the aircraft plants that had been taken from him and nationalized only the previous June. Shiina, however, continued to run the ministry. Only ten days after the fighting stopped and barely a day before the first Allied troops arrived at Atsugi air base to prepare the way for General MacArthur, Shiina told several of his younger colleagues that he had an important assignment for them, one that they must complete overnight. They were to recreate MCI before the occupation began.
Yamamoto Takayuki, MITI's first vice-minister in 1949, has said that the overnight rebirth of MCI was ordered because all the civilian bureaucrats in MM feared that the Allies would fire or arrest anyone connected with munitions. Shiina has indicated that he also had personal reasons for wanting to put some distance between the MCI contingent and the military officers in MM, and that he recognized the necessity for getting rid of the Munitions Ministry before the Americans did so. According to various accounts, those involved in the resurrection were Yamamoto, Ueno Koshichi*, Tokunaga Hisatsugu, and Hirai Tomisaburo*, all of whom became MITI vice-ministers during the 1950's.
26
Thus, by Imperial ordinance 486 of August 26, 1945, the Ministry of Munitions and the Ministry of Agriculture and Commerce disappeared, and in their places were reinstalled the old MCI and the old Ministry of Agriculture and Forestry.
Shortly after the establishment of SCAP headquarters, Allied investigators discovered the end-of-the-war juggling of ministries, but they did not attempt to do anything about it because the changes had been in the direction the Allies wanted the Japanese to go anyway. One of the official, although nameless, American historians of the occupation merely noted, "Bureaucrats were aware that their presurrender cooperation with militarists and zaibatsu interests constituted a threat to their continued hegemony. In the weeks before the occupation began officially, personnel records were destroyed, wholesale shifts of higher officials were made, and initial steps were taken to
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divorce administration from some of the most obvious features of aggressive imperialism."
27
Since SCAP had decided on an indirect occupation, which left the Japanese government intact even if taking orders from SCAP, the Allies did not demand a reform of all ministries, only those that had been closely connected with the military or the police (one was the Home Ministry), which the occupation ordered abolished. SCAP intended to deal on an individual basis with those bureaucrats whom it held responsible for the warthrough the purge rather than through structural change. But as we saw in Chapter 2, recent Japanese estimates put the number of MCI officials who were actually purged at only 42; and according to SCAP's own figures, it investigated 69 MCI officials but removed from office only 10.
28
Thus Shiina's last-minute ploy worked quite well; the trade and industry bureaucracy maintained its continuity despite the crisis of defeat.
The accounts of what happened during the four years from mid-1945 to mid-1949 in the realm of economic and industrial policywhether by SCAP officials or Japaneseoften differ so markedly as to make it appear that each side is talking about a different country. SCAP began the occupation by declaring that the Japanese had brought about their own economic difficulties and that the Allies therefore took no responsibility for maintaining any particular level of living in Japan. However, the Americans quickly discovered that if they stuck to this positiongiven the collapse of all Japanese international tradethey would merely ensure a communist revolution in Japan and not a "democratically reoriented" country.
29
The Americans therefore began state-controlled trade and demanded that the Japanese government impose economic controls. As it turned out, the prewar and wartime victories of the zaibatsu over the state-control bureaucrats proved to be the zaibatsu's undoing. SCAP declared that the zaibatsu had been responsible for the war economy, banned any further private cartels, and ordered government officials to exercise the powers previously reserved for the control associations. MCI officials of the "Kishi-Shiina line" were only too happy to oblige; after their struggles of the previous fifteen years, it suddenly seemed as if they had arrived in the bureaucratic promised land.
Similarly, with regard to emergency economic rehabilitation measures or positive economic reforms, the Japanese and the Americans often seemed purposely to misunderstand each other. Yoshida Shigeru (18781967), the great ex-bureaucrat prime minister who presided over Japan's rise from the ashes, once commented, "The occupation, with all the power and authority behind its operation, was
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hampered by its lack of knowledge of the people it had come to govern, and even more so, perhaps, by its generally happy ignorance of the amount of requisite knowledge it lacked.
*
Thus SCAP would sometimes approve of MCI proposals that the Americans thought were temporary expedients but that ended up lasting until well into the 1960's (foreign exchange budgets, for example). As for SCAP's policies calling for zaibatsu dissolution, the officials of MCI's old Enterprises Bureaunow called the Readjustment Department (Seiri Bu)administered this program with enthusiasm. But when it came to economic deconcentration generally, toward which the breakup of the zaibatsu was only a means and not an end, the industrial bureaucrats quickly discovered that there were divisions within SCAP and took advantage of them. Eleanor Hadley, herself a SCAP trustbuster, explains:
Inasmuch as in the United States commercial banks are not permitted to have industrial and trading subsidiaries or affiliates, the American vocabulary and way of thinking is to regard commercial banking as quite separate from industry and commerce. . . . The Economic and Scientific Section of [SCAP] Headquarters . . . was set up with an Antitrust and Cartel Division and a Finance Division, which was a mistake. . . . The result of the actual arrangement was that the Antitrust and Cartel Division claimed jurisdiction in antitrust matters over the banks, but the staff of the Finance Division insisted that the banks were entirely theirs (and their responsibility included no antitrust assignment!).
31
After the occupation the old zaibatsu were recreated on the basis of their banks rather than their former family holding companies. This was a much more rational and effective arrangement, but it is certain that this was not exactly what SCAP had in mind. In fact, in 1975, with no apparent sense of irony, the Japanese government awarded its Second Class Order of the Sacred Treasure to Tristan E. Beplat, who had recently retired as a senior vice-president of the Manufacturers Hanover Trust Company of New York. As the
Japan Times
explained, Beplat was "an American banker who the government said
*
See
The Yoshida Memoirs
, p. 128. However, Yoshida himself was not above attempting to fool SCAP o
fficials. "The original GHQ plan, as handed to us," Yoshida writes, "called for the purging of 'standing directors' as well as others occupying top positions. This was translated into Japanese by our side as 'managing directors.' Strictly speaking, however, a 'standing director' could be interpreted as one who functioned regularly in a company, which would have included most ordinary directors. We held to our interpretation that 'standing directors' were, in fact, managing directors, and by so doing were able to save many ordinary directors who might otherwise have been so classified from the purge. Which shows that upon occasion mistranslations serve their turn."
Ibid.
, pp. 15556. The issue here is the translation of the difficult terms
senmu torishimariyaku
(executive director),
jomu
*
torishimariyaku
(managing director), and
torishimariyaku
(director).
30
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had made a vital contribution to Japan's postwar economic recovery. . . . He was in charge of occupation policy toward Japanese banking from 1945 to 1948. . . . Many financial leaders, including [then] Deputy Prime Minister Fukuda Takeo, credit him with preventing the breakup of Japanese banks and insurance companies in the postwar dismemberment of zaibatsu companies in Japan.''
32
Without wishing to detract from Beplat's award in any manner, one may suggest that from the Japanese, and especially from MCI's point of view, there was a degree of
menju
*
fukuhai
(following a superior's orders to his face while reversing them in the belly) at work during those immediate postwar years.
Sometimes Japanese officials genuinely did not understand what SCAP wanted them to do. For example, with regard to the Antimonopoly Law (number 54 of April 14, 1947), Morozumi Yoshihiko, who 25 years later became vice-minister of MITI, recalls his painful efforts during the occupation to translate article by article into legal Japanese the draft of the Antimonopoly Law that General MacArthur's headquarters had sent over to MCI for enactment. "It seems laughable today," he writes, "but then we didn't really know what they were talking about."
33
When Morozumi showed his draft to his "senior," Murase Naokai, then chief of the Cabinet Legislation Bureau, Murase asked him what something he had translated meant and he was forced, much to his embarrassment, to reply that he did not know. Murase got the drift of the law only by looking at the original English text. Needless to say, the Antimonopoly Law was not something the Japanese were able to avoid or evade. As we shall see in the next two chapters, MITI spent the succeeding 30 years struggling to get around Morozumi's handiwork. The tension that developed between MITI on the one hand and the Fair Trade Commission (created by the law) on the other undoubtedly made a contribution to the favorable climate in which high-speed growth took place. This tension, unintended by either SCAP or MCI, may have been one of the occupation's greatest contributions to the economic "miracle."
Although SCAP's accounts are virtually silent on the subject, the Japanese characterize the first four years of the occupation by reference to two great debates over Japan's economic reconstruction and by one overwhelming factthe rise of the state as the central actor in the economy. The first of the two controversies was over whether reconstruction should give priority to expanding production (the
seisan
fukko
*
setsu
, or the theory of reconstruction through production) or to price stabilization and control of inflation (the
tsuka
*
kaikaku setsu
, or the theory of currency reform).
34
The second controversy concerned
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what type of economy Japan should rebuildone oriented to light industries and Japan's comparative advantage of a large, still cheap labor force, or one oriented to heavy and chemical industries with their greater value-added potential (that is, the greater value of the products produced after the cost of materials, taxes, and depreciation have been subtracted).
The emphasis on production rather than stabilization and on heavy industry rather than light industry usually prevailed, but the advocates of the opposite positions were not necessarily wrong. They made their contribution during the "Dodge Line" (194950) and the Korean War (195053), when the advocates of production and of heavy industries had to come to grips with controlling inflation and with Japan's dependence on international trade. It was then that MITI was born and that both sides of the occupation controversies were synthesized to form the high-growth system.
The rise of state power and its role in reconstruction dominated all of the controversies. The historian Hata Ikuhiko states flatly that "never has the Japanese bureaucracy exercised greater authority than it did during the occupation"; and the MITI Journalists' Club refers to the occupation as MCI's "golden era"the period in which it exercised total control of the economy.
35
The government's assumption of all functions previously shared with the private sector, its recreation of the ''economic general staff" and the materials mobilization plans under new names but in much stronger forms, and its enactment of legislation that made the National General Mobilization Law pale by comparison led to an enormous growth of the bureaucracy. During 1948 and 1949 MCI came to control the third largest share of the general account budget (only the Prime Minister's office and the Ministry of Finance had larger shares); and when MITI was founded in 1949, it had a total of 21,199 employees, as compared with 13,891 in 1974 to serve an infinitely larger and more complex economy.
The growth of the public sector caused an intensification of the bureaucratic struggles for jurisdiction on which a ministry's security and even its existence depended. The Finance Ministry and the Bank of Japan fought tooth and nail over control of the banks, a struggle that Finance eventually won. Ichimada Naoto was president of the Bank of Japan and an advocate of both the currency reform theory and light industries; had he instead of Ikeda Hayato accepted Prime Minister Yoshida's offer to become minister of finance in 1949, the economic history of postwar Japan would surely have been very different from what it was.
36
But the struggle of greatest interest to this study occurred between the Ministry of Foreign Affairs and MCI. With all of
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Japan's foreign legations closed, there existed during the occupation a vast surplus of diplomats who had to be given work in the government. They were, moreover, of all officials the most adept at the English language, and this gave them a great advantage in dealing with SCAP.
Most important in this struggle was the fact that the key politician of the postwar years, Prime Minister Yoshida, was an ex-Foreign Office official. Yoshida has always acknowledged that he did not know much about and was more or less uninterested in economics, but he had quite firm views on certain other matters about which he knew a great deal. Two such issues concerned Japan's wartime controlled economy and the economic bureaucrats who had cooperated with the military. He deeply disliked both of them. According to many accounts, Yoshida "could not distinguish an MCI official from an insect"; and he was determined to put reliable Foreign Office men over what he regarded as the dangerously national socialist MCI bureaucrats.
37
MCI had to move nimbly in order to survive at all, since its greatest danger came not from SCAP but from its own country's political leader and from some of his official colleagues. As we shall see, MITI did not escape fully from Foreign Ministry influence until 1956.
In these important bureaucratic struggles, SCAP was not so much "supreme" as a major player on a national chessboard, sometimes the queen but more often merely a pawn. Yoshida on occasion manipulated the purge apparatus to get rid of a politician who had crossed him. And MCI men took full advantage of the proclivities of some of SCAP's "new dealers"
toward a "planned economy," much to Yoshida's irritation. The coming to power in 1947 of Japan's only socialist government, something that SCAP was very enthusiastic about, was a godsend for MCInot because MCI advocated socialism but because socialism afforded it a plausible cover for its own industrial policies and because the socialist government put Yoshida out of power for eighteen months.
38
These are matters to which we shall return. The first four years of the occupation were a period of immense complexity, extremely rapid social change, and for the Japanese people a bitter struggle for survivalthe time of the "prison of hunger," as they spoke of it then. But out of it came a summing up of the experiences of the prewar, wartime, and occupation industrial policies that allowed the government during the next decade to lead the country to prosperity.
The initial postwar problem, and the one that conditioned all the others to come, was inflation. If we take the price level of August 1945 to be 100, then the level rose to 346.8 in September, to 584.9 in Decem-
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ber, and to 1184.5 the following March.
39
Several factors caused this inflation, including mustering-out payments to the Japanese armed forces, but the most important was the continuation and even acceleration of government disbursements for wartime contracts, war production loans, munitions companies guarantees and indemnities, and various other obligations the government had assumed under wartime laws and ordinances. One of these was payments for factories that had been seized and converted to munitions production by the Industrial Facilities Corporation. In mid-1946, when SCAP's order to the government to default on its wartime obligations was finally carried out, the Industrial Facilities Corporation still owed the cotton textile industry some ¥12 billion for factories it had taken over. Before SCAP stopped the payments, the government had literally flooded the economy with money. The
MITI and the Japanese miracle Page 28