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The role of competition in industrial history of Japan

Japan has the most outstanding industrial development among Asian countries. It can be compared to the development in many big countries such as Germany, Britain, France and United States. However, the development of industry in Japan has its own uniqueness. Japan industrial development was mainly caused by its decision of not to be intruded by Western. In order to do that, Japan realized that they had to be more Western. When speaking about the industrial history of Japan, one of the most important things to be considered is the role of competition.

The competition has become aroused especially in the postwar era of Japan. In a market economy, as commonly acknowledged, there should be individual freedom, and an acceptable economic performance could be reached by market mechanism which adjusts individual activities. Consequently, government should put into practice policies which encourage competition among companies to improve the benefit for consumers, in this case all the citizens. However, in contrast to the above statement, the postwar Japan industrial policy tends to be in that of controlled economy, rather than to a more competitive market economy.

This is where the Ministry of International Trade and Industry (MITI) had the key points on how the Japan

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industrial development become. The policy was that of catch-up type which was regarded to be important to become more competitive internationally against western countries. For most of the post-war era, the principal goal of Japan’s economic policy has been development and growth, and free competition has sometimes been seen as inconsistent with that goal1. The policies are based on the opinion that: (1) the production must be given first priority, and (2) the fruitless competition should be excluded.

These postwar policies were carried out under the recognition; that is (1) the improvement of productivity in all industrial fields resulting in an improved standard of living; (2) for this purpose, collaboration of people is necessary and it is essential to equally deliver the obtained result to them2. Competition policy has been treated as a species of regulation, not an organizing principle for the economy. Even though there was Antimonopoly Act since 1947, it had not been enforced strictly.

According to the above statements, the main type of postwar industrial policies is either competition-restrictive or cooperation-oriented. According to Prof. Takako Ishihara of Hyogo University, the role of competition in the history of industrialization of Japan can be mainly divided into 3 phases, (1) the policies that attempt to protect and promote the key industries from the late 1940s to 1950s, (2) the industrial reorganization policies dealt with the trade and capital liberalization in 1960s, and (3) the industrial adjustment policies in 1970s.

The first phase is a phase where there was consideration on the protection and promotion of basic or strategic industries. From 1946 to 1948, the “priority production system” was carried out in order to promote steel and coal mining industries. The allocation of the limited government capital, foreign-currency holdings and imported raw materials for both industries was given top priority in those days to make a foothold of Japan’s postwar recovery in economy and industry.

In the 1950s, the protection and promotion to key industries was effected with preferential measures on the tax system and the special financing by the Japan Development Bank aimed at key industries (the steel, coal mining, shipbuilding, electric power industries, and so on). The industries with potential growth (the synthetic fibers, plastic, petroleum refining, petrochemical and electronics industries, and so on) were also subjects for protection and promotion. Then, in 1956, the Law on Extraordinary Measures for the Promotion of Machine Industry was legislated.

This law was legislated as a temporary statute for 5 years but it was prolonged two times afterward. It has been enforced for 15 years. This implement was based on the idea that rationalization is required in the machine parts industry, mainly consisting of small businesses, in order to strengthen the industrial basis like the automobile and the machining tools industries. Furthermore, in those ages, the Antimonopoly Act was amended to relax. Especially, the amendment in 1953 permitted the two types of cartel: rationalization cartel and depression cartel.

In this respect, it is also recognized that the government in those days intended to eliminate fruitless or excessive competition. The priority production system aimed at the entirety of steel and coal mining industries for protection and promotion, but in the industry rationalization policy and the protection and promotion measures in the 1950s, the superior enterprise in the said industries became the subject of preferential measures. The second phase is the policies in 1960s.

As the competition with foreign enterprises became the real issue, the opinion that “we must strengthen the international competitiveness by eliminating the domestic excessive competition and enlarging size of business” became more powerful, and then industrial reorganization was attempted by promoting mergers. Actually, big mergers occurred in the 1960s. There is no doubt that the merger supporting measures by the government really promoted mergers, but it is interesting that the private enterprises had reluctance in accepting the way of government leading style.

This is nothing else but the appearance of this fact, which the Bill on Extraordinary Measures for the Promotion of Specific Industry was discarded. It is also a good example that the consolidation plan for automobile manufacturers by MITI failed after all. Moreover, for strategic industries such as the automobile industry and the computer related fields, the protective trade measure was taken in order to strengthen the international competitiveness.

These industries show outstanding growth afterward, but one influential opinion is that the success owes not to the protective trade measures themselves but to their being “time-bound. ” To sum up, the threat of facing the competition with foreign enterprises in the near future gave a strong incentive to domestic enterprises to improve efficiency; as a result, they could strengthen their competitiveness.

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