The Political Economy of Japan Bradley M. RICHARDSON

examples, not MITI policy. Under the kinds of circumstances just described someJapanese economists have been loath to grant the plans a determinant role ineconomic behavior. In the words of Toshimasa Tsuruta (46):"...the modernization of the industrial structure, and the strengthening ofindustrial competitiveness were not the result of industrial policy, but rather ofthe relatively smooth operation of the price mechanism and the ability of firmsthrough their own decisions to adapt. The initial objectives of industrial policycould not be realized, and they remained empty plans…."Many commentators on Japanese economic policy have speculated as to thegovernment's ability to pick winners and allocate resources accordingly. Among theindustries supported by the Japanese government in the 1950s, iron and steel isnormally seen as a successful application of industrial policy (47). A variety of policytools -loans, tax incentives, protection and coordinated production and sales- wereused to stimulate modernization of facilities and stable supply and demand. Iron andsteel received $74.5 million in "rationalization" support from 1951-1965. While thiswas a fairly small amount of money compared with the funds given power, coal andshipping, it was still was considerably more than was given any other industry at thistime. The goal of policy was modernization of steelmaking processes so as toimprove productivity and lower prices. Lower prices in the steel industry were soughtto facilitate growth in domestic manufacturing industries which depended on steelinputs. Lower prices would also lead to more competitive exports. Productivity didincrease in the 1950s and steel prices declined until the first oil crisis in 1973 (48).One of the more interesting facets of Japanese industrial policy is the simplefact that two of Japan's most highly successful industries, consumer electronics andautomobiles, were given very little government support relative to infra-structure andlater recessed industries. Consumer electronics received only $6 million ingovernment loans during the 1960s, and the government initially opposed technologyimports destined for this industry in the 1950s (49). The government role in theautomobile industry was mixed. Government lending provided 8 percent of theindustry's borrowing needs in 1955, but only between less than 1 percent and 2percent in most other years (50). Tax incentives, government allocated technologyimports and protection have been seen as having a modest positive effect on theindustry in the 1950s and 1960s. Still, government policies (especially protectionistbarriers) are believed to have played a relatively modest role relative to othereconomic factors including high world demand, cheap gasoline in the United Statesand improvement of the Japanese road system (51). Perhaps the most importantgovernment supports given Japan's automobile industry were the loans and otherincentives provided auto parts producers, since these encouraged cost-saving andquality-invoking technological innovations in medium and small firms which providedinputs for the assembly lines of large firme (52).