The inner workings of a society are often
obscured by outward appearances. This is cer-
tainly true of Japan. Its early industrial successes
and its recovery from the low of war’s end might
at first sight be ascribed to purposeful govern-
ments setting planned targets and, with the help
of the bureaucrats in the relevant ministries, espe-
cially the Ministry of Finance, the Ministry of
International Trade and Industry (the famous
MITI) and the Economic Planning Agency,
achieving them unfailingly. From the mid-1950s
onwards, plan after plan, some ten of them in
thirty years, were produced, often interrupted,
amended or discarded before they could run
their five- or ten-year terms. There is no doubt
that in the early post-war years the influence of
governmental–bureaucratic measures was consid-
erable. At first, priority was given to coal and
steel, to provide the basic energy and material for
manufacture; then other sectors were successfully
developed – chemical fertilisers, shipbuilding,
cars, machine tools, transistor radios, cameras,
television sets, video-recorders and microchips.
MITI encouraged the formation of the keiretsu,
the pre-war zaibatsus. Mitsubishi and Mitsui were
back in business and huge new conglomerates
came into being, such as the electronic innovator
Sony and car manufacturers Toyota and Nissan.
Government–bureaucracy assisted during the
early years in various ways, most importantly by
managing the nation’s finances and investments
through controlling revenue and banks and by
making cheap loans to targeted industries
through the Reconstruction Finance Bank, the
Export–Import Bank and the Japan Development
Bank. Industry expanded fast, fed by enormous
investments. Governmental–bureaucratic rules
and legislation in the 1960s and 1970s meanwhile
protected the emerging home industries, employ-
ing many devices to prevent foreign imports from
being competitive – where they could not be kept
out altogether. This was to lead to tension with
the US and Western Europe, which were threat-
ened with a flood of Japanese exports. Japanese
trade unions became steadily more cooperative
after the more turbulent 1950s; continual con-
servative government and rising prosperity under-
mined union militancy and membership.
Undeniably, then, the government–bureaucracy
has played an important role in Japan’s rapid eco-
nomic growth. But the notion that it has devel-
oped anything like a command economy is very
misleading. Since 1945, command economies
have failed all over the world. It would be strange
if Japan were the one exception. In fact, Japanese
government planning had far more in common
with the approach of Jean Monnet in France, that
is indicative planning, than with Stalinist forms of
control over production, investment, distribution
and pricing. Japan’s economy was and remains
thoroughly capitalist, with a profit-oriented out-
look, fiercely competitive at home and abroad.
The role of MITI declined after the early 1960s; it
remains a source of supplementary assistance to
industry but it has long since ceased to be decisive.
Business leadership, however, was certainly deci-
sive. But neither government–bureaucracy nor
business could have generated the colossal invest-
ment in technology necessary for the economies
of scale achieved as huge industrial conglomer-
ates were built up but for the availability of
funds. These came not from abroad but from the
Japanese man in the street, who lived frugally
and saved a fifth of his income year after year.
The rewards of this frugality were not large in
the short term. The return from interest and the
growth of pensions was kept very low so that
companies could borrow money cheaply. In the
longer term, however, the Japanese did benefit
from industry’s prosperity. Meanwhile, govern-
ment expenditure for non-industrial purposes was
also held down – welfare payments, housing, the
infrastructure were all neglected. The contrast
between an automated industry employing the
largest number of robots in the world, on the one
hand, and the inadequate sewerage system in
many large cities, the over-crowded roads and
extensive pollution, on the other, was the price
paid for the single-minded pursuit of industrial
growth. The close links between savings, the
banks, their loans to industries good and bad
would lead to trouble later.
At the start of the 1960s, the new prime minis-
ter, Ikeda Hayato, promised to double everyone’s
income in ten years. Business met this target with
extraordinary rapidity, more than quadrupling
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