Japanese Targeting

The beginning is not the worst place to take up the story of industrial policy and targeting. It is admittedly rather tame and not as exciting as letting the reader know right off how absolutely wonderful or excruciatingly vicious these phenomena are, as is increasingly the practice nowadays. But that can always be done at the end, when the reader has more knowledge to decide whether or not such conclusions are correct.

By now most people who have been familiarised with the concept of industrial targeting assume that a study of the institutions involved must focus primarily on the Ministry of International Trade and Industry. Most of those for and against the practice regard it not only as the mainspring but as almost the only source of such activities. An objective view of the situation provides very different insight.

Most attempts at explaining how industrial policy and targeting work are rather confusing. That is partly because this is a fairly complicated matter involving many different techniques, and variations on each of them, which are used individually or several at a time. Merely listing them does little to clarify the situation unless one also knows more exactly what purpose each one serves. Then it becomes much easier to understand.

The initial stage of postwar industrial policy was devoted to the restoration of a number of industries which had been pioneered and developed ever since the Meiji era. Most of them had risen to some prominence before the war and several received special support from the militarists, because they were regarded as providing either the sinews of an armaments industry or, more generally, the backbone of a strong, modern economy.

Once the basic industries had been restored and could shift nicely for themselves, the targeting operation became even more focused on rather different kinds of sectors. These were not labour-intensive and, in many cases, not even capital-intensive like the first batch. Rather, they were extolled as knowledge-intensive and consequently deemed ideal for Japan because of its highly educated workforce. They brought other advantages as well: they promised high value added, they were relatively non-polluting and they enhanced the nation’s prestige.

It was not only the government which singled out attractive products and mobilised its resources to promote them. This was done throughout the postwar period by the private sector, often with striking success. In some of these exercises, the public role was secondary, minor or negligible. But this did not keep the businessmen from pushing ahead. The goal they had in mind, although not always stated publicly, was not so much a strong economy or international recognition as market share and sometimes profits.

It is more than slightly misleading to assume — as some observers claim — that the day of industrial policy has passed and now the government entrusts the economy to market forces. What has happened is simply that different sectors are being targeted and are receiving substantial aid, but in somewhat different ways. Upon closer scrutiny, one could actually say that there is about as much effort to boost the economy to a higher level as there ever was. This time, however, the desire is not only to catch up or even pull ahead but to take the lead.

Finally, although the Japanese do not like to think of it that way, there is another major phase that is not only unfolding at present but should continue extending indefinitely into the future. It is the attempt to save declining sectors. Judging by Japan’s experience thus far and especially the experiences of the countries that preceded it, this may eventually become the most substantial dimension of industrial policy.

On the basis of these case studies, it must be amply clear that industrial policy and targeting were — and still are — extremely widespread and played a significant role. They have been applied to a very broad range of sectors and products, not only in manufacturing but also in mining, agriculture and services. The exercises involved not only MITI but many other ministries and agencies as well as key politicians. The number of companies which participated in one project or another is legion. And the outcome affected every Japanese (and many foreigners).

Japan’s swift, inexorable rise after the war inevitably created strains in the world economy. While economic growth was only a few per cent a year in most other countries, Japan averaged nearly 9 per cent in the 1950s and 1960s and still 3–4 per cent in the 1970s and 1980s. It was therefore expanding more rapidly than other countries, which had to make way for it. Those most directly affected were the advanced industrial economies of Europe and America, none more so than the United States.

By now it must be obvious that, while industrial targeting was a domestic policy option of Japan, it had tremendous external repercussions. It affected virtually every country the Japanese dealt with, some of them quite severely. It was consequently necessary for those countries to decide whether, and how, to react.