The politics of economic planning in postwar Japan : a study in political economy

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A rn o ld , W a lte r

THE POLITICS OF EC O N O M IC PLANNING IN POSTWAR JAPAN: IN POLITICAL EC O N O M Y

University of California, Berkeley

University Microfilms International

300 N. Zeeb Road, Ann Arbor, Ml 48106

Ph.D.

A STUDY

1984

The P o litic s o f Economic Planning in Postwar Japan: A Study in P o litic a l Economy By Walter Arnold A.B. (State U niversity o f New York a t Buffalo) 1973 A.M. (Stanford University) 1976 DISSERTATION Submitted in p artial sa tisfa c tio n o f the requirements for the degree o f DOCTOR OF PHILOSOPHY in P o litic a l Science in the GRADUATE DIVISION OF THE UNIVERSITY OF CALIFORNIA, BERKELEY

.V

Approved:

WHIM

THE P OL I T I C S OF ECONOMIC PLANNING A STUDY

IN POSTWAR JAPAN

IN P O L I T I C A L ECONOMY

Copyri ght

Q

1984

by W a lte r Arnold

ACKNOWLEDGMENTS

In researching and w rit in g of t h i s study I have incurred a g r e a t many debts to i n d i v i d u a l s , or g a n iz a ti o n s and i n s t i t u t i o n s on both si des o f the P a c i f i c .

I am deeply indebted to the members

o f my d i s s e r t a t i o n committee, Profs. Robert A. Scalapino ( c h a i r ) , Chalmers A. Johnson, and Carl Mosk, f o r t h e i r i n t e l l e c t u a l encourage­ ment and support.

In Japan I have be nef ited from support and advice

by Pr ofessor Masu Uekusa, Faculty of Economics, Univer si ty of Tokyo, Mr. Yasuo Katsumura, then D ire c to r of the I n d u s t r i a l Economic A f f a i r s D iv is io n , Coordination Bureau of the Economic Planning Agency, and a l s o Profe sso r Kiichi Kageyama, Faculty of Economics, Chiba Sho-Dai. My resea rch s t a y in Japan from 1978-1980 was made p o s s ib le by a generous scholars hip provided by Monbusho.

My i n s t i t u t i o n a l a f f i l i a ­

t i o n with Tod ai's Faculty o f Economics has been useful in various ways and g r e a t l y con tribu ted to the successful completion of my f i e l d work.

L a s tl y , I want t o acknowledge with g r a t i t u d e Profe sso r

Suruki Akagi's i n t e r e s t in my work and pro fessi ona l development, and a ls o his f r i e n d s h i p and h o s p i t a l i t y over the ye ar s.

TABLE OF CONTENTS

Chapter

Page INTRODUCTION 1. 2. 2.1. 2.2. 3.

I.

1

F o r e w o rd ......................................................................... Organizing Core of the S t u d y ............................... T h e s i s ............................................................................. S c o p e ............................................................................. On S o u r c e s .....................................................................

1 4 4 5 6

THE POLITICS OF JAPANESE ECONOMIC PLANNING

......................

10

I n t r o d u c t i o n ................................................................. Planning in Postwar Japan (Review of the L i t e r a t u r e ) .................................................. Japanese P o l i t i c s of Planning ........................... Japan: S t a t e Autonomy and Planning . . . . Bureaucratic Dominance o f Japanese Economic Planning ..............................................

10 12 16 23

A SHORT HISTORY OF JAPANESE ECONOMIC PLANNING ...................

36

1. 2. 3. 4. 5. II.

....................................................................................

1. 1.1. 1.2. 1.3. 1.4. 2. 2.1. 2.2. 2.3. 2 .3 . 1 . 2.3 .2 . 2. 3 .3 . 3. 3.1. 3.2.

I n t r o d u c t i o n ................................................................. Economic Planning as a Public Policy Issue . Economic Planning Induced by I n t e r n a t i o n a l F a c t o r s ................................................................... H is to ri c a l Basis of Bu re aucratic Plan D o m i n a n c e ............................................................... P e r io d i z a ti o n of Japanese Economic P l a n n i n g ................................................................... H is to ri c a l Antecedents ............................................ I n t r o d u c t i o n ................................................................. Kogyo Iken— 1884: Japan's F ir s t Developmental P l a n .............................................. From Quasi War Economy t o Controlled E c o n o m y ................................................................... Introd uctio n ................................................................. Junsenji Keizai: Quasi War Economy . . . . Tosel Keizai (Controlled Economy) ................... Postwar Economic Planning .................................... I n t r o d u c t i o n ................................................................. Post-Surrender Economic Plans (1945-1946) .

i 11

30

36 36 37 37 38 39 39 40 45 45 46 56 58 58 61

C h a p te r

Page

3.3. 3 .3 . 1 . 3.3 .2 . 3.4. 3 .4 .1 . 3.4 .2 . 3 .4 .3 . 3 .4 .4 . 3 .4 .5 . III.

STRUCTURE AND ORGANIZATION OF JAPANESE ECONOMIC PLANNING........................................................................................ 1. 2. 2.1. 2.2.

64 64 70 77 77 79 84 89 94 101

I n t r o d u c t i o n ................................................................ Prime M i n i s t e r ........................................................... Plan and Prime M i n i s t e r ...................................... Prime M i n i s t e r ' s Plan as Public Policy D e v i c e ....................................................................... Economic De lib er at io n Council .......................... I n t r o d u c t i o n ................................................................ Formal Organization ............................................... Formal St r u ct u re ....................................................... EDC-Chairman ................................................................ Economic I n t e r e s t s ................................................... Labor ............................................................................ EDC-Subcommittees ............................. Economic Planning Agency (EPA) .......................... I n t r o d u c t i o n ................................................................ I n s t i t u t i o n a l Development ................................... Organizational Coherence and Functional D i v e r s i t y ............................................................... Economic Planning Function ................................... Dienstwlssen: Power Basis of the EPA . . . EPA's Po si tio n 1n the Economic Bureaucracy . P o l i t i c a l Determinants ........................................... Organizational Determinants .............................. Technical Determinants ........................................... Sources o f Bureaucratic Plan Dominance . . . Liberal Democratic Party (LDP) .......................... LDP and P l a n ................................................................ Plan and E l e c t i o n s ...................................................

101 104 104

THE NATIONAL INCOME DOUBLING PLAN..........................................

163

3. 3.1. 3.2. 3.3. 3.3 .1 . 3 .3 . 2 . 3 .3 . 3 . 3.3 .4 . 4. 4.1. 4.2. 4.3. 4.4. 4.5. 4.6. 4 .6 . 1 . 4 .6 .2 . 4.6.3. 4.7. 5. 5.1. 5.2. IV.

Economic Planning From 1946-1954 ....................... Reconstruction Plans (1946-1949) ....................... Economic Self-Support Plan (1949-1954) . . . Japanese Economic Planning From 1955 to the P r e s e n t ........................................................... Introduction ................................................................. Planning f o r Economic Self-Support .................. Planning f o r High Economic Growth .................. Planning f o r Balanced Economic Growth and Social Development .............................................. Planning in an Age of S c a r c i t y ...........................

1. 1.1. 1.2.

Prolegomenon to 1959 ............................................... Intr oduction to the T h e m e ................................... Introd uctio n to Major Players ........................... iv

106 Ill Ill 115 119 119 121 124 126 132 132 132 135 139 141 148 148 150 155 156 158 158 160

163 163 164

C h a p te r

Page

1 .2 .1 . 1 .2 .2 . 1.2 .3 . 1.3. 1.3 .1 . 1 .3 .2 . 2. 2.1.

Economic Bureaucracy ............................................... P o l i t i c a l Forces ........................................................ Economic Forces ........................................................ Plan Env ir on m e nt........................................................ I n s t i t u t i o n a l Factors ............................................ Economic Factors ........................................................ K i s h i ' s Wage Doubling P l a n ................................... I n s t i t u t i o n a l Harbingers of the Income Doubling P l a n ....................................................... K i s h i ' s Third Cabinet—Motives and C h a r a c t e r i s t i c s ................................................... P o l i t i c s , Economic Soc iety and Gestation of the P l a n ........................................................... ANPO and the Quell T h e s i s ................................... Ikeda Launches the Income Doubling Plan . . Ikeda: A P o l i t i c o Bio-Sketch ........................... I k e da 's Conversion .................................................... Struggle f o r Economic Growth ............................... I k e da 's P o s it iv e Economic Policy ....................... The Ministry of Finance and the Plan . . . . Ikeda Launches the National Income Doubling P l a n ........................................................................... The Formulation of the National Income Doubling P l a n ....................................................... I k e da 's New Policy .................................................... December 27, 1960: Launching of the Income Doubling P l a n .......................................... A fte rc are of the National Income Doublinq P l a n ............................. C h a r a c t e r i s t i c s , Achievements and Fa il u r e s of the P l a n ........................................................... Request f o r Plan R e v i s i o n ................................... P o l i t i c s of A ft e rc ar e ............................................ I ke da 's Pyrrhic Victory ........................................

164 168 170 174 174 176 177

CONCLUDING SUMMARY .......................................................................

246

2.2. 2.3. 2.4. 3. 3.1. 3.2. 3.3. 3.4. 3.5. 4. 4.1. 4.2. 4.3. 5. 5.1. 5.2. 5.3. 5.4. V.

1. 2. 3. 3.1.

177 179 184 198 199 199 202 207 207 211 214 214 217 223 228 228 231 237 241

I n t r o d u c t i o n ................................................................. A r g u m e n t a t i o n ............................................................ The E v i d e n c e ................................................................. Bureaucratic Dominance of Japanese P l a n n i n g ................................................................... National Income Doubling Plan ...........................

246 247 251

NOTES.....................................................................................................................

261

BIBLIOGRAPHY

297

3.2.

....................................................................................................

v

251 255

INTRODUCTION 1.

Foreword

J ap a n 's phenomenal growth of the 1950s and 1960s and the ensuing p r o s p e r i t y of the 1970s has been widely reported by Western a n a l y s t s , academic and j o u r n a l i s t i c a l i k e , and has given r i s e to an i n t e r e s t i n g l i t e r a t u r e de sc rib in g and e xp la in in g J ap a n 's success and shortcomings, as well as t h e i r underlying c a u s e s . 1 The r e le v a n t l i t e r a t u r e dealing with J a p a n ' s rapid economic expansion has advanced convincing, though v a r i a b l e , i n t e r p r e t a t i o n s and arguments.

Economists have tended to focus t h e i r analyses on

narrow te chn ic al c a t e g o r i e s , while p o l i t i c a l and social s c i e n t i s t s have d e a l t with the broader is su e s and attempted to account f o r the underlying r e l a t i o n s h i p s of J a p a n ' s ascendance to the s t a t u s of an 2 economic world power. Early in the 1960s, J ap a n 's "success" was e le va te d to a pr o to ­ type l e v e l , and "modernization" t h e o r i s t s were viewing Japan as an a l t e r n a t i v e "model" t o s o c i a l i s t development.

3

R et ro sp e c tiv e ly ,

i t seems safe to s t a t e t h a t J ap a n 's postwar recovery did indeed e x e r t a "demonstration e f f e c t . "

Moreover, the o r i g i n a l t h e s i s t h a t Japan

was to be the linc hp in and key to economic recovery and p o l i t i c a l s t a b i l i t y in East Asia proved to be q u i e t a cc u ra te .

Never theles s,

some Japanese c i r c l e s have voiced re s e r v a t i o n s and ob je ct io n s about 4 the wider a p p l i c a b i l i t y of the "Japanese Model." Thus, extreme 1

2

caution should guide those p re s c ri b in g the Japanese paradigm as a remedy f o r the a i l i n g American i n d u s t r i e s in the r o s t b e l t or the American proponents of an i n d u s t r i a l p o lic y in the image of Japan to lead the " r e i n d u s t r i a l i z a t i o n " e f f o r t in the United S t a t e s .

5

During the p a st two decades, Taiwan, South Korea and Singapore have achieved tremendous economic growth and socio-economic progr ess. I t i s c e r t a i n l y no overstatement to argue these "Newly I n d u s t r i a l i z i n g Countries" in East Asia have pa tte rn ed the s t e e r i n g and management of t h e i r economies a f t e r the Japanese model.®

Some of the se Asian

Newly I n d u s t r i a l i z i n g Countries have become " l i t t l e Japans," and s u c c e s s f u l l y seized o p p o r t u n i t i e s of t h e i r comparative advantage in a highly competitive in t e r n a t i o n a l economic environment, c ha r ac te ri z ed by a shrinking world market, resu rgen t prote ction ism and neomercantilism.^ I t appears t h a t a l l of these East Asian Newly I n d u s t r i a l i z i n g Countries are recognizing the importance and advantages of economic planning in the ove rall management of t h e i r economies.

While the

i n i t i a l impetus to i n s t i t u t i o n a l i z e economic planning has pr im ar i ly come from the "requirements" posed by i n t e r n a t i o n a l public and pr iv a te le n d e r s , economic u t i l i t y and p o l i t i c a l co mpatability of planning with e x i s t i n g s o c i o - p o l i t i c a l s t r u c t u r e s are recognized by public o f f i c i a l s and business managers in these b a s i c a l l y market-oriented economies.

As a r e s u l t , the formal i n s t i t u t i o n a l i z a t i o n of economic

planning in these East Asian Newly I n d u s t r i a l i z i n g Countries has g

become more of a te ch nic a l problem than an ide ological is su e .

*

3

The vigorous i n t e r e s t of e n e r g e t i c Asian policy-makers in the Japanese planning system has manifested i t s e l f during the past two decades.

Numerous Asian de lega tio ns have v i s i t e d J a p a n ' s Economic

Planning Agency (EPA) and were b r ie fe d on the i n t r i c a c i e s of the g organiz ati on and procedures of Japanese economic planning. Although Japan has not been the f i r s t or only s t a t e among the Advanced In d u s t r i a l Countries to i n s t i t u t i o n a l i z e economic planning, i t appears t h a t the Japanese economic planning system has been of p a r t i c u l a r i n t e r e s t to various East Asian c o u n tr ie s f o r a t l e a s t two reasons.

F i r s t , i n t e r e s t in the Japanese planning system may

have been s t i r r e d because of a s i m i l a r c u l t u r a l h e r i t a g e , i . e . the Confucian Legacy, pervasive in the bureaucracies ad ministering the c ountr ie s under the influence o f the S i n i t i c t r a d i t i o n .

And, second,

because J ap a n 's "economic miracle" and i t s r a d i a t i n g demonstration e f f e c t have s p i l l e d - o v e r to o th e r Asian c o u n tr ie s . Thus, i t seems not only useful but also d e s i r a b l e to examine J ap a n 's planning system, p a r t i c u l a r l y in view of i t s d i r e c t and i n d i r e c t influence on economic planning in the Newly I n d u s t r i a l i z i n g Countries of East Asia.

In a d d i t i o n , t h i s study will hopefully c o n tr ib u te to

a b e t t e r understanding of the broader r a m if i c a ti o n s of economic planning on the East Asian p o l i t i c a l economy as a whole.

Yet another concern

of t h i s study i s to bring the Japanese experience in t o a l a r g e r com­ p a r a ti v e framework of the Advanced In d u s t r i a l Countries where planning has become a most important and absorbing ta sk of modern government since the end of World War I I .

Furthermore, t h i s study i s intended

to demonstrate the growing relevance of the economic planning process

4

as one of th e various s p e c ia li z e d instruments f o r e x e r c is in g s t a t e authority.

And l a s t l y , i t i s hoped t h a t t h i s sti^Jy will y i e l d bene­

f i t s not only f o r Japanese s tu d ie s but comparative a n a l y s i s as well. 2. 2.1.

Organizing Core of the Study Thesis

The study addresses the paramount is su e of expanding a d m in is tr a ­ t i v e autonomy, as opposed to independence and i n i t i a t i v e from the p r i v a t e s e c t o r in the Japanese planning process.

Japan's p o litic s

of planning are conceived as b u re a u cr a ti c p o l i t i c s .

J a p a n ' s bureau­

c r a t i c planning c o n s i s t e n t l y attempts to r a t i o n a l i z e macro-economic p o li c y l e f t in a vacuum, by and la rg e due to the i n a b i l i t y of both the Diet and p o l i t i c a l p a r t i e s to deal e f f e c t i v e l y with c r i t i c a l macro-economic problems and i s s u e s . The study will address s e le c te d p o l i t i c a l is s u e s concerning Japanese economic planning.

In p a r t i c u l a r , i t will attempt to shed

l i g h t on general co nd iti ons of the p o l i t i c a l and socio-economic environment in which post-occupation Japanese economic planning has been o pe ra tin g.

More s p e c i f i c a l l y , t h i s re sea rch c e n te rs on the

p o l i t i c s of economic planning and the r e l a t e d p o l i t i c a l e f f o r t of the Japanese government t o manage and s t e e r the course and development of J a p a n ' s economy from 1959 t o 1964.

The major a n a l y t i c a l focus

evolves around the varying r o l e s of the Economic Planning Agency and o t h e r economic m i n i s t r i e s and t h e i r d i f f e r e n t uses of power in the formulation and implementation of the National Income Doubling Plan.

5

2.2.

Scope

Chapter I (The P o l i t i c s of Japanese Economic Planning) c r i t i c a l l y reviews the p e r t i n e n t l i t e r a t u r e ; i t d i f f e r e n t i a t e s economic planning in the EPA from o th e r a d m in is tr a ti v e planning; i t fi n d s t h a t Japanese economic planning b a s i c a l l y c o n s i s t s of two pr in c ip a l phases:

plan

formulation and plan implementation, both involving p o l i t i c a l and te ch ni ca l pro ce sse s; i t suggests t h a t s t a t e autonomy in economic planning i s premised on EPA-Dienstwissen and the absence of any s p e c i f i c planning mandate from c i v i l s o c i e t y ; and f i n a l l y , i t d e fi n e s the parameters of the Japanese p o l i t i c a l economy within which Japanese economic planning must op e ra te . Chapter II (A Short History of Japanese Economic Planning) i s an i n t e r p r e t a t i v e a n a ly s is of the h i s t o r i c a l development of Japanese economic planning since the 1880s.

The r e l e v a n t theme here concerns

the u t i l i z a t i o n of economic planning as a d i s t i n c t macro-economic p o li c y instrument.

During the pa st century the Japanese developmental

s t a t e has ins tru me nta liz ed planning in order to c o o rd in a te , control and s t e e r the Japanese economy.

This chapt er examines the functional

change and d i f f e r e n t usage of Japanese economic planning over time. Chapter I I I ( S tr u c u tr e and Organization o f Japanese Economic Planning) focuses on fo ur major a r e a s :

the Prime M in is t e r , the

Economic De lib er atio n Council ( Keizai Sh in q i k a l) , the Economic Planning Agency, and the Liberal Democratic Part y.

F i r s t , the r o l e and function

of the Japanese Prime Min ist er in economic planning i s a ss ess ed ; second, the o r g a n iz a ti o n , r o l e and func tion of the Economic D elibera­ t i o n Council i s examined by a ss e ss in g the p a r t i c i p a t i o n of the p r i v a t e

6

s e c t o r in the planning process; the EDC i s a l s o assessed in terms o f i t s func tion and u t i l i t y as a s p e c i a l i z e d instrument of bu re a uc ra tic dominance in Japanese economic planning; t h i r d , the formal organiza­ t i o n of the EPA and sources of i t s power v i s - a - v i s the economic bureaucracy w il l be analyzed, as well as the EPAs inf lu enc e on plan decision-making; f o u r t h , the r o l e of the Liberal Democratic Party in economic planning will be discussed. Chapter IV (The National Income Doubling Plan) i s the t h e s i s confirming empirical p a r t of t h i s study and examines f a c t o r s and fo rc e s t h a t impinged on the formulation of the NIDP.

This chapter

s p e c i f i c a l l y a t t e s t s to the b u re a u cr a ti c dominance of Japanese economic pla nning, a t the same time 1t i s i n d i c a t i v e of the LDP's r o l e as control f a c t o r in Japanese economic planning, and l a s t l y , i t evinces th e r o l e of the p r i v a t e s e c t o r in the formulation of the National Income Doubling Plan. 3.

On Sources

This study has drawn on a v a r i e t y of major public and p r i v a t e s our ces , the most Important are b r i e f l y o u tl in e d and discussed below. The s i n g l e most s a l i e n t source of t h i s researc h work has been Keizai Keikaku Bunken Mokuroku, 1962 (Bibliography on Economic Planning), and Keizai Keikaku Bunken Mokuroku Hoi, 1967 (Supplement) published by the National Diet Library.

This bib liography co ntains over one

thousand e n t r i e s which are divided I nt o general c o n t r i b u t i o n s , r e l a t e d d r a f t s , and documents ( Gen-An Kankei Shiry o).

General c o n t r i b u t i o n s

include books and a r t i c l e s by s c h o l a r s , o f f i c i a l s , j o u r n a l i s t s , as

7

well as r e p r e s e n t a t i v e s of various i n t e r e s t groups and p o l i t i c a l parties.

Most of these a r t i c l e s were published in r e l e v a n t academic

and public jo u r n a ls and p e r i o d i c a l s .

However, newspaper a r t i c l e s

and e d i t o r i a l s are n e i t h e r p a r t of t h i s bibliography nor i t s supple­ ment.

The " r e l a t e d d r a f t s and documents" comprise e n t r i e s from a

broad range of o f f i c i a l sources and p u b l i c a t i o n s , and most of these c o n t ri b u ti o n s are authored by the Economic Planning Agency, MITI, and the Ministry of Finance.

All e n t r i e s are arranged according

to the r e s p e c ti v e planning pe rio d , from Plan I to IV (Medium-Term Economic Plan of 1965).

These e n t r i e s may not be ex ha us tiv e , but

they a re e s s e n t i a l l y covering the most re le v a n t items of the planning dis cus si on from 1945 to 1965. Following Plan IV, but p r i o r to th e f i r s t o i l c r i s i s in 1973, th re e important s tu d ie s have summarized and hig hlig ht e d the s t a t e of the Japanese economic planning system.

In 1969, the Economic

Council commissioned a comprehensive study on economic planning, which was l a t e r published as Keizai Keikaku Kihon Mondai Kenkyu Iin Kai Hokoku Sho (Report of the Study Committee on Fundamental Problems of Economic Planning in Japan).

In 1971, the renowned Japanese

Economic Research Center organized an i n t e r n a t i o n a l conference on economic planning whose proceedings were subsequently published 1n two volumes, Economic Planning and Macro-Economic P o l i c y .

And on

January 10, 1973, the p r e t i g l o u s Kindai Keizai Gaku Se ri e s of Toyo Keizai published a voluminous special

oport on "Planning in Mixed

Economies,'' comprising academic c o n t r i b u t i o n s , fin di ng s of a round t a b l e and proceedings of a conference on planning.

These th re e items

8

are c r i t i c a l not only with regard to the "Problematik" of Japanese planning in g e n e r a l, but a ls o the planning dis cu s s io n of the 1960s and 1970s. Various important works regarding the s t r u c t u r e , org anization and function of the Japanese planning system and the Economic Planning Agency have been consulted by t h i s aut hor.

Two g e n e r a l, d e s c r i p t i v e ,

and informative accounts are Keizai Kikaku Cho, Ohnishi, Tokyo: Kyoikusha, 1975; and Keizai Kikaku Cho—K os e ito r ih ik i I i n k a i , Tokyo: Kyoikusha, 1979.

But f a r more i n t e r e s t i n g and useful have been two

o f f i c i a l h i s t o r i e s of the Economic Planning Agency, Keizai Kikaku Cho Niju-Nen Sho S h i , 1966, and the e x c e l l e n t and d e t a i l e d i n s t i t u ­ tio n a l account of J ap a n 's postwar planning experience Gendai Nihon Keizai No Tenkai, 1976.

Both accounts provide many i n s i g h t s as well

as d e t a i l e d personal interview s with some of the EPA's leading f i g u r e s , many s t a t i s t i c a l t a b l e s , a compilation of laws and ordinances, org a ni z a ­ tio n c h a r t s of the EPA and i t s antecedent i n s t i t u t i o n s , e t c .

Economic

Planning in Japa n, a 1979 EPA-mimeo, gives an updated o f f i c i a l version of Jap a n's "formal" planning process and plan implementation.

Also

of g r e a t use has been Keizai Kikaku Cho Kankei Horei Shu, 1979 e d i t i o n , an EPA handbook-like compilation of a l l r e le v a n t laws, ordinances p e r t i n e n t to the work and procedures of the agency. S t i l l o th e r sources of importance have been th e Japanese Economic P la n s , nine e x i s t e d by August 1979.

Of p a r t i c u l a r s ig n i f i c a n c e f o r

our pr es ent study has been the National Income Doubling Plan of December 1960, and the corresponding p e r t i n e n t documents of the Economic De liber ation Council, the Kokumin Shotoku Baizo Keikaku

9

Shir yo, 1961-1962, ten volumes of r e p o r ts and minutes of d e l i b e r a t i o n s compiled by the Planning Bureau of the Economic Planning Agency and r e a d i l y a v a i l a b l e to t h i s author. Moreover, a la rg e number of Japanese newspaper accounts have been examined f o r t h i s study, mostly because of t h e i r general r e l i ­ a b i l i t y as important and informative sources on Japanese p o l i t i c s and economic m a tte rs .

In our a n a l y s i s of the National Income Doubling

Plan we have r e l i e d in p a r t i c u l a r on a sp ecial compilation o f newspaper c li p p in g s by Kokuritsu Kokkai Toshokan cont ainin g over 500 e n t r i e s from major Japanese newspaper a r t i c l e s and e d i t o r i a l s from 1959 to 1965. By and l a r g e , th e se are the major sources t h a t have been used f o r t h i s study, however, th e r e are s t i l l o th e r o f f i c i a l p u b l i c a t i o n s , i . e . m i n i s t e r i a l "White Papers," and secondary sources t h a t have been consulted but a re not s p e c i f i c a l l y mentioned here.

CHAPTER I THE POLITICS OF JAPANESE ECONOMIC PLANNING 1.

Introduction

For a c a p i t a l i s t i c and dem ocr ati cal ly organized s o c i e t y , the Japanese s t a t e has been conducting remarkably strong and vigorous economic p o l i c i e s .

Japan, a t an e a r l y stage in i t s modernization,

seems to have recognized the u t i l i t y of methods and instruments fo r s t e e r i n g the course of i t s economic development.

And since the 1950s

and 1960s, Japan has s u c c e s s f u l l y pe rfe ct ed the se methods and i n s t r u ­ ments to i n t r i c a t e and s o p h i s t i c a t e d l e v e l s . * In a highly complex and interdependent world of advanced i n d u s t r i a l s t a t e s , where economic dysfunctions and ensuing a b e r r a t i o n s can t r i g g e r profound p o l i t i c a l and socio-economic d is c o r d , and where i n t e r n a t i o n a l s p i l l - o v e r e f f e c t s can have a paraly zing impact on e x i s t i n g i n s t i t u ­ ti o n a l arrangements, the planning a c t i v i t y of the s t a t e has increased in importance and gained s e r io u s a t t e n t i o n by decision-makers t h a t 2 attempt to a l l e v i a t e socio-economic u n c e r t a i n t y . Today, government planning a c t i v i t y a p p li e s p a r t i c u l a r l y to the economic realm, the c e n t r a l concern of each and a l l i n d u s t r i a l s t a t e s , s o c i a l i s t and c a p i t a l i s t a l i k e .

The s t a t e ' s c ap a c it y to

deal e f f e c t i v e l y and respond r a p id ly t o s t r u c t u r a l and exogenously induced c r i s e s has become one of the most s a l i e n t and c r i t i c a l 10

11

c r i t e r i o n in e val ua ti ng the p o l i t i c a l and a d m i n i s t r a t i v e performance of i n d u s t r i a l s t a t e s . As a p o l i t i c a l phenomenon, economic planning has been dis ce rn a bl e in most i n d u s t r i a l s t a t e s since the l a t e 1940s, when e x ig e n c ie s , and l a t e r imperatives of managing the national economy, led to the p r o l i f e r a t i o n and i n s t i t u t i o n a l i z a t i o n of planning in many market3 or ie n te d i n d u s t r i a l s t a t e s , although the p r a c t i c a l problem of economic p la n n in g ' s com pat abi li ty with the p r i n c i p l e s of a " f r e e market economy" remained an unresolved is su e .

By now, the problem of plan versus

market seems to have been solved; however, the " r e c o n c i l i a t i o n " between planning and f r e e market fo rc e s has d i f f e r e d from country to country t h a t engage in economic planning, leading to the v a r i a n t s of "French Planning," "Dutch Planning," "German Non-Planning," and "Japanese Planning," a l l having developed t h e i r own na tiona l economic planning system.

And not s u r p r i s i n g l y , perhaps, economic planning in these

systems o f d e c e n t r a l i z e d economic decision-making has led to qu it e d i f f e r e n t outcomes and r e s u l t s , with Japan a t one end of the spectrum 4 and Great B r i t a i n a t the o th e r. This study will address s e le c ted p o l i t i c a l is s u e s surrounding Japanese economic planning.

In p a r t i c u l a r , i t will attempt to shed

l i g h t on the c ond iti ons of the p o l i t i c a l and socio-economic environ­ ment in which postwar Japanese economic planning has been o pe ra tin g. More s p e c i f i c a l l y , t h i s research c e n te rs on the p o l i t i c s of economic planning and the r e l a t e d p o l i t i c a l e f f o r t of the Japanese government to manage and control the course and development of Jap a n' s economy in the years from 1959-1964.

The c e n tr a l focus i s on the

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varying r o l e of the economic bureaucracy and i t s d i f f e r e n t uses of power in the c on c e p tu a li z a ti o n and formulation of economic plans r e l a t e d to the high growth p o l i c i e s of the period under examination. 2.

Planning in Postwar Japan (Review of the L i t e r a t u r e )

Planning in postwar Japan has evoked a v a r i e t y of i n t e r e s t i n g but also d i f f e r i n g and even c o n t r a d i c t o r y i n t e r p r e t a t i o n s and a s s e s s ­ ments.

At one end of the spectrum one fi n d s bold and crude a s s e r t i o n s

d e pic t in g J a p a n ' s economic system as guided and governed by government c o n tr o ls and planning, while opponents of such pe rs p ec ti v e s contend t h a t a system of l i b e r a l economy p r e v a i l s in Japan. In g e n e r a l, the l i t e r a t u r e on Japanese economic planning i s confusing.

This i s p a r t l y the e f f e c t of s u p e r f i c i a l analyses and

extreme p o s i t i o n s taken by many a u th o r s , but a l s o because of the lack of empirical s t u d i e s going beyond the mere technical a sp e c ts o f planning.

The l i t t l e work t h a t has been done, in Japanese and

Western languages, focuses mainly on methodological asp ec ts of Japanese economic planning and i s u s u a l l y presented in the form of s h o rt a r t i c l e s in academic j o u r n a l s , s in g le c ha pte rs in books, or essays and compendia. In te g ra te d s t u d i e s de ali ng with the i n s t i t u t i o n a l aspe ct s of Japanese economic planning are sca rc e.

Of the s tu d ie s t h a t do e x i s t , most

have been authored by members of the Economic Planning Agency.

How­

e v e r , th e se s t u d i e s tend to be d e s c r i p t i v e " i n s t i t u t i o n a l h i s t o r i e s " which lack a t h e o r e t i c a l framework, and thus s ev e re ly reduce t h e i r explan at ory power.® A b r i e f survey o f r e p r e s e n t a t i v e pe rs p e c ti v e s may i l l u s t r a t e

a

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the s t a t e o f a f f a i r s in the di scu ss ion of postwar Japanese economic planning.

Some of the r e p r e s e n t a t i v e a s s e r t a t i o n s are :

" Jap an 's economy today i s probably the w orl d' s most d e f t l y guided economy, governed by a s e t of c o n t r o l s more r e fi n e d than Karl Marx, V. I. Lenin, or J o s e f S t a l i n ever dreamed of."® "Japan i s a country t h a t openly admits t h a t i t s economy i s planned . . . and t h a t planning 1s the only important cause f o r the rapid economic growth in Japan. . . . Karl Hax, a German economist and J a p a n o l o g i s t , argued:

". . . i t

i s c e r t a i n t h a t the g r e a t Japanese success in r e c o n s tr u c ti n g the economy i s based t o a g r e a t e x te n t on systematic planning and coopera­ ti o n between governmental economic and f i s c a l p o lic y and the policy of individual e n t e r p r i s e s . " Hax contends:

" . . .

O

Pushing his argument even f a r t h e r ,

e a r l i e r the re were plans to conquer Asia, now-

adays these have been replaced by economic pla ns. . . . "

g

Hax bases

his a s s e r t i o n s on the assumption of a g e n e r a ll y favorable d is p o s i t i o n towards national I n t e r e s t goals in Japan. William W. Lockwood, in hi s dis cus si on of the Japanese postwar p o l i t i c a l economy, has s t r e s s e d the importance of economic planning f o r Japanese p o l i t i c s , and notes:

"Government a gen ci es, s e n s i t i v e

to p o l i t i c a l pre ssu re s . . . have prepared new plans to enlarge modestly various programs of government aid. . . .

On the p o l i t i c a l fr o n t

indeed 1t [planning] 1s bound to inc rease with the sharpening competi­ ti o n of the Liberal Democratic Party and S o c i a l i s t p a r t i e s f o r the midd le-c lass v o t e . " 1® Chitoshi Yanaga, echoing a s i m i l a r theme, and po int ing to the

14

sa li e n c e of developmental planning, noted:

"The most e f f e c t i v e weapons

a t J ap a n 's disposal are systematic economic planning and advanced technology . . . without them, the na tion could not have achieved such phenomenal success. . . .

Economic planning has not only become

an i n t e g r a l and indispensable p a r t of policy-making, but i t a f f e c t s and even determines the substance of p o l i t i c s . . . Diam et ric all y opposed to such views i s the following statement: ". . . the strong growth of the Japanese economy seems to have l i t t l e to do with planning in the sense of programming done within the Planning Agency, but has more to do with p o l i t i c s . " Writes Saburo Okita:

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"Although the government has produced

several economic plans since the end of World War II and in the govern­ ment th e re i s the Economic Planning Agency, J a p a n ' s economic system i s not a planned economy but a predominantly p r i v a t e e n t e r p r i s e economy . . . c o n tr a ry to the p r e v a i l i n g conception of a highly concentrated and organized economy Japan has been c ha r a c te ri z e d by keen competition among e n t e r p r i s e s . . . . "

13

In an assessment of Japanese economic

planning, Mihohel Shinohara observed:

"Although economic plans in

Japan have always s e t up some type of q u a n t i t a t i v e frameworks, they are not the same as ord in a ry econometric models . . .

i t merely shows

a broad skele ton o f the f u t u r e national economy, and gives some sug­ gesti ons o r

dvice as guide -posts f o r the behavior of the government,

business e n t e r p r i s e s , f i n a n c i a l i n s t i t u t i o n s , e t c . . . ."

14

Discussing d is c r e p a n c ie s between planned and actual r a t e s of growth, Tsunehiko Watanabe concluded:

"The number of r e v i s i o n s

experienced in the postwar national planning of Japan has been more

15

numerous than in any o th e r country, simply because of t h e i r d e f i c i e n c i e s in q u a n t i t a t i v e p r o j e c t i o n , which has transformed J ap a n 's nationa l planning from ' i n d i c a t i v e ' to ' d e c o r a t i v e . ' . . ."

15

In a most in c i s i v e a n a l y s i s of Japanese planning, Ryutaro Komiya, the dean of J ap a n 's l i b e r a l economists, repo rted some i c o n o c l a s t i c fi n d i n g s :

"When people speak o f 'economic planning' in Japan they

u s u a ll y have in mind the na tiona l economic plan prepared by the EPA. . . .

Yet in my view the se national plans are not so much a

' p l a n ' in the usual sense of the term, and are not as important as they f i r s t appear.

Those who a re not well informed about economic

policy-making in Japan might thi nk t h a t the Japanese government l a r g e l y follows i t s medium-term nat ion al economic plan when making annual or day-to-day economic poli cy d e c i s i o n s .

In f a c t , t h i s i s not the

case . . . the national economic plan i s becoming l e s s and l e s s r e l e ­ vant to actual economic p o lic y. . . .

This does not mean, however,

the Japanese economy i s run without much government planning. . . . Pointing to the crux of the Japanese economic planning problem, Chalmers A. Johnson w ri te s :

". . . planning i s a formal function

in Japan; i t i s j u s t not done by people in o rg a ni z at io ns c a l l e d 'planning a g e n c i e s . ' . . This discord of i n t e r p r e t a t i o n s and paradoxical a s s e r t i o n s not only i l l u s t r a t e s the general need f o r more s a t i s f a c t o r y explan ation s of Japanese planning, but a ls o makes i t imperative to come to gr ip s with the basic conceptual problems o f Japanese economic planning. This t h e s i s i s intended to make a c o n t r i b u t i o n in both r e s p e c t s .

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3.

Japanese P o l i t i c s of Planning

Japanese economic planning i s conceived here n e i t h e r as a p o l i t i c a l h i s t o r y nor as a study o f a mere techn ica l problem, although t h i s study will most c l o s e l y resemble the former. Analytical focus on t h i s study will be on planning as a p o l i t i c a l contest.

Japanese planning i s seen here as a high ly p o l i t i c a l c o nt es t

in which c hoice s, a l t e r n a t i v e s , and va lu es , r a t h e r than e f f i c i e n c y or coherence are the fundamental c h a r a c t e r i s t i c s .

Our primary concerns

are the c o n f l i c t i n g p o l i t i c a l and economic fo rc e s t h a t shape planning, and i t i s attempted to explain how such c o n f l i c t s a re resolved through the p o l i t i c a l process.

In s h o r t , t h i s a n a l y s i s focuses on the process

of planning, from causation to d e c i s i o n , to borrow Stephen S. Cohen's phrase, and not on the cont ent of plans.

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Our study will focus mainly on the following i n t e r r e l a t e d is sues and concerns:

(1) the formal and informal s t r u c t u r e s of planning,

and the coordination o f macro-economic planning among the government and various p o l i t i c a l and economic f o r c e s ; (2) to exp lain how the s t a t e in fl uen ces planning decision-making and s t r a t e g y ; and (3) to what e x te n t economic s o c i e t y inf lu enc es the process of planning. Moreover, we want to determine what u lt im a te weight must be given the f a c t o r s of p r i v a t e i n i t i a t i v e and Independence, as t o or 1n complementarity with I n i t i a t i v e s by the Japanese "economic bureauc­ racy" during the planning period from 1955 to 1964. Let us s t a r t with the c r i t i c a l contention t h a t Japanese economic planning 1s a n o n - p o l i t i c a l phenomenon. "A pol iti cal planning i s a f i c t i o n .

Writes Stephen S. Cohen:

All planning i s p o l i t i c a l .

The

17

na ture of a p a r t i c u l a r planning process i s ins ep a ra ble from the sub­ s t a n t i v e outcome of the c o n f l i c t s i t ' t r e a t s . '

I t can never be n e u t r a l .

Each planning process d e f i n e s , e x p l i c i t l y or i m p l i c i t l y , a p o l i t i c a l r o l e f o r planning; i t makes planning p a r t of a p a r t i c u l a r kind of politics."

19

The universal dilemma of a p o l i t i c a l planning has been

de picted by Guy Benveniste as "those e x p er ts (plann ers ) who s t i l l b e li e v e they are re sp onsib le only f o r a narrow spectrum of techn ica l knowledge and who f a i l to assume t h e i r p o l i t i c a l r e s p o n s i b i l i t y , become agents of b u re a u c ra ti c s t e r i l i t y . "

20

The pres sing query becomes th e n, whose p o l i t i c s i s economic planning? and why?

Who i s included in the planning process?

Who i s excluded,

These a re some of the c r i t i c a l is s u e s addressed in the

pr e s e n t study. In a te chn ic al sense, Japanese economic planning i s oft en r e f e r r e d t o as n e u t r a l .

21

Japanese economic planning, however, has received

co nsi de ra ble p o l i t i c a l support from the r u l i n g "conservative" for ces in Japanese p o l i t i c s .

22

In f a c t , the r e org a ni z at io n of Japanese

economic planning in 1954-1955 and i t s formal i n s t i t u t i o n a l i z a t i o n which led to the formation o f the Economic Planning Agency on Ju ly 20, 1955, could not have taken place without e x p l i c i t conse rvative p o l i t i c a l support.

23

On the o th e r hand, " ref orm is t" fo rc e s 1n Japanese p o l i t i c s ,

24

following an a c t i v e p a r t i c i p a t i o n in the emotion a f f l i c t e d planning debates of the l a t e 1940s and 1950s, have p r a c ti c e d a self-imposed a bst ln enc y from the planning dis cu s s io n during the 1960s and most of the 1970s.25

18

Various arguments have been made t h a t la bor and the p o l i t i c a l opposition were d e l i b e r a t e l y denied access to the economic policy decision-making pro c e ss , and thus they were a ut o m a ti ca ll y excluded 26 from plan decision-making as well. Business support of planning has not been unequivocal e i t h e r . In a 1959 in te rv ie w , Inayama Yoshihiro, c u r r e n t chairman of Keidanren, then executive d i r e c t o r of Yawata S t e e l , remarked s a r c a s t i c a l l y : "To put i t b l u n t l y , planning i s encroaching on the l i b e r a l economy, but I t h i n k , t h i s i s the new form of c a p i t a l i s m . "

27

Keidanren and

Keizai Doyukai, the two most prominent and i n f l u e n t i a l Japanese economic peak a s s o c i a t i o n s , have g e n e r a ll y been p e r c e p t i v e , but not u n c r i t i c a l , and favorably disposed towards planning.

28

Throughout the e n t i r e

postwar e r a , r e p r e s e n t a t i v e s of b u s in e s s , i n d u s t r y , f i n a n c e , and commerce have always been i n v it e d and able to p a r t i c i p a t e in the planning process.

However, t h e i r impact on plan formulation and

decision-making has varied over time, and has even been n e g l i g i b l e in some i n s t a n c e s , as t h i s study will evince. Japanese academic economists have approached the economic planning phenomenon with some ambivalence.

In g e n e r a l , they have tended to

be preoccupied with methodological concerns and thus shown l i t t l e i n t e r e s t in o r g a niz at io na l problems and i n s t i t u t i o n a l asp ec ts of planning.

Some have, however, been groping f o r an a pp ro p ri a te type

of planning, c o n s i s t e n t with J ap a n 's f r e e e n t e r p r i s e system and the basic f e a t u r e s of J ap a n 's economy.

29

Formal economic planning in postwar Japan has long been a s s o c iated with the economic bureaucracy.

30

A ft e r the formation of the

19

Economic Planning Agency in 1955 the formal i n s t i t u t i o n a l arrangement of Japanese economic planning included the EPA's Bureau of Comprehen­ sive Planning (sogo keikaku bu); the r e l e v a n t planning organs within the Ministry of Finance and the Ministry of I n t e rn a ti o n a l Trade and Ind us try ; the Economic Delib era ti on Council; and the Liberal Democratic P a r t y ' s "Economic Research Council." Against the backdrop of the formal and legal framework of Japanese economic policy-making, as well as the informal web of Higher Civil Servant inter-communication, i t i s suggested t h a t Japanese economic planning does hardly operate in a p o l i t i c a l vacuum.

Moreover, Japanese

economic planning, as t h i s study will show, has been managed and coordinated by the economic bureaucracy f o r almost th re e decades now.

Thus, i t i s our contention t h a t the e n t i r e planning pro cess,

and t h e r e f o r e a g r e a t deal of the Japanese p o l i t i c s of planning can be meaningfully described as b ur e a ucr a tic p o l i t i c s . Obviously, the postwar planning debate in Japan involved not only the bureaucracy, but major p o l i t i c a l and economic i n t e r e s t s as well.

Never the les s, our a n a l y t i c a l preference i s to view the

Japanese p o l i t i c s o f planning mainly in terms of the r o l e of the economic bureaucracy and i t s usage of power and a u t h o r i t y in the economic planning process. To put i t d i f f e r e n t l y , t h i s study i s an attempt to deal more ri g o r o u s ly with r e l e v a n t f a c t o r s of Japanese b u re a u cr a ti c p o l i t i c s in J ap a n 's economic planning than any o f the previous s t u d i e s .

Above

a l l , we will t r y to explain the o rg an iz ati ona l pervasiveness and the overwhelming power po s it io n of the economic bureaucracy in the

20

Japanese planning process.

We are p r im a r i ly i n t e r e s t e d in ex plaining

t h e r o l e and function assigned to economic planning in the broader framework of Japanese economic policy-making, and f u r t h e r , to shed some l i g h t on the underlying precepts of the EPA's a c t i v i t i e s . While the o r i g i n a l purpose of t h i s study remains the same--to weigh f a c t o r s of p r i v a t e economic i n i t i a t i v e and independence a g ai ns t the r o l e of the economic bureaucracy in economic planning—a second, major purpose has emerged:

to explain the EPA's t h r u s t f o r organiza ­

ti o n a l autonomy and operational dominance of the Japanese economic planning process. Our basic working premise i s t h a t the economic bureaucracy r e p r e ­ se n ts the major force in the p o l i t i c s of Japanese economic planning from 1955-1964.

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However, to e l u c i d a t e the general a n a l y t i c a l

complexity surrounding the p o l i t i c s of economic planning i t i s neces­ sary t o b r i e f l y deal with the major competing paradigms of Japanese politics:

(1) p lu ra li s m , (2) e l i t i s m , (3) s t a t i s m , and (4) bureau­

cratic politics.

Although from among th e se p e rs p e c ti v e s bur e a u cra tic

p o l i t i c s and s t a t i s m seem to be most r e l e v a n t f o r our concerns here, a l l fo u r p e rs pe c ti ve s will be b r i e f l y evaluated in or de r to determine t h e i r r e l a t i v e u t i l i t y as h e u r i s t i c devices f o r our a n a l y s i s of the Japanese p o l i t i c s of economic planning. (1) The p l u r a l i s t i c pe rs pec tiv e of Japanese p o l i t i c s t y p i c a l l y contends t h a t the Diet f a c t i o n s , and fa c t i o n a l i s m c o n tr ib u te t h e i r share to making Japanese p o l i t i c s more open and comp et iti ve , and a ls o t h a t d i f f e r e n t groups p a r t i c i p a t e in the decision-making process depending on the is su e involved.

32

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(2) The competing e l i t e model i s based on the general assumption t h a t Japanese p o l i t i c s are dominated by a c o r p o r a t i s t c o a l i t i o n of Higher Civil Servants, Big Business, and the r u l i n g Liberal Democratic P a r ty , bound t o g e th e r by a congruence of i n t e r e s t and consensus about economic goals in an e f f e c t i v e a l l i a n c e c o n t r o l l i n g decision-making on major p ol ic y is s u e s .

33

(3) The s t a t i s t paradigm focuses p r i m a r i l y on autonomous s t a t e i n i t i a t i v e s to promote soci al change, manage economic c r i s e s , or to develop innovative public p o l i c i e s .

34

(4) The bure a uc ra tic p o l i t i c s paradigm focuses on higher c i v i l s e r v a n ts ' de cis ion and a c t i v i t i e s and i t s cumulative impact on the autonomy o f t h e i r r e s p e c ti v e o r g a n iz a ti o n s .

The model's organizing

concepts c e n t e r on thr e e c r i t i c a l que st io ns : determines each p la y e r s' stand?

(a) Who plays?

(b) What

(c) How are p l a y e r s ' stands aggregated

to y i e l d governmental d e ci s io n s and a c ti o n s ?

The answers to these

qu e rie s help e l u c i d a t e the ro le o f competition among the bureaucracy, ex ec ut iv e , l e g i s l a t u r e , and i n t e r e s t groups.

35

Advocates of the p l u r a l i s t p e rs p e c ti v e a re p r i m a r i l y ch allenging the essence of the power e l i t e argument, " . . .

they draw a p i c t u r e

of [ p l u r a l i s t ] Japanese policy-making c h a r a c te r iz e d by f l u d i t y , complexity, and v a r i a b i l i t y , r a t h e r than by the r e g u l a r i t y , s t a b i l i t y , and constancy which the power e l i t e p e rs p e c ti v e p r o j e c t s . "

36

In s p i t e of the p l a u s i b i l i t y o f both the p l u r a l i s t and e l i t e p e r s p e c t i v e s , they e s s e n t i a l l y a re of l i t t l e u t i l i t y in e x p l i c a t i n g the overtowering power po s it io n o f the Japanese bureaucracy in the p o l i t i c s of planning.

In f a c t , th e major problem with these two

22

p e rs pe c tiv e s i s t h a t they are not very helpful in exp lai nin g the asymmetry of power between the planning bureaucracy and the various economic and p o l i t i c a l i n t e r e s t s competing f o r power and influen ce in the planning process.

And f i n a l l y , both the e l i t e and p l u r a l i s t

model do not lend themselves r e a d i l y to exp lan at ion s of the locus and b a si s of the planning burea ucr ac y's power, one of the major is sue s and concerns of t h i s pr e s en t study. I t i s our contention t h a t the s t a t i s t paradigm and a modified version of the bu re a u cr a ti c p o l i t i c s model are more promising f o r e x p l i c a t i n g the i n t e r a c t i o n of various o rg a n iz at i o n s and div e rs e i n s t i t u t i o n s in the process of Japanese economic planning, which in turn should permit us to ge ne r a li z e the p o l i t i c s of Japanese economic planning. Before turn in g to the se two models, however, l e t us r e i t e r a t e t h a t we conceive the Japanese p o l i t i c s of planning as bu re a u cr a ti c p o l i t i c s in i t s rudimentary form and s t a t e the following two general p ro pos iti on s in support o f our argument:

(1) Japanese economic plan­

ning, l i k e in o th e r c a p i t a l i s t economies, i s a non-democratic, p ri m a ri ly a b u re a u cr a ti c a c t i v i t y ;

37

(2) Japanese economic planning, as a te c h ­

nical problem and i s s u e , has given a g r e a t deal o f p o l i t i c a l leverage 38 to the planning bureaucracy ( i . e . Dienstwissen). On the b a si s of the above two p ro p o s it io n s we proceed now to o u t l i n e the general framework t h a t will guide our a n a l y s i s of the s t r u c t u r e and org a ni z at io n of the Japanese p o l i t i c s of economic planning from 1959-1964. What i s needed and what the s t a t i s t and modified bure a ucr a tic

23

p o l i t i c s paradigm provide i s an approach capable of de ali ng with the important i s s u e of whether o r not the Japanese s t a t e has a pro­ p e n s i t y to a c t as an autonomous power in shaping Japanese economic planning. 4.

Japan:

St a te Autonomy and Planning

As a concept, the Japanese s t a t e i s i l l - d e f i n e d and most amor­ phous, with the p l u r a l i s t , power e l i t e and Marxist p e r s p e c ti v e s hold­ ing each ot he r hostage.

What s t r i k e s as being s i m p l i s t i c in these

pe rs pe c ti ve s i s t h a t they view th e ma tte r as i f th e re were some inhe rent c h a r a c t e r i s t i c s to the postwar Japanese s t a t e t h a t biased i t f o r o r a g a i n s t "democracy," thus ignoring or bypassing the i n s t i t u ti o n a l r e a l i t y o f the s t a t e and i t s impact on s o c i e t y . What i s the Japanese s t a t e ?

39

To answer t h i s query i t i s useful

to borrow Alfred Stepan's s t a t i s t p e rs p e c ti v e : considered as more than the 'government.'

"The s t a t e must be

I t is the continuous

a d m i n i s t r a t i v e , l e g a l , bu re a u c ra ti c and coercive system t h a t attempts not only to r e s t r u c t u r e r e l a t i o n s h i p s between c i v i l s o c i e t y and public a u t h o r i t y in a p o l i t y but a ls o t o s t r u c t u r e many c r u c i a l r e l a t i o n s h i p s within c i v i l s o c i e t y as w e l l . " ^

St ep an 's argument seems p a r t i c u l a r l y

useful f o r our endeavor to exp lain the autonomous r o l e of the Japanese s t a t e in r e l a t i o n to economy and s o c i e t y . On a pre lim in a ry b a si s i t i s hypothesized t h a t s t a t e autonomy in Japanese economic planning could be viewed as the government formulating and Implementing economic plans without any e x p l i c i t o r i m p l i c i t mandate or demands from soci al or economic fo r c e s .

24

Writes Skocpol:

" S ta te s . . . may formulate and pursue goals t h a t

are not simply r e f l e c t i v e of the demands or i n t e r e s t s of soci al groups, c l a s s e s , or s o c i e t y .

This i s what i s u s u a ll y meant by ' s t a t e auton­

omy.'"41 However, f o r many Americans in Japanese s t u d i e s , as opposed to t h e i r European c o u n t e r p a r t s , f o r example, a s t a t e - c e n t r i c approach or pe rs pe c tiv e seems to re p re se n t a near a n a l y t i c a l anathema.

Only

f o r too long have s o c ie ty -c e n te r e d and cu ltu re -b a se d s t u d i e s dominated the f i e l d , emphasizing J a p a n ' s "uniqueness" and "special circumstances." Thus, not s u r p r i s i n g l y , by r e l e g a t i n g "the s t a t e " to a n a l y t i c a l o b s c u r i t y , ex planatory s t e r i l i t y has come t o dominate a g r e a t deal of American work on Japan. There have, however, been exceptions.

In re c e n t years several

American p o l i t i c a l s c i e n t i s t s , most no tably Johnson and Pempel, have s t a r t e d to re-examine the r o l e of the Japanese s t a t e in economy and s o c i e t y . 4^

Both Johnson and Pempel seem to agree t h a t the r o l e of

the Japanese s t a t e in the economy i s shared with the p r i v a t e s e c t o r ; they disagr ee about the p re c is e modality of the s t a t e - s o c i e t y i n t e r ­ actions. In hi s important work, MITI and the Japanese M ira cl e , Johnson emphasizes the c r i t i c a l r o l e of the s t a t e bureaucracy and the s t a t e s o c i e t y r e l a t i o n and ex pl ai ns the sources o f b u re a u c ra ti c control in economic pal icy-making.

Johnson views the power p o s it io n of

the Japanese s t a t e bureaucracy l a r g e l y as a r e s u l t o f i t s ad m in is tr a ­ t i v e e f f i c i e n c y and or ga niz ati ona l e f f e c t i v e n e s s , both c r e a t i n g the r e q u i s i t e aura of a u t h o r i t y and legitimacy commensurate with i t s

25

power p o s i t i o n .

The s t a t e bureaucracy d e riv e s i t s vocational impetus

from what Johnson c a l l s " s i t u a t i o n a l impe rativ es" ; i t s elements are: lack of na tural re s o u rc e s , la rg e po pul at ion , need to t r a d e , and cons t r a i n t s o f i n t e r n a t i o n a l balance of payments.

43

In esse nce , these

" s i t u a t i o n a l imperatives" are r e f l e c t i v e of J ap a n 's perennial economic s e c u r i t y dilemma, imaginary or r e a l , as perceived by J a p a n ' s p o l i t i c a l and economic e l i t e throughout the postwar e ra . In his model of Japan as a "developmental s t a t e , " Johnson s t r e s s e s the s t r a t e g i c a l l y s i g n i f i c a n t r o l e and function o f the Ministry of I n te r n a ti o n a l Trade and Industry and i t s h i s t o r i c a l antecedents during the course of modern J a p a n ' s i n d u s t r i a l development.

Johnson declared

the r e l a t i o n a l linakges between s t a t e and the p r i v a t e s e c t o r as the paramount problem of the " st at e -g u id e d high growth system," and i d e n t i ­ f i e d th re e d i s t i n c t developmental stages in the state-economy r e l a t i o n over th e p a s t 50 y e ar s:

(1) " s e l f - c o n t r o l , " (2) " s t a t e c o n t r o l , "

(3) " p u b l i c - p r i v a t e co op er at io n. "

These th r e e r e l a t i o n a l p a t t e r n s ,

during which the state-economy r e l a t i o n has produced in c re as in g l e v e l s of i n d u s t r i a l and economic development, ar e c r i t i c a l f o r any under­ standing o f modern J ap a n 's p o l i t i c a l economy and deserve to be quoted in some d e t a i l . (1)

44

SELF-CONTROL means t h a t the s t a t e l i c e n s e s p r i v a t e e n t e r ­ p r i s e s to achieve developmental goa ls. The ty p ic a l i n s t i t u ­ t i o n i s the st ate-s po ns ore d c a r t e l , in which the s t a t e a ut h or iz es c a r t e l s 1n i n d u s t r i e s i t de sig na te s as s t r a t e g i c but then leaves to the e n t e r p r i s e s themselves the task of fashioning and operating the c a r t e l . The primary advantage o f t h i s form of government-business r e l a t i o n s h i p i s t h a t i t af fo rd s the g r e a t e s t degree of competition and p r i v a t e management in the developmental s t a t e system. I t s g r e a t e s t disadvantage i s t h a t 1t leads to control of an in du s tr y by the l a r g e s t groups in i t . . . , and to the li ke lih oo d

26

of divergence between the i n t e r e s t s o f the big op e ra to rs and the i n t e r e s t s of the s t a t e . This form of governmentbusiness r e l a t i o n s h i p i s the one t y p i c a l l y pr e fe rr e d by big business. (2)

STATE CONTROL r e f e r s to the attempt to separate management from ownership and to put management under s t a t e su pe rv isi on . I t was t y p i c a l l y the form of the r e l a t i o n s h i p pr e fe rr e d by the "reform" ( o r " c o n t r o l" ) bur eaucrats of the l a t e 1930s and by the whole s t a t e bureaucracy during postwar rec o n st r u ct io n and the e a r l y stages o f high-speed growth. I t s pr in c ip a l advantage i s t h a t the s t a t e ' s p r i o r i t i e s take precedence over those of p r i v a t e e n t e r p r i s e . I t s primary disadvantages are t h a t i t i n h i b i t s competition, and th e r e f o r e t o l e r a t e s gross i n e f f i c i e n c y in the economy, and t h a t i t f o s t e r s i r r e s p o n s i b l e management.

(3)

PUBLIC-PRIVATE COOPERATION i s by f a r the most important . . . the broad p a t t e r n s of development since the l a t e 1920s has been from s e l f - c o o r d i n a t i o n to i t s o p p os ite , s t a t e c o n t r o l , and then to a s y n th es is of the two, coopera­ t i o n . The c h i e f advantage of t h i s form i s t h a t i t leaves ownership and management in p r i v a t e hands, thereby achieving higher l e v e l s of competition than under s t a t e c o n t r o l , while i t a ff or ds the s t a t e much g r e a t e r degrees of social g o a l - s e t t i n g and inf lu enc e over p r i v a t e de cis ion s than under s e l f - c o n t r o l . I t s pri nc ip a l disadvantage i s t h a t i t i s very hard to achieve.

Of p a r t i c u l a r i n t e r e s t f o r t h i s pre sen t study i s what Johnson c a l l s " p u b l i c - p r i v a t e cooperative r e l a t i o n s h i p " and whose r e l a t i o n a l framework he premised on:

45

(1)

the e x is te n c e and workings of an e l i t e bureaucracy

(2)

a s u f f i c i e n t scope f o r bure a ucr a tic i n i t i a t i v e with p o l i t i c a l leade rs fu nc tio nin g as a " s a f e t y valve"

(3)

s t a t e in t e r v e n t i o n embedded in market-conforming methods achieved through p o lic y formulation in c o n s u lt a ti o n with major I n t e r e s t s

(4)

the e x is te nc e of MITI as a " p i l o t - o r g a n i z a t i o n , " c h a r a c t e r ­ ized by fu nc tio na l and o r g a ni z at io na l f l e x i b i l i t y and p r e d i ­ cated on a mix o f powers to make i t e f f e c t i v e ye t not an autonomous power.

In s h o r t , Johnson's empirical fin di ngs and i n t e r p r e t a t i o n of

27

the p u b l i c - p r i v a t e cooperation suggest f o r c e f u l l y t h a t the s t a t e bureaucracy seems to hold a very strong p o s i t i o n o f power and a u t h o r i t y in the s t a t e - s o c i e t y r e l a t i o n in general and in the state-economy r e l a t i o n in p a r t i c u l a r . Pempel, on the o th e r hand, views the r o l e o f the s t a t e bureauc­ racy l a r g e l y as one of i n t e r e s t int erm ediation and not of domination. He exp lains J a p a n ' s s t a t e - s o c i e t y i n t e r a c t i o n in terms of the c o r p o r a t i s t paradigm, arguing t h a t s o c i e t a l i n t e r e s t s a re a s s o c i a t i o n a l l y organized, under the auspices o f the s t a t e bureaucracy and are h i e r a r c h i c a l l y linked to na tio na l economic decision-making s t r u c t u r e s .

46

In his dis cu s s io n o f Japanese corpo ratis m, Pempel a n a l y t i c a l l y d is t i n g u i s h e s th r e e c r i t i c a l f o c i :

47

(1)

na ture of soci al c o a l i t i o n which c o n t r o l s the s t a t e apparatus and u l t i m a t e l y the p o l i t i c a l economy of the country;

(2)

the na ture of the p o l i t i c a l i n s t i t u t i o n s and channels of in fl uen ce a v a i l a b l e t o the s t a t e and open to the d i f f e r e n t s oc ia l s e c t o r s within the cou ntry;

(3)

the r e l a t i v e degree of dependence or independence an i nd ivi dua l so cia l s e c t o r and /or the s t a t e as a whole enjoys within the i n t e r n a t i o n a l p o l i t i c a l and economic system.

Pempel argues t h a t the v a r i a t i o n s in the s tr e n g th of c o r p o r a t i s t linkages between components of the s t a t e and components of s o c i e t y will vary d i r e c t l y with changes in th e c h a r a c t e r of the dominant c o a l i t i o n and the r e l a t i v e place of a country within the i n t e r n a t i o n a l system.*®

More c o n c r e t e l y , Pempel's c o r p o r a t i s t explanation of

the s t a t e - s o c i e t y r e l a t i o n s h i p focuses on the " en c orp or at iz a tio n" of the Japanese p o l i t i c a l economy.

The dominant c o a l i t i o n of the

postwar p o l i t i c a l economy i s depicted as c o n s i s t i n g of the s t a t e

28

bureaucracy, big b us in es s , a g r i c u l t u r e , and to a l e s s e r e x t e n t , smalland medium-size b us in es s , with the s t a t e bureaucracy e x e r c is in g "top down" c o n t r o l . The cohesion of the "state-dominated c o r p o r a t i s t s t r u c t u r e " hinges p ri m a ri ly on J ap a n 's r e l a t i v e p o s i t i o n in the world economy, but a l s o on the s t a t e bure aucracy's a b i l i t y to cope with and accommo­ date unabating attempts and demands to " p r i v a t i z e " Japanese p o l i c y ­ making by p r i v a t e s e c t o r and semi-public o r g a n iz a ti o n s . Pempel concludes t h a t J a p a n ' s i n t e r n a t i o n a l economic success and the in c re as in g i n t e r n a t i o n a l i z a t i o n of the Japanese economy are diminishing the s t a t e burea ucra cy 's power and a u t h o r i t y over the economy and have led to changes in the state-dominated c o r p o r a t i s t s t r u c t u r e with big business p re s si ng f o r more autonomy.

He c i t e s

the Diet as one of the new ar eas in which big business has t r i e d to r e s i s t the attempt to re in c o rp o ra ti o n by the s t a t e .

49

By and large Pempel's c o r p o r a t i s t c on c e p tu a li z a ti o n o f the Japanese s t a t e - s o c i e t y r e l a t i o n s h i p seems to support Johnson's basic argument of a powerful Japanese s t a t e machinery, y e t both caution not t o view bu re a u cr a ti c i n i t i a t i v e s as autonomous s t a t e a c t i o n s . Pempel fin ds t h a t the Japanese s t a t e shows " f l a s h e s of autonomy," 50 but he adds t h a t " i t hardly e x i s t s in a soci al vacuum," while Johnson, in hi s discus sio n of MITI, argues t h a t "func tio na l and org a niz atio na l 51 f l e x i b i l i t y . . . make i t e f f e c t i v e y e t not an autonomous power." Both Johnson and Pempel's a u t h o r i t a t i v e arguments concerning J a p a n ' s state-economy and s t a t e - s o c i e t y r e l a t i o n s and the empirical background of J a p a n ' s p o l i t i c a l economy poin t s tr o n g ly to the

29

conclusion t h a t th e s t a t e - c e n t r i c paradigm i s of marginal u t i l i t y in any ex planation of the p o l i t i c s of Japanese economic planning. Turning now to the b u re a u cr a ti c p o l i t i c s paradigm i t i s most opportune t o r e s t a t e the major arguments and concerns of t h i s t h e s i s , and a t the same time t o make an a n a l y t i c a l d i s t i n c t i o n between the Japanese s t a t e as a p o l i t i c a l i n s t i t u t i o n and the Japanese bureaucracy as an in t e g r a l p a r t t h e r e o f . Basic t o our argument of Japanese p o l i t i c s of planning i s the ro le and func tion of the s t a t e bureaucracy and i t s usage of power in the economic planning process.

More p r e c i s e l y , t h i s t h e s i s s et s

out t o explain the sources of b u re a u cr a ti c power, predominant in postwar Japanese economic pla nning, by shedding l i g h t on the bureauc­ r a c y ' s r e l a t i v e p o s i t i o n of autonomy and i t s d i s c r e t i o n a r y usage of i t s autonomy-enhancing c a p a c i t i e s .

52

The argument advanced here

i s t h a t Japanese postwar economic planning r e p r e s e n t s an ins tance of bu re a uc ra tic autonomy with the economic bureaucracy e f f e c t i v e l y r u l i n g and p o l i t i c i a n s e x e r c is in g sovereign power and a u t h o r i t y : the Japanese Prime Min ist er c a l l s f o r an economic pla n, the bureaucracy e s s e n t i a l l y formulates and implements the plan while the LDP provides formal p o l i t i c a l legit im ac y f o r economic pl a ns.

However, postwar

J ap a n 's p ro pe n s ity to engage in economic planning should not be viewed as s i n g u l a r l y emanating from autonomous a c ti o n s taken by J ap a n 's economic bureaucracy when, in f a c t , i t has been the r e s u l t of a combi­ nation of co inciding prefe ren ces 1n p o l i t i c a l , economic, and bureau­ c r a t i c c i r c l e s , and " s i t u a t i o n a l im per at iv es. "

30

And, f i n a l l y , i t i s imperative to recognize t h a t the post-occupation Japanese s t a t e i s a r a t h e r amorphous p o l i t i c a l i n s t i t u t i o n with pressure and i n t e r e s t groups, p o l i t i c i a n s and high ranking c i v i l se rv an ts c o n s t a n t l y engaging in competition over power and in fl ue nc e.

Yet

while the na tiona l bureaucracy must not be viewed as the embodiment of the s t a t e ' s t o t a l i t y , i t i s important to r e c a l l t h a t the Japanese bureaucracy re p re s e n ts the s t a t e ' s o r g a niz atio na l and a d m in is tr a ti v e core and i s guided by d i s t i n c t pr e fe re n c e s , a l l of which have a s i g n i f i c a n t impact on J a p a n ' s public p o l i c i e s , as in our c as e , economic planning. Although bu re a uc ra tic preference has never been r e a l l y uniform with r e s p e c t to Japanese economic planning, power, a u t h o r i t y and e x p e r t i s e of the economic bureaucracy have always been of most d e ci s iv e and c r i t i c a l importance in the Japanese economic planning process, o ft e n a t the detriment of s o c i e t a l preference. 5.

Bureaucratic Dominance of Japanese Economic Planning

What ar e the sources of Japanese b u re a u c ra ti c power in economic planning?

Three s a l i e n t f a c t o r s come immediately to the f o r e :

C u l t u r a l - h i s t o r i a l - - b a s e d on pro pe ns ity to be concerned with J a p a n ' s i n d u s t r i a l and economic development t h a t seems to have become 53 an in t e g r a l p a r t of the ethos of J a p a n ' s Higher Civil Servants. Dienstwissen--acquired by the bureaucracy as a r e s u l t of s i t u a ­ ti o n a l imperatives and exigencies cr eat ed by the US-occupation and J a p a n ' s postwar economic r e c o n s t r u c t i o n , both of which c a ta pu lte d the bureaucracy in t o s t r a t e g i c p o s i t i o n s of economic decision-making,

31

which aided the bureaucracy to c o ns oli dat e and s o l i d i f y i t s power 54 position. Organization schemes--with the formal i n s t i t u t i o n a l i z a t i o n of economic planning in 1955, the economic bureaucracy began to u t i l i z e the planning process as one of i t s d i s t i n c t approaches to economic pol ic y:

to synchronize na tiona l economic goals and perc eption s.

The economic planning proc ess , t i g h t l y administered and c l o s e l y monitored by the Economic Planning Agency, has subsequently come to f u l f i l l two e s s e n t i a l fu nc tio ns:

preparing the background f o r de cis ion s

(nemawashi) and synchronizing widely diverging p r i v a t e s e c t o r and public i n t e r e s t s in the realm of macro-economic p oli c y .

Moreover,

the economic bureaucracy plays a c r i t i c a l ro le as r e g u l a t o r , c o n t r o l l e r and c oo rdi na tor of the Japanese economy in gen eral.

And f i n a l l y ,

the Japanese bureaucracy "p resides" over a s u b s t a n t i a l public s e c t o r through which the s t a t e owns and a dm ini st ers a broad range of s e r v ic e s and i n d u s t r i e s .

55

In f a c t , the h i s t o r i c a l an tecedents o f bure a u cr a tic power in economic planning can be trac ed back to the Kogyo Ik e n , 5^ Jap a n' s f i r s t developmental plan advanced in 1884.

The p la n, while s t r e s s i n g

the planning function of the government, advanced an ambitious program of economic development and s e t o ve ra ll na tiona l economic o b j e c t i v e s and t a r g e t s f o r a t e n -y e a r span. Numerous authors have discussed and i n t e r p r e t e d the r i s e to predominance of the Japanese bureaucracy in the postwar e r a .

The

noted Japanese sch ola r Klyoaki Tsuji argued t h a t the Japanese bureauc­ r a c y ' s adm ini st eri ng of the U.S.-occupation reforms tended to upgrade

32

the very r o l e and s t a t u s of bu re a uc ra tic policy-making, moreover, bu re a ucra tic dominance was achieved and su sta in e d by v i r t u e of special knowledge, e x p e r t i s e and competence, p a r t i c u l a r l y in the process of law-making.

57

In a s i m i l a r v e in , Yanaga a s s e r t s :

"The t r u t h

i s t h a t p o l i t i c i a n s and Diet members are completely a t the mercy of the bureaucracy since without the help and support of the c a r e e r CO

o f f i c i a l s and ex- bur eau crat s they are unable to operate a t a l l . . . . And in a more re c en t study, Sakakibara has pointed to the importance of the bur eaucracy's public esteem, arguing t h a t bureaucrats derive much of public t r u s t from t h e i r achievements in the economic realm, and a ls o enjoy much deference because of th e bureaucracy's e l i t i s t character.^ These and s i m i l a r conten ti on s about t h e r o l e and function of the Japanese bureaucracy are p r im a r i ly d e s c r i p t i v e and must not be s u b s t i t u t e d as explan ation s of b u re a u c ra ti c dominance of the Japanese planning pro cess.

To e l u c i d a t e and o p e r a t i o n a l i z e the "bure auc ratic

dominance" t h e s i s in the context of Japanese economic planning i t might be useful to add a comparative p e rs pe c tiv e a t t h i s ju n c tu re . The l a t e Andrew Shonfield, f o r one, argued t h a t the postwar era (of Western Europe) has been c h a r a c te ri z e d by a general and i n e v i t a b l e trend toward planning, leading to a predominant ro le f o r the public s e c t o r and a reduction in the power o f the m a r k e t . M o r e o v e r , ". . . the leading [planning] na tio ns have been those which h i s t o r i c a l l y have had a s tr ong ly developed s t a t e apparatus and off icialdom. . . With t h i s general background in mind the v a l i d i t y of the bureau­ c r a t i c dominance t h e s i s f o r Japanese economic planning can be t e s t e d

33

by examining the power and prec epts underlying the a c t i v i t i e s of th e EPA bureaucracy, and a l s o , by way of analyzing the role and func­ t i o n assigned to economic planning within the broader framework of Japanese economic policy-making. I t i s hypothesized t h a t the economic bureaucracy i s u t i l i z i n g th e economic planning process p r im ar il y to harmonize J ap a n 's diverging economic i n t e r e s t s and demands.

In a d d i t i o n , under the tu te la g e

o f the EPA, the Japanese economic planning process i s channelling th e se i n t e r e s t s and demands in t o d esi re d d i r e c t i o n s .

To t h i s end,

th e Japanese economic planners have engaged in " s t r a t e g i c planning" which i s cautious in s e l e c t i n g i t s ta sks and makes much use o f i n t e r ­ action:

"A conventional planner would be w i l l i n g d i r e c t l y t o t a c k l e

th e task of resource a l l o c a t i o n f o r an e n t i r e economy; a s t r a t e g i c planner would n o t . "

62

Japanese economic planners recognize t h a t

control over th e economy i s l i m i t e d , thus they ne g o ti a te with the economic environment r a t h e r than seeking to command i t .

By and l a r g e ,

J a p a n ' s economic planning since the mid-1950s has been an e x e r c i s e in s t r a t e g i c planning in s o f a r as the economic and planning bureaucracy has induced and encouraged J a p a n ' s i n d u s t r i a l and fi n a n c i a l c i r c l e s t o exchange information about t h e i r economic plans.

This exchange

o f plan information, however, has been made to f i t i n t o a r i g i d framework of the EPA administered and c o n t r o l l e d planning process. In view of t h i s i n s t i t u t i o n a l arrangement, bur e a ucra tic dominance o f economic planning i s perhaps b e s t explained by weighing f a c t o r s o f p r i v a t e i n i t i a t i v e and Independence a g a i n s t the EPA's t h r u s t f o r org a ni z at io nal autonomy and dominance in the postwar planning process.

34

Empi ric all y, the " bu reau cra tic dominance" t h e s i s i s supported by several f a c t o r s .

For one, postwar Japanese economic planning has

not been c h a r a c te ri z e d by excessive o r extreme p o l i t i c a l p a r t y involve­ ment, as f o r example in s o c i a l i s t s t a t e s , or Great B r i t a i n , where the p o l i t i c s of planning have become an i n t e g r a l p a r t of Labor Party po lic y.

63

This i s not to su ggest, however, t h a t Japanese p o l i t i c a l

p a r t i e s did not show any i n t e r e s t in economic planning a l t o g e t h e r ; q u i t e the c o n t r a r y , moves f o r and a g a i n s t planning can be discerned in postwar Japan.

Never the les s, u n t i l the end of the Yoshida era

planning was an anathema f o r the Japanese p o l i t i c a l formula, but with the advent of the National Income Doubling Plan in the l a t e 1950s, the r u l i n g LDP had discovered i t s p o l i t i c a l u t i l i t y and i n s t r u ­ m e n ta li ty and became a proponent of economic planning.

With the

de cl i ni ng fo r tu n es of the Income Doubling Plan, p o l i t i c a l p a r t y i n t e r e s t in economic planning faded r a t h e r qui ck ly and i t has never regained i t s e a r l i e r momentum in LDP c i r c l e s .

Secondly, since Japanese economic

plans do not r e qu ir e formal Diet ap proval, th e r e i s no formal public dis cus si on of the d r a f t plan.

However, plans may be discussed in

the Diet in connection with r e l a t e d items t h a t are formally presented to the Diet.

The f a c t remains, however, t h a t the l e g i s l a t u r e does

p a r t i c i p a t e n e i t h e r in the formulation nor r a t i f i c a t i o n of Japanese economic p la n s , and, t h u s , the Diet i s e x p l i c i t l y excluded from J ap a n 's economic planning process. And l a s t l y , the economic bureaucracy, the EPA in p a r t i c u l a r , has not only a v i t a l pro fessi ona l stake and i n t e r e s t in the c ontin u­ ing e xi st en c e and extension of the planning fu n c t i o n , but a l s o , the

35

planning bureaucracy has s u c c e s s f u l l y managed to "define" the p o l i t i c s o f Japanese planning by drawing on i t s autonomy-enhancing c a p a c i t i e s , i . e . a d m i n i s t r a t i v e power, e x p e r t i s e , s t a t u s , and p r e s t i g e , which in essence are the sources of bure a ucr a tic dominance of planning. Moreover, i t i s important to note t h a t J ap a n 's planning bureaucracy has never been s i g n i f i c a n t l y challenged by e i t h e r p a r ty or i n t e r e s t group p o l i t i c s .

Whenever such challenges have a r i s e n , however, the

Economic Planning Agency has simply extended the " p a r t i c i p a t o r y f r a n ­ chise" o f the planning pro c e ss , but without ever changing the basic r u l e s governing the i n s t i t u t i o n a l arrangement of the Japanese economic planning pro c e ss , i . e . EPA a d m in is tr a tio n and c o n t r o l .

Furthermore,

si nce n e i t h e r the D ie t, nor the p o l i t i c a l p a r t i e s , seem capable of independently formulating concrete economic p o lic y p r e s c r i p t i o n s and measures, i t seems va li d to argue t h a t the bureaucracy has thus been f i l l i n g an economic p o l i c y vacuum, and hence c o n s t a n t l y c o n t r i b u t ­ ing to the r a t i o n a l i z a t i o n of Japanese macro-economic poli cy . In s h o r t , t h i s study addresses the c r u c ia l is su e of expanding bu re a u cr a ti c autonomy in the Japanese planning p ro c e ss , as opposed to independence and i n i t i a t i v e from the p r i v a t e s e c t o r .

Japanese

p o l i t i c s of planning are conceived as bu re a u cr a ti c p o l i t i c s , con­ s i s t e n t l y attempting to r a t i o n a l i z e macro-economic p ol ic y l e f t in a vacuum, by and la rg e due to the i n a b i l i t y of both the Diet and p o l i t i c a l p a r t i e s to deal e f f e c t i v e l y with c r u c ia l macro-economic p o li c y problems and i s s u e s .

CHAPTER II A SHORT HISTORY OF JAPANESE ECONOMIC PLANNING 1.

Intro duc tion

To s e t the stage f o r t h i s i n t e r p r e t a t i v e h i s t o r y of Japanese economic planning and before analyzing i t s antecedents and develop­ ment to the p r e s e n t , i t seems useful to o u t l i n e a frame of re fere nce in the form of four p ro pos iti on s r e le v a n t f o r Japanese economic planning in gener al. 1.1.

Economic Planning as a Public Poli cy Issue

Here i t i s useful to d i s t i n g u i s h a n a l y t i c a l l y between bu re a ucr a tic p o l i t i c s and p a rt y p o l i t i c s as the two basic kinds of p o l i t i c s of planning.

I t i s a trusim t h a t both bure au cra ts and p o l i t i c i a n s attempt

to maximize power and in fl ue nc e.

Moreover, p o l i t i c i a n s and bureau­

c r a t s are oft en co-operant f a c t o r s , t h a t i s , the production of public p o l i c i e s depends on t h e i r j o i n t c o n t r i b u t i o n s . *

Cooperation between

p o l i t i c i a n s and bureaucrats has become pervasive in p u b l i c - p o l i c y making of postwar l i b e r a l s o c i e t i e s .

In Japan economic planning

has been the ex clu si ve preserve of the Japanese bureaucracy u n t i l the e a r l y 1950s.

Since 1955, however, the Liberal Democratic Pa rty

has taken an a c t i v e i n t e r e s t in economic planning as a public p o lic y i s s u e , y e t i t s i n t e r e s t has varied over time, reaching i t s peak with the National Income Doubling Plan in 1960.

36

37

1.2.

Economic Planning Induced by I n t e r n a t i o n a l Factors

During both the pre- and postwar era i n t e r n a t i o n a l events have acted as c a t a l y s t s f o r Japanese economic planning as t h i s study will evince.

The f a c t remains t h a t economic plans have f r e q u e n t l y been

used as instruments in the org a ni z at io n of J a p a n ' s "defensive" e f f o r t s to maintain economic (and p o l i t i c a l ) independence since the 1880s. Notes Pempel:

" . . .

throughout J a p a n ' s modern h i s t o r y , external

circumstances have been seen as th r e a te n i n g to i t s economic development . . . t h i s perception of i n t e r n a t i o n a l v u l n e r a b i l i t y l a i d the b a si s f o r the agenda and instruments o f Japanese economic p o li c y u n ti l the 1970s."2 1.3.

H is to r ic a l Basis of Bureaucratic Plan Dominance

Throughout modern J a p a n ' s h i s t o r y various i n s t i t u t i o n a l f a c t o r s have c o nt ri bu te d to b ur e a uc ra tic dominance of economic planning. Chapter I i d e n t i f i e d e th o s ,

Dienstwissen and o r g a niz at io n schemes

as the primary sources of b u re a u cr a ti c plan dominance.

Moreover,

b ur e a uc ra tic plan dominance must a l s o be seen as a m a nif est ation of the " p l a n - r a t i o n a l - s y s t e m , " which, as Johnson has pointed o u t, depends (among o th e r th in g s ) on the e xi st en c e of a widely agreed 3 upon s e t of overarching goals f o r the s o c i e t y . I t i s suggested here t h a t Japanese economic plans should be viewed as the formal 4 expression of economic goals of the developmental s t a t e . Bureau­ c r a t i c plan dominance has a ls o shown a remarkable c o n t i n u i t y over time.

The c o n t i n u i t y from the prewar to the postwar e ra should,

by and l a r g e , be seen as a consequence of the developmental s t a t e ' s

38

economic growth promoting p o l i c i e s which are i n d i c a t i v e of the Japanese bu rea ucracy's autonomy-enhancing c a p a c i t i e s . b ur e a uc ra tic plan dominance.

Two f i n a l po in ts on

F i r s t , b u re a u cr a ti c dominance and org a ni ­

za ti o n al e f f e c t i v e n e s s of Japanese economic planning must not be equated with economic e f f i c i e n c y .

There i s simply no causal r e l a t i o n ­

ship between J a p a n ' s economic plans and contemporary Jap a n 's proverbial 5 economic e f f i c i e n c y . Organizational e f f e c t i v e n e s s does not a p r i o r i lead to economic e f f i c i e n c y .

To th e c o n t r a r y , in a planning c o n te x t ,

o rg a n iz at i o n al e f f e c t i v e n e s s has ofte n been achieved a t the detriment of economic e f f i c i e n c y .

Second, b u re a u cr a ti c dominance of economic

planning i s not a s t a t i c phenomenon e i t h e r .

Any v a r i a t i o n in bureau­

c r a t i c plan dominance must be explained in terms of the p o l i t i c a l b a si s underlying J a p a n ' s plan r a t i o n a l system.

No a n a l y s t can dismiss

the f a c t t h a t " p o l i t i c s " abound in both the prewar and postwar Japanese developmental s t a t e .

At the same time, i t i s important to bear in

mind t h a t economic p o l i c i e s have been the p re ro g a ti v e p r im a r i ly of the economic bureaucracy to d a t e , while " p ar ty p o l i t i c s " have come to abound in the general public p o lic y debate only since the 1950s. 1.4.

P e r io d i z a ti o n of Japanese Economic Planning

The form and content of a l l formal and informal Japanese economic plans have been g r e a t l y r e f l e c t i v e of changing h i s t o r i c a l , p o l i t i c a l , and economic circumstances and may be u s e f u l l y c l a s s i f i e d according to t h e i r p o lic y o b j e c t i v e s and r e l a t e d t o s p e c i f i c developmental phases of the Japanese economy:

39

A.

H is to r ic a l Antecedents Kogyo I ken Quasi War Economy Controlled Economy

B.

Postwar Economic Plans Post-Surrender Economic Plans Economic Reconstruction Plans Economic Self-Support Plans Plans f o r High Economic Growth Economic and Social Development Plans

2. 2.1.

H is t o r i c a l Antecedents Introd uction

The importance o f the government's ro le during the pre-World War II Japanese economic development has become something of a c l i c h e . Nevert hele ss, i t i s widely recognized t h a t the Japanese government has played not only a c r i t i c a l r o l e in introducing Western sci e nc e, technology, and i n d u s t r i a l processes and te chn iq ues , but a ls o t h a t the government has been a major pioneer in the formation of Jap a n's modern i n d u s t r i a l and commercial base.

Furthermore, most h i s t o r i e s

o f J ap a n 's economic development will c o r r e c t l y p o in t to the f a c t t h a t the Japanese government did not r e t a i n ownership in i t s p i l o t e n t e r p r i s e s , except f o r s t r a t e g i c a rs e n a ls and sh ip ya rd s, and t h a t the Japanese s t a t e never attempted to r e s o r t to d e t a i l e d control over the economy during i t s t a k e - o f f and a fte rw ar ds.

O st ens ibl y,

Jap a n' s pre-1937 economy was not planned in a techn ica l sense.

Yet

a t the same time i t i s recognized t h a t the ro le and presence of the s t a t e in economic and i n d u s t r i a l development has been more ub iq u it io u s in Japan than ot he r comparable i n d u s t r i a l s ta t e s .®

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2.2.

Kogyo I ken—1884:

J ap a n 's F i r s t Developmental Plan

What i s n e i t h e r widely known nor pu bli ci zed i s the f a c t t h a t in 1884 Japan launched i t s f i r s t economic p la n, the KOGYO I KEN, to provide a p o li c y framework f o r economic development.

In t h e i r i n t e r ­

p r e t a t i v e a n a l y s i s of the KOGYO IKEN Inukai and Tussing observed ". . . the KOGYO IKEN i s a comprehensive o f f i c i a l study of economic conditions during the (1868-1884) phase . . .

as i t s t i t l e sug ges ts ,

i t s e t s up a program of economic development . . . o v e r - a l l national o b j e c t i v e s , t a r g e t s f o r a t e n -y e a r time span, and a s e t of recommended p o l i c i e s . . . were c l e a r l y s e t f o r t h in the KOGYO IKEN . . .

in

t h i s sense, i t might be considered the w orl d' s f i r s t economic develop­ mental pla n." ^ the c a b in e t.

In December 1884, the KOGYO IKEN was approved by The plan c on tent comprised some t h i r t y volumes of q u a n t i ­

t a t i v e and q u a l i t a t i v e mate ria l and information:

vol. I Summary,

vol. II I n tr o d u c ti o n , v ol . I l l Present Condition, vol. IV Causes, vols. V-X References (domestic and f o r e i g n ) , vol. XI S p i r i t / W i l l i n g ­ n e s s , vols. XII-XIV National Economic Capacity, vo ls . XV-XXVII Regional Q

Economic Capacity, and vo ls . XXVIII-XXX P o l i c i e s . In many ways the KOYGO IKEN has been a pr ec u rso r of the subse­ quently formulated Japanese economic p la n s , i t s primary goal being rudimentary:

to bring a measure of o rd er i n t o an environment char ­

a c t e r i z e d by u n c e r t a i n t y .

The KOYGO IKEN was compiled and formulated

a g a i n s t the backdrop of i n t e r n a t i o n a l l y induced and domest ica lly rooted e x ig en c ie s.

The c r i s i s ridden e a r l y 1880s formed the plan

environment; a pressi ng s e c u r i t y dilemma, domestic economic chaos; g runaway i n f l a t i o n , a wave of b a n kr up tc ie s , and c i v i l d i s o r d e r .

41

Furthermore, J ap a n 's long-term p o l i c i e s a t t h a t time were p r i ­ ma rily of a p o l i t i c a l na ture and found expression in the broad national consensus of the popular Meiji slogan FUKOKU KYOHEI (enric h the country in ord er to strengthen the army) and in the overarching goal of c at c h ­ ing up with the West. The formulation of the KOGYO I KEN was undoubtedly an exclu si ve b ur e a uc ra tic a f f a i r .

In January 1884, Masana Maeda, an o f f i c i a l

of the M inistry of Agric ult ure and Commerce, who had e a r l i e r conceived of the idea of the KOYGO I KEN, proposed within the m i n i s t r y t h a t a plan p r o j e c t team be s e t up.*®

With the e f f e c t i v e support from

h is Vice M in is t e r , Maeda assembled a 13-man p r o j e c t team; t h i s was no small achievement given the a d m i n i s t r a t i v e cutbacks and budgetary r e s t r a i n t s t r a i l i n g the Matsukata d e f l a t i o n .

I t took about one year

to compile the r e q u i s i t e date f o r the KOGYO I KEN.

As a document

the KOGYO IKEN in i t s e l f i s an in d i c a t i o n of the org a ni z at io na l e f f e c t i v e n e s s of Jap a n' s Imperial bureaucracy.

The p r o j e c t team,

supported by members and s t a f f o f the Ministry of A gric ul tu re and Commerce,** conducted a massive survey on the c ond iti ons of the Japanese economy; diagnosed i t s s t r e n g t h s and weaknesses, and f i n a l l y published the 30 volumes.

And subsequently, the KOGYO IKEN came to serve as

a p o lic y framework f o r the f u t u r e d i r e c t i o n of the Japanese economy, and i t c re at e d ". . . a economic growth. . . . "

sound economic environment conducive f o r 12

Although the p r i v a t e s e c t o r was e s s e n t i a l l y excluded from plan decision-making, i t s ro le having been r e le gat e d to providing p e r t i n e n t economic data and o th e r r e le v a n t plan information, i t must be recognized

42

t h a t successful and speedy plan formulation depended t o a g r e a t deal on an e f f i c i e n t cooperation of various i n d u s t r i a l , commercial and a g r i c u l t u r a l o rg a ni z at i ons with the p r o j e c t team and i t s c o l l a b o r a t o r s within the M inistry of A gric ul tu re and Commerce.

13

Already then the "b ure auc ra tic p o l i t i c s of planning" came in t o play in the c o n f l i c t over the i n d u s t r i a l bank is sue during the formu­ l a t i o n of the KOGYO IKEN.

Soda and Ariizumi w ri te :

". . . Maeda

Masana and h is group in the Minsitry of A g ric ult ure and Commerce completed the o r ig i n a l t e x t of the KOGYO IKEN and 150 copies were s en t out among government o f f i c i a l s f o r comments on September 1, 1884.

However, Matsukata Masayoshi and h is group in the Ministry

of Finance expressed t h e i r disagreement with the i n d u s t r i a l bank c o n c e p t ^ 3 found in Maeda1s work, and due to Matsukata's de ci s iv e demand the copies were a l l r e c a l l e d by December 13, 1884. was sought . . . [and] . . . reached . . .

A compromise

the M inistry of Finance

would withdraw i t s own proposal f o r an i n d u s t r i a l bank in exchange f o r the exclusion of Maeda's i n d u s t r i a l bank concept from th e o r ig in al text. . . Subsequently, the KOGYO IKEN served as a comprehensive poli cy framework f o r Japanese economic and i n d u s t r i a l development as several a n a l y s t s confirm:

". . . the i n d u s t r i a l development p o l i c i e s contem­

pla te d and adopted in Japan during the period from 1881 to the beginning o f the Sino-Japanese War of 1894-95 were mostly formulated in accordance with the s t r a t e g y envisaged in the KOGYO IKEN. . . .

[Since then]

many new i n d u s t r i a l p o l i c i e s have been formulated. . . .

Nonetheless,

the fundamental s t r a t e g y envisaged in the KOGYO IKEN s t i l l remains

43

the same in i t s es s e nc e ."

15

Kuromasa notes s i m i l a r l y :

. . KOGYO IKEN was a d e f i n i t e

polic y proposal which c a l l e d f o r abandoning the previous p o lic y of metaphrastic importation of Western i n d u s t r i e s to Japan during the e a r l y Meiji pe ri o d , re pla cin g i t by a p o lic y of nationa l development based on the process of the indigenous i n d u s t r i e s as a whole.

The

KOGYO IKEN became the foundation o f the r e a l i z a t i o n o f new development p o l i c i e s , and not a few of our pr es ent economic p o l i c i e s are s t i l l based on the KOGYO IKEN. . . .

In a sense, the KOGYO IKEN functioned

to t r i g g e r the r i s e of i n d u s t r i e s in the Meiji period."*® During the following decades the KOGYO IKEN came to serve as the comprehensive p o li c y framework and i t s p ol ic y p r e s c r i p t i o n s were gra dual ly implemented.

Plan implementation, by and l a r g e , "depended

upon the successive issu in g of r u l e s and r e g u l a t i o n s e s t a b l i s h i n g an economic environment conducive to the r i s e of p r i v a t e e n t e r p r i s e s in the framework o f a f r e e market economy."*^

One c h a r a c t e r i s t i c

f e a t u r e of the KOGYO IKEN was the c r i t i c a l ro le of the s t a t e .

". . .

I f the government does not make the best po s s ib le e f f o r t [ in c o n s t r u c t ­ ing a developmental p l a n ] , and i f the f u t u r e outcome i s not a d e s i r a b l e one, the government i t s e l f must take the blame . . . in i t s capacity as le ad e r of nation al development, the government had to have unanimous consensus of opinion within i t s e l f , a c l e a r schedule of p r i o r i t i e s 18 and timing, and a mutually c o n s i s t e n t s e t of p o l i c i e s . " The planner s, however, were keenly aware t h a t the e f f e c t i v e n e s s of the governmental i n i t i a t i v e s were completely dependent on the p e op le 's r e a ct io n t o them.

However, the emphasis on the n e c e s s i t y

44

f o r voluntary p a r t i c i p a t i o n among the people was a highly p a t e r n a l i s t i c one.

One of the func tions of government was to s t i m u l a t e , guide,

and a s s i s t p r i v a t e i n i t i a t i v e s and a c t i v i t y ; farmers, craftsmen, and merchants were a l l thought of as an ignora nt mass, needing benevo­ l e n t d i r e c t i o n s and strong coercion in orde r to c a r ry out a developmental po licy.

19

E s s e n t i a l l y u t i l i z i n g corporatism as an organizing

device f o r the implementation of the KOGYO IKEN the government a c t i v e l y engaged in the org anization and mobi liz at ion of thousands of e n t r e ­ pren eu rs, i . e . , DOGYO KUMIAI (prod, coop erativ es and tr a d e a s s o c .) and KYOSHINKAI (Japanese s t y l e priceshows) Recent Japanese sc ho la rs hi p has compared the KOGYO IKEN with the p r i o r i t y production system (KEISHA SEISAN HOSHIKI)^* which Japan adopted during the economic recovery a f t e r the P a c i f i c War.

Probably

most economic h i s t o r i a n s would concede t h a t the KOGYO IKEN e s t a b l i s h e d a useful politico-economic framework f o r J a p a n ' s t a k e - o f f and subse­ quent economic and i n d u s t r i a l development.

And f i n a l l y , one could

argue with some c e r t a i n t y t h a t the KOGYO IKEN, as the f i r s t develop­ mental p la n, made i t s most s i g n i f i c a n t c o n tr ib u ti o n to Jap a n's economic development not so much by p r e s c r i b i n g a route or s e t t i n g s p e c i f i c t a r g e t s , but r a t h e r by I n t i c i n g and mobilizing J ap a n 's l a t e n t e n t r e ­ p r e n e u r i a l , t e c h n i c a l , and managerial t a l e n t s and p o t e n t i a l and as such can be viewed as a t r u e harbinger of Japanese economic planning.

45

2.3. 2.3.1.

From Quasi War Economy to Controlled Economy Intr oduction

The decade following the implementation of the KOGYO IKEN saw the emergence o f a Japanese i n d u s t r i a l economy guided and driven by bureaucrats in c ol lu s io n with big b us in es s , i n d u s t r y , and financ e. The arrangement of J ap a n 's p o l i t i c a l economy during the f i r s t two decades o f the tw e nt ie th century can be c h a r a c t e r i z e d as b a s i c a l l y " l i b e r a l " ; with a s t a t e pursuing n o n - i n t e r v e n t i o n i s t economic p o l i c i e s and a bst a in in g from economic planning a l t o g e t h e r .

Notes Lockwood:

". . . s t a t e c a p i t a l i s m (in the sense of public ownership and i n t e r ­ vention) played a de cl in in g r o l e in prewar Japan u n t i l i t s revival in the war economy of the l a t e 1930s."

22

During t h a t in t e r v a l s t a t e

ownership and control was lim it ed to the t r a d i t i o n a l monopolies l i k e r a i l r o a d s , tobacco, telephone and te l e g r a p h , and, of course, a r s e n a l s , the s t r a t e g i c s e c t o r of the economy.

By and la rg e the

s t a t e remained in the background o f economic a f f a i r s during t h a t time and operated through i t s influence on banking, f i s c a l po lic y and on th e f i n a n c ia l and i n d u s t r i a l e l i t e .

In e f f e c t th e n, the

dri ve and momentum of Jap a n's i n d u s t r i a l ascendance during the e a r l y twe nt ie th century should be viewed l a r g e l y as the r e s u l t of p r i v a t e i n i t i a t i v e and a conducive I n t e r n a t i o n a l tr a d i n g environment.

How­

e v e r , th e Financial Panic of 1927, the Great Depression of 1929, the Manchurian C r i s i s of 1931 and subsequent e s c a l a t i o n of the con­ f l i c t and concurrent r a d i c a l i z a t i o n of Japanese p o l i t i c s of the e a r l y 1930s gr ad ua lly led to the org a ni z at io n of economic force s f o r p o l i t i c a l purposes.

By 1938 the promotion of economic and

46

i n d u s t r i a l development had become p a r t of the normal function of the Japanese s t a t e , congruent with the dictum t h a t "the b a si s of warfare i s p r im a r i ly economics."

By 1940, the Japanese economy

had become thoroughly organized by the m i l i t a r y and c i v i l i a n bureauc­ racy which employed i t s various coercive powers and instruments; i . e . , control of investments, m a t e r i a l s and foreign t r a d e .

To t h i s

end economic planning, various laws and ordinances were used and the Japanese economy was gra du al ly reorganized in t o a system of wartime economic c o n t r o l s . 2.3.2.

Ju nsenji Keizai:

Quasi War Economy

The s tr o n g e s t impetus f o r Japanese economic planning a f t e r the mid-1930s came from a combination of politico-economic f a c t o r s creat ed by the exigencies of J a p a n ' s domestic economic c r i s e s of the 1920s and the World Depression o f the 1930s.

Yet perhaps the

most important s i n g l e f a c t o r was J ap a n 's China p o li c y which g ra du a lly s h i f t e d to d i r e c t m i l i t a r y in t e r v e n t i o n and war; Manchurian Inc ident 1931; Shanghai Incident 1932; formation of Manchukuo in 1932; and f i n a l l y , the outbreak of the Sino-Japanese War in 1937, a l l of which were ex acting J a p a n ' s na tio na l resources and the s t a t e ' s o r g a ni z at io na l abilities. The argument has been made t h a t Japanese economic planning of the e a r l y Showa period was o f f i c i a t e d when the Army moved to implement i t s "Five Year Plan f o r Key I n d u s tr ie s " a f t e r the February 26, 1936, i n c i d e n t . ^

However, i t 1s q u i t e po s s ib le to point to

several harbingers of economic planning in the e a r l y 1930s; i . e . ,

47

p r o l i f e r a t i n g s t a t e control over the economy, a t t i t u d i n a l change v i s - a - v i s c a p it a li s m in g e n e r a l, and f i n a l l y contingency planning in the Army i t s e l f . S ta te control of the economy was o r i g i n a l l y l e g i s l a t e d in the e a r l y 1930s, and in l a t e r years expanded to become an in t e g r a l p a r t of J a p a n ' s planned economy of the 1940s. measures were:

Some of the e a r l y control

YUSHUTSU KUMIAI HO (Export Association Law, 1931),

JUYO SANGYO T0SEIH0 (the Important I n d u s t r i e s Control Law, 1931), to control basic i n d u s t r i e s , and KOGYO KUMIAI HO ( I n u d s t r i a l Associ­ a ti o n Law, 1932). The Bureau of In d u s t r i a l R a t io n a li z a ti o n (SANGYO GORI KYOKU), e s t a b l i s h e d in June, 1930, in the M inistry of Commerce and Industry (SHOKO SHO), in or der to champion " i n d u s t r i a l r a t i o n a l i z a t i o n " can be regarded as an antecedent of bu re a u cr a ti c planning in prewar Japan.^ Moreover, the foreign induced, y e t b a s i c a l l y domest ica lly rooted Showa economic c r i s i s led to a c r i t i c a l i n t e l l e c t u a l reassessment of c a p it a li s m by the Japanese Right and Le ft.

At the same time

the r o l e of the s t a t e in the economy became more a c t i v i s t and i n t e r ­ v e n t i o n i s t with the s t a t e bureaucracy extending i t s control over the economy in i t s attempt to harness "capi ta lis m" to i t s develop­ mental goals. in 1937:

" . . .

Reflecting on these un d e rc u rr e n ts , Arisawa wrote a f t e r the outbreak of the Great Depression of 1929

the Japanese economy was in a deep c r i s i s . . . and the l i b e r a l asp ec ts of c a p i t a l i s m disappeared almost completely while ' c o n t r o l ' (-ism) came to the fore . . . faced with a general c r i s i s of c a p i t a l i s m ,

48

i t i s no longer a pp ro p ri a te f o r the s t a t e t o leave the na tiona l economy to i t s own course . . .

the s t a t e must i n t e r v e n e , or e l s e

the nationa l economy might be destroyed . . . s t a t e economic control . . . can overcome the c r i s i s of c a p it a li s m . . . t h u s , economic cont rol i s the demand o f the day. . . . "

26

Japanese m i l i t a r y contingency planning f o r World War II da tes back t o the 1920s when Nagata Tetsuzan, a general s t a f f o f f i c e r , formulated a comprehensive plan f o r nat ion al mobi liz at ion f o r war (1926), and f i r s t a r t i c u l a t e d th e concept of K0KUB0 KOKKA (a national defense s t a t e based on long-range economic planning).

Nagata's

idea o f KUKUBO KOKKA came to e x e r t a powerful influence upon m i l i t a r y and c i v i l i a n planners in Japan.

27

Yet, because o f i n t e r n e c i n e r i v a l r y between the Army and Navy over s t r a t e g i c p r i o r i t i e s and a l l o c a t i o n of re s ou rc e s , as well as b ur e a uc ra tic in f i g h t i n g in g e n e r a l, the idea of K0KUB0 KOKKA could never be f u l l y r e a l i z e d ; in f a c t , Nagata was murdered by a r i g h t wing o f f i c e r who f e l t t h a t he had sold out t o monopoly c a p it a li s m .

28

However, Ishiwara Kanji, one o f J a p a n ' s most b r i l l i a n t m i l i t a r y s t r a t e g i s t s with a repu ta ti o n as a s u p e r l a t i v e planner s u c c e s s f u l l y managed to implement some of the K0KUB0 KOKKA's pr ec ept s upon assuming charge of the Operations Section (SAKU SENKA) of the Operations Division of the General S t a f f on August 1, 1935.

Ishiwara simply

extended the d e f i n i t i o n o f ope ra tio nal m i l i t a r y planning to include planning f o r economic growth and i n d u s t r i a l m o b il iz a ti o n ; subsequently, he formed and pe rs on al ly led a new o f f i c e , the War Leadership Section (SENSO SHIDOKA) which took charge of co ordinating s t r a t e g i c planning

49

and i n d u s t r i a l development.

29

The 1936 attempt b y Ishiwara to combine long-range m i l i t a r y planning with economic and i n d u s t r i a l mo bi liz at io n was motivated pri m ar i ly by his r e a l i s t i c perception of J a p a n ' s r e l a t i v e m i l i t a r y st re n g th and his profes si onal assessment of the Soviet Red Army which had undergone a program of rapid expansion and modernization by the mid-1930s and b u i l t up i t s s t r e n g t h in the Soviet Far East by i n c re a s in g i t s manpower and introducing ta n k s , modern a r t i l l e r y and a i r c r a f t s in gre a t numbers.

However, Is h iw a ra 's planning mission

was s e r i o u s l y hampered by the non-existence of any planning machinery. Notes P e a t t i e :

". . . the re e x i s t e d no coordinated survey, e i t h e r

governmental or p r i v a t e , of J a p a n ' s economic p o t e n t i a l . . . nor did th e r e e x i s t s u f f i c i e n t e x p e r t i s e within the army . . . charge of planning i t s e l f . . . .

to take

Ishiwara e s t a b l i s h e d the ZAISEI

KEIZAI CHOSAKAI as a semi-governmental organ within th e General S t a f f . . . [and appointed] Miyazake Masayoshi [as head]. . . . Miyazaki had gained a s o l i d r e p u t a t i o n as an a n a l y s t and planner as c h i e f of the Research Division o f the Mitsui Bank . . . [and shared a s i m i l a r outlook with] . . .

a growing number of c i v i l i a n

te c h n o c r a ts — ' r e f o r m i s t b ure a ucr a ts ' (KAKUSHIN KANRYO). . . . The " re fo rm is t bureau cra ts " or "new bureaucrats" (SHIN KANRYO)— the terms have been used interchangeably 1n Japan f o r more than 30 y e a r s —have been described by Spaulding as p r o f e s s i n g , f i r s t , "a pragmatic nat ion alism emphasizing the economic r o l e of the s t a t e " ; second, "a w ill in gne ss to c o l l a b o r a t e with like-minded men in o th e r m i n i s t r i e s and in the m i l i t a r y s e r v i c e " ; and t h i r d , "a d e s i r e to

50

change the e x i s t i n g order from within by non-r evo lutio nar y means."

31

Purporting s i m i l a r views and percep tio ns of J a p a n ' s exposed i n t e r n a t i o n a l s t r a t e g i c and economic p o s i t i o n , the Miyazaki group began to cooperate with the KAKUSHIN KANRYO and t h e i r c ou nt er pa rt s in the army, KAKUSHIN BAKURYO ( r e n o v a t i o n i s t s t a f f ) , and to ge th e r embarked on an ambitious program to reorganize J ap a n 's p o l i t i c a l economy as Japan entered the phase of JUNSENJI KEIZAI (quasi-wartime economy) a f t e r the February 26, 1936, m i l i t a r y up ris in g staged by young m i l i t a r y o f f i c e r s .

32

The quasi-wartime economy ushered in

a new era of s t a t e r e g u l a t i o n , control and increased r e l i a n c e on economic planning, which developed g ra dua lly u n t i l the outbreak of the P a c i f i c War when the Japanese economy was placed under almost complete wartime c o n t r o l .

Notes Yoshino:

". . . in the mid-1930s,

the government began to assume control over c e r t a i n key s t r a t e g i c industries . . .

by 1940, a number o f s t r a t e g i c a l l y important indus-

t r i e s had been brought under c e n t r a l i z e d a d m in is tr a ti o n . . . . "

33

This notwithstan ding , economic c o n t r o l s , cooperation and f i n a n ­ c i a l inducements by the powerful s t a t e and m i l i t a r y bureaucracy were n e i t h e r undisputed nor did these have an e f f i c a c i o u s e f f e c t on economic and s t r a t e g i c planning and war prepa ratio n as hoped by the KAKUSHIN KANRYO.

Already in 1937 Arisawa noted:

" . . .

i t i s f a l l a c i o u s to consider t h a t the s t a t e can put the economy a t i t s disposal . . . t h i s erroneous idea i s oft en held as an ideology by bureaucrats who are in charge of a d m in s it r a ti v e control . . . now t h a t the economy i s subordinated to s t a t e power and d i r e c t s t a t e in te r v e n ti o n has become accepted, the bureaucrats tend to fee l t h a t

51

they command the economy. . . . "

34

In f a c t , however, numerous domestic and i n t e r n a t i o n a l f a c t o r s have impeded the development of s t a t e control and economic planning during the l a t e 1930s.

Symptomatic of the g r e a t d i f f i c u l t i e s and

odds Japanese planners encountered was the d r a f t i n g of the "Five Year Plan f o r Japanese and Manchurian Industry" in June of 1936 by the army's Miyazaki group (MIYAZAKI IKEN).

F i r s t of a l l , i t

took u n t i l January 1939 f o r the 1936 plan d r a f t to be submitted to the government; i n t e r - m i n i s t e r i a l f i g h t i n g and the age-old ArmyNavy r i v a l r y must be c i t e d as a major cause of t h i s delay in time.

35

The Five Year Plan, conceived as a blue p r i n t to implement the K0KUB0 KOKKA (National Defense S t a t e ) system, c a l l e d f o r a consid era ble inc re ase in the production and s t o c k p i l i n g o f munitions, m i l i t a r y hardware and o th e r ma terial and reso urc es .

Moreover, the plan

emphasized the long-range expansion of economic and i n d u s t r i a l pro­ d u c t i v i t y and e f f i c i e n c y ; to t h a t e x t e n t the plan emp hat ically p re scr ib ed the extension o f s t a t e control over every a spe ct involving the na tio na l economy.

36

By and la rge however, i n d u s t r i a l and f i n a n c i a l c i r c l e s showed l i t t l e i n c l i n a t i o n and enthusiasm f o r t h i s ambitious plan and most o f big business had to be coopted (v ia control a s s o c i a t i o n s —TOSEI KAI) to p a r t i c i p a t e in t h i s w a r- re la te d e f f o r t o f s t r a t e g i c planning and i n d u s t r i a l development. I t can be argued, however, t h a t the most s i g n i f i c a n t and c r i t i c a l impediment fo r economic planning during the JUNSENJI KEIZAI period was undoubtedly the e s c a l a t i o n o f the Sino-Japanese c o n f l i c t in to

52

a f u l l - f l e d g e d war in June 1937.

The c o n f l i c t was most detrimental

because i t undermined the very premise upon which much of Japanese s t r a t e g i c th ink ing and thus economic planning r e s t e d ; namely a t l e a s t f i v e years o f u ni n te rr u p t ed peace t h a t would enable Japan to devote i t s ener gies and re sources to the long-range development of i t s economic b a si s of war, t h i s to combine long-range s t r a t e g i c planning with economic mo bili za tio n and i n d u s t r i a l development. In the f i n a l a n a l y s i s , J ap a n 's undeclared war in China n u l l i f i e d a l l attempts to build a nat ion al defense s t a t e .

Moreover, because

o f China's tenacious r e s i s t a n c e , the war continued unabated and J a p a n ' s long-term s t r a t e g i c and economic planning gr ad ua lly had to y i e l d to the imperatives from the b a t t l e f i e l d which i n e v i t a b l y led to improvisational and ad-hoc planning devoid o f any long-term pe rs p e c ti v e . And f i n a l l y , J ap a n 's economic planning e f f o r t p r i o r to the P a c i f i c War was consid era bly f r u s t r a t e d by the lack of a powerful and c e n t r a l i z i n g system and org a niz at io n of economic planning. Writes Takahashi:

". . . t h e r e was no agency to assume u n if i e d

r e s p o n s i b i l i t y f o r the c o n t r o l l e d economy, . . . a d m i n i s t r a t i v e r e s p o n s i b i l i t i e s were s c a t t e r e d . . . the government c a r r i e d out economic control with powerful a u t h o r i t y , but because of antagonism within i t s own ranks f a i l e d to conduct u n if i e d economic control . . . f o r example, the Cabinet Planning Board was i n s t i t u t e d as an agency t o draw up war-time economic plans but i t had no executive a u t h o r i t y a t a l l . . . [moreover] th e re was [a ] shortage of s t a t i s t i c a l data and . . . economic planning techniques [were p r i m i t i v e ] . . . ."

37

53

In t h i s v o l a t i l e plan environment, a s e r i e s of s t r a t e g i c economic and i n d u s t r i a l plans were formulated by various semi-public and m i l i t a r y org a niz at io ns located in Japan and Manchuria.

Yet in the

absence of any c o or di na ti on , many of these plans d i r e c t l y competed with each o th e r over the a l l o c a t i o n of r e s o u rc e s , m a t e r i a l , and manpower, thus rendering planning even more u n r e a l i s t i c . The following synoDtic discussion i s not intended to be an exhaustive l i s t i n g of economic and s t r a t e g i c plans although i t examines the most s i g n i f i c a n t plans o f the quasi-war economy period.

Starting

in January 1937, the Army moved to implement i t s "Five Year Plan f o r Key I n d u s tr ie s " (Production Capacity Expansion Plan) based on the concept of the National Defense St a te and ideas of Ishiwara Kanji; the plan was intended as pre pa ra ti on f o r the expected war with the Soviet Union, and was o r i g i n a l l y formulated by the Kwantung Army ("Five-Year Plan f o r Japanese and Manchurian In d u s tr y " ).

38

The Army's s t a f f completed the plan and subsequently i t was presented to the Hayashi Cabinet on May 29, 1937. were:

" . . .

39

The p l a n ' s key f e a t u r e s

production of f i v e m il li o n metric tons of i r o n , two

m il li o n tons o f s t e e l , and two m il li o n tons of l i q u i d f u e l ; the c r e a t i o n of aluminum and magnesium i n d u s t r i e s ; the esta blis hme nt o f motor c a r s , machine tool and areoplane i n d u s t r i e s ; the complete e x p l o i t a t i o n o f coal d e p o s i t s , and the l a r g e - s c a l e extension of h y d ro e le c tr ic power and p la n ts . . . the a g r i c u l t u r a l phase of the plan contemplated sending 100,000 Japanese f a m i l i e s to Manchuria." The p la n , however, was too ambitious and had to be scaled down and re vis ed d r a s t i c a l l y each year.

40

54

Meanwhile, in Japan proper, several Five-Year Plans were d r a ft e d f o r i r o n , s t e e l , pulp, s a l t , gold, alumina, and o th e r commodities.

41

These plans were subsequently merged when the newly c re at e d Cabinet Planning Board began d r a f t i n g i t s "Four-Year Plan—M ate ria ls Mobiliza­ ti o n Plan" (1938-1941), the p l a n ' s goal was to expand productive power and mobilize m a t e r i a l s .

This plan c a l l e d f o r very la rg e

in creas es in the output of iron and s t e e l , gold, o t h e r m e ta ls , c o al , s y n th e t ic gasoline and heavy o i l , crude chemicals, pulp, s a l t , machinery and ve h ic l e s .

Moreover, the plan aimed toward the a t t a i n ­

ment of s e l f - s u f f i c i e n c y within the Yen-Bloc area of 1942 in iron and s t e e l , c o a l , l i g h t m e ta ls , r o l l i n g st o c k , motor c ar s and shipping; the plan was premised on fin di ng the raw m a t e r i a l s f o r th e se products in Japan, Korea, Manchuria and China.

42

As a r e s u l t , both the Japanese

Four-Year Plan and the Manchukuo Five Year Plan were i n t e r r e l a t e d to such an e x te n t t h a t the r e a l i z i n g of the former was very much dependent on the successful completion of the l a t t e r .

Although

the plan period was o f f i c i a l l y extended from f i v e to seven y e a r s , many "p riv a te " observers pre dic ted t h a t i t would re q u ir e t e n , f i f t e e n or even twenty years f o r some of the more ambitious p r o j e c t s .

43

Throughout the period o f the quasi-wartime economy, th e bureauc­ racy and i t s a l l i e s in the m i l i t a r y vigorously attempted t o r e s t r u c ­ t u r e the na tiona l economy in t o a f u l l - f l e d g e d wartime economy. To t h i s end the bureaucracy and the m i l i t a r y r e l i e d e s s e n t i a l l y on t h e i r t r a d i t i o n a l powers:

regulation, le g is la tio n , control,

as well as the e n c o r p o ra t iz a ti o n of producers, the de si gna tio n of national p olic y companies, and the u t i l i z a t i o n of za ib a ts u as instruments

55

of nation al policy.

44

I n s p i t e of bu re au cra tic and org a n iz at i o n al measures Japan gradu­ a l l y d r i f t e d toward a f u l l s t a t e o f war without the b e n e f i t of a w e ll- fu n c ti o n in g mechanism of c e n t r a l i z e d and in te g r a te d s t r a t e g i c economic planning. The d e f i c i e n c i e s of Jap an 's planning system can be summarized in to fo ur problem a re as .

At the te ch nic a l l e v e l , Japan did not

dispose over the r e q u i s i t e planning instruments and c a p a c i t i e s to engage in such a g ig a n ti c planning e x e r c is e .

The Cabinet Planning

Board had a very small s t a f f , and th e course of m i l i t a r y events outpaced the planning e f f o r t s h ope lessly.

45

In the p o l i t i c a l realm

business and in d u s tr y managed to r e s i s t t o t a l control and subjugation by the m i l i t a r y and t h e i r a l l i e s in the bureaucracy mainly by u t i l i z ­ ing t h e i r remaining access to the p o l i t i c a l groups and by a c t i v e l y p a r t i c i p a t i n g in the process of e n c o r p o r a t iz a ti o n and thus r e t a i n i n g some leverage in decision-making.4® In the ideolo gic al realm the re were s er io us problems t o o , as exemplified in the 1941 purge of many Cabinet Planning Board o f f i c i a l s which were accused of being "communists."47

The s in g le g r e a t e s t d e f ic ie n c y of Jap a n' s qu a si ­

wartime economy planning was, however, i t s mistaken premise. Cohen:

" . . .

Writes

the Japanese war plan assumed a ne gotia ted peace

without l a r g e - s c a l e f i g h t i n g , and th e r e f o r e did not contemplate broadening the base of the economy. . . . " Germany's " B li tz k ri e g " su cce ss,

49

48

In th e image of

Japan s basic s t r a t e g y was based

on a s e r i e s of successful s hort campaigns.

56

2 .3 .3 .

Tosei Keizai (Controlled Economy)

In e a r l y 1943, a f t e r the A lli ed Meeting in Casablanca, more American resources were div e rte d to the P a c i f i c Theater.

This in

turn a c c e le r a te d the de clin e of Imperial J ap a n 's productive power and brought about a general reassessment of the s t a t e of a f f a i r s of the war economy.

Already p r i o r to 1943a sobering r e a l i z a t i o n

had s e t in among Japanese m i l i t a r y and bu re a uc ra tic le ad e rs t h a t the course and outcome o f t h e P a c i f i c War would be determined by the b a t t l e of production.

But, as Rice noted:

" . . .

not u n t i l

November, 1943, was an attempt made to c e n t r a l i z e economic p oli cy making and implementation. . . . "

50

In September, 1943, the Japanese

system of wartime economic planning had reached a pivo ta l tur ni ng point when the government announced the "Outline f o r an Administra­ t i v e Program Under the Present S i t u a t i o n " which was e s s e n t i a l l y a general ( c a l l ) and plan f o r the t o t a l mobi liz at ion of Jap a n' s mate ria l and human resources.®*

As a r e s u l t , J a p a n ' s wartime economic

planning system was revamped once more to s u i t changing circumstances. In the o rg an iz ati ona l realm r e s t r u c t u r i n g of the planning system brought about the formation of the Ministry of Munitions in November, 1943; both the Cabinet Planning Board and the Ministry of Commerce and In dust ry were abolished and most o f t h e i r powers and j u r i s d i c t i o n were t r a n s f e r r e d to the new m i n is tr y .

The imperative behind t h i s

reo rg an iz ation e f f o r t was to d r a s t i c a l l y Increase the production of a i r c r a f t through exclu siv e and u n i f i e d control over c o n t r a c t s and production under the a u s p ic ie s of the Ministry of Munitions, whose j u r i s d i c t i o n extended over the following:

(1) general national

57

m o b il iz a tio n; (2) production of munitions; (3) su per vision of produc­ t i o n , d i s t r i b u t i o n , supply, consumption and p r i c i n g of mineral and i n d u s t r i a l products oth e r than those under the j u r i s d i c t i o n of o th e r m i n i s t r i e s ; (4) supervision of l a b o r, wages, c a p i t a l f o r e n t e r p r i s e s engaged in the war e f f o r t s and (5) control over e l e c t r i c and waste 52 power. Japan had entered the highest stage of "to s e i k e i z a i " ( c o n t r o l l e d economy). P r i o r to the November 1943 re or gan iz ation J a p a n ' s war production had suffe red from g r e a t d i f f u s e n e s s , waste and i n e f f i c i e n c y .

This

s t a t e of a f f a i r s was p a r t i a l l y the r e s u l t of i n t e r n e c i n e competition over scarce resources between the M i n i s t r i e s of the Army and Navy, the Ministry o f Commerce and Industry and the Cabinet Planning Board. To remedy t h i s c r i t i c a l s i t u a t i o n , d r a s t i c measures were needed and the new Ministry of Munitions was designated and empowered to become the o r g a n iz at io nal and a d m in is tr a ti v e c e n t e r o f J a p a n ' s war production.

However, in s p i t e of increased and tigh te ne d planning,

c o n t r o l , and management of the economy, J ap a n 's productive e f f o r t i r r e v e r s i b l y de clined with the course of the war in 1945. In summary, i t can be argued t h a t although J a p a n ' s wartime economic planning c o n t r o l s had been extended in scope and degree from ye ar to ye ar since 1937, the attempt to f u l l y control both the economy and the productive e f f o r t were, by and l a r g e , dismal failures.

For one, the Increasing i n t e n s i t y and course of the war

a f t e r 1943 played havoc to the control attempt.

Moreover, the te nacious

r e s i s t a n c e of the p r i v a t e s e c t o r to bure a u cr a tic dominance and sub­ o r d i n a t i o n , as well as the absence of a un if i ed planning machinery,

58

adv ers el y a f f e c t e d the implementation of a wartime c o n t r o l l e d economy. 3. 3.1.

Postwar Economic Planning Intro duc tion

There has been a tendency in s t u d i e s of modern Japan to view 1945 as a pivotal tu rn in g p oi nt and the beginning o f a new era f o r Ja p a n’s p o l i t y , economy, and s o c i e t y .

However, a g r e a t many r e v i s i o n ­

i s t authors have challenged t h a t view and pointed t o the c o n t i n u i t y of pre-1945 politico-economic p a t t e r n s and i n s t i t u t i o n s .

In pa r­

t i c u l a r Nakamura and Dower have advanced the " c o n t in u it y " t h e s i s in t h e i r w rit in gs and c r e d i b l y demonstrated i t s relevance f o r postwar J a p a n ' s economy and p o l i t i c s .

53

Economic planning i s no exception.

Noted a former EPA D ir ec to r-G en er al, " . . .

the pre s en t Economic

Planning Agency has i t s o r i g i n s in the Economic S t a b i l i z a t i o n Board, but the ESB's predecessor was the Cabinet Research Bureau . . . which played an important r o l e in p o li c y fo rm ul at io n, coordination and implementation. . . ." he notes t h a t :

54

Thus Fukui i s simply mistaken when

". . . the f i r s t experimentation with more or less

systematic long-term economic planning was undertaken in Japan during t h i s (post-1945) very e x t r a o r d i n a r y period. . . ."

55

I t i s suggested

here to view postwar Japanese economic planning as a public po lic y continuum, and moreover as one of the le g a c i e s of th e P a c i f i c War, not unlike MITI's guidance of the p r i v a t e s e c t o r ( gyosei s h id o ), the k e i r e t s u phenomenon, or the social s e c u r i t y system t o name j u s t a r e p r e s e n t a t i v e few.®®

59

In terms of the continuum of economic planning i t i s important to r e i t e r a t e t h a t Japanese economic planning was formally i n s t i t u ­ tional'

J during the P a c if ic War, but a ls o t h a t planning commenced

with the quasi-wartime economy in 1937.

With the outbreak of the

P a c i f i c War and i t s e s c a l a t i n g i n t e n s i t y the planning idea was f u r t h e r enhanced and g e ner al iz e d; and f i n a l l y , the war conditioned chaotic s t a t e of the economy, which r e le g a te d market fo r ce s in to a permanent s t a t e o f p a r a l y s i s , made i t p l a i n t h a t planning was n ece ssa ry , i n e v i t ­ able and above a l l here to s ta y. In i t s conception and implementation both wartime and postwar economic planning have been e xc lus ive bu re a u c ra ti c " a f f a i r s , " even though the s t a t e has always r e l i e d on i n d u s t r i a l and t r a d e a s s o c i a ­ t i o n s to execute the d e t a i l s of i t s pla ns.

During the pre-1945

and postwar era the locus of power and a u t h o r i t y f o r economic planning has res ide d with the bureaucracy.

And moreover, not unlike the

wartime per iod , when a r i g i d system of to s e i keizai ( c o n t r o l l e d economy) was adopted, the postwar bureaucracy exer cise d s t r i c t d i r e c t control over the economy well i n t o the e a r l y 1950s when the wartime p a t t e r n s of economic control were f i n a l l y abandoned and replaced by a system of s t r a t e g i c s e c t o r a l and i n d i c a t i v e economic planning. In f a c t , during the g r e a t e r p a r t of the p o s t - s u r r e n d e r period the ro le of the s t a t e 1n the economy grew s t e a d i l y to reach unprecedented dimensions with the bureaucracy acqu irin g more and more r e s p o n s i b i l i ­ t i e s f o r planning, organizing and i n i t i a t i n g economic a c t i v i t y . In s h o r t , s t a t e c a p it a li s m f i n a l l y seemed to become a r e a l i t y under the U.S. occupation.

Although the powerful r o l e of the s t a t e was

60

n e i t h e r uniquely Japanese nor a c c i d e n t a l , f o r in most war-torn c ou nt ri e s problems o f economic r e h a b i l i t a t i o n and r e c o n s tr u c ti o n augmented the s t a t e ' s ro le as pl a nner , a l l o c a t o r and provider.

Japanese a t t i ­

tudes toward economic planning—i n i t i a l l y formed during the wartime period and s t r e s s i n g the r o l e of the s t a t e as a l l o c a t o r and provider in s o c i e t y —were c r i t i c a l l y re in fo r ce d by the ex igencies pervasive throughout the occupation e r a .

Moreover, many of J ap a n 's postwar

economic planners who had formed t h e i r p o l i t i c a l b e l i e f s and "planning" views in the 1930s and gained conside rab le planning experience during the course of the war came to e x e r t consid era ble infl uence on J ap a n 's postwar economic and i n d u s t r i a l p o l i c i e s .

These f a c t s reasonably

suggest t h a t th e re has been a s i g n i f i c a n t prewar-postwar continuum in terms of planning p r e c e p t s , o r ga niz atio n and even s t a f f .

And

on a f i n a l note , the postwar arrangement o f the Japanese economic planning system accorded in some of i t s i n s t i t u t i o n a l f e a t u r e s and org a ni z at io nal e f f e c t i v e n e s s to what the by then defunct m i l i t a r y bu re a ucr a tic s t r a t e g i s t s and "planners" of the "quasi-wartime" economy and wartime era had a sp ir ed ye t were unable to achieve.

This

phenomenon may be explained in p a r t as the r e s u l t of a c o l l u s i o n between leading fo rc e s in p o s t - s u r r e n d e r Japanese p o l i t i c s (SCAP and i t s Japanese c o l l a b o r a t o r s in the Economic S t a b i l i z a t i o n Board) to s t r u c t u r a l l y con tain s o d a ! c o n f l i c t and p o l i t i c a l extremism in t h e i r search f o r a s t a b l e Japanese postwar economy and s o c i e t y .

61

3.2.

Post-Surrender Economic Plans (1945-1946)

Immediately a f t e r the conclusion of the P a c i f i c War in August 1945 o f f i c i a l s in the Ministry of Foreign A f f a i r s and the r e s u rr e c te d M ins it ry of Commerce and Industry

57

began to formulate and d r a f t

various p l a n - l i k e documents in an attempt to r e s t o r e J ap a n 's economic v i a b i l i t y and to r e h a b i l i t a t e the na tiona l economy.

On August 16,

1945, one day a f t e r the su rr e n de r , a "study group" of various Japanese o f f i c i a l s held the f i r s t of over f o r t y meetings to dis cus s problems of the postwar economy.

This p a r t i c u l a r meeting, however, had been

planned well before J ap a n 's su rr e nder , and while the date was a coincidence the theme was not, f o r the Yalta and Potsdam provisions f o r Japanese r e p a ra t io n s were looming dark over the Japanese p o l i t i c a l economy. 58 The nucleus of t h i s study group was formed under r a t h e r d i f f i c u l t circumstances in e a r l y 1945 and included mainly economists and bureau­ c r a t s , some o f them were e x - o f f i c i a l s o f the 1942 disso lve d Cabinet 59 Planning Board. In March of 1946, t h i s group, designated as the Special Study Committee on Postwar Economic R e h a b i l i t a t i o n and a f f i l i ­ at ed with the Foreign Ministry under the e n e r g e ti c lead ersh ip of Taira and Okita,®® produced a r e p o r t e n t i t l e d "Basic Problems f o r the Economic Reconstruction of Japan"; 10,000 copies of the re p o rt were produced and widely disseminated among leading Japanese in the p r i v a t e and public s e c t o r .

R et ro sp e c ti v e ly many have come to

co nsid er the re p o rt as Instrumental 1n s e t t i n g the course of the postwar economic re h a b i l i t a t i o n . ® *

In November 1946 the same r e p o r t

was published as the "Foreign Office P ro je c tio n" to g e th e r with the

62

CO

"Supply Capacity Study Group P r o j e c t i o n . "

Both re p o r t s brought

in t o sharp focus J ap a n 's p o s t- s u rr e n d e r economic p l i g h t , and demon­ s t r a t e d s u c c e s s f u l l y t h a t the s t r a i n of the P a c if ic War had been too severe f o r the economy which was now in a complete s t a t e of chaos.

The r e p o r t s t a t e d q u i t e c l e a r l y t h a t e f f o r t s t o convert

the wartime economy to a peacetime economy would not succeed unless the mater ia l needs to r e v i t a l i z e and r e h a b i l i t a t e the Japanese economy could be s a t i s f i e d . Timing and scope of the Ministry of Foreign A f f a i r s Study Group Report have been of g r e a t e s t p o l i t i c a l s i g n i f i c a n c e .

For one, the

committee r e p o r t c l e a r l y contravened the simultaneously published Pauley Report on Japanese Reparations which surmised t h a t the war had only damaged the d i r e c t war economy, t h a t Japan s t i l l r e ta in ed g r e a t productive p o t e n t i a l , t h a t a surplus was a v a i l a b l e f o r r e p a ra ­ t i o n s to neighboring Asian c o u n tr ie s which would c o n t r i b u t e to 64 p o l i t i c a l s t a b i l i t y in East Asia. Moreover, the Pauley Report suggested t h a t the All ie d Powers should take no a ct i o n to a s s i s t Japan in maintaining a standard of l i v i n g higher than t h a t of neighboring A s i a t i c c ou n tr ie s inj ur ed by Japanese aggression.

65

This notwith stand ing, a lr e ad y in 1947 the i n i t i a l U.S. policy o f demanding s ub st a nt iv e r e p a ra t io n s was changed to encouraging r e c o n st r u c ti o n of the Japanese economy, a t the same time the o th e r members of the Far Eastern Commission continued to pres s f o r r e p a ra ­ tions.

A combination of economic and p o l i t i c a l f a c t o r s must be

c i t e d as the major reason behind the American p o lic y change. one, since mid-1946 the Japanese government had begun to make

For

63

ex tens ive p o l i t i c a l use o f the Foreign M i n i s t r y ' s two p l a n - l i k e re p o rt s ("Basic Problems of the Japanese Economic Reconstruction" and the "Living Standard and the Future Economy of Japan."®®

What

has been overlooked in most analyses of t h a t period i s the instrumental r o l e these re p o r t s played in the Japanese campaign to champion the argument t h a t the r e c o n s tr u c ti o n of the Japanese economy would have to be premised on J a p a n ' s i n d u s t r i a l recovery which in turn was said to be co ntingent upon the a v a i l a b i l i t y of r e q u i s i t e machinery, p l a n t s , raw m a t e r i a l s and o t h e r means of production.

O st en s ib ly ,

the Japanese bu rea ucrats were q u it e successful in t h e i r attempt to impress upon various U.S. f a c t - f i n d i n g teams and missions the view t h a t a s e l f - s u p p o r t i n g Japanese economy was necessary f o r recovery and r e c o n s t r u c t i o n . that " . . .

However, charges were leveled in A ll ie d q u a r t e r s

the Japanese made t h e i r country seem poorer than i t

r e a l l y was. . . ."®^ Moreover, the Japanese quest f o r a s e l f - s u p p o r t i n g economy was i n a d v e r t e n t l y y e t p o s i t i v e l y r e in fo r ce d by American f e a t s t h a t Japan might become a permanent burden f o r the U.S. taxpayer i f re pa ra ­ t i o n s would be exacted according to the Pauley r e p o r t .

As a r e s u l t

the view came to pr ev ai l t h a t Japan would be able to stand on i t s own without massive American a s s i s t a n c e only through a revival of i t s economy.

Supporting t h i s pragmatic view was the conviction

pervasive in American c i r c l e s t h a t a strong Japan would be a bulwark 68 a g a in s t Soviet Communist incurs ion s in East Asia. I t i s a g a in s t t h i s complex politico-economic background t h a t one must view the re p o rt s and recommendations o f the S tr ik e Mission (o r Overseas

64

Consultants) and the Johnston Committee urging i n d u s t r i a l revival 69 of Japan; and a ls o the Far Eastern Commission's January 23, 1947, d i r e c t i v e s t a t i n g t h a t the peaceful needs of the Japanese people should be defined as being s i m i l a r to the standard o f l i v i n g p r e v a i l ­ ing in Japan during the period of 1930-1934.^°

In r e t r o s p e c t i t

seems p l a u s i b l e to argue t h a t the Foreign M i n i s t r y ' s two po s t- s u rr e n d e r economic plans have been most instrumental in thwarting A lli ed re p a ra ­ t i o n s req ue sts and demands a t the detriment of J ap a n 's economic r e h a b i l i t a t i o n and recovery.

And f i n a l l y , the se p l a n - l i k e re po rts

c l e a r l y co rroborate the ' c o n t i n u i t y ' t h e s i s . 3.3. 3 .3 . 1 .

Economic Planning From 1946-1954 Reconstruction Plans (1946-1949)

The economic plans d r a ft e d in the years from 1946 to 1954 can be meaningfully divided in t o re c o n s tr u c ti o n plans (1946-1949) and plans f o r economic s e l f - s u p p o r t (1949-1952/4).

Although both plan

periods possessed e n t i r e l y d i f f e r e n t c h a r a c t e r i s t i c s , r e f l e c t i v e of the r e s p e c ti v e planning environment, the org a n iz at io n of economic planning remained concentrated in the same i n s t i t u t i o n u n t i l 1952, the Economic S t a b i l i z a t i o n Board (ESB), which provided important I n s t i t u t i o n a l c o n t i n u i t y in a period o f economic and p o l i t i c a l uncer­ tainty. The ESB was formed 1n 1946 and l a s t e d u n t i l Japan regained i t s independence 1n 1952; th e re can be no doubt t h a t the ESB has been J a p a n ' s most powerful and e f f e c t i v e economic planning i n s t i t u ­ tio n ever.

The c r e a t i o n of the ESB, i t s function and or ga niz ati on

65

in p a r t i c u l a r , must be ascribed to a p o l i t i c a l compromise st ru c k between the Japanese government and SCAP.

In e a r l y March 1946 the

Shidehara c ab in e t [1945-46] was fa cing a mounting economic and p o l i t i c a l c r i s i s and requested permission from SCAP f o r an or g a n iz a ti o n a l arrangement to cope with the r a p i d l y in c re as in g i n f l a t i o n and ubiquitous mate ria l s h o r t a g e s . W h i l e the Japanese government's i n t e n t i o n bore the earmark of wartime economic control a s s o c i a t i o n s and m a te r ia ls a l l o c a t i o n , the economic reformers in SCAP envisioned an economic recovery managed by an al l-powerful c e n t r a l i z e d economic superagency adm inistering the r e q u i s i t e economic p o l i c i e s .

At a Tokyo press

conference in May 1946 a ranking GHQ o f f i c e r s t a t e d t h a t J a p a n ' s economic c r i s i s required economic planning and the ESB was to be e s t a b l i s h e d f o r t h a t purpose.

72

As a r e s u l t of the Japanese working arrangement with SCAP the ESB's functio n was defined as to s t e e r the various economic m i n i s t r i e s in a coordinated program of economic s t a b i l i z a t i o n ; u n t i l 1952 the ESB's major ta sk s co nsis te d mainly of economic planning, a d m in is tr a ­ ti o n o f the postwar economic c o n t r o l s , and the ov e ra ll coo rdi na tio n 73 of economic p o l i c i e s . Under the s o c i a l i s t Katayama and Ashida c a b in e ts the ESB evolved in to a g i g a n t i c government cont rol agency e x e r c i s i n g a u t h o r i t y over a l l asp e c ts of J a p a n ' s economy with a reach extending even to the provin cial l e v e l .

The ESB s t a f f was

huge and reached more than two thousand a t i t s prime under the Katayama Cabinet. The c e n t e r of economic planning was loc ated in the ESB's Research Section which became the t r a i n i n g ground f o r J a p a n ' s postwar economic

66

planners who were s t i l l using the "micro method," or add-up-by-sector pro ce ss, th e p r a c t i c e of the mo bi liz at io n plans during the P a c i f i c War.

But they soon mastered modern methods and t h e i r " s c i e n t i f i c "

judgments and assessments, in the form of recommendations, came to e x e r t con sid er ab le infl uence on postwar economic policy making.

74

The problematik surrounding the ESB has been s u c c i n c t l y sum­ marized by Suzuki:

" . . .

the causes f o r the powerful p o s it io n

of ESB a u t h o r i t y was i t s backing and support by the GHQ . . . which in turn was based on the influence o f young "New Deale rs” in the GHQ which attempted to r e a l i z e " p l a n n i f i c a t i o n " in an experimental manner u n a tt a in a b le in t h e i r own country. . . .

At the same time,

however, the Japanese government and p u b l i c , while recognizing the ser iou sne ss of the economic c r i s i s , f e l t s tr o n g ly t h a t such an or g a n i­ z a ti o n l i k e the ESB could not have been creat ed with such ease with­ out the GHQ support because of J ap a n 's p o l i t i c a l c u l t u r e rooted s e c t i o n a l i s m , the strong s t a t u s quo o r ie n te d bureaucracy and i n f l u ­ e n t i a l zaikai By 1949 some of the economic c o n t r o l s had become s u f f i c i e n t l y dy sfunctional and t h i s in turn diminished the very power base i f not raison d ' e t r e o f the ESB.

Moreover, the June 1949 a d m i n i s t r a t i v e

reform (in connection with a n t i - i n f l a t i o n a r y measures) s i g n i f i c a n t l y c u r t a i l e d the ESB's s t a f f which was then reduced to 900.^®

F ur th er ­

more, general confidence in the performance of the Japanese economy was boosted by the Korean War and business began to demand more economic freedom.

And f i n a l l y , as soon as the San Francisco Treaty

came int o e f f e c t and Japan regained i t s independence, z aik ai

67

demanded f o r c e f u l l y the a b o l i t i o n of the ESB.

In Ju ly 1952, as the

r e s u l t of a combination of underlying c u r r e n t s and o f f i c i a l demands the once powerful economic planning and p olic y making i n s t i t u t i o n was reorganized and re le g a te d to the s t a t u s o f an agency f o r economic resea rch and coo rd in atio n; J a p a n ' s most powerful economic planning organzation had been disso lve d and ceased to e x i s t .

During i t s

s i x years of ex ist en c e the Economic S t a b i l i z a t i o n Board d ra ft e d several important economic plans f o r J a p a n ' s economic re c o n st r u ct io n and economic s e l f - s u p p o r t , to be discussed below. Economic Recovery Plan On May 17, 1948, the ESB announced the d r a f t f o r "Economic Recovery Plan"; in terms of i t s content the d r a f t plan c a l l e d f o r achieving the 1930-1934 Living Standard by 1952, a s u b s t a n t i a l reduc­ t i o n of unemployment t o about two m i l l i o n , and a ls o a balanced Balance of Paym en ts .^ This plan d r a f t was o r i g i n a l l y requested by the s o c i a l i s t Katayama Cabinet (May 24, 1947-March 9, 1948) upon taking o f f i c e . The new c ab in e t professed i t s "planning" p r o c l i v i t i e s when i t e s t a b ­ l is h e d a " S e c r e t a r i a t f o r Long-Range Planning" within the ESB in J u l y 1947.

The S e c r e t a r i a t f o r Long-Range Planning, in cooperation

with o th e r governmental agencies and m i n i s t r i e s , and the Economic Reconstruction Conference ( Keizai Fukko Kaiqi)

78

were the p r in c ip a l

authors of the economic recovery plan d r a f t . In formulating the plan d r a f t , however, J a p a n ' s postwar planners by and la rg e s t i l l r e l i e d on the proven techniques and experiences

68

o f the wartime commodity mob iliza tion pla ns .

79

This notwithstanding

by the time the f i r s t version of the Economic Recovery Plan was d r a f t e d the Katayama Cabinet had a lre ad y f a l l e n . The formulation of the Economic Recovery Plan however brought important org a ni z at io na l changes and p o l i t i c a l developments f o r Japanese economic planning.

F i r s t of a l l , the "p lanning-oriented"

s o c i a l i s t Katayama appointed Hiro Wada to the Cabinet as D ir e c to rGeneral of the ESB.

Wada had been implicated in the "Cabinet Planning

Board Incident" in 1940 and was a r r e s t e d a t t h a t time fo r a ll e g e d l y t r y i n g to u t i l i z e e x i s t i n g governmental c o n t r o l s f o r communist pur­ poses.

The s o c i a l i s t s viewed Wada as a bureaucrat t h a t could be

t r u s t e d and provide e f f e c t i v e l i a i s o n with more conse rvativ e elements in the bureaucracy.

Wada and his a s s o c i a t e s made the ESB in to one 80 o f the c en te rs of p o l i t i c a l a u t h o r i t y in the government. To t h i s end d r a s t i c changes in personnel a dm in is tr a ti o n were implemented with the ESB s t a f f reaching an a l l - t i m e high of 2003 personnel. In the general e f f o r t to reorganize J a p a n ' s economy and in du s tr y s p e c i a l i s t s from the p r i v a t e s e c t o r were r e c r u i t e d to important ESB posts while several m i n i s t r i e s dispatched some of t h e i r most t a l e n t e d young o f f i c i a l s to serve in various important c a p a c i t i e s a t the ESB.81 Secondly, in Spring 1948 the Japanese bureaucracy managed to "capture" plan decision-making and to make i t one of i t s d i s c r e t e instruments in the policy-making a r s e n a l .

The 1946 formed Economic

Reconstruction Conference ( Keizai Fukko K aiqi) [which stro ve to generate e f f e c t i v e n o n - o f f i c i a l input in t o the b u re a u cr a ti c

69

decision-making process by engaging in the d r a f t i n g of long-term economic r e c o n s tr u c ti o n plans] had been formally dissolved by May 1948, and the task of formulating economic plans was l e f t again to the bureaucracy, p a r t i c u l a r l y the ESB.

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And t h i r d l y , the tenor o f the 1948 Economic Recovery Plan was a g g re s s iv e , s e t t i n g annual t a r g e t s f o r the various s e c t o r s of the economy unlike the previous "passive" and "defensive" p l a n - l i k e Foreign Office p r o j e c t i o n s .

In t h a t sense th e n, the 1948 Recovery

Plan marked a piv ota l turn in g poi nt in the course and d i r e c t i o n of Japanese economic planning. Economic Reconstruction Plan (1949-53) The Ashida Cabinet (March 10-0ctober 15, 1948) continued the planned r e c o n s tr u c ti o n e f f o r t ; i t e s t a b l i s h e d the Economic Reha bil i­ t a t i o n Committee (headed by the Prime M inister) as an ex tr a o rd in a ry organ o f the ESB and requested the formulation o f a long-term economic r e c o n st r u c ti o n plan.®^ The plan period was then divided i n t o two d i s t i n c t phases: Phase one, 1949-1950, aimed to achieve economic s t a b i l i t y by r e e s t a b ­ l i s h i n g the l i v i n g standard of the people a t a reasonable level (1930/34) and to a r r e s t runaway i n f l a t i o n ; phase two, 1951-53, to achieve economic v i a b i l i t y by a t t a i n i n g a s e l f - s u p p o r t i n g economy capable o f exporting enough t o pay f o r the imports o f necessary f o o d s t u f f s and raw m a t e r i a l s .

Moreover, the Ashida government c l e a r l y

recognized t h a t the success of t h i s r e h a b i l i t a t i o n plan was dependent on American aid and a s s i s t a n c e thus n e c e s s i t a t i n g car eful management

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and the s e t t i n g of p r i o r i t i e s .

And f i n a l l y , the Ashida government

made runaway i n f l a t i o n a major p ol ic y is su e and de clared t h a t a n t i i n f l a t i o n a r y measures had to be viewed from a long-term pe rs pec tiv e and held t h a t by inc re as in g the supply of bottl e ne ck commodities i n f l a t i o n could be a r r e s t e d .

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The "Ashida Plan" and the c a b i n e t ' s p o s i t i o n on a n t i - i n f l a t i o n a r y measures contravened with SCAP which went on to formulate i t s own a n t i - i n f l a t i o n a r y p o l i c y and in December 1948 decreed a most rigorous d e f l a t i o n program, the "Nine Point Program" t h a t c a l l e d f o r painful and d r a s t i c measures to suppress i n f l a t i o n .

Meanwhile, the Ashida

government had a lr e ad y been replaced by a new Yoshida government which endorsed the SCAP Nine Point Program as well as the "Dodge Plan" placing gre a t emphasis upon monetary s t a b i l i z a t i o n , i t declared a wage f r e e z e , demanded a c u t in government e xp en di tu re s ; and p re ­ scribed the Japanese government to r i d i t s e l f of U.S. aid and govern­ ment s u b s i d i e s , both of which had been supporting the Japanese economy since the end of the P a c i f i c War.

85

Both programs could e l i c i t

l i t t l e enthusiasm in Japanese p o l i t i c a l c i r c l e s , ye t the new Yoshida ad m in is tra tio n made the c r i t i c a l d i f f e r e n c e as f a r as t h e i r implementa­ ti o n was concerned. 3 .3 .2 .

Economic Self-Support Plan (1949-54)

The new Yoshida a dm in is tr a ti o n marked a ls o the beginning of a new stage f o r postwar economic planning.

Yoshida's d r a s t i c s h i f t

to l i b e r a l economic p o l i t i c s , his implemeentation of the "Nine Point Program" and general support of the l a i s s e z - f a i r e a t t i t u d e s enunciated

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in the Dodge s t a b i l i z a t i o n program rep resen ted a r a d ic a l depar ture from the previous system of c o n t r o l l e d economy upon which the e n t i r e postwar economic planning e f f o r t had been premised.

Under these

new circumstances the Economic R e h a b i l i t a t i o n Committee proceeded with i t s work and on Hay 30, 1949, the committee presented i t s "Economic R e h a b i l i t a t i o n Plan."

The p la n , however, had l i t t l e chance

to be implemented under the Yoshida a d m in is tr a ti o n .

Observed Tsuru:

". . . Prime Mi nister Yoshida was highly c r i t i c a l of the plan and suggested ' r e c a s t i n g ' the whole th in g . . . the commission spent the next few months in the work of dres s-u p r e v i s i o n . . . however, . . . the salvage ope ration was a f a i l u r e . . . f i n a l l y in September 1949 i t was decided t o bury the p la n , and Mr. Yoshida explained th e reasons in the Diet in October, saying t h a t 'long-range planning i s meaningless.'"®® Yoshida's r e c a l c i t r a n t a t t i t u d e toward economic planning did not change u n t i l his p o l i t i c a l downfall in December 1954; only then was the way clear ed again f o r o f f i c i a l Japanese economic planning. Yoshida considered economic planning to be the main a t t r i b u t e of communism, and anyone on his s t a f f who argued the need f o r drawing up an economic plan was l i a b l e to be branded "communist."

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Prime

M in ist er Yoshida's s t i f f opp osition to any kind of economic planning came to have a de trimental Impact on planning.

From 1949 u n t i l

1954 th e r e was n e i t h e r o f f i c i a l encouragement f o r planning, nor was t h e r e any o f f i c i a l re quest f o r the formulation of long or medium term economic plans.

Throughout the e n t i r e Yoshida era the ESB

s t a f f was s y s t e m a t i c a l l y reduced, and as soon as Japan had regained

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i t s p o l i t i c a l independence and sovereignty the ESB was s w i f t l y d i s ­ banded to r i d Japan of one of the most unpleasant symbols of the U.S. occupation.

In s p i t e of Yoshida's notorious a n ti - p la n n in g

stance J a p a n ' s bure a ucr a tic planners formulated several important economic planning documents during h i s re ign .

Moreover, Japanese

economic planning during t h a t period was a ls o c r i t i c a l l y influenced by the changing circumstances brought about by the outbreak of the Korean war which not only ended the 1949 r e c e s s i o n , but a ls o brought the U.S. occupation to an end in 1952.

Under the se changing economic

and p o l i t i c a l circumstances s ix p l a n - l i k e documents were d ra ft e d by the ESB and i t s successor o r g a n i z a t i o n , the Economic De liber atio n Agency: EOS-Project (1950-1952) 3-Year Economic Self-Support Plan (1951-1953) Top Level Study (1950-1951) B-Materials Plan (1951-1954) Outlook of the Economy in 1957 (1952-1957) Okano Design (1953-1957) The EOS P r o je c t was a study of the c ond iti ons f o r achieving economic s e l f - s u p p o r t , focused mainly on problems r e l a t e d to Jap a n's dependence on American aid and a s s i s t a n c e ; i . e . shortage of U.S. and investment funds, and t r a d e promotion.

The study proposed a

Marshall Plan f o r Asia and a re l a x a t i o n of J ap a n 's tr a d e with China in order to a t t a i n economic v i a b i l i t y by 1952.

The EOS study d i d ,

however, not have any p r a c t i c a l Influence on economic p o l i c y , but i t helped s e t the stage f o r d r a f t i n g the 3-Year Economic Self-Support P la n .88 The 3 - Year Economic Self-Support P la n , a f u r t h e r re v is io n of

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the 1949 Economic Reconstruction Plan, was formulated by th e ESB in coooperation with the Commission f o r Economic Self-Support through which the government sought the opinion and cooperation of the business community.

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The plan d r a f t was presented in January 1951; i t c a l l e d

f o r securing of e s s e n t i a l raw material imports, d r a s t i c in creas es in food production, the formation o f investment c a p i t a l , e t c . , a l l ta r g e te d f o r 1953.

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Meanwhile the Korean War had broken out and

t h i s event was d r a s t i c a l l y changing the p l a n ' s environment and premise, moreover, i t a f f e c t e d the course and speed o f J a p a n ' s postwar economic development.

For Japan the "Korean War Boom" marked a pivotal

tu rn in g p o i n t ; U.S. special procurement led to a gi g a n ti c windfall d o l l a r income which i n i t i a l l y blurr ed plan t a r g e t s and f i g u r e s . By the time the plan was published i t had a lr e ad y become dysfunctional altogether. Top-Level Study.

As a r e s u l t of the Korean War SCAP ordered

many changes in i t s previous occupation polic y.

In t h i s context

SCAP ordered a reassessment o f J a p a n ' s i n d u s t r i a l c ap a c ity and i t s p o t e n t i a l c o n tr ib u ti o n to the war e f f o r t .

A j o i n t survey was c a r r i e d

out by SCAP and Japanese government teams to determine J a p a n ' s l a t e n t i n d u s t r i a l ca p a c it y ; the fin din gs were published as the Top-Level Study in e a r l y 1951 concluding t h a t p l a n t s and equipment presented lim it ed f a c t o r s .

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B-Materials P la n, a ls o r e f e r r e d to as B-Reference Plan, was 92 l a r g e l y based on the f in di ng s of the Top-Level Study. In i t s conception, however, the plan resembled a war-time mob iliza tion plan because of i t s est im ati on of the economy's t o t a l c ap ac ity .

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74

The B-Materials Plan had several f u n c ti o n s ; f o r one, i t served as "refere nce m a te r ia l" f o r the Japanese Peace Treaty d e le g a ti o n . Yet another purpose of d r a f t i n g the plan was to a n t i c i p a t e economic probems t h a t might occur as a r e s u l t of the end of the U.S. occupation and the "special procurement."

The plan i d e n t i f i e d possi bl e b o t t l e ­

necks, i . e . lack of adequate power supply and s e t the goal of securing s u f f i c i e n t e l e c t r i c power.

Moreover, the plan a ls o estimated Jap a n' s

a b i l i t y to ser vic e a $285 m il li o n loan in connection with the finan cing of power p l a n t p r o j e c t s .

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Outlook f o r the Economy in 1957.

In February 1953 the Economic

D el ibera ti on Council, successor o f the 1952 dissolved ESB, published a "Comprehensive Pe rspective of the Japanese Economy in 1957." Computing the amount of for eig n loans required f o r the long-term development of the Japanese economy the EDC formulated the "Outlook" which was prepared p r im a r i ly to s a t i s f y demands from the I n te r n a ti o n a l Bank f o r Reconstruction and Development.

The IBRD was i n t e r e s t e d

in le ar ni ng the pro spective s t a t e of the Japanese economy; and the probable course and d i r e c t i o n of the government's economic p o li c y in the post-Peace Treaty e r a .

This "plan" assigned exports a c r i t i c a l

func tion while Investments were to be concentrated in a g r i c u l t u r e and sh ip b ui ld in g.

Methodologically, the "outlook” marked a new

depar tur e I n s o fa r as growth r a t e concepts were used more f r e q u e n tl y than ever be fo re , and an Investment fund shortage 1n the amount of $317 m il li o n was to be met by borrowing from the World Bank.

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The Okano Scheme, b a s i c a l l y a revised version of the "Outlook," was published on June 2, 1953.

I t was d r a f t e d f o r p o l i t i c a l reasons

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p ri m a ri ly .

For one to draw maximum loans from the World Bank, a

d e le ga tio n was expected to v i s i t Japan in the f a l l ; but e q u a ll y important was the acute d i f f i c u l t y in the Balance of Payments which had become the c e n t r a l economic (and p o l i t i c a l ) issue by Spring of 1953; Jap a n's fo re ig n exchange holdings had been dwindling r a p i d l y f o r the proceed­ ing few months.

The Okano Scheme, named a f t e r the EDC chairman,

was b a s i c a l l y an a u s t e r i t y program.

To remedy economic exigencies

the Okano Scheme proposed an expansion of exp orts and to promote economic s e l f - s u p p o r t by su bs id iz in g import competing i n d u s t r i e s (import s u b s t i t u t i o n ) ; i t a ls o suggested the formation o f export c a r t e l s . 96

And f i n a l l y the Okano Scheme served as a guidepost f o r

planning the r a t i o n a l i z a t i o n of J a p a n ' s domestic i n d u s t r i e s .

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However, these pseudo-planning e x er ci s e s came to an abrupt end when the new Hatoyama a dm in is tr a ti o n formally i n s t i t u t i o n a l i z e d economic planning in 1955 by c a l l i n g f o r a 5-year development plan and e s t a b l i s h i n g the Economic Planning Agency.

Before tu rn i n g our

d is cus si on to J a p a n ' s " i n s t i t u t i o n a l i z e d " and "formal" postwar economic planning, l e t ' s pause f o r a moment and summarize some of the s a l i e n t f e a t u r e s of planning f o r economic s e l f - s u p p o r t of the Yoshida admin­ istration. I t i s c e r t a i n l y no overstatement to surmise t h a t the Japanese plans and p l a n - l i k e documents f o r economic s e l f - s u p p o r t were exceed­ ing ly "crude" and s u p e r f i c i a l 1n t h e i r conception and execution. This can, however, be explained s a t i s f a c t o r i l y by poin ting to Yoshida's tenacious opposition to any form of planning.

Moreover, the plans

f o r economic s e l f - s u p p o r t were formulated a g a i n s t a background of

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p o l i t i c a l and economic turmoil and often in response of tremendous exter nal p o l i t i c a l and economic p r e s s u r e s , e . g . Korean War, World Bank. Furthermore, a t the end of the U.S. occupation in 1952, broad s o c i e t a l , p o l i t i c a l and economic force s pressed f o r d i s s o l u t i o n of the ESB as an i n s t i t u t i o n f o r economic c o n t r o l , p o li c y making and planning.

Congruent with his " l i b e r a l " p r e c e p t s , Yoshida complied

and st ri p p e d the ESB of most of i t s previous powers and a u t h o r i t y and reduced the s t a f f from 666 to 397.

At the same time the Economic

D el ibera ti on Council was organized and de clared the ESB's organiza­ ti o n a l successor and formally designated as the leading a d m in is tr a ti v e e n t i t y in charge of economic planning.

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Yoshida had in f a c t success­

f u l l y emasculated Japanese economic planning by formally s ep ar atin g economic planning from the economic policy-making f unc tio n.

Previously

the se two fun ct ion s had been u n if i e d o r g a n i z a t i o n a l l y and a dm in is tra ­ t i v e l y in the ESB where they represented one of the ba sic p i l l a r s of postwar J ap a n 's notorious economic control system.

Under the

new arrangement economic planning and the new Economic

Delib erati on

Agency were re le g a te d to p o s i t i o n s of l e s s e r s i g n i f i c a n c e in the ove ra ll framework of Japanese economic policy-making.

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A gr e a t

deal of the power and a u t h o r i t y of the defunct ESB was usurped by MITI 1n I t s r e l e n t l e s s dri ve to reorganize J ap a n 's post-independence i n d u s t r i a l s t r u c t u r e in i t s own image.

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3.4. 3. 4 .1 .

Japanese Economic Planning From 1955 to the Present Introduction

Since the o f f i c i a l incep tion of Japanese economic planning in 1955, the government has presented ten o f f i c i a l pl a ns.

The Economic

Planning Agency c l a s s i f i e s these plans in t o four broad c a t e g o r i e s based on t h e i r poli cy objectives.*®® The f i r s t category concerns the various economic p l a n s , o f f i c i a l and u n o f f i c i a l , t h a t coped with J a p a n ' s economy from recovery of the P a c i f i c War u n t i l the phase of ' s e l f - s u p p o r t ' in the mid-1950s. Hatoyasma's 1955 Five-Year Plan f o r Economic Self-Support (1956-1960) belongs in t h i s category; i n c i d e n t i a l l y t h i s plan was the only one t h a t was " o f f i c i a l l y approved" by the Cabinet during the e n t i r e postwar period.

The basic aim o f the Economic Self-Support Plan

was to achieve economic s e l f - r e l i a n c e within f i v e y e a r s , i . e . to achieve independence from the United S t a t e s aid and sp eci al procure­ ment, gain f u l l employment through modernization of production f a c i l i ­ t i e s and the promotion of i n t e r n a t i o n a l tr a d e and reduc tion of depend­ ence on Imports (import s u b st it u ti o n ). * ® * The various plans f o r rapid economic growth belong to the second category; the New Long-Range Economic Plan f o r 1958-1962; the National Income Doubling Plan f o r 1961-1970; and the Medium-Term Economic Plan f o r 1964-1968.

These plans aimed p r i m a r i l y a t maximizing economic

growth and f u l l employment; major p o lic y o b j e c t i v e s were improvement o f i n f r a s t r u c t u r e and the I n d u s t r i a l s t r u c t u r e , promotion o f e x p o r t s , and modernization o f the backwards s e c t o r s of the economy (low pro­ ductivity sectors).

During t h i s period major emphasis was placed

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on rapid economic growth and the market mechanism was expected to take care of income d i s t r i b u t i o n .

102

In the t h i r d category belong several plans t h a t emphasized balanced economic growth and social development in the decade follow­ ing the mid-1960s; the Economic and Social Development Plan f o r 1967-1971, the Economic and Social Development f o r 1970-1975, and the Basic Economic and Social Plan f o r 1973-1977.

These plans were

p r im a r i ly a p olic y response to balance in c re as in g excesses and i n e q u i t i e s creat ed during the decade of rapid economic growth. The concept of " s o c ia l" (development) was added to the plan t i t l e and the notion of Japan as a "welfare s t a t e " was o f f i c i a l l y i n t r o ­ duced.

The basic aims were to achieve balanced and steady economic

development and the promotion of na tio na l welfare through pr ic e s t a b i l i z a t i o n , social development, and i n t e r n a t i o n a l cooperation. The plans a ls o came to emphasize environmental problems.

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The fo u r th category comprises the Japanese economic plans since the f i r s t o i l c r i s i s in 1973, the Economic Plan f o r the Second Half of the 1970s f o r 1976-1980, and the New Economic and Social SevenYear Plan f o r 1979-1985.

As a r e s u l t o f the o i l c r i s e s and the

various raw ma terial s h o rt a g es , Japan had e nter ed a phase of severe business downswing, i n f l a t i o n and economic u n c e r t a i n t y by 1974. The economic plans f o r the second h a l f of the 1970s t r i e d to p re s c ri b e a general path leading through t h i s phase of economic c r i s i s and attempted to bring about a measure of c e r t a i n t y and p r e d i c t a b i l i t y in t o t h i s era of u n c e r t a i n t y caused by exogenous f a c t o r s , p a r t i c u l a r l y the world energy s i t u a t i o n .

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3.4.2.

Planning f o r Economic S e lf Support

5-Year Plan f o r Economic Self-Support (1956-1960) The coming of the Hatoyama Cabinet inaugurated an e ra of renewed importance f o r Japanese economic planning which a ls o coincided with the advent of the High Economic Growth e r a .

In the decade a f t e r

1955 long and medium-term economic plans came to play the c r i t i c a l function of guideposts f o r the economy and a ls o the guiding p r i n c i p l e f o r economic p o l i c i e s .

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A fte r Hatoyama's Liberal Party took charge on December 10, 1954, an o f f i c i a l economic plan was immediately c a l l e d f o r .

One

source t h a t gave impetus to the plan req uest was l a r g e l y the d e t e r i o r a t ­ ing economic condition of Japan; the 1953 Balance of Payments d e f i c i t and the severe 1954 re ces si on had exacted a high economic t o l l and made p o l i t i c a l s o lu ti o n s imperative.

Elements in the Liberal Party

held the view t h a t a coordinated s e r i e s of remedial measures were necessary f o r public fi n a n c e , the employment s i t u a t i o n , and Jap a n' s i n d u s t r i a l s t r u c t u r e in ord e r to a s c e r t a i n the ov e ra ll development of the Japanese economy.

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As a r e s u l t , the Hatoyama Cabinet

requested the Economic D e lib er at io n Agency to formulate an economic plan.

The EDA responded qu ic kl y to the government's re que st and

produced a t e n t a t i v e 6-year economic plan in January o f 1955; the plan was endorsed by the Hatoyama Cabinet and p u b l i c l y announced without delay. The t e n t a t i v e 6-year plan became a p o l i t i c a l l i a b i l i t y as soon as i t was formally announced; the p l a n ' s content t r i g g e r e d a barrage of c r i t i c i s m from the economic bureaucracy and the p o l i t i c a l l y

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powerful economic peak a s s o c i a t i o n s both of which f e l t t h a t they had been cut out from the plan formulation a l t o g e t h e r .

The finance

m i n i s t e r , Ichimada, f o r example, reacted by o f f i c i a l l y censoring the EDA d i r e c t o r , Takasaki Tatsunosuke, f o r running too f a r ahead of him and d r a f t i n g plans which could not be backed up by adequate budgetary a p p r o p r ia ti o n s .

Many f e l t t h a t the "harmonious" arrangement

between bureaucracy, p a r t y p o l i t i c i a n s and economic c i r c l e s had been s e r i o u s l y compromised by the single-handed manner in which the EDA formulated the t e n t a t i v e s i x - y e a r plan.*®® In orde r to reso lve the p o l i t i c a l problem and a l s o to salvage the plan the Hatoyama Cabinet re s o rt e d to a s e r i e s o f orga niz ati ona l changes which s i g n i f i c a n t l y a f f e c t e d the i n s t i t u t i o n a l arrangement of Japanese economic planning and t h a t have l a s t e d to the very pre sen t. Hatoyama cre ated the Economic Delib erati on Council (EDC) and the Economic Planning Agency (EPA).

Established on Ju ly 6, 1955, the

EDC's task was defined to coordinate diverging p o s i t i o n s of the various economic and p o l i t i c a l groups i n t e r e s t e d in economic p la n s , and moreover to e l i c i t from the se groups formal support and endorse­ ment f o r economic plans.

And, on August 1, 1955, economic planning

was given a new i n s t i t u t i o n a l framework through the formation of the Economic Planning Agency which succeeded the EDA.

The Economic

D el ibe rat io n Council, designated an advisory organ o f the EPA, began t o formulate a 5-year economic plan (based on the e a r l i e r 6-year plan during the summer of 1955).

About 100 o r so e x p e r ts r e c r u i t e d

from the bureaucracy, I n d u s tr y , fi n a n c e , commerce and academe p a r t i c i ­ pated in the various subcommittees*®^ whose f in din gs were adjusted

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and in t e g r a t e d in to a f u l l - f l e d g e d plan by the General Committee. On December 23, 1955, the Hatoyama Cabinet formally adopted the plan as nation al p o lic y.

The declared purpose of the plan was to

decrease dependence from U.S. aid and sp ecial procurement, and the enlargement of employment o p p o r t u n i t i e s f o r the la bor f o r c e , while maintaining a dynamic e q uili br iu m in the i n t e r n a t i o n a l balance of payments.*®® The plan sp ell ed out the ba sic measures to implement the content in terms of i t s basic p o l i c i e s :

streng thenin g o f the i n d u s t r i a l

foundation, promotion of for eig n t r a d e , prudent fo re ign exchange management, conservation and development of na tural re s o u r c e s , encour­ agement of science and technology, improvement o f medium and smallsca le e n t e r p r i s e s , expansion o f employment, maintenance of social s e c u r i t y , sound f i s c a l p o l i c i e s , s t a b l e p r i c e s , s t a b l e l i v i n g standard and level of consumption.

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I n v a r i a b l y , these measures r e f l e c t e d

some o f the pe t p r o j e c t s of the various m i n i s t r i e s which a ls o u t i l i z e d the plan t o inc re ase t h e i r budget appropriations.**®

Moreover,

the Hatoyama government took pains to make c l e a r i t s ba sic p o s it io n : maximum r e s p e c t f o r p r i v a t e i n i t i a t i v e and the minimum r e s o r t to any kind o f c e n t r a l i z e d planning.***

P o l i t i c a l l y s i g n i f i c a n t a ls o

was the p l a n ' s demonstration e f f e c t which formally a t t e s t e d the ex ist en c e of a consensus between government, the LDP and big business as to the f u t u r e course of the Japanese economy. The New Long-Range Economic Plan (1958-1962) By mid-1956 the 5 - Year Plan f o r Economic Self- Support had

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a lre ad y become obs olete because the rea l economic growth r a t e turned out to be twice as la rg e as what had been pr o je c te d and t h u s , the plan could no longer func tion as an e f f e c t i v e guide -post f o r economic policies.

Plan re v is io n became imperative ye t the r e s ig n a ti o n of

Prime Mi nister Hatoyama and the sudden h o s p i t a l i z a t i o n of his successor, Ishibashi Tanzan, rendered the formulation of a new economic plan impossible. On February 25, 1957, Kishi Nobusuke formed hi s f i r s t c abi ne t and in August of the same year Kishi formally requested the formula­ t i o n of a new long-range economic plan.

The Economic Planning Agency,

in cooperation with the Economic De liber ation Council, began immediately with the planning work, while the r uli n g Liberal Democratic Party s e t out to produce i t s own plan d r a f t .

Differences between the

government and the p a r t y ' s plan were l a t e r "re conciled" in several meetings between leading members of the various LDP p o li c y board committees, the Min ist er of Finance and D ir e c to r of the EPA.

A fter

making r e q u i s i t e adjustments a consolidated plan d r a f t was presented to the c ab in e t which approved i t as na tiona l plan on November 15, 1957.112 The New Long-Range Economic Plan alms were to achieve a maximal growth r a t e , f u l l employment, and a r i s e in the standard of l i v i n g while maintaining general economic s t a b i l i t y .

The plan s p e c i f i c a l l y

c a l l e d f o r the expansion of e x p o rt s ; Increase in c a p i t a l formation; streng thenin g of basic i n d u s t r i e s ; improvement of the i n d u s t r i a l s t r u c t u r e ; modernization of a g r i c u l t u r e ; and adequate management o f public finance and banking.

These sp ecial measures were intended

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to bring about an annual inc re as e of 6.5 percent in the r a t e of economic growth over the e n t i r e plan period (FY 1958-1962); i f the plan succeeded the GNP of 1962 would be 40 percent more than in 1956.113 Moreover, the Kishi plan emphasized the s a l i e n t r o l e and func­ ti o n of the p r i v a t e s e c t o r as the d r iv i n g for ce in economic growth; and while pointing out t h a t the plan was to serve as a guide-post f o r economic a c t i v i t y the plan a ls o s p e c i f i e d instruments f o r i t s implementation ( i . e . f i s c a l , monetary and fo r ei gn exchange p o l i c i e s ) . And f i n a l l y , the plan s t a t e d e x p l i c i t l y t h a t the government would r e f r a i n from r e s o r t i n g to d i r e c t control measures.

To enhance the

p l a n ' s c r e d i b i l i t y i t was c r i t i c a l to signal t h a t the new na tio na l plan would not be of a d i r e c t control type but r a t h e r " in d i c a t i v e " since th e r e were s t i l l those in business and i n d u s t r i a l c i r c l e s t h a t a ss o c ia te d Kishi with J a p a n ' s notor iou s system of to s e i keizai ( c o n t r o l l e d economy). However, the Kishi plan too was soon outdated since the Japanese economy began to grow a t an ever a c c e l e r a t i n g pace a f t e r 1956 as a r e s u l t of he ct i c p r i v a t e investment and a fa vorable i n t e r n a t i o n a l tr a d i n g environment leading t o a growth r a t e of 10 percent as a g a in s t the planned 6.5 pe rc en t.

The r e s u l t was a s e r i e s of bo tt le n e ck s

and shortcomings t h a t began s e r i o u s l y to impede and hamper J ap a n 's rapid economic growth and Kishi contemplated to re qu e st a new longrange economic plan to r e f l e c t the se r a p i d l y changing circumstances.

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3 .4 .3 .

Planning f o r High Economic Growth

The National Income Doubling Plan (1961-1970) A r e l a t i v e l y o p t i m i s t i c mood in business and government regard­ ing the c o u n t r y ' s long-term economic prospects was the immediate consequence of J ap a n 's rapid economic growth and development from 1956-1959.

This new mood was r e f l e c t e d in J ap a n 's mass p o l i t i c s

and public p o li c y debates of 1959 e s p e c i a l l y when the se came to focus on such is s u e s as "doubling s a l a r i e s and incomes" and the maintenance of a su sta in e d 10 percent economic growth r a t e over a longer period of time. One of the major reasons f o r the new debate was t h a t during the Jimmu Boom (1955-1956) the number of J ap a n 's low income e ar ners had increased to about 10 m il li o n in s p i t e of a c c e l e r a t i n g economic growth and become something of a p o l i t i c a l issue with the Welfare M i n i s t r y ' s Annual White Paper taking n o ti c e of the in c re as in g d i s ­ crepancy between nominal wage in cre ase s and r a p i d l y r i s i n g consumer prices.

In search f o r a p o l i t i c a l s o lu ti o n f o r t h i s unabating so cio­

economic problem ( d i f f e r e n t i a l s between real wages and consumer p r i c e s ) , Prime Min ist er Kishi and MITI's Ikeda began to t a l k a gr e a t deal about a "wage doubling plan" 1n the course of the 1959 House of Counsellors e l e c t i o n campaigns,

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and on November 26, 1959,

Prime Min ist er Kishi o f f i c i a l l y requested the formulation o f a new long-range economic plan. However, a lr e ad y p r i o r to K1sh1's plan re quest the r u l i n g Liberal Democratic Party had s t a r t e d work on a f e a s i b i l i t y study f o r the replacement of the 1957 New Long-Range Economic Plan and subsequently

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adopted the "wage doubling" concept in i t s new economic program which was o f f i c i a l l y t i t l e d "Income Doubling Plan" in October 1959.

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The Economic D el ibe rati on Council organized a host of s p e c ia li z e d sub-committees and to ge th e r with the Economic Planning Agency began the ted iou s task o f d r a f t i n g the "government's" long-term plan to double the real na tiona l income in ten y e a r s , the assumed growth r a t e was 7 .2 pe rcent. As soon as the process of plan formulation had begun, however, J ap a n 's public p o lic y debate s h i f t e d to the re v is io n of the U.S.-Japan Se c u ri ty Treaty.**®

The ensuing controversy and above a l l r a d i c a l i z a -

ti o n of the ANPO is su e led to s o c i o - p o l i t i c a l turmoil unprecedented in postwar Japan; i t a l s o re le g a te d the Income Doubling Plan in to temporary o b li v io n .

When Hayato Ikeda replaced Prime Min ist er Kishi

in the wake of the ANPO r i o t s , Ikeda r e s o l u t e l y launched two major policies:

the National Income Doubling Plan and a p o l i t i c a l posture

of "low p r o f i l e " in an attempt to re c o n c il e a badly divided body politic.

Ikeda not only r e v i t a l i z e d the Income Doubling Plan but

a ls o person alize d i t ; moreover, Ikeda managed s k i l l f u l l y to s h i f t mass public a t t e n t i o n toward economic problems.

A ft e r the Economic

De lib er at io n Council presented i t s plan d r a f t to the Cabinet, the Income Doubling Plan was adopted as the national plan on December 27, 1960, and announced with g r e a t f a n f a r e .

To some e x te n t the

Income Doubling Plan had become a functi onal e qu iv al en t of an LDP platform.

Moreover, the Income Doubling Plan a ls o provided long-term

g ui de lin e s f o r both the s t a t e and business in the name of na tio na l consensus while r e s t r i c t i n g the course o f p r i v a t e a c t i v i t i e s within

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the l a r g e r plan framework.

To t h a t end the Income Doubling Plan

had divided the economy in t o public and p r i v a t e s e c t o r s .

The plan

formulated and s p e c i f i e d a l l the d e t a i l s f o r the public s e c t o r , while i n d i c a t i n g only broad goals f o r the p r i v a t e s e c t o r , thus e f f e c t i v e l y leaving plan implementation and compliance e n t i r e l y up to the business world.

O st en s ib ly , the core of the plan centered

on the public s e c t o r f o r i t was su b je c t to governmental measures and p o l i c i e s .

As f a r as the p r i v a t e s e c t o r was concerned the scope

f o r governmental in t e r v e n t i o n was narrowed even more than in previous plans. The Income Doubling Plan emphasized t h a t the government's i n t e n ­ ti o n was not to e x e r t control over p r i v a t e i n d u s t r i e s but to provide information which would help the p r i v a t e s e c t o r t o draw up i t s own long-term business plans and p r o j e c t i o n s in accordance with long-term government p oli c y .

The pervasive governmental assumption was t h a t

the p r i v a t e s e c t o r plan would be self-implementing as long as the business and i n d u s t r i a l world would conform to the National Income Doubling P l a n ' s f o r e c a s t s .

The o v e ra ll ro le of the s t a t e in the

National Income Doubling Plan was o u tl in e d as:

(1) streng thening

of s o c ia l overhead c a p i t a l ; (2) inducing a s h i f t 1n the i n d u s t r i a l s t r u c t u r e toward heavy I n d u s t r i e s ; (3) promotion of I n t e r n a t i o n a l tr a d e and economic cooperation; (4) promotion of science and te c h ­ nology; and (5) m i ti g a ti o n o f economic dualism.**^ The announcement e f f e c t of the Income Doubling Plan had created a gr e a t deal of euphoria in business c i r c l e s and the "self-implemen­ t a t i o n " of the plan by business and in d u s tr y t r i g g e r e d an

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unprecedented boom in p r i v a t e equipment investment.

The r e s u l t

was vigorous economic growth of one percent ( i n s t e a d of the 7.2 pe rcent) t h a t produced an imbalance in J a p a n ' s i n t e r n a t i o n a l balance of payments and a l s o led to r i s i n g consumer p r i c e s (6 percent p.a. since 1960).

Not s u r p r i s i n g l y , by e a r l y 1962 th e re were repeated

c a l l s f o r immediate remedial ac ti on by the government.

Subsequently

t i g h t money measures were implemented in June and again J u ly 1962 in orde r to slow down the rapid speed of economic growth.

Ost ensibly,

con dition s surrounding the Japanese planning environment had changed r a d i c a l l y since the o r i g i n a l formulation o f the Income Doubling Plan with most of i t s content having a lr e ad y become obs olete by 1962. Medium-Term Economic Plan (1964-1968) Against the background of a moribund Income Doubling Plan the Economic De liber ation Council was mandated to rea ss es s the plan in e a r l y 1963.

A fte r ex tensive follow-up s t u d i e s the EDC suggested

t h a t a new economic plan covering four to f i v e years should be formu­ la t e d because the projec ted f i g u r e s in the Income Doubling Plan had a lr ead y been o v e r - a t t a i n e d , and, moreover, i t was held t h a t new p ol ic y measures were necessary to cope with Jap a n' s new economic co nditio ns and s i t u a t i o n ; i . e . shortage of labor and tr a d e l i b e r a l i ­ za ti o n . Prime Min ist er Ikeda subsequently requested the formulation of a "Medium-Term Economic Plan" (MTE) on January 22, 1964.

A fter

several months o f d e l i b e r a t i o n s a newly c o n s t i t u t e d EDC submitted

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a plan d r a f t on November 17, 1964, to the c ab in e t now led by Eisaku Sato who had replaced Ikeda.

Ikeda was forced to re si gn on November

9 due to r a p i d l y f a l l i n g h e a lt h .

The Sato c ab in e t reviewed the

plan and a few weeks l a t e r , on January 22, 1965, the Medium-Term Economic Plan was adopted as national pol ic y by a c a b in e t de c is io n . The major o b je c t iv e o f the Medium-Term Economic Plan was to c o r r e c t some o f the d i s t o r t i o n s brought about by rapid economic growth since 1960 and in p a r t i c u l a r to m it ig a te d i f f e r e n t i a l s between the advanced and lagging s e c to r s of the economy, but a ls o to bring i n t o accord the pace of economic and social development.

However,

the g e s ta ti o n o f the MTE plan was overshadowed by important p o l i t i c a l factors.

For one, as mentioned above, the de c li n in g he al th of Prime

M inister Ikeda became apparent 1n Spring of 1964 and led to open sp ecu la tio ns about the f u t u r e course of Ik ed a's growth p o l i c i e s which had a lr e ad y been under in c re as in g a t t a c k from segments within the Liberal Democratic Part y. The is su e of co ntention concerned the a l l o c a t i o n and d i s t r i b u ­ ti o n of ne ar ly $50 b i l l i o n f o r public investment during the proposed plan period from 1964 to 1968.

Strong ob je ct io n s were r a i s e d by

various m i n i s t r i e s expre ssin g g r e a t concern over "Inadequate" a l l o c a ­ t i o n and prompting some of them t o p r i v a t i z e the is su e by tu rn in g to the r e s p e c ti v e LDP Poli cy Board subcommittees f o r help and a s s i s t ­ ance in t h e i r que st f o r a more e q u i t a b l e d i s t r i b u t i o n of the se funds. As a r e s u l t , th e public s e c t o r component o f the MTE plan became In s ta nta ne ous ly p o l i t i c i z e d and the plan came under Incre asi ng LDP c r i t i c i s m and p o l i t i c a l p re s su re s .

In a d d i t i o n , the p l a n ' s public

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s e c t o r component was vehemently c r i t i c i z e d by the media and leading economic c i r c l e s , both expressing f e a r s t h a t i t s huge a l l o c a t i o n s would only exacerbate the a lre ad y e x i s t i n g i n f l a t i o n a r y pre ssu res and t h a t the se would be most detrimental to the f u t u r e course and development of the Japanese economy.

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In view of S a t o ' s p o l i t i c a l l y motivated an ti- gro w th p os tu re , espoused during the reign of Ikeda, f u r t h e r p o l i t i c a l complications arose and had to be solved.

In an attempt to render S a t o ' s r h e t o r i c

more c o n s i s t e n t with the content of the MTE p la n , the planned t a r g e t s had to be lowered.

To t h i s end the EPA engaged 1n what Watanabe 120 c a l l e d " p o l i t i c a l modification" of plan v a r i a b l e s , e . g . , EPA o f f i c i a l s produced u n r e a l i s t i c consumer pr ic e t a r g e t s by concealing r e l e v a n t key information.

Annual inc re as e s of consumer p r i c e s f o r

the 1964-1968 plan period were s e t a t 3 percent in s p i t e of the empirical evidence of high inc re as e s in the consumer pr ic e index since 1960.

O st en si bl y , the Medium-Term Economic Plan was not

de st in ed to l a s t f o r very long indeed. 3.4.4.

Planning f o r Balanced Economic Growth and Social Development

The Economic and Social Development Plan (1967-1971) Prompted by a strong mix of economic f a c t o r s and p o l i t i c a l c o n s i d e r a t i o n s , r i s i n g consumer p r i c e s and repeated c a l l s on the Prime M1ns1ter to espouse his own politico-economic views, Prime M in ist er Sato shelved the Medium-Term Economic Plan 1n January 1966, and several months t h e r e a f t e r , on May 23, 1966, Sato requested t h a t the Economic D el ibe rati on Council prepare a d r a f t f o r a new

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long-term economic plan to achieve balanced and steady p r o s p e r i t y f o r both the economy and s o c i e t y .

In e a r l y 1967 a d r a f t was presented

to the Prime Mi nister and on March 13, 1967, the "Economic and Social Development Plan" covering the 1967-1971 period was o f f i c i a l l y adopted as the new natio na l plan. The d r a f t i n g of S a t o ' s f i r s t economic pl a n, however, brought to the su rface some of the l a t e n t and d i a m e t r i c a l l y opposed so cio ­ economic c u rr e n ts in J a p a n ' s p o l i t i c a l economy, as i t p i t t e d the EPA/MITI based "growth fa c t i o n " a g a i n s t the an ti-grow th sentiment which was beginning to spread through J a p a n ' s p o l i t y and s o c ie ty . The "anti-growth" sentiment held p r i m a r i l y government economic p o l i c i e s resp on sib le f o r the negative concomitants of rapid economic growth, i . e . , r i s i n g consumer p r i c e s , inadequate s o cia l welfare and i n f r a s t r u c t u r e , over-crowded urban me tropolitan a r e a s , p o l l u t i o n , and economic growth's general de trime nta l impact on a g r i c u l t u r e and small business. However, since MITI and the Economic Planning Agency dominated the Economic Delib erati on Council, the "growth-oriented" views p re v a il e d . Yet in the plan d r a f t ample l i p s er vic e was paid to the concerns of the "anti-growth f a c t i o n . "

For one, the planners simply added

" s o c i a l " to economic development 1n the plan t i t l e .

Moreover, while

the plan c l e a r l y de clared Improvement o f the n a tio na l standard o f l i v i n g i t s ult im a te goal, i t continued to place g r e a t e s t emphasis on high growth and economic e f f i c i e n c y .

In view of the impending

o v e r - a l l "open-door economy," the plan c a l l e d f o r improvement of Japan's industrial structure.

During th e phase of plan implementation

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both government economic p o li c y and individual corpora te s t r a t e g y i n t e r a c t e d e f f e c t i v e l y ; and the p r i v a t e s e c t o r ' s "self-implementation" led to an i n t e n s i f i e d i n d u s t r i a l re or ga ni z at io n e f f o r t r e s u l t i n g in the con cen tra tio n of many advanced s e c t o r e n t e r p r i s e s , p a r t i c u l a r l y in s t e e l , automobile and banking.

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Not s u r p r i s i n g l y , the actual annual economic growth r a t e of 13 percent diverged again from the o r i g i n a l l y planned 8 .2 pe rcent. But more importantly s t i l l , the rash of i n d u s t r i a l and f i n a n c i a l mergers had a most de trimen tal impact on J a p a n ' s "balanced develop­ ment"; i t penalized i n e f f i c i e n t producers in the backward s e c to rs and consumers in ge neral.

And f i n a l l y , r i s i n g consumer and wholesale

p r i c e s , a rash of ba nkru ptc ies , and a growing d i s p a r i t y between economic and social development led to the quest f o r ye t another plan. New Economic and Social Development Plan (1970-1975) In view of these developments Prime Mi nister Sato requested t h a t the Economic D el ibe rati on Council prepare a new plan.

The

EDC submitted a plan d r a f t on April 9, 1970, which was declared na tiona l p o li c y by the c ab in e t on May 1, 1970.

B a s i c a l l y , the re

were few major p o lic y changes from the previous p la n , except f o r the professed aim to c o n s t r u c t an "admirable s o c i e t y through balanced economic growth" and to "accomplish social development on the ba sis of a long-term pe rspec tiv e of what were p u b l i c l y d e s i r a b l e o b j e c t i v e s to Improve the l iv e li h o o d o f the people."

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The general c r e d i b i l i t y of the plan was s e r i o u s l y hampered

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however by a widening d i s p a r i t y between plan content and plan environ­ ment, because the New Economic and Social Development Plan continued to s t r e s s high economic growth (10.6 percent p . a . f o r the plan period) which was d i a m e t r i c a l l y opposed to the ra p i d l y spreading anti-growth sentiment.

By the end of the 1960s Jap a n 's rapid economic growth

had produced several cases of severe environmental p o l l u t i o n and caused a general d e t e r i o r a t i o n of the natural environment.

This

in turn led not only to c r i t i c i s m and media exposure of the varigated c o s t s of economic expansion, but a ls o to v i t r i o l i c a t t a c k s on the very notion of economic growth.

Leading in the emerging anti-growth

movement was Asahi which ran a s e r i e s of kutabare GNP (down with GNP) in e a r l y May of 1970, by and la rg e r e f l e c t i n g the greening of a new nationa l sentiment in the e a r l y 1970s.

O st en s ib ly , r u t h l e s s

p o l i c i e s of "economic growth f i r s t , " d e s t r u c t i o n of the nat ura l environment, and continuing unbalanced socio-economic development began to have a negative impact on p e o p le 's perception of "GNP-ism" and f i n a l l y s h a t t e r e d the idol e n t i r e l y .

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Even in big business c i r c l e s th e re were in c re as in g concerns about the environmental and social impact of p a s t rapid economic growth prompting Keizai Doyukai chairman Kikawada to downgrade "rapid growth" as inimical to public i n t e r e s t and his advocation o f s t a b l e growth i n s t e a d . 124 Obviously, Japanese planning encountered ser io us d i f f i c u l t i e s in s h i f t i n g the national p r i o r i t y from high economic growth to oth e r s o c i e t a l goa ls.

Against such a background of decreasing p l a n a b i l i t y ,

i t i s not s u r p r i s i n g t h a t the plan found only cool re cep tio n in

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s o c i e t y and p o l i t y .

Undoubtedly, with the New Economic and Social

Plan postwar Japanese planning had reached an Impass i f not one of i t s lower ebbs. Basic Economic and Social Plan (1973-1977) The New Economic and Social Development Plan contained s t i p u l a ­ t i o n s f o r r e v is io n s in i t s t h i r d y e a r , ye t a lr ead y in 1972 a new plan was c a ll e d f o r .

There had been several s i g n i f i c a n t domestic

and i n t e r n a t i o n a l p o l i t i c a l changes making a new plan imperative. Foremost perhaps was the sudden emergence of Kakuei Tanaka as Prime M inister who, once in o f f i c e , was anxious to impress h i s p o l i t i c o economic views upon J ap a n 's p o l i t y and s o c ie ty .

To t h a t end Tanaka

requested the EDC to formulate a new plan on August 23, 1972.

Several

months l a t e r the EDC submitted a plan d r a f t to the Prime Minister and on February 13, 1973, the c ab in e t adopted the Basic Economic and Social Plan as the new nation al plan. Unlike i t s prede cesso r, the Basic Economic and Social Plan professed s p e c i f i c a l l y a p o li c y s h i f t from high economic growth to the p u r s u i t of national welfare.

The Tanaka plan was intended

t o respond p ri m a ri ly to J a p a n ' s domestic socio-economic s t r u c t u r a l change of the 1960s; m a l d i s t r i b u t i o n of wealth, lim it ed na tural re s ou rc e s , environmental problems, and demands f o r g r e a t e r social ju stice, etc.

The proposed p o lic y s h i f t marked an Important p o l i t i c a l

de parture and was to be c a r r i e d out along the following axes:

(1)

re s p ec t f o r socio-economic e f f i c i e n c y ; (2) securing s oc ia l development; and (3) promotion of d e c e n t r a l i z a t i o n (of decision-making).

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Simultaneously with the promotion of "domestic welfare" the new plan propagated " i n t e r n a t i o n a l c o l l a b o r a t i o n " as one of i t s major goa ls.

Euphemistically, t h i s was e s s e n t i a l l y a s t r a t e g i c

p o lic y response to the rapid changes and in c re a s in g confusion in the i n t e r n a t i o n a l economic environment caused p ri m a ri ly by Nixon's New Economic Policy and ra p i d l y r i s i n g p ro te c tio ni s m in the EEC, both of which had alarmed J ap a n 's p o l i t i c a l and economic d e c i s i o n ­ makers. The o ve rri di ng question concerning the Tanaka plan was of course whether o r not the government r e a l l y intended to s h i f t i t s p r i o r i t y from growth to social welfare.

However, t h e r e was never an acid

t e s t of t h i s ma tter since only s i x months a f t e r the plan had been adopted Japan was hard h i t by the 1973 o il - s h o c k which rendered the Basic Economic and Social Plan u s el e s s and demanded an immediate r e s t r u c t u r i n g of na tiona l p r i o r i t i e s . 3.4.5.

Planning in An Age of S c a r c it y

Economic Plan f o r the Second Half of the 1970s (1976-1980) In the f i r s t h a l f of the 1970s Japan experienced a s e r i e s of domestic and i n t e r n a t i o n a l l y induced economic and p o l i t i c a l c r i s e s whose cumulative Impact s t r a i n e d J a p a n ' s s o c i o - p o l i t i c a l f a b r i c to the outmost.

In 1972-73, j u s t before the o i l c r i s i s , Japan

experienced an unprecedented sharp surge in i n f l a t i o n a r y p re s su re s . The rampant I n f l a t i o n was p a r t i a l l y the r e s u l t of Tanaka's "Plan to Remodel the Japanese Archipelago” which had I n t i c e d a wave of land and commodity sp ec u la ti o n ; a ls o a c o n t r i b u t i n g f a c t o r was the

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enduring impact of the New Economic Poli cy of the United S ta te s which had led to sharp f l u c t u a t i o n s o f the U.S. d o l l a r / y e n exchange rate.

The ensuing soci al h y s t e r i a climaxed when the o i l embargo

h i t Japan on October 17, 1973, and the c o u n t r y ' s mood reached panic p ro por tio n s.

I t must be pointed o u t , however, t h a t OAPEC cu t i t s

s u pplie s to Japan by f i v e perc ent only and the embargo was l i f t e d on December 25, 1973, when Japan was de clared a " f ri e n d ly " na tio n. O s t en s ib ly , the o il - sh oc k l a i d bare J a p a n ' s l a t e n t v u l n e r a b i l i t y as i t led to kyoran bukka, the i n f l a t i o n a r y craze of panic buying and hoarding by producers and consumers.

By e a r l y 1974 J ap a n 's

n ation al confidence was thoroughly s h a t t e r e d and s o c i a l p r o t e s t took momentum by making Keidanren one of i t s t a r g e t s .

Keidanren

was accused of manipulating conse rva tive p o l i t i c s , f a i l i n g to stop p o l l u t i o n and allowing p r i c e s to " le ap ."

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The ra p i d l y spreading socio-economic turbulence and uneasiness was f u r t h e r exacerbated by the Lockheed b r ib e r y scandal which impli­ cated J a p a n ' s Prime Mi nsiter and e v e n t u a l l y led to his p o l i t i c a l downfall.

In December 1974, Takeo Miki, a perennial " a l s o - r a n , "

emerged as the LDP's compromise candidate to f i l l Tanaka's po s it io n as Prime M inister.

Yet Miki did not d i s p l a y much f l a i r f o r economic

m a tte rs upon assuming o f f i c e ; and, a g a i n s t the backdrop of abnormal i n f l a t i o n and harsh r e c e s s i o n , the Prime Mi nister requested the EDC to formulate an outlook f o r the second h a l f of the 1970s (date o f re qu e st:

7/2 9/75).

The Miki p l a n ' s most s a l i e n t function was to devise an e f f e c t i v e economic program to f i g h t a g a i n s t economic d e cl i n e and kyoran bukka,

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thus to guide the nation through the painful t r a n s i t i o n from abnormal i n f l a t i o n and harsh recession to a new era in Japanese postwar economic development.

The p l a n ' s professed p o l i t i c a l aims were the r e a l i z a ­

ti o n of a r i c h e r nationa l l i f e and s t a b l e development of the c o u n tr y ' s economy.

To t h i s end the plan s t i p u l a t e d fo u r major p o lic y goals:

(1) securing s t a b l e p r i c e s and f u l l employment; (2) ensuring a s t a b l e l i f e and c r e a t i n g a favorable l i v i n g environment; (3) cooperating with and c o n t r i b u t i n g to the development of the world economy; and (4) ensuring economic s e c u r i t y and f o s t e r i n g of grounds f o r long-term development.

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However, i n t e r n e c i n e f a c t i o n a l s t r i f e during Miki's tenure was q u i t e de trimental to the Prime M i n i s t e r ' s planning e f f o r t as i t did l i t t l e to enhance c r e d i b i l i t y or even arouse enthusiasm f o r the "Economic Plan f o r the Second Half of the 1970s," and, as a r e s u l t , the plan was p o l i t i c a l l y l e s s than promising from the very outset.

And, f i n a l l y , on an i n s t i t u t i o n a l no te , a lr e a d y in 1975

i t had become unmistakingly c l e a r t h a t planning "in the age of s c a r c i t y " would not be an a f f a i r to be l e f t in the hands of the Economic Planning Agency.

And when the Overall I n v e s t i g a t i v e Commis­

sion on Energy, a MITI advisory organ with e i g h t subcommittees, presented I t s r e p o r t on s t a b i l i z i n g the energy supply i t had become evid ent t h a t MITI had added J ap a n 's most pre ssi ng public p o lic y is sue to i t s own agenda. New Economic and Social Seven Year Plan (1979-1985) By 1977-78 J a p a n ' s economy had enter ed a new phase in i t s

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a da pta tio n to the o il c r i s i s of 1973.

For one, the conversion of

J ap a n 's i n d u s t r i a l s t r u c t u r e to a more energy e f f i c i e n t one was well under way, while Jap a n' s vigorous e xp ort s had managed to keep t h e i r momentum throughout.

In f a c t , a lr e a d y by the end of 1976

i t had become widely recognized t h a t e xports and expansion of public spending ( to st im u la te domestic demand) would be the driv in g forces of J a p a n ' s economic recovery. However, Prime Min sit er Fukuda, who had replaced Miki on December 24, 1976, i n s i s t e d on a cauti ous approach to government d e f i c i t spend­ ing, and, i n s p i t e of tremendous domestic and i n t e r n a t i o n a l p o l i t i c a l p r e s s u r e s , Fukuda kept the issuance of new bonds within a 30 percent c e i l i n g (of t o t a l revenue) throughout 1977.

128

At the same time

Fukuda l e t the vigorous export of fe nsi ve con tinue; i t e f f e c t i v e l y l i f t e d Japan out of i t s economic doldrums but only a t the expense of the ot he r Advanced I n d u s t r i a l i z e d C ou nt rie s , some of which thr eatened with economic r e t a l i a t i o n .

Against t h i s background Prime Minister

Fukuda requested the "New Economic and Social Seven Year Plan" on September 12, 1978; Fukuda intended to make the plan an i n te g ra l p a r t of his a d r o i t management of the p o s t - o i l c r i s i s economy. The formulation of the Fukuda plan was hardly under way when i t s very premises were st ru c k by sudden economic and p o l i t i c a l d i s ­ aster.

For one, the Iranian revo lut ion erupted and created a gre a t

power vacuum in the Middle East t h a t led to new i n t e r n a t i o n a l economic uncertainty.

And even though Japan was b e t t e r prepared fo r t h i s

exigency than the f i r s t o i l c r i s i s , the Ira ni a n rev olu tio n created g r e a t u n c e r t a i n t y f o r the Japanese economy.

Moreover, the Fukuda

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plan l o s t a l l i t s p o l i t i c a l c r e d i b i l i t y when on December 1, 1978, Masayoshi Ohira was e le c te d LDP pr e s id e n t as the r e s u l t o f the p a r t y ' s f i r s t primary and thus forced Fukuda's r e s ig n a ti o n as Prime Minister. Meanwhile, an unprecedented debate was occurring among the 180 or so members of the Economic D el ibera ti on Council as to the f e a s i b i l i t y of formulating y e t another plan a g a i n s t the g r e a t odds of in cr eas in g economic u n c e r t a i n t y and p o l i t i c a l u n p r e d i c t a b i l i t y in the wake of the second oil c r i s i s .

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In the end the EDC decided

to comply with the Prime M i n i s t e r ' s plan re que st and several months l a t e r , on August 3, 1979, a plan d r a f t was submitted to the Ohira Cabinet which subsequently adopted the New Economic and Social Seven Year Plan as na tio na l po licy.

The broad aims of the plan were:

(1) s h i f t to a s t a b l e growth pa th; (2) enrichment of q u a l i t y of national l i f e ; and (3) c o n t r i b u t i o n to the development of the i n t e r national economic communtiy.

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Pursuant to EDC su gge st ion s, but

a ls o in view of the ge ner al ly unpre dic tab le plan environment, p a r t i c u ­ l a r l y the energy s i t u a t i o n , th e Ohira government pledged to annually review the plan throughout the plan period and to r e f l e c t i t s review findi ngs in the management of economic po lic y. However, the untimely death of Prime Mi nister Ohira in June 1980 and hi s s u c c e s s o r ' s t o t a l lack of i n i t i a t i v e or even i n t e r e s t in the New Economic and Social Seven Year Plan f i n a l l y led to the q u i e t abandonment of the Ohira plan a l t o g e t h e r .

Zenko Suzuki has

been the f i r s t Japanese Prime Mi nister since 1955 who did not request the formulation of an economic (and s o c i a l ) plan to p u b l i c l y r e f l e c t his own politico-economic outlook; in t h a t sense then Prime Mi nister

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Suzuki represented an a b e r r a t i o n . Outlook and Guidelines f o r the Economic Society o f the 1980s On August 9, 1983, the Economic Council (formerly EDC) presented Prime Minister Nakasone a d r a f t of J ap a n 's t e n th postwar economic plan e n t i t l e d "Outlook and Guidelines f o r the Economic Society of the 1980s."

According to a Yomiuri r e p o r t , the t r a d i t i o n a l nomen­

c l a t u r e had been changed because Nakasone did not l i k e the designa­ t i o n of " o f f i c i a l pla n ."

Nakasone's view on t h i s m a tt e r may have

been influenced more by p o l i t i c a l c on si d e ra ti o n s than ideologic al p r e d i s p o s i t i o n , f o r the record of the previous nine o f f i c i a l economic plans has been somewhat l e s s than ou ts ta nd in g.

Most of the nine

economic plans had to be re vis ed e x te n s iv e ly during the plan period. Moreover, few have l a s t e d more than two y e a r s , mainly because of the perennial gap between plan p r e d ic ti o n and actua l developments in the plan environment. Some of these f a c t o r s have led the public to become q u i t e a p a t h e t i c towards planning, i f not o u t r i g h t m i s t r u s t i n g of economic planning a l t o g e t h e r , and may have prompted Nakasone to r e s i s t c a l l i n g h i s b l u e - p r i n t a plan. On the o th e r hand, Nakasone has been u t i l i z i n g some of the same phraseology l i k e his p re d e ce ss o rs , i . e . c a l l i n g the 1980s a period to build a " c r e a t i v e and s t a b l e s o c i e t y , " a t the same time the plan d r a f t has a ls o addressed several of J ap a n 's most pres sing p o l i t i c a l problems and c o n tr o v e rs ia l public p o lic y i s s u e s .

In f a c t ,

several of the p l a n ' s overarching aims are intended to suggest

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remedies f o r some of these problems.

To t h i s end the b l u e - p r i n t

suggests a host of politico-economic measures as gu id e li n e s f o r the 1980s:

(1) to stop is su in g d e f i c i t - c o v e r i n g bonds by the end

of the plan period; (2) to continue the a u s t e r i t y p o li c y and hold down public e xpend it ures; (3) to f u r t h e r l i b e r a l i z e the domestic market by expanding the import of foreign manufactured goods and avoiding f r i c t i o n in e xp orts ; and (4) to inc re as e economic a s s i s t a n c e to developing c o u n tr ie s . In s h o r t , the "Outlook and Guidelines f o r the 1980s" c a l l f o r not a few unpopular measures, and indeed, i t i s r a t h e r doubtful whether or not the Nakasone government will have the c l o u t , stamina and enough time to p o l i t i c a l l y o p e r a t i o n a l i z e some of the important plan p r o vis io ns .

Yet, t h i s seems almost beside the poi nt i f one

regards the rudimentary function of J a p a n ' s postwar economic plans as:

to inform and popularize the Prime M i n i s t e r ' s politico-economic

Ideas and views, even 1f t h e i r atta inm ent seems somewhat doubt ful . In t h a t sense then the Nakasone " b l u e - p r i n t " f o r the 1980s compares favorably with some of the previous economic planning e x e r c i s e s .

CHAPTER I I I

STRUCTURE AND ORGANIZATION OF JAPANESE ECONOMIC PLANNING 1.

Intr oduction

This chapt er will a sse ss the bu re a ucr a tic dominance of Japanese economic planning by examining the s t r u c t u r e and o r ga ni z at io n within which Japanese economic planning has been op er at in g since i t s formal inception in 1955. There are a number of formal and informal arrangements f o r bringing to g e th e r the key pla yer s of J a p a n ' s p o l i t i c a l economy f o r the formulation of economic plans.

Most important formal a c t o r s

in J ap a n 's economic planning process are the Prime M in is t e r , the Economic Delib erati on Council, the Liberal Democratic Pa rt y , and the Economic Planning Agency. This c ha pte r will de scr ibe the process of J a p a n ' s economic plan for mulation, and analyze the r o l e s played by a l l formal and informal p a r t i c i p a n t s in the plan making process.

In o rd er to

o p e r a t i o n a l i z e the b ure a uc ra tic dominance t h e s i s , t h i s c ha pte r will examine the power r e l a t i o n s between the formal and informal a c t o r s in Japanese economic planning, f o r t h i s purpose the following four major i n s t i t u t i o n s will be discussed:

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102

(A) (B) (C) (D)

Prime Mi nister Economic Deliber ati on Council Economic Planning Agency Liberal Democratic Party

At the o u t s e t a look a t the formal o r ga ni z at io n of Japanese economic planning might be u s e f u l.

Chart 1* below provides f o r

an overview o f the i n s t i t u t i o n s and o r g a n iz a ti o n s p a r t i c i p a t i n g in the formulation of Japanese economic pla ns .

However, t h i s c h a r t

does not in any way r e f l e c t the informal power r e l a t i o n s underlying the Japanese economic planning process which t h i s chapt er s e t s out to explai n. When the Japanese Prime M in ist er d e s i r e s an economic plan, he i n s t r u c t s the Economic D elibe ra ti on Council ( kelzai s h i n g i k a i ), an advisory organ to the Prime M in is t e r , to formulate a plan.

The

EDC works t o g e th e r with the Over-all Planning Bureau ( sogo keikaku cho) of the Economic Planning Agency to which i t i s a d m i n i s t r a t i v e l y a t t a c h e d , and co nsu lt s with the Policy A f f a i r s Research Council ( seimu chosakai cho) of the Liberal Democratic Part y.

The chairman

of the EDC submits the d r a f t plan to the Prime Mi nister who then pre se n ts the d r a f t to the Council of M ini st ers ( kakuqi).

The c ab in e t

adopts the plan without any f u r t h e r amendments, and subsequently the EPA publishes the document as the o f f i c i a l economic plan. Japanese eocnomic plans are approved by the c a b i n e t .

The Diet plays

no r o l e whatsoever in the formulation and implementation of Japanese economic plans.

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Prime Minister

Cabinet

EDC

r

EPA

^

Econ. M in is t r ie s Other M i n i s t r i e s

Subcommittees

Chart 1

Numerals i n d i c a t e s p e c i f i c planning st ep s and the flow of information during the plan formulation and denote the following: 1. 2. 3. 4. 5. 6. 7. 8. 9.

plan request ( shimon) formation of subcommittees EPA support function support from economic and o th e r m i n i s t r i e s re p o r t s of the EDC, d e l i b e r a t i o n of f i n a l d r a f t f i n a l r e p o r t t o the Prime Min sit er ( t o s h i n ) dis cu s s io n of the plan d r a f t a t the c ab in e t level c ab in e t decision ( kakugi k e t t e i ) formal announcement and p u b li c a ti o n of plan

Plan

LDP

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2.

Prime Minister

2.1.

2

Plan and Prime Minister

According to r e l e v a n t Japanese planning laws, i t i s within the d i s c r e t i o n of the Prime Min ist er to c a ll f o r economic plans 3 and to propose broad planning goals. The formal process i s t h a t f i r s t the Prime Min ist er reque sts the Economic De lib er at io n Council to prepare a national plan.

To t h i s e x te n t the Prime Mi nister submits

a s p e c i f i c request ( shimon) to the EDC.

This step u s u a l l y takes

the form of a b r i e f l e t t e r i n d i c a t i n g only the general purpose of the plan and reque sting the EDC to formulate a d e t a i l e d economic plan.

These plan re q u e st s have t r a d i t i o n a l l y been b r i e f , and such

basic and c r i t i c a l elements as p re c is e goals and modality of plan implementation have been l e f t open without exception.

Thus not

s u r p r i s i n g l y , the chronic vagueness of a Prime M i n i s t e r ' s plan request has led to fr eq ue nt c r i t i c i s m surmising a general lack of 4 " p o l i t i c a l s i n c e r i t y " in Japanese economic planning. However, the re are no di s ce rn a b le in d i c a t i o n s or ta n g ib le evidence t h a t the formulation of Japanese economic plans has been adversely a f f e c t e d as a r e s u l t of vague plan re qu e sts by the Prime M inister.

An argument can be made t h a t Japanese planning has been

g r e a t l y enhanced because of the d e l i b e r a t e omission of d e t a i l e d t a r g e t s and p r e s c r i p t i o n s in the o r ig i n a l plan r e q u e s t , thus allow­ ing and f u r t h e r i n g c r e a t i v i t y and I n i t i a t i v e 1n the formulation of Japanese economic pla ns.

Consequently, the vagueness 1n the

wording of the plan re que st can be I n t e r p r e t e d as a designing or g a n i­ z ati onal device f o r the economic planning process.

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Since 1955 each Japanese Prime Mi nister has requested a t l e a s t one economic plan during the tenure of his o f f i c e ; Zenko Suzuki, 1980-1982, i s the one exception to the r u l e t h a t each Prime Mi nister sponsored hi s own plan.

However, none stayed in o f f i c e long enough

to see his plan through from s t a r t to f i n i s h .

5

In f a c t , a l l Japanese

economic plans have been scrapped or replaced long before the resp ec­ t i v e plan period elapsed.

Japanese Prime Min ister s have not been

i n t e r e s t e d in carrying through a plan requested by a predecessor. A good case in point i s Ik ed a's 1964 "Medium-Term Economic Plan." O f f i c i a l l y , the c a n c e l l a t i o n of t h i s plan was r a t i o n a l i z e d on grounds of r i s i n g consumer p r i c e s and changing monetary p o li c y . reason was, however, the change in government.

The pr in c ip a l

Prime Min ist er Sato,

ta king over from Ikeda in 1964, was urged to formulate his own pla n, expounding his p o l i t i c a l views, and to p re s en t i t to the people.® P o l i t i c a l motives and economic f a c t o r s are some o f the most compelling reasons t h a t have prompted Japanese Prime Ministers to request economic plans.

Notes Woronoff:

". . . any Prime Mi nister

devotes much of his energy to de ali ng with economic m a tt e rs .

This

has been t r u e from the e a r l i e s t governments and s t i l l a p p li e s today. Indeed, a le ad e r often stands or f a l l s by hi s economic record. All o f the e a r l i e r Prime Min ister s had t h e i r plans and grand designs. . . . Although the changing of government does not bring any funda­ mental s h i f t in economic p o lic y because the same p a r t y st ays in power, i t does provide both the Prime M in ist er and the p a r t y with an oppo rtuni ty to a d j u s t in response to the changing economic and

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political situation.

This i s c l e a r l y evidenced by the empirical

r e a l i t y of the pa st 25 ye a r s.

There have been eleven d i f f e r e n t

Prime Ministers and ten d i f f e r e n t economic plans.

Thus i t seems

not unreasonable to expect t h a t each f u t u r e Japanese Prime Mi nister will request a new economic plan to expound his politico-economic "philosophy" or i n t e n t i o n . 2.2.

Prime M i n i s t e r ' s Plan as Public Policy Device

Under the sway of the dual le ad e rs hi p function both in the p a rt y and in the government, postwar Japanese Prime Ministers since 1955 have shown a pro pensity to mesh exigencies of economic growth with p o l i t i c a l expediency of the Liberal Democratic Party.

In f a c t ,

economic plans were used by Prime Ministers as p o l i t i c a l devices during most of the "High Growth Era," and since 1955, Japanese economic plans have come to be regarded as a concrete manife st atio n of the government's p o l i t i c a l will to give top p r i o r i t y to i n d u s t r i a l growth.® In order to enhance the p o l i t i c a l impact of the announcement e f f e c t , Japanese economic plans were given " a t t r a c t i v e " t i t l e s and promulgated with considerable fa nfa re and support from the Prime M inister.

Hayashi Yujlro observed:

". . . the c h a r a c t e r and goal

of the plan i s a lr e ad y conveyed by i t s name. . . .

The plans have

gr e a t p o l i t i c a l s i g n i f i c a n c e and a consid era ble 'PR' e f f e c t . "

g

O st en s ib ly , Japanese Prime Ministers made good use of the propaganda e f f e c t of economic plans.

I t appears t h a t economic plans

con tribu ted s u b s t a n t i a l l y to the s o c i e t y wide euphoria surrounding

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J a p a n ' s economic growth p o t e n t i a l during the 1950s and 1960s.

In

f a c t , several of the more powerful p o l i t i c a l slogans of the "High Growth Era" were subsequently made t i t l e s of economic plans.

Flashy

p o l i t i c a l slogans l i k e "economic s e l f - s u f f i c i e n c y " and "income doubl­ ing" became linked to s p e c i f i c public p o lic y p r o j e c t s of several key Prime M in is te r s. In g e n e r a l, however, Japanese Prime M ini st er s have not always brought a comprehensive and systematic p olic y p e rs pec tiv e to bear on planning.

There have been several e x c e pt io ns , however:

Hatoyama I c h i r o , "Economic Self-Support" ( keizai j i r i t s u ) Ikeda Hayato, "Income Doubling" ( shotoku b a i z o ) Sato Eisaku, "Econ. t Social Development" ( keizai shakai h a t t e n ) Tanaka Kakusi, "Remodel Japan" ( nippon r e t t o kaizo ron) Hatoyama Ic h ir o was J a p a n ' s f i r s t postwar Prime Min ist er to o f f i c i a l l y adopt an economic plan as a na tiona l p ol ic y.

The fa n fa re

a tt e nd in g the event was unprecedented and epoch making.

While a

change in p o l i t i c s , f a l l of the Yoshlda a d m i n i s t r a t i o n , was perhaps the s in gle most important reason f o r the economic pl a n, Jap a n' s precarious economic s i t u a t i o n in the mid-1950s n e c e s s i t a t e d i t as well.

Hatoyama's p o l i t i c a l slogan, " l e s s economic r e l i a n c e on the

United S t a t e s , " was not only i m p l i c i t in the t i t l e of t h i s f i r s t o f f i c i a l postwar economic pl a n, but a l s o appealed to the Japanese mood a t the time.

The avowed plan o b j e c t i v e was to a t t a i n economic

s e l f - s u f f i c i e n c y which meant reducing economic dependence on the United S t a t e s by e li m la n tl n g "special procurement demand," and a ls o the p r o t e c t i o n of Japanese a g r i c u l t u r e by guaranteeing both s a l e

108

and p r i c e s of s t a p l e prod uc ts, p a r t i c u l a r l y r i c e . 1® The "National Income Doubling Plan," with i t s emphasis on rapid economic growth, advocated and adopted by Prime Mi nister Ikeda in 1960 had c l e a r l y a p o l i t i c a l l y motivated public p o lic y p e rs p ec tiv e . The Income Doubling Plan was undoubtedly J a p a n ' s most c e le br a te d postwar planning e x e r c i s e .

The p l a n ' s major o b je c t iv e was to r a i s e

J ap a n's l i v i n g standard and t o accomplish f u l l employment by r a i s i n g the annual growth r a t e of the Japanese economy to 7-8 p e rc e n t, and thus to double the na tiona l income within ten ye ar s.

The p ol ic y

p r e s c r i p t i o n was to keep p r i c e s s t a b l e by in c re as in g production or l i b e r a l i z i n g imports and to maintain t a x e s , s e r v i c e s , and u t i l i t i e s a t the c u r r e n t , 1960, level i f p o s s ib le .

Furthermore, a s u b s t a n t i a l

expansion of public works in housing and roads was proposed, as well as increased social s e c u r i t y . 11

In s h o r t , I k e da 's "National

Income Doubling Pla n," c o n s i s t e n t with the LDP's general public polic y platform o f " p r o s p e r i t y and p r o g r e s s , " meshed well with the r i s i n g economic ex p ec ta tio ns o f J ap a n 's populace a t the end of the 1950s. Prime M in ist er S a t o ' s 1967 plan f o r "Economic and Social Develop­ ment" s t r e s s e d the ' s o c i a l ' asp e c ts of economic development and was to re d re ss the e x i s t i n g imbalances between economic growth of the 1960s and i t s social consequences.

Although t h i s plan was

supposed to r e f l e c t a new a t t i t u d e toward s o c i e t y and economy within Japanese public p o l i c y making c i r c l e s , t h e r e was never any re c o n s id e r ­ at io n of the "production f i r s t p r i n c i p l e " (by then no to ri ous) and no p o l i t i c a l ac ti on was taken to accommodate social demands.

Sato's

109

public p o lic y of "Social Development" ( shakai k a i h a t s u ) remained, by and l a r g e , an empty p o l i t i c a l slogan u n t i l i t backfired in the l a t e 1960s when r i s i n g l e v e l s of p o ll u t i o n and s o c i e t a l pre ssu re s forced the Prime Min ist er to re a ss e s s his p o lic y outlook and p r a c t i c e . As a r e s u l t , Prime Minister Sato requested a "New Economic and Social Development Plan" in September 1969; the plan was formally adopted in 1970 and emphasized the "promotion of social development."

12

Tanaka's m i l l i o n - s e l l e r "Nippon Retto Kaizo Ron" was published in June 1972 s h o r t l y before his e l e c t i o n to Prime M inister.

The

general t h e s i s of the book, to build a new Japan, was subsequently adopted as the ba sic Leitmot if f o r Tanaka's economic plan which c a l l e d f o r sweeping p o li c y measures to solve the many socio-economic imbalances t h a t r e s u l t e d from J a p a n ' s rapid economic growth.

The

Tanaka plan f o r "Remodeling the Japanese Archipelago," announced with g r e a t f a n f a r e , advanced concrete public p o l i c i e s to remedy the most pre s si ng problems and excesses of economic growth, such as u r b a n iz a ti o n , lack of social i n f r a - s t r u c t u r e , i n d u s t r i a l l o c a t i o n , public fi n a n c e , e t c . , to name j u s t a few.

I n i t i a l l y , the general

p u b l i c ' s r e a c ti o n to Tanaka's high-powered program to "remodel" the Japanese arch ipela go in to a new i n d u s t r i a l country suffe red ser io us setbacks as 1t s t i r r e d i n f l a t i o n and threa ten ed p o ll u t i o n across the country.

With the economic c r i s i s ensuing the 1973 oil

c r i s i s and Tanaka's r a p i d l y d e cl i ni ng p o l i t i c a l for tun es in the wake of the Lockheed scandal in 1974, the ambitious Tanaka plan faded q u i e t l y away.

13

In conclusion i t seems reasonable to expect t h a t each f u t u r e

110

Japanese Prime M in ist er will req ue st a new economic plan.

And since

each Prime Min ist er may want to approach economic p o l i c y in his own way, he might want to use the economic plan to expound his politico-economic philosophy or i n t e n t i o n .

Evidence suggests t h a t

Prime Minsiters do g e n e r a ll y seem to have a good understanding of the p o t e n t i a l "PR" value of the plan announcement e f f e c t .

On the

o th e r hand, the record i n d i c a t e s t h a t few Prime Min ister s have managed to bring a comprehensive and r e a l i s t i c public p o li c y pe rs pec tiv e to bear on Japanese economic planning. pretations for th is fa ilu re .

There are two po s si b le i n t e r ­

One reason might be a scr ibe d to the

al le ged " p o l i t i c a l i n s i n c e r i t y " of economic plans which would render the cont ent of any plan a p r i o r i meaningless.

Perhaps more important

i s the find in g t h a t the r e l a t i v e l y sh or t o f f i c e tenure of Japanese Prime Min ister s of the pa st decade--they have averaged about two years since Tanaka--may have prevented them to impose a more compre­ hensive public p o lic y vis io n of t h e i r own on economic plans. And f i n a l l y , l e t ' s pause f o r a moment to summarize the re le v a n t findi ngs about the r o l e of J a p a n ' s Prime Min ist er in the S tr uct ur e and Organization of J ap a n 's Economic Planning.

(1) The Prime Mi nister

i s the most important s in g le p a r t i c i p a n t in the Japanese economic planning proc ess ; the Prime Min ist er decides whether or not an economic plan will be formulated during the tenure of his o f f i c e ; (2) because of the r e l a t i v e high tu rn - o v er of Japanese Prime M ini st ers in the pa st decade or so, one can i n f e r a causal r e l a t i o n s h i p between the high frequency of economic plans and the o f f i c e tenure of Japanese Prime M in ist er s.

Ill

3. 3.1.

Economic D el iberation Council (EDC) Introduction

This sec tio n d is cu ss es ro le and functio n of the Economic De lib er at io n Council in J ap a n 's economic planning process.

For

t h i s purpose the org anization and a c t i v i t i e s of the EDC will be exami ned. The EDC i s a public advisory organ.

Public advisory organs

have become an in te g ra l p a r t of postwar J ap a n 's public p o li c y making machinery where they perform a linkage function between the public and p r i v a t e realm; the social and economic environment. Ohnishi:

" . . .

14

Writes

the government i s u t i l i z i n g a la rg e number of advisory

committees f o r the s ol ut io n of economic and social problems.

The

Economic Planning Agency, f o r example, has i t s a c t i v i t i e s ' su pp le ­ mented' by the Economic D el ibe rati on Council and the Economic Welfare Council, both instruments of f a c t f i n d i n g f o r the Prime M inister. A v a r i e t y of advisory committees a tt ach ed to each m i n i s t r y . . . which make the best of these e x p e r t s , t h e i r data and m a t e r i a l . . . . "

15

During f i s c a l 1982-83 th e re were not l e s s than 168 public advisory organs.*®

In Council System in Japan, a p u b l i c a t i o n of

the Administrative Management Agency, the e n t i r e a r r a y of ' c o u n c i l s ' has been divided in to two basic c a t e g o r i e s :

' a d v is o ry ' and ' c o n s u l t a ­

t i v e ' c o u n c i l s , moreover they have been ordered according to t h e i r p r in c ip a l fun c tio ns ,* ^ and o f f i c i a l l y defined a s , ". . . a council i s a c o l l e c t i v e org anization which conducts research on s p e c if ie d matte rs as an a u x i l i a r y organ o f an a d m in is tr a ti v e o rg a n iz a ti o n . . . ." By and l a r g e , public advisory organs are cr eat ed f o r the purpose

18

112

of (1) introd ucing various kinds of e x p e r t i s e in t o the operation of public a d m i n i s t r a t i o n ; (2) t o induce e x p e r t i s e in p ol ic y d r a f t i n g and planning; (3) to implement programs f a i r l y and e q u i t a b l y ; and (4) to take in to c onsid er at ion views and opinions of i n t e r e s t e d parties.

19

Japanese advisory organs have a long-standing t r a d i t i o n da ting back to the Meiji e r a , y e t the pre s en t p r o l i f e r a t i o n began with a SCAP ordinance, congruent with the general attempt to "democratize" Japanese p o l i t i c s , during the U.S. occupation, t h a t intended to revive the ex ist en c e and func tion of advisory organs. The very ex ist en c e of such a la rg e number of div e rs e advisory organs r a i s e s some important is su e s not only f o r the a n a l y s i s of Japanese economic planning, but a ls o the l a r g e r concerns of Jap a n' s p o l i t i c a l economy.

For one, the se adv isory councils appear in f a c t

to supplement the a c t i v i t i e s of the more conventional i n s t i t u t i o n s of Japanese a d m in is tr a ti v e system, i . e . the economic bureaucracy and o th e r s p e c ia li z e d governmental agencies. How must the formation and function of these advisory councils be explained? Do these cou ncils possess any real power and influence in the public p o lic y decision-making process? ti o n a l a t t r i b u t e s of these cou ncils ?

What are the func­

What are some of the motives

and underlying r a t i o n a l e of the economic bureaucracy and the r u li n g Liberal Democratic Party to open up a " p a r t i c i p a t o r y " fr an c h is e in form of these councils? Okabe, Pempel, Schmid and T re ib er contend t h a t public advisory organs are being e s ta b li s h e d because of the broadening scope and

113

in c re a s in g complexity of governmental a c t i v i t y t h a t makes outs ide e x p e r t i s e imperative.^® I t i s contended here t h a t the Economic De lib er at io n Council (EDC) serves e s s e n t i a l l y as a synchronizer of public and p r i v a t e i n t e r e s t s , and not merely as an i l l u s t r i o u s

blue-ribbon panel of

e x p e r ts a t the dis posal of the Japanese bureaucracy.

There a r e ,

however, s a l i e n t is s u e s a t s t a k e , namely, power and domination. What fo rc e s impact and influence the EDC during the process of synchroni­ z a ti o n of p r i v a t e and public i n t e r e s t s ? In terms of formal o r ga ni z at io n i t i s the EDC and i t s c o n s t i t u e n t sub-committees t h a t are " d e l i b e r a t i n g " th e cont ent of J ap a n 's economic plans by synchronizing d i f f e r i n g p r i v a t e and public i n t e r e s t during the plan formulation.

Once a plan i s formulated the EDC chairman

p re s en ts i t s fin din gs to the Prime Min ist er.

Japanese economic

plans are us u al l y adopted in t h e i r o r i g i n a l ( d r a f t ) form by the c ab in e t and declared the guiding p r i n c i p l e of Japanese economic policy.^ * The formal function of the EDC has been defined as ". . . study and d e l i b e r a t e on the formulation of long-term economic plans and o t h e r important economic p o l i c i e s and programs upon request o f the Prime M in is t e r , . . .

and a ls o to s t a t e i t s (EDC) opinion 22 t o the Prime M in ist er. . . . For t h i s purpose, the EDC draws from ex per ts in the pu bli c and p r i v a t e s e c t o r . I t i s often contended, however, t h a t as an i n s t i t u t i o n the EDC does not possess any s i g n i f i c a n t or s u f f i c i e n t power, and thus the EDC has come to be perceived nothing more than a "forum" f o r

114

the exchange of ideas regarding Japanese economic plans.

23

The ambiguous power of the EDC must be explained in terms of i t s r e l a t i o n s h i p with the Economic Planning Agency (EPA).

The EPA

serves as the s e c r e t a r i a t f o r the EDC; i t provides re s e a rc h , s t a t i s t i c a l , e d i t o r i a l and c l e r i c a l work f o r the EDC.

There i s ,

not s u r p r i s i n g l y , l i t t l e consensus of the EDC's power among a n a l y s t s . Writes H a it a n i , " . . .

m i n i s t e r i a l o f f i c i a l s f i r s t de fine the is sue

f o r the council . . . they provide a prel im ina ry p o s i t i o n paper supported by data . . . bu re a u c ra ts , in c lo se cooperation with the o f f i c i a l s of the m i n i s t r y , e f f e c t i v e l y s t e e r the d i r e c t i o n of council meetings. . . . "

24

Bieda, on the o th e r hand, a s c r i b e s hig he st s i g ­

n if i c a n c e to the EDC's workings and in f l u e n c e ; s t a t e s he:

" . . .

the Economic De lib er at io n Council i s . . . p o l i t i c a l l y (an) i n f l u e n t i a l body which decides the broad, or macro-economic p o li c y o b j e c t i v e s , 25 such as the ' o p ti m a l' r a t e of growth. . . ." However, th e se and s i m i l a r statements do not explain very much because such a s s e r t i o n s are not u s u a l l y s u b s t a n t i a t e d with empirical evidence, thus they should be viewed as d e s c r i p t i v e a t b e s t .

Yet

both statements r e f l e c t , a t l e a s t in p a r t , the ambiguity surrounding the general study o f Japanese advisory c ou nc il s. s tu d ie s of J a p a n ' s advisory co uncils are s c a rc e ,

In f a c t , empirical 26

and since the

e x i s t i n g s t u d i e s are s t i l l a t the p r e - t h e o r e t i c a l l e v e l , no general pro po si tio n about o rg a n i z a t i o n , s t r u c t u r e and function of Jap a n' s advisory c ounci ls have been advanced.

Moreover, t h i s a n a l y t i c a l

dilemma—absence of general p r o p o s i t i o n s —i s f u r t h e r exacerbated by the e x is t e n c e of more than 200 advisory c ounci ls a t any given

115

time, and by the f a c t t h a t these co uncils vary g r e a t l y in s ize and significance.

27

These are some of the more s a l i e n t problems surround­

ing the a n a l y s i s of Jap a n' s advisory organs and must be born in mind f o r the pre sen t i n t e r p r e t a t i v e a n a l y s i s of the EDC. 3.2.

Formal Organization

While the following a n a l y s i s of the EDC, during the plan period from 1955 to 1964 (plan I - IV ), focuses on formal o r g a n i z a t i o n , s t r u c ­ t u r e and f u n c ti o n , a p a r t i c u l a r attempt will be made to shed some l i g h t on the informal s t r u c t u r e s in orde r to determine the power r e l a t i o n s underlying the r o l e of EDC in the formulation of Japanese economic plans during the period under examination. The Economic D elibe ra ti on Council was o r i g i n a l l y cre ate d by an ordinance on August 1, 1951, during a general re org a ni z at io n of J ap a n 's economic machinery, and i t replaced the U.S. occupation created Economic S t a b i l i z a t i o n Board, s ig n if y in g a f i r s t step to J ap a n 's economic independence.

28

The EDC's formal o rg a n iz a ti o n ,

t a s k s , and op eration al procedures are s t a t e d in a d m in is tr a ti v e ordinance no. 302.

29

In org a niz atio na l terms the EDC has been

designated a fuzoku kikan (organ) of the Economic Planning Agency, and f o r p r a c t i c a l purposes, the EDC has been designated an advisory committee to the Prime M inister.

30

Usually the EDC c o n s i s t s of 30 ' r e g u l a r ' members,

31

a l l appointed

by the Prime Mi nister f o r a period of two y e a r s ; the term is renew­ ab le.

All EDC members are expected to possess extended pr of essio nal

and/or s c i e n t i f i c experience ( gakushiki keikensha).

32

The EDC chooses

116

i t s own chairman. which he p r e s id e s .

The chairman prepares and c a l l s f o r meetings Moreover, the EDC chairman nominates ex per ts

to s t a f f the various subcommittees which deal with s p e c ia li z e d aspects o f the content of Jap a n' s economic pla ns .

The EDC c h a i r a l s o decides

'pace' and 'agenda' of plan d e l i b e r a t i o n s , unless otherwise s p e c if ie d in

the

Prime M i n i s t e r ' s o r i g i n a l req ue st ( shimon).

Ashimon i n d i c a t e s only the general purpose of the p la n,

while

the EDC organizes the machinery f o r the d e l i b e r a t i o n and d r a f t i n g of

the

economic plan; the plan d r a f t i s then submitted to the c ab in e t.

In

the

p a s t , plan d r a f t s have been adopted by the c abi ne t as the

government's o f f i c i a l economic plan without any amendments.

33

According to the provis ions of ordinance no. 302, the EDC formu­ l a t e s economic plans and may a ls o be required to convey i t s opinion on s p e c i f i c economic i s s u e s .

The EDC i s f u r t h e r e n t i t l e d to submit

t o the Prime Mi nister i t s own recommendations and viewpoints on economic m a tt e rs .

However, the EDC has not made any use of these

pr ov is ion s to t h i s very da te . All a d m i n i s t r a t i v e work and chores r e s u l t i n g from the a c t i v i t i e s o f the EDC are borne by the Economic Planning Agency's "Bureau of Comprehensive Planning," which serves a ls o as the s e c r e t a r i a t of ^ ji

the EDC.

In a d d i t i o n , the Economic Planning Agency provides the

EDC and i t s sub-committees with a host of highly q u a l i f i e d economic and planning exp er ts from i t s s t a f f . in i t s basic ta sk performance.

These exp erts a s s i s t the EDC

Moreover, o f f i c i a l s of the Economic

Planning Agency play a c r i t i c a l ro le as in te rm e d ia ri e s between the EDC and various m i n i s t r i e s and agencies during the freque nt c o n s u l t a t i o n s

117

t h a t are necessary during the formulation of economic plans. From a formal l e g a l i s t i c p e r s p e c ti v e , s t r u c t u r e and organ iz ati on of the EDC seem most impressive; ta sk s are well de fi n e d , th e re appears to be a high degree of EDC independence in the formulation of economic pl a n s, and ample room f o r economic i n i t i a t i v e s .

The EDC's apparent

power and i n f l u e n t i a l p o s it io n may be led back to a t l e a s t two important f a c t o r s :

(1) the EDC i s one of J a p a n ' s l a r g e s t advisory

committees with 42 ' r e g u l a r ' and 147 ' i r r e g u l a r ' members, not counting functional s p e c i a l i s t s . of only th re e members.

35

36

J a p a n ' s s m alles t advisory council c o n s i s t s (2) The EDC counts among i t s members several

of J ap a n 's most powerful and i n f l u e n t i a l i n d u s t r i a l and fi n a n c i a l l e a d e rs .

During the formulation of the National Income Doubling

Plan (from November 26, 1959, to November 1, 1960) the EDC included the following top-ranking le ad e rs of J a p a n ' s business world ( z a i k a i ):

37

Horie, Shi geo—P r e s i d e n t , The Bank of Tokyo Ojima, Arakazu—P r e s i d e n t , Yawata Iron & Steel Co., Ltd. Kurata, Chikara—P r e s i d e n t , Hitachi Manufacturing Co., Ltd. Uemura, Kogoro--Vice P r e s i d e n t , Keidanren Kikawada, Kazutaka—Vice P r e s i d e n t , Tokyo E l e c t r i c Power Co. Ishikawa, I c h i r o —Member, Atomic Energy Commission of Japan Yamashita, S e i i c h i — S ec ret ary General, Keizai Doyukai Wada, Kanj 1 —P r e s i d e n t , Maruzen Oil Co., Ltd. While t h i s l i s t i s not complete, i t does however contain some of J ap a n 's most p r o l i f i c business le ad e rs of the High Growth Era. I t would, however, be too presumptuous to a s c r i b e the EDC power and Influence because of some of i t s I n f l u e n t i a l members.

The issue

of the EDC's power and infl uence i s much too complex and hinges to a g r e a t deal on background v a r i a b l e s .

Therefore, 1t will be

necessary to examine the EDC's composition of membership and the

118

EDC's r o l e in the plan d e l i b e r a t i o n process.

For t h i s purpose,

i t w ill be useful to dis cu s s b r i e f l y the general org a ni z at io na l evironment in which the EDC must ope rate. The EDC's org an iz ati onal environment i s c h a r a c te r iz e d by a gre a t deal of ambiguity.

For one, the functio na l r e l a t i o n s h i p between

the Economic Planning Agency and the EDC i s not s u f f i c i e n t l y c l e a r l y defined or d e l i n e a t e d .

The EDC, in charge of J ap a n 's economic plan

formulation, i s o r g a n i z a t i o n a l l y attache d to the Economic Planning Agency as an organ ( fuzoku kikan) , and the EPA i s in charge of the EDC's d a i l y a f f a i r s .

The c r i t i c a l

question becomes th e n, who i s

a c t u a l l y formulating J a p a n ' s economic plans? t h i s is su e t h a t e xper t opinion div e rg e s.

I t i s p r e c i s e l y over

Notes the Japanese economist

Komiya, ". . . i t may be said . . . t h a t the Council members' involve­ ment in plan-making i s minimal . . . the EPA's Bureau of Comprehensive Planning dominates the process of plan-making . . . t o g e th e r with o f f i c i a l s of the EPA, o f f i c i a l s of various m i n i s t r i e s and agencies atte nd the meetings . . . they c o l l e c t necessary m a t e r i a l s , prepare documents, and d r a f t pla ns. . . ."

38

Komiya's statement i s d i a ­

m e t r i c a l l y opposed to the view advanced by Bieda p or tr ay in g the EDC as an i n s t i t u t i o n y ie ld in g g r e a t p o l i t i c a l power and Inf luence.

39

I t i s a g a i n s t t h i s o rg an iz ati ona l background of ambiguous functi onal and ope ra tio nal r e l a t i o n s between the Economic Planning Agency and the EDC t h a t the r e l a t i v e power of the EDC msut be examined.

119

3.3. 3.3.1.

Formal St ru ct ure EDC - Chairman

Turning now to our di scu ss ion of EDC member composition, the EDC chairman seems a log ic a l poi nt of d e p a r tu re .

As in d ic a te d above,

the EDC chairman holds a p o s i t i o n o f s t r a t e g i c importance.

However,

the chairman's power to nominate members of the council and i t s sub-committees i s s u b je c t to e f f e c t i v e checks by the Economic Planning Agency which i s 'adm in ist rat in g* a ctu al appointments.

". . . [The]

Economic Planning Agency s e l e c t s as members of the Council or i t s sub-committees only those who will behave w e ll , t h a t i s , those who cooperate with government o f f i c i a l s . . . .

The legitim ac y of

the EDC's chairman i s based on the ordinance governing the workings of the EDC and re in fo rc ed by the actua l appointment bestowed upon him by the Prime Min ist er who in turn wants to ass ure his control over the planning process. o u t, " . . .

As Johansen and Benveniste have pointed

the chairmanship o f any important planning e x e r c is e

i s always kept in t r u s t e d and f r i e n d l y hands . . . the c h i e f t e c h n i ­ cian or c h i e f profes si onal planner i s r a r e l y the t i t u l a r head of 41 planning groups." This has been p r e c i s e l y the p r a c t i c e in postwar Japanese economic planning, and f o r good reasons.

The governmental

r a t i o n a l e has been to bring to g e t h e r the public and p r i v a t e realm during the plan formulation, y e t a t the same time to keep the formu­ l a t i o n of national economic plans under the Influence and control of the bureaucracy. The f i r s t EDC c h a i r was e n t r u s t e d to Ishlkawa I c h i r o , the doyen of J a p a n ' s economic re c o n s tr u c ti o n e f f o r t during the f i r s t phase

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of the High Economic Growth Era.

From the EDC’s inception in 1952

on, Ishikawa led the council u n r e l e n t i n g l y from economic plan to economic plan.

Ishikawa l e n t the EDC c h a i r a gr e a t deal of p r e s t i g e ,

p a r t i a l l y because of h is high s t a t u s in Japanese economic c i r c l e s , but a ls o because Ishikawa was simultaneously holding the presidency of J ap a n 's foremost economic peak a s s o c i a t i o n , keidanren, a p o s i t i o n he kept u n t i l 1956. the zaika i s o r i ,

42

The f a c t t h a t J a p a n ' s "economic Prime M in is t er ," presided over the EDC appears to have been most

c r i t i c a l f o r the o ve ra ll success of postwar J ap a n 's f i r s t several economic pla ns.

For one, Ishikawa, as z ai k a i sori and doyen of

postwar economic recovery, provided the planning process and the EDC with a g r e a t deal of s t a t u s and c l o u t .

Second, perhaps even

more imp ort an tl y, Ishikawa's chairmanship of the EDC can be i n t e r ­ preted as an e x p l i c i t ma nife st at io n of a basic agreement e x i s t i n g in Japanese economic c i r c l e s about the u t i l i t y o f the government's planning e f f o r t in ge neral.

Such an i m p l i c i t condoning of planning

by Japanese business must be regarded as a c r u c i a l turnaround, par­ t i c u l a r l y in view o f the a n ti - p l a n n i n g sentiment fo s te re d by the Japanese government in the 1930s and 1940s.

43

In f a c t , Ishikawa

brought a g r e a t many of J ap a n 's most accomplished i n d u s t r i a l i s t s , bankers and economic leade rs in t o th e economic plan d e l i b e r a t i o n s . In April 1966, a t the age of 81, Ishikawa resigned from the EDC c h a i r and was replaced by Klkawada Kazutaka, p r o l i f i c business le a d e r s .

44

y e t another of Japan s

Kikawada's c r e d e n t i a l s were most impressive

to o, p r e s i d e n t of Tokyo E l e c t r i c Power and a leading f i g u r e of Keizai Doyukai.

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From the very o u t s e t of his tenure as EDC chairman, Kikawada worked extremely hard to inc rease the power and influence of the EDC, he intended to p a t t e r n a f t e r the "Council of Economic Advisors" of the United S t a t e s .

45

The t a s k , however, remained unaccomplished.

Nevert hel es s, Kikawada was much of an economic " a c t i v i s t , " as two examples well i l l u s t r a t e .

Kikawada had been one of the leading

founding members of the sangyo mondai kenkyukai—sanken f o r s h o rt .

46

Sanken, a p r i v a t e group, engaged in the "study" of J ap a n 's i n d u s t r i a l s t r u c t u r e ; i t i s perhaps be st known f o r i t s ro le in the successful engineering of an epoch making merger in the s t e e l i n d u s t r y , the Yawata-Fuji fusion in to the g i a n t Nippon Steel Corporation, which since has become the w orl d' s most e f f i c i e n t st e e l p r o d u c e r . ^

Second,

in the e a r l y 1970s, Kikawada had v i r t u a l l y become the sole spokesman f o r kelzai doyukai, J ap a n 's second l a r g e s t economic o r g a n iz a ti o n , and thus came to e x e r t co ns id erab le infl uence in J a p a n ' s economic circles zaik ai.

However, with the passing of Kikawada in 1978,

the EDC l o s t a g r e a t deal of i t s a t t r a c t i o n and s t a t u s in Jap a n' s economic c i r c l e s , and the c u r r e n t EDC chairman, Enoji J i r o , e d i t o r o f the p r e s t i g i o u s Nihon Keizai Shlmbun, compares l e s s favorably with hi s two predecessors in terms of p r a c t i c a l managerial experience and le ad e rs hip function in z a i k a i . 3 .3 .2 .

Economic I n t e r e s t s

The actua l dominance of the EDC c h a i r by Ishikawa and Kikawada f o r a cumulative 25 years r a i s e s some important questions with regard to power and infl uence in the Japanese economic planning process.

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However, i t would be too s i m p l i s t i c to i n t e r p r e t Ishikawa's and Kikawada's long reign as EDC chairmen as c l e a r evidence of t h e i r power and influence over the form and content of Japanese economic plans.

There i s simply no fa c tu a l evidence t h a t would suggest t h a t

e i t h e r Ishikawa or Kikawada have ever attempted to influence a Prime M inis ter in his re quest f o r an economic plan ( shimon).

Both, Ishikawa

and Kikawada, d e a l t and worked with f i v e r e s p e c ti v e d i f f e r e n t Prime M in is t e r s , y e t th e re are no o f f i c i a l records of any EDC c h a i r communi­ c a ti n g with the Prime Min ist er suggesting the d e s i r a b i l i t y or even n e c e s s i t y of a new economic plan.

However, i t i s q u i t e conceivable

t h a t both EDC chairman and the Prime Min ist er might have conferred inf ormally about planning m a tt e r s , but ag ain , th e r e are simply no t a n g i b l e records a t t e s t i n g t h a t such c o n s u l t a t i o n s have indeed been c a r r i e d out. On the o t h e r hand, the f a c t t h a t Ishikawa and Kikawada, two of z a i k a i ‘s most s i g n i f i c a n t lead e rs in the postwar e r a , have indeed dominated the EDC c h a i r f o r almost 25 years i s not without meaning in i t s e l f .

In f a c t , i t can be argued t h a t z aik ai has dominated

the EDC c h a i r , and by v i r t u e of Ishikawa's and Kikawada's reign and t h e i r nominating power, zaikai has had a most c r i t i c a l impact on the composition of the EDC membership, which s ha ll be analyzed next. Z a i k a i ' s dominance of the EDC can be reasonably well i l l u s t r a t e d and documented.

According to the compilation in Table 1, the m a jo ri ty

of EDC members during the plan periods from 1957 to 1966 (Plans I-V) was a f f i l i a t e d with economic i n t e r e s t s and r e c r u i t e d p ri m a ri ly

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from bus ine ss , i n d u s t r i a l and f i n a n c i a l c i r c l e s .

There have been

even some "independent" EDC members, although lacking any meaningful numerical r e p r e s e n t a t i o n ; thus one i s in c li n e d to view t h e i r ro le in plan d e l i b e r a t i o n as marginal a t b e s t.

Perhaps the most s t r i k i n g

fe a tu re o f

EDC membership from 1955 to 1965 has been the conspicious

absence o f

any r e p r e s e n t a t i v e s from labor.

Tsuda

has i n t e r p r e t e d the strong r e p r e s e n ta ti o n of big business

in the EDC as r e f l e c t i v e of changing a t t i t u d e s a f t e r the mid-1950s. He w r i t e s :

". . . a l l [e xe cut ive s] believed t h a t a c ti n g in l i n e

with the national economic development program would c o n t r i b u t e to the development o f both the national economy and t h e i r own firms . . . i t i s said t h a t the Japanese economy s t a r t e d i t s rapid growth in the l a t e 1950s . . . however, c orpo ratio ns and managers were s t i l l unsure of the growth p o li c y before 1960 . . .

i t was only

around 1960 t h a t they came to have f a i t h in the growth p o lic y. . . . "

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In 1959 EDC chairman Ishikawa, in cooperation with the Economic Planning Agency's Bureau of Comprehensive Planning, assembled a formidable group f o r the d e l i b e r a t i o n and formulation of the "National Income Doubling Plan."

The National Income Doubling Plan brought

about some innovation with regard to the EDC.

Most s i g n i f i c a n t l y ,

the number of "experts" c a l l e d to serve 1n the plan d e l i b e r a t i o n was increased.

Some eleven u n i v e r s i t y p ro f es so r s and seven r e s e a r c h e r s ,

drawn from various p r i v a t e researc h I n s t i t u t e s , were in v i t e d to 49 lend t h e i r e x p e r t i s e to the EDC. In a d d i t i o n , two members of the "massmedia" were c a l l e d up, which was another novum. The inclus ion 50 of Enjoji J i r o , e d i t o r of Nihon Keizai Shimbun, and Tsuchiya Kiyoshi,

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on the e d i t o r i a l s t a f f of Asahi > was an i n t e l l i g e n t l y designed move to ass ure maximum media exposure.

As i t turned out l a t e r , the mass-

media played a c r i t i c a l r o l e in the "p op ul ariz atio n" o f the National Income Doubling Plan.

At the same time the r e p r e s e n t a t i o n of " in du s tr y

and commerce" on the EDC was reduced by 50 p e rc e n t, while economic peak a s s o c i a t i o n s increased the re p r e s e n t a t i o n of big business by 25 percen t.

All in a l l , f o r the d e l i b e r a t i o n of the National Income

Doubling Plan the EDC reached an a l l - t i m e high of 42 members in 1959-1960. 3 .3 .3 .

Labor

At the same time i t i s a ls o q u i t e important to examine which groups have been excluded from economic plan formulation a l t o g e t h e r . The conspicious absence o f labor from economic planning from 1955 to 1965 can be explained be st in terms of the pe rc ept ion s held in government and la bo r a t t h a t p a r t i c u l a r time.

There can be no doubt

t h a t the Japanese government and elements in the Liberal Democratic P ar ty have attempted to keep labor and i t s le ad e rs a t a safe di s ta n c e from the c r u c ia l c e n t e r of public policy-making as long as p o s s i b l e , since la bor was perceived as a p o l i t i c a l t h r e a t .

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One o f the most

compelling p o l i t i c a l f a c t o r s exp lai nin g l a b o r ' s e x p l i c i t exclusion from public policy-making during the l a t e 1950s has been Prime M inis ter K1shi's 1957 t a i k e t s u

(showdown) with the S o c i a l i s t Party

and i t s s u p p o rt e rs , p a r t i c u l a r l y sohyo (General Council of Trade Unions), and a ls o K i s h i ' s expansive economic p o l i c i e s , which, tog e th e r with the g e n e r a ll y d e t e r i o r a t i n g economic s i t u a t i o n a t the end of

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1957 led to v i t r i o l i c p o l i t i c a l a t t a c k s by labor and the S o c i a l i s t P a r ty , accusing the Prime M inister of be fr ie ndi ng c a p it a li s m .

52

Obviously, Kishi and the S o c i a l i s t Party with i t s labor supporters were s e t on an i r r e v e r s i b l e c o l l i s i o n course during the l a t e 1950s, and thus ob via tin g any formal la bor p a r t i c i p a t i o n in the making of economic plans. Labor, on the o th e r hand, r e j e c t e d economic planning in c a p i t a l i s m as dece ptive .

Most important la bor org a n iz at i o n s l i k e

sohyo and domei (Confederation of Labor) purported a "negative" s ta n c e , i f not o u t r i g h t h o s t i l i t y toward " s t a t e monopoly c a p i t a l i s m , " and they were unwilling to p a r t i c i p a t e in planning, which meant to cooperate with a government t h a t they perceived as the embodiment of monopoly c a p it a li s m .

53

Besides l a b o r ' s id e o lo g ic al and r h e t o r i c a l

reasons th e r e have been v a li d p r a c t i c a l concerns as well. Taira:

" . . .

Notes

the ma tters t h a t are of g r e a t s i g n i f i c a n c e to workers

are d e a l t with ou ts id e the planning system by p o l i c i e s having to do with wages, p r i c e s , employment, working c o n d i t i o n s , soci al insurance, and w elfa re. . . . A p iv ot a l change of governmental a t t i t u d e s occurred in 1966-67 with the Economic and Social Development Plan, when domei and sohyo managed t o place a r e p r e s e n t a t i v e each on the newly c re at e d "General Committee" of the EDC ( o r g a n i z a t i o n a l l y placed between the EDC and i t s subcommittees), and the placement of labor r e p r e s e n t a t i v e s on the EDC subcommittees f o r ' l a b o r ' and ' p r i c e s . '

As a r e s u l t , labor

re p r e s e n t a t i o n on the EDC became i n s t i t u t i o n a l i z e d and, f o r example, in 1979 the EDC d e l i b e r a t i n g the New Economic and Social Seven-Year

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Plan included the p r e s id e n t o f sohyo, Motofumi Makieda, among many o th e r labor r e p r e s e n t a t i v e s on the various EDC subcommittees.

55

The c r i t i c a l 1967 turnaround marked the inc lu si on of labor in to the plan decision-making process and may be explained as the r e s u l t of a r a p i d l y in cr eas in g s e l f -c o n fi d e n c e in the Japanese government and the Liberal Democratic P a r ty , because national welfare go a ls , as enunciated in e a r l i e r pla n s, were now indeed being r e a l i z e d . Moreover, J ap a n 's rapid economic growth during the e a r l y 1960s had led to ful employment and an in c re a s in g l i v i n g stand ard; la bor seemed s u f f i c i e n t l y content and was no longer perceived an immediate t h r e a t , unlike during the 1950s. 3 .3 .4 .

EDC--Subcommi t t e e s

Next, a t t e n t i o n will focus on the subcommittees o f the Economic Delib erati on Council.

As mentioned above, the EDC chairman organizes

the various sp e c ia li z e d subcommittees to d e l i b e r a t e d e t a i l e d problems and aspe ct s of J ap a n 's economic pl a n s.

But the EDC chairman rec eiv es

" a s s is t a n c e " from the Economic Planning Agency's 'planning o f f i c e ' f o r the s e l e c t i o n and appointment of subcommittee members. For the d e l i b e r a t i o n of the National Income Doubling Plan the EDC was organized in t o the following committees and subcommittees: 1.

Overall Policy Committee

2.

Public Sector Committee - D is t r i b u t i o n of Investment Committee - I n d u s t r i a l Location Committee - Tr ans portation System Committee - Housing & Living Environment Committee - U t i l i z a t i o n o f Land & Water Committee - Energy Committee

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-

Science & Technology Committee Education & Training Committee Social Se c u ri ty Committee Finance & Banking Committee

3.

P r iv a t e Sector Committee - General Committee - Advancement of In d u s t r i a l Committee - Trade Committee - Modernization of A gr ic ul tu re Committee - Small Business Committee - Wages & Employment Committee - Living Standard Committee

4.

Calcu la tio n Committee

The i n t e r l o c k i n g of the s p e c i a l i z e d and is su e s p e c i f i c sub­ committees with the Overall Policy Committee and the EDC i t s e l f has been of g r e a t e s t s ig n i f i c a n c e . The Public Sector Committee and the P r iv a t e Sector Committee and t h e i r various subcommittees are f u n c t i o n a l l y linked to the (EDC and the Overall Poli cy Committee) through in t e r l o c k i n g memberships, with the subcommittee chairman performing the necessary linkagef u n c t i o n s , i . e . the chairman i s re sp on sib le f o r the " lin ki ng " of the committee's f i n a l r e p o rt to the EDC's plan d r a f t .

I t i s through

t h i s org a ni z at io n al s et - u p t h a t the subcommittees re p o rt t h e i r d e l i b e r ­ a t i o n fi ndin gs to the Economic D elibe ra ti on Council.

However, the

sum t o t a l of the se f a c t - f i n d i n g re p o r t s does not c o n s t i t u t e a plan draft.

The plan d r a f t c o n s i s t s mainly of synopsized v e r s i o n s , p a r t s ,

and s ec tio ns of the se Individual committee r e p o r t s .

Needless to

mention t h a t the f i n a l i n t e g r a t i o n and coordination of the se f i n a l r e p o r t s in to a plan d r a f t has proven to be most time consuming and d i f f i c u l t a t time s, f o r these various subcommittees, by and l a r g e , operate in a highly independent s e t t i n g from each o t h e r , with

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v i r t u a l l y no formal channels of communication between themselves.

56

In the d e l i b e r a t i o n of the National Income Doubling Plan the C al culation Committee was p ri m a ri ly re sp onsib le f o r the technical aspe ct s of the economic plan.

Members and s t a f f , q u i t e few in numbers,

r e c r u i t e d mainly from academic c i r c l e s , with many showing a p1 : l i v i t y for quantitative analysis.

All were accomplished economists, among

them Kazushi Ohkawa ( H it o t s u b a s h i) , Tadao Uchida (Todai), Masao Baba (Kyoto), Hiroya Ueno (Nagoya), and Kenichi Miyazawa (Yokohama). Beginning with Plan IV, the committee became re sp onsib le f o r the econometric models of Japanese economic planning; and a t t h a t time the Calcu la tio n Committee was reorganized i n t o the "Econometric Methods Committee."

This development was p a r t i a l l y the r e s u l t of

the in c re as in g number and complexity of pla n s, but a ls o because of the rapid development of new planning techniques and t h e i r p r a c t i c a l a p p l i c a b i l i t y f o r Japanese economic planning.

As a consequence,

the committee's ro le in the planning process augmented co nsi derably.

57

In t h e i r plan d e l i b e r a t i o n these various subcommittees have enjoyed the a s s i s t a n c e of "experts" delegated from a l l Japanese m i n i s t r i e s and governmental agencies.

However, not u n t i l Plan VI

(New Economic and Social Development Plan, 1970) have the se ex p er ts been o f f i c i a l l y l i s t e d as members of the EDC.

The very presence

of such governmental ex pe rt s r a i s e s some important is su e s about power in the formulation of Japanese economic plans.

For one, the

argument can be made t h a t government e x p er ts on subcommittees is a c l e a r in st an ce of "government advi si ng government."

Moreover,

i t has been suggested t h a t the mere presence of such public o f f i c i a l s

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on these various subcommittees may preclude any frank d is c u s s io n ; and a l s o , t h a t these "experts" are in f a c t sup er vis ing the workings of the se committees and s t u l t i f y innovation by "checking" d i s p l e a s ­ ing or in a p p ro p ri a te conclusions and/or recommendations a t the very o u t s e t of the plan d e l i b e r a t i o n .

These governmental "experts" play

obviously an important ro le in the Japanese plan formulation a t the subcommittee level by v i r t u e o f t h e i r "Dienstwissen," but a ls o because of the s t a t u s and p r e s t i g e g e n e r a ll y a ss o c ia te d with members of the national bureaucracy.

As a r e s u l t , the opinion and suggestions

of the se "experts" will not encounter much disagreement and opposition in the subcommittees ( a t the detriment o f c r e a t i v i t y and innovation in Japanese economic planning ).

The e s s e n t i a l function of these

governmental ex per ts i s a p p r o p r i a t e l y described as "guiding" the se various subcommittees in t o a d esi re d d i r e c t i o n in t h e i r task p e r­ formance. Komiya has depicted the ro le of governmental ex pe rt s on these subcommittees as follows:

". . . in ad di ti o n to the o f f i c i a l s of

the EPA, o f f i c i a l s of various m i n i s t r i e s and agencies a tte nd the meetings whenever ma tters on which they have j u r i s d i c t i o n are d i s ­ cussed . . . they a c t as the s e c r e t a r i a t of subcommittees:

they

c o l l e c t necessary m a t e r i a l s , prepare documents, and d r a f t plans . . . a l l members (of subcommittees) know t h a t the o f f i c i a l s of m i n i s t r i e s and agencies have v i r t u a l v e to s , and do not waste time f i g h t i n g a g a i n s t them. . . ."

59

In sum, the presence o f governmental e x p er ts on the se sub­ committees has two most s i g n i f i c a n t im pl ic a ti o n s f o r the p o l i t i c s

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of Japanese economic planning.

O r g a n iz a ti o n a ll y , the very "informal"

presence ( u n t i l Plan VI a t l e a s t ) of m i n i s t e r i a l e x p er ts on sub­ committees has assured a r e l a t i v e l y e f f i c i e n t and speedy f a c t - f i n d i n g process because these e x p er ts possess the necessary connection which f a c i l i t a t e access to r e l e v a n t planning data and information t h a t otherwise would not be r e a d i l y a v a i l a b l e f o r the subcommittees and i t s " c i v i l i a n " members.

P o l i t i c a l l y , the overtowering presence

o f governmental ex pe rt s on a l l committees and subcommittees can be taken as a perspicuous i n d i c a t i o n of the bu re au cra cy 's dominance and power in J a p a n ' s plan formulation.

In f a c t , i t i s p r e c i s e l y

t h i s r o l e of "bureaucrats as planning ex perts" t h a t ex p la i n s the burea ucrac y's power and dominance of the Japanese planning process. Turning to the plan d e l i b e r a t i o n pro ce ss, one f i n d s t h a t i t has not changed in o r g a ni z at io na l terms in the ten years from 1955 to 1965.

In most cases l i t t l e more than one calenda r year was needed

t o d e l i b e r a t e a s p e c i f i c economic plan.

De lib er atio n would s t a r t

with a basic dis cus si on of the plan framework and i t s major components; such d is cu s s io n s took place in the "Overall Poli cy Committee," and in c o n s u lt a ti o n with the "Calc ula tio n Committee" ("Econometric Methods Committee" since Plan IV).

The various subcommittees would then

s t a r t t h e i r d e l i b e r a t i o n pro c e ss , r e g u l a r l y concluded within thr e e to s ix months with a r e p o r t and/or recommendation to the EDC.

The

Economic Delib era ti on Council u s u a l l y convened only once during the e n t i r e planning pro c e ss , namely to " f i n a l i z e " the fi n d i n g s of the committees and subcommittees and then to formally submit the tos hin (r e p ly ) to the Prime Mini st er.

The Prime M in ist er would

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then submit the d r a f t plan to the c ab in e t which would then accept the plan in i t s basic form; and a f t e r some minor s t y l i s t i c modifications the plan would then be declared "the guiding p r i n c i p l e f o r managing J a p a n ' s economy."6® In conclu sio n, t h i s i n t e r p r e t a t i v e a n a l y s i s of the Economic D e lib er at io n C ounci l's org a niz atio n and general a c t i v i t i e s during the decade from 1955 to 1964 has led to several conclusions important f o r the p o l i t i c s o f Japanese economic planning.

For one, business

has dominated the membership of the EDC during the e n t i r e decade, while la bor was e x p l i c i t l y excluded from plan formulation a l t o g e t h e r . Second, although in formal or g a n iz at i o n al terms the EDC has been given a c l e a r mandate to formulate J a p a n ' s economic p la n s , in r e a l i t y Japanese economic plans are e s s e n t i a l l y d r a f t e d by governmental e x p er ts who, by v i r t u e of t h e i r "Dienstwissen," are s t a f f i n g the various committees and subcommittees and are a c t i v e l y engaged in c o l l e c t i n g m a t e r i a l s , preparing documents, and d r a f t i n g plans. The question remains, why does business then p a r t i c i p a t e in the a c t i v i t i e s of the EDC?

Obviously, the pecuniary renumeration i s

n e g l i g i b l e but the access to plan information i s valued r a t h e r highly in economic c i r c l e s . 61

For the economic bureaucracy, on the o th e r

hand, i t seemed important to take i n t o co n si d e ra ti o n views and opinions of the business world in the formulation of J ap a n 's high growth p o l i c i e s , and consequently the government sought the opinion and cooperation of the business community in formulating economic plans.

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4. 4.1.

Economic Planning Agency (EPA) Intr oduction

In terms of real power and i n f l u e n c e , as t h i s sec tio n will amplify, the Economic Planning Agency—the M i n i s t e r ' s S e c r e t a r i a t and the Planning Bureau in p a r t i c u l a r —i s undoubtedly the s in g le most s a l i e n t i n s t i t u t i o n p a r t i c i p a t i n g in the p o l i t i c s of Japanese economic planning.

The basic argument i s as follows:

by v i r t u e

of i t s Dienstwissens the EPA dominates the e n t i r e economic planning process; the EPA's domineering ro le of the org a niz at io n and manage­ ment i s based pr im ar i ly on the EPA's techn ica l e x p e r t i s e and adminis­ t r a t i v e performance in the plan formulation.

C r i t i c a l , moreover,

a re the EPA's power and inf lu enc e over the appointment of the members of the Economic Delib erati on Council, agenda bu ild ing f o r plan d e l i b e r ­ a t i o n s , and information acce ss.

In the following i t i s attempted

to exp lain the sources and locus of bu re a ucr a tic dominance of Japanese economic planning in general and the EPA in p a r t i c u l a r .

To t h i s

end, the formal o r g a niz at io nal s t r u c t u r e of the EPA, i t s op eration and management of economic planning will be described and analyzed. Moreover, i t i s attempted to explain the EPA's i n s t i t u t i o n a l r e l a ­ t i o n s h i p with the economic bureaucracy. 4.2.

I n s t i t u t i o n a l Development

EPA's Antecedents.

Japanese postwar economic planning has

undergone th re e major org a ni z at io nal changes u n t i l i t s formal i n s t i ­ t u t i o n a l i z a t i o n in 1955.

At the i n s t i g a t i o n o f the A ll ie d Occupation

Forces, the Economic S t a b i l i z a t i o n Board (ESB) (k e iz ai a n te i honbun)

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was e s t a b l i s h e d on August 12, 1946.

The ESB's mandate was to s t a b i l i z e

and r e c o n s t r u c t J a p a n ' s economy which s uf fere d from mounting i n f l a t i o n and severe shortages of goods; and as a c e n t r a l economic control 62 organ the ESB took over a l l o c a t i o n s and control fu n c ti o n s . To the ESB, a special committee charged with the ta sk of preparing a re c o n st r u c ti o n plan was a tt a c h e d , and t h i s committee prepared a d r a f t , "Economic R e h a b i l i t a t i o n Plan, 1949-53," in 1948. plan had two pr in c ip a l t a r g e t s :

The

one was to r e - e s t a b l i s h the l i v i n g

standard of the people a t a reasonable level and the o th e r was to a t t a i n a s e l f - s u p p o r t i n g economy capable of expo rting enough to 63 pay f o r the import of food and raw m a t e r i a l s . This d r a f t was never o f f i c i a l l y adopted by the government because of p o l i t i c a l changes in the Cabinet.

The d r a f t , however, served the purpose

o f providing background information f o r the government in reque stin g economic ai d from the United S t a t e s .

64

O r g a n iz a ti o n a ll y , the ESB

c onsis te d of ten bureaus and 50 working s e c t i o n s .

During the tenure

of the ESB the number of i t s r e g u la r s t a f f members g r e a t l y f l u c t u a t e d : 1946 1947 1948 1949 1950 1951

-

316 2,003 1,321 895 711 666

The Economic D e lib er atio n Agency (EDA) ( keizai shingi cho) replaced the Economic S t a b i l i z a t i o n Board on August 1, 1952.

The

Economic D el ibe rat io n Agency can be described as an i n s t i t u t i o n p r im a r i ly charged with planning, coordin ation and a n a l y s i s of economic p o l i c i e s in a " l i b e r a l " (market) environment, unlike i t s

65

134

predece ssor, the Economic S t a b i l i z a t i o n Board which was, by and l a r g e , an i n s t i t u t i o n f o r planned economic control in a p o l i t i c o economic environment c ha r a c te ri z e d by u n c e r ta in t y .

Politically,

the formation of the EDA was a most s i g n i f i c a n t d e c l a r a t i o n of politico-economic independence from American occupation p o li c y , and i t marked the beginning of a s e r i e s of re v is io n s in SCAP-imposed economic p o l i c i e s in the aftermath of the Peace Treaty of San Francisco in September of 1951 and the Japanese-American S ec uri ty Pact of May 1952.

By and la rg e EDA economic planning was p o l i t i c a l l y moti­

vated; the general tenor of EDA economic schemes emphasized a s e l f supporting Japanese economy f r e e from special procurement ( to k u j u ) income.®®

Moreover, the EDA's economic schemes and plans were

in st rum en ta liz ed in the drawing o f maximum loans from the World Bank and they were a l s o used to j u s t i f y export c ar te ls .® ^

When

a survey mission of the I n te r n a ti o n a l Bank f o r Reconstruction and Development v i s i t e d Japan in 1952, the government prepared the "Economic Table f o r FY 1957" and i t computed the amount of foreign CO

loans required f o r the long-term development of the Japanese economy. In org a ni z at io na l terms the EDA co ns is te d of twenty-two s e c t i o n s , organized in t o fo ur newly c rea te d departments of Research ( chosa bu), Planning ( keikaku bu) , Coordination ( chosei bu) , and General A f f a i r s ( somu bu).

Although d r a s t i c a l l y reduced from i t s predecessor

the re g u l a r EDA s t a f f remained r e l a t i v e l y s t a b l e : 1952 1953 1954 1955

-

397 395 367 371

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135

Economic Planning Agency (ke iz ai kikaku cho).

The re or ga niz a­

ti o n of the Economic D el ibe rati on Agency in to the EPA on J u l y 21, 1955, marked the beginning of formal and i n s t i t u t i o n a l i z e d economic planning in postwar Japan.

P o l i t i c a l l y s i g n i f i c a n t was the p r i o r

f a l l o f Prime Mi nister Yoshida f o r whom the word "planning" was an anathema.

Yet p r e c i s e l y Yoshida's p o l i t i c a l demise opened new

pros pects f o r Japanese economic planning.

Prime M in sit er Hatoyama’s

formal request f o r the "Five-Year Plan f o r Economic Self-Support" bestowed legitimacy t o economic planning and made i t an in te g ra l p a r t of Jap a n' s post-Yoshida p o l i t i c s .

Almost needless to add t h a t

Hatoyama's economic planning measures g r e a t l y motivated Jap an 's l a t e n t planning force s and gave a new impetus to J a p a n ' s planning machinery.

However, in view o f some skepticism in the business

world the Hatoyama government took pains to make c l e a r t h a t the basic governmental p o s i t i o n was the maximum r e s p e c t f o r p r iv a te i n i t i a t i v e and the minimum r e s o r t to any kind of c e n t r a l i z e d pl a n n in g .7® In g e n e r a l, however, the p r i v a t e s e c t o r did not pe rceive Jap a n's r e s u rr e c te d planning system as a major t h r e a t , and the EPA was c o r r e c t l y seen as the weakest element of J a p a n ' s economic bureauc­ racy from which th e r e was l i t t l e to expect. 4 .3 .

Organizational Coherence and Functional D i v e r s i t y

According to A r t i c l e 3 o f the Law e s t a b l i s h i n g th e Economic Planning Agency,71 the EPA has been mandated to perform the follow­ ing f u nc tio ns :

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a.

formulation and promotion o f long-range economic plans

b.

formulation of basic p o l i c i e s f o r op er atio n of general aspe ct s of the economy and o u t l i n e of the economic plan f o r each FY

c.

plan and d r a f t of o v e r - a ll p o l i c i e s r e l a t i v e to economic measures to be executed by two or more a d m in is tr a ti v e agencies

d.

co ordination and adjustment of basic economic p o l i c i e s

e.

a n a l y s i s and a ppr ai sal of o v e r - a l l nat ion al resources

f.

researc h and a n a ly s is concerning domestic and foreign economic t r e n d s , national income, e t c .

In o th e r words, the EPA i s mainly concerned with the formula­ t i o n of long-term and s hor t-t erm economic p la n s , the coordination and adjustment concerning t h e i r implementation and the resea rch and a n a l y s i s which form the ba si s f o r such a c t i v i t i e s .

The implemen­

t a t i o n of s p e c i f i c pl a n s, however, i s "e ntr us te d" to o th e r agencies and m i n i s t r i e s . In or de r to achieve i t s designated t a s k , the EPA has been led by a Director-General with rank of a M in ist er o f S t a t e , and o r i g i n a l l y c onsi s te d of twenty-four d i f f e r e n t working s e c t i o n s organized int o f i v e p r in c ip a l departments:

D ire ct or Gen era l's S e c r e t a r i a t ( chokan

kanbo); Coordination ( chosei bu); Planning ( keikaku bu); Development ( kaihatsu bu); and Research ( chosei bu).

72

During the course of i t s development since 1955, the Economic Planning Agency has g r e a t l y expanded i t s range o f competence and pr eserve.

New ta sk s and assignments and increased a d m in is tr a ti v e

r e s p o n s i b i l i t i e s have led to new fun ct ion s and the or ga niz ati on of several new a d m in is tr a ti v e e n t i t i e s and re sea rch u n i t s .

Of gre a t

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si g n i f i c a n c e f o r Japanese economic planning has been the Ju ly 1958 c r e a t i o n of the "Economic Research I n s t i t u t e " ( keizai kenkyu sho) which has been attach ed to the EPA as an a u x i l l i a r y organ and long since developed in t o an economic research c e n te r of hi ghe st national and i n t e r n a t i o n a l rep ute.

The Economic Research I n s t i t u t e has

been engaged in a s er io us pu b li c a ti o n e f f o r t , and some o f i t s r e p re ­ s e n t a t i v e p u b li c a ti o n s a re :

kenkyu s h i r i z u (Research S e r i e s ) , kokumin

shotoku tokei nempo (National Income Yearbook), Economic B u ll e ti o n , keizai bunseki (Economic A n a ly s is ) , kikan kokumin keizai keisan 73 (National Budget Q u a rte rly ). Since 1955 th e r e have a l s o been several s i g n i f i c a n t functional changes.

For one, the formation of the Social A f f a i r s Bureau ( kokumin

s e ik a ts u kyoku) which i s p r im a r i ly concerned with consumer a f f a i r s ; and the Price Bureau ( bukka-kyoku) which i s mainly deali ng with p r i c e p ol ic y and r e l a t e d a s p e c ts .

74

The Social A f f a i r s Bureau was

cre at e d in June 1965 by s ep a ra tin g i t o r g a n i z a t i o n a l l y from the Coordination Bureau of which i t had pr e vio us ly been an i n t e g r a l part.

The newly c re ate d Social A f f a i r s Bureau o r i g i n a l l y co nsi st ed

of t h r e e s e c ti o n s :

Social A f f a i r s , Consumers' A f f a i r s , and Price

Po li cy , and has been headed by a D ire c to r who has been supported by several Administrative Councillors and Senior Administrative Officers.

In accordance with the popular notion t h a t th e re should

be no economic growth without w e lf a re , the formation of the Social A f f a i r s Bureau can be i n t e r p r e t e d p r i m a r i l y as an o r ga ni z at io na l response to c o r r e c t some of the more pr es sin g socio-economic maladjustments caused by the National Income Doubling Plan.

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Research

138

a c t i v i t i e s of the Social A f f a i r s Bureau have been focusing mainly on problems r e l a t e d to the "Quality of Life" in Japan, and addressed such concrete is su e s as consumer p r o t e c t i o n , environmental problems, urban cong estio n, social c o st s of development, e t c .

The Social

A f f a i r s Bureau publishes an Annual Report on National Life (kokumin s e i k a t s u hakusho) t h a t o r d i n a r i l y a t t r a c t s co nsiderable a t t e n t i o n by the media and the public a t l a r g e .

The Price Bureau was formed

in Ju ly 1973 as an of f sh o o t of the Social A ff a ir s Bureau.

Here

a g ai n, timing and circumstances suggest t h a t the government attempted a "quick" org a niz at io nal s o lu ti o n to a s t r u c t u r a l problem, namely, to quell widespread f e a r s o f the public over s t e e p l y r i s i n g land p r i c e s , the "Soybean Shock," and the s c a r c i t y of c e r t a i n commodities t h a t led to r a p i d l y r i s i n g p r i c e s and i n f l a t i o n in e a r l y 1973.^® Although both the Social A f f a i r s Bureau and the Pr ice Bureau are performing important fun ct ion s in c o l l e c t i n g and analyzing r e l e ­ vant data on consumer welfare and p r i c e s t a b i l i t y , t h e i r "consumer ori e nte d" a c t i v i t i e s are only remotely r e l a t e d to economic planning. The f a c t i s t h a t since 1955 the Economic Planning Agency has extended i t s preserve in t o areas t h a t are not p ri m a ri ly r e l a t e d t o economic planning, the EPA's o r i g i n a l purpose and mission.

I t i s a s h o rt

s te p t o suggest t h a t both the Social A f f a i r s Bureau and the Price Bureau appear symptomatic m a n if e s t a ti o n s of a l a t e n t tr e nd pervasive in the EPA:

many d i v i s i o n s , bureaus, and se c ti o n s are mainly engaged

1n data g a th e r in g , e v a l u a t i o n , p u b l i c a t i o n , and dis semination r a t h e r than economic planning per se.

Em pirically one f i n d s t h a t th e re

i s an endles s flow of r e p o r t s , numerous white papers, and s t a t i s t i c s

139

from the various EPA o r g a n i z a t i o n s , some of which a re of questionable o r a t best n e g l i g i b l e u t i l i t y f o r the general ta sk of economic planning and f o r e c a s t i n g . ^

The ex ist en c e of these various r e p o r t s , white

papers and s t a t i s t i c s , however, suggest t h a t the EPA i s playing an important function as a c e n te r f o r the c o l l e c t i o n , a n a l y s i s and dissemination of economic information.

On the o th e r hand, the re

can be no doubt t h a t the EPA d u p l i c a t e s economic researc h a c t i v i t i e s o f o t h e r m i n i s t r i e s , i . e . MITI, th e Ministry of Finance, and the M inistry of Foreign A f f a i r s .

Most r e c e n t l y s t i l l , the Economic

Planning Agency has been designated to serve as s e c r e t a r i a t f o r the Office of Trade Ombudsman (0T0), an i n t e r - m i n i s t e r i a l o f f i c e which oversees the re s o l u t i o n of market-access complaints.

78

All

t h i s suggests t h a t the Economic Planning Agency i s involved in a g r e a t many a c t i v i t i e s o t h e r than planning. 4.4 .

Economic Planning Function

Turning to the 'economic planning fu n c ti o n ' one fi n d s indeed t h a t o f the e n t i r e Economic Planning Agency only two org an iz ati ons a re a c t i v e and d e ci s iv e p a r t i c i p a n t s in the formulation of long­ term economic pla n s,

namely the Planning Burea ( soqo keikaku kyoku)

and the M i n i s t e r ' s S e c r e t a r i a t ( chokan kanbo).

To r e i t e r a t e , the

M i n i s t e r ' s S e c r e t a r i a t and the Planning Bureau function as the s e c r e t a r i a t f o r the Economic D e lib er at io n Council and handle a l l of the EDC's a d m in is tr a ti v e chores t h a t may r e s u l t from a s p e c i f i c plan re q u e st .

T yp i ca ll y, the M i n i s t e r ' s S e c r e t a r i a t organizes

committee meetings, c o l l e c t s necessary m a t e r i a l s , prepares documents,

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w ri te s up minutes and plan d r a f t s , while the Planning Bureau has been mandated with the te ch ni ca l pre pa rat ion o f Jap a n’s long- and medium-term economic and soci al pl a n s, and, in cooperation with the Economic Delib erati on Council, has formulated a l l economic and soci al plans since 1955.

A b r i e f d e s c r i p t i o n of the Planning Bureau's

o rg an izati on and a sh ort di scu ss ion of i t s fun c tio n s seems a pprop ria te here. The Planning Bureau i s headed by a Deputy D ire ct or General a s s i s t e d by several 'A dm inistrative C oun ci llo rs ' ( s a n ji kan); org a n i­ z a t i o n a l l y the Planning Bureau c o n s i s t s of the following u n i t s : A. B. C.

Planning Division ( keikaku ka) Senior Planning O f f i c e r ( keikaku kan) Senior O f f i c e r f o r Power Development Planning ( dengen kaihatsu kan) 79 In accordance with EPA r e g u l a t i o n s the se planning u n i t s have j u r i s d i c t i o n over the following planning ta sk s and r e l a t e d ma tters : A.

Planning Division TI General A f f a i r s 2. Coordination and Adjustment 3. Long-Term Planning 4. Economic De lib er at io n Council 5. General Research and Development

B.

Senior Planning O ff i c e r 1. Heavy Industry 2. Medium- and Small-Enterprises 3. A g r ic u lt u re , F or est ry and Fishery 4. Trade 5. Communications and Construction 6. Money and Finance 7. Labor 8. National Welfare 9. Regional Planning 10. Computation

141

C.

Senior O ff i c e r f o r Power Development Power Development 2. Power Adjustment and Review 3. Energy 4. N o t i f i c a t i o n

Y.

In a numerical sense the Economic Planning Agency i s a r e l a ­ t i v e l y small o r g a ni z at io n.

In 1979, the EPA had a t o t a l of 525

r e gula r s t a f f members assigned to the following fu nc tio na l u n i t s : M inister's S ecretariat Coordination Bureau Economic Welfare Bureau Price Bureau Planning Bureau Research Bureau Economic Research I n s t i t u t e 4.5.

Dienstwissen:

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136 64 40 43 63 99 80

Power Basis of the EPA

A ft e r reviewing the formal s t r u c t u r e of economic planning in the EPA i t i s imperative, a t t h i s s t a g e , to address in more d e t a i l the eminently p o l i t i c a l question of prof ess io nal power or the ba sis of Dienstwissen in the Economic Planning Agency, and i t s commensurate infl uen ce on the formulation o f nat ion al economic plans.

The key

question here concerns the i n t e r r e l a t i o n s h i p between Dienstwissen and plan formulation.

In the following i t i s attempted to explain

the b a si s and degree to which p ro fes si ona l power Dienstwissen i n f l u ­ ences economic plan making in the face of the formally mandated a c t i v i t i e s of the Economic D e lib er at io n Council.

For t h i s purpose

i t i s c r i t i c a l f i r s t to examine the composition and q u a l i f i c a t i o n s of the EPA s t a f f , and, secondly, to determine the EPA's r o l e and power p o s i t i o n within the economic bureaucracy. In terms of i t s s t a f f composition, the EPA has been a remarkably

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heterogeneous or ga niz ati on and t h i s has co nt rib ute d to both the agency's weakness and prof essio nal power.

A n a l y t i c a l l y , the EPA

s t a f f can be divided in to thr e e major groupings: 1. 2. 3. 1.

shukko EPA-proper p r i v a t e s e c t o r temporaries

Shukko-sha denotes a c ar ee r o f f i c i a l assigned to an exter nal

p o s i t i o n , not as a l i a i s o n o f f i c e r , but as a r e g u l a r s t a f f member of the re s p e c ti v e or ga n iz at i o n .

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The shukko system i s most pervasive

in the Japanese bureaucracy and c r i t i c a l l y a f f e c t s the power r e l a t i o n s among d i f f e r e n t m i n i s t r i e s .

When a new m i n i s t r y o r agency i s being

e s t a b l i s h e d , i t s s t a f f members must be i n i t i a l l y r e c r u i t e d from among e x i s t i n g m i n i s t r i e s and agencies. has not been an exception.

The Economic Planning Agency

Since the EPA's incept ion in 1955 u n ti l

the l a t e 1960s the agency, by and l a r g e , had been c o n t r o l l e d by shukko-sha o f f i c i a l s mainly from MITI and the M inistry of Finance. Since t h a t period both MITI and MOF have been seeking power and infl uence over the EPA.

Although the EPA began r e c r u i t i n g i t s own

c a r e e r o f f i c i a l s as e a r l y as 1956, i t was not u n t i l 1969 t h a t EPA c a r e e r i s t s began to e x e r c is e control over t h e i r own agency, t h a t i s , when the EPA's f i r s t c a r e e r o f f i c i a l , Yoshio Shikano, was appointed D ire ct or General on December 5, 1969. 2.

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EPA-proper [naibu] denotes only those o f f i c i a l s t h a t were

r e c r u i t e d by the Economic Planning Agency s t r a i g h t from u n i v e r s i t i e s and have developed a d i s t i n c t o r g a ni z at io nal i d e n t i t y by considering themselves as genuine members of the agency. rose through the ranks the key p o s i t i o n s in *'

Until the se EPA-propers agency were

143

monopolized by shukko-sha o f f i c i a l s , and, moreover, the EPA was s u b j e c t to in te ns e e xt ern al c o n t r o l s exerted by the shukko-sha respective ministry.

S t i l l , twenty years a f t e r the formation of

the EPA, in 1965, 110 of the agency's 210 c a r e e r o f f i c i a l s were shukko from o th e r m i n i s t r i e s and agencies.

83

During the 1960s a

f i e r c e bu re a uc ra tic st ru g g le raged over shukko posts in the EPA with MITI and MOF competing head on f o r s t r a t e g i c p o s i t i o n s of i n f l u ­ ence and power, while the agency's own c a r e e r i s t s had to be content with sharing p o s i t i o n s and assignments with the shukko from these powerful m i n i s t r i e s .

84

The following l i s t in d i c a t e s the e x te n t QC

of shukko u bi qu ity and d i s t r i b u t i o n in the EPA: MITI

Permanent Vice M inister Bank of Japan Committee Member S e c r e t a r i a t Planning Section Coordination Bureau Coordination Section Trade Exchange Section Economic Cooperation Section

Ministry o f Finance

Sec retary Finance Coordination Bureau Planning Bureau Planning Section Water Resources Bureau Economic Welfare Bureau and Price Poli cy

Ministry o f A gr ic ul tu re and Fo r es tr y Economic Welfare Bureau A gric ult ure and F o r e s tr y Coordination Bureau Economic Welfare Bureau Consumer Affairs EPA-proper

Economic Welfare Bureau Economic Welfare Section Coordination Bureau Research Section Head Economic Research I n s t i t u t e

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3.

P r iv a t e Sector Temporaries.

S t a r t i n g with the Economic

S t a b i l i z a t i o n Board in 1947 the p r i v a t e s e c t o r , a t the re q u e st of the government, began to assign temporary s p e c i a l i s t s to the Planning Office where these s p e c i a l i s t s from the p r i v a t e s e c t o r performed variou s planning r e l a t e d t a s k s ; some of these s p e c i a l i s t s even held bureau level p o s i t i o n s .

With the 1955 i n s t i t u t i o n a l i z a t i o n

of economic planning, th e se s p e c i a l i s t s were however re le g a te d to junior-level positions.

These p r i v a t e s e c t o r tempora rie s, 60 to

70 a t a time, r e c r u i t e d mainly from commerce, s t e e l , banks, and the chemical i nd us tr y.

There can be no doubt t h a t the EPA be ne fi te d

co nsi de ra bly from t h i s p r a c t i c e , since i t not only re li e v e d the agency from personnel c o s t s - - t h e temporaries remained on the payroll of t h e i r companies during t h e i r s t a y a t the EPA--but a l s o , i t enabled the EPA to in c re as e the scope of I t s a c t i v i t i e s .

The p r i v a t e s e c t o r ,

on the o t h e r hand, was not h e s i t a n t to assign some of i t s b e s t j u n i o r s t a f f f o r a s t i n t in the EPA t h a t could l a s t anywhere from two to t h r e e ye ar s.

Some of the more compelling reasons to assign temporaries

to the EPA was the f a c t t h a t the agency had long enjoyed a good re p u ta ti o n f o r economic research and a n a l y s i s in

J a p a n ' s business

world from which the temporaries could amply p r o f i t . th e close personal

Moreover,

connections, ensuing from the work of t h e i r

temporaries in the EPA, were valued r a t h e r highly by the sponsoring companies.

This p r a c t i c e came, however, to an abrupt end when charges

became Inc e ss an t t h a t some companies were in f a c t " p r i v a t i z i n g " access to economic planning through t h e i r temporaries.

In view

of the la rg e number of companies p a r t i c i p a t i n g in t h i s p r a c t i c e —

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more than 50 a t a time—such charges were s c a rc e l y te n ab l e.

But,

as the r e s u l t of a Diet i n t e r p e l l a t i o n the "loan" p r a c t i c e was d i s ­ continued in FY 1973/74, and the EPA s t a f f was reduced accordingly from 572 in 1973 to 496.86 Relating now EPA s t a f f composition and q u a l i f i c a t i o n s to the agency's prof ess io nal power, i t i s no overstatement to argue t h a t the shukko system has been one of the most overlooked f a c t o r s enhancing the pro fe s si on al power of the EPA.

Undoubtedly, the shukko-sha

assigned to the EPA have played a c r i t i c a l r o l e in shaping the EPA's Dienstwissen by working with s u p e r v is in g , and leading EPA c a r e e r o f f i c i a l s in various c a p a c i t i e s and a c t i v i t i e s .

Moreover, access

to people, d a t a , and information in t h e i r honsho (m i n is tr y proper) has made shukko-sha not only valuable members of the EPA, but a ls o aided f u r t h e r i n g the agency's planning mission.

I t must be pointed

o u t, however, and the di scu ss ion below will address the is su e in some d e t a i l , t h a t the shukko system has a ls o been de trimental to the EPA's i n t e r e s t as an or ga n iz at i o n .

The c o n t r i b u t i o n to EPA

Dienstwissen by p r i v a t e s e c t o r temporaries i s somewhat more d i f f i c u l t to a s s e s s , mainly because of the j u n i o r level p o s i t i o n s these tempor­ a r i e s held.

However, the argument can be made t h a t the presence

of such temporaries allowed the EPA to r e l e a s e i t s c a r e e r o f f i c i a l s from ro u ti n e d u t i e s and instead to co ncentrate on b uild in g t h e i r pro fe s si on al s k i l l s by focusing on more demanding t a s k s , t h i s in turn has enhanced the EPA-proper's pr ofe s si onal a b i l i t y and added to the agency's o ve ra ll prof essio nal power.

Another r e l a t e d and

important aspect of pro fe ssional power i s education and t r a i n i n g .

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In terms of educational background most of the EPA's c a r e e r o f f i c i a l s share a s i m i l a r experience with t h e i r shukko c o ll e a g u e s , i . e . they are graduates of the U niversity of Tokyo, oft e n c a l l e d kanryo yo s ei j o (nu rsery f o r bure au cra ts ) and they have s u c c e s s f u l l y passed the koto bunkan shiken (Higher Civil Service Exam).

As f a r as advanced

t r a i n i n g i s concerned, many of the EPA's c a r e e r o f f i c i a l s have been s en t abroad to study planning processes and te ch niq ue s , and to "broaden t h e i r prof ess io nal p e r s p e c t i v e s . "

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EPA o f f i c i a l s are also frequ en t

p a r t i c i p a n t s in i n t e r n a t i o n a l meetings and conferences on planning m a tt e rs .

All t h i s in d i c a t e s the high p ro fes si on alis m p r e v a il in g

in the EPA.

In f a c t , the EPA's prof ess io nal competence i s not only

proverbial but a ls o well grounded in t r a d i t i o n .

The antecedents

of pro fe ssional competence in Japanese o f f i c i a l planning da tes back a t l e a s t to the e a r l y postwar years when the "economists" in the Economic S t a b i l i z a t i o n Board took the i n i t i a t i v e in using new economic t h e o r i e s and s t a t i s t i c a l methods to analyze and plan the Japanese economy.

Their successors 1n the EPA have been dubbed kancho

economists since the l a t e 1950s.

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During the 1960s and 1970s these

kancho economists have acquired national rec og ni tio n and prof ess io nal prestige.

For one, the kancho economists showed a pro pe ns ity and

a b i l i t y to "popularize" economics, p r im a r i ly through the medium of the EPA published economic white papers which have become q u it e popular 1n Japan.

More Importantly, however, the kancho economists

have b u i l t a s o li d profes si ona l rep u ta ti o n based on economic re s e a rc h , q u a n t i t a t i v e p r o j e c t i o n s , and econometric modelling.

As a r e s u l t ,

the EPA and i t s a f f i l i a t e d Economic Research I n s t i t u t e have a t t r a c t e d

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many o f Jap a n 's foremost academic economists f o r c o ll a b o r a t io n in various p r o j e c t s and research endeavors during the past two decades. In s h o r t , the EPA's Dienstwissen has evolved p a r t i a l l y as the r e s u l t of pro fe ssi ona l s o c i a l i z a t i o n , i . e . educational background, Higher Civil Service Exam, advanced t r a i n i n g , and a s s o c i a t i o n with shukko.

The EPA-proper1s pro fe ssi onal s o c i a l i z a t i o n has been r e i n ­

forced by p e er s, experience and the d i s t i n c t o r g a ni z at io nal i d e n t i t y , namely the sense of belonging to J a p a n ' s b u re a u cr a ti c e l i t e , which, a Johnson has put i t :

" . . .

makes most major d e c i s i o n s , d r a f t s

v i r t u a l l y a l l l e g i s l a t i o n , c o n tr o ls the na tio na l budget, and i s the source of a l l major p o li c y innovations. . . . "

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An e qu all y

c r i t i c a l dimension of the EPA's Dienstwissen i s the agency's p r o f e s ­ sional competence manifest in the various s p e c i a l i z e d a c t i v i t i e s the kancho economists are engaged i n , i . e . ba sic economic r e s e a r c h , q u a n t i t a t i v e a n a l y s i s , econometric p r o j e c t i o n s , and the performance of s h o rt and long-term planning.

I t i s our contention t h a t i t i s

p r e c i s e l y t h i s pro fe s si on al competence which forms the b a si s of the EPA's power and influen ce over the Japanese economic planning pro ce ss.

In f a c t , as Komiya s t a t e s :

" . . .

r a r e l y any member of

the Economic De lib er at io n Council ( o r i t s sub-committees) opposes the opinion of government o f f i c i a l s . "

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This seems to support the

e a r l i e r contention t h a t the bureaucracy i s in f a c t dominating the Japanese economic planning process by v i r t u e of i t s te chn ic al exper­ t i s e and a d m in is tr a ti v e powers.

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4.6.

EPA's Po si tio n in the Economic Bureaucracy

Turning to the EPA's r o l e and power p o s i t i o n within the economic bureaucracy the inh e re nt weaknesses of the agency become quickly apparent.

The EPA's most formidable p o l i t i c a l handicap has been

i t s agency s t a t u s .

I t should be r e c a l l e d here t h a t the EPA i s only

one of several agencies a ss oc ia te d with the Prime M i n i s t e r ' s O ffi ce , and thus cannot claim the pre ro gat iv es of a r e g u la r m in is tr y . In the following we will b r i e f l y dis cu s s several of the d i s ­ para te f a c t o r s t h a t influence the r o l e and power p o s it io n of the EPA within the economic bureaucracy.

For a n a l y t i c a l purposes these

f a c t o r s are categ orized as p o l i t i c a l , o r g a n i z a t i o n a l , and te c h n i c a l . 4.6.1.

P o l i t i c a l Determinants

P o l i t i c a l l y , the most s a l i e n t is sue regarding the EPA's ro le and power p o s it io n among i t s peer m i n i s t r i e s concerns the very i n s t i ­ tu t i o n and s t a t u s of economic planning in Japan.

While most a n a l y s t s

would agree t h a t the EPA i s a "weak" agency, t h e r e might be d i s a g r e e ­ ment about the nature of t h i s weakness.

I t i s argued here, f i r s t ,

t h a t the EPA's weakness i s r e l a t i v e , and secondly, t h a t the ' r e l a t i v e ' weakness of the EPA v i s - a - v i s the o t h e r economic m i n i s t r i e s i s , by and l a r g e , the r e s u l t of the o r g a n iz at io nal complexity and p o l i t i c a l ambiguity t h a t surround Japanese economic planning in general.

The crux of the problem i s t h a t , on the one hand, the

EPA's public mission has been formally defined and c o d if ie d as formuQ1

l a t i n g basic economic p o l i c i e s and pla n s,

while on the o th e r hand

a l l o th e r m i n i s t r i e s and agencies i n v a r i a b l y engage in some s o r t

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of (economic) planning of t h e i r own.

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The r e s u l t has been t h a t

the EPA i s a planning agency in name only.

Japanese economic planning

i s c har a c te ri z e d by or ga niz ati ona l fr agm entation, and the EPA's planning r o l e i s s e r i o u s l y impaired and const raine d by MITI and the M inistry of Finance, both c o n s t r i c t i n g the EPA's power by using t h e i r strong power c o n f ig u r a ti o n s .

For example, although public

s e c t o r investments are determined by the EPA formulated p la n , s p e c i f i c a l l o c a t i o n s must be ne gotia ted with the M ini st ry of Finance every year in ord er to become e f f e c t i v e .

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In essence then, the Ministry

of Finance has v i r t u a l veto-power over the public s e c t o r component of the economic plans formulated by the EPA.

MITI' s involvement

in economic planning has been even more de trimental to EPA power, since the MITI s t a f f u s u a l l y prepares a l l plans f o r J a p a n ' s i n d u s t r i a l s e c t o r s , and c o n tr o ls the implementation of th e se pla ns.

O st ens ibl y,

Japanese economic planning i s not the e xc lu s iv e preserve o f the EPA, and t h i s i s p r e c i s e l y the major source of the agency's lack of power, while the fragmentation of planning must account f o r the ambiguity surrounding the EPA's planning r o l e .

In sum, unlike the

c e n t r a l i z e d planning p r a c ti c e d by the Economic S t a b i l i z a t i o n Board during the occupation, Japanese economic planning since 1955 has been c ha r ac te ri z ed by op erational fragmentation and absence of a p o l i t i c a l l y powerful planning i n s t i t u t i o n , with s e c to ra l and oth e r m i n i s t e r i a l planning competing with or d u p l i c a t i n g the EPA's planning role.

Moreover, unlike MITI, the Ministry of Finance and most oth er

m i n i s t r i e s and a gen cies, the Economic Planning Agency does not have a c o ns ti tu en c y of i t s own.

There a re simply no i n t e r e s t or pressure

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groups c l u s t e r e d around the EPA's d i v i s i o n s , bureaus, and s e c t i o n s , a l l with a vested

i n t e r e s t in the "well-being" and growth of " t h e i r "

agency, t h a t could be tapped f o r support by the agency in the i n t e r bu re a ucr a tic s tr u g g le f o r power and Inf luence.

And f i n a l l y , as

Suzuki has suggested, the EPA's power depends on i t s m i n i s t e r , and provided with a m i n i s t e r of g r e a t c a l i b e r , who has a st ron g say within the p a r t y and the c a b i n e t , the EPA will f a r e b e t t e r p o l i t i c a l l y .

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However, th e r e i s i n s u f f i c i e n t empirical evidence to prove t h a t any p a r t i c u l a r m i n i s t e r has g r e a t l y enhanced the EPA's r o l e and power p o s i t i o n v i s - a - v i s o th e r economic m i n i s t r i e s .

Min ister s come

and go and most regard the EPA as y e t another s t a t i o n in t h e i r p o l i t i c a l career.

While some EPA m i n i s t e r s might be more fo rc e fu l than ot h e rs

in advancing the o r g a n i z a t i o n ' s i n t e r e s t , a l l are bound to compromise and cooperate a t the c a b in e t l e v e l .

Moreover, a l l EPA m i n i s t e r s

are i n t e n s e l y const ra ine d in t h e i r attempt t o enlarge the r o l e or enhance the power of the agency by the e x i s t i n g o r g a ni z at io na l frame­ work within which the EPA must oe pra te . 4.6.2.

Organizational Determinants

O r g a n iz a ti o n a ll y , the EPA's r e l a t i v e weakness in the economic bureaucracy has th re e major problem a re a s : c o ord in a ti on, and plan implementation.

shukko system, plan

As s t a t e d above, the shukko

system, by and l a r g e , has been a mixed b le s s in g f o r the EPA.

While

enhancing the agency's o v e ra ll Dienstwissen, shukko t u t e l a g e must be c l e a r l y seen as one of the major causes c o n s t r i c t i n g the power of the EPA.

The perennial problem with shukko-sha concerns t h e i r

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org a ni z at io nal i d e n t i t y with the EPA or lack t h e r e o f .

Shukko-sha

are simply unprepared to transcend t h e i r l o y a l t y away from the honsho since they are bound to r e tu rn to t h e i r m i n i s t r y proper a f t e r completion of t h e i r assignments.

The problem of d u a l - l o y a l t y has

posed fr equ en t dilemmas f o r shukko o f f i c i a l s and c re at e d a ls o some degree of tension among the EPA-staff. Related to the shukko t u t e l a g e is the d i r e c t infl uence exerted over the EPA by MITI and the M inistry of Finance through s k i l l f u l l y s t a f f i n g s t r a t e g i c planning p o s i t i o n s with members of t h e i r own m in is tr y .

Although the r i s e of the EPA-propers during the past

several decades has thwarted the inf lu enc e of MITI and MOF, during p a r t s of the c r i t i c a l "High Economic Growth" era (1955-1973), MITI and MOF managed to s t a f f , and thus c o n t r o l , the s t r a t e g i c a l l y most s a l i e n t planning p o s i t i o n s in the EPA.

To give a r e p r e s e n t a t i v e

example of the m id - 1 9 6 0 s :^ M inistry of Finance

Chief Planning Bureau Chief Planning Section

MITI

Chief S e c r e t a r i a t Planning Section Chief Coordination Bureau Chief Coordination Section

The Ministry of Finance was holding power over the major planning positions:

Chief of Planning Bureau and Chief of Planning Section,

in essence holding the key p o s it io n in Japanese economic planning, which in a nominal sense had been e n t r u s t e d to the EPA,

96

while

MITI monopolized plan coordination to which we turn next. Coordination among d i f f e r e n t socio-economic and p o l i t i c a l groups re p re s e n ts a most s a l i e n t a spe ct of any e x e r c is e in economic planning.

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The EPA has been formally mandated with the plan co ordination among m i n i s t r i e s and governmental agencies.

Notes Shishido:

" . . .

each

m i n is tr y has the o b li g a ti o n to gear i t s long-term p ol ic y on the 97 economic pla n." There are several compelling reasons n e c e s s i t a t i n g plan c oor din at ion .

For one, unanimous agreement of c ab in e t members

i s necessary f o r the plan d r a f t to be adopted as government plan. Second, te chn ical impe rativ es, i . e . when the EPA lacks data or te c h ­ nical knowledge the agency needs the cooperation o f the re s p e c ti v e m i n is tr y or agency.

According to the EPA:

" . . .

formal 'p la n -

co ord in a tio n' takes place a t a meeting of the s e c r e t a r y of each government or ga niz ati on with the EPA's Planning Bureau which i s e la b o r a ti n g on the plan d r a f t .

The EPA then compiles the comments

and claims of o th e r m i n i s t r i e s , d is cu ss es and a d j u s t s them in t o a c o n s i s t e n t framework."

98

At the empirical l e v e l , however, plan

coordination i s a r a t h e r obfuscated e n t e r p r i s e and eminently d i f f e r e n t from the EPA's i d y l l i c d e p ic t io n .

The f a c t remains t h a t the strong

power c onfi gura tio n of the o th e r m i n i s t r i e s has exer ted g r e a t e r 99 influence over plan coordination than the EPA. As a general r u l e , the m i n i s t r i e s vigorously r e s i s t "coordination" ( c o n t r o l ) from the " r e l a t i v e l y " weak EPA, and they defend t h e i r p re ro ga ti ve s with gre a t s k i l l and determination.

S t a t e s Komiya:

"When the MOF makes d e c i ­

sions on the annual budget, the Bank of Japan on money supply, and the Ministry of I n te r n a ti o n a l Trade and In dust ry on i n d u s t r i a l p o l i c i e s , they pay l i t t l e a t t e n t i o n to the na tiona l economic plan . . . i t appears t h a t government m i n i s t r i e s and agencies o th e r than the Economic Planning Agency tend to t r y to incorp ora te in the

153

n a tio na l economic plan as l i t t l e as p o s s ib le of those elements which they co nsider may bind them r i g i d l y and und esi rably in the future."*®® Considering s i z e and degree of complexity of m i n i s t e r i a l , s ec to ra l and individual agency pl a n s, th e r e should be a powerful i n s t i t u t i o n t o coordinate a l l these d i s p a r a t e planning a c t i v i t i e s in to a c o n s i s t e n t and comprehensive planning framework.

And in f a c t , the EPA has

been formally mandated with the coo rdina tion t a s k , ye t f o r various reasons EPA-coordination cannot bring complete or even near complete adjustment of the m i n i s t e r i a l t a r g e t s .

Writes Campbell:

". . .

although mechanisms f o r coordina ting the various plans e x i s t , they have not been e f f e c t i v e , mainly because the p a t t e r n s of p o l i t i c a l pr es sur e bearing on each planning a c t i v i t y are d i f f e r e n t , and the p re ssu re s f o r i n t e g r a t i n g the plans are weak."*®*

Moreover, th e re

i s no o f f i c i a l machinery f o r EPA plan coordina tion with the p r i v a t e sector.

Each m i n i s t r y concerned with the p re pa ra ti on of plans organ­

iz e s p r i v a t e groups under i t s a u s p i c i e s to co nsider the d r a f t of 102 the s e c to ra l plan prepared by the EPA. As a r e s u l t , EPA plan co ord ina tio n has remained a d i f f i c u l t and o ft e n f r u s t r a t i n g e n de a v o r r e q u ir in g lengthy i n t e r m i n i s t r y di s c u s s io n s and n e g o t i a t i o n s .

The

outcome has f r e q u e n tl y been a d m i n i s t r a t i v e compromise ( a t b e s t) and minimal progress toward a more c o n s i s t e n t and comprehensive economic plan.

O st ens ibl y, the EPA i s not capable of independently

performing the prescr ib ed plan coo rdi na tio n f u n c ti o n , notes Tsuru: ". . . in p r a c t i c a l l y no a d m i n i s t r a t i v e ma tte r can the EPA e x e r c is e 103 an independent i n i t i a t i v e or power of c o o r d in a ti o n ." I t is ironic t h a t plan coordination proves to be y e t another source t h a t

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diminishes the agency's r o l e and power, when in f a c t plan coordina­ ti o n ought to be the agency's major source of power v i s - a - v i s oth e r m i n i s t r i e s and agencies.

Again we find t h a t the formal mission

of the EPA corresponds l i t t l e with the r e a l i t i e s of power and i n f l u ­ ence t h a t en g u lf the s t r u c t u r e and or ga niz ati on of Japanese economic planning. Plan implementation too poses several major problems of power and a u t h o r i t y f o r the EPA.

A fter c ab in e t approval and adoption,

the implementation of economic plans becomes the r e s p o n s i b i l i t y of the various m i n i s t r i e s and agencies concerned and not the exclusive prero ga tiv e of the EPA.

The EPA m i n i s t e r , n e v e r t h e l e s s , has the

legal r i g h t to give advice to the heads of o th e r government org a ni ­ z a ti o n s f o r the promotion of the plan implementation; he may recommend methods of d r a f t i n g t h e i r re s p ec ti v e p o l i c i e s and pla ns.

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In

o t h e r words, the a u t h o r i t y and power to implement economic plans i s d if f u s e d and surrounded by a g re a t deal of p o l i t i c a l ambiguity. The EPA the n, ag ain , lacks power to play a more fo rc e fu l ro le in plan implementation, and p a r t i c u l a r l y in absence of any s i g n i f i c a n t i n s t i t u t i o n a l c a p a b i l i t i e s , a d m in is tr a ti v e and economic means, the agency's r o l e in plan implementation has been r e le g a te d to mere dissemination of information, promotion and c r e a t i o n of channels f o r the exchange of plan information between the d i f f e r e n t govern­ ment u n i t s and o r g a n iz a ti o n s .

And f i n a l l y , plan implementation

in Japan must be viewed p ri m a ri ly as a p o l i t i c a l process because i t involves the choice of o b je c t iv e s and instruments of economic p o li c y in g e n e r a l, as well as the execution of p o lic y by individual

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m i n i s t r i e s and agencies in p a r t i c u l a r .

The sum of the se f a c t o r s

helps explain the EPA's weakness in plan implementation. 4.6.3.

Technical Determinants

The l a s t question to be examined in t h i s s e c ti o n concerns the EPA's te chn ic al e x p e r t i s e and i t s impact on the agency's i n s t i t u t i o n a l r e l a t i o n s h i p with the economic m i n i s t r i e s .

D e s c r i p t i v e l y , the EPA's

te ch ni ca l e x p e r t i s e in economic planning de rives mainly from i t s Dienstwissen and i t s a p p l i c a t i o n to economic f o r e c a s t i n g , modelb u i l d i n g , a n a l y s i s of economic poli cy i s s u e s , pre p a ra t io n of economic data and information, s t a t i s t i c a l a n a l y s i s , c o n s u l t a t i o n and the d r a f t i n g of "Economic White Papers," e t c .

I t i s argued here, t h a t

the EPA's i n s t i t u t i o n a l r e l a t i o n s h i p with oth e r economic m i n i s t r i e s i s , by and l a r g e , a function o f t h i s te ch nic a l e x p e r t i s e t h a t is widely recognized in the Japanese government.

The EPA's power and

s t a t u s , based on techn ica l e x p e r t i s e , i s f u r t h e r b u t t r e s s e d by the a c t i v i t i e s of the EPA a f f i l i a t e d Economic Research Centre, which in i t s e l f i s a crude ma ni fe st at io n of the EPA's attempt to stren gth en i t s own p o s i t i o n , and, by acquiring e x te r n a l p r of es si onal consensus on p o lic y is s u e s and c r e a t i n g la rg e i n t e g r a t e d researc h teams whose advice cannot be e a s i l y dismissed.*®**

Moreover, the EPA's s t a t u s

and power in the bureaucracy i s p o s i t i v e l y re in fo r ce d by EPA generated and obtained economic information and knowledge t h a t can be used as a p o l i t i c a l commodity; i . e . information and knowledge can be exchanged f o r o t h e r p o l i t i c a l favors.

Without d i g r e s s i n g too f a r

from the s u b je c t m a tt e r , i t can be argued t h a t t h i s techn ic al

156

e x p e r t i s e and information based power i s one avenue to r a t i o n a l i z e the very e x is t e n c e of the agency today.

S t a t e s Komiya:

" . . .

once the Economic Planning Agency was e s t a b l i s h e d , i t became very d i f f i c u l t to c u r t a i l i t s personnel o r to change i t s name to ' f o r e ­ c a s t i n g ' or ' r e s e a r c h , ' ins te ad of 'p la n n i n g ' not to speak of a b o l i s h ­ ing it."*®®

The f a c t remains, however, t h a t the EPA has not been

a b o lis hed , and t h i s can be explained l a r g e l y as th e r e s u l t of the agency's te ch nic a l e x p e r t i s e t h a t has made the EPA an inva lua ble "economic da ta s er v ic e or ga niz ati on" f o r the e n t i r e Japanese govern­ ment.

Furthermore, new fu nc tio ns and tasks have been added to old

ones, but most are remote from economic planning, which helped to preserve the EPA's i n t e r e s t s as an o r g a n iz a ti o n .

On the o th e r hand,

in s p i t e of perennial fragmentation in Japanese economic p o l i c y ­ making, the EPA has not been allowed to f u l l y play i t s mandated r o l e , p a r t i c u l a r l y v i s - a - v i s th e r e s t of the bureaucracy, which would e l e v a t e the agency to the powerful p o s i t i o n of an a r b i t r a t o r in the i n t e r m i n i s t r y d is pu te s over economic p o l i c y , a s i t u a t i o n t h a t would be t o t a l l y unacceptable from the stand po int of both MITI and the Ministry o f Finance. 4.7.

Source o f Bureaucratic Plan Dominance

F i n a l l y , the di scu ss ion o f EPA i nfl uen c e over economic plan formulation brings us to the sources of " bure au c ra ti c dominance" in Japanese economic planning.

Comparing both th e ro le and p o s i t i o n

of the EPA and the Economic De lib er at io n Council in the plan formula­ ti o n process i t seems d i f f i c u l t not t o argue t h a t the EPA i s in

157

f a c t dominating the te chn ic al dimension of plan formulation (while the powerful economic m i n s i t r i e s are dominating the p o l i t i c a l process) in s p i t e of the e x p l i c i t mandate f o r the Economic Delib era ti on Council to formulate economic plans.

Several explan ations a t t e s t f o r the

EPA's dominance of the economic planning process.

Most important

i s the agency's general Dienstwissen and i t s s p e c ia li z e d economic planning e x p e r t i s e .

Moreover, as s t a t e d above a lr e a d y , the Planning

Bureau of the EPA has been in charge of the or ga niz ati on of the meetings of the Economic D el ibera ti on Council and i t s subcommittees; the Planning Bureau i s a ls o compiling data f o r the committees, d r a f t ­ ing i t s r e p o r t s , w ri ti n g the minutes, and keeps i t s records. more, Komiya observes:

Fu rt he r­

". . . in a d d it io n to the o f f i c i a l s of the

EPA, o f f i c i a l s of various m i n i s t r i e s and agencies at te nd the meet­ ings whenever m at te rs on which they have j u r i s d i c t i o n are discussed . . . a l l (EDC) members know t h a t the o f f i c i a l s of m i n i s t r i e s and agencies have v i r t u a l v e to s , and do not waste time f i g h t i n g ag ai n s t them.

To begin w ith , EPA s e l e c t s as members of the EDC or i t s sub-

committeees only those who will behave w e l l , t h a t i s , those who cooperate with government o f f i c i a l s . I n c i d e n t i a l l y , t h i s view 108 i s widely shared 1n Japanese academic and business c i r c l e s . And f i n a l l y , the EPA i s a permanent a d m i n s i t r a t i v e o rg a n i z a t i o n , while the Economic Delib erati on Council i s an ad hoc i n s t i t u t i o n t h a t meets i n f r e q u e n t l y only.

The EDC simply does not possess the

necessary te chn ic al e x p e r t i s e and know-how to formulate economic plans and thus has to r e l y on the EPA f o r techn ic al and ex pert a s s i s t a n c e in the d r a f t i n g of J a p a n ' s economic plans.

This s t a t e

158

o f a f f a i r s in turn has c re ate d the ba sis not only f o r EPA dominance over the workings of the EDC but the bu re a u cr a ti c dominance of Japanese economic planning in general. 5.

Liberal Democratic Party (LDP)

5.1.

LDP and Plan

What

ro le and

function does the Liberal

in Japanese economic planning?

Democratic Party perform

One of the most p e r t i n e n t and also

i n t e r e s t i n g qu e rie s i s whether or not the r u l i n g LDP re pre sen ts a

c r i t i c a l control f a c t o r in the

pla ns.

formulation of J a p a n ' s economic

A r e l a t e d question i s , how important

is

economic planning

f o r the LDP? In the e a r l y 1950s the Liberal Party (one of the two antecedents o f the LDP) was the most vigorous "conservative" proponent of o f f i c i a l economic planning.

By the mid-1950s, however, the planning i n i t i a 109 t i v e had a lre ad y passed to the economic bureaucracy. Japan's s o c i a l i s t opposition p a rt y published several economic plans of i t s own since the end of the P a c if ic War.*1® A piv ota l tur ni ng point was reached when Prime Minister Yoshida was replaced by Hatoyama o f the Liberal Party in December 1954, and the newly formed Liberal Democratic Party became a c t i v e l y engaged in the economic planning process.

Writes Fukui:

". . . the newly e s t a b l i s h e d LDP Economic

Planning Committee conferred with o f f i c i a l s of the Economic Planning Agency about the implementation o f the (1955) Five-Year Plan. . . . 1,111 And ever s i n c e , the p r a c t i c e has been t h a t before the f i n a l d r a f t i s sent to the general meeting of the Economic D e lib er at io n Council,

159

c o n s u l t a t i o n s with the LDP's "Policy A f f a i r s Research Council" (PARC)

112

are hel d, and, comments and suggestions by PARC are con-

sid ered in the f i n a l d r a f t .

113

Moreover, since the economic plan

in Japan plays the ro le of in d i c a t i n g the p o l i t i c a l philosophy of th e government, the plan must be c o n s i s t e n t with the p o l i c i e s of th e p o l i t i c a l p a rt y c u r r e n t l y in power,

114

thus the LDP will hardly

e v e r veto the content of an economic pla n, but a t the same time the LDP will a l s o guard i t s e l f in c r i t i c i z i n g economic plans too r i g o r o u s l y because of i t s close working r e l a t i o n s h i p with the EPA and the EDC.

Thus the argument can be made t h a t the Liberal Demo­

c r a t i c Party does indeed r e pr e se nt a control f a c t o r o f some s o r t in Japanese economic planning, even though the plan i t s e l f i s never d i r e c t l y discussed in the Diet. This i s not to su ggest, however, t h a t the LDP has always accepted th e economic plans formulated by the Economic Planning Agency and th e Economic D e lib er at io n Council.

Quite to th e c o n t r a r y , f o r example,

th e d r a f t i n g of the "National Income Doubling Plan" involved a g r e a t deal of d i f f e r e n c e s in opinion between the LDP and the plan d r a f t e r s in the EDC and EPA.

In October 1959 LDP p o l i t i c i a n s had d r a ft e d

a plan emphasizing public a s s i s t a n c e to the a g r i c u l t u r a l s e c to r. On the o t h e r hand, the plan formulated by the EDC emphasized the rapid inc re as e in i n d u s t r i a l production and a favorable foreign t r a d e balance.

The ensuing debate between i n t e r e s t e d p a r t y p o l i t i c i a n s

and the Economic Planning Agency was deadlocked f o r some time (the p a r t i c u l a r s will be discussed in Chapter IV).

160

5.2.

Plan and Elections

Let us turn now to the question of how re le v a n t economic planning has been f o r the Liberal Democratic Party.

Although the LDP has

shown l i t t l e i n t e r e s t in economic planning during the p a s t decade or s o , in the 1950s and 1960s the LDP a l l e g e d l y used economic plans as an important p o l i t i c a l means f o r "sosenkyo-yo" ( e l e c t i o n campaigns). This a s s e r t i o n seems to have some empirical b a si s as the following t a b l e will i n d i c a t e : ELECTIONS & PLAN DECISION IN THE CABINET

Plan

Election

I II II I IV V VI VII VIII IX

2/27/1955 5/22/1958 11/11/1960 11/21/1963 1/29/1967 7 / /1971 12/ /1972 12/ /1976 10/ /1979

HR:

House of Representatives

HC:

House of Commons

Sources:

Plan Decision HR HR HR HR HR HC HR HR HR

12/23/1955 12/17/1957 12/27/1960 1/22/1965 3/13/1967 5/ 1/1970 2/13/1973 5/14/1976 8/10/1979

Own compilation, based on Asahi Nenkan and Japan S t a t i s t i c a l Yearbook, 1981 (Tokyo: S t a t i s t i c s Bureau, Prime M i n i s t e r s O ffi ce , 1981.

In the case of Plan I , I I , I I I , VI, VII and IX the a s s e r t i o n t h a t th e re i s a nexus between "plan" and " e l e c ti o n " seems to have an empirical b a s i s , although i t i s d i f f i c u l t to e s t a b l i s h a c l e a r

161

and d i r e c t connection between the two.

This notw ith st an din g, the

content of economic plans has never been an LDP-election i s s u e . On the o th e r hand, in some of the e l e c t o r a l c o n t e s t s the LDP has used powerful (and popular) p o l i t i c a l slogans a s s o c ia te d with the various economic pla ns; e . g . keizai j i r i t s u (economic independence, plan I ) ; shotoku baizo (income doubling, plan I I I ) ; keizai shakai haten (economic and so cia l development, plan V); and f i n a l l y , nippon r e t t o kaizo (remodel the Japanese a r c h ip el a go , plan VI I ) ; and, as discussed above, the LDP has obtained a co nsi de ra ble PR e f f e c t from the se politico-economic slogans. In sum i t i s no overstatement to argue t h a t although the planning i n i t i a t i v e s t i l l r e s t s with the Prime Mi nister and the Liberal Demo­ c r a t i c Pa rt y , as a d i r e c t consequence of the Prime M i n i s t e r ' s dual ro l e as head of government and Pr es id e n t of the Liberal Democratic P a r ty , the formulation and implementation of Japanese economic plans has long become the preserve of the Japanese economic bureaucracy which e s s e n t i a l l y dominates the planning p r o c e s s .

This notwithsta nd­

in g , the Liberal Democratic Party serves as a c r i t i c a l control f a c t o r in the o ve ra ll economic planning pro c e ss , mainly through the a c t i v i ­ t i e s of the PARC.

P o l i t i c a l l y the most s a l i e n t Is sue here i s ,

however, how much s i g n i f i c a n c e the Liberal Democratic Party assigns to economic planning in gen er al.

I f the p a s t decade o r so i s any

i n d i c a t i o n , then i t seems f e a s i b l e to argue t h a t economic planning, as a p o l i t i c a l e x e r c i s e , has become an is su e of marginal s i g n i f i c a n c e and u t i l i t y f o r the Liberal Democratic Part y.

This development

may be p a r t i a l l y the r e s u l t of the f a c t t h a t J a p a n ' s nine postwar

162

economic plans were re vi s ed e x t e n s i v e l y in midtern, each b a re ly r e t a i n i n g i t s o r i g i n a l form f o r an average of t h r e e ye ar s.

And

moreover, the gap between plan p r e d i c t i o n s and p r e s c r i p t i o n s and actual economic development have led many Japanese to d i s t r u s t economic plans in gener al.

Thus not s u r p r i s i n g l y , the p o l i t i c a l

value o f economic planning f o r the Liberal Democratic Pa rty has been g r e a t l y diminished since the planning heydays in the e a r l y 1960s and the con ser va tiv e p a r t y ' s a t t e n t i o n has come to focus on o th e r public p olic y is su e a re as .

CHAPTER IV

THE NATIONAL INCOME DOUBLING PLAN 1. 1.1.

Prolegomenon to 1959 Introduction to the Theme

In Chapter I I I an i n t e r p r e t a t i v e a n a l y s i s of the s t r u c t u r e and organi zat io n of Japanese economic planning was pres ente d.

The

basic argument advanced has been t h a t the Japanese economic bureauc­ racy in general and the Economic Planning Agency in p a r t i c u l a r have dominated the planning pro cess, and t h a t these fo rc e s play a d e cis iv e ro l e in shaping Japanese economic plans by v i r t u e o f t h e i r Dienstwissen.

In the following study of the National Income Doubling

Plan ( shotoku baizo keikaku) will give some i n d ic a ti o n of how the Japanese p o l i t i c s of planning work in p r a c t i c e , and the a n a l y s i s hopes to demonstrate t h a t the Japanese bureaucracy dominates economic planning by v i r t u e of i t s Dienstwissen. In order to e l u c i d a t e the a ss o c i a t i o n a l r e l a t i o n s h i p s underlying the formulation of the National Income Doubling Plan, t h i s c h a p t e r ' s a n a l y t i c a l focus will c e n te r on such qu e rie s as to what e x te n t economic s o c i e t y has p a r t i c i p a t e d 1n the formulation o f J ap a n 's economic and social plans.

To explain the r o l e played by the planning

bureaucracy i t i s imperative to determine whether or not the planning environment has been pa ssi ve, and a ls o whether o r not Japanese 163

164

economic planners in the EPA have been unre s tr a in ed and f r e e to u t i l i z e t h e i r power and a u t h o r i t y in plan formulation.

To put i t

d i f f e r e n t l y s t i l l , the important t h e o r e t i c a l and empirical questions c e n te r on the s a l i e n t is su e of the s t a t e ' s autonomy enhancing capa ci ­ t i e s in Japanese economic planning. 1.2.

Intr odu cti on to Major Players

1 .2 . 1 .

The Economic Bureaucracy

The major fo rc e s in the economic bureaucracy in charge of de v is ­ ing and implementing public p o li c y have been i d e n t i f i e d in Chapter I I I as Minsitry of Finance, the Minsitry of I n te r n a ti o n a l Trade and In d us tr y, and the Economic Planning Agency.

All of the se thr e e

i n s t i t u t i o n s have t r a d i t i o n a l l y been involved in d i f f e r e n t kinds of planning:

the MOF in budgetary planning; MITI in s t r a t e g i c and

s ec to ra l i n d u s t r i a l planning; and the EPA in national economic and soci al planning; and i t does not come as a s u r p r i s e t h a t these three d i s t i n c t kinds of planning are i n v a r i a b l y "competing" with each other.* The M inistry of Finance has been e x e r c is in g the g r e a t e s t power over Japanese planning in general and economic planning in p a r t i c u l a r by v i r t u e o f i t s overtowering r o l e in budget-making, but a l s o by pos ting MOF o f f i c i a l s ( shukkosha) in s t r a t e g i c p o s i t i o n s in the Economic Planning Agency.

2

However, during the period of the National

Income Doubling Plan, the Ministry of Finance proved to be a r e l a ­ t i v e l y good "team p l a y e r . "

For one, as an MOF alumnus, Prime Mi nister

Ikeda managed to e s t a b l i s h an e x c e l l e n t personal rapp ort with the

165

Minsitry of Finance, and, moreover, Ikeda has appointed two MOF m i n i s t e r s , Mizuta (1961-1962) and Tanaka (1963-1965), who were b a s i c a l l y "economic ex pan si onis ts " and shared in the consensus of 3 economic growth as a p o l i t i c o - s t r a t e g i c national goal. 4 The Ministry of In te rn a ti o n a l Trade and Indu stry has been most fo rc e fu l in devising J ap a n 's i n d u s t r i a l p o l i c i e s by co n ce p tu a li z ­ ing J ap a n 's grand i n d u s t r i a l s t r a t e g y .

For t h i s purpose MITI has

been t a r g e t i n g s p e c i f i c i n d u s t r i a l s e c to rs f o r advancement ( i d e n t i ­ f i c a t i o n and support of i n d u s t r i a l champions) and/or retrenchment (des ign ati ng and "condemning" de c li n in g i n d u s t r i e s ) .

Since the

l a t e 1940s J a p a n ' s i n d u s t r i a l s t r u c t u r e has been the exclu si ve pr e ­ rogativ e of MITI.

Osten si bly , MITI' s basic ta sk performance e n t a i l s

a gr e a t deal of s e c to ra l and s t r a t e g i c planning as well as general economic f o r e c a s t i n g .

As a r e s u l t MITI' s a c t i v i t i e s not in f r e q u e n tl y

d u p li c a te and supplement the national economic planning pursued by the EPA. During the period o f the National Income Doubling Plan, 19591964, MITI had planted many of i t s o f f i c i a l s as shukkosha in s t r a t e g i c p o s it io n s throughout the EPA; e . g . MITI-shukkosha held the p o s it io n o f Administrative Vice-Minister and as a r e s u l t MITI was in e f f e c t i v e control of the EPA's r e l a t i o n s h i p with the Cabinet and the Diet 5 which are p a r t of the Administrative V ic e- M in is te r' s d u t i e s . As f a r as a s s o c l a t i o n a l r e l a t i o n s are concerned, MITI has been a ct i n g a t the detriment of the EPA a l l throughout, because a gr e a t many i n t e r e s t and pre ssure groups of J ap a n 's economic s o c i e t y have turned to MITI in t h e i r search f o r access channels to the s t a t e .

166

During the formulation of Japanese economic plans the se MITI-clients expect the m in is tr y to re p res en t t h e i r concerns.

The e f f e c t i v e

circumvention of the EPA by important elements of the Japanese p o l i t i c a l economy has l e f t the EPA without a co nsti tu en cy of i t s own. And f i n a l l y , i t should be pointed out t h a t f o r a g r e a t e r p a r t of the post-World War II period both MITI and the Ministry of Finance have been der ivi ng a g r e a t deal of t h e i r power and infl uence through an i n t r i c a t e system o f r e g u l a t i o n , s u b s i d i e s , tax in c e n t iv e s and gyosei shido ( a d m in is tr a ti v e guidance), once o p e r a ti o n a l iz e d these instruments provide the two m i n i s t r i e s with a tremendous leverage to influence d e cis io ns and a c t i v i t i e s in J ap a n 's economy.

The

Economic Planning Agency, on the o th e r hand, has not been able to assemble such a formidable arsenal of e f f e c t i v e instruments of power and i n f l u e n c e , not even a t i t s prime during the National Income Doubling Plan. The Economic Planning Agency, as discussed a t length in Chapter I I I , i s o r g a n i z a t i o n a l l y subordinated to the Prime M in is t e r , and the EPA's linkages to t h a t o f f i c e are f u r t h e r re in fo rced by the function and r o l e of the Economic Delib era ti on Council.

By now

i t has become an accepted f a c t t h a t the EPA's economic and social plans are b a s i c a l l y instruments f o r pr es ent ing general economic and soci al p olic y ideas of the Prime Min ist er to the p u blic .

And,

as the case of the National Income Doubling Plan will e vin ce, many plans take some o f the f e a t u r e s of a politico-economic manifesto by the Prime M inister.

167

Three d i f f e r e n t EPA Secretary-Generals were a c t i v e l y involved in the work of the National Income Doubling Plan.®

Wataro Kanno

(6 /1 8 / 5 9 -7 /1 9 /6 0 ), a one-time p r o f e s s o r of Economics a t Osaka Univer­ s i t y , was in charge of the agency when the plan was f i r s t requested by Prime M in ist er Kishi; Kanno remained on hi s post during most of the p l a n ' s i n i t i a l g e s t a t i o n .

Upon assuming o f f i c e Prime Min ist er

Ikeda e n t r u s t e d the Economic Planning Agency to Hisatsune Sakomizu ( 7 /1 9/ 60 -7 /1 8/6 1) , who supervised the f i n a l i z a t i o n and implementation of the Income Doubling Plan.

In the course of r e d re s s in g the p o l i t i c a l

balance of power within the LDP, Prime Minister Ikeda decided to include the r e c a l c i t r a n t A i ic h ir o Fujiyama in his second c abi ne t by making him EPA Secretary-General.

The Fujiyama interregnum (7/18/61-

7/6/62) was a stormy one; Fujiyama found himself q u i t e oft e n p u b l i c l y a t loggerheads with the Prime M in is t er over politico-economic is sue s p e r t i n e n t to the Income Doubling Plan, which were p r ia m r i ly motivated by Fujiyama's own p o l i t i c a l a s p i r a t i o n s . However, in s p i t e of a l l i n h e r e n t and apparent or ga niz ati ona l and i n s t i t u t i o n a l weaknesses the EPA has managed to enjoy a gre a t deal of s t a t u s in J ap a n 's economic s o c ie ty .

By and l a r g e , the EPA's

s t a t u s has been based on the agency's Dienstwissen, which the agency demonstrated, l i k e i t s i n s t i t u t i o n a l pr e de ce sso rs, by publishing numerous Economic White Papers and f o r e c a s t s over the y e a r s , a l l i n d i c a t i v e of the agency's te chn ic al competence and genuine concern with the Japanese economy. most propagated themes were:

Among the EPA's championed causes and (1) economic cooperation with the

United S t a t e s ; (2) d i v e r s i f i c a t i o n of J ap a n 's fo reign economic

168

r e l a t i o n s ; (3) r a t i o n a l i z a t i o n of the Japanese economy through s t a t e i n t e r v e n t i o n ye t in cooperation with r e l e v a n t s e c to r s of the economic society.

Moreover, the EPA was q u i t e successful in propagandizing

J ap a n 's economic growth r a t e s .

The theme was subsequently picked

up by the mass media and the ensuing general glamorization of J ap a n 's rapid economic growth su cc e ssi ve ly led to the " c u l t" of high economic growth and found i t s f u l f i l l m e n t in the National Income Doubling Plan. 1 .2 .2 .

P o l i t i c a l Forces^

The p o l i t i c a l l i n e -u p a t the cl ose of 1958 showed the two major p a r t i e s , the Liberal Democratic Party and the S o c i a l i s t P a r ty , with 296 members and 166 members r e s p e c t i v e l y in the House of Representa­ t i v e s , and 126 LDP members and 78 S o c i a l i s t s in the House o f Council­ lors.8 The Liberal Democratic Pa rty

g

formed f o u r y e a r s before in 1955

to a dv er t the advance of the S o c i a l i s t Pa rty was s p l i t i n t o the mainstream f a c t i o n s of Kishi, Kono, Ono and Sato and the a n ti -m a in ­ stream f a c t i o n s of Ikeda, Ishi and Miki.

On January 24, 1969, the

l a t e n t antagonism and d is c o n t e n t pervasive in the LDP came to the open when the anti-mainstream f a c t i o n s opposed Prime Min ist er K i s h i 's e l e c t i o n to LDP p a rt y p re s id e n t and proposed a candidate of t h e i r own.

Although the strawman, Kenzo Matsumura, casted 166 votes only

a g a i n s t the 320 f o r Kishi i t was c l e a r t h a t K i s h i 's p o s i t i o n a t the helm of the LDP and as Prime Min sit er would remain unstab le unless he would manage to re dre ss the balance of power within the LDP.

169

The S o c i a l i s t Pa rt y ^

in 1958/1959 represented an amalgam of

th re e competing ideolo gic al f a c t i o n s with the mainstream fa c t i o n purporting t h a t the JSP should be a c l a s s p a rt y in the wider sense, and t h a t so cialism should be achieved through parliame ntary means. At the two opposite ends of the spectrum were the anti-mainstream f a c t i o n s , one advocating c l a s s st ru g g le to e s t a b l i s h the d i c t a t o r ­ ship of the p r o l e t a r i a t , while the o th e r attempted to appeal to the mid dle -c lass in add iti on to the working-class. While b i t t e r l y opposing each o th e r in na tiona l p o l i t i c s both the LDP and the JSP were s t i l l q u i t e busy with i n t r a - p a r t y d is p u te s . The LDP was engaged in the perennial f a c ti o n a l s t r i f e over le ad e rs hip and power and the JSP was in the midst of an in te r n e c i n e ideolo gic al s tru gg le among i t s c o n s t i t u t i n g f a c t i o n s . However, a t the same time both p a r t i e s were anxiously viewing a t the upcoming e l e c t i o n s ; local e l e c t i o n s were to be held in April and House of Councillor e l e c t i o n s were scheduled f o r June 2, 1959. The local e l e c t i o n s took p a r t i c u l a r s i g n i f i c a n c e since they marked the f i r s t "showdown" a t the p o l l s between the two r iv a l p a r t i e s since the LDP merger in 1955, and as a r e s u l t both the LDP and JSP campaigned vigorously and a gg re ssi ve ly . The S o c i a l i s t Pa rt y , however, did not f a r e well in both e l e c ­ t i o n s i n s p i t e o f the r a t h e r unpopular Kishi government.

The LDP,

on the o th e r hand, managed to gain a secure m a jo ri ty of 132 in the House of Co uncillor s.

Based on the fa vorable e l e c t i o n r e s u l t s Prime

M inister Kishi proceeded to form a new Cabinet on June 18, 1959. K i s h i ' s t h i r d Cabinet contained several important new f e a t u r e s ,

170

f o r one, Hayato Ikeda, one of the anti-mainstream f a c t i o n l e a d e r s , joined as m i n i s t e r of MITI.

Also noteable was the f a c t t h a t most

key c ab in e t p o s i t i o n s were occupied by e x- b u re au c ra ts .

Politically

most s i g n i f i c a n t was Ikeda 's jo i n i n g of the Kishi c ab in e t although I k e da 's " p o s i ti v e " economic p o l i c i e s were in sharp c o n t r a s t to MOF m i n s i t e r S a t o ' s conservative economic poli cy .**

In his a d m in is tr a ­

t i v e p o li c y statement a t the beginning of the 32nd session of the D ie t, mainly convened to organize the House of Councillors following the Upper House e l e c t i o n of June 2, Prime Min sit er Kishi b r i e f l y s t a t e d the th re e major p ol ic y goals of hi s a d m in is tr a ti o n as:

(1)

re v is io n of the U.S.-Japan Se c u ri ty Treaty; (2) the d r a f t i n g of a 10-year economic expansion program; and (3) r e v i s i o n of the Election Law [Minich 7/20]. 1. 2 .3 .

Economic Forces

13

Although t h e i r access channels

14

and t a c t i c s of inf lu enc e have

varied over time, J a p a n ' s major economic i n t e r e s t s have represented a formidable p o l i t i c a l force in the Japanese p o l i t i c a l economy. During the postwar years very cl ose a s s o c i a t i o n a l linkages have developed between the Japanese s t a t e and economic s o c i e t y , with many of the se linakges p e r s i s t i n g to t h i s very da te .

Not unlike

economic fo r ce s in o th e r advanced i n d u s t r i a l s o c i e t i e s , Jap a n' s economic i n t e r e s t s are organized f o r two purposes mainly:

one,

to maximize input in t o public p o li c y making, i . e . t r y i n g to i n f l u ­ ence, dominate and perhaps even to capture p e r t i n e n t politico-economic is su e s and concerns.

Second, economic force s g e n e r a ll y seem to

171

show an i n c l i n a t i o n to influence and determine the course of i n d u s t r i a l and business a c t i v i t i e s by reducing competition and engaging in c o l l u s i v e arrangements. The economic bureaucracy and the Liberal Democratic Party con­ s t i t u t e the major access channels f o r J ap a n 's economic i n t e r e s t groups and a s s o c i a t i o n s ; t h i s i s perhaps be st exemplified in the r o l e and function of MITI’s genkyoku (bureaus of primary j u r i s d i c ­ t i o n ) ^ but a ls o the nokyo (A gr ic ul tu ral Cooperative Assoc iation s) which have exerted a most e f f e c t i v e influen ce on J ap a n 's postwar a g r i c u l t u r a l polic ie s.* ®

The linkages between the LDP and various

e xt er na l groups have developed b a s i c a l l y a t two l e v e l s , formal p a r ty o r g a niz at io n and individual p a rt y member l e v e l .

While these linkages

are designed to provide the LDP mainly with support of funds or v o te s, i t i s obvious t h a t support i s given almost always on a r e c i p r o ­ cal b a s i s in re tu r n f o r s p e c i f i c s e r v ic e s rendered or to be rendered by the p a r t y or i t s members.*^

The linkages between economic s o c i e t y

and the LDP became formally i n s t i t u t i o n a l i z e d a f t e r the c o ns o li da tio n o f J ap a n 's conse rvative p o l i t i c a l fo rc e s in 1955 and ever since then th e re have been w i l l i n g c o l l a b o r a t o r s in the LDP t h a t have acted on behalf of Jap a n' s economic I n t e r e s t groups 1n national politics.

By and la rg e J a p a n ' s economic s o c i e t y has been represented

by four major economic peak a s s o c i a t i o n s and numerous sp e c ia li z e d tr a d e a s s o c i a t i o n s throughout the postwar e r a . Keidanren— Keizai Dantei Rengokai (Federation of Economic Organizations) has been J a p a n ' s most p r o l i f i c and i n f l u e n t i a l economic peak a s s o c i a t i o n .

Keidanren's ro le and function have been s u c c i n c t l y

172

summarized by one a n a ly s t as:

. . i t s [Keidanren] primary aim

i s to c r e a t e a p o l i t i c a l clima te and economic c ond iti ons t h a t will insure p r o f i t s f o r business and in d u s tr y through cooperation with government and within the business community i t s e l f . "

18

To t h i s

end, Keidanren has maintained successful u n in te rru pt ed co nta ct with both the LDP and the bureaucracy. Keizai Doyukai (Committee f o r Economic Development) has been re p re se n ti n g the pro gressive side of J ap a n 's economic s o c i e t y by re p e at e d ly s t r e s s i n g bus iness' so cia l r e s p o n s i b i l i t i e s ,

19

e.g. at

i t s annual meeting in 1956 Keizai Doyukai adopted a re s o l u t i o n s t a t i n g t h a t the time had long pa st when the i n t e r e s t s o f p r i v a t e e n t e r p r i s e coincided with those of the p u b l i c , and t h a t in planning growth and p r o s p e r i t y of e n t e r p r i s e s and the n ation al economy i t was incumbent upon managers to a d j u s t the i n t e r e s t s of t h e i r e n t e r p r i s e s to those of s o c i e t y . ^ Nihon Keieisha Dantai Renmei (J a p a n 's Federation of Employer's Asso cia tions) has been an org an iz ati on of employers and devoting i t s major e ne rg ies to labor problems.

I t s prime was during the

l a t e 1940s and 1950s when the " s o c i a l i s t " s p e c t e r haunted the Japanese p o l i t i c a l economy.

N ik ke ire n 's proverbial op erat io nal e f f e c t i v e n e s s

was based p r im a r i ly on i t s org a ni z at io nal power and a cl ose working r e l a t i o n s h i p with the co nservative p o l i t i c a l force s in Japanese p o l i t i c s , and i t s d i r e c t access to r e le v a n t LDP p o lic y committees. Moreover, Nikkeiren had the f i n a n c i a l resources to inf lu enc e mass opinion by financ ing Sankei Shimbun, Fuji TV, and a radio s t a t i o n .

21

By the l a t e 1950s " f i g h t i n g Nikkeiren," as i t was dubbed, was amidst

173

a major c o nfro nta tio n with labor over Mitsui Mining's Mi ike Coal Mine. Nissho—Nihon Shoko Kaigisho (Japan Chamber of Commerce and Industry) has long been re p re se n ti n g an o r g a niz at io nal framework f o r hundreds of J a p a n ' s local chambers of commerce and in du st ry by e f f e c t i v e l y l i n k in g local commercial and i n d u s t r i a l i n t e r e s t s to national p o l i t i c s .

In the 1950s and e a r l y 1960s Nissho was

i n t e r e s t e d in promotion of i n t e r n a t i o n a l t r a d e , development of regional economies, increased consumption and pri c e s t a b i l i z a t i o n . For t h i s purpse Nissho maintained c lo se linkages to r e l e v a n t o f f i c e s and bureaus in MITI, the Ministry of Trans portation and the Ministry o f Foreign A f f a i r s .

22

Trade A s s o c i a t i o n s .

There are more than one hundred tra de

a s s o c i a t i o n s in Japan ye t they a l l perform the same basic func tion: to promote and p r o t e c t t h e i r p e r t i n e n t i n t e r e s t s by maintaining e f f e c t i v e l i a i s o n with LDP p o li c y committees, standing committees of the D ie t, and with r e l e v a n t government a g en c ie s, bureaus and m inistries.

23

These numerous tr a d e a s s o c i a t i o n s have a c t i v e l y

p a r t i c i p a t e d in pu bli c p o lic y decision-making o f the l a t e 1950s and e a r l y 1960s.

P a r t i c u l a r l y those t h a t were i d e n t i f i e d as "national

champions" and thus occupied a p o s i t i o n of some s i g n i f i c a n c e in the s t a t e ' s o v e ra ll i n d u s t r i a l s t r a t e g y were q u i t e I n f l u e n t i a l and powerful.

By and l a r g e , the power p o s it io n of tr a d e a s s o c i a t i o n s

tended to be commensurate with t h e i r importance of t h e i r p o s it io n 1n the o ve ra ll s t r u c t u r e of in d u s tr y and economy of the l a t e 1950s 24

and e a r l y 1960s.

174

The above discussed four economic f e d e r a t i o n s t o g e th e r with the tr a d e a s s o c i a t i o n s comprise J a p a n ' s most i n f l u e n t i a l i n t e r e s t OC

group u s u a l l y r e f e r r e d to as zaika i (business world). 1.3. 1. 3 .1 .

Plan Environment I n s t i t u t i o n a l Factors

During the f i v e year in t e r v a l from 1955 to 1960 J a p a n ' s economic planning environment experienced several important i n s t i t u t i o n a l changes t h a t will be discussed below. In d u s t r i a l S t r u c t u r e .

Perhaps most c r i t i c a l and important

during the in t e r v a l was the rapid s t r u c t u r a l change t h a t was ta king place in J a p a n ' s i n d u s t r i a l or ga n iz at i o n .

This s t r u c t u r a l change

was f a c i l i t a t e d p r im a r i ly by the e x t r i p a t i o n of the Law f o r the Elimination o f Excessive Concentration of Economic Power in 1955.

26

The trend from 1955 on was toward v e r t i c a l and horizo nta l concentrat i o n and formation of powerful e n t e r p r i s e groups in Japanese in dus try .

27

During t h a t period many new e n t e r p r i s e s were s e t up, petro-chemicals in p a r t i c u l a r , while i n t e n s i f i e d economic growth centered on heavy in d u s tr y and chemicals in ge neral.

28

Concurrently the Japanese

s t a t e was adm ins iterin g a massive i n fl u x of for eig n technology, and, a ls o in 1955 the Japan P r o d u c ti v it y Center was s e t up in Tokyo to take up the formidable ta sk o f reducing J a p a n ' s p r o d u c t i v i t y gaps. All in a l l , 1955 had marked a pivo tal tu rn in g poi nt f o r J ap a n 's i n d u s tr y and economy.

The country had embarked on a thorough re o rg a n i­

z at i o n of i t s i n d u s t r i a l s t r u c t u r e and was not implementing public p o l i c i e s which in di ca ted preference f o r la rg e s i z e f ir m s , economic

175

e f f i c i e n c y and i n d u s t r i a l champions. In t e rn a ti o n a l Trade.

As f a r as J ap a n 's for eign t r a d e in the

f i r s t h a l f of the 1950s i s concerned, i t was marginal a t b e s t. However, around 1955 t h e r e was the beginning of a s t r a t e g i c s h i f t away from l i g h t in d u s tr y and numerous small firms toward heavy in du s tr y and chemicals with la rg e e n t e r p r i s e s becoming a c t i v e in foreign trade.

This s t r a t e g i c s h i f t in the co n fig ur a tio n of J a p a n ' s i n t e r ­

national tra d e had been in the making f o r some time and was g r e a t l y f a c i l i t a t e d by a g e n e r a ll y favorable environment f o r i n t e r n a t i o n a l t r a d e , but also because Japan had been a member of several supranational economic or gan iz ati on s and i n s t i t u t i o n s : GATT, Art. 14 nation in 1955.

IMF and IBRD in 1953;

These f a c t o r s were q u i t e instrumental

in paving the way f o r the expansion of Japanese exports in the l a t e 7Q 1950s and beyond. Role o f the S t a t e .

Already with the end of the U.S. occupation

in 1952 did the Japanese s t a t e begin to bui ld up a r e q u i s i t e i n s t i t u ­ ti o n a l and f in a n c ia l framework f o r i n d u s t r i a l expansion and export promotion.

This was achieved by pursuing a s t r a t e g y of s t a t e - l e d

economic growth, ag gre ssive public p o l i c i e s , and re sources a l l o c a t i o n to de signated investment p r o j e c t s and i n d u s t r i e s .

Yet, while such

p o l i c i e s o f s t a t e - l e d growth and government guidance had been a c t i v e and important throughout the f i r s t p a r t of the 1950s, i t was not un t i l a f t e r 1955 which saw the r i s e of " bu reau crat ic " p o l i t i c i a n s with a prop en si ty f o r economic planning ( i . e . Prime Min sit er Kishi) t h a t the politico-economic environment of Japanese planning improved considerably.

176

1 .3 .2 .

Economic Factors

As a lre ad y pointed out above, by the mid-1950s Japan had entered a new phase in i t s postwar economic development.

Against the back­

drop o f buoyant economic c o n d i t i o n s , the Korean War Boom of 1951, the Investment Boom of 1953, and an average annual growth r a t e of 12.1 percent (from 1950-1955), the Economic Planning Agency o f f i c i a t e d in i t s 1956 Economic White Paper t h a t the postwar era had come to an end.

30

In f a c t , Japan was j u s t a t the th re sh ol d of a new economic

boom (Jimmu Boom 1956-1957), which was based on a t r a n s f e r of tech­ nology induced "technological rev ol ut io n" and a ls o on a "revolution in consumption," which, t o g e th e r with a c on st a nt upsurge in p r i v a t e investment l a i d the foundation f o r a decade of rapid economic growth, 9.6 percent p .a . of real economic growth, which came to an abrupt end however with the 1964-1965 re ces si on. During the 1956-1959 period J a p a n ' s economy a c c e le r a te d i t s expansive d ri ve with real economic growth r a t e s surpassing projec ted target figures.

Several f a c t o r s accounted f o r t h i s development,

f o r one, a combination of s t e a d i l y improving business p r o f i t s , s a t i s ­ f a c t o r y in creas es in e x p o r ts , an expanding na tio na l budget and e a s i e r money helped to spur p r i v a t e equipment investment.

Moreover, Japan

experienced a boom f o r household e l e c t r i c a l appliances and durable consumer goods in a l l of 1958/59, a development which s i g n i f i c a n t l y aided s u s t a i n i n g the growth momentum and business confidence in an expanding economy.

By 1959 the Japanese economy was on a normal

course of expansion and s t a b l e growth with p r i v a t e equipment i n v e s t ­ ment holding the key f o r f u r t h e r expansion.

177

However, the MOF s i t u a t e d f i s c a l conse rva tiv es and economic pe ss im is ts became i n c r e a s i n g l y alarmed a t the rapid equipment i n v e s t ­ ment d r i v e , fe a r i n g t h a t the Japanese economy would become overheated. Indeed, the ever a c c e l e r a t i n g investment dr iv e of 1959 had the pro­ p e n s it y to c r e a t e "bottlen eck s" in the economy since the sudden s p u rt in r e l a t e d imports of raw m a te ri a ls and machinery represented a heavy dra in on J a p a n ' s f in a n c ia l resources and had the p o te n ti a l to a f f l i c t an a lre ad y prec ariou s balance of payments s i t u a t i o n . The c r i t i c a l issue became whether or not autonomous p r i v a t e s e c to r adjustment and qyosei shido would be s u f f i c i e n t and e f f e c t i v e enough to prevent the economy from being "overheated."

Economic and f i s c a l

conserva tiv es in MOF held t h a t strong ac ti on was necessary to curb equipment spending, and indeed, t h e i r views came to p re va il and found formal expression in the EPA's 1960 Economic Forecast ( c u s to ­ marily serving as ba sis f o r th e compilation of the na tio na l budget) which was published on October 16, 1959, and s p e c i f i c a l l y c a ll e d f o r a s e t of prec au tio na ry f i n a n c i a l and monetary measures to de cel er a t e p r i v a t e equipment investment. 2. 2 .1 .

31

K i s h i 's Wage Doubling Plan I n s t i t u t i o n a l Harbingers of the Income Doubling Plan

Contrary to the dominant myth and " o f f i c i a l h is to r io g r a p h y ," the Idea of the National Income Doubling Plan was n e i t h e r created 32 nor did i t emanate from I ke da 's b r a i n t r u s t or hi s f i r s t c a b in e t. Ichiro Nakayama, a noted Hitotsubashi economist and chairman of the Overall Policy Committee o f the Economic De lib er at io n Council

178

o r i g i n a l l y conceived the idea and suggested to then Prime M inister Kishi t h a t a two-fold expansion of Jap a n' s na tio na l income was pos sib le within ten y e a r s .

Nakayama's conception of doubling the national

income in ten year s was based on his percep tiv e empirical a n a ly s is of the performance and tr a c k record of J a p a n ' s economy since the e a r l y 1950s.

Moreover, Nakayama had gained f u r t h e r i n s i g h t s about

the growth p o t e n t i a l of the Japanese economy by monitoring the prog­ re s s of an EPA p r o j e c t e n t i t l e d "Prospects of J ap a n 's Economy in 1980."

33

As a r e s u l t , Nakayama surmised to Kishi t h a t a new economic

plan should r e f l e c t the growth p o te n ti a l of the economy, and t h a t doubling o f the na tiona l income was a f e a s i b l e pr op o s it io n . Prime Min ist er Kishi who in the p a st had been i n t i m a t e l y a s s o c i ­ ated with wartime economic planning seized the momentum o f steady economic growth and improving l i v i n g standard and decided to adopt Nakayama's idea.

In a d d i t i o n , th e r e had been repeated c a l l s to

re v is e K i s h i 's 1957 New Long-Range Economic Plan.

Subsequently,

Kishi op e ra ti o n al iz e d the "income doubling" idea p o l i t i c a l l y as a "wage doubling plan" during the e l e c t i o n s of sp ring 1959; Kishi was facing tough local e l e c t i o n s in May and House of Councillors e l e c t i o n s in June.

A ft e r a convincing LDP e l e c t i o n v i c t o r y , however,

pressures mounted on Kishi to redeem himself and to put the wage doubling idea i n t o p r a c t i c e . At the formal request from opposition p a r t i e s Prime Min ist er Kishi f i n a l l y used the occasion o f the formal opening o f the 32 e x t r a o rd in a ry Diet on June 25, 1959, to e l a b o r a t e on his f u t u r e politico-economic p o l i c i e s .

However, Kishi spoke mainly about the

179

proposed r e v i s i o n of the U.S.-Japan S e c u ri ty Treaty and of the Election Law, y e t Kishi t o t a l l y missed to explain how to double the na tiona l income in the coming ten y e a r s .

Instead Kishi emphasized

t h a t the r e s h u f f l e of hi s Cabinet and the Party were aimed a t "enforcing" the se p o l i c i e s .

34

P r e d i c t a b l y , public re a c ti o n to K i s h i ' s speech was mixed. A Mainichi a r t i c l e summed i t up however when i t denounced K i s h i 's speech as " c l a p tr a p p o l i c y , " pointing t o the pa st when Kishi had f i r s t become Prime Min ist er and promised to e li m in a te poverty, corrup tio n and violence in 1957, a promise he never managed to follow through.

S p e c i f i c a l l y r e f e r r i n g to the absence of d e t a i l e d and

concrete p o l i c i e s designed to implement t h i s long-range economic program f o r doubling the nationa l income, Mainichi warned t h a t i t was necessary to d i s t i n g u i s h between K i s h i ' s c l a p t r a p p o l i c i e s and the plans he in f a c t intended to c a r r y o u t , i . e . Se c u ri ty Treaty re v is io n and passage of the Police B i l l . 2.2.

35

K i s h i ' s Third Cabinet—Motives and C h a r a c t e r i s t i c s

Here the a n a l y t i c a l l y more i n t e r e s t i n g and r e l e v a n t is s u e s concern the motives and fo r ce s behind K i s h i ' s Cabinet r e s h u f f l e and l in e -u p in June 1959.

O st en si bl y, several c r i t i c a l f a c t o r s

i n t e r a c t e d a t t h a t ju nc tu re in Japanese p o l i t i c s with p o l i t i c a l expediency and e f f i c a c y d i c t a t i n g the course of the ev ent s. There can be no doubt t h a t Kishi intended to s tr en gth en his Cabinet and to achieve p a r t y unity f o r the upcoming Treaty Revision. On the o th e r hand, f o r anti-mainstream p o l i t i c i a n s l i k e Hayato Ikeda

180

the moment must have appeared opportune to get back i n t o the p o l i t i c a l game since i t was widely assumed t h a t the Treaty Revision would be K i s h i ' s " f i n a l ac t" as Prime Min ist er.

This notwith st an din g,

the actual formation of the Third Kishi Cabinet on June 18, 1959, brought s t i l l some p o l i t i c a l " s u r p r i s e s . " K i s h i ' s o r i g i n a l s t r a t e g y was to strengthen his c ab in e t by giving " a t t r a c t i v e " posts to the important f a c t i o n l e a d e r s , Kono, Sato and Ikeda.

The s t r a t e g y was d i f f i c u l t to o p e r a t i o n a l i z e , however,

and had to be abandoned e v e n tu a ll y because of i n te r n e c i n e r i v a l r i e s between Kono and Ikeda, and between Sato and Ohno.

In the end the

Sato f a c t i o n moved c l o s e r to Ikeda while Kono broke with Kishi, both moving i n t o the anti-mainstream.

Kishi moved r e s o l u t e l y and

quic kly in or der to avoid p o l i t i c a l i s o l a t i o n and managed to e s t a b ­ l i s h a working a l l i a n c e with Ikeda who only si x months e a r l i e r had 36 charged him with p o l i t i c a l corru pti on and incompetence. K i s h i ' s subsequent Cabinet r e s h u f f l e had wide ranging ra m if i ca ­ t i o n s and unintended consequences.

O s t en s ib ly , the r e s h u f f l e can

be i n t e r p r e t e d as y e t another round in the perennial i n t r a - P a r t y s t r u g g l e f o r the LDP-presidency.

In 1959 Sato was p i t t e d a g a in s t

Ikeda, while Kishi attempted to smash the inf lu en c e of a l l prospec­ t i v e can didates in order to b o l s t e r hi s own p o s i t i o n .

As f a r as

Ikeda was concerned, i t was q u i t e obvious from the o u t s e t t h a t he joined the Cabinet only with the LDP presidency on his mind, and not f o r the purpose of " pa rt y unity" o r b o l s t e r i n g Kishi in the upcoming S e c urit y Treaty r e v i s i o n , which Ikeda i n c i d e n t i a l l y regarded 37 as a simple ma tte r of fo r m al i ty . And indeed, Ikeda took a

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c a u t i o u s , middle-of -the -ro ad p o s i t i o n on the t r e a t y and kept a reason­ able d is ta n c e from Kishi when the tr ou bl e began; a t t h a t time however, i t was abundantly c l e a r t h a t he had moved i n t o the lead to succeed K i s h i . 38 P o l i t i c a l l y , i t may be argued, the Cabinet r e s h u f f l e a c t u a l l y weakened K i s h i 's co ntro l over the LDP because hi s p o l i t i c a l maneuver backfired by f u r t h e r ex acerbating LDP-factional s t r i f e which i n v a r i ­ ably had to a f f l i c t the upcoming re v is io n of the Se c u ri ty Treaty, as well as the formulation of the contemplated 10-year economic program.

39

In s h o r t , K i s h i ' s d e s id e r a ta of "par ty unity" never

m a te r ia li z e d . "Cabinet unity" did not work much b e t t e r e i t h e r .

The Third

Kishi Cabinet was deeply divided over two of the Prime M i n i s t e r ' s major p o l i c y i s s u e s .

There was fundamental divergence of opinion

between Ikeda and Foreign M in ist er Fujiyama on the S e c uri ty Treaty i s su e with Fujiyama ta king a comparatively f l e x i b l e stand while 40 Ikeda purported the s o - c a l l e d "Yoshida-formula." Furthermore, t h e r e was l a t e n t c o n f l i c t between Finance M in ist er Sato favoring co nse rva tiv e economic p o l i c i e s , while MITI Min ist er Ikeda advocated " p o s i t i v e " economic measures; and i t appeared i n e v i t a b l e t h a t the two would be c las hin g over the pro je c te d 10-year economic program.

41

With resp ec t to K i s h i 's new economic p o li c y the Third Kishi Cabinet looked r a t h e r impressive since most of the key c ab in e t pos ts connected with economic a f f a i r s were held by experienced people with ex tensive background in the management of J a p a n ' s economy; MOF Min ist er Sato was from the Tr ans porta tio n Ministry; MITI Minister

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Ikeda from MOF; A gr ic ult ure and F o r es tr y Minister Fukuda from MOF as w e ll ; moreover, Cabinet Chief S e c re ta ry Shiina had been a ViceM in ist er of the defunct Ministry of Munitions.

The EPA D ir e c to r-

General Kanno, as mentioned p re v io u s ly , was a p ro f e s s o r of economics. All in a l l , the lin e -u p f o r the 10-year economic program seemed more than adequate in terms of the Cabinet members pro fessional c r e d e n t i a l s and a d m in is tr a ti v e competence.

There was, however,

widespread f e a r in the public a t la rg e t h a t the new cab ine t would engage in mere a b s t r a c t d is cu s s io n s without a c t u a l l y carr ying out any p r a c t i c a l economic po li c y ; the appointment of Kanno, the p o l i t i c a l economist, to the post of EPA Director-General stimulated p r e c i s e l y such f e a r s and perc eptions .

42

And f i n a l l y , the Third Kishi Cabinet assumed a strong "bureau­ c r a t i c coloring" with more than h a l f of i t s members being ex-bureau­ c r a t s , including Kishi himself.

A ft e r the r e s h u f f l e Sankei Shimbun

interviewed two noted a u t h o r i t i e s on bureaucracy on the causes f o r 43 th e revival o f " b ur eau crat ic government." Kiyoaki Tsuji explained the phenomenon as a function of the following f a c t o r s :

(1) bureau­

c r a t s are more competent than p a r t y o f f i c i a l s in conducting adminis­ t r a t i v e a f f a i r s ; (2) government o f f i c i a l s , while in o f f i c e , e s t a b l i s h networks and build up a sphere of influen ce making i t po s si b le to be e l e c t e d a f t e r " re ti re m e n t" ; (3) interconnectedness between the LDP economic peak a s s o c i a t i o n s and the government.

Fukuji Taguchi

observed t h a t prewar bureaucrats had been backed by a powerful machinery o f a u t h o r i t y which had been weakened to some e x t e n t in the postwar e r a , however government agencies have come to e x e r c is e influence

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over the n a t i o n ' s economic and social l i f e .

Consequently, o f f i c i a l s

of the m i n i s t r i e s concerned with economic a f f a i r s such as MOF, MITI and the Ministry of Construction have replaced the once-powerful (prewar) o f f i c i a l s in wielding t h e i r in fl uen c e.

And, ex plaining

the d if f e r e n c e between the pre-war and post-war e r a , Taguchi added: Because the p r i n c i p l e of pa rliamentary government and p a rt y p o l i t i c s has been e s t a b l i s h e d high ranking government o f f i c i a l s find i t neces­ sar y to jo in p o l i t i c a l p a r t i e s i f they wish to a t t a i n p o l i t i c a l fame.

Consequently, they t r y to obtain executive p o s i t i o n s in a

p o l i t i c a l pa rt y taking advantage of t h e i r e xpe rt know-how and t h e i r connections with f i n a n c i a l c i r c l e s .

The esta bli sh me nt of le a d e rs h ip

by former bur eaucrats in the Government and i t s Party s i g n i f i e s a move of the Government and I t s Party to reorganize domestic p o l i t i c s along b ur e a uc ra tic l i n e s . In sum, the p o l i t i c a l lin e -u p f o r the Prime M i n s i t e r ' s thr e e major p ol ic y o b j e c t i v e s was completed in e a r l y summer of 1959 with a secure ma jo rit y in both Houses, r e l i a b l e and competent ex-bureau­ c r a t s occupying the most s a l i e n t c ab in e t posts with regard to economic a f f a i r s ; and Hayato Ikeda and h is "p o si ti v e " economic po lic y a t the helm of the Ministry of I n te r n a ti o n a l Trade and Indus try.

More­

over, the p o l i t i c a l balance of power within the Liberal Democratic Party had been thoroughly redressed as a r e s u l t of the Cabinet r e s h u f f l e , and the s o c i a l i s t " t h r e a t " had been s u f f i c i e n t l y co ntained, f o r the time being a t l e a s t .

Obviously pleased with his achievements,

re c en t v i c t o r y in the House of Councillors e l e c t i o n and the "suc ces s­ f u l " Cabinet r e s h u f f l e , Prime Mi nister Kishi l e f t Tokyo on Ju ly 1 1 ,

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1959, f o r a one-month long goodwill to u r of twelve foreign c o u n t r i e s . Meanwhile in Tokyo, the b a t t l e over K i s h i 's 10-year program f o r economic expansion was shaping up with the various combatants st aking out t h e i r re s p ec ti v e p o s i t i o n s . 2.3.

P o l i t i c s , Economic Society and the Gestation of the Plan

In order to maintain the popular support gained during the 1959 Spring e l e c t i o n s i t became c r i t i c a l f o r the Liberal Democratic Party t o c a r r y out e l e c t i o n pledges linked to na tio na l economic welfare.

Prime Mi nister Kishi had been using the "income doubling

idea" as an e l e c t i o n slog an, and, moreover, Hayato Ikeda who had touched o f f the income doubling argument had since joined the Cabinet. As a r e s u l t the "income doubling program" had become a major slogan of the Third Kishi Cabinet a lr e a d y , and the Prime Min ist er ordered his economic policy-making e x p er ts to begin work on a d r a f t f o r a long-range economic program f o r doubling the na tiona l income. However, in Japanese p o l i t i c a l and economic as well as bureau­ c r a t i c c i r c l e s the re was wide disagreement over the f e a s i b i l i t y of K i s h i ' s ambitious economic program.

Optimists pointed to the

f a c t t h a t since 1951 the Japanese economy had been developing a t a r a t e almost un p a ra ll el ed in Western Europe and the United S t a t e s . Others cautioned arguing t h a t doubling the nation al income would hinge on J ap a n 's exports which in turn were dependent on the economic cond itions of oth er c o u n t r i e s .

S t i l l o th e r s a i r e d f e a r s t h a t a

program of economic expansion would lead to an "excessive boom" since the economy, as everyone agreed, was a lre ad y in a phase of

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upswing.

Some were q u i t e c r i t i c a l o f Ikeda po int ing out t h a t Jap a n's

economic growth must be based on the expansion of export tr a d e while Ikeda hoped to st im u la te economic expansion through a combination of exports and stimulated consumer purchase power.

And f i n a l l y ,

th e re were those in z aik ai wary of any move o f the Kishi Cabinet f o r " f l i r t i n g " with the public and warned t h a t the p o l i t i c i a n s should not c r e a t e unnecessary d is tur ba nce s in economic c i r c l e s .

44

But

almost a l l agreed t h a t K i s h i 's ambitious endeavor would require careful planning, wide c o n s u lt a ti o n s and pr e p a ra t io n s in or der to be e f f e c t i v e . Against t h i s backdrop a conference of s e n io r LDP le ad e rs was convened on June 18, 1959, and i t was decided t h a t the Cabinet would have to s t r i v e f o r doubling the na tio na l economic output and income; moreover i t was decided to form the LDP Economic Research Council in order to i n v e s t i g a t e the f e a s i b i l i t y of such a plan and to study the problem of how to double the na tiona l income.

45

At a Cabinet meeting on Ju ly 7, 1959, Prime Min ist er Kishi declared t h a t the general framework f o r the 10-year economic program would be drawn up as soon as po s si b le in ord er to be incorporated in to the budget f o r FY 1960.^*

The following day the Prime M inister

and the LDP's newly c reate d Economic Research Council (ERC) met s e p a r a te ly with EPA Director-General Wataro Kanno and conferred about the ba sic planning framework f o r the 10-year economic program. During the meeting Kanno and the ERC r e p r e s e n t a t i v e s agreed to cooperate in the formulation of the p l a n ' s basic framework and the outmapping of the plan c on te nt , and both, the ERC and the EPA

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Dire ct or- G en er al, were o p t i m i s t i c t h a t the d e t a i l s would be ready f o r p u b li c a ti o n within 12 to 18 months.

47

And immediately a f t e r

re c ei v in g p e r t i n e n t data and m a t e r i a l s from the Economic Planning Agency, MITI, and the Ministry of Finance the Economic Research Council began i t s work and di scu ss ion of the basic framework of the long-term economic plan to double the income.

Only a few weeks

l a t e r , in an a r t i c l e published in Nihon Keizai Shimbun, the chairman of the ERC, Kazuo Aoki, a ir e d some of the basic tre nd s underlying the committee's work by s t a t i n g t h a t the ERC will propose f u r t h e r co ns o li d at io n of the i n d u s t r i a l s t r u c t u r e , expansion of t r a d e , increase of employment, but a l s o , t h a t the plan re q u ir e s adequate government support and backing in order to succeed; and, moreover, t h a t the committee would include a p a r t of the long-term plan in the budget f o r FY 1960 and f o r t h i s purpose would rush to s e t t l e i t s own basic d i f f e r e n c e s to ready the basic o u t l i n e (plan framework) by the end of October 1959, on time f o r the budget d e l i b e r a t i o n s .

Aoki s t a t e d

f u r t h e r t h a t the Liberal Democratic Pa rty would not f a l l back in to a system of "to s e i k e i z a i " ( c o n t r o l l e d economy), in s te ad t h a t the LDP was thoroughly committed to p r o t e c t the p r i n c i p l e s of c a p i t a l i s m , as s u ri n g independence and f r e e i n i t i a t i v e of the p r i v a t e s e c t o r . However, he added, t h i s plan will not remain a wishful d e s i r e only, f o r i t will be supported and backed by concrete government p o l i c y , 48 a d m i n i s t r a t i v e guidance, the budget and public investment. The LDP's Economic Research Committee had staked out i t s p o s i t i o n . Meanwhile in the EPA, Director-General Wataro Kanno was fac ing two immediate t a s k s ; one to formulate the 10-year economic program

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proposed by Prime Min ist er Kishi, but a l s o , to draw up the annual Economic Forecast t h a t c o n s t i t u t e s the b a si s f o r the compilation of the budget f o r next f i s c a l year.

Needless to say almost t h a t

a t t h i s p oi n t the two had become c l o s e l y int erconnected and the c r i t i c a l question regarding the budget compilation concerned the d i f f i c u l t problem of how to a d j u s t the e x p a n s i o n i s t i c views of MITI M inister Ikeda and Ministry of Finance Min ist er S a t o ' s c a l l f o r "prudent" economic p o l i c i e s .

Asahi assessed the dilemma p e r c e p ti v e ly

by observing t h a t both, " s t a b i l i z e d growth" and "excessive economic boom" would be the d i r e c t consequence of the kind of budget t h a t 49 would be compiled f o r next f i s c a l year . Obviously, the c r i t i c a l p o l i t i c a l query was whether o r not EPA Director-General Kanno would be able to " adj ust " the p o l i c i e s of the various m i n i s t r i e s ; MITI, the Ministry of Finance, A gri c u lt u re and F o r e s t r y , and Trans portatio n in p a r t i c u l a r .

Director-General Kanno decl ar ed t h a t he intended

t o make the necessary adjustments from a n e utra l and economically h o l i s t i c pe rs p e c ti v e .

50

The c a r e e r o f f i c i a l s in the EPA, l i k e everyone e l s e , were f i r s t unclear about the scope of the "income doubling id e a ," because the exact c h a r a c t e r and o b j e c t i v e s of Prime M in ist er K i s h i ' s economic program were not c o n c r e te ly known o r s p e ll e d out anywhere.

On the

o th e r hand, the Economic Planning Agency welcomed the Prime M i n i s t e r ' s i n t e r e s t in long-range economic planning.

51

And on Ju ly 9, a f t e r the Kishi-Kanno meeting, the Overall Planning Bureau of the EPA began work on the ba sic methodology f o r the 10-year economic program using the framework o f the 20-year lon git udina l

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study developed by Kazushi Ohkawa, the D ire ct or of the I n s t i t u t e of Economic Research of the EPA.

52

According to o f f i c i a l s in the

EPA, the ta sk f e l l to the Overall Planning Bureau with Saburo Okita as D ir e c to r because the Research Bureau was busy in i t s j o u r n a l i s t i c e f f o r t to publish the Economic White Paper, and the Coordination Bureau, s t a f f e d and dominated by shukkosha from MITI and o th e r i n t e r ­ e s te d m i n i s t r i e s were kept out of the opera tio n as much as p o s s i b l e , although basic l i a i s o n with o th e r m i n i s t r i e s was maintained through t h e i r shukkosha in the Coordination Bureau.

53

Presenting the EPA's

Monthly Economic Report on Ju ly 30, 1959, EPA Director-General Kanno s t a t e d t h a t f a c t - f i n d i n g f o r the basic framework f o r the Long-Term Plan would be concluded by September and t h a t the plan would be op era tio na l next year.

54

Subsequently a s e r i e s of plan r e l a t e d prelimina ry meetings took place between the Economic Research Council of the LDP and the EPA's General Planning Bureau, and on August 26, 1959, Saburo Okita, Chief of the General Planning Bureau presented a general framework f o r the plan in form of a b l u e p r i n t f o r the Japanese economy in ten years hence. points:^

The EPA b lu e p r i n t advanced the following major

(1) the GNP will inc rea se two-fold and reach 22,400 b i l l i o n

Yen in 1969, with 11,200 b i l l i o n Yen estimated f o r 1959, assuming 7.2 perc ent annual growth; (2) r e q u i s i t e exports ranging from $7.13 b i l l i o n to $7.95 b i l l i o n , assuming a balanced i n t e r n a t i o n a l account; (3) manufacturing and mining production are expected to increase 2.3 to 2 . 4 - f o l d , and employment by 9.3 m il li o n new jobs within 10 y e a r s , while a g r i c u l t u r a l production was estimated to inc rease only

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1 .3 -f ol d during the same period of time. An animated di scu ss ion ensued with members o f the Economic Research Committee immediately r a i s i n g for cef ul ob je ct io n s ag ai n s t the EPA's p r o je c ti o n of a widening gap between production in a g r i ­ c u l t u r e and the o th e r s e c to r s of the economy; the ERC demanded t h a t the EPA modify the a g r i c u l t u r a l component of i t s proposed planning framework.

Moreover, the ERC took is su e with the EPA’s pro je c ted

s u b s t a n t i a l inc rease in the volume of J ap a n 's export t r a d e , arguing t h a t the EPA's c a l c u l a t i o n s were premised on the assumption t h a t general tr a d i n g c ond iti ons and overseas markets would remain very favorable to Japan.

The EPA countered t h a t i t was ne cessary to

expand exports consid era bly i f the GNP i s to continue to inc re as e 7.2 percent per annum, and t h a t i t will become necessary to modify the r a t e of 7.2 percent i f the pace of expansion in manufacturing and mining would be relaxed in order to maintain a balance with a g r i c u l t u r a l production.

The ERC, however, i n s i s t e d t h a t a g r i c u l t u r a l

production could not be l e f t f a r behind the o th e r s e c to r s a t a time when the LDP's Basic A g r ic ultu ra l Problems Research Council was going to e s t a b l i s h a plan f o r a d r a s t i c expansion of a g r i c u l t u r a l production.®® Both the EPA and the Economic Research Committee were scheduled to meet again on October 16, 1959, to r e c on ci le t h e i r basic d i f f e r ­ ences regarding the imbalance between the a g r i c u l t u r a l and i n d u s t r i a l growth r a t e (2. 5 percent vs. 7.2 p e r c e n t ) , and the problem of exp ortled income doubling.

By and l a r g e , both proposals were q u i t e s i m i l a r ,

except f o r the s t a t e d d i f f e r e n c e s of course, in term of t h e i r basic

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p o l i c i e s , with the EPA s tr o n g l y emphasizing "government guidance" in i t s basic framework, and the LDP's ERC s t r e s s i n g improvement of a g r i c u l t u r e as i t s major concern; both avoided to s t a t e any conc r e t e f i g u r e s in t h e i r ba sic o u t l i n e of the plan framework.

57

However, the Economic Research Committee u n i l a t e r a l l y and inform­ a l l y decided on the f i n a l version o f i t s plan d r a f t on October 13, proposing to double the nationa l income, d r a s t i c a l l y improving the p e o p le 's standard of l i v i n g , and solv ing the employment problem by 1969.

The d r a f t proposal s p e c i f i c a l l y c a l l e d f o r the achievement

of a gross n a tio na l income o f Yen 18,500 b i l l i o n ; a GNP of Yen 22,400 b i l l i o n ; exports and imports each to exceed $7 b i l l i o n ; the c re a ti o n of 9 m ill io n new job s; and a 1 .6 - f o ld inc re as e in p r i v a t e consumption; a l l with commodity p r i c e s being kept s t a b l e during the e n t i r e te nyear period.

58

As expected, the LDP Executive Board approved Economic

Research Committee's plan d r a f t during an October 20, 1959, meeting. There was, however, l i t t l e enthusiasm f o r the plan i t s e l f a t t h a t time as exemplified in perfun cto ry and lukewarm remarks made during a pre ss conference by the Vice-Chairman of the LDP Executive Board Tsukada:

"The two-fold inc rease of na tio na l income does not mean

an inc rea se in monthly pay; people must not thi nk t h a t t h e i r monthly pay will immediately i n c r e a s e , " and, "fr a nk ly speaking, nothing 59 can be done with t h i s p la n ," a l l of which l e f t the d i s t i n c t impres­ sion with many t h a t the plan to double the national income was indeed nothing more than a mere "desk" plan.

As subsequent events showed,

such and s i m i l a r deductions proved to be qu it e erroneous.

Instead

what had s h i f t e d the LDP l e a d e r s h i p ' s focus of a t t e n t i o n away from

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the income doubling program was the in c re a s in g r e a l i z a t i o n t h a t the re v is io n of the S e c ur ity Treaty was the most pr e s si ng p o l i t i c a l is su e and needed immediate and f u l l a t t e n t i o n of the par ty. As soon as the LDP's plan to double the income was published, i t came under rigorous p o l i t i c a l c r i t i c i s m and s c i e n t i f i c s c r u t i n y . Many observers pr e fe rr e d to view (and dismiss) the income doubling program as a ty p ic a l case of "public pledges" made by p o l i t i c i a n s who are subsequently unable to put them in to p r a c t i c e .

More import­

a n t l y , however, the plan d r a f t l e f t too many problems and is sue s unanswered.

F i r s t of a l l th e r e was the is su e of contention between

the EPA and the LDP with regard to "adjustments" on t h e i r re s p e c ti v e plan d r a f t s .

Secondly, t h e r e was the eminently p o l i t i c a l question

of how the LDP plan d r a f t could be incorporated in t o the budget f o r FY 1960.

And f i n a l l y , the te chn ic al problem of the r e l a t i o n s h i p

between the LDP's plan d r a f t and the New Long-Range Economic Plan which had been in e f f e c t since 1958. O s t e n s i b l y , 60 the adjustment of the EPA and LDP d r a f t ve rsion s had to be a d i f f i c u l t undertaking, si nce the EPA had estimated a 2.5 percent annual growth f o r a g r i c u l t u r e a g a i n s t a 9.3 percent growth f o r i n d u s t r i a l production, and the LDP members o f the Agri­ c u l t u r e and F or est ry Subcommittees (PARC) complained loudly c a l l i n g the EPA est im ate a "neglect" of a g r i c u l t u r e .

Although the charge

was unreasonable and u n j u s t i f i e d the EPA increased the growth r a t e t o 3 p e rc e n t, which amounted to 40 perc ent a g r i c u l t u r a l growth by 1969.

These LDP t a c t i c s l e f t the Impression t h a t the p a r t y was

only i n t e r e s t e d in propagandizing the "income doubling program"

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with l i t t l e co nsid e ra tio n l e f t f o r the p l a n ' s s c i e n t i f i c b a si s and c on si s te n cy , and led to open s pe c u la tio ns t h a t the a g r i c u l t u r a l i n t e r e s t s within the LDP were banking on the "income doubling pro­ gram" to get more budget a l l o c a t i o n s f o r t h e i r pe t p r o j e c t s .

The

f a c t t h a t the LDP's Economic Research Committee had hur ri ed in d r a f t ­ ing i t s plan within th re e months was explained as readying i t in time f o r the compilation of the FY 1960 budget.

Also, th e re was

a gre a t deal of doubt whether Japan would be able to maintain an economic growth r a t e higher than the 6.2 perc ent in e f f e c t under the c u r r e n t New Long-Range Economic Plan during the e n t i r e span of the next decade as envisioned by the "income doubling program," thus i t was feared t h a t the LDP plan d r a f t was u n r e a l i s t i c . ® 1 Miyohei Shinohara, Pr ofe ss or of Economics, Hitotsubashi Univer­ s i t y , published an i n c i s i v e a n a l y s i s c r i t i c i z i n g the LDP's Economic ‘i

Research Committee's plan d r a f t . are summarized in the following:

Several of the major h ig h l i g h t s 62

(1) while Shinohara acknowledged

t h a t the 1951-1957 annual average growth r a t e came c lo se to the pr oje ct ed 7.2 percent he explained t h i s higher than normal growth r a t e as a consequence of the postwar economic r e c o n s t r u c t i o n e f f o r t and Shinohara maintained t h a t th e r e was no guarantee t h a t the Japanese economy would continue to expand a t such a high r a t e during the proposed plan period of ten y e a r s ; (2) Shinohara challenged the " o p ti m is ti c " a s s e r t i o n t h a t su sta ine d technological innovation would maintain the growth momentum, and, ins te ad surmised t h a t technological innovation could not be expected to continue a t the pre s e n t r a t e f o r e v e r; (3) Shinohara a l s o pointed to the f a c t t h a t the most

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s t r i k i n g a c c e l e r a t i o n of economic growth had occurred in war devastated c ou n tr ie s l i k e Japan and West Germany, and i t would be a mistake to expect t h i s temporary phenomenon to continue f o r the next ten years during which time Shinohara expected the economy to turn to normal; (4) i f , f o r LDP p o l i t i c a l c onsi d e ra ti o n s the "income doubling program" would be c a r r i e d o u t , Shinohara pr e di c te d an i n e v i t a b l e widening of the a lre ad y e x i s t i n g wage and production d i f f e r e n t i a l between in d u s tr y and a g r i c u l t u r e , and a ls o between the advanced s e c t o r and the medium- and s m a l l - s e c t o r s , since the advancement of the over all na tiona l income level would n e c e s s a r i l y have to be spearheaded by the advanced s e c t o r of the economy; (5) Shinohara a ls o dismissed the co ntention of LDP-based a g r i c u l t u r a l i n t e r e s t s c a l l i n g f o r the simultaneous doubling of a g r i c u l t u r a l production as sheer nonsense because i t r e f l e c t e d a t o t a l d is re gar d of the n atura l tendency in economic development toward diminution of the r e l a t i v e importance of a g r i c u l t u r e in a c o u n tr y ' s i n d u s t r i a l s t r u c t u r e . On October 19, 1959, the EPA plan d r a f t was submitted to a plan l i a i s o n conference of several m i n i s t r i e s which infor ma ll y decided to adopt the program to "double the nation al income within 10 ye ar s" ; subsequently, the plan d r a f t was discussed a t a meeting of economic m i n i s t e r s , and f i n a l l y i t was submitted to a re g u l a r Cabinet session f o r formal approval on October 22, 1959.

Upon formal Cabinet approval

the EPA plan d r a f t came under s c r u t i n y l i k e i t s LDP c o u n te r p a r t. Wrote the Tokyo Shimbun:

" . . .

the plan i s p r im a r i ly a means to

implement Prime Mi nister K i s h i 's pledge to a t t a i n a two-fold inc rease of the p e o p l e ' s income in ten ye ars t h a t he advanced during the

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Upper House race e a r l i e r t h i s Spring . . . ye t t h i s plan i s qu it e d i f f e r e n t from what the public had expected from K i s h i ' s e l e c t i o n commitment . . .

in s h o r t , i t [th e plan] does not go beyond s t a t i n g

t h a t the national income will see a two-fold incre ase in ten years provided t h a t the national economy keeps growing a t the average annual r a t e of 7.2 pe rcent. . . .

I t [the plan] does not r e f l e c t

any real enthusiasm on the p a r t of the Government to t r a n s l a t e i t in t o ac ti o n . . . the Government, while admitting t h a t the income doubling plan i s s t i l l a ' s k e t c h , ' i s planning to work i t in to the next y e a r ' s budget program. . . .

This in d i c a t e s t h a t the plan

i s a ' c l a p t r a p ' measure designed to j u s t i f y the e l e c t i o n commitment r a t h e r than a ser io us plan aiming to improve the n a t i o n ' s economic s t r u c t u r e within the next ten ye ars . . . the Government's income doubling plan i s t o t a l l y void of concrete measures to solve the CO

fundamental problems underlying the Japanese economy." On October 19, 1959, when the " Is e Bay Typhoon" h i t Japan, i t i n f l i c t e d not only physical damages surpassing the 200 b i l l i o n Yen mark, i t l e f t a l s o the government's finances in a s t a t e of d i s ­ a r r a y , and above a l l the Ise Bay Typhoon blew K i s h i 's income doubling plan tempo rar ily o f f from the p o l i t i c a l scene. A fte r in s p e c ti n g the Typhoon h i t ar eas Prime Min ist er Kishi decided to d r a s t i c a l l y inc rease n a tu ra l d i s a s t e r r e l i e f funds. At t h a t time the government had a lr e ad y been flooded with budgetary re q ue sts f o r n a tu ra l d i s a s t e r r e l i e f funds t o t a l i n g 200 b i l l i o n Yen, prompting Finance Minister Sato to force the Ministry of Finance to "empty i t s purse to the l a s t penny."

64

The u t i l i t a r i a n c h a r a c t e r

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of the r e l i e f measures was obvious and the subsequently compiled supplementary budget f o r d i s a s t e r r e l i e f expenditures and the increased d i s a s t e r r e l i e f a l l o c a t i o n s f o r FY 1960 l e f t the government with a c r i t i c a l shortage of revenues in i t s compilation of th e budget f o r FY 1960.

As a r e s u l t Prime Mi nister Kishi was about to give

up the idea to include the income doubling plan in the budget fo r FY 1960, when Hayato Ikeda enter ed the scene and argued t h a t : . . the f i s c a l 1960 s t a t e budget should not be intended merely f o r coping with natural d i s a s t e r s , but various measures f o r the growth o f the na tiona l economy should be woven in to i t . . . [and] . . . i f the necessary revenue sources cannot be ra is ed through an [annual] in creas e in the amount of t a x e s , the Government should devise some o t h e r means to r a i s e the necessary fund . . . [and more­ over] . . . i t i s not always necessary to formulate the s t a t e budget within the framework of a balanced budget . . .

i f revenue sources

are s h o r t , i t will be necessary f o r the Government to tap a new revenue source. . . .

65

And i t seems t h a t I ke da 's l i n e of reasoning

c a r r i e d within the LDP which revealed i t s p o lic y f o r the compilation of the budget f o r FY 1960 on November 24, 1959.

The LDP's budget

p o lic y c a l l e d f o r providing the basic co nditi on s f o r the income doubling program; a plan to f l o a t public bonds; i t a ls o s t a t e d t h a t the Pa rty will t r y to secure a balanced budget and avoid excessive economic expansion.®®

The P a r t y ' s p olic y statement was a c l e a r

expression t h a t the view took ro o ts t h a t the Government should f l o a t bonds in orde r to cover the expected public d e f i c i t s in FY 1960. The LDP came under immediate a t t a c k however, Mainichi c a l l e d the

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LDP's budget compilation p o lic y "a lax f i n a n c i a l p o l i c y , " deploring the increased f l o a t i n g of public bonds because i t contained the danger of inducing i n f l a t i o n a t a time when prec aut ion s should be taken a g a i n s t the danger o f "business overheating."®^ Prime M inister Kishi, unperturbed by negative pres s c r i t i c i s m , decided to go ahead with his income doubling program and on November 26, 1959, Kishi formally requested the chairman of the Economic D el ibe rati on Council, Ichiro Ishikawa, t h a t the EDC formulate a long-range economic plan f o r a s t a b l e development of the Japanese CQ

economy,

thus K i s h i 's Wage Doubling Plan had been launched

officially. I t may be r e c a l l e d here t h a t the Economic D e lib er at io n Council i s an advisory organ of the Economic Planning Agency, and i t s primary ta sk has been the formulation and p r e pa ra ti on of long-range economic plans.

The Overall Policy Committee of the EDC i s a permanent org a ni­

zati on t h a t c o n s i s t s of not more than 30 members, a l l of whom are appointed by the Prime Mi nister who chooses them from i n d u s t r i a l , f i n a n c i a l and s c h o l a r l y c i r c l e s .

In November 1959, the composition

of the Overall Policy Committee looked more l i k e a "Who's Who" of the Japanese business world, the l i n e -u p was as follows: Chairman I c h ir o Nakayama, Professor, Hitotsubashi U niv e rs ity Members Tadashi Adachi, P r e s i d e n t , Japan Chamber o f Commerce and Industry Tsutomu Taniguchi, Vice P r e s i d e n t , The Bank of Japan I c h ir o Ishikawa, Member, Atomic Energy Commission of Japan Heltaro Inagaki, Japan Trading Association Kogoro Uemura, Vice P r e s i d e n t , Keidanren

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Hisako Ujiye, P r o fe s s o r, Japan Women's Univer si ty Shunichi Uchida, Honorary P r o fe s s o r, Tokyo U niv e rs ity of Technology Shiro Ohtagaki, P r e s i d e n t , Kansai E l e c t r i c Power Co., Ltd. Teiichi Kawakita, P r e s i d e n t , I n d u s t r i a l Bank of Japan Chikara Kurata, P r e s i d e n t , Hitachi Manufacturing Co., Ltd. Arakazu Ojima, P r e s i d e n t , Yawata Iron and Steel Co., Ltd. Sukemasa Komamura, Adviser, Japan Export Trade Promotion Agency Michisuke Sugi, P r e s i d e n t , Osaka Chamber of Commerce and Industry Kiyohiko Sho, P r e s i d e n t , Mitsubishi Shoji Kaisha, Ltd. Kamekichi Takahashi, Takahashi Economic Research I n s t i t u t e Se iichi Tohata, P r e s i d e n t , Asia Economic Research I n s t i t u t e Yasusaburo Hara, P r e s i d e n t , Japan Gunpowder I n d u s t r i a l Co., Ltd. Shi geo Horie, P r e s i d e n t , Bank of Tokyo Toshiye Obama, Adviser, Economic Planning Agency The Economic De lib er at io n C o un ci l's chairman appointed 22 ex pert members and s e c r e t a r i e s from the various economic m i n i s t r i e s to a s s i s t the Overall Poli cy Committee in the plan d e l i b e r a t i o n .

The

c h a i r of the Overall Policy Committee, Ic h ir o Nakayama, passed broad guid e lin e s f o r the plan t o O k i t a ' s General Planning Bureau.

The

general framework of the plan was drawn up by Kazushi Ohkawa, Directo r o f the I n s t i t u t e of Economic Research o f the EPA, and the Planning Bureau came up with a f i r s t d r a f t in March 1960.

By the end of

1959 the te chn ic al process of plan formulation was well on i t s way; the major p o l i t i c a l p o s i t i o n s had been staked out with the LDP pushing a g r i c u l t u r a l growth while the EPA emphasized i n d u s t r i a l production and e xp o rt -l e d growth.

However, th e re was a ls o some fundamental

di scu ss ion concerning the na ture and r o l e of the economic plan in the management of the na tio na l economy t h a t took place between the EDC and the EPA, and from these d is cu s s io n s the d i s t i n c t i o n between planning f o r the public s e c t o r and p r i v a t e s e c t o r was drawn f o r the f i r s t time, and moreover, the general understanding was achieved

198

t h a t the Japanese economy of the 1960s would have to be mixed type r a t h e r than a strong government-guided economy.^® 2.4.

ANPO and the Quell Thesis

I t i s oft en contended t h a t the so cia l and p o l i t i c a l turmoil c rea te d by the r e v is io n of the Se c u ri ty Treaty prompted the Japanese government to seek f o r an a t t r a c t i v e p o l i t i c a l slogan in orde r to s h i f t mass public opinion toward economic problems, and t h a t the National Income Doubling Plan was o f f i c i a l l y launched f o r t h a t pur­ po s e .^ 1 The "quell t h e s i s , " as such conten ti ons are r e f e r r e d to here, must be dismissed on several grounds however.

F i r s t , the

antecedents of the National Income Doubling Plan, as discussed above, date back well to 1958/59 when Ic h ir o Nakayama f i r s t tin k e re d with the idea of doubling na tiona l production within ten ye a r s.

Second,

Prime Min ist er Kishi took up Nakayama's idea and o p e r a ti o n a l iz e d i t p o l i t i c a l l y during the Spring 1959 Upper House E le ction campaign, when he was joined by Ikeda who was pushing the idea of doubling monthly wages in hi s campaign speeches.

And f i n a l l y , Prime Minister

Kishi o f f i c i a l l y requested the formulation of the long-range economic plan f o r 1961-1970 on November 226, 1959.

Against t h i s overwhelming

background i t seems r a t h e r u n l i k e l y t h a t the "quell t h e s i s " has much credence.

Moreover, when Prime Mi nister Kishi announced t h a t

he would res ign following the r a t i f i c a t i o n of the S e c u r i t y Tr eaty, the a n t i - t r e a t y fo rc e s l o s t much of t h e i r appeal and when Kishi resigned as Prime Min ist er the Japanese p o l i t i c a l scene s t a b i l i z e d a l l by i t s e l f .

The "Wage Doubling Plan" idea was, however, soon

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overshadowed by the p o l i t i c a l events surrounding the re vis io n of the Se cu rit y Treaty.

The p o l i t i c a l debate over the Se c u ri ty Treaty

is su e had c on cu rr en tl y begun with the launching of the Wage Doubling Program.

However, the S o c i a l i s t Party decided to pres s the is sue

and since mid-summer of 1959 had been pursuing " c o n f r o n t a t i o n i s t " p o l i c i e s v i s - a - v i s the LDP, and by y e a r s ' end i t was c l e a r t h a t a p o l i t i c a l showdown over the t r e a t y is su e was imminent.

In a d d i t i o n ,

the LDP was s t i l l deeply divided along f a c t i o n a l l i n e s , mainstream versus anti-mainstream f o r c e s .

All the se f a c t o r s c o ntr ib ute d f o r

the Wage Doubling Plan to be re le ga te d to p o l i t i c a l o b l i v i o n , even more so as na tiona l p o l i t i c s and c i v i l s o c i e t y became i n c r e a s i n g l y immersed in the "ANPO"-struggle. 3. 3.1.

Ikeda Launches the National Income Doubling Plan Ikeda:

A P o l i t i c o Bio-Sketch

Next, a b r i e f sketch of Ikeda's c a r e e r leading up to Prime Minister will follow.

Born in Hiroshima P r efect ur e in 1899 the

youngest son of a w e ll -t o- do sake merchant Ikeda entered the Ministry of Finance in 1925 upon graduating from the Faculty of Law a t Kyoto Imperial Univ ers ity .

In the Ministry o f Finance Ikeda became a

s p e c i a l i s t in t a x a t i o n and served in a succession of p re f e c t u r a l tax o f f i c e s u n t i l his c a r e e r was a b r u p tl y i n t e r r u p t e d in 1932 when Ikeda c on tra cte d an obscure skin d is e a s e .

For the next f i v e years

Ikeda experienced an ordeal of repeated medical trea tme nt and immense physical pain, during the course of which h is f i r s t wife succumbed of exhaustion.

72

In 1937 Ikeda rejo in e d the M inistry of Finance,

200

but his c a r e e r was not moving w e ll , while his contemporaries had a lr e ad y moved on to higher p o s ts .

The purge o f higher public o f f i c i a l s

in 1945 made him Chief of the Taxation Bureau in MOF.

But the real

breakthrough in I k e da 's c a r e e r came when he was appointed MOF Vice Min ist er by Tanzan I s h i b a s h i , the Mi nsiter of Finance of the f i r s t 73 Yoshida Cabinet in February 1947. Ikeda remained MOF Vice-Minister f o r 13 months and with the help of Ishibashi won a Diet s e a t in the e l e c t i o n of January 28, 1949.

Ikeda had entered na tiona l p o l i t i c s .

I ke da 's new c a r e e r as a p o l i t i c i a n began with a windfall to o , when he found himself r a t h e r unexpectedly a t the helm of MOF in the Third Yoshida Cabinet.

The circumstances of t h i s development

are c r i t i c a l f o r the course and development of J a p a n ' s postwar economy.

In 1948, during the Second Yoshida Cabinet, then Finance

Mini st er Sanroku Uzumiyama had to resign in d i s g r a c e ,

74

and Prime

Minister Yoshida was d e s p e r a te ly searching f o r a s u i t a b l e succe sso r, a ta sk made q u i t e d i f f i c u l t in view of the purges t h a t had decimated the ranks o f e l i g i b l e and q u a l i f i e d persons.

Yoshida o ff ere d the

job to Hisato Ichimada, then Pr es id e nt of the Bank of Japan; Ichimada v a c i l l a t e d and a f t e r broad c o n s u l t a t i o n s with hi s f r i e n d s turned down the job.

S e i j i r o Miyajima, a most i n f l u e n t i a l Yoshida co nfidant

and leading o f f i c i a l in Keidanren, recommended Hayato Ikeda f o r the job.

75

The s i g n i f i c a n c e of t h i s event concerns the d i a m e t r i c a l l y

opposed approach to economic p o li c y by the two in d i v i d u a l s .

Ichimada,

nurtrued by h is l i f e - t i m e a s s o c i a t i o n with the Bank of Jpaan, was a f i s c a l conservative and cauti ous in economic policy-making while

201

Ikeda was not.

Influenced by Tanzan I s h i b a s h i , Ikeda had become what

one a n a l y s t has c a l l e d "a p o s i t i v e type p ol ic y maker," as subsequent events were to confirm.^®

R et ro sp e c ti v e ly , i t seems safe to s t a t e

t h a t the course of Jap a n' s postwar economic development would have taken a d i f f e r e n t turn had Ichimada become Mi nister of Finance in 1949. As Mi nister of Finance Ikeda enforced the unpopular a n t i - i n f l a ­ t i o n a r y p o l i c i e s demanded by the "Dodge Line"; these p o l i c i e s were c o n tr o v e r s ia l and above a l l q u i t e painful a t t h a t time, however, as i t i s conceded today, the se p o l i c i e s e s s e n t i a l l y l a i d the founda­ t i o n of J ap a n 's s t a b l e growth of the 1950s.

During these probing

years Ikeda found himself ofte n a t odds with SCAP, Japanese bu si nes s, and the Parliament, where he was oft en too co nceited.

For example,

in debating the f a l t e r i n g economy a member of the House complained t h a t many Japanese could not a f f o r d r i c e . Ikeda snapped back.

"Let them e a t b a r l e y , "

The remark was about as popular as the one

a t t r i b u t e d to Marie A n to in e tt e , "Let them e a t cake."

In another

i n s t a n c e , Ikeda was charged with enforcing p o l i c i e s detrimental to small e n t e r p r i s e s ; declared he, ". . . the Government c a n ' t help i t i f 5 or 10 small businessmen go broke and hang themselves." This remark c os t him his job t h o u g h . ^

In s p i t e of such temporary

s e tb a c ks, Ikeda made himself Indispensable 1n the economic f i e l d ; in October 1953 Ikeda held both the post of Min ist er of MITI and D i re c to r o f the Economic Planning Board.

In 1956 Ikeda became again

Finance Mi nister under Tanzan I s h i b a s h i ; he kept the same post under Prime Mi nister Kishi in 1957, s h o r t l y resigned in 1958 and returned

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again as Mi nister o f MITI in June 1959. When Hayato Ikeda was e le c te d LDP Pr esi de nt and become Prime M in ist er on Ju ly 24, 1960, i t was by and la rg e due to his a b i l i t i e s and accomplishments in the economic f i e l d , which, coupled with Jap an 's rapid economic growth since 1958, had assured him a powerful po s it io n in the Liberal Democratic Party; Ikeda had been a strong proponent of economic growth and vigorous champion of economic expansion as Min ist er of the Ministry of I n t e rn a ti o n a l Trade and Industry during K i s h i ' s Third Cabinet.

Furthermore, in summer of 1960 th e re was

simply no o th e r q u a l i f i e d r iv a l in the LDP t h a t could have e f f e c t i v e l y competed with Ikeda over the post of Prime M in is te r ; the only l i k e l y c a n di da te , Eisaku Sato, was too c l o s e l y a ss o c ia te d with Kishi, and thus unable to challenge Ikeda a t t h a t time.

On the o th e r hand,

I k e da 's p o s i t i o n in the LDP was never r e a l l y very s tr ong, and as a member of the "b ure auc ratic p o l i t i c i a n s " group he had no large f a c t i o n a l following, as a r e s u l t Ikeda had t o r e l y on p o l i t i c a l support from in d iv id u a ls and o t h e r f a c t i o n s in orde r to survive politically. 3.1.2.

Ike da 's Conversion

In the following sec tio n I ke da 's r e l a t i o n s h i p to J ap a n 's postwar p o l i t i c a l economy will be analyzed with special a t t e n t i o n given to Ik e d a 's a t t i t u d e toward and u t i l i z a t i o n o f economic planning. O s t en s ib ly , the begging a n a l y t i c a l question concerns the explanation of I ke d a 's phenomenal conversion from " a n t i - p l a n n e r ” to a vigorous promoter and advocate of economic planning in connection with the

203

National Income Doubling Plan.

In view of Ik e d a 's close p o l i t i c a l

and prof ess io nal a f f i l i a t i o n , Yoshida's a t t i t u d e toward planning seems a good p o in t of depar tur e. As pointed out above, f o r Prime M in ist er Yoshida economic plan ­ ning was an anathema; "a communist a c t i v i t y . " to planning must be explained as follows.

78

Yoshida's aversion For Yoshida Japanese

economic planning meant control and a means to c o n s t r i c t l i b e r a l i s m and deny freedom to develop; planning was a s s o c ia te d with the i n e f f i ­ c i e n t wartime control economy ( to s e i k e i z a i ). on planning had broad i n s t i t u t i o n a l support.

The Yoshida po s it io n For one from the z a i k a i ,

Keidanren in p a r t i c u l a r , which desi red a l i b e r a l economy a f t e r the excesses and ordeal of to s e i keizai during the war ye ar s.

There

was a ls o s i g n i f i c a n t support f o r Yoshida's a n ti - p l a n n i n g views within the Ministry of Finance, where some feared f o r the M i n i s t r y ' s preroga­ t i v e and argued t h a t long-term planning would r e s t r i c t and l i m i t financial p olicies.

As a r e s u l t of the se p r e v a i l i n g views and i n s t i ­

tu t i o n a l support t h e r e o f , economic planning was never considered as a pol ic y- op tio n throughout the Yoshida e r a . As Minister of Finance Ikeda demonstrated a con sid er ab le degree of a n t i - p a t h y toward economic planning by e f f e c t i v e l y "boykotting" any economic plan t h a t had the prope ns ity to r e s t r i c t the f l e x i b i l i t y of f i s c a l expenditures in the long-range, thus e f f e c t i v e l y p r o te c ti n g MOF's overtowering power po s it io n in Japanese budget-making.

79

C le a r l y , Ikeda and the Ministry of Finance were not in c lin e d to repeal any of t h e i r poli cy instruments o r to c u r t a i l f i s c a l f l e x i b i l i t y and maneuverability a t the expense of "economic planning."

80

204

However, under the influence of h is economic a d v is o r , Osamu Shimomura,

81

from whom he sought advise and a conceptual framework

to accommodate h is i n t u i t i v e percep tion of J a p a n ' s economy, "which had begun with 'n oth in g ' and developed ra p i d l y during the f i r s t ten postwar y e a r s ; production went up and l i f e improved, why?"

82

Ik e da 's a t t i t u d e toward J a p a n ' s economy began to change gradua lly in favor of u nre s tra in ed economic growth supported by expansive economic p o l i c i e s ; during t h a t time period of s p i r i t u a l tra n s fo rm a ti o n , Ikeda a l s o came to r e a l i z e the u t i l i t y and i n s t r u m e n t a l i t y of long­ term i n d i c a t i v e economic planning.

Both Ikeda and Shimomura were

in basic agreement about p a s t f a i l u r e s in Japanese f i s c a l p o lic y and economic planning.

Ikeda soon adopted Shimomura's conception

of J a p a n ' s p o t e n t i a l f o r economic growth (and economic demand; i . e . inve st men t) , which, u n t i l then had been l a r g e l y underestimated i f not suppressed a r t i f i c i a l l y .

And f i n a l l y , both Ikeda and Shimomura

shared a b e l i e f in the general c r e a t i v i t y and v i t a l i t y of the p r i v a t e s e c t o r , y e t f u l l y cognizant o f the g e n e r a l l y r e s t r a i n i n g con dition s surrounding the Japanese p o l i t i c a l economy in which business had to o pe ra te .

Shimomura contended t h a t the s t r i n g e n t monetary and

f i s c a l p o l i c i e s advocated and followed by MOF and the Bank of Japan were the major causes impeding actua l growth to f u l l y r e a l i z e i t s p o t e n t i a l , and he pres cribed t h a t more a c t i v e f i s c a l and monetary p o li c y measures be u t i l i z e d to s ti m u la te and a c c e l e r a t e economic growth.

During the course of these Shimomura-Ikeda di scu ss io ns

1n 1958 Ikeda changed r a d i c a l l y and began to advance hi s p o s i t i v e economic poli cy emphasizing high growth.

This marked indeed q u i t e

205

a depar tur e f o r Ikeda since his days as MOF Min ist er when he was i n s t r u c t e d to r e s t r a i n the economy most of the time.

Politically

most c r i t i c a l f o r Ikeda was his "discovery" of the g r e a t importance of the v i t a l i t y of J ap a n 's economy, i . e . i t s growth p o t e n t i a l , and his genius and i n t u i t i o n to capture "economic growth" as a p o l i t i c o economic is su e and to o p e r a t i o n a l i z e i t p o l i t i c a l l y by advancing economic growth as his public p olic y l i n e . As f a r as the o r i g i n s of Ik ed a's "income doubling" idea is concerned i t has been suggested by one of his biographers t h a t i t r e s u l t e d from a dis cu s s io n with newspaper r e p o r t e r s t h a t had gathered OO

a t Ik ed a's residence a f t e r he had l e f t the Kishi Cabinet in 1958. At t h a t p a r t i c u l a r meeting the is su e of l i v i n g standard came up and Ikeda inquired about the r e p o r t e r ' s l i v i n g c ond iti ons and was to l d t h a t they had no d i f f i c u l t i e s with food and c lo t h i n g but housing was a problem.

Ikeda e la b o r a ti n g s t a t e d t h a t the r a t e of improvement

must have been co nsiderable (s inc e the war) and he added:

"Your

income will double in ten y e a r s ," y e t the r e p o r t e r s are said to have disagreed while Ikeda i n s i s t e d t h a t "income doubling" would become a r e a l i t y . ® 4

Ik ed a's income doubling idea was subsequently

taken up by a study group under Shimomura, y e t the concept did not gain any p o l i t i c a l currency u n t i l the House of Councillors Election in 1959. Followed by a huge group of r e p o r t e r s i n t e r e s t e d in fin di ng out what the major f i g u r e of the anti-mainstream f a c t i o n s intended to do next Ikeda returned to his e l e c t o r a l d i s t r i c t in Hiroshima in February 1959, where Ikeda presented his "income doubling" idea

206

QC

to the public f o r the f i r s t time in a press conference.

I t seems

almost c e r t a i n t h a t Ikeda used the e l e c t i o n campaign to t e s t the popular appeal of his "wage doubling" p la n , during the course of which he became something of an "economic a g i t a t o r " by giving numerous speeches and making a g r e a t deal of appearances.

Here i s a verbatime

re n d it io n of one of Ikeda's s t r e e t corner speeches: a t work! while?

"Those of you

I know you are busy, but won't you l i s t e n to me f o r a This i s a s t o r y about doubling your monthly income!

have r i s e n from the ashes!

We

Plea se, r e c a l l those days when we were

facing tremendous d i f f i c u l t i e s !

We used to wait in l i n e fo r our

r a ti o n s !

Our l i f e has improved tremendously,

hasn't i t ?

We do t h i s no longer!

Some would say our pre sen t economy i s doing f i n e .

w i l l , however, improve even f u r t h e r through your own work! not up to me, i t i s up to you!

It

It is

We'll work to g e th e r si de by side!

(And r e f e r r i n g to the candidate standing next to him) I t i s t h i s candidate t h a t understands me!

Those who agree with me, please

QC

vote f o r t h i s person."

Ikeda had launched "shotoku baizw

as

his public pol ic y program. Meanwhile, Prime Mi nister Kishi who had been advocating the Nakamura in sp ire d "doubling of production in ten years" scheme as discussed above, c l o s e l y monitored a l l Ikeda speeches during the e l e c t i o n campaign, and when the e l e c t i o n was won on June 2, 1959, K1sh1 i n v it e d Ikeda to e n t e r his Third Cabinet.

In a p r i v a t e conver­

sation K1sh1 r e f e r r e d to Ik ed a's e l e c t i o n campaign speeches and urged a most r e l u c t a n t Ikeda to take on the p o s it io n as MITI M inister in order to r e a l i z e his " p o s i t i v e p o l i c y . "

According t o his biographer

207

and t r u s t e d aid Masaya I t o , Ikeda, who was facing an extremely d i f f i ­ c u l t p o l i t i c a l dilemma, accepted only because his "wage doubling" idea was a t stake and had now a chance to become r e a l i z e d .

87

While

Ikeda f u l l y immersed himself in his l a t e s t p o s it io n a t MITI he f o r c e ­ f u l l y championed the cause of "wage doubling" from the very beginning of the Third Kishi Cabinet. 3.2.

Struggle f o r Economic Growth

3.2.1.

I ke d a 's P o s it iv e

Economic Policy

In view o f the worldwide tendency to l i b e r a l i z e foreign tra de at

the c lo se of the 1950s the Japanese government concluded t h a t

it

had to r e a s s e s s i t s pa st economic p o l i c i e s and pre s en t economic

s t r u c t u r e in orde r t o devise a f u t u r e course of a ct i o n to preserve and f u r t h e r J ap a n 's national economic i n t e r e s t s in the in t e r n a t i o n a l arena.

88

This i s y e t another background dimension to be kept in

mind when examining formulation of the National Income Doubling Plan which e s s e n t i a l l y c a ll e d f o r the r e c t i f i c a t i o n of the d e fe c ts of J a p a n ' s economic s t r u c t u r e in view of the impending i n t e r n a t i o n a l ­ i z a t i o n of the Japanese econo.ny and pre scr ib ed to boost the i n d u s t r i a l s t r u c t u r e to a higher le v e l .

89

I n d u s t r i a l c i r c l e s in zaika i placed g r e a t hopes on Ik ed a's e x p a n s io n ! s ti c p o l i c i e s when he took charge of MITI in the summer of 1959.

MITI o f f i c i a l s too were r a t h e r s a t i s f i e d with Ik ed a's

appointment, and some f e l t g u i t e re li e v e d since many in the Ministry f e l t t h a t MITI had been t r e a t e d brusguely by MOF with regard to 90 i t s proposed export p o l i c i e s . Moreover, th e re had been concern

208

t h a t Japan had f i n a n c i a l and loan p o l i c i e s but no i n d u s t r i a l p o li c y , not only meaning t h a t MITI' s influence was weak and MOF's s tr on g, but more imp or tan tl y, t h a t J a p a n ' s i n d u s t r i a l s t r u c t u r e was i n s u f f i c i e n t l y prepared f o r economic l i b e r a l i z a t i o n .

91

I ke da 's a r r i v a l

a t MITI was seen as an opp ort unit y to advance i n d u s t r i a l policy in the context of his " p o s i t i v e p o l i c i e s , " obviously MITI o f f i c i a l s banked on Ik ed a's p o l i t i c a l a b i l i t y f o r the formulation and approval of acceptable i n d u s t r i a l p o l i c i e s .

92

And i t seemed t h a t a common

sphere of i n t e r e s t had developed between Ikeda and MITI o f f i c i a l s . In his inaugural address MITI Min ist er Ikeda s t a t e d t h a t " i t i s necessary before anything e l s e to r a i s e the p e o p l e ' s standard of l i v i n g .

For t h i s purpose, e f f o r t s should be made to advance

the ten year economic program f o r doubling the n a tio na l income."

93

And a t t a c k i n g the MOF Ikeda continued, "the re i s no need to take a s er io u s view of the f l u c t u a t i o n s in the i n t e r n a t i o n a l account."

94

Yet Ikeda made no e f f o r t t o e la b o r a te on how the se new economic p o l i c i e s would be c a r r i e d out u n t i l about one month l a t e r during an in tervi ew when he made the following statement:

"I think t h a t

the major emphasis o f the Government's economic p o l i c y should focus on s t a b i l i z i n g n a tio na l economic l i f e and the expansion of employ­ ment.

The b e s t way to s tim ula te sound consumption i s to inc rease

the income of the low-income b ra c k et , which accounts f o r the g r e a t e r p a r t of the population.

Stimulation o f sound consumption i s v i t a l l y

important f o r the development of the na tiona l economy, con trary to some p e o p le ' s i n c l i n a t i o n to view export promotion as a panacea f o r a l l of the n a t i o n ' s economic problems.

Export i s not an end

209

1n i t s e l f but i s a means to ensure the promotion of the p e o p le ' s l i v i n g standard (by imports and value-added prod uc tio n).

In my

opinion the expansion of the na tiona l economy i s p o s si bl e only through st im u la ti o n o f sound mass-consumption."

95

In esse nce , Ikeda proposed

to advance Japanese c a p i t a l i s m from an a u s t e r i t y stage to a new stage of mass-consumption. During Ju ly o f 1959 Ikeda held numerous meetings with business le ad e rs rep re se n ti n g various branches of i n d u s t r y , a t such meetings Ikeda pushed his e x p a n s i o n i s t i c economic p o l i c i e s emphatically but without committing himself to concrete p o li c y meausres. the is su e was pre ssed, Ikeda i n v a r i a b l y r e p l i e d : more time to st ud y,"

96

And whenever

"Give me a l i t t l e

but the general f e e l i n g was t h a t a formal

announcement on concrete p oli cy measures was imminent.

Ikeda had

become a man in the l i m e l i g h t . At the i n v i t a t i o n of the sankei konwakai (Roundtable Conference Society) Ikeda d e li v e re d an epoch-making speech on August 5, e n t i t l e d "Doubling the National Income and the Future o f Jap a n' s Economy," which f i n a l l y revealed the t e n e t s of his ex p an s io n is t economic p o l i c i e s , the g i s t o f which follows:

97

My theory of income doubling a p p l i e s not only t o s a l a r i e d persons but a l s o t o small businesses and farmers. . . . Since 1951 p r i c e s have le vel ed o f f . . . production has Increased . . . and to a degree we are doing much b e t t e r . . . the n a t i o n ' s fi na nc es have Improved as well making tax c ut s p o s s ib le in re c e n t years . . . the Increase in p e o p l e ' s income and tax re duc tio ns have led to increased savings . . . which have been u t i l i z e d f o r I n s t a l l i n g new production f a c i l i t i e s , which have Increased production and the GNP and made p o s si b le new tax r e d u c t i o n s , which In turn increased the amount of savings . . . as a r e s u l t a cycle emerged, and t h a t has prompted me to advance the idea of doubling the income of the people. . . .

210

Is J a p a n ' s economy overheated? . . . in my opinion i t i s not . . . i t i s o pe ra tin g a t about 90 perc ent a t c ap a c it y . . . I cannot a c c e l e r a t e i t s t r e n d , but I have no i n t e n t i o n to r e s t r a i n i t e i t h e r . . . the f u t u r e of J a p a n ' s economy i s b r i g h t . . . i n t e r n a l l y , improvement of the i n d u s t r i a l s t r u c t u r e i s ne ces sary, as are the promotion of science and technology and the stre ngthe ni ng of the basic foundation of i n d u s t r i e s . . . the r e h a b i l i t a t i o n of Japan i s comparable to t h a t of West Germany . . . Japan has become a powerful i n d u s t r i a l country . . . [ a ll u d in g to r i s i n g concerns over balance of payment problems Ikeda s t a t e d ] . . . imports have not yet reached dangerous pro portions . . . with ample stocks of m a t e r i a l s , t h e r e i s no need to worry about a l i t t l e unfavorable balance o f tra de . . . which i s based on the th ink ing t h a t a balanced economy and savings are the most important f a c t o r s , t h i s idea i s wrong . . . a balanced economy and savings alone are not s u f f i c i e n t to r i s e our standard of l i v i n g , nor can they r e a l i z e f u l l employment . . . a s t i l t e d national economy i s of course taboo, but a stu nte d n ation al economy does not bring progress . . . the balance of for eign tr a d e must be considered from such a viewpoint . . . production inc rease i s the fundamental f a c t o r of our economy and the question i s how to dispose of the increased amount of products . . . of course i t i s necessary to export them, but exp orts cannot be advanced r a p i d l y . . . t h i s n a t u r a l l y makes us con sid er the consumption by the people, otherwise the dream of doubling the income cannot be re a l i z e d . . . my i n t e n t i o n i s to c r e a t e a sound mass-consumption and to s e l l the production su rpl us es to foreign c o u n t r i e s , even under the d e fe rre d payment formula . . . t h e r e i s no o th e r route f o r us to take. Ik e da 's ideas were well received by the sankei konwakai, and a lr e ad y next day Ikeda ta lk e d to a la rg e business g a th er in g in Osaka on the same to p i c .

Over the next several months I ke da 's ' p o s i t i v e

economic p o li c y ' led to open sp ecu la tio n t h a t i t would prompt the Liberal Democratic Party and the various M i n i s t r i e s and government agencies to demand f o r increased budgetary a l l o c a t i o n s in expec ta tio n of the Income Doubling P l a n ' s implementation.

And indeed, already

f o r the compilation o f the budget f o r FY 1960 the s t r u g g l e over resources a l l o c a t i o n began as 1t was shown above.

As a r e s u l t ,

the Ministry of Finance, the guardian over the na tio n s e xpend it ure s,

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began to concern i t s e l f with the Income Doubling Plan. 3.2.2.

The Ministry of Finance and the Plan

The Income Doubling Program f i r s t became a h o tly contested is su e during the summer months o f 1959 in connection with the compila­ t i o n o f the budget f o r FY 1960, with MOF's Sato favoring "go-slow" p o l i c i e s and MITI' s Ikeda advocating hi s e x p a n s i o n i s t i c economic p o lic y.

The opening round of the b a t t l e was f i r e d when the Ministry

of Finance a u t h o r i t a t i v e l y requested a h a l t to attempts to include the Income Doubling Plan i n t o the budget f o r FY 1960. Sato was quoted as saying:

MOF Minister

" i t i s impossible to c a r r y out the program

next year because we have no f i n a n c i a l re s o u r c e s ."

The Ministry

o f Finance argued t h a t the various M i n i s t r i e s and governmental agencies would l i k e l y advance "immoderate" budgetary demands unre la ted to 98 the Income Doubling Plan proper. Moreover, given MOF's pro pensity and past record of c u t t i n g down va st budget r e q u e s t s , the Ministry did probably not want to c r e a t e a precedent case by l e t t i n g the Income Doubling Program become an instrument of the various agencies and M i n i s t r i e s to circumvent i t s budget pre ro ga tiv e . The over ri d in g concern of the Ministry of Finance with regard to Ik ed a's Income Doubling Plan was t h a t i t would cause a larg e sc a le inc re ase in government ex pe nd it ur es , which would c r e a t e i n f l a ­ t i o n a r y tre nd s harmful to the course of the economy, and moreover, these la rg e sc a le expenditures would make i t d i f f i c u l t to reduce ta xes . The Ministry of Finance received some support f o r i t s "go-slow"

212

p o li c y from the le ad e rs of keizai doyukai, who were apprehensive t h a t f u r t h e r e x p a n s io n is ti c economic p o l i c i e s were taken a t a time when business had improved to a con sid erab le e x t e n t , fe a r i n g t h a t i t may lead to an "overheating" of business.

99

As a r e s u l t keizai

doyukai requested t h a t the government so ft- pe d a l i t s economic p o l i c i e s . Commenting on the Sato-Ikeda d i s c o r d , Chief Cabinet S ec retar y Etsusaburo Shiina made i t c l e a r t h a t work on the p l a n ' s ba sic concept­ ual framework would end in September and the plan would be implemented in FY 1960; moreover, a f t e r the d i f f e r e n c e s between Finance Minister Sato and MITI' s Ikeda have been a dj ust ed f u l l - s c a l e d r a f t i n g of the program will s t a r t . S h i i n a ' s remarks added to the ambiquities surrounding the Income Doubling Plan in summer of 1959; above a l l i t was e n t i r e l y unclear whether the p l a n ' s basic framework would be formulated a f t e r the budget compilation or whether the Income Doubling program would be "adjusted" with the budget d i r e c t l y . O st ens ibl y the M inistry o f Finance did not want to inc or po ra te the plan in t o " i t s " budget f o r FY 1960.

As a r e s u l t of these fundamental

p o l i t i c a l problems, both the Liberal Democratic P a r t y ' s Economic Research Committee and the Economic Planning Agency's General Planning Bureau rushed and a c c e le r a te d t h e i r work in order to draw up a general framework f o r Income Doubling Program before the compilation of the FY 1960 budget.

The Mi nis tr y of Finance shar ply c r i t i c i z e d

the EPA's work on the plan and denounced i t as nothing more than an enumeration of fi g u r e s without any p r a c t i c a l public p o li c y r e l e v ­ ance, to which a l l e g a t i o n the EPA responded t h a t the agency was bound by a mandate of LDP p o l i t i c a l demands and would proceed in

213

mapping out d e t a i l s f o r the plan content to be ready by Spring I9 6 0 .1®1 I t must be r e c a l l e d here t h a t as soon as the LDP and EPA plan ve rsions were published they were denounced as mere instruments of LDP campaign pledges.

Moreover, the October 1959 Ise Typhoon e f f e c ­

t i v e l y jeopardized the politico-economic b a si s of the Income Doubling Program and i t s formulation became u n c e r t a i n ; Ikeda came to the rescue i n s i s t i n g t h a t the Income Doubling Program had g r e a t e s t relevance f o r the f u tu r e course of the Japanese economy and needed to be incorporated in to the budget in s p i t e of a shortage of funds due to the Typhoon induced supplementary budget.

Ikeda suggested

the f l o a t i n g of bonds to make up f o r the shortage of revenues, a suggestion which ran in t o s t e r n r e s i s t a n c e a t the Ministry of Finance. This notwith stand ing, Prime Min ist er Kishi went ahead and formally requested the Economic D el ibe rati on Council to formulate the long-range economic plan to double n ation al production.

However, the plan

formulation was soon overshadowed by the S e c ur ity Treaty st ru g g le and subsequently r a r e l y captured public a t t e n t i o n .

At t h i s junc tur e

the Ministry of Finance s tr o n g l y opposed the d r a f t i n g of the plan which almost ran aground because the MOF bureaucracy refus ed to provide the necessary public finance da ta.

102

Unperturbed by the open de fiance by the Ministry of Finance the EPA and the Economic D el ibe rati on Council continued t h e i r work on the Income Doubling Plan.

And, a f t e r a Cabinet meeting on March

15, 1960, EPA Director-General Kanno declared a t a pres s conference t h a t the o ri g i n a l time t a b l e f o r the f i n a l i z a t i o n of the plan would be delayed u n t i l f a l l , and he added t h a t the Income Doubling Program

214

would most l i k e l y be incorporated i n t o the budget f o r FY 1961.

103

The Kanno announcement c l e a r l y in d icat ed t h a t the p o l i t i c s of the Income Doubling Plan had come to a temporary s t a n d s t i l l a t the Cabinet l e v e l , and t h a t the discord between the Ministry of Finance and Ikeda was s t i l l "unad ju ste d."

Yet, a l l of t h i s seemed only na tural

in view of the S e c uri ty Treaty st ru g g le and Prime M in ist er K i s h i 's r a p i d l y d e c li n in g p o l i t i c a l f o r t u n e s , which in d ic a te d by spring 1960 t h a t his r e s ig n a ti o n was imminent. 4. 4.1.

Ikeda Launches the National Income Doubling Plan The Formulation of the National Income Doubling Plan

The work of the EDC on the formulation of the basic plan frame­ work proceeded i n s p i t e of MOF r e s i s t a n c e and a pp ar en tly unaffected by the p o l i t i c a l turmoil in connection with the S e c ur ity Treaty. By mid-April 1960 the EDC had completed a f i r s t working d r a f t which proposed a plan f o r s t a b l e growth of the economy with the annual growth r a t e of 7.2 p er cen t; y e t t h i s f i r s t d r a f t received very l i t t l e a t t e n t i o n because of the i n t e n s i f i e d p o l i t i c a l c r i s i s rocking the Japanese body p o l i t i c s .

A few weeks l a t e r , on May 19, 1960, the

EDC's s pec ia l subcommittee f o r the study o f lon gitu din a l prospects o f the Japanese economy submitted i t s inte rim r e p o r t , which had Important r a m if i c a ti o n s f o r the National Income Doubling Plan. The Interim r e p o r t analyzed the Japanese economy from a long-term pe rsp ec tiv e (20 year s) and advanced a long-term economic p o lic y course.

The r e p o r t s p e c i f i c a l l y pr e di c te d a 4- fo ld inc rea se of

the 6NP by 1980, a 3-fold inc re ase in national income, a 3 .5 - f o ld

215

in c re as e in individual consumer spending; the r e p o r t a l s o predic ted 104 a s e r io u s labor shortage a f t e r 1970. The s i g n i f i c a n c e of the long-term prospect was summed up by one a n a l y s t as follows:

"The

m erit of the Long-Term Prospect l i e s in the f a c t t h a t i t underl ine s the important mission of the National Income Doubling Program fo r the general f u t u r e of the Japanese economy."

105

In May 1960, the EDC added to the e x i s t i n g permanent Overall Policy Committee th re e a d d iti on a l major committees:

Public Sector

Committee, P r iv a t e Sector Committee, and Cal cul at ion Committee; and 17 sub-committees, a l l designed to d e l i b e r a t e the ba sic plan content d ra ft e d by the Overall Policy C o m m i t t e e . T h e th r e e new committees were a l l chaired by members o f the Overall Po li cy Committee, thus a ss uri ng a high degree of i n t e g r a t i o n and o r g a ni z at io na l cohesion f o r d e l i b e r a t i o n of the plan. On June 2, 1960, the EDC chairman, Ic hir o Ishikawa, convened the e n t i r e Economic D elibe ra ti on Council, now c o n s i s t i n g of 179 members, f o r an inaugural meeting where they were joine d by 71 exp erts from the various m i n i s t r i e s and o f f i c i a l s of the EPA.

The nature

of the meeting was ceremonial mainly, but i t was agreed t h a t plan d e l i b e r a t i o n s would be brought to a conclusion by mid-September and subsequently the to sh in ( r e p l y to the o r i g i n a l plan re qu est ) would be presented to the Prime M i n i s t e r . H o w e v e r , the EDC committees and subcommittees did not f i n i s h t h e i r work and d e l i b e r a ­ t i o n s u n t i l October 6.

Moreover, a d d iti on a l time was needed to

make c e r t a i n formal and s t y l i s t i c (not s u b s ta n ti v e ) adjustments f o r the compilation o f the individual re p o r t s and f i n a l i n t e g r a t i o n

216

in to a w e l l - s t r u c t u r e d planning document.

As a r e s u l t the toshin

did not reach the Prime Mi nister u n t i l October 25, 1960.

In his

cover l e t t e r f o r the plan d r a f t Ic hir o Ishikawa, Chairman of the EDO, made the following remarks and su ggestions: I t i s hoped t h a t the Government will use t h i s r e p o r t as guiding p r i n c i p l e f o r i t s f u t u r e economic p o lic y and w ill approve the document as soon as p o s si bl e and disseminate the plan content in ord e r to e l i c i t understanding and cooperation from the p u b l i c . 10® In s p i t e of the ample p o l i t i c a l p re ssu re s t h a t were exerted on the EDC to complete i t s work well before the impending November 20 e l e c t i o n s , t h e r e were several important f a c t o r s t h a t delayed a timely d r a f t i n g of the t o s h i n .

Most important a t the EDC level

were the heated dis cu s s io n s focusing on the p r i o r i t i z i n g of public investments over social s e c u r i t y measures and the growth r a t e to be s t i p u l a t e d f o r the plan pe riod.

Many contended t h a t i n s u f f i c i e n t

social i n f r a s t r u c t u r e ( i . e . p o r t s , highways, e t c . ) was impeding the growth and expansion of the Japanese economy and were c a l l i n g f o r "app ro pri at e" a l l o c a t i o n s of public investment funds.

In the

end, i t was agreed to s e t public investments a t Yen 16,130 t r i l l i o n and t o st rengthen the s oci a l s e c u r i t y system in the l a t t e r h a l f 109 of the plan period. However, the most embarrassing dilemma the EDC was fa cing in the f i n a l i z a t i o n of i t s plan d r a f t concerned the growth r a t e to be s t i p u l a t e d f o r the plan period of 10 ye ar s.

As

revealed by Ich iro Nakayama, Chairman of the Overall Policy Committee, then in charge of coo rdi na tin g the d i f f e r e n t views and opinions f o r the f i n a l d r a f t of the pla n , the EDC was i n c li n e d to s t i p u l a t e a higher economic growth r a t e f o r the second h a l f of the plan period

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and to lower the r a t e of growth f o r the f i r s t half.**®

However,

in s p i t e of immense p o l i t i c a l and b ur e a ucr a tic p re ssu re s the Economic D el ibe rati on Council did not y i e l d and adopt Ik ed a's 9 percent annual growth r a t e f o r the f i r s t th re e years in or der to adapt the EDC's plan recommendation to the "New P o l i c i e s " o f the f i r s t Ikeda Cabinet, and ins te ad s t i p u l a t e d a 7.8 percent annual economic growth r a t e f o r the e n t i r e plan period. 4.2.

I ke da 's New Policy

Concurrently with the formulation of the Income Doubling Plan went Ik ed a's personal p o l i t i c a l b a t t l e .

Upon becoming Prime Mi nister

on Ju ly 19, 1960, i t had been c l e a r to Ikeda t h a t the l i f e - s p a n of his Administration would c r i t i c a l l y depend on the outcome of the general e l e c t i o n s to be held in l a t e f a l l , and in view of S ec uri ty Treaty r e l a t e d kokunan (nati ona l c r i s i s ) t h i s was c l e a r l y a d i f f i c u l t task to accomplish.

However, as hi s biographer has pointed o u t,

Ikeda had learned a g r e a t deal about the " peo pl e' s" perception and t h e i r r i s i n g economic e x pe c ta tio ns during the Spring 1959 campaign f o r the House of Councillors e l e c t i o n .

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I ke da 's conclusion was

sw i ft and r a d i c a l ; only a s u b s t a n t i a l e l e v a t i o n of J a p a n ' s l i v i n g standard would ass ure broad and s t a b l e p o l i t i c a l support f o r his Cabinet and the LDP. In a n t i c i p a t i o n of the coming e l e c t i o n campaign, in an August 19 Cabinet meeting, Prime Min ist er Ikeda emphasized the need to formulate a "New Policy" which would be easy f o r people to under­ st an d, i . e . a p oli cy instrumental to prop up p o l i t i c a l support f o r

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the LDP.

113

Subsequently, the various ongoing meetings and conferences

concerned with the e l e c t i o n platform in both the government and the Liberal Democratic Pa rty were i n s t r u c t e d by the Prime Minister t o emphasize the C a b i n e t' s economic p o l i c i e s in t h e i r proposals.

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As a r e s u l t the various committees and study groups focused t h e i r a t t e n t i o n on such "flashy" p o l i t i c a l is sues as doubling of the national income and f u l l employment, balanced development of the economy, tax cu t o f 100 b i l l i o n yen, increased spending f o r soci al s e c u r i t y , public investment, and adjustment of the d i f f e r e n t i a l s between the advanced s e c to r s o f the economy and a g r i c u l t u r e , f o r e s t r y , and small enterprises.

And following a f i n a l round o f meetings in l a t e August

t o a d j u s t remaining d i f f e r e n c e s , Prime Min ist er Ikeda unveiled the j o i n t Government and LDP's "New Policy" on September 5, 1960.

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In esse nce , however, the New Policy not only contained and popularized many f e a t u r e s o f the National Income Doubling Plan to which i t was obviously d i r e c t l y r e l a t e d , ye t without c l e a r boundaries drawn or functio na l d i f f e r e n c e s s p e ll e d out.

I t seems f a i r to say t h a t the

New Poli cy re presented the p o l i t i c a l o p e r a t i o n a l i z a t i o n of the economic plan to double the na tiona l income, which, a t t h a t time was s t i l l in the process o f g e s t a t i o n and was not formally adopted u n ti l a f t e r the November 1960 e l e c t i o n s .

In the in te ri m the New Policy came

to func tion as a su rro ga te f o r the National Income Doubling Plan. I k e da 's "New Policy" was o s t e n s i b l y a smorgasboard of economic measures to appeal to the population a t large in view of the upcoming e l e c t i o n s , and i t s major t e n e t s were designed accordingly:

(1)

a l l e f f o r t s will be made to continue a high r a t e of economic growth

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without i n f l a t i o n and to t r i p l e the GNP within the next ten ye ar s; (2) a proposed tax cu t of more than Yen 100 b i l l i o n f o r FY 1961; (3) th e re will be investment in social c a p i t a l and i n f r a s t r u c t u r e to balance economic development; (4) advancement of modernization of a g r i c u l t u r e , f i s h i n g , f o r e s t r y in order to achieve higher produc­ t i v i t y t h a t will narrow income d i f f e r e n t i a l s with o th e r s e c t o r s ; and (5) s t a b i l i z a t i o n of small business and i n d u s t r i e s through g r a n t s , tax i n c e n t i v e s , lo a ns , etc.**® Many commentators, however, were q u i t e c r i t i c a l of the "New Policy" from the very o u t s e t , some s t a t i n g t h a t most of i t s content will become mere LDP slogans f o r the general e l e c t i o n , ot h e rs suggested to compare the New Policy with the LDP's previous public pledges and to examine to what e x te n t pledges were a c t u a l l y c a r r i e d out.**^ S t i l l oth e rs charged t h a t the "New Policy" was placing a high p r i o r i t y on the expansion of production while regarding " d i s t r i b u t i o n " as a matt er of secondary importance; moreover, i t was lamented t h a t the o r ig i n a l orde r of p o lic y p r i o r i t i e s (s o c ia l s e c u r i t y , tax c u t , and public investment) had been redressed in t o making High Economic Growth (9 pe rcent) and public investment the focus of the "New P ol i cy ."

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The 9 percent economic growth r a t e assumption underlying

the New Economic Policy came under p a r t i c u l a r heavy a t t a c k from various force s with many a n a ly s ts and commentators questio ning the motives behind the sudden e l e v a ti o n of the growth r a t e from 7.2 percent to 9 p e rc en t; according to the JSP, the growth r a t e was e leva te d overnight.**^

The upward change 1n the growth r a t e was

explained as a move to cope with the increased budget demands from

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the various m i n i s t r i e s , and i t was hoped, by s e t t i n g the growth r a t e a t 9 percent one could reasonably assume a na tur al inc rease of revenues in the neighborhood of approximately 300 b i l l i o n yen.

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Some o f the c r i t i c s s p e c i f i c a l l y charged t h a t the growth r a t e was purposely exaggerated in order to j u s t i f y the d r a f t i n g of the New Policy.

They may have had a valuable point since the economic ex pe rt s

of the Economic Delib erati on Council, a f t e r studying p a st tr e n d s , d r a ft e d the Income Doubling Plan based on a pr oje cted 7.2 percent average annual economic growth r a t e , which was subsequently revised upwards to 9 percent f o r the f i r s t th re e years of the plan pe riod, thus making c o n s i s t e n t the e l e c t i o n induced politico-economic conten­ t io n of doubling the national income in l e s s than ten y e ar s.

However,

a g a i n s t the backdrop of phenomenal economic development and Ikeda's salesmanship, an inc re as in g number of economists and p o l i t i c i a n s , in s p i t e of disagreements over the New Po li cy , came to accept the 9 percent growth formula as an adequate est im ate f o r the next three ye ars . Undoubtedly, many o f the s t i p u l a t i o n s o f the New Policy were c o n t r o v e r s i a l , ye t not s u r p r i s i n g l y , z aik ai emerged as i t s major supporter with i n d u s t r i a l c i r c l e s f u l l y endorsing the New Policy which they came to regard as a means t o modernize J a p a n ' s I n d u s t r i a l s t r u c t u r e , thereby echoing the LDP contention t h a t the New Policy was to serve as guide post f o r the modernization of Jap a n’s industries.

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I n d u s t r i a l c i r c l e s welcomed the f a c t t h a t Prime Minister

Ikeda was a t t a c h i n g g r e a t e s t Importance to the expansion of investment in public p r o j e c t s to "strengthen the economic foundation of the

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c ountry ."

I t was hoped t h a t the productive power of the country

would be f u r t h e r increased by the expansion of Government investment in public p r o j e c t s and p r i v a t e investment in production f a c i l i t i e s ,

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since business c i r c l e s had feared t h a t a rec es si on might follow the rapid economic expansion and growth of 1959-1960.

Prime Minister

I k e da 's idea on public investment was well grounded in the "theory" advanced by his major economic a d v is o r , Shimomura, who argued t h a t public investment should be increased in or d e r to s tim ula te i n s u f f i c i e n t demand, and thus induce an a l l out expansion of the economy.

123

There were of course a gre a t many are as of investment o u t l e t , y e t in general the following th re e were considered the most important ones:

(1) formulation of a 5-year road expansion pla n, s t a r t i n g

FY 1961; (2) expansion of JNR (Japan National Railroad) ca p a c it y ; and (3) c on st r uct i on and expansion of harbors and a i r p o r t s ; unprecede n t l y la rg e amounts of funds were to be a l l o c a t e d f o r these and o th e r p r o j e c t s .

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The idea behind a l l of t h i s was of course t h a t

public investment would play an important r o l e in "developing" the na tio na l economy; publi c investments would in c re as e the demand f o r m a t e r i a l s , goods, s e r v i c e s and l a b o r , which in turn would s ti m ula te production and inc re as e employment.

Again, i n d u s t r i a l c i r c l e s welcomed

Prime Min ist er Ik ed a's aggressive and e x p a n s i o n i s t i c public p o l i c i e s , not so the fi n a n c i a l c i r c l e s , which were on guard a g a i n s t the New P o li c y , arguing:

"When the national economy i s growing h e al t hy ,

Government incitement 1n the form of increased public investment does more harm than good."

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By f a l l of 1960 i t had become well

understood in economic and p o l i t i c a l c i r c l e s t h a t the New Policy

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would be advanced on the ba sis of Ik ed a's two i n t e r r e l a t e d major public p o li c y aims:

high level of economic growth (9 perc ent e s t i ­

mated growth r a t e ) , and the income doubling program (about to be f i n a l i z e d a t t h a t ti m e ), and public investment serving as dri v i n g fo r c e .

Yet, the p ol ic y of expanding public investment to s tim ul a te

the economy, i . e . i n t i c e high economic growth r a t e s , and doubling the na tio na l income, was received r a t h e r s k e p t i c a l l y in the Ministry of Finance, where o f f i c i a l s were debating whether or not i t would be p o s si bl e to secure s u f f i c i e n t a pp ro p ri a ti o n s every year in order to implement the po lic y.

O st en s ib ly , as long as the New Policy

was not backed and covered by r e q u i s i t e budgetary measures and appro­ p r i a t i o n s , the New Policy was indeed nothing more than an e l e c t i o n slogan.

Yet Prime Mi nister Ikeda used a l l of his p o l i t i c a l acumen

and s k i l l s , as well as his e x c e l l e n t ra pport with the economic minis­ t r i e s , in order to o p e r a t i o n a l i z e the New Poli cy by g e t t i n g the necessary support f o r the r e s p e c ti v e a p p r o p r ia ti o n s . Prime Min sit er Ik ed a's most c r i t i c a l p o l i t i c a l ta sk was to convince the Ministry of Finance to change i t s r e s t r i c t i v e f i s c a l polic y and to subscribe hi s own e x p a n s i o n i s t i c p o l i c i e s (high growth and income doubling) which were by and larg e premised on the s tim ula ­ ti o n of " e f f e c t i v e demand" through public investment and expen dit ures . Although fo rc e s in the LDP, z a i k a i , and even some MOF o f f i c i a l s , 126

including MOF Mi nister Mizuta,

were q u i t e sympathetic to the EPA

proposal to is su e national bonds f o r t h a t purpose, MOF's powerful Budget Bureau vetoed t h i s plan i n s t a n t l y .

Yet the M inistry of Finance

"came around" when high revenue f o r e c a s t s f o r 1961 were compiled

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f i r s t i n d i c a t i n g t h a t a surplus of Yen 250 b i l l i o n and l a t e r Yen 450 b i l l i o n would be a v a i l a b l e f o r the New Policy.

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During the

subsequent implementation of the National Income Doubling Plan in 1961, the Ministry of Finance, then under Mizuta who was a f i s c a l e x p a n s i o n i s t , assumed a more d e cis iv e growth-oriented posture and MOF a c t u a l l y began to remove o b s ta c le s to the growth of the p r i v a t e s e c t o r , thus e f f e c t i v e l y shaking o f f the stigma of o b s t r u c t i n g high economic growth.

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There can be no doubt t h a t Prime M inister Ikeda

was most successful in s o l i c i t i n g the M inistry of Finan ce's approval, support and cooperation f o r his New Poli cy and the formulation and implementation of the National Income Doubling Plan.

This may be

explained in p a r t as the r e s u l t of the f a c t t h a t Ikeda was an ex-MOF o f f i c i a l himself and perhaps a ls o because he was highly respected f o r his pro fessi ona l competence ( Dienstwissen) , y e t e q u a ll y important, i t seems was Ik ed a's a b i l i t y to put t r u s t e d hands in charge o f the M inistry of Finance; Mizuta and Tanaka, who both were sharing the Prime M i n i s t e r ' s enthusiasm and view o f the growth p o t e n t i a l of the economy and the general course o f J a p a n ' s economic p o l i c i e s . 4 .3 .

December 27, 1960:

Launching of the Income Doubling Plan

On November 1, 690, the Economic De lib er atio n Council submitted i t s f i n a l plan d r a f t to the Prime M in is t e r , y e t with the e l e c t i o n imminent, November 20, no s p e c i f i c a ct i o n was taken by the government. However, a lr e ad y with the New Policy announcement on September 6, 1960, the e n t i r e nature of the November e l e c t i o n had been changed from a r e t r o s p e c t i v e referendum of the S e c ur ity Treaty is su e to

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a popular judgment of Prime M inister I ke da 's economic p o l i c i e s . As one newspaper put i t :

" I t i s a ra re phenomenon t h a t a long-range

economic plan becomes a focal is sue in a nat ion al e l e c t i o n campaign."

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The v i c t o r y of the LDP in the November 20 e l e c t i o n strengthened Prime Min ist er Ike da 's Administration and p o s i t i o n in the p a rt y as he had hoped in September when he launched the New Policy; the Ikeda Cabinet had now a c l e a r popular mandate to adopt and implement the Income Doubling Plan which was s t i l l awaiting approval. The government was expected to adopt the long-range economic plan on November 29, however, Cabinet approval was f u r t h e r delayed fo r p o l i t i c a l re aso ns , because on November 28 the Liberal Democratic P a r t y ' s Policy Board had held an emergency meeting to dis cu s s the content of the EDC/EPA plan.

There was st rong d i s s a t i s f a c t i o n with

the p l a n ' s d r a f t , p a r t i c u l a r l y the proposed economic growth r a t e and the general measures and p o li c y proposals f o r a g r i c u l t u r e . As a r e s u l t the Policy Board decided to begin immediately n e g o ti a ti o n s with the government in order to " adj ust " and "coordinate" the d i f f e r ing views with regard to the growth r a t e and a g r i c u l t u r e p oli cy .

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These is s u e s had a r i s e n a lre ad y during the e l e c t i o n campaign when Prime M inister Ikeda and the LDP advanced the t h e s i s t h a t the national economy would grow a t the r a t e of 9 percent f o r the f i r s t th re e years of the plan period (thus doubling the income in le ss than ten y e a r s ) .

On the o th e r hand, the EPA and the EDC had formulated

t h e i r plan d r a f t based on the 7 .2 perc ent assumed growth r a t e . The LDP's Policy Board requested t h a t the plan content be revamped and premised on the 9 percent growth r a t e f o r the f i r s t th r e e years

225

in s t e a d .

Moreover, the a g r i c u l t u r a l r e p r e s e n t a t i v e s on the Policy

Board i n s i s t e d t h a t the a g r i c u l t u r a l s e c t o r had been s h o rt changed in the EDC/EPA p la n, whose measures and p o l i c i e s f o r a g r i c u l t u r e were found to be " l e s s p o s i t i v e " than those s t i p u l a t e d in the LDP's New Policy.

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In a d d i t i o n , the LDP's Committee on Small E n t er pr is e s

had been under a g r e a t deal of p o l i t i c a l pre ssu res from i t s c o n s t i t u ­ ency which had declared e a r l i e r t h a t :

"There i s nothing new [in

the New Policy] f o r us smaller e n t e r p r i s e s . "

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Thus not s u r p r i s i n g l y ,

the LDP requested t h a t the EDC/EPA plan be a l t e r e d and made to conform to the LDP c o n s t i t u e n c y ' s a s p i r a t i o n s . On November 29, EPA Director-General Sakomizu conferred with Prime Mi nsiter Ikeda about the new s i t u a t i o n c re ate d by the LDP's Policy Board request and i t s a f f e c t on the Cabinet approval of the Income Doubling Plan.

And they both agreed t h a t the plan would

not be amended a t t h i s l a t e s t a g e , but a ls o t h a t the EPA would adopt a f l e x i b l e posture during the implementation of the plan, and f i n a l l y , t h a t Sakomizu would make the " fi n a l adjustments" with the LDP Policy Board.

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Assuring EPA Director-General Sakomizu of his f u l l support

the Prime Mi nister ind ic a te d t h a t he intended to have the Income Doubling Plan approved by the Cabinet on December 2. However, no deci si on was made on December 2 e i t h e r , and a t a press conference on December 8, EPA Director-General Sakomizu s t a t e d t h a t " fo r the r e a l i z a t i o n of the Income Doubling Plan the Economic Planning Agency has been n e g o ti a ti n g with the LDP on problems p e r t a i n i n g to income d i f f e r e n t i a l s in a g r i c u l t u r e and the growth r a t e , and since agreement on these matters i s expected to be reached

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soon, we should launch the high economic growth p o lic y on the ' b a s i s 1 O il

of t h i s [Income Doubling] p l a n . 1"

Again, the is su e remained

unresolved and the approval of the plan was not n e ar ly in s i g h t . While the EPA was haggling with the LDP Policy Board over the content of the Income Doubling Plan, the economic growth r a t e issue had moved in t o the l i m e li g h t again in connection with the n e go tia ­ t i o n s f o r the budget f o r FY 1961.

At t h a t time t h e r e was s t i l l

a g r e a t deal of inde ci siv en ess and apprehension in the economic bureaucracy about the "proper" economic growth r a t e upon which to base the budget c a l c u l a t i o n s , and as c l o s e r a f i n a l decision on the issue came, the uneas ier the o f f i c i a l s became in t h e i r search for a solution.

As one press r e p o r t summed i t up:

"In c o n t r a s t

to t h e i r i n t e n t i o n of compiling a f i s c a l budget geared to promote economic growth the opinion f o r compiling a ' f l e x i b l e budget' without s t i c k i n g to the 9 percent growth r a t e i s gaining ground in the Ministry of Finance, MITI, and the Economic Planning Agency and z a i k a i ."

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These views had been shared by some e a r l i e r , but during

December had r a p i d l y gained support in f i n a n c i a l and i n d u s t r i a l c i r c l e s , which began to c a l l f o r the approval of the Income Doubling Plan without s t i c k i n g to the 9 percent economic growth r a t e , and since these c i r c l e s have long been strong supportive bodies of the Prime M in is t e r , and thus these c a l l s could not be ignored e n t i r e l y . Obviously, time was running s h o rt and the Income Doubling Plan needed to be acted on, p a r t i c u l a r l y in view of the r i s i n g economic e x p e c t a t i o n s , propagandized and shored up by LDP e l e c t i o n r h e t o r i c and pledges.

After several unsuccessful rounds to "adj ust" the

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d i f f e r e n c e s between the p a r t y ' s plan and the EDC/EPA plan d r a f t , the Liberal Democratic P a r t y ' s Economic A f f a i r s Research Council reached the conclusion t h a t the Government should adopt both the P a r t y ' s plan and the Income Doubling Plan prepared by the EDC/EPA, which would a ssu re t h a t the LDP's i n t e n t i o n would be incorporated in the implementation of the Income Doubling Plan.

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Party c i r c l e s

had f e l t s tr o n g ly t h a t a compromise with the EPA was impossible, p a r t i c u l a r l y because the EPA chose to ignore the importance o f develop­ ing a g r i c u l t u r e and the economically backward s e c t o r s .

Economic

A f f a i r s Research Council chairman Aichi submitted the proposal to adopt both plans to a meeting o f the LDP Executive Board on December 24, 1960, and suggested t h a t the Pa rty re que st the Government to adopt the plan a t the Cabinet meeting scheduled f o r December 27, 1960. The EDC/EPA plan d r a f t was o f f i c i a l l y approved by the Cabinet on December 27, 1960, with the statement t h a t a supplement had been added to the r e p o r t o f the Economic D e lib er at io n Council o u t l i n i n g the stand point of the Government and the Liberal Democratic Part y.

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Prime Mi nister Ik ed a's p o l i t i c a l gamble had paid o f f and his high growth promoting economic p o l i c i e s had been s e t on a s o l i d p o l i t i c a l b a s i s ; the National Income Doubling Plan had been launched and the e ra of high economic growth formally inaugurated.

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5.

A fte rc are of the National Income Doubling Plan

5.1.

C h a r a c t e r i s t i c s , Achievements and Fa ilu re of the Plan

At l e a s t th re e major motivating f a c t o r s must be taken in to account in orde r to explain the December 27, 1960, Cabinet approval of the National Income Doubling Plan.

For one, the New Long-Range

Economic Plan (1958-1962) had become dysfunctional a lr e ad y in 1959 sin ce some of the plan t a r g e t s had by then a lr e ad y been o u ts tr ip p e d by economic r e a l i t y and thus made a plan re v is io n imperative.

Second,

a r a p i d l y changing domestic and in t e r n a t i o n a l economic environment made i t necessary to address such p re s si ng problems as t r a d e l i b e r a l i ­ z a t i o n , i n d u s t r i a l r e s t r u c t u r i n g , manpower p o l i c i e s , income and p r o d u c t i v i t y d i f f e r e n t i a l s between the advanced and backward s e c to rs of the Japanese economy, e t c . , a l l c a l l i n g f o r a new economic plan in order to devise a r e q u i s i t e policy-framework to cope with the new domestic and i n t e r n a t i o n a l economic environment.

Thi rd, and

perhaps most important, however, were p o l i t i c a l c o n s id e r a ti o n s : "Doubling o f the Income" had become more than j u s t an e l e c t i o n slogan, i t had been e lev at ed to a popular "myth" and become a ve hic le to win popular p o l i t i c a l support f o r Prime Mi nister Ikeda and the Liberal Democratic Party. Commenting on the p o l i t i c a l s i g n i f i c a n c e of the plan w ri te s Kosaka:

" . . .

the [Income Doubling] plan a t t r a c t e d the people

very s t r o n g l y , c r e a t i n g a high ly u n i f i e d , c l o s e l y k n it s o c i e t y as Japan had not witnessed f o r some time . . . they were only too pleased to be c a l l e d upon to d i r e c t t h e i r e ne rg ies to t h e i r own, and t h e i r c o u n tr y ' s economy . . . economic development was probably the only

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p os sib le concensus in Japan a t t h a t time [ a f t e r the Se c u ri ty Treaty s t r u g g l e ] . . . the reason was t h a t the plan o b j e c t i v e s were both a t t r a c t i v e and p os si b le to achieve . . . the National Income Doubling Plan served as a goal f o r the people. . . . "

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In terms of i t s c o n te n t , the National Income Doubling Plan c onsis te d of four major p a r t s .

Par t I o u t l i n e s the basic framework

of the pla n, pr in c ip a l t a r g e t s , growth r a t e s , course of development, etc.;

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Pa rt I I de als with s t a t e planning f o r the public s e c t o r ;

ro l e of the government, s tr en gth eni ng of Social Overhead C a p i t a l , improvement o f human a b i l i t y and promotion o f science and technology, stre ngt hen in g of soci al s e c u r i t y and advancement of so cia l w e lf a re , and f i n a l l y , proper management of money and government f in a nc e;

140

P a rt I I I o u t l i n e s the guiding p o li c y and a f o r e c a s t f o r the p r i v a t e s e c t o r ; ro le of the p r i v a t e s e c t o r , i t s ta sk in economic growth and guiding government p o l i c i e s ; promotion of t r a d e and economic co ope ration; advancement of i n d u s t r i a l s t r u c t u r e and c o r r e c t io n 141 o f the dual economic s t r u c t u r e ; P a rt IV gives an outlook f o r the p e o p le 's standard of l i v i n g ; modernization of employment, upswing in consumption l e v e l , and outlook f o r p e o p le ' s l i v i n g .

142

The most s a l i e n t f e a t u r e s o f the co nt en t of the National Income Doubling Plan are summarized in the following th r e e p o i n t s :

First,

the plan attached hi gh e st p r i o r i t y to the build-up of the so ci o­ economic i n f r a s t r u c t u r e which had long been neglected by government po li c y ; i . e . highways, p o r t s , ha rbors, sewage and drainage system, and housing.

Second, the plan emphasized the important nexus between

manpower p o lic y and economic growth, i . e . development of science

230

and technology, and the supply of an adequate cadre of competent engineers to meet the requirements of J ap a n 's rapid economic growth and changing i n d u s t r i a l s t r u c t u r e (growth centered on expansion o f heavy and chemical i n d u s t r i e s ) .

Third, plan c a l l e d f o r measures

to elim in a te the various d i s p a r i t i e s in wages and p r o d u c t i v i t y between the advanced and backward s e c t o r s of the Japanese economy.

143

However, the most ra dic al and fundamental change brought about by the National Income Doubling Plan concerned the r o l e and function o f both the s t a t e and economic s o c i e t y in implementing the plan. I t i s not an overstatement to argue t h a t the NIDP re presented some­ thin g l i k e a "q uiet" re vo lu tio n f o r J ap a n 's arrangement of the p o s t ­ war p o l i t i c a l economy i n s o f a r as the NIDP redefined the c r i t i c a l s t a t e and economic s o c i e t y r e l a t i o n s h i p .

The plan assigned the

economic s o c i e t y an important new r o l e , s t r e s s i n g the importance o f p r i v a t e i n i t i a t i v e as well as the s al ie nc e of the p r i v a t e s e c to r c o n tr ib u ti o n in the su sta ine d expansion of J ap a n 's economy.

As

a r e s u l t , the National Income Doubling Plan did not s e t d e t a i l e d plan t a r g e t s or g o a l s , but in s te ad provided data and f o r e c a s t s f o r the s t a t e of the economy in 1970.

All in a l l t h i s marked an important

de parture from previous plans which had tended to emphasize s t a t e control and i n t e r f e r e n c e in the economy, caused mainly because of the t i g h t supply-demand s i t u a t i o n f o r most resources and commodities during the f i r s t postwar decade.

The s t a t e ' s new r o l e was defined

as providing the necessary framework c on d it io n s ; I . e . def ine the ove rall socio-economic o b j e c t i v e s and to make a v a i l a b l e the necessary data and information to achieve them, and a ls o to provide inducements

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and a d m in is tr a ti v e guidance when necessary.

Moreover, the s t a t e

was to co ncentrate i t s ( d e t a i l e d ) planning e f f o r t on the public s e c t o r component of the plan, where i t could function as a l l o c a t o r , provider and c o n t r o l l e r , in c o n t r a s t to the p r i v a t e s e c t o r where the s t a t e no longer was able to play such a r o l e e f f e c t i v e l y . In s h o r t , the d r a f t i n g and approval of the National Income Doubling Plan had e f f e c t i v e l y changed the basic postwar arrangement of Jap a n' s p o l i t i c a l economy, p a r t i c u l a r l y as i t pe rta in ed to the important s t a t e and economic s o c i e t y r e l a t i o n s h i p .

The plan envisaged

p r i v a t e i n i t i a t i v e (by i n d iv id u a ls and business) to play a c r i t i c a l l y de c is iv e r o l e as a prime mover in the expansion of the Japanese economy.

Such was p os sib le now t h a t the p r i v a t e s e c t o r had been

o f f i c i a l l y free d from excessive s t a t e i n t e r f e r e n c e and impediments. However, while the s t a t e ' s ro le and function in the plan implementa­ ti o n had been confined to the public s e c t o r , the economic bureaucracy had reserved i t s e l f the r i g h t to int erve ne in the economy in cases where l a i s s e z - f a i r e might lead to excesses. 5.2.

Request f o r Plan Revision

During the 1961-1964 time period the Japanese economy continued i t s rapid growth reaching 14.4 percent in 1961, 5.7 percent during the 1962 " r e c e s s i o n ," 12.8 percent in 1963, and 10.4 perc ent in 1964; t h i s rapid economic expansion was spurred p ri m a ri ly by a vi g or ­ ous expansion in p l a n t and equipment investment leading to an unpre­ cedented investment boom, while the s t a t e l e t t i n g the economy taking 144 i t s course undisturbed. In s h o r t , the announcement e f f e c t of

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the National Income Doubling Plan had led to an overexpansion of the economy, and as e a r l y as l a t e s pri ng 1961 th e re were c a l l s fo r an amendment of Prime Min ist er Ik ed a's "High Economic Growth Po li cy ." On May 9, 1961, ke id an re n' s General Poli cy Committee d r a f t e d a r e s o l u ­ tio n as follows:

"There i s no o bje ct io n to th e Government's 'double

the nation al income' program as a long-range program, but i t i s necessary t o r e c t i f y the excesses of the 'growth mood.'"

145

However,

Prime Mi nister Ikeda continued to adhere to h i s e x p a n s i o n i s t i c economic policies.

The excesses of Ik ed a's e x p a n s i o n i s t i c p o l i c i e s s p i l l e d

over p o l i t i c a l l y in t o the LDP when a t a June 24, 1961, pr e s s con fer­ ence in Kyoto LDP Policy Board Chiarman Takeo Fukuda s t a t e d :

"The

Government's economic expansion p ol ic y should be replaced with one aimed a t s t a b i l i z i n g the na tio na l economy."

146

Obviously, i t had

become more d i f f i c u l t to maintain a consensus on economic pol ic y within the LDP le a d e r s h ip .

Prime Mi nister Ikeda r e s o r t e d to p o l i t i c a l

means in orde r to r e c r e a t e the consensus by r e c r u i t i n g those i n f l u e n t i a l LDP f i g u r e s t h a t had been c r i t i c a l of his "economic growth policy" fo r his Third Cabinet, which was i n s t a l l e d on J uly 18, 1961.

Prime

Minister Ikeda was hopeful t h a t the s e l e c t i o n of f i v e d i f f e r e n t f a c ti o n leade rs of the LDP f o r key m i n i s t e r i a l posts would help him to continue h is e x p a n s io n is ti c economic p o l i c i e s ; Sato became MITI M in si t e r , Kono took over the Ministry o f A gric ul tu re and F o r e s tr y , A iic hl ro Fujiyama took the post of EPA D ir e c to r- G e ne r al , Takeo Miki became Director-General of the Science and Technology Agency, and Shojiro Kawashima took over the Administrative Management Agency. A f r a g i l e a l l i a n c e had been put t o g e th e r f o r the sake of the Prime

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M i n i s t e r ' s economic p o l i c i e s . The National Income Doubling Plan had run i n t o d i f f i c u l t i e s f o r the perennial problem in p o l i t i c a l economy; the re d re ss in g of imbalances between the p r i v a t e and public s e c t o r s , or as one a n a ly s t put i t :

"To sum up J a p a n ' s dilemma:

(1) growth i s d e s i r a b l e and

the p r i v a t e s e c t o r i s q u i t e capable of d e l i v e r i n g i t ; (2) investment in so cia l overhead c a p i t a l i s d e s i r a b l e and only the government can do i t ; (3) s t a b l e growth i s d e s i r a b l e and only the compensatory e f f o r t s of the p r i v a t e and public s e c to r s can achieve i t .

A full

r e le a s e of the p r i v a t e s e c t o r ' s p o t e n t i a l plus the Government's vigorous social overhead c a p i t a l formation would be d e s t a b i l i z i n g . "

147

And the l a t t e r i s of course p r e c i s e l y what happened in 1961-1962. Moreover, the unexpected investment boom of 1961-1962 revealed two fundamental d e f i c i e n c i e s in the plan.

For one, a serio us u n d e r e s t i ­

mation of the level of p r i v a t e fixed p l a n t and equipment investment (the 1970 level of investment in pla n t and equipment was a lr e ad y achieved in 1972).

Second, from e a r l y 1962 on consumer p ri c e s

s t a r t e d to r i s e , the plan however, had assumed them to remain almost s t a b l e during the plan period.

148

In e a r l y September 1961, Prime Min ist er Ikeda acknowledged in a speech t h a t the pace of economic development had become exces­ sive and he in di c a ted t h a t the government would be f l e x i b l e about i t s adjustment.

149

And in subsequent speeches d e li v e re d through

f a l l o f 1961 the Prime Min ist er re pe at e dly r e i t e r a t e d t h a t he would fi rm ly maintain the Income Doubling Plan as a p oli c y.

At one occasion

Ikeda declared t h a t he was executing economic p o l i c i e s a t his own

234

r e s p o n s i b i l i t i e s and t h a t people should not worry too much about the n a t i o n ' s economic problem s,^® i n d i c a t i v e of Ike da 's high degree of s e lf - c o n f id e n c e .

Meanwhile, however, the high-pitched economic

growth p o li c y of the Prime Mi nister came under ever in c re a s in g p o l i t i c a l a t t a c k by the Opposition during the Diet session in f a l l of 1961.

By spring of 1962 the Japanese economy was v i s i b l y a f f l i c t e d

by the e f f e c t s of rapid and u n re s tr a in e d economic growth:

rising

p r i c e s f o r commodities and consumers, production b o t t l e n e c k s , sporadic labor s h o rt a g es , a delay in the modernization of the low p r o d u c t i v i t y s e c t o r s , and severe balance of payment problems due to excessive imports. Against t h i s backdrop o f d e t e r i o r a t i n g economic c ond iti ons and business slump the EPA Director-General Fujiyama p u b l i c l y c r i t i ­ cized the C a b i n e t' s p o s i t i v e economic p ol ic y a t the 1962 Annual Convention o f keizai doyukai on April 13.

Not only was the audience

taken by s u r p r i s e by the h e r e t i c a l l e g a t i o n s of the EPA D ir e c to rGeneral, i t a ls o sent Shockwaves through J a p a n ' s p o l i t i c a l landscape. The g i s t of the "Fujiyama s ta te m e nt," as i t was dubbed in s ta n ta n e o u s ly by the media, was as follows:

(1) rosy f o r e c a s t s f o r the f u t u r e

course of the Japanese economy are dangerous; (2) e x c e s si v e ly high growth r a t e s are unsound, and growth should be balanced; (3) the government's cheap money p o lic y i s re sp onsib le f o r ex cessive i n v e s t ­ ments; (4) the r i s e of p r i c e s cannot be remedied with stop-gap measures a lon e, in s te ad i t must be achieved through the normalization of economic management ( i . e . guidance and s t a t e c o n tr o l) .* ^ * The s ens at ion al Fujiyama statement led to complex p o l i t i c a l

235

repe rcuss ion s in the Liberal Democratic Party and of course came t o a f f l i c t the National Income Doubling Plan.

There was f i r s t a

g r e a t deal o f spe c ul a tio n about Fujiyama's real i n t e n t i o n with some suggesting t h a t he had "declared candidacy" f o r th e LDP presidency 152 (with such e l e c t i o n s scheduled f o r summer 1962). The more immediate is su e however concerned the d i f f e r e n c e in Fujiyama's and the C a bin et 's perception o f the "weakening" s t a t e of the Japanese economy and the r e q u i s i t e adjustment measures.

In or der to iron out such d i f f e r ­

ences a Conference of Economic Min ister s was c a l l e d f o r April 26 (the f i r s t meeting of what became a s e r i e s of high level meetings). During the course of the conference i t became c l e a r , however, t h a t EPA Director-General Fujiyama seemed more determined than e ve r to 153 uphold his stand f o r a t i g h t e r monetary p o lic y. At the May 8, 1962, Conference of Economic M i n i s t e r s , Fujiyama made a force ful attempt to change I ke da 's Income Doubling Plan by proposing several axioms:

(1) unle ss thorough t i g h t money measures a re taken, i t

will be d i f f i c u l t to balance the i n t e r n a t i o n a l account; (2) i t is necessary to change the economic growth r a t e f o r FY 1962; (3) i t i s necessary to normalize the money s i t u a t i o n by r a i s i n g the money ra te .^

A few days l a t e r , on May 12, Fujiyama d e li v e re d a speech

to the Nagoya J un io r Chamber of Commerce and In du st ry (Nagoya was then c a l l e d a "victim d i s t r i c t " s u f f e r i n g from high economic growth p o l i c y ) , and Fujiyama c a ll e d f o r s t a b i l i z a t i o n of economic growth and r e f l e c t i o n on I ke da 's measures f o r high economic growth.

155

A ft e r several Inconclusive Conferences of the Economic Ministers regarding th e "new" consensus on economic p o lic y measures, Prime

236

Mi nister Ikeda became i n c r e a s i n g l y concerned t h a t "Cabinet d is u n it y " might h ur t the Liberal Democratic Party in the upcoming Upper House e l e c t i o n s , and a l s o , t h a t i t might be adverse f o r himself in the LDP p r e s i d e n t i a l e l e c t i o n .

156

The Fujiyama statement was f i n a l l y resolved on May 21, a t ye t another Conference of Economic M i n i s t e r s , and by and l a r g e , Fujiyama's opinion c a r r i e d the day.

However, as one a n a ly s t pointed out c o r r e c t l y :

"Behind t h i s l a r g e - s c a l e adoption of Fujiyama's view were two f a c t o r s , one to a v e r t Fujiyama's p o s s ib le r e s i g n a t i o n ; and second, to avoid a formal ' p o l i c y change,' both were seen as de trimental f o r the upcoming e l e c t i o n s . "

157

As a r e s u l t , a f r a g i l e Cabinet u m t y had

been e s t a b l i s h e d , f o r the time being a t l e a s t .

Yet, the danger

of another Cabinet s p l i t over economic p o li c y was looming la rg e . The p o l i t i c s of the National Income Doubling Plan had reached a c r i t i c a l j u n c t u r e , and the Fujiyama sta te m e nt , which was e s s e n t i a l l y an informal c a ll f o r plan r e v i s i o n , did indeed for ce the Prime Min ist er to reexamine his economic po lic y. The popular perception of the Income Doubling Plan as o f mid-1962 was s u c c i n c t l y summarized by one Tokyo Shimbun columnist who wrote: "I recognize the f a i l u r e o f the Ikeda po lic y.

Housewives a s s a i l

Ikeda f o r r a i s i n g commodity p r i c e s , and leading businessmen and la rg e banks a ls o charge t h a t the c u r r e n t monetary st ri n g e n cy has been brought about by Ikeda.

On the o t h e r hand, farmers and small

e n t e r p r i s e r s are more s t a b l e than expected.

The r a t e of consumption

i s s t i l l high, and the shortage of manpower i s becoming more and more s e r i o u s .

The p re s en t business depression d i f f e r s in nature

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from t h a t of the p a s t , and Ikeda i s not f a t a l l y wounded in t h i s respect.

In o th e r words, the time i s not ye t ri p e f o r those who

want to succeed Ikeda. 5.3.

P o l i t i c s of After car e

In view o f these various developments by mid-1962 the c r i t i c a l p o l i t i c a l (and te c h n i c a l ) question had become whether to a d j u s t or di s ca rd the National Income Doubling Plan. th re e options f o r Prime Min ist er Ikeda:

There were b a s i c a l l y

(1) to dis c a rd long-range

planning e n t i r e l y ; (2) formulate a new income doubling plan; (3) to amend the pre s e n t plan.

While to dis c a rd the plan e n t i r e l y would

have meant to admit p o l i t i c a l d e f e a t with regard to economic p o li c y , to d r a f t a new version of the plan was p o l i t i c a l l y not f e a s i b l e e i t h e r , thus Prime Minister Ikeda chose to amend the e x i s t i n g plan. Endowed with a c l e a r mandate not to make any s u b s t a n t i a l changes in e i t h e r the t a r g e t f i g u r e s or the basic framework, the Economic Planning Agency began i t s follow-up s t u d i e s on the National Income Doubling Plan as e a r l y as June 1962.

The purpsoe of the EPA follow-

up s t u d i e s was to examine and i n t e r p r e t the di s cr ep a nc ie s between actua l performance and the planned course of the economy, and to a sse ss the impact of these dis cr ep a nc ie s on the f u t u r e course of the economy.

159

In a d d i t i o n , the EPA was expected to focus i t s

a t t e n t i o n on several f a c t o r s t h a t had not been covered s u f f i c i e n t l y in the o r i g i n a l Income Doubling Plan; p r i c e f l u c t u a t i o n s , i n t e r ­ national economic developments ( r i s e o f EEC), and balance of payment problems.

Meanwhile, within the EPA i t s e l f th e re had been a movement

238

to study the planning experiences of o th e r i n d u s t r i a l c o u n t r i e s . As a r e s u l t of t h i s endeavor, i t was concluded t h a t a plan period of ten ye ars was too long, making accur ate f o r e c a s t s and pr e d ic ti o n most haphazardous.

And in the image of the French Monnet plan,*®®

i t was proposed to r e t a i n the basi c goals and t a r g e t s o f the National Income Doubling Plan and t o map out a medium-term plan covering four to f i v e years.*®* In the p o l i t i c a l realm not much could be expected with regard to the Income Doubling Plan u n t i l the Ju ly 1962 e l e c t i o n s , which, c o n t r a r y to o r i g i n a l e x pe c ta tio ns proved q u i t e favorable fo r the LDP.

When Prime Minister Ikeda reorganized hi s Cabinet on Ju ly

18, 1962, both Mi nister of Finance Sato and EPA Director-General Fujiyama r e s ig ne d, obviously viewing f o r the next LDP p r e s i d e n t i a l election.

These circumstances permitted Prime Min ist er Ikeda to

f i l l several of the key Cabinet pos ts with " t r u s t e d men," e .g . Kiichi Miyazawa, a former subordinate of Ikeda in the Ministry of Finance, took on the post of EPA Director-General and Min ist er o f S t a t e ; and, as discussed e a r l i e r , Kakuei Tanaka, an a rde nt supporter of Ik ed a's e x p a n s io n is ti c economic p o l i c i e s , became Min ist er of Finance. Upon assuming his p o s t , EPA Director-General Miyazawa acknowl­ edged in a Ju ly 20, 1962, in te rv ie w t h a t the Income Doubling Plan was a very ambitious p o l i t i c a l theme, but a l s o , t h a t the basic policy of the Income Doubling plan would need no r e v i s i o n , y e t the ope ra tion (implementation) of the plan should be adju sted a nn ua ll y, congruent 162 with the p l a n ' s s t i p u l a t i o n s , with a ctu al government p o l i c i e s . During f a l l of 1962 the Economic Planning Agency continued

239

i t s a n a l y s i s of foreign planning systems and planning exper ienc es, as well as i t s study of economic problems d i r e c t l y r e l a t e d to the Income Doubling Plan.

P o l i t i c i a n s and business c i r c l e s , meanwhile,

focused t h e i r a t t e n t i o n on the impact of the government's "adjustment" measures ( i . e . monetary polic y) on the 1962 re c es si on .

And in January

1963 A ii c h ir o Fujiyama, campaigning f o r the LDP in gubernatorial e l e c t i o n s , again p u b li c ly attacked Ik ed a's National Income Doubling Plan when he s t a t e d :

"There i s something wrong in the way the Govern­

ment pushes the Income Doubling Program.

I t seems t h a t the Govern­

ment has r e c e n t l y s t a r t e d a re-examination of the program, but I think t h a t a fundamental change should be e f f e c t e d r a t h e r than a 163 p a r t i a l r e v is io n of the p la n ." And a ls o in January, both the ru l i n g Liberal Democratic Party and the Opposition P a r t i e s agreed not to d i s s o l v e the Lower House; the Opposition P a r t i e s , however, c a l c u l a t e d t h a t the economic s i t u a t i o n would for ce an e l e c t i o n in f a l l anyway, and they were q u i t e r i g h t in t h e i r assumption.

For

Prime M in ist er Ikeda t h i s p o l i t i c a l understanding was advantageous i n s o f a r as i t permitted him to conce ntr at e on politico-economic affairs entirely.

I ke da 's two r i v a l s , Sato and Fujiyama, gained

by the f a c t t h a t they were given more time to c r i t i c i z e Ikeda 's economic p o l i c i e s and a ls o to s o l i d i f y t h e i r p o l i t i c a l p o s i t i o n s , which was c r i t i c a l 1n view of the upcoming LDP p r e s i d e n t i a l e l e c t i o n s and t h e i r I n te n ti o n to prevent a t h i r d - t e r m e l e c t i o n o f Ikeda as LDP P r e s i d e n t . 164 Against the backdrop o f such r e l a t i v e l y s t a b l e p o l i t i c a l condi­ ti o n s and s u b t l e s ig n al s from zaika i c i r c l e s suggesting t h a t the

240

Prime Min ist er should switch from his p re s en t polic y of high-pi tched growth to a p o li c y of s t a b l e and balanced economic growth, Prime Minister Ikeda began to adopt a more f l e x i b l e stand on economic p o l i c y , and the a f t e r c a r e of the income doubling plan received his renewed a t t e n t i o n .

165

In a d d i t i o n , the Prime M in sit er had decided

to appeal to the country with his economic p o lic y by holding e l e c t i o n s in sp ring of 1964.

During an exten siv e in terv ie w with nikkei shimbun

Prime M in ist er Ikeda a sc rib e d the phenomenal growth o f the Japanese economy since 1961 to the Income Doubling Plan, and he declared t h a t he would continue to adhere to t h i s p o l i c y , and t h a t the plan would be achieved a few years e a r l i e r than o r i g i n a l l y planned, and t h a t the unused funds ( a v a i l a b l e because of e a r l y achievement of the plan) would be used f o r the modernization of a g r i c u l t u r e and small and medium-size businesses.*®®

I n d i r e c t l y , Ikeda had f i n a l l y

admitted some of the p l a n ' s shortcomings, i . e . underdevelopment of a g r i c u l t u r e and the medium- and small-bu sin ess s e c t o r s . At the end of November 1963 the Economic De lib er at io n Council presented a d r a f t o f i t s in te rim r e p o r t on the National Income Doubling P l a n . 1®7

The d r a f t c r i t i c a l l y evaluated the p l a n ' s basic assumptions

and actual achievements.

I t i s of i n t e r e s t to note t h a t the r e p o rt

found t h a t i n s p i t e of s p e c t a c u l a r economic growth, J a p a n ' s per c ap it a nation al income remained low compared with Western Europe and the United S t a t e s , and t h a t in view of t h i s , Japan needed to continue to maintain a considerable high r a t e of growth.

The re p o r t a l s o

pointed to the dangers o f the excesses of high growth; moreover, the re p o r t s t r e s s e d the modernization of a g r i c u l t u r e and small

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e n t e r p r i s e s , i t a l s o emphasized the need to f u r t h e r improve the q u a l i t y o f the li v e li h o o d o f the people.

And f i n a l l y , the rep ort

proposed to repla ce the Income Doubling Plan with a new middle-range economic plan of about f i v e years du ra ti o n . Ike da 's b r a i n t r u s t e r , Osamu Shimomura, launched a v i t r i o l i c a t t a c k on the r e p o r t charging t h a t the Interim Report f a i l e d to grasp a c c u r a t e l y the h i s t o r i c a l nature of economic growth, and the changes the Japanese economy had gone through in the p a s t several y ear s and how i t will change in the f u t u r e .

For t h i s reaso n, Shimomura

argued, did the r e p o r t s t r e s s the asp e c ts of s t r a i n and d i s t o r i t i o n (of p a st high economic growth), ins te ad of recognizing t h a t the Japanese economy was going through a h i s t o r i c a l l y high-degree phase of development as the r e s u l t of the Income Doubling Plan.

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This

notwithstanding the EDC and EPA began p r e lim in a ry work on a new medium-range economic plan as a "supplement" to the " a f t e r - c a r e in te ri m re p o rt " o f the National Income Doubling Plan, a f i r s t p r e l i m i ­ nary d r a f t was expected to be produced by f a l l o f 1964.

Throughout

most of sp rin g of 1964 1t appeared t h a t the Japanese economy had enter ed a phase of slow but steady and su sta ine d growth. 5.4.

I k e d a 's Pyrrhic Victory

By l a t e Spring 1964 the s i x t h LDP P r e s i d e n t i a l Election was coming c l o s e r and the Japanese p o l i t i c a l scene was r i f e with specu­ l a t i o n s since I t was not e n t i r e l y c l e a r whether o r not Ikeda could be e l e c t e d f o r a t h i r d time.

His a r c h r i v a l s , Sato and Fujiyama,

were running f o r the Presidency as w e l l , and during the campaign

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both pointed to the grave d i s t o r t i o n s caused by I ke da 's "high growth policy" and they t r i e d to c a p i t a l i z e on the "general d i s s a t i s f a c t i o n " o f the people with J a p a n ' s economic development and both asked f o r a d r a s t i c change in economic p ol ic y.

For many observers i t seemed

t h a t the Ikeda Administration had o u tl iv e d i t s u t i l i t y and could no longer continue to function e f f e c t i v e l y ; and th e re were those urging the re s ig n a ti o n o f the Prime Min ist er.

A political c r itic ,

Ryugen Hosokawa, i s r e p r e s e n t a t i v e of the a n t i - I k e d a undercurrent o f mid-1964, wrote he:

"The Ikeda Cabinet was inaugurated four

years ago with h ig h - r a te economic growth and doubling of the national income as i t s major p oli cy .

I t i s r e g r e t t a b l e t h a t t h i s p o li c y

has led to economic imbalances and even economic u n r e s t .

There

i s no o th e r way to s e t t l e the s i t u a t i o n but to change the p i t c h e r . " * 6® But t o the s u r p r i s e of many Ikeda triumphed in the e l e c t i o n and defeated both Sato and Fujiyama d e c i s i v e l y on the f i r s t b a l l o t . The new Ikeda Cabinet, however, was faced with a s e r i e s of most pre ssi ng politico-economic problems t h a t needed immediate a t t e n t i o n , among them the " a f t e r c a r e of the Income Doubling Plan" or what by then had become the Medium-Term Economic Plan.

A ft e r the Cabinet

had been formed in J u l y , Asahi Shimbun commissioned "pieces of o u t­ spoken economic advise to the Ikeda Cabinet" from p r o l i f i c economists. Ic h ir o Nakayama, a noted economist and veteran of Japanese postwar economic planning, of fere d the following a n a l y s i s and p r e s c r i p t i o n s : "The Income Doubling Plan has been the leading item in Ik ed a's p o li c y , and as such should not be abandoned, even though i t has brought about d i s t o r t i o n s in the economy.

The government, however, must

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not h e s i t a t e to r e v i s e the Income Doubling Plan in or de r to "save i t s face."

The plan was o r i g i n a l l y d r a f t e d based on 1959 f i g u r e s ,

y e t during the p a s t several years the s t r u c t u r e of the Japanese economy has changed markedly.

And since th e plan was launched a

l i t t l e b i t too b o ld ly , some excesses arose in the f i r s t and second years and caused various imbalances.

Thus i t i s necessary to face

t h i s f a c t and to ta c k l e the job of c o r r e c t i n g them.

I t i s requested

t h a t the Prime Min ist er r e v i s e the program boldly without pu tti ng name before r e a l i t y . Plan i s important.

For t h i s purpose, the Medium-Term Economic I f the Income Doubling Plan was a program fo r

q u a n t i t y , then the Medium-Term Economic Plan should be one f o r sub­ stance.

I t i s necessary to make an e f f o r t to balance a l l growth-

supporting f a c t o r s , in s te ad o f f o s t e r i n g a high-growth r a t e alone. Some of the most pres sing is su e s to be addressed by the Medium-Term Economic Plan a re how to c o r r e c t the imbalances between economic and soci al s t r u c t u r e , shortage of so cia l c a p i t a l , and d i f f e r e n t i a l s in p r o d u c t i v i t y between in dus tr y and a g r i c u l t u r e and s e r v ic e i n d u s tr y and between la rg e e n t e r p r i s e s and medium and small e n t e r p r i s e s . Moreover, i t i s hoped t h a t the Ikeda Cabinet devise a long-term economic vis io n in order to c r e a te a basis f o r th e Japanese economy in the next 20 to 30 year s.

Such a "super long-term economic po lic y

vision" i s the bi g ge st ta sk of the reorganized Ikeda Cabinet, ye t i t i s necessary to embark on t h i s road by r e v i s i n g the Income Doubling Program with the Medium-Term Economic Plan aimed a t s t a b i l i z e d economic growth."^®

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The EPA and the Economic De liber ation Council had been working on the formulation of a d r a f t f o r the Medium-Term Economic Plan since January 22, 1964, when Prime Min ist er Ikeda formally requested the EDC Chairman t h a t such a plan be formulated.

The basic framework

of the new plan was based on the fin d in gs o f the Interim Study of the Income Doubling Plan, conducted as a follow-up or a f t e r c a r e during the f a l l of 1963 in order to ass e ss the d i s t o r t i o n s brought about by Ikeda 's po licy of high-pi tched economic growth.

The f a c t

t h a t Prime Mi nister Ikeda had asked f o r a new plan o f f i c i a l l y i n d i ­ cated t h a t he conceded t h a t the Income Doubling Plan had become "d ysfunctional" from a te chn ic al p e rs p e c ti v e .

However, the Prime

M inis ter te n ac io u s ly adhered to the income doubling as a p o l i t i c a l concept u n t i l the b i t t e r end.

For Ikeda "Doubling the National

Income" had become a p o l i t i c a l tr a d e mark, and th e r e can be no doubt the economic success a ss o c ia te d with the phenomenon helped him to survive p o l i t i c a l l y a t many occasions.

And i t seems t h a t Prime

Min ist er Ikeda viewed the LDP e l e c t i o n success and his t h i r d e l e c t i o n to the Party Presidency as a vi n d ic a ti o n o f his Income Doubling Policy which had begun t o f a l l from grace in p o l i t i c a l and economic circles. Yet t h i s l a t e s t p o l i t i c a l achievement by Ikeda turned out to be a pyrr hlc v i c t o r y .

Prime Min ist er Ikeda had developed cancer

and was forced to withdraw from p o l i t i c s a l t o g e t h e r .

He entered

the National Cancer I n s t i t u t e ' s hos pit al on September 9, 1964, f o r tre atmen t of his t h r o a t ailm en t; i t was rumored t h a t t h i s ailment was brought on by the r a t h e r strenuous speaking to u r during the

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June- July national e l e c t i o n campaign.

For several weeks Ikeda t r i e d

to run the government from the h o s p i t a l ; and f i n a l l y , under inc re asi ng p o l i t i c a l pressures Ikeda decided to resign from hi s p o s t, and succeeded by Eisaku Sato, who was i n s t a l l e d as Prime Min ist er on November 9, 1964.

Prime Min ist er Sato adopted the Medium-Term

Economic Plan on January 22, 1965, as a ma tte r of cou rte sy to Ikeda, y e t never acted on the plan i t s e l f .

Hayato Ikeda succumbed on August

13, 1965, in the ho sp ita l of Tokyo Un ive rs ity .

And with Prime Minister

S a t o ' s May 23, 1966, re que st to the EDC chairman t o formulate an "Economic and Social Development Plan," the National Income Doubling Plan had been o f f i c i a l l y d i s ca rd e d, ye t i t continues to be recognized as one of the mainstays of J ap a n 's postwar economic development.

CHAPTER V

CONCLUDING SUMMARY 1.

Intr o du cti on

This pre s e n t study has d e a l t mainly with the p o l i t i c s of postwar Japanese economic planning which i s not only a s a l i e n t i n s t i t u t i o n of J ap a n 's p o l i t i c a l economy, but a ls o r e p r e s e n ts an important dimension of the over all r e l a t i o n s h i p between the Japanese s t a t e and the economic s o c ie ty .

The ba sic approach has been to view

Japanese postwar economic planning as a highly p o l i t i c a l c o n t e s t with the s t a t e bureaucracy playing a r o l e of utmost s i g n i f i c a n c e based on i t s overtowering power p o s i t i o n .

Moreover, derived from

empirical observation of economic planning in s i m i l a r Advanced Indus­ t r i a l Co untries, J ap a n 's postwar economic planning e f f o r t has been ge neralized p r i m a r i l y as a non-democratic and b u re a u cr a ti c a c t i v i t y . This perception 1s r e in fo r ce d by the view t h a t economic planning i s e s s e n t i a l l y a techn ica l problem and a c t i v i t y which in turn has accorded the planning bureaucracy a f a i r amount of power and i n f l u ­ ence based on i t s ex pert knowledge and a b i l i t i e s ( Dienstwissen). I t has a ls o been found t h a t Japanese economic planning i s one of several prewar f e a t u r e s of J a p a n ' s politico-economic arrangement t h a t has continued a meaningful e x is t en c e throughout the e n t i r e postwar period.

During th e postwar e r a , however, Japanese economic 246

247

planning has undergone fundamental org an iz ati on al and fun ctional changes from an instrument of "command and c o n tr o l" to a ve hicle of " s t r a t e g i c planning" which uses i n t e r a c t i o n and exchange of i n f o r ­ mation and ideas as a means to accommodate and to harmonize diverging and competing economic i n t e r e s t s in a system of mixed economy. Moreover, i t was discerned t h a t from among the various competing paradigms of Japanese p o l i t i c s a modified bu re a ucr a tic p o l i t i c s approach proved to be most y i e l d i n g in ex plaining the p o l i t i c s of Japanese postwar economic planning in addressing the c r i t i c a l query of expanding bure a uc ra tic autonomy as opposed to independence and i n i t i a t i v e from the economic s o c i e t y in the Japanese planning process. To t h i s end the pre s e n t study has examined r e l e v a n t formal and informal s t r u c t u r e s of planning and attempted to explain how the s t a t e i n f l u ­ ences plan decision-making.

And f i n a l l y , t h i s study attempted to

determine the pro pe ns ity of the Japanese s t a t e to a c t as an autonomous power in shaping Japanese economic planning. 2.

Argumentation

The basic argument advanced in t h i s study surmises t h a t Jap a n's p o l i t i c s of planning are e s s e n t i a l l y bure a u cr a tic p o l i t i c s with the Economic Bureaucracy attempting to r a t i o n a l i z e J ap a n 's macroeconomic p o l i c i e s which had been l e f t in a vacuum during p a r t of the period under examination.

In c a pa c ita te d by 1nternc1ne 1n tra -

and I n t e r - P a r t y p o l i t i c a l s t r u g g l e the p o l i t i c a l p a r t i e s found i t r a t h e r d i f f i c u l t to deal c o n s t r u c t i v e l y with the c r i t i c a l macroeconomic problems posed by the l a t e 1950s and e a r l y 1960s, t h u s ,

248

with regard to economic planning the planning bureaucracy was l e f t to r u l e e f f e c t i v e l y with p a rt y p o l i t i c i a n s e x e r c is in g sovereign power and a u t h o r i t y ; the Japanese Prime Mi nister c a ll e d f o r economic p la n s , the bureaucracy presided over the plan formulation and imple­ mentation, while the Liberal Democratic Party provided formal p o l i t i c a l le gitimacy f o r these economic plans by di sc uss in g and approving them in the r e s p e c ti v e LDP policy-subcommittees. The general i n s t i t u t i o n a l arrangement of postwar Japanese economic planning has been c h a r a c te ri z e d by several basic f a c t o r s .

For one,

Japan has t r a d i t i o n a l l y had a strong s t a t e and competent bureaucracy, both ty pi ca l of leading planning n a ti o n s .

Second, postwar Japan,

l i k e most o th e r war-torn c o u n t r i e s , experienced a gre a t upsurge in economic planning a f t e r the war.

This development must be explained

in terms of the overwhelming e xi g en ci es c rea te d by World War II and the subsequent need f o r p olic y instruments to bring a measure of c e r t a i n t y in t o the ge n er al ly unstable socio-economic environment. Postwar Japanese economic planning has had both domestic and foreign r o o t s ; th e re was planning t h a t emanated from the Foreign Ministry Study Group under Okita, but a l s o the SCAP-induced planning system in connection with the a c t i v i t i e s of the Economic S t a b i l i z a t i o n Board.

And since the s t a t e bureaucracy came to play a leadi ng ro le

in ESB economic planning during the occupation, i t was very d i f f i c u l t i f not impossible to simply dis car d economic planning a l t o g e t h e r by dismantling the planning o r ga niz at io n and dismissing i t s personnel when Japan regained I t s so vereignty 1n 1952.

Although pushed Into

a Cinde rel la e x is t e n c e f o r several inte rv e ni ng y e a r s , Japanese economic

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planning received a fo r ce fu l impetus in 1955 when the Economic Planning Agency was c r e a t e d ; and ever since the agency has been defending i t s pre ro g a ti v e s and also added new t a s k s to i t s e x i s t i n g d u t i e s , which have come to include the newly c re at e d Office of Trade Ombudsman. The f a c t remains however t h a t Japanese economic planning has been formally i n s t i t u t i o n a l i z e d in the postwar e r a , and i t s org a ni z at io na l base, the Economic Planning Agency, has become an important and in t e g r a l p a r t of the Economic Bureaucracy. S t a te autonomy in Japanese economic planning i s a f a c t , ye t i t i s not an i n t r i n s i c a l l y Japanese phenomenon, s i n c e , in g e n er al , s t a t e s i n i t i a t e plan formulation and supervise plan implementation. The Economic Planning Agency, as a d m i n i s t r a t i v e and te chn ic al locus of the economic planning e f f o r t , i s well s i t u a t e d to control the Japanese planning process.

In f a c t , the EPA dominates the planning

process by coo rdi na tin g d iv e rg e n t economic i n t e r e s t s and demands by pre si d in g over a l l the c r i t i c a l "adjustment" meetings between the d i f f e r e n t p r i v a t e s e c t o r r e p r e s e n t a t i v e s and s t a t e o f f i c i a l s . In order to e f f e c t u a t e I t s coo rdina ting ta sk the EPA engages in " s t r a t e g i c planning" which s e t s a high premium on n e g o ti a ti o n between the d i f f e r e n t fo rc e s in economic s o c i e t y r a t h e r than top down command since the Japanese s t a t e has long recognized and acknowledged t h a t control over the economy 1s lim it ed .* One Important form of t h i s genre of co ordination i s to induce and encourage Japanese I n d u s t r i a l and f i n a n c i a l c i r c l e s to exchange information within the EPA c o n tr o ll e d framework con dition s of the economic plan.

The Japanese government, however, does not r e l y

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on the EPA-EDC formulated economic plan f o r the management of i t s economy since i t i s b a s i c a l l y market o r i e n t e d .

Japanese economic

plans are p ri m a ri ly gui deposts, i n d i c a t i n g i n t e n t i o n s and ex p ec ta ti o n s ; Japanese economic plans l i s t proposed public expenditures which a r e , however, not authorized by the plan i t s e l f , but ins te ad by 2 the annual budget. In J ap a n 's case the argument can be made however t h a t economic plans are devoid of any popular mandate since the Diet n e i t h e r dis cus ses nor approves J ap a n 's social and economic plans. Three p r in c ip a l sources of b u r e a u c r a ti c plan dominance have been i d e n t i f i e d :

a c u l t u r a l - h i s t o r i c a l l y conditioned ethos of preoccu­

pation with the developmental a sp e c ts of J a p a n ' s economy; Dienstwissen or managerial experience by and la r g e derived from what Johnson r e f e r s to as " s i t u a t i o n a l imper atives" ;

3

and org a ni z at io na l schemes,

i . e . the Economic Planning Agency's t i g h t a dm in is tr a ti o n and con stan t monitoring of the economic planning process. In a d d i t i o n , several empirical obser vations have been made supportive of the bu re a ucr a tic dominance argument.

S t a t e autonomy

in Japanese economic planning i s a f a c t , y e t i t i s not an i n t r i n s i c a l l y Japanese phenomenon, s i n c e , in general s t a t e s i n i t i a t e plan formula­ ti o n and supervise plan implementation.

Yet, unlike in o th e r s e t t i n g s

Japanese economic planning has not been c h a r a c t e r i z e d by excessive Party involvement, and moreover, the absence of any organized public dis cus si on of the plan ( i . e . Diet) has enabled the bureaucracy to "capture" economic planning and to make i t i t s own preserve.

Moreover,

J a p a n ' s planning bureaucracy has never been challenged e f f e c t i v e l y

251

by any Pa rty or i n t e r e s t group p o l i t i c s .

Whenever such a challenge

has a r i s e n , the EPA has simply extended the planning process by extending the p l a n ' s p a r t i c i p a t o r y fr an c h is e by g ra nti ng access to membership in the Economic De lib er atio n Council or any o th e r of the planning r e l a t e d s p e c i a l i z e d committees witho ut, however, loosening i t s t i g h t control and su pervision of the planning process. Furthermore, the Economic Planning Agency has a v i t a l p o l i t i c a l and or ga niz ati ona l i n t e r e s t in a continuing e x is t e n c e and extension of the planning function in the Japanese p o l i t i c a l economy.

These

motivational f a c t o r s have prompted the EPA, in concert with the economic bureaucracy, to de fin e and control the p o l i t i c s of Japanese economic planning by drawing on i t s autonomy enhancing c a p a c i t i e s , i . e . a d m in is tr a ti v e power, Dienstwissen, s t a t u s and p r e s t i g e , which are the essence o f bur e a uc ra tic dominance in Japanese economic planning. 3. 3.1.

The Evidence Bureaucratic Dominance of Japanese Planning

Chapter I I I has I d e n t i f i e d the key pla yer s in Japanese economic planning as the Prime M in is t e r , the Economic D el ibe rati on Council, the Economic Planning Agency, and the Liberal Democratic P a r ty , and examined the underlying formal and informal power r e l a t i o n s between and among these important a c t o r s .

A synoptic sketch of

the s t u d y ' s f in di ngs follow. I t was found t h a t the planning i n i t i a t i v e r e s t s with the Prime Minister who reque sts the formulation o f plans a t his own d i s c r e t i o n . Almost a l l postwar Japanese Prime Ministers have requested the

252

formulation of economic and soci al pl an s; f o r example, during the p a s t 25 years th e r e have been ten d i f f e r e n t Prime M ini st ers and ten d i f f e r e n t economic and social pla ns.

Most of these plans have

become a device to propagate public p o li c y go a ls , y e t only a few o f them have r e a l l y advanced concrete and comprehensive public po lic y p e r s p e c ti v e s .

Empirical evidence suggests a causal r e l a t i o n s h i p

between the high frequency of economic plans and the high turnover in the o f f i c e of the Japanese Prime Min ist er. There i s overwhelming evidence t h a t the EDC, a public advisory organ o f the Prime M in ist er and o r g a n i z a t i o n a l l y a tta ch e d to the Economic Planning Agency, i s only nominally in charge of the formula­ t i o n o f Japanese economic pla ns. t o synchronize d i f f e r i n g

The func tion o f the EDC i s mainly

p r i v a t e s e c t o r demands with public i n t e r e s t

concerns in the process of plan d e l i b e r a t i o n .

Consisting of 30

r e g u l a r members, and appointed by the Prime Min ist er f o r a two-year term, th e EDC i s organized in t o four major committees:

"overall,"

p u b l i c , p r i v a t e , and c a l c u l a t i o n . From a formal l e g a l i s t i c p e r s p e c t i v e , the s t r u c t u r e and org a ni ­ z atio n o f the Economic De lib er at io n Council look very impressive; well defined t a s k s , ample room f o r p r i v a t e s e c t o r I n i t i a t i v e and Independence in the formulation of pla ns.

The fin di ngs of t h i s

pr e s en t study, however, p o in t c l e a r l y t o the f a c t t h a t various bureau­ c r a t i c force s have been c u r t a i l i n g the pr e ro g a ti v e s of the EDC by Impinging on the general o r ga ni z at io nal environment 1n which the EDC must operate.

For one, the Bureau of Comprehensive Planning

o f the Economic Planning Agency serves as the EDC's general

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s e c r e t a r i a t performing a l l of i t s rou ti ne a d m in is tr a ti v e chores b u t a l s o i t s important work, i . e . w ri te up of the f i n a l plan d r a f t . Second, and of most c r i t i c a l importance f o r the bu re a u c ra ti c dominance t h e s i s i s the f a c t t h a t the Economic Planning Agency a ls o provides numerous e x p e r t s ; planners and economic s p e c i a l i s t s , to the Economic D el ibe rati on Council and i t s various subcommittees.

These EPA-experts

grant advise and lend te chn ical sup port, they a ls o perform an important function as l i a i s o n and intermediary between the EDC and the various re le v a n t M i n i s t r i e s and governmental agencies. These empirical obs ervat ion s suggest t h a t the EPA o f f i c i a l s made q u i t e s k i l l f u l use of t h e i r autonomy-enhancing c a p a c i t i e s ( Dienstwissen, a d m in is tr a ti v e power, s t a t u s and p r e s t i g e ) .

And,

within the confines of the pre sen t study, the re seems to be convincing c or rob ora tin g evidence t h a t could lead one to conclude t h a t the r o l e of the Economic Planning Agency on the EDC committees re p re s e n ts an unequivocal ins tance of bu re a ucr a tic dominance in general and bur e a uc ra tic plan dominance in p a r t i c u l a r .

Osten sib ly th e r e i s

a dependency based on the f a c t t h a t the EDC does not dispose over r e q u i s i t e techn ic al e x p e r t i s e to formulate economic plans on I t s own, and thus has to r e l y on the EPA's Dienstwissen and pr of ess io nal planning e x p e r ts . With regard to the is su e of c o u n te r v a il in g powers in Japanese economic planning the f in din gs o f the pre s en t study are somewhat l e s s c l e a r cu t than o r i g i n a l l y expected.

Labor, a t one end of the

spectrum, had been e f f e c t i v e l y excluded from the Japanese economic planning process during the decade from 1955 to 1965; since the n,

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however, the p a r t i c i p a t o r y f r a n c h is e has been extended to include lab or in economic planning as well. Organized economic i n t e r e s t s have been an in t e g r a l p a r t of the Japanese economic planning process since i t s formal incept ion in 1955, and f o r the p a s t 25 years top z aik ai le ad e rs have held the post of the EDC Chairman (most notably Ishikawa and Nikawada). In f a c t , t h i s study has found t h a t from 1957 to 1966 the m a jo ri ty of EDC members were r e c r u i t e d from among commercial, f i n a n c i a l and industrial c irc le s.

Yet, economic re p r e s e n t a t i o n on the EDC has

not been able to e f f e c t i v e l y challenge the overtowering r o l e and function o f the EPA planning o f f i c i a l s and economic e x p e r t s . In s h o r t , n e i t h e r organized business nor la bo r has been able to a c t as an e f f e c t i v e c o u n te r v a il in g for ce by accessing the Japanese economic planning process through the Economic De lib er atio n Council since both organized business and labor do not possess the r e q u i s i t e s p e c ia li z e d techn ica l e x p e r t i s e and knowhow to compete with the EPA's pr of ess io nal planners and economists. Turning to the ro le and function of the Liberal Democratic Party 1n Japanese economic planning the following f in d in gs were made.

F i r s t , the LDP I n s t i t u t i o n a l i z e d what might be r e f e r r e d to

as "plan a u d i t , " I . e . the LDP's Policy A f f a i r s Research Council began to function as a s o r t of control f a c t o r 1n economic planning; the PARC 1s consulted as a matt er of ro u ti n e during the formulation o f J a p a n ' s soci al and economic plans.

However, c l o s e r s c r u t i n y

has revealed t h a t the actua l impact of the LDP on the cont ent and form of Japanese economic and so cia l plans has been n e g l i g i b l e a t

255

b e st .

In f a c t , th e r e has been only one ins ta n ce when the LDP a c t u a l l y

intervened in t o the process of plan making.

When the National Income

Doubling Plan was about to be made public th e re s t i l l remained various d i f f e r e n c e s of opinion between force s within the LDP t h a t wanted to inc orp ora te t h e i r ( p o l i t i c a l l y opportune pet ) p r o j e c t s in to the plan, ye t the Economic Planning Agency was te n ac io u s ly c li n g in g to the EDC/EPA plan d r a f t .

The stalemate was f i n a l l y resolved when

a compromise was s tru c k to add a supplement to the National Income Doubling Plan, r e f l e c t i v e of the se LDP views.

4

In the f i n a l a n a ly s is

i t could be argued t h a t t h i s in c id e n t i l l u s t r a t e s the power r e l a t i o n s underlying the Japanese economic planning pro c e ss , i . e . suggesting t h a t both the LDP and the planning bureaucracy could have i t t h e i r own way i f necessary.

But, as in d ic a te d above, the is su e has never

a r is e n s i n c e , because planning l o s t p o l i t i c a l relevance.

A fte r

the National Income Doubling Plan had outl iv e d i t s p o l i t i c a l u t i l i t y , economic planning r a p i d l y l o s t i t s a t t r a c t i o n f o r na tio na l p o l i t i c s , and i t has never since regained the p o l i t i c a l momentum i t once possessed. As a r e s u l t , the Liberal Democratic Party has become d i s i n t e r e s t e d in economic planning and the p o l i t i c s of economic planning have become a non-issue in nation al p o l i t i c s . 3.2.

National Income Doubling Plan

Chapter IV, which r e p r e s e n ts e s s e n t i a l l y the th e si s- c on fi r m in g empirical p a r t , 1s a mixture of d e s c r i p t i o n and I n t e r p r e t a t i v e analysis.

Several alms were pursued simultaneously; f o r one, i t

was attempted to o p e r a t i o n a l i z e the p o l i t i c s of Japanese economic planning a g a i n s t the empirical background of the National Income

256

Doubling Plan.

And, secondly, p a r t i c u l a r a t t e n t i o n has been paid

to the i n i t i a t i v e and independence o f the p r i v a t e s e c t o r as opposed to the r o l e of the planning bureaucracy. S t a r t i n g with an i n t e r p r e t a t i v e a n a ly s is of the i n s t i t u t i o n a l environment of the National Income Doubling Plan several important, ye t r a t h e r e s t a b l i s h e d a s s e r t i o n s were confirmed.

The economic

foundation f o r high-speed economic growth and the ensuing National Income Doubling Plan was l a i d with the Jimmu Boom (1956-1957), when p r i v a t e equipment and investment expansion and a boom in consumer goods and household appliances e s s e n t i a l l y transformed Japanese c a p i t a l i s m from an a u s t e r i t y model i n t o a mass consumption model, a l l of which came to s e t the Japanese economy on a steady and s t a b l e course o f sustained economic expansion. Another c r i t i c a l , ye t oft en overlooked element in the g e s t a t i o n of the National Income Doubling Plan has been the pivota l r o l e played by P ro fe sso r I c h i r o Nakayama who f i r s t suggested to Prime M in ist er Kishi the p o s s i b i l i t y of doubling J ap a n 's GNP within ten y e a r s ; Kishi, however, conceived the idea of doubling national production as a mere p o l i t i c a l ploy f o r the Spring 1959 Election campaign. On the o th e r hand, during the same e l e c t i o n campaign, Hayato Ikeda who was then tempora rily out of p o l i t i c a l power, expanded on Nakayama's theme and began to popularize hi s own version c a l l i n g i t "Salary Doubling Theory." A ft e r an unexpected e l e c t i o n success Prime Mi nister Kishi was under tremendous p o l i t i c a l pressure to follow up on the campaign pledges with regard to the Wage Doubling idea.

Kishi ordered the

257

Economic Planning Agency to begin pre limina ry work on a d r a f t f o r a long-range economic plan to " in cr eas e nation al produ ction ."

Analyt­

i c a l l y , i t i s important to note t h a t the Economic Planning Agency and not the Economic Delib era ti on Council began the pre lim ina ry work on the basic framework of what was to become the National Income Doubling Plan.

Meanwhile, Ikeda had become Mi nister of MITI and

was busy r e f i n i n g his Salary Doubling th e or y, and in August 1959 Ikeda espoused the basic t e n e t s of his p o s i t i v e p o lic y in his speech on "Doubling the National Income and the Future of J ap a n 's Economy." The g i s t of Ik ed a's argument was t h a t the growth p o t e n t i a l of the Japanese economy had been badly underestimated in the p a s t .

Ikeda

suggested t h a t the s tim ula tio n of the domestic demand would e f f e c t economic growth and expansion leading to income doubling in l e s s than ten year s. A ft e r K i s h i 's r e s ig n a ti o n Ikeda took charge of the National Income Doubling Plan, and when the EPA/EDC d r a f t was presented In the f a l l of 1960 the Ikeda-LDP l i n e forced re w ri ti n g o f the EPA proposed growth r a t e of 7.2 percent to a 9 percent average growth r a t e f o r the f i r s t thr e e y ear s of the plan period.

In many ways,

the Income Doubling Plan was d i f f e r e n t from previous economic plans. There had been several long-range economic plans before the National Income Doubling Plan, but the NIDP was the f i r s t Japanese economic plan ever to u t i l i z e and f o r c e f u l l y advance the concept of economic growth.

The announcement e f f e c t of the National Income Doubling

Plan t r i g g e r e d , however, an unprecedented rush in p r i v a t e p l a n t and equipment investment which e v e n tu a ll y caused s er io us imbalances

258

in the economy as well as environmental problems c a l l i n g f o r p o l i t i c a l a c ti o n . Turning the empirical and d e s c r i p t i v e focus to p o l i t i c a l f a c t o r s , i t was found t h a t I ke da 's p o l i t i c a l commitment to kodo-seicho (high­ speed economic growth), as exemplified in his p o s i t i v e p o l i c i e s and the National Income Doubling Plan, had e nti c e d an economic growth euphoria and also s t a r t e d a c u l t of "growth r a t e s , " and p o l i t i c i z e d economic growth to the e x t e n t t h a t n e i t h e r the LDP nor any of the opposition p a r t i e s could af for d to ignore the p o l i t i c s of economic growth.

Also of s i g n i f i c a n c e , i t was found, was the temporary s h i f t

away from c a t e r i n g to a g r i c u l t u r a l i n t e r e s t s ; y e t i t did not take very long f o r the backward s e c to rs o f the Japanese economy to oppose the National Income Doubling Plan which th e se fo rc e s perceived as a d i r e c t t h r e a t to t h e i r economic i n t e r e s t s . In or de r to o p e r a t i o n a l i z e the p o l i t i c a l commitment to high­ speed economic growth and to f u l l y r e a l i z e the growth p o te n ti a l o f the Japanese economy, Prime Mi nister Ikeda s e t out to r i d J ap a n 's economy of some of i t s most co ntra in in g domestic and i n t e r n a t i o n a l f a c t o r s and impediments ( I k e d a 's po lic y of i n t e r n a t i o n a l i z i n g the Japanese economy has not been d i r e c t l y addressed in t h i s study how­ ever).6

In t h i s r e s p e c t , one of Ik ed a's most c r i t i c a l measures

was the conversion of the Ministry o f Finan ce's con ser va tiv e and r e s t r i c t i v e economic p o lic y outlook Into one r e f l e c t i v e of a more e x p a n s i o n l s t l c outlook.

In a c a l c u l a t e d move Ikeda placed highly

t r u s t e d I n d i v i d u a l s , who shared his basic e x p a n s i o n l s t l c views, a t the helm of the Ministry of Finance.

In t h i s c o n te x t , i t can

259

be argued t h a t the g r e a t e s t c o n tr ib u ti o n of Ik ed a's National Income Doubling Plan has been to arouse public support f o r his high-speed economic growth poli cy by r a i s i n g the p e o p le ' s economic ex pec ta tio ns and mobilizing J ap a n 's l a t e n t p o t e n t i a l f o r economic growth and expansion. With regard to s t a t e economic s o c i e t y r e l a t i o n s we found t h a t Prime Min ist er Ikeda did not u t i l i z e the National Income Doubling Plan in an attempt to control the p r i v a t e s e c t o r .

To the cont rary.

For one, the Income Doubling Plan was a measure f o r the p o l i t i c a l r e a l i z a t i o n of economic vision-making, aiming a t the c r e a t i o n of goodwill f o r the r e a l i z a t i o n of the p o t e n t i a l c a p a b i l i t i e s of the Japanese economy.

Only f o r too long had J ap a n 's economy "suffered"

from obtru sio n i n f l i c t e d by the Ministry of Finance which f r e q u e n tl y tended to put the l i d on J a p a n ' s explosive economic growth t h a t had been burgeoning since the e a r l y 1950s. The National Income Doubling Plan i t s e l f , i t was found, marked an e n t i r e l y new depar tur e f o r J ap a n 's s t a t e economic s o c i e t y r e l a ­ ti ons in general and p r i v a t e s e c t o r i n i t i a t i v e and independence in p a r t i c u l a r .

The plan e x p l i c i t l y recognized t h a t p r i v a t e e n t e r ­

p r i s e s ope rate through the market and c a r r y out economic a c t i v i t y on t h e i r own i n i t i a t i v e s , and a ls o t h a t they devise t h e i r own economic long-range plans (based on the EPA p ro je c te d economic trends and othe r r e l e v a n t plan inf ormation).

Moreover, the National Income

Doubling Plan expected p r i v a t e firms and e n t e r p r i s e s to f u l l y u t i l i z e t h e i r p o t e n t i a l and so to c o n tr ib u te to the development of the Japanese economy.

The Income Doubling Plan defined the s t a t e ' s r e s p o n s i b i l i t i e s

260

as s t i m u l a t i o n , encouragement and guidance of p r i v a t e economic activity.

At the same time i t declared the s t a t e ' s i n t e n t i o n to

a b o li s h the remaining d i r e c t c o n t r o l s over the economy (a legacy o f the P a c i f i c War and the U.S. occu pa tio n), and to keep to a minimum d i r e c t s t a t e in te r v e n ti o n and i n t e r f e r e n c e a t the firm l e v e l . Against the backdrop of the se e m p i r i c a l l y v e r i f i a b l e f a c t s , i t i s no misreading of r e a l i t y to suggest t h a t the National Income Doubling Plan indeed marked a p iv ota l tu rn in g poi nt in the arrangement of postwar J ap a n 's p o l i t i c a l economy, since the p r i v a t e s e c t o r was now accorded a g r e a t e r degree of i n i t i a t i v e and independence than ever before.

C le a rl y , under the r e s o l u t e le ad e rs hip of Prime Minister

Ikeda the Japanese s t a t e had made a genuine e f f o r t to loosen i t s r a t h e r t i g h t grip on the economic a c t o r s and decided to reduce the ubiquitous control of the economy in orde r to st im u la te economic development and expansion, and, as an unintended consequence, the p r i v a t e s e c t o r gained a new measure of i n i t i a t i v e and independence in economic a c t i v i t y , which, however, i t took ye t another decade o r so to come to f u l l f r u i t i o n .

NOTES

Intr oduction Recent c o n f l i c t i n g accounts are Ezra Vogel, Japan as Number One (Cambridge, MA: Harvard U ni ve rs ity P r e s s , 1979); Jon Woronoff, Japan--The Coming Economic C r i s i s (Tokyo: Lotus P r e s s , 1979); Chalmers A. Johnson, MITI and The Japanese Miracle (Stanford: Stanford Univer­ s i t y P r e s s ) ; Roy Hofheinz and Kent Calder, The E a s ta s ia Edge (New York: Basic Books, 1982); Ts'an-Hui Chen, Nihon Ga Totemo Shimpai Desu ( J a p a n ' s Anxiety) (Tokyo: Shisshin Hodo, 1981). p See f o r example H. P a tr i c k and H. Rosovsky, e d s . , A s i a ' s New Giant (Washington, D.C.: Brookings I n s t i t u t i o n , 1976). 3 This is sue has been r a i s e d f r e q u e n tl y . Two r e p r e s e n t a t i v e examples a r e : Int ro du ct or y e ss a y , "E. H. Norman, Japan and the Uses o f History" in Origins of the Modern Japanese S t a t e : Selected Writings of E. H. Norman, e d it e d by John Dower (New York: Random House, 1975); and Ross E. Mouer, Conservative and Radical Approaches in the L i t e r a t u r e on Japanese S o c i e t y , paper presented a t the 1978 Convention of the Asian Studies Association of A u s t r a l i a , May 1978. ^An i l l u s t r a t i v e account can be found in Saburo Okita, "The Case of Japan and the P o s s i b i l i t i e s in Some Developing Coun tri es ," in Japan 1n the WorlId Economy (Tokyo: Japan Foundation, 1975); see al so Shuichl Kato, "The Japan Myth Reconsidered," in Democracy, J u ly , 1981. 5 See f o r example Ezra Vogel, Japan as Number One, and f o r a more c r i t i c a l e v aluat ion of the Japanese model se e , Chalmers A. Johnson, MITI and the Japanese Miracle. ®See Chalmers A. Johnson, "The Taiwan Model," in James C. Hsiung, e t a l . , The Taiwan Experience, 1950-1980 (New York: Praeger P u b li sh e rs , 1981); and Bela Belassa, th e Newly I n d u s t r i a l i z i n g Countries in the World Economy (New York: Pergamon P r e s s , 1981); a ls o Hofheinz and Calder, The E a s ta s ia Edge. ^For an i n t e r e s t i n g d is cu ss io n r e l a t i n g to "Neo-Mercantilism" in Japan see D. P. Calleo and Benjamin M. Rowland, America and the World P o l i t i c a l Economy (Bloomington: Indiana U ni ve rs ity P r e s s, 1973); a ls o of i n t e r e s t a re Otto Hieronyml, e d . , The New Economic Nationalism (New York: Praeger P u b li s h e rs , 1980), and David J . Sylvan, "The Newest Mercantilism," in I n t e r n a t i o n a l Organ ization , 35, 2, Spring 1981. 261

262

o

In p a r j t i c u l a r South Korea, Taiwan, and Malaysia, which have i n s t i t u t i o n a l i z e d economic planning without p o l i t i c a l or id eo log ic al qualms. g

According to one EPA informant, the People 's Republic of China sent a de leg at ion to c a ll on the Japanese Economic Planning Agency in March 1980, r e c i p r o c a t i n g a February v i s i t to Beijing by a highranking EPA o f f i c i a l .

Chapter I *There i s a g r e a t deal of general and s p e c ia li z e d w r it i n g on J ap a n 's postwar i n d u s t r i a l p o l i c i e s . A r e p r e s e n t a t i v e t r e a t i s e i s Yoshio Ando, e d . , Nihon Keizai Seisaku Shi Ron, Vol. I and II (Tokyo: U nive rsity o f Tokyo P r e s s, 1973). A more r a d ic a l approach can be found in Yoshiharu Kitada and Toshio Aida, e d s . , Gendai Nihon No Keizai Seis aku, Vol. I and II (Tokyo: Otsuki Shoten, 1979). For an o f f i c i a l and i n s t i t u t i o n a l i n t e r p r e t a t i o n see OECD, The In d u s t r i a l Poli cy of Japan ( P a r i s , 1972). o Peter Katzenstein, e d . , Between Power and Plenty—Foreign Economic Policy of Advanced In d u s t r i a l S ta te s (Madison: U n iv e rs ity of Wisconsin P r e s s, 1978), 1s an e x c e l l e n t compilation of case s tu d ie s de aling with the domestic f a c t o r s 1n the g e s t a t i o n of i n t e r n a t i o n a l economic p ol ic y. The Japanese case 1s covered by T. J . Pempel. 3 An e x c e l l e n t i n t e r p r e t a t i v e a n a l y s i s of the ev olution of postwar macro-economic planning theo ry can be found in Leif Johansen's twovolume work, Lectures on Macro-Economic Planning (Amsterdam: NorthHoli and Publishing Company, 1977). A

For good p o l i t i c a l h i s t o r i e s and country s t u d i e s on economic planning from 1945 to the mid-1960s see: Andrew Sho nfield, Modern Capitalism (London: Oxford U ni ve rs ity P r e s s, 1968); Eberhard Volk: " R a t i o n a l I t a e t und H e r r s c h a f t, " in Sozioloqische Abhandlungen, Heft 12, 1970; and the U ni ve rs ity o f Syracuse s e r i e s on planning with c o n tr ib u ti o n s by Joseph LaPalombara, I t a l y —The P o l i t i c s o f Pla nning, 1962; Eve rett E. Hagen, and Stephanie F. T . White, Great Britain:" u i e t Revolution in Planning, 1968; Hans-Joachim Arndt, West Germany: he P o l i t i c s o f Non-Planning, 1966; Geoffrey Denton, e t a l . , Economic Planning and P o l i c i e s in Great B r i t a i n , France and Germany (New York: Praeger, 1968). 5 Representative d e s c r i p t i v e s t u d i e s and works are Yujiro Hayashi, Nihon No Seizai Keikaku, Senqo No Reskishi To Mondaiten (Tokyo: Toyo Keizai Shlmposha, 1957); Yuzo Yamada and Isamu Yamada, "Keizai Keikaku," in Nihon Keizai No Bunseki, Vol. 12, 1960; Kiyoichi Ohnishi,

?

263

Keizai Kikaku Cho (Tokyo: Kyoiskusha, 1975); Economic Planning Agency, Keizai Kikaku Cho Niju-nen Sho Shi (Tokyo, 1966); Gendai Nihon Keizai No Tenkai (Tokyo: 1976). ®Richard Halloran, Japan: Imaqes and R e a l i t i e s (Tokyo: Charles E. T u t t l e & C o. , 1970), p. 133. 7Firmin Oules, Economic Planning and Democracy (Harmondsworth: Penguin, 1966), pp. 45 and 67. O Karl Hax, Japan: Wirtschaftsmacht des Fernen Osten—Ein Beitrag Zur Analyse Des W its chaftlichen Wachstums (Koeln: Westdeutscher Verlag, 1961), p. 467. 9I b i d . , pp. 467-468. *®William W. Lockwood, "Ja pa n's New C apitalism," in William W. Lockwood, e d . , The S t a t e and Economic E nt er pr is e in Japan (P ri n c e ­ ton: Princeton U ni v ers ity P r e s s , 1965), p. 492. **Chitoshi Yanaga, Big Business in Japanese P o l i t i c s (New Haven: Yale U ni ve rs ity P r e s s, 1968), pp. 309-310. 12

B. H. Higgins and E. E. Hagen in Saburo Okita and Isamu Miyazaki, "The Impact of Planning on Economic Growth in Japan," in OECD e d . , Development and Programmes Studies in Development, No. 1 ( P a r i s , 1964), p. 66. 13

Saburo Okita, "The Experience o f Economic Planning in Japan," in Japan in the World Economy (Tokyo: The Japan Foundation, 1975), p. 64. ^Miyohei Shinohara, "Evaluation of Economic Plans in the Japanese Economy," in W e l t w i r ts c h a f tl ic h e s Archiv, Vol. I , 1964, p. 213. ^Tsunehiko Watanabe, "National Planning and Economic Develop­ ment," in Economics of Pla nning, Vol. 10, No. 1-2, 1970, pp. 22-23. ^ R y u t a r o Komiya, "Planning in Japan," in M. B e r ns te in , ed. Economic Planning: East and West (New York: B a l l i n g e r , 1975), p.

1ST. ^Chalmers A. Johnson, J a p a n ' s Public Policy Companies (Washing­ ton: AEI-Hoover Policy Studies 24, 1978), p. 22. 1ft Stephen S. Cohen, "From Causation to Decision: Planning as P o l i t i c s , " in The American Economic Review, May 1970, No. 2.

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20

Guy Benveniste, The P o l i t i c s of Experti se (San Francisco: The Glendessary P r es s, 1972), pp. v i i - i x . 21

Dominant s e l f - p e r c e p t i o n and image of EPA o f f i c i a l s . One of them d e c la ri n g to t h i s auth or: "We do not have a c o n st i tu en c y l i k e MITI or the MOF." The is su e of p l a n n e r ' s n e u t r a l i t y will be addressed in subsequent c ha p te rs . 22

See the following di scu ss ion on the p o l i t i c a l asp e c ts of e a r l y postwar Japanese economic planning, Haruhiro Fukui, "Economic Planninq in Postwar Japan: A Case in Policy Making," in Asian Survey, Vol. 12, No. 4, April 1972. 23

See Economic Planning Agency, Gendai Nippon Keizai No Tenkai (Tokyo, 1975), pp. 9 9 - f f . , on the formal estab lish me nt of the EPA. 24 Various d i f f i c u l t i e s in a s u b s ta n ti v e d e f i n i t i o n o f " ref orm is t for ce in Japanese p o l i t i c s " a re enough to make i t a tre acherous tool of a n a l y s i s . For our puprose here, however, " r e f o r m is t forces" comprisea broad spectrum of s o c i o - p o l i t i c a l for ces from the " l e f t " to the " r i g h t " in Japanese p o l i t i c s , d i s t i n g u i s h i n g c r i t e r i o n being the f a c t t h a t these fo rc e s do not share in actua l power with the r u l i n g conservative f o r c e s . 25

For an e x c e l l e n t and d e t a i l e d dis cu s s io n of the JS P' s ro le in the planning debate of the l a t e 1940s and up to the e a r l y 1960s see chaps. 5 and 6 in Allan B. Cole, e t a l . , S o c i a l i s t P a r t i e s in Postwar Japan (New Haven: Yale U ni ve rs ity P r e s s, 1966). 26 See T. J . Pempel and Keiichi Tsunekawa, "Corporatism Without Labor? The Japanese Anomaly," 1n Philip pe C. Schmltter and Gerhard Lehmbruch, e d s . , Trends Toward C o r p o r a t i s t Intermediation (Beverly H i l l s : Sage P u b l i c a t i o n s , 1979); and Fukui, "Economic Planning in Postwar Japan." 27

Yomiuri, June 27, 1959 (New Long-Term Plan and Income S e r i e s ) .

28

Keizai Doyukal has been most a c t i v e 1n promoting economic planning and management techniques in Japan; t h i s economic peak a s s o c i a t i o n compares well with the German RKW ( R a t l o n a l i s i e r u n g s Kuratorium der Deutschen W l r t s c h a f t ) , although the Keizai Doyukai does not re cei ve public su b si d ie s l i k e I t s German c o u n t e r p a r t , even though both perform s i m i l a r fu n c ti o n s . 29

See Tsunehlko Watanabe, "National Planning and Economic Develop­ ment," 1n Economics o f Planning, Vol. 10, No. 1-1, 1970; and Saburo Okita, The beveloping Economies and Japan—Lessons in Growth (Tokyo: Univ e r s i t y o f Tokyo P r e s s, i9 6 0 ) , p. 224.

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30

The Japanese economic bureaucracy c o n s i s t s of the Ministry of Finance (MOF), Ministry of I n t e r n a t i o n a l Trade and Indus try (MITI), M inistry of T r a n s p o rt a ti o n , Economic Planning Agency, Bank of Japan, and the In d u s t r i a l Development Bank. For an e x c e l l e n t i n t e r p r e t a t i v e a n a l y s i s , see Chalmers A. Johnson, MITI and the Japanese Miracle: The Growth of I n d u s t r i a l Poli cy, 1925-1975 (Stanford: Stanford Univers i t y P r e s s , 1982), pp. 35-82. 31

Most a n a l y s t s would probably concur with t h i s co n ten ti on. N a jit a and Fukui have made statements to t h i s e f f e c t from a h i s t o r i c a l , resp. p o l i c y - o r i e n t e d p e rs p e c ti v e . See Tetsuo N a j i t a , Japan (Engle­ wood C l i f f s : Pr en ti ce H a ll, I n c . , 1970), p. 3; and Haruhiro Fukui, "Bureaucratic Power in Japan," in Pe te r Drysdale, e d . , Japan and A u s t r a l i a (Canberra: A us tr a lia n National U n iv e rs it y , 1980); and T. J . Pempel, "The B ur eau crat iz at ion of Policymaking in Postwar Japan," in American Journal of P o l i t i c a l Scie nce, 18 (November 1974). 32 A standard p l u r a l i s t pe rs p ec ti v e of Japanese p o l i t i c s i s advanced in Robert E. Ward, J a p a n ' s P o l i t i c a l System, 2nd ed. (Engle­ wood C l i f f s , NJ: P r e n t i c e - H a l l , 1978); f o r a more c r i t i c a l a n a l y s i s see J . A. A. Stockwin, Japan: Divided P o l i t i c s in a Growth Economy, 1 s t ed. (New York: W. W. Norton, 1976)» pp. 105-106, 240. Also useful are Hans Baerwald, " P a r t i e s , P o l i t i c s , F a c tio ns , and the D i e t , " in Murakami and Hirschmeier, e d s . , P o l i t i c s and Economics in Contemporary Japan (Tokyo: Japan Culture I n s t i t u t e , 1979), p. 83; and Gerald L. C u r t i s , "Big Business and P o l i t i c a l In f lu e n c e s, " in Ezra F. Vogel, Modern Japanese Organization and Decisionmaking (Berkeley: Unive rs ity of C a l i f o r n i a P r e s s , 1975), p. 68. 33 For an e x c e l l e n t essay on the " p l u r a l i s t vs. e l i t i s t " deb ate , see Haruhiro Fukui, "Studies in Poli cy Making: A Review of the L i t e r a ­ t u r e , " in T. J . Pempel, e d . , Policymaking in Contemporary Japan (I t h a c a : Cornell U ni ve rs ity P r e s s , 1977); see a ls o Pempel and tsunekawa, Japanese Corporatism, op. c i t . QJ

On the s t a t i s t paradigm see Theda Skocpol, "Bringing the St a te Back In ," in Items, Vol. 36, No. 1-2, June 1982, pp. 1-8. 35

On the b u re a u cr a ti c p o l i t i c s model, see Graham T. A l l i s o n , The Essence of Decision: Explaining the Cuban M iss ile C r i s i s (Boston: L i t t l e , Brown, 1971), and Morton h7 Hal p e r i n , Bureaucratic P o l i t i c s and Foreign Policy (Washington, D.C.: The Brookings I n s t i t u t i o n , 1974), and Graham T. Allis on and Morton H. Hal p e r i n , "Bureaucratic P o l i t i c s : A Paradigm and Some Poli cy I m p l ic a ti o n s ," in Raymond Tanter and Richard H. Ullman, e d s . , Theory and Policy in I n t e r n a t i o n a l Relations (Prin cet on: Princeton U niv e rs it y P r e s s, 1972). For a rec en t c r i t i c a l di scu ss ion of the a p p l i c a b i l i t y of the "Bureaucratic P o l i t i c s Paradigm" r e f e r to J e r e l A. R o sa tl , "Developing a Systematic Dec1s1on-Mak1ng Framework: Bureaucratic P o l i t i c s In P e r s p e c t i v e ," in World P o l i t i c s , XXXIII (January 1981), 234-252.

266

8®Fukui, "Studies in Poli cy Making," p. 47. 37 See Leif Johansen, Lectures on Macroeconomic Planning, Part 1, General Aspects (Amsterdam: North-Holland Publishing Company, 1977), pp. 104-109. 38

T. J . Pempel, e d . , Policymaking in Contemporary Japan ( I t h a c a , NY: Cornell U ni ve rs ity P r e s s, 1977), p. 312. 39

See Theda Skocpol, op. c i t .

40

Alfred Stepan, The S t a t e and Society: Peru in Comparative Persp ect ive (P rinceton: Princeton U n iv e rs ity P r e s s , 1978), p. x i i . 41

Theda Skocpol, op. c i t . , p. 4.

4^See Chalmers A. Johnson, "Japan: Who Governs? An Essay on O f f i c i a l Bureaucracy," Journal of Japanese S t u d i e s , 2 (Autumn 1975), 1-28; J a p a n ' s Public Policy Companies (Washington, D.C.: American En te rp r is e I n s t i t u t e , 1978); Mill and the Japanese Miracle: The Growth of In d u s t r i a l Poli cy, 1925-75 (Stanford: Stanford U nive rsity P r e s s , 1982). 43 Chalmers Johnson, MITI and the Japanese M ira cl e , op. c i t . , pp. 309 -ff. 44I b i d . , pp. 310-311. 45I b i d . , pp. 315-320. 46T. J . Pempel and Keiichi Tsunekawa, "Corporatism Without Labor?" in Philippe C. Schmitter and Gerhard Lehmbruch, e d s . , Trends Toward C o rp o ra ti s t Intermediation (Beverley H i l l s : Sage P u b l i c a t i o n s , 1979), p. 268. 47I b i d . , p. 238. 48I b i d . , p. 238. 49I b i d . , p. 269. 80T. J . Pempel, P o l i c y a n d P o l i t i c s in Japan ( P h ila d elph ia : Temple Uni ve rs ity P r e s s, 1982), p. 24. 51

Johnson, op. c1 t. CO See Eric A. NordHnger, On the Autonomy of the Democratic St a te (Cambridge, MA: Harvard U nive rsity P r e s s, 1981), pp. 1-39.

267

N a j i t a , Tetsu, Japan (Englewood C l i f f s : P r e n t f c e - H a l l , 1974), f o r a most i n c i s i v e and suggestive discus sio n of the ethos of Jap an 's Higher Civil Servants. 54 Writes Maik: "The bureaucracy made s i g n i f i c a n t c o n tr ib u ti o n s to the se accomplishments (occupation and re co very) , f o r i t was the prime source of c o n t i n u i t y between the old and the new in Japanese government." John M. Maki, Government and P o l i t i c s in Japan (New York: Praeger, 1964), p. 70. 55

For an i n t e r p r e t a t i v e a n a l y s i s of J ap a n 's Public E n t e r p r i s e s , see C. A. Johnson, J ap a n 's Public Policy Companies (Washington: AEI-Hoover Policy S tu d i e s , 1978). And a ls o Masu Uekusa, The Role of Public E nt er pr is e s in the Service Sector in Japa n, Univer si ty o f Tokyo, paper, mimeo, 1979, f o r a d e t a i l e d d e s c r i p t i o n o f the "Third Sector" where Public En t er p r is e s are most prominent with 30.7% in a s s e t and stocks (1970) and accounting f o r 9.2% of t o t a l national wealth in 1970. As well as Kiyohiko Yoshitake, Public E nt er pr is e in Japan, Nippon Hyoron-sha, Tokyo, 1973. ^®See Inukai, I. and Tussing, A. R . , "Kogyo-Iken: J a p a n ' s Ten-Year Plan, 1884," in Economic Development and Cultural Change, Vol. 16, 1967/8. ^ T s u j i , Kiyoaki, Nihon Kanryosei No Kenkyu (U n iv e rs ity of Tokyo P re ss, 1969), p. 271. 57

Yanaga, C h it o s h i, Big Business in Japanese P o l i t i c s (Yale U ni ve rs ity P r e s s, 1968), pp7 307-308. 59 Sakakibara, Eisuke, Nihon 0 Enshutsu Suru Shin Kanryo Zo (Tokyo, 1979), pp. 16-48. ®®See Andrew Shonfield, Modern Capitalism (Oxford, 1969) f o r an o u t l i n e of the basic argument of the changing balance of public and p r i v a t e power, pp. 61-69. 61

Anthony Giddens, The Class S t r u c t u re of the Advanced S o c ie tie s (London: Hutchinson Unive rs ity Li brary, 1978), p. 162. CO Charles E. Lindblom, "The Sociology of Planning: Thought and Social I n t e r a c t i o n , " in M. Bornstein, e d . , Economic Planning in East and West (Boston: B a l l i n g e r , 1975), pp. 23-59. 63

For a c r i t i c a l and b r i l l i a n t a n a ly s is of the c r u c i a l nexus p a rt y and planning p o lic y and p o l i t i c s , see Alan Budd (Glascow: William Collins Sons & Co., 1978).

268

C h a p te r I I

See Albe rt Breton, "Economics of Representative Democracy," in James M. Buchanan, e t a l . , e d s . , The Economics of P o l i t i c s (Lancing, West Sussex: Goron P r o - P r i n t Co., L t d . , 1978), pp. 55-56. o

See T. J . Pempel, Policy and P o l i t i c s in Japan; Creat iv e Conservatism ( P h ila de lp hi a : Temple Unive rs ity P r es s, 1982), p. 47. 3 Chalmers Johnson, MITI and the Japanese Miracle: The Growth of I n d u s t r i a l Poli cy, 1925-1975 (S ta nfo rd , CA: Stanford U niv e rs ity P r e s s , 1982), p. 22. ^ I b i d . , pp. 22-30. 5 For example, economic dualism p e r s i s t s to t h i s very da te . A c l a s s i c account has been Seymour Broadbridge, I n d u s t r i a l Dualism in Japan: A Problem of Economic Growth and S tr u c t u r a l Change (Chicago: Aldine Publi shi ng , 1966), although d a te d , t h i s work i s s t i l l very useful in i t s basic c on c e p tu a li z a ti o n of the problem. ^Perhaps with the exception of the t o t a l i t a r i a n s t a t e s of the 1930s: I t a l y , Germany and the Soviet Union. ^Ichirou Inukai and Arlon R. Tussing, "Kogyo Iken: J a p a n ' s Ten Year Plan, 1884," in Economic Development and Cultural Change, Vol. 16, No. 1, p. 51. ®Ichirou Inukai, "The Kogyo Iken: J a p a n ' s Ten Year Plan, 1884," in Kyoto Sangyo U ni ve rsity Economic and Business Review, No. 6, May 1979, p. 4. I n c i d e n t a l l y , t h i s i s perhaps the most comprehensive study in English on the Kogyo Iken. q For example, in 1877 i t took the Tokyo government some six months of b i t t e r f i g h t i n g by 40,000 troops to put down the Satsuma r e b e l l i o n ( a l s o r e f e r r e d to as the Selnan engagement). *®The r o l e of Masana Maeda in the making o f the Kogyo Iken i s described on pp. 27-42 1n Kyoto Sangyo Unive rs ity Economic and Business Review, op. c1 t. ^ E s t a b l i s h e d 1n 1881 to s t e e r economic growth. 12

Kyoto Sangyo U niv e rs ity Economic and Business Review, op. c i t . , pp. 44-46, passim. 13

I b i d . , pp. 62-67, passim.

269

Although th e re was agreement t o e s t a b l i s h a mechanism to provide i n d u s t r i a l loans to e n t e r p re n e u rs ; disagreement concerned the s e t t i n g o f p r i o r i t i e s in view of th e prospects o f financ ing an unlimited number of e n t e r p r i s e s with a li m it ed amoung of funds. 14 Kyoto Sangyo Univer si ty Economic and Business Review, op. c i t . , p. 44. 15I b i d . , p. 7.

17I b i d . , p. 50. 18I b i d . , p. 54. 19

I b i d . , pp. 55, 56.

20I b i d . , p. 77. 21I b i d . , p. 21. 22

William W. Lockwood, The Economic Development of Japan: Growth and S tr u c t u r a l Change, expanded e d i t i o n (Princeton: Princeton Univer­ s i t y P r e s s, 1968), p. 508. 23

Takafusa Nakamura, The Postwar Japanese Economy: I t s Development and St r u ct u re (Tokyo: U niv e rs ity o f Tokyo P r e s s, 1981), p. 4. 9A

Hlromi Arisawa, Nippon Kogyo Toseiron (Tokyo: Yuhikaku, 1937),

p. 229. 25

Kazuzo Tsukata, Sangyo Gorika-Ron (Tokyo: Nippon Shuppan Sha, 1942), pp. 8-9. 26

Arisawa, op. c i t . , pp. 80-81.

27

See Mark R. P e a t t i e , Ishiwara Kanji and Jap a n's Confrontation with the West (P ri n c et o n , NJ: Princeton Unive rs ity P r e s s , 1975), ph