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Economic Planning in Postwar Japan: A Case Study in Policy Making
Author(s): Haruhiro Fukui

Source: Asian Survey, Vol. 12, No. 4 (Apr., 1972), pp. 327-348
Published by: University of California Press
Stable URL: https://www.jstor.org/stable/2642940
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ECONOMIC PLANNING
IN POSTWAR JAPAN,:
A CASE STUDY
IN POLICY MAKING
/ Haruhiro Fukui
ne of the most interesting and important aspects of postwar Japanese

politics is what may be called a form of limited pluralism in the process
of authoritative policy-making. This refers to a situation that may be de-
fined as a process of policy-making in which a relatively clearly and nar-
rowly limited number of individuals participate, usually but not always
with a relationship characterized by a high degree of consensus and will-
ingness to cooperate with each other. These participants belong to one or
another of three fairly stable and distinct categories of people; i.e., high-
ranking bureaucrats in the central government ministries and agencies,
members of the National Diet affiliated with the ruling Liberal-Democratic
party (or its predecessors before November 1955), and leaders of organized
big business. The degree to which this process is influenced by or insulated
from those individuals and groups in the society who do not belong to the
above-mentioned categories appears to vary a great deal depending on
specific subjects of policy-making involved and, perhaps, many other fac-
tors. In certain cases the influence of the opposition parties, the press and
"public opinion" may be very substantial, even decisive, whether in a posi-
tive or negative sense from the point of view of a smooth and efficient process
of decision-making. The process seems, however, typically less sensitive
to pressures emanating from the segments of the society which are not
represented by the central bureaucracy, the ruling party or the organized
business community. It appears, in other words, to operate often like an
autonomous and self-contained system impervious to its environment. It
also seems to be the case, however, that certain pluralistic, if not outright
antagonistic, pressures tend to build among the principal participants and
interfere with the process of consensus-building and decision-making.
It is my impression that this limited pluralist pattern is the dominant
one in the governmental policy-making process of contemporary Japan.
327
328 PLANNING IN POSTWAR JAPAN
In a previous study I attempted to e

which relate primarily to variables int
principal participants, namely, the L
ticians.' In a study currently underw
relationships between the three catego
particularly the opposition parties and
as commonality in the modal patter
and analyzed in the larger study thr
dealing with specific policy-making
as one involving the issue of environ
trol or another involving the controver
ment, will show that there are indee
autonomy and imperviousness to env
is severely limited.
The case presented below is based o
in the book-length study. It is, howeve
typical and modal pattern, rather th
In this sense the primary purpose of a
firmation by presentation of additio
the "normal" situation previously no
like it to be considered in the context o
certain important patterns of policy-m
isolated case study which is complete in
ECONOMIC RECOVERY UNDER THE ALL
The first few years after Japan's acce

and the termination of the hostilities in
and social change unprecedented in t
not only struggling to survive in the w
spiritual devastation which had been
experiencing for the first time in it
and control by foreigners. It is interes
with more or less systematic long-term
in Japan during this very extraordinar
dents set then have since evolved int
for postwar economic policy making. T
and growth of Japanese economy has n
from the series of official economic pl
"miracle" of the nation's economic perf
had much to do with the frequently ch
three-year or five-year projections and
in the present study, however, mainly w
'Party in Power: The Japanese Liberal-Dem

Los Angeles: University of California Press
HARUHIRO FUKU1 329
were responsible for official policy decisions at the time they were made
interacted with one another and with other important elements in the so-
ciety. To the extent that the process of economic plans-making reflected
the patterns of such interactions, we are interested in analyzing and under-
standing those processes.
Japan's recovery from the dreadful state of poverty and hunger to which
the war had led her depended very substantially upon the material assistance
and policy guidance offered by the U.S. during the Allied occupation of
the country under the command of General Douglas MacArthur. Particu-
larly after the so-called Johnston report was published by the U.S. Depart-
ment of the Army in the spring of 1948, it became an increasingly firm
commitment of Washington to encourage and assist Japan's prompt eco-
nomic recovery.2 In the years ensuing the U.S. government not only helped
to cut down the amount of Japan's war reparations obligations and expand
her foreign trade opportunities but also provided substantial amounts of
loans and credits. Between September 1945 and April 1952 some $1.8 bil-
lion was thus poured into Japan, principally under the Government and
Relief in Occupied Areas (GARIOA) and the Economic Rehabilitation in
Occupied Areas (EROA) programs.3 The assistance extended by the U.S.
in the form of policy advice and recommendations, such, for example, as
the prescriptions for the control of the postwar inflation and the stabilization
of the currency, offered in early 1949 by the Detroit banker, Joseph M.
Dodge, acting as financial adviser to General MacArthur, were no less vital
to Japan's swift economic recovery.4
It should be emphasized, however, that all such material and technical
assistance extended by the U.S. could have been wasted without leaving a
permanent impact on the tottering economy. The fact that the American
assistance did not in fact go down the drain but was effectively utilized to
bring the devastated nation and its economy back on its own feet points to
the importance of the dedication and efforts of the Japanese people them-
selves. In line with their centuries-old tradition the Japanese efforts were
initiated and directed, often in response to formal directives or informal
promptings of the Americans, by those professional bureaucrats who manned
the central government ministries and agencies. Wartime government con-
trols were quickly replaced by a series of new postwar controls administered
mainly by the newly established Economic Stabilization Board (ESB) and
2Jerome B. Cohen, "Japan: Reform vs Recovery," Far Eastern Survey, June 23, 1948,
pp. 137-42.
3All of this aid was not given, however, as an outright gift but rather in the form of
loans eventually to be repayed. In fact, according to the terms of an agreement con-
cluded between the United States and Japanese governments in January 1962, about a
third of the amount of the original loans, less various deductions, or $490 million, would
be repaid by Japan over a period of fifteen years at 2.5% interest. For the text of the
agreement, see Asahi Shimbun, January 9, 1962. Also see Kanichi Ishii, "Garioa Eroa
enjo to sono henzai," Seisaku Gepp6, March 1962, pp. 112-23.
'Robert A. Fearey, The Occupation of Japan: Second Phase, 1948-50, (New York:
Macmillan Co., 1950), pp. 128-35.
the Ministry of Commerce and Industry, subsequently reorganized into

the Ministry of International Trade and Industry (MITI). Rations for
footstuffs, fuels and other basic necessities of life were as rigidly maintaine
as were possible under the conditions, and controls over trade in foodstuffs,
raw materials and textiles were enforced through various public control
corporations established in the spring of 1947.5
During the first year following Japan's surrender in August 1945 it was
an ad hoc group of Cabinet ministers called a Cabinet Economic Forum
(Keizai kakury& kondankai), which included the ministers for home affairs,
finance, commerce and industry, agriculture and forestry, transportation,
and welfare, that was charged with the task of devising and enforcing these
controls as well as supervising the program of economic decentralization
and democratization ordered by the SCAP. This was a temporary device,
however, and the functions of the Forum were taken over 'by the ESB as
soon as the latter was established in August 1946.
During this period both the government party and various business groups
presented their views to the cabinet, whether directly or through informal
conversations with individual cabinet ministers. In fact, almost as soon as
the war was over, cabinet ministers began to confer officially with influential
business leaders. In October 1945, for example, eighteen businessmen were
invited for consultation by the Minister of Commerce and Industry, while
in February of the following year twenty representatives of the incipient
Federation of Economic Organizations (Keizaidantai reng6kai) were re-
ported to have presented to the ministers of Finance and of Commerce and
Industry their suggestions for coping with the deteriorating management-
labor relations, the rectification of irregularities in pricing practices, the
rationalization of the distributive system, etc.6 In July!1946 the newly formed
Committee for Economic Development (Keizai D6yiikai) issued a state-
ment on the cabinet decision to suspend the payment of compensation for
cancelled wartime government contracts.7 This last-mentioned employer
organization began in October to study on its own initiative the possi-
bilities of a government-sponsored long-term economic reconstruction plan.
About the same time there was an interesting attempt to free the efforts
for economic rehabilitation and development from the rigid bureaucratic
control and to provide for substantial and effective participation in the
process of decision-making by representatives of both management and
labor or private businesses. Inaugurated in December 1946, the Economic
Reconstruction Conference (Keizai Fukko Kaigi) initially consisted of those
representing eight employer organizations, including the Committee for
Economic Development, and seven labor groups, including the Japan Fed-
5See Seisaku Jih6, ed., Tsiusansh6: Sono hito to soshiki, (Tokyo: Seisaku Jiha sha,
1968), p. 14.
Mlsahi Shimbun, October 5, 1945; February 23, 1946.
'Keizai D6yfikai, (ed.), Keizai Ddyfikai Jinenshi, (Tokyo: Keizai DMyfikai, 1956),
pp. 38-39.
HARUHIRO FUKUI 331
eration of Labor (Sadomei) and the Japan Labor Congress (Nichir6 Kaigi).
For fifteen months of its active existence under the leadership of Chairman
Mosabur6 Suzuki, a veteran labor leader and Socialist member of the House
of Representatives, it strove to generate effective non-official input into the
bureaucratic decision-making process by sponsoring a "production rehabili-
tation movement," by setting up specialized study committees on foodstuffs,
fertilizer, electric power, small businesses, etc., and by engaging in the
drafting of long-term economic reconstruction plans.8 This attempt was,
however, short-lived primarily due, I suspect, to the difficulty of keeping
such an economically and ideologically heterogeneous group united in pur-
pose and action for more than a very limited period of time. The Conference
was formally dissolved in May 1948 and thereafter the task of making both
short-term and long-term economic plans was left again largely to govern-
ment agencies, particularly the ESB. The latter drafted the first official
economic reconstruction plan in the same month in 1948 that the Economic
Reconstruction Conference was disbanded.
Aimed primarily at raising within five years the nation's standards of
living to a level equal to that of the 1930-34 average, this plan was subse-
quently found to be in conflict with the spirit of the American recommenda-
tions embodied in the so-called Nine Principles which were handed to the
Japanese government in December 1948 and the "Dodge Plan" announced
in early 1949 by Joseph M. Dodge. These American plans both emphasized
above all an effective control of the inflation by stabilizing the currency,
preventing wage increases, and rigidly restricting government expenditures.
As a result, after having been revised in 1949, the first official economic
reconstruction plan was quietly abandoned despite strong objections raised
by the ESB officials.9
It is both interesting and important to note that despite the apparent
failure of the Economic Reconstruction Conference as a permanent ma-
chinery for effective participation of private groups in the policy-making
process, the ESB continued to allow throughout this period a limited number
of management representatives (but not those of labor) as well as a few
eminent university professors to participate in policy deliberations in an
individual and advisory capacity. Thus the revision of the original 1948
reconstruction plan was undertaken by an advisory body called the Eco-
nomic Council (Keizai Shingikai) appointed by the ESB director. The
membership of the Council included some of the nation's leading business
men and academic economists. Thereafter the Economic Council became
an ad hoc and yet virtually permanent agency through which the govern-
ment sought the opinions and cooperation of the business community in
revising existing economic plans or formulating new ones.
8Ibid., pp. 55-70, 167-78. See also Asahi Shimbun, May 21, June 5, September 29,
1947; February 24, 1948.
9ESB General Secretary, Hidez5 Inaba, resigned in protest. See ibid., September 18,
1948.
The Economic Council appointed

recommendations for the attainm
were assigned by appointment to s
cific areas of the economy. The p
Organizations was assigned as chairman to a sub-committee on mining and
manufacturing industry, while the managing director of the same employer
organization led the finance and banking sub-committee. Likewise, the presi-
dent of a leading trading firm was appointed chairman of the foreign trade
sub-committee, while a director of the National Shipowners Association
was in charge of the transportation sub-committee.10 The report of the
council officially submitted to the cabinet in January 1951 was concerned,
just as the previous government plans had been, primarily with the rehabili-
tation of the Japanese economy from the very visible effects of the destruc-
tive war. It called for securing imports of essential raw materials from
overseas sources, drastically increasing the production of foodstuffs, and
building capital for investment, so that by 1953 the general standards of
living might recover to 89%o of the 1934-36 level.
In the period following Japan's recovery of political independence sim-
ilar councils were appointed one after another. Needless to say, these coun-
cils provided selected leaders of big business organizations with facilities
and opportunities for participating in the governmental policy-making proc-
ess on an official and more or less permanent basis. ;It should not be assumed,
of course, that the influence the big business leaders brought to bear upon
the government either through the machinery of the Economic Council or
through less formal channels was then or has since been always a decisive
factor in government decision-making. Evidence seems to suggest that their
influence was always important and often critical but remained generally
subordinate to the influence of cabinet ministers as a group and bureaucrats,
at least until late 1954 when the powerful Liberal premier, Shigeru Yoshida,
who had ruled Japan almost single-handed during the greater part of the
postwar years, finally yielded the executive power to his Democrat rival,
Ichir6 Hatoyama.
As government officials were desperately struggling in the years imme-
diately following the end of World War II to bring the nation's crippled
economy back on its own feet through the utilization of American assistance
and experimentation with economic planning within the limits of the capi-
talist free enterprise system, the Socialists manifested a great deal of interest
in "socialist" economic planning. Their program published in October
1945, for example, called for the nationalization of iron and steel, coal
mining, fertilizer, and electric power industries, as well as banking and
insurance services, and for "democratization" of those services which were
already managed by the government, such as railroad, postal, telephone
and telegraph services."1 The same proposal for the "socialization" of the
"Ibid., September 1, 1950. See also Asahi Shimbunsha, Asahi Nenkan 1952, p. 178.
"Asahi Shimbun, October 19, 1945.
HARUHIRO FUKUI 333
key industries was repeated on subsequent occasions, as in the announce-

ment of the party's Central Executive Committee in the fall of 1946 and
in the five-year plan drafted by its policy board in 1956.12
They were naturally interested also in more concrete and specific issues,
such as the proposed requisition of war-induced profits, the suspension of
the payment by the government of compensation for cancelled wartime con-
ltracts, the imposition of sharply progressive rates for property, income and
inheritance taxes, and the replacement of the existing pension schemes pro-
vided by individual corporations and government agencies by a uniform
national system. In fact, after the short-lived and generally undistinguished
governance by Socialist-Democrat coalition cabinets in 1947 and 1948 the
call for the socialization of the economy quickly lost its appeal to the elec-
torate and, more importantly, to the party leaders themselves. They con-
tinued to present their own economic plans as alternatives to those prepared
by government bureaucrats and management representatives, but these plans
were gradually reduced to less grandiose and more practical specifics. The
"Four-Year Plan for Economic Independence" drafted by the party's policy
board in the fall of 1950, for example, emphasized the increased production
of foodstuffs, rehabilitation of the merchant marine, the unobstructed opera-
tion of electric power plants, promotion of foreign trade, etc., while not com-
pletely abandoning the prospects for eventual socialization of the major
industries in an indefinite future.'3 It is interesting to note that in this
program and others the Socialists spoke in 1950 and 1951, just like the
conservatives, increasingly of the goals of economic independence, full
employment and modernization, rather than the overthrow of the capitalist
system despite the continuing militancy of active labor leaders who were
the principal supporters of the party.
POLITICAL AND ECONOMIC INDEPENDENCE IN THE KOREAN WAR PERIOD
The first few years of the 1950's marked a critical period of transition
for Japan's postwar economic recovery, from the initial phase of rehabilita-
tion under American tutelage to a new stage of increasingly autonomous
growth and development. In this process of transition the outbreak of the
Korean War in June 1950 and its immediate and long-range effects proved
to be of crucial importance. The policy based on the Nine Principles and
the Dodge Plan had succeeded in blunting the edge and eventually halting
the progress of the postwar inflation, but, ironically, it had also given rise
to a series of other problems hardly less intractable-an alarming number
of business bankruptcies, especially among small enterprises, a steady in-
crease in unemployment, stagnant export trade and the resultant stockpiling
of undisposable goods, an apparently chronic state of depression in the agri-
"2For details of the specific nationalization plans, see Nihon ShakaitB Seisakushingi-
kai, (ed.), Riron to seisaku, (Tokyo: Nihon Shakait5 Kikanshikyoku, 1965), pp. 975-97.
13Asahi Shimbun, November 21, 1950.
cultural sector, etc.14 In a sense the

these vexatious problems by creating
especially American, demands for Ja
machinery. Although these sudden de
omy a new series of difficult problem
ages of raw materials and the reappea
Gures, it is undeniable that the boom
phot in the arm for the struggling ec
manufacturing production rose to th
1950 and by March 1951 outstrippe
textiles and foodstuffs, industrial pr
lation, capital investment and gros
reached the prewar level by the midd
tions that Japan officially regained h
the peace treaty in San Francisco in S
The conclusion of the peace treaty and the prospects of an imminent
restoration of political and diplomatic independence stirred the political
parties to prepare and announce new policy programs appropriate to the
changed circumstances of the nation. Not surprisingly, the Liberals who
were still in power published their plan first in October 1951 which included
calls for the promotion of export trade, economic cooperation with the U.S.
and the nations of Southeast Asia, increased production of foodstuffs, de-
velopment of resources available at home, expansion of heavy industry,
protection of small and medium enterprises, etc. The Socialists followed
suit in November by publishing their "Road to Peace and Stabilization of
Life," which contained a five-year plan for the attainment of full employ-
ment, a higher living standard and social security. The Democrats came
out with proposals almost identical with those previously published by the
Liberals, except for the inclusion of a reference to a "capitalist economic
planning" for the building of a welfare state.'6 Needless to say, the actions
of the Liberals were the most important as a factor in the making of the
official economic plans during this period. The official government policy
for post-independence economic development, as explained in January 1952
by the director of the ESB to the plenary meetings of both houses of the
Diet, was an almost verbatim reproduction of the Liberals' 1951 program.
Once the process was set in motion for the formulation of a new official
long-term economic plan, however, the initiative passed from the party
strategists back to bureaucrats, especially to those in the ESB. By the sum-
mer of 1952 the officials, in consultation with their counterparts in the
Finance ministry and the MITI, began to consider prospects for such a plan.
"4Keizaikikakuch6 Sengokeizaishi Hensanshitsu, (ed.), Sengokeizaishi: Sokanhen,

(Tokyo: Okurash6 Insatsukyoku, 1957), pp. 230-99.
15Ibid., pp. 345-48, 425-27; Shiryd Sengo Njiinenshi, Vol. 2, Keizai, ed. Hiromi Ari-
sawa, Hidez6 Inaba, (Tokyo: Nihon Hyoronsha, 1966), pp. 150-51.
"Asahi Shimbun, December 4, 1951.
HARUHIRO FUKUI 335
In conformity with the precedent set during the period of the Allied Occu-
pation an Economic Council was appointed with members recruited from
among leaders of organized business groups, reinforced by a few university
professors. On the basis of the recommendations submitted by this council
the Economic Deliberation Agency (Keizai Shingich&), which had replaced
the ESB in August 1952, adopted in September 1953 three goals of normal-
izing Japan's export trade, increasing her economic self-sufficiency and
accelerating domestic capital accumulation.'7
The passage of initiatives from the party politicians to the ministry
bureaucrats and vice versa in the making of specific economic plans was
actually not very important. Far more significant was rather the continuing
and progressively more intimate relationship between the two and also the
leaders of the powerful employer organizations. In May 1952, for example,
the prime minister and the MITI minister addressed the annual conven-
tion of the Japan Chamber of Commerce and Industry, while the Finance
Minister personally discussed with the leaders of the Committee for Eco-
nomic Development the future of Japan's capitalist economic system, the
expansion of export trade and other related issues. In November of the
same year the Finance and MITI ministers together conferred with some
sixty members of the Chamber of Commerce and Industry, then the MITI
minister held a series of talks with representatives of trading firms, coal
mine operators, explosives manufacturers, etc.
In the meantime, both the Committee for Economic Development and the
Federation of Economic Organizations officially presented to the cabinet
their resolutions on economic matters.18 The latter's "Basic Policy De-
mands" of 1953 called for government commitment to a long-term devel-
opment planning, support of firms engaged in foreign trade, relief aids
to steel, shipbuilding and industrial machinery manufacturers. They were
presented to both the cabinet and the Liberal party, and were subsequently
used as a basis for consultations and negotiations between the representa-
Itives of the business organizations on the one hand and, on the other, those
representing the government and the ruling party.19 During the summer
of 1954, just as the ranking officials of the Economic Deliberation Agency
were being invited for consultation to the meetings of the Finance ministry
bureau chiefs, the Policy Affairs Research Council of the Liberal party
was frequently inviting and exchanging views with officials from the Eco-
nomic Deliberation Agency, MITI, Finance Ministry and Labor Ministry,
as well as the representatives of the Federation of Economic Organizations,
the Chamber of Commerce and Industry, the Japan Federation of Em-
ployer Associations (Nihon Keieishadantai Renmei), etc.
"7For details of this plan and others drafted during this period, see Sengokeizaishi:
Keizaiseisakuhen, op. cit., pp. 296-309.
18Keizai D6yakai, op. cit., pp. 323-26; Asahi Shimbun, May 9, May 15, November 2,
November 20, November 26, 1952.
"9Teiz6 Horikoshi, (ed.), Keizaidantai reng6kai jiinenshi, (Tokyo: Keizaidantai Ren-
gokai, 1962), Vol. 1, pp. 291, 297.
336 PLANNIN G IN POSTWAR JAPAN'
In the years between the conclusio

in 1951 and the change of cabinets in late 1954 the opposition parties also
drafted and published their own economic plans. However, the differences
between the opposition programs and those produced by the Liberals and
the government were rather nominal. The "Five-Year Plan for Economic
Independence" which the Progressives adopted in 1953, for example, spoke
mainly of necessary capital accumulation, more effective exploitation of
resources available within Japan, full employment, scientific and techno-
logical development, etc., although it referred more explicitly than the
Liberals programs had ever done to the need for government control of
important industries, profit-sharing between management and labor, and
the expansion of social security administration.20 If the remarkable simi-
larities between the visions of the Liberals and the Progressives (soon to
be renamed Democrats) were not surprising, the basic features of the So-
cialist economic plan, published in the same year as a "Five-Year Plan
for the Construction of a Peace Economy," were rather amazing. The five
major recommendations contained in this program were full employment,
the improvement of living standards, increased productivity, the encour-
agement of savings, and the stabilization of consumer prices. Moreover,
it specifically defined the economic system envisaged by the Socialist authors
of the program as a mixed one based on the principle of private ownership
of property.21
OFFICIAL PLANS-MAKING UNDER LIBERAL-DEMOCRATIC PARTY DOMINANCE
As soon as their leader Hatoyama replaced the long-time Liberal premier,

Yoshida, in December 1954, the role of the Democrats changed drastically.
In their new role as the ruling party they began immediately to prepare
their own official economic plan in cooperation with both bureaucrats in
the central government ministries and influential business leaders. The ties
between the bureaucrats and the representatives of the organized business-
men with Democratic party leaders were probably not as close at the outset
as those which had long bound them to the Liberals. In any event, the reac-
tions to the six-year plan hastily prepared by the Economic Deliberation
Agency at the request of the Democratic party in December 1954 and en-
dorsed by the Hatoyama cabinet the following month proved that sharp
differences of opinion could arise and persist between the party politicians
and the bureaucrats representing the various ministries concerned and, in
fact, between any two or more of the major members of the tripartite
coalition.
The six-year plan was designed, according to its authors, to help develop
a viable and self-supporting national economy and to provide adequate
employment opportunities for the growing population. The first three years
20Asahi Shimbun, November 29, December 11, December 13, 1953.

"1Ibid., September 3, 1953.
HARUHIRO FUKU1 337
was to be devoted mainly to balancing international payments by stimu-

lating export trade and the last three years to the attainment of full em-
ployment.22 Almost as soon as the plan was announced and, in fact, even
before it was officially approved by the cabinet, officials of the MITI, the
Finance ministry, and the Agriculture and Forestry ministry all expressed
opinions sharply critical of its details. The MITI officials were upset by
what they believed to be a lack of concern on the part of its authors for
the need to vastly increase the volume of investment and foreign trade, while
the Finance ministry bureaucrats were angry about the prospects of ex-
cessive investment and fast-rising wholesale and retail prices. The Minister
of Finance, in fact, officially warned the Economic Deliberation Agency
director against the danger of running too far ahead of him and drafting
plans which could not be backed up by adequate budgetary appropriations.
In the meantime, the Agriculture ministry officials resented the lack of
appreciation on the part of the Economic Deliberation Agency planners
of the sense of urgency with which they considered the issue of national
self-sufficiency, especially in the production of foodstuffs.23 Feelings of
uncertainties, if not of outright disaffection, also afflicted such big business
groups as the Federation of Economic Organizations who sought repeated
conferences with the Agency officials and the leaders of the Democratic
party.24
The six-year plan was subsequently referred to a newly appointed Eco-
nomic Council. The six working sub-committees of the Council which under-
took a drastic revision of the original plan involved twenty-five well-known
businessmen, such as the presidents of the Federation of Economic Organiza-
tions, the Chamber of Commerce and Industry, the National Shipowners
Association, etc., and four eminent university professors, three of them
from Tokyo University. The Council changed the six-year plan to a five-year
plan and presented it to the cabinet several weeks after the merger of the
Liberal and Democratic parties in late 1955. This revised plan envisaged
an increase in five years of about 33%o in the nation's GNP, about 56%o
in private invested capital, and 20%, 53% and 28% respectively in the
primary, secondary and tertiary industry production.25 More important
than these details of the plan itself was the fact that the internal harmony
of the tripartite coalition which had appeared for a while to be breaking
down as a result of the rather tactless manner in which the Economic De-
liberation Agency had drafted the original plan was restored in the delib-
erate process of revision undertaken in the second half of 1955. When the
LDP was born through the merger of the two conservative parties in No-
22The plan was based on a document titled "A Proposal for Overall Development"
drafted by the staff of the Economic Deliberation Agency, which was in turn derived
from The American Economy in 1960 by Gerhardt Colm, National Planning Association
(Washington), 1952.
28See Asahi Shimbun, January 7, 8, 11, 18, 1955.
24Ibid., March 9, April 5, 1955; Horikoshi, op. cit., p. 301.
"5Sengokeizaishi: Keizaiseisakuhen, op. cit., pp. 351-57.
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HARUHIRO FUKUI 339
vember of that year

signs of internal strains or conflicts.
It was during the following decade and a half that Japan's postwar econ-
omy demonstrated its capabilities, little suspected in the period immediately
after her surrender in 1945, for fantasically rapid and sustained growth.
The nominal value of the nation's GNP grew about 82% between 1955
and 1960, another 101% between 1960 and 1965, and further 91% between
1965 and 1969.26 In other words, Japan's nominal GNP value in 1969 was
more than seven times the 1955 value. As a result, the annual per capita
national income increased during the same period from about $220 to about
$1,300.27 There was also a rapid rise in consumer prices; about 31%o rise
in the ten years 1955-65, and nearly 25% in the next five years.28 The real
gains in the average wage-earners' purchasing power were therefore not
really as great as the nominal increase in their monthly paychecks would
have suggested. In fact, a sub-committee of the Economic Council advising
the Economic Planning Agency (which had replaced the Economic Delib-
eration Agency in July 1955) reported in February 1970 that in terms of
selected quantitative indexes measuring the quality of life and living en-
vironment Japan in 1965 still lagged considerably behind the advanced
nations of the West. Furthermore, the projections for 1975 indicated that
even then Japan is likely to find itself substantially short of the Western
nations' 1965 level of attainments in such areas as social security and public
amenities. All this notwithstanding, it is undeniable that Japan's economy
has been growing at an extraordinary pace and is likely to continue to do
so in the immediate future.
During this period of rapid economic growth the role of the LDP in
the tripartite coalition was largely one of an intermediary between gov-
ernment bureaucracy and organized private interest groups, especially the
national and regional organizations of big businessmen. It was symbolic
in this respect that the newly established LDP Economic Planning Com-
mittee conferred with officials of the Economic Planning Agency about the
implementation of the five-year plan the same day in December 1955 the
top party leaders consulted with the president of the Federation of Eco-
nomic Organizations and other top-flight businessmen of the nation.29 There-
after consultations between bureaucrats and party leaders and between
the latter and spokesmen for organized business groups have been held
almost regularly as a matter of routine. As suggested by the meeting of the
Committee for Economic Development and the LDP leaders in November
1956, the party's policy board officials usually represented the party, but
26Keizaikikakuch6 Ch6sakyoku, (ed.), Keizai y6ran, Tokyo: Okurash6 Insatsukyoku,

1970, p. 13, Table 1; Nihon Keizai Shimbun, June 19, 1970.
27KeizaikikakuchK, (ed.), Kokuminshotoku takei nemp6, 1968, (Tokyo: Okurash6
Insatsukyoku, 1969), p. 190; Asahi Shimbun, May 14, 1970.
"Keizai yoran, op. cit., p. 254.
2Asahi Shimbun, December 17, 1955.
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HARUHIRO FUKU1 341
other officials, especiall

sulted with prominent b
bureaucrats and the bus
the successively appointed Economic Councils and other similar advisory
councils working with various ministries and agencies.31 Contact at the
less formal levels was also frequent and important.
The periodic consultations often resulted in the emergence of at least
apparent and temporary consensus among the major groups involved on
specific economic policy issues and plans. Take, for example, the case of
the "New Long -Term Economic Plan" drafted for the new government of
Nobusuke Kishi in late 1957. On this occasion the LDP and the Economic
Council, acting on behalf of the Economic Planning Agency, first prepared
their own separate versions during the same week of November, then the
chairmen and other leading members of the party's policy board commit-
tees met the Finance minister and the Economic Planning Agency director
to make necessary adjustments, and finally the consolidated plan emerging
out of the government-party consultations was presented to and approved
by the cabinet. This plan projected growth of Japan's GNP at 6.5%o per
year in the next five years, reaching in 1962 a total of slightly over $36.1
billion with the value of the nation's exports in that year estimated at about
$4.7 billion.32
The differences of opinion between politicians, bureaucrats and business
executives and, in fact, even among members of the same groups, proved
to be more basic and intractable, as was evidently the case with the various
proposals put forward in connection with the revision of the 1957 long-term
plan and the formulation of the "Income-Doubling Plan." By the summer
of 1959 both bureaucrats and party politicians began to feel the need to
revise and update the 1957 plan. During the 1959 House of Councillors
election campaigns the prime minister and the MITI minister talked about
an "income-doubling" or "wage-doubling" plan. Accordingly, a new com-
mittee to investigate the feasibility of such a plan was created in the LDP,
which drafted by October 1959 a program officially titled an "Income-
Doubling Plan."
Beyond recommending various measures to raise the general standards of
living and insure full employment, as the authors of practically every pre-
vious plan had done, the politicians who prepared the 1959 plan emphatically
8"For a discussion of the composition and role of the "six leaders" of the Liberal.
Democratic Party, see Fukui, op. cit., pp. 93-95.
"1In addition to the Economic Council, three other advisory councils of a similar
nature have been appointed by the Economic Planning Agency, two working on prob-
lems related to the quality of water and the third on that of ground-sinking. Included
among the members of these councils were the vice-ministers of the various ministries
concerned with the respective problems and prominent businessmen. Likewise, most
other ministries and government agencies have appointed several councils of this kind.
For the names of the councils and their members, see Shokuinroku, (Tokyo: Okurashb
Insatsukyoku, annual, Vol. 1) -
"Asahi Shimbun, August 16, November 16, and November 20, 1957.
called for continued and substantially increased public assistance to farmers

in order to "rectify the imbalance of income" between them and other
occupational groups in the society, a position which no doubt reflected the
views of the farm bloc members of the party who were duly represented
on the policy board drafting sub-committee. The plan presented by the
Economic Planning Agency, on the other hand, aimed primarily at a rapid
increase in industrial production and achievement of a favorable foreign
trade balance. Despite the fact that the two plans were based on the same
data compiled by the Agency staff, the difference of emphasis was real and
important. Until the spring of 1960, when the whole discussion of the new
economic plan was completely overshadowed by the intensifying dispute
over the proposed revision of the U.S.-Japan Security Treaty, the debate
between the bureaucrats and the party politicians was stalemated. Under
the cross pressures from the party and the Economic Planning Agency the
cabinet was ambivalent and indecisive. It chose to criticize rather half-
heartedly the Agency plan and to refer it back for reconsideration, while
equally halfheartedly agreeing to "respect the spirit" of the party-sponsored
plan.33
When the storm over the security treaty issue had blown over, bringing
down the Kishi cabinet in its wake, the new LDP government led by Hayato
Ikeda immediately resurrected the "Income-Doubling Plan" which had now
been slightly modified to emphasize equally the need to build "social capi-
al," effect a structural reform of businesses, promote foreign trade and
international cooperation, cultivate human resources, develop science and
technology, and equalize the uneven and unbalanced levels and paces of
development in various segments of the national economy. When it came
to spelling out specific projections, especially as regards the rate of growth
to be promised for the ten-year period covered by the plan, there emerged
again sharp conflicts of opinion between the bureaucrats and politicians.
On one hand, the LDP leaders proposed a yearly GNP growth rate of 9%,
while, on the other, the Economic Planning Agency speaking through the
mouth of the Economic Council preferred a much slower pace of between
7.2 and 7.8%. The party politicians, particularly the members of the party
committee responsible for matters relating to agriculure, criticized the coun-
cil's proposal as much too conservative and neglecting the crying needs
of the underdeveloped agricultural sectors of the economy. To them the
impact of the proposed plan on the psychology of the electorate in the
rural areas of the country was probably the primary concern. The business-
men and academics with the backing of the Economic Planning Agency
officials retaliated by pointing out that an excessively high growth rate of
9% would generate unbearable pressures on already scarce labor and capital
supplies. As it turned out, however, this controversy was essentially academic
rather than practical in retrospect. The actual growth rate proved to be
"Ibid., October 21, 1959.
HARUHIRO FUKUI 343
higher even than the "excessive" 9%, registering a spectacular 15.5% in

1961 and after two consecutive years of relatively modest 7.5%o again
shooting up to 13.8% in 1964, or an average of 10.4% for the 1961-65
period.
The extraordinary pace of the economic growth turned out to be as much
a cause for concern as for jubilation, bringing about a sharp rise in con-
sumer prices, a dire shortage of labor and widening gaps in wealth and
opportunity between the industrial and agricultural sectors and within the
industrial sector between the giant corporations and small enterprises.
By the fall of 1963 it became evident that the current plan called for an
immediate and drastic revision and, accordingly, the Economic Council
recommended adoption of a new "middle-term plan" in November of that
year. The new plan emphasized above all the promotion of export trade,
modernization of agriculture, small enterprises and the distributive system,
a greater attention to social welfare, and a stable, rather than a rapid, over-
all development of the economy. When, however, a specific amount of about
$49.6 billion for public investment over the five-year period, 1964-68, and
the ministry by ministry allocations of that amount were announced, vir-
tually every ministry expressed strong objections to what seemed to each
to be an entirely inadequate amount of their own share of the proposed
appropriations. The Construction Ministry immediately sought the assis-
tance of the construction sub-committee of the LDP policy board to bring
pressure to bear on the Economic Planning Agency and to have its alloca-
tion substantially increased. The Transportation Ministry officials followed
suit by soliciting the support of the party's transportation sub-committee
and the National Railroad administration committee.34 As a result of all
these pressures the party policy board began a month or so later to openly
criticize the plan.
The situation was further complicated by a change of cabinet following
Prime Minister Ikeda's resignation due to illness in November 1964 and
also by the criticisms of the middle-term plan by both business leaders and
the press for reasons almost exactly opposite to those which had upset the
ministry bureaucrats. While the latter had felt that both the total proposed
amount of the prospective government investment and their own shares
of it were grievously inadequate and had to be substantially increased
-a view which was strongly supported by their collaborators and sym-
pathizers in the LDP policy board committees-many businessmen and
journalists disapproved it, at least publicly, because they believed that the
proposed spending was large enough to threaten further to stimulate the
dangerously rapid growth of an already overheated economy. Under the
diverse pressures the new prime minister, Eisaku Sato, and his cabinet
approved the plan in January 1965 and then one year later decided to
34Ibid., October 27, 28, 1964. See also Seisaku GeppU, November 1964, pp. 188-91, f
the mention of the middle-term plan as a subject of discussion in various policy boar
subcommittees in the month of October 1964.
abandon it in favor of still another "long-term plan" of their own.

Drafting a new long-term plan for the Sato cabinet proved hardly less
controversial and troublesome than it had been for their predecessors. On
the one hand, the "growth-at-any-cost faction," who represented the domi-
nant opinion among the bureaucrats, particularly those in the Economic
Planning Agency and the MITI, insisted on the continuation of the expan-
sionist policy. On the other hand, the "people's livelihood faction," prob-
ably reflecting more accurately the current mood of the average consumer,
challenged the growth-at-any-cost faction's position over such thorny issues
as rising consumer prices, inadequacy of government-sponsored social wel-
fare programs, increasing pollution of the environment, etc. In the end,
the growth-at-any-cost faction, which dominated the Economic Council,
won the battle and a series of recommendations were drawn up by January
1967 incorporating the group's basic economic philosophy and commit-
ments. The five-year "Economic and Social Development Plan" based on
these recommendations, which one newspaper dubbed a policy calculated
to breed conglomerates,35 envisaged an average annual growth rate of
8.2% during the period 1967-71, with public investment increasing at the
rate of 10.5% per year, and a net foreign trade profit of $200 million and
an average annual per capita national income of about $1,300 in the target
year 1971. Subsequently, the plan was further modified so as to be applied
to the period 1970-75 with the projected annual GNP growth rate raised
to 10.8% and an annual 4.9% rise in consumer prices.36 Despite its osten-
sible references to the "stabilization of commodity prices" and "social
development," the Economic and Social Development Plan of 1967 con-
tinued to place a major emphasis on a high growth rate and efficiency.
Regarding the relationships between the groups comprising the policy-
making coalition, it should be noted that despite all the visible and real
disagreements on matters of economic planning, they continued through-
out this period to keep closely in touch with one another and work together
towards building as much harmony and consensus among themselves as
possible. The leaders of the Federation of Economic Organizations and the
Committee for Economic Development decided in the summer of 1963 to
hold periodic consultations with the LDP Executive Council and policy
board chairmen, while one year later representatives of the latter organiza-
tion agreed with the party's secretary-general on the need to "unify the
thoughts of politicians and businessmen."37 The establishment jointly by
these two employer organizations of the Center for Regional Development
in October 1963 as a counterpart of the official Industrial Location Center
was advertised as a step towards closer government-business cooperation
35Asahi Shimbun, February 27, 1967.

36Keizaishingikai Sogobukai, "Shin keizaishakai b.-atten keikaku no kadai," Ekono-
misuto, January 27, 1970, pp. 108-15; Y6 Yamauchi, "Shin keizaikeikaku kaitei no
butairura," ibid., pp. 48-49.
37Asahi Shimbun, August 11, 1963; July 17, 1964.
HARUHIRO FUKUI 345
and unity. When work was started in 1966 for the formulation of the new
Economic and Social Development Plan, the Committee for Economic De-
velopment decided officially to participate more positively than previously
in the efforts led by the Economic Planning Agency bureaucrats and the
Economic Council.38
OPPOSITION RESPONSE
The process of official plan-making reviewed above left little room for
effective participation by the opposition parties and groups which func-
tioned essentially as non-participant observers and critics. In this role the
Socialists have followed generally two lines of action. One line involved
straightforward and rather simplistic criticisms of the successive government
economic plans both within and outside the Diet. During the proceedings
of the plenary meetings and budget committee meetings of each house, for
example, the spokesmen for the party castigated the "Income-Doubling Plan"
and the subsequent revisions of it as benefiting only the rich at the expense
of the poor.39 It is interesting to note, however, that the Socialist criticisms
were rather formal and ritualistic both in substance and tone and also that
they have been remarkably sparse and, when voiced, rather perfunctory
during the past ten years. After reading the records of the relevant portions
of the Diet proceedings, one finds it difficult to believe that they meant
seriously to challenge the government and the LDP on the issue of eco-
nomic planning. This is true also of the Socialist criticisms voiced outside
the Diet on various occasions.
The charges which the party published against the official five-year plan
of 1957 for example, were that it had been copied directly from the draft
originally prepared by the Economic Council, as it no doubt had been,
that it was being used for purposes of election campaigning, as it probably
was, that it failed to emphasize the need for Japan's economic autonomy
and independence, and that it neglected the interests of farmers and small
entrepreneurs.40 In December 1961 the party published a document criti-
cizing the government "high growth" policy on account of its failure to
deal adequately with the evils of the "dual structure" of the Japanese econ-
omy. The charges were probably all valid, at least to a certain extent, and
yet none of them was really practical or specific enough to compel the
government and its collaborators to reconsider their economic plans in
the light of these criticisms.
Apart from these rather futile criticisms of the government-sponsored
economic plans, the Socialists engaged in the formulation and publication
8Ibid., February 6, May 15, 1966.

"9See, for example, the exchanges between Socialist interpellators and cabinet repre-
sentatives in both houses, as reported in ibid., December 14, 20 (evening edition), 1960;
March 17, 1962; January 24 (evening edition), November 30 (evening edition), 1964;
February 26, 1966.
'"Ibid., November 21, 1957.
of their own economic plans. In 1956

plan which called for the promotion
national payments, the establishmen
economy, the effective exploitation
and a 70%o increase in GNP in the ne
1961, however, they have entrusted a group of party supporters among
academic economists, called a Peace Economy Planning Conference (Heiwa
Keizai Keikaku Kaigi) with the task of drafting an annual "People's Eco-
nomic White Paper" which included projections and plans for the future
as an alternative to the government economic plans. While the technical
analyses as well as the philosophical visions of the future contained in these
white papers were certainly not inferior to the increasingly elaborate works
produced by the Economic Planning Agency for the successive government
plans and their endless revisions, the opposition plans had practically no
chance whatsoever of ever being translated into authoritative public actions
or even significantly influencing such government actions as were taken
by the ruling coalition. In other words, these documents were of essentially
academic, rather than practical interest as far as the actual policy-making
process was concerned. The treatment of the annual white papers by the
Socialists themselves suggests that they have been regarded as academic exer-
cises even by the sponsors and, perhaps, also by the authors.
A similar statement may be made about the plan-making efforts under-
taken by the Democratic Socialists. The first thing they did in 1960 on
dissociating themselves from the Socialists to set up their separate party
was to formulate an "eight-year economic plan" which was aimed, in their
own view, at turning the whole Japanese nation into a vast middle class.
For this purpose the volume of the nation's GNP was to be raised 8.8%o
per year, the work-force in the primary, secondary and tertiary industries
redistributed in favor of the latter two categories, labor producivity in-
creased between 5%o and 7.4%o, and exports expanded 10% a year, while
the key industries were to be socialized.42 Like the Socialists, they too
criticized the government economic plans both within and outside the Diet.
Their actions were, however, no more effective than those of the Socialists
from the point of view of practical results.
The response of the Komeito party, which was officially established in
November 1960 as the principal political arm of the S6kagakkai, has been
less explicit and specific than that of either socialist party. Although they
propounded from the outset what it defined as a "welfare economy policy,"
this really did not go beyond calling for granting income tax exemptions
to low-income families, substantially increasing public assistance to the
indigent, small farmers and small entrepreneurs, providing better public
4"Nihon Shakait6 Seisakushingikai, op. cit., pp. 1099-1155.

"2Asahi Shimbun, August 17, 1960.
HARUHIRO FUKUI 347
housing, and controllin

important proposal th
control over and, pos
coal mining and elect
integral part of the so-called "humanistic socialism," which was said to
be gradualist, democratic, peaceful, and based on the principle of private
property ownership with certain guarantees for the equalization of wealth
distribution.44 Needless to say, this echoed the early Socialist programs
mentioned already, but the Komeito has never produced a plan to imple-
ment it that is even as detailed as the latter's. In any event, the party's
response to the official economic plans has generally been, if anything, no
less ineffectual and perfunctory than those of the two socialist parties.
The Communists concentrated on criticizing the government economic
policies and plans on a basis which may be regarded as more or less a
straight Marxist view of a capitalist economic system and its attributes,
and did not bother to propose an alternative development plan of their own.
The Communists no doubt were convinced that it was entirely meaningless
to engage in, perhaps even to talk about, economic planning in a capitalist
society. To them economic planning had to be, by definition, socialist eco-
nomic planning which would become possible only after a socialist revolu-
tion. Their interpretation of the official economic plans drafted during this
period was therefore totally negative. According to them, the income.
doubling plan of 1960 was designed to strengthen the state monopoly capi-
talism by further expediting the exploitation of the working class by the
monopoly capitalists in control of the government and ultimately to en-
courage with the assistance of the U.S. government the revival of Japanese
militarism and imperialism.45 This theme has since been elaborated with
increasingly substantial statistical evidence and detailed analysis.
In the more recent years the arguments about the intensified exploitation
of the working class by monopoly capitalists and the collusion of American
and Japanese imperialists were supplemented frequently by references to
the evils of environmental pollution resulting, they argued, from the "high
growth" policy pursued by the LDP government on behalf of the monopoly
capitalists.46 It is evident that the economic plans which have been drafted
under the auspices of bureaucrats, conservative politicians and organized
big business groups were looked upon by the Communists in a totally nega-
tive light. If the Socialists and the Democratic Socialists were interested in
43For details, see K6meito Seisakukyoku, (ed.), Fukushikeizai e no michi, 4 vols.,

(Tokyo: Kameit5, 1965-67).
"Kdmei Shimbun, February 15, 1967. For a good critique of the ambiguities in the
party's doctrinal position on the issue of economic system, see Hajime Shinohara,
"Komeit6 e no gimon," Sekai, April 1967, pp. 71-74.
"Sumiyoshi Asakura, "Ikedanaikaku no shotokubaiz6keikaku hihan," Zenei, Novem-
ber 1960, pp. 39-49. See also Tsutomu Doki, "Ikedanaikaku no shinseisaku no sh6tai,"
ibid., pp. 30.38.
"0Takashi Yazawa, "Dokusenshihon no keizaikeikaku: Sono nanajfinendai koso hihan,"
ibid., July 1970, pp. 82-83.
these plans to the extent of producing their own counter-plans, the Com-
munists were interested merely in registering their absolute and complete
rejection of the very idea of economic development and planning in a
capitalist society.
Thus there was a considerable range of variation in the opposition par-
ties' response to the official economic plans drafted and published during
the last fifteen years under the auspices of the ruling policy-making coalition.
They have been, however, uniformly ineffective in influencing either the
processes through which the official plans were prepared or their contents.
In this sense the opposition parties and, by inference, all those individuals
and groups who were associated with them have been effectively excluded
from participation in the process of public decision-making regarding mat-
ters of economic development which have no doubt been important, if not
predominant, concerns of the average Japanese citizens. The study pre-
sented above of the politics of postwar economic planning thus reveals
rather conclusively the precariousness and marginality of the role played
by the opposition groups in authoritative policy-making processes in post-
war Japan and, conversely, the predominant, almost exclusive, role of the
tripartite coalition. There is no reason to doubt that the experience with
the politics of economic planning which we have reviewed above has in
fact been typical rather than exceptional under what Junnosuke Masumi
once called the "post-1955 political system" of Japan.47
"7Junnosuke Masumi, Gendai nihon no seijitaisei, (Tokyo: Iwanami Shoten, 1969),

pp. 195 ff.
HARUHIRO FUKUI is Assistant Professor of Political Science at the University of

California, Santa Barbara.

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Economic Planning in Postwar Japan: A Case Study in Policy Making

Author(s): Haruhiro Fukui

ne of the most interesting and important aspects of postwar Japanese

In a previous study I attempted to e

ECONOMIC RECOVERY UNDER THE ALL

The first few years after Japan's acce

'Party in Power: The Japanese Liberal-Dem

the Ministry of Commerce and Industry, subsequently reorganized into

The Economic Council appointed

key industries was repeated on subsequent occasions, as in the announce-

POLITICAL AND ECONOMIC INDEPENDENCE IN THE KOREAN WAR PERIOD

cultural sector, etc.14 In a sense the

"4Keizaikikakuch6 Sengokeizaishi Hensanshitsu, (ed.), Sengokeizaishi: Sokanhen,

In the years between the conclusio

OFFICIAL PLANS-MAKING UNDER LIBERAL-DEMOCRATIC PARTY DOMINANCE

As soon as their leader Hatoyama replaced the long-time Liberal premier,

20Asahi Shimbun, November 29, December 11, December 13, 1953.

was to be devoted mainly to balancing international payments by stimu-

vember of that year

26Keizaikikakuch6 Ch6sakyoku, (ed.), Keizai y6ran, Tokyo: Okurash6 Insatsukyoku,

< = 6 8EE om t 3Sw

other officials, especiall

called for continued and substantially increased public assistance to farmers

"Ibid., October 21, 1959.

higher even than the "excessive" 9%, registering a spectacular 15.5% in

abandon it in favor of still another "long-term plan" of their own.

35Asahi Shimbun, February 27, 1967.

8Ibid., February 6, May 15, 1966.

of their own economic plans. In 1956

4"Nihon Shakait6 Seisakushingikai, op. cit., pp. 1099-1155.

housing, and controllin

43For details, see K6meito Seisakukyoku, (ed.), Fukushikeizai e no michi, 4 vols.,

"7Junnosuke Masumi, Gendai nihon no seijitaisei, (Tokyo: Iwanami Shoten, 1969),

HARUHIRO FUKUI is Assistant Professor of Political Science at the University of

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