Ministry of International Trade and Industry
Encyclopedia
The Ministry of International Trade and Industry (通商産業省 Tsūshō-sangyō-shō or MITI) was one of the most powerful agencies of the Government of Japan
. At the height of its influence, it effectively ran much of Japanese industrial policy, funding research and directing investment. In 2001, its role was taken over by the newly created Ministry of Economy, Trade and Industry (METI).
, the Economic planning
Agency, and the various commerce-related cabinet
ministries. At the time it was created, Japan was still recovering from the economic disaster of World War II
. With inflation
rising and productivity failing to keep up, the government sought a better mechanism for reviving the Japanese economy.
MITI has been responsible not only in the areas of exports and imports but also for all domestic industries and businesses not specifically covered by other ministries in the areas of investment in plant and equipment, pollution control, energy and power
, some aspects of foreign economic assistance, and consumer complaints. This span has allowed MITI to integrate conflicting policies, such as those on pollution control and export competitiveness, to minimize damage to export industries.
MITI has served as an architect of industrial policy
, an arbiter on industrial problems and disputes, and a regulator. A major objective of the ministry has been to strengthen the country's industrial base. It has not managed Japanese trade and industry along the lines of a centrally planned economy
, but it has provided industries with administrative guidance and other direction, both formal and informal, on modernization, technology, investments in new plants and equipment, and domestic and foreign competition.
The close relationship between MITI and Japanese industry has led to foreign trade policy that often complements the ministry's efforts to strengthen domestic manufacturing interests. MITI facilitated the early development of nearly all major industries by providing protection from import competition, technological intelligence, help in licensing foreign technology, access to foreign exchange, and assistance in mergers.
These policies to promote domestic industry and to protect it from international competition were strongest in the 1950s and 1960s. As industry became stronger and as MITI lost some of its policy tools, such as control over allocation of foreign exchange, MITI's policies also changed. The success of Japanese exports and the tension it has caused in other countries led MITI to provide guidance on limiting exports of particular products to various countries. Starting in 1981, MITI presided over the establishment of voluntary restraints on automobile exports to the United States to allay criticism from American manufacturers and their unions.
Similarly, MITI was forced to liberalize import policies, despite its traditional protectionist focus. During the 1980s, the ministry helped to craft a number of market-opening and import promoting measures, including the creation of an import promotion office within the ministry. The close relationship between MITI and industry allowed the ministry to play such a role in fostering more open markets, but conflict remained between the need to open markets and the desire to continue promoting new and growing domestic industries.
As late as the 1980s, prime minister
s were expected to serve a tenure as MITI minister before taking over the government. MITI worked closely with Japanese business interests, and was largely responsible for keeping the domestic market closed to most foreign companies.
MITI lost some influence when the switch was made to a floating exchange rate
between the United States dollar
and yen in 1971. Before that point, MITI had been able to keep the exchange rate artificially low, which benefited Japan's exporters. Later, intense lobbying from other countries, particularly the United States
, pushed Japan to introduce more liberal trade laws that further lessened MITI's grip over the Japanese economy. By the mid-1980s, the ministry was helping foreign corporations set up operations in Japan.
The decline of MITI was described Johnstone:
The declining significance of MITI to Japanese companies made it a less powerful agency within the bureaucracy, and by the end of the 20th century, it was folded into a larger body. In 2001, it was reorganized into the Ministry of Economy, Trade, and Industry (METI).
Government of Japan
The government of Japan is a constitutional monarchy where the power of the Emperor is very limited. As a ceremonial figurehead, he is defined by the 1947 constitution as "the symbol of the state and of the unity of the people". Power is held chiefly by the Prime Minister of Japan and other elected...
. At the height of its influence, it effectively ran much of Japanese industrial policy, funding research and directing investment. In 2001, its role was taken over by the newly created Ministry of Economy, Trade and Industry (METI).
History
MITI was created with the split of the Ministry of Commerce and Industry in May 1949 and given the mission for coordinating international trade policy with other groups, such as the Bank of JapanBank of Japan
is the central bank of Japan. The Bank is often called for short. It has its headquarters in Chuo, Tokyo.-History:Like most modern Japanese institutions, the Bank of Japan was founded after the Meiji Restoration...
, the Economic planning
Economic planning
Economic planning refers to any directing or planning of economic activity outside the mechanisisms of the market, in an attempt to achieve specific economic or social outcomes. Planning is an economic mechanism for resource allocation and decision-making in contrast with the market mechanism...
Agency, and the various commerce-related cabinet
Cabinet (government)
A Cabinet is a body of high ranking government officials, typically representing the executive branch. It can also sometimes be referred to as the Council of Ministers, an Executive Council, or an Executive Committee.- Overview :...
ministries. At the time it was created, Japan was still recovering from the economic disaster of World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
. With inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
rising and productivity failing to keep up, the government sought a better mechanism for reviving the Japanese economy.
MITI has been responsible not only in the areas of exports and imports but also for all domestic industries and businesses not specifically covered by other ministries in the areas of investment in plant and equipment, pollution control, energy and power
Energy production in Japan
Japan lacks significant domestic sources of fossil energy except coal and must import substantial amounts of crude oil, natural gas, and other energy resources, including uranium...
, some aspects of foreign economic assistance, and consumer complaints. This span has allowed MITI to integrate conflicting policies, such as those on pollution control and export competitiveness, to minimize damage to export industries.
MITI has served as an architect of industrial policy
Industrial policy of Japan
A complicated system of Industrial Policies was devised by the Japanese Government after World War II and especially in the 1950s and 1960s. The goal was to promote industrial development, and it cooperated closely for this purpose with private firms...
, an arbiter on industrial problems and disputes, and a regulator. A major objective of the ministry has been to strengthen the country's industrial base. It has not managed Japanese trade and industry along the lines of a centrally planned economy
Planned economy
A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...
, but it has provided industries with administrative guidance and other direction, both formal and informal, on modernization, technology, investments in new plants and equipment, and domestic and foreign competition.
The close relationship between MITI and Japanese industry has led to foreign trade policy that often complements the ministry's efforts to strengthen domestic manufacturing interests. MITI facilitated the early development of nearly all major industries by providing protection from import competition, technological intelligence, help in licensing foreign technology, access to foreign exchange, and assistance in mergers.
These policies to promote domestic industry and to protect it from international competition were strongest in the 1950s and 1960s. As industry became stronger and as MITI lost some of its policy tools, such as control over allocation of foreign exchange, MITI's policies also changed. The success of Japanese exports and the tension it has caused in other countries led MITI to provide guidance on limiting exports of particular products to various countries. Starting in 1981, MITI presided over the establishment of voluntary restraints on automobile exports to the United States to allay criticism from American manufacturers and their unions.
Similarly, MITI was forced to liberalize import policies, despite its traditional protectionist focus. During the 1980s, the ministry helped to craft a number of market-opening and import promoting measures, including the creation of an import promotion office within the ministry. The close relationship between MITI and industry allowed the ministry to play such a role in fostering more open markets, but conflict remained between the need to open markets and the desire to continue promoting new and growing domestic industries.
As late as the 1980s, prime minister
Prime minister
A prime minister is the most senior minister of cabinet in the executive branch of government in a parliamentary system. In many systems, the prime minister selects and may dismiss other members of the cabinet, and allocates posts to members within the government. In most systems, the prime...
s were expected to serve a tenure as MITI minister before taking over the government. MITI worked closely with Japanese business interests, and was largely responsible for keeping the domestic market closed to most foreign companies.
MITI lost some influence when the switch was made to a floating exchange rate
Floating exchange rate
A floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency....
between the United States dollar
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
and yen in 1971. Before that point, MITI had been able to keep the exchange rate artificially low, which benefited Japan's exporters. Later, intense lobbying from other countries, particularly the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, pushed Japan to introduce more liberal trade laws that further lessened MITI's grip over the Japanese economy. By the mid-1980s, the ministry was helping foreign corporations set up operations in Japan.
The decline of MITI was described Johnstone:
- ... by the early 1980s, when Western analysts first became aware of MITI, the ministry's glory days were over. In 1979 MITI lost its primary instrument of control over Japanese firms — allocation of foreign currency. The power, that is, to decide who could — and who could not — import technologies. [For example] ... MITI bureaucrats attempted to deny fledling Sony the $25,000 the company needed to license transistor technology from Western Electric.
The declining significance of MITI to Japanese companies made it a less powerful agency within the bureaucracy, and by the end of the 20th century, it was folded into a larger body. In 2001, it was reorganized into the Ministry of Economy, Trade, and Industry (METI).
Agencies
Important MITI agencies include:- National Institute of Advanced Industrial Science and TechnologyNational Institute of Advanced Industrial Science and TechnologyThe , or AIST, is a Japanese research facility headquartered in Tokyo, and most of the workforce is located in Tsukuba Science City, Ibaraki, and in several cities throughout Japan. The institute is managed to integrate scientific and engineering knowledge to address socio-economic needs...
(AIST) - Japan External Trade Organization (JETRO)
- Japan Patent OfficeJapan Patent OfficeThe Japan Patent Office is a Japanese governmental agency in charge of industrial property right affairs, under the Ministry of Economy, Trade and Industry...
(JPO)
External links
METI website- Benjamin Powell (2007) Japan and the Myth of MITI in Library of Economics and LibertyLibrary of Economics and LibertyThe Library of Economics and Liberty is a free online library of economics books and articles from a libertarian view and is sponsored by the private Liberty Fund.-Content:...
Good Design Award Japan Industrial Design Promotion Organization - Zaibatsu Dissolution, Reparations and Administrative Guidance.