UBC Theses and Dissertations

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UBC Theses and Dissertations

A study on Japan's reaction to the 1973 oil crisis Yamakoshi, Atsushi 1986

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A STUDY ON JAPAN'S REACTION TO THE 1973 OIL CRISIS  By ATSUSHI YAMAKOSHI B.A., Waseda University, 1981  A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS  in THE FACULTY OF GRADUATE STUDIES (Department of I n t e r d i s c i p l i n a r y Studies) (Commerce/Economics/Political  Science)  We accept t h i s thesis as conforming to the required standard  THE UNIVERSITY OF BRITISH COLUMBIA June 1986 (c) Atsushi Yamakoshi, 1986  )E-6  In p r e s e n t i n g  this thesis  r e q u i r e m e n t s f o r an of  British  it  freely available  agree that  in partial  advanced degree a t  Columbia,  understood that for  Library  s h a l l make  for reference  and  study.  I  f o r extensive copying of  h i s or  be  her  g r a n t e d by  shall  not  be  I n t e r d i s c i p l i n a r y Studies  The U n i v e r s i t y o f B r i t i s h 1956 Main Mall V a n c o u v e r , Canada V6T 1Y3 Date  (3/81)  June  1986  of  further this  Columbia  thesis  head o f  this  my  It is thesis  a l l o w e d w i t h o u t my  permission.  Department O f  the  representatives.  copying or p u b l i c a t i o n  f i n a n c i a l gain  University  the  f o r s c h o l a r l y p u r p o s e s may by  the  the  I agree that  permission  department or  f u l f i l m e n t of  written  Abstract The Japan's two  object reaction  major  recover  to the  questions.  from the  distinctive  Chapter crisis.  One  reaction  provides discusses  Two  examines  mainly  were becoming extensive  differences interests  diversified  Japan  answer  able  of other  to  was  to the o i lc r i s i s  a general  as  countries? review  t h e f o c u s and  of the  the  the p o l i t i c a l At  1973 o i l  basic  aspects  the beginning in a  the.opinions after  state  of  of  o i lc r i s i s  sectors.  This  and  1970's,  historical  the accomplishment 1973  Japan's  of the  of Japanese  i n the government  industrial  attention  was  to  S e c o n d l y , what  reaction  g r o w t h . The  of o p i n i o n  among  i n order  a n d how  s c e n e was  because  economic  investigate  dissertation.  Japanese p o l i t i c a l  special  why  to the o i lc r i s i s .  transition  i s to  o i lc r i s i s  o i lc r i s i s ?  Japan's  of t h i s  Chapter  1973  the reactions  I t also  methodology  dissertation  First,  1973  about  compared w i t h  the  of t h i s  people of  reflected  the  the c o n f l i c t  chapter  of  pays  to Japan's bureaucracy i n facing  the o i l  crisis. Chapter reaction confusion the  within  the economic The  the Japanese  the i n f l a t i o n a r y  i t s industrial  vulnerability,  o i lc r i s i s  situation  and  i i  The  of  created  after  recovered  structure.  efficiency  aspects  economy b e c a u s e  i n 1971. However, J a p a n  changing the  discusses  to the o i lc r i s i s .  time of  Shock"  Three  Japan's  great  i t occurred the  "Nixon  from the c r i s i s  o i lc r i s i s  f l e x i b i l i t y of  at  by  elucidated the  Japanese  economy.  Chapter reaction.  Four  Japanese  decision-making the  deals  activities  business  process of  Nissho,  efforts  rationalize  decreasing efforts  i n d u s t r y . The  the  Chapter chapters. recovery  friction Five  from  the  1973  commitment  problems caused  by  findings,  the  efforts  commitment  i s recognized  Japanese  this  major  various  consensual  the  by  l e d by  reaction to  process  by  as  relations  the  change  between  structural  the  labour  change.  the  preceding  that  accomplished  by  Japan's the  f a c t i o n s to s o l v i n g  rather  than  government. T h i s  the  by  structural  i t concludes  social  crisis the  made  rationalization  f i n d i n g s of  was  the  through  Companies  between management and  o i l crisis  of  influence  m a t e r i a l s produced  cooperative  the  Japan's  organizations:  production  caused  those  of  government  a c c e l e r a t e d the  and  offers  B a s e d on  voluntary the  business  to  Doyukai.  f o r the  in  moderated  Japanese  i n p u t s . These  demand  aspects  tried  business  their  i n d u s t r i e s and  government and  the  N i k k e i r e n and  oil-reliant Japanese  business  leaders  of  intermediate  decreased  the  four major  Keidanren, to  with  by  voluntary  most d i s t i n c t i v e  o i l crisis.  the  feature  in  Table CHAPTER  of Contents  ONE  THE N A T U R E OF T H I S T H E S I S 1. WHAT WAS THE  1  1973 O I L C R I S I S ?  2  2. THE FOCUS OF T H I S T H E S I S 3. T A B L E S C H A P T E R TWO THE P O L I T I C A L A S P E C T S OF J A P A N ' S TO THE 1 9 7 3 O I L C R I S I S  6 8 REACTION  11  1. T H E J A P A N E S E GOVERNMENT S Y S T E M AND THE S I T U A T I O N I N THE E A R L Y 1970'S 2. T H E A C T I O N S CRISIS  TAKEN  BY T H E GOVERNMENT  3. THE C H A R A C T E R I S T I C S OF THE J A P A N E S E R E A C T I O N TO THE O I L C R I S I S  POLITICAL  FACING  THE  POLITICAL  4. T A B L E S  19 32 39  CHAPTER THREE THE ECONOMIC A S P E C T S OF J A P A N ' S TO THE 1 9 7 3 O I L C R I S I S  REACTION  42  1. THE J A P A N E S E ECONOMIC S T R U C T U R E 2. THE I M P A C T S OF T H E ECONOMIC R E A C T I O N  13  44  1 9 7 3 O I L C R I S I S AND  3. T H E C H A R A C T E R I S T I C S OF THE J A P A N E S E R E A C T I O N TO THE O I L C R I S I S  JAPAN'S  ECONOMIC  67  4. T A B L E S  70  C H A P T E R FOUR THE B U S I N E S S A S P E C T S OF J A P A N ' S TO THE 1 9 7 3 O I L C R I S I S 1. THE P O L I T I C A L R E A C T I O N THE O I L C R I S I S 2. T H E ECONOMIC R E A C T I O N THE O I L C R I S I S  54  REACTION  85  OF J A P A N E S E B U S I N E S S  TO 86  OF J A P A N E S E B U S I N E S S  TO 94  3. T H E C H A R A C T E R I S T I C S OF THE J A P A N E S E R E A C T I O N TO THE O I L C R I S I S 4. T A B L E S  BUSINESS  98 104  iv  CHAPTER F I V E CONCLUSION  106  BIBLIOGRAPHY  113  APPENDIX A J A P A N E S E V I E W ON CANADA'S R E A C T I O N TO THE 1 9 7 3 O I L CRISIS  116  1. THE P O L I T I C A L  ASPECTS  116  2. THE ECONOMIC A S P E C T S  124  3. THE C H A R A C T E R I S T I C S OF T H E C A N A D I A N THE O I L C R I S I S 4. T A B L E S  REACTION  TO 127 132  v  List (Chapter 1-  of Tables  One)  1. S t r u c t u r e o f E n e r g y D e p e n d e n c e Countries  1-2.  A Basic  of Major  Industrial 8  Concept  9  1- 3. Some A s p e c t s o f J a p a n ' s R e a c t i o n  t o t h e 1973 O i l  Crisis  10  (Chapter 2-  Two)  1. T h e N u m b e r o f S e a t s i n t h e D i e t  by J a p a n e s e  Political  Parties  39  2-  2. M a j o r M e m b e r s o f T a n a k a ' s  2-  3. P r i m e M i n i s t e r s (Chapter  33-  of Japan  Cabinet  40  ( 1 946-1 985)  41  Three)  1. E c o n o m i c G r o w t h R a t e s o f M a j o r C o u n t r i e s 2. C o m p a r i s o n o f T a r g e t s s e t b y t h e N a t i o n a l I n c o m e Doubling Plan and A c t u a l Economic Performance  71  3-  3. H o u s e h o l d S a v i n g  73  3-  4. T h e G r o w t h  3-  5. M a j o r J a p a n e s e T r a d e  3-  6. T h e S h i f t  Rates of Major Countries  of Japanese Foreign  Trade  70  74  Items  75  i n the Japanese Postwar  Industrial  Structure  76  3-  7. T h e S h i f t  i n Japanese  Energy  3-  8. S m i t h s o n i a n R a t e s o f M a j o r C u r r e n c i e s  78  3-  9. U.S. I n t e r n a t i o n a l  78  Liquidity  3-10.  Change  3-11.  Major Japanese Economic  3-12.  Growth and  Supply  77  Position  i n O i lPrices  of Real  GNP  79 Indices  i n Seven  (1972-1975)  Industrial  79  Countries  t h e OECD  80  3-13.  Wholesale Price  Indices:  International  3-14.  B a l a n c e o f I n t e r n a t i o n a lv i P a y m e n t s  Comparison ."  ..81 82  3-15.  Current  Balances  3- 1 6 .  Total Foreign Countries (Chapter  4-  1. C h a n g e s  o f OECD C o u n t r i e s  83  Exchange Reserves of Major  Industrial  a n d OPEC C o u n t r i e s  84  Four) i n Intermediate  Inputs  i n the Processing  Industry  104  4- 2. P r o d u c t i v i t y I n c r e a s e  i n the Processing  4- 3. T h e R a t i o  Establishments  of Business  Industry  ..105  Implementing  Employment Adjustment  105  (Appendix) A-  1. Some A s p e c t s to  of t h e Japanese and Canadian  Reactions  t h e 1973 O i l C r i s i s  132  A-  2. C o n s u m e r  A-  3. C u r r e n t  A-  4. C a n a d i a n M e r c h a n d i s e T r a d e  135  A-  5. C h a n g e s i n L a b o u r C o s t s a n d P r o f i t s p e r U n i t o f Output 6. P r o d u c t i o n S h a r e s b y S e c t o r s , S e l e c t e d Y e a r s  136  A-  P r i c e I n d i c e s : I n t e r n a t i o n a l C o m p a r i s o n ..133 Balances  of Major  Industrial  Countries  ....134  1870-1 974  137  A-  7. E m p l o y m e n t  A-  8. F o r e i g n  A-  9. E x p l o i t a b l e O i l R e s e r v e s  A-10. A-11.  Shares  by Economic  Sector  and Industry  Ownership C o n t r o l of Canadian  Industry  i n Canada  P r o v i n c i a l Shares i n the Manufacturing (1980) The T o p T e n I n d u s t r i a l s ( 1983)  vii  .138  ....139 140  Sector 141 142;  Acknowledgements Five of  this  W.  C.  people  dissertation.  Tomlinson, Dr.  Nemetz and, like  Institute  C.  Dr.  H.  B.  Vertinsky,  Smith, Dr.  Terence  made p o s s i b l e  of Canada, and and  this  G.  Peter  McGee.  I  Dr.  complete Finally  their  J.  N. would  by  financial  o f UBC,  the  support  federal  the Keidanren. I thank  appreciate  Dr.  support. I would  from  these  McGee's c o o p e r a t i o n i n also  like  to thank  Dr.  Frank  Langdon. Special  me  D.  of A s i a n Research  organizations obtaining  Malcolm  Ilan  to the completion  them a l l .  s t u d y was  government  significantly  They a r e Dr.  in particular,  t o thank This  the  contributed  thanks my  t o my  two-year  but most  Keidanren colleagues for  s t u d y a t UBC  importantly  encouragement and  support.  viii  helping  successfully.  I thank  my  parents for  CHAPTER THE  The  world  political  economy  given  I t may  criticism  by  be  i t s rapidly  is  both  is  o f t e n argued  the  increased crises  political  argued  North  of  tensions should  and  be  target  trade of  such  i t s "closed" market, increased tension.  recovered  successfully  this  main  tensions i n the  because Japan  1970's more  the  world  American c o u n t r i e s because  exports  victim  to  increased  p r o t e c t i o n i s m i n the  that p o l i t i c a l  According  facing  that Japan,  increasing  mainly  i n the  countries.  growing  c a u s e and  THESIS  industrialized countries,  European and  of  THIS  is currently  t e n s i o n among  particularly system.  NATURE OF  ONE  argument, found  from  than the  i n the  world the  other cause  way  1  It  economy  two o i l industrial of  Japan  T h e p o l i t i c a l t e n s i o n s u r r o u n d i n g J a p a n i s s y m b o l i z e d by t h e p h r a s e " t r a d e f r i c t i o n . " T h i s f r i c t i o n c a n be c l a s s i f i e d i n t o t h r e e major c a t e g o r i e s : Japanese e x p o r t s , the Japanese m a r k e t , and Japanese p o l i c y and economic s t r u c t u r e . T o p i c s c o n c e r n i n g Japanese e x p o r t s i n c l u d e the e x p o r t of such p r o d u c t s a s t e x t i l e s , s t e e l , c o l o u r TV s e t s , a u t o m o b i l e s , machine t o o l s and e l e c t r o n i c s , and p o l i c y measures r e l a t e d to J a p a n e s e e x p o r t s such as v o l u n t a r y e x p o r t r e s t r a i n t and l o c a l content proposals. Topics concerning the Japanese market i n c l u d e the market f o r such p r o d u c t s as t e l e c o m m u n i c a t i o n equipment, beef and o r a n g e s as w e l l as p o l i c y measures such as t a r i f f s and n o n - t a r i f f b a r r i e r s (NTB). T o p i c s c o n c e r n i n g Japanese p o l i c y i n c l u d e a g r i c u l t u r a l p o l i c y , d e f e n s e p o l i c y , i n d u s t r i a l p o l i c y and the i n t e r n a t i o n a l i z a t i o n of t h e yen, and t h o s e c o n c e r n i n g the Japanese economic s t r u c t u r e i n c l u d e the d i s t r i b u t i o n system and i n t r a - g r o u p t r a n s a c t i o n s . In a d d i t i o n t o t h e s e t o p i c s , even such i s s u e s as J a p a n e s e c u l t u r e and l a n g u a g e s o m e t i m e s become t h e t o p i c s o f t r a d e f r i c t i o n . 1  1  2 recovered recovery The reacted called  from the o i l c r i s e s differed purpose  from that of this  i n 1979.  because  i t had a greater i n 1979.  w e a k n e s s e s when hoped will  that  elucidate  face  i t faces  War out, oil  deals  a crisis.  insights  into  o f contemporary  Arabian  1973 o i l c r i s i s  than d i d the  second  i t s strengths and  In this  reaction  respect  i t i s  t o t h eo i l c r i s i s  and weaknesses of Japan, and  the current  economic  actions  trends.  was t r i g g e r e d  o u t on O c t o b e r  6, 1 9 7 3 .  o i lproducing countries  (sometimes  the  of Japan i n  2  OIL CRISIS?  1973 o i l c r i s i s  breaking  how J a p a n  "the second o i l  with  t e n d s t o show  t h estrengths  countries.  The 1973o i l c r i s i s i s  impact on Japan  A country  1. WHAT WAS T H E 1 9 7 3 The  thesis  industrial  vis-a-vis  a review of Japan's  p r o v i d e many the  This  Japanese  i s t o investigate  o f 1973.  o i lc r i s i s "  crisis"  crisis  of other  thesis  t o the o i lc r i s i s "the f i r s t  a n d i n how t h e  described  3  by the M i d d l e E a s t When t h e w a r b r o k e  decided t o use t h e i r  as the"fourth m i l i t a r y  weapon"'  As f o r Japan's energy strategy i t s e l f through the f i r s t and s e c o n d o i l c r i s e s , s e e P. N . N e m e t z , I . V e r t i n s k y a n d P. V e r t i n s k y , "Japan's Energy S t r a t e g y a t the C r o s s r o a d s , " Pacific Affairs 57 ( W i n t e r 1 9 8 4 - 8 5 ) : 5 5 3 - 5 7 6 . The i n f o r m a t i o n on t h e h i s t o r i c a l i n c i d e n t s d i s c u s s e d i n t h i s s u b s e c t i o n i s b a s e d o n t h a t o f Asahi Nenkan, 1974 (Tokyo: A s a h i Shinbunsha, 1974). The t r a n s l a t i o n i n t o E n g l i s h was done by t h e a u t h o r . " T h i s p h r a s e i s u s e d i n ibid., p. 63. The o i l s t r a t e g y o f A r a b i a n o i l p r o d u c i n g c o u n t r i e s was a n e f f e c t i v e weapon t o s u p p o r t t h e i r p o l i t i c a l g o a l s . F o r instance, Japan had t o declare i t s support f o r Arabian 2  3  3 along  with  bargaining 16,  t h e army, t h e navy and t h e a i r f o r c e ) power and implement  s i xPersian  Kuwait, and  Abu Dhabi  decided  day.  Gulf  to raise  On t h e o t h e r  o i l s t r a t e g i e s . On  c o u n t r i e s , Saudi  and Qatar,  held  Arabia,  i n Kuwait  and decided  production  b y 5% p e r m o n t h . T h e y d e c l a r e d  in  their  o i l production  of  the Arabian  of  P a l e s t i n i a n s i n the Middle  territory  against  the United  other  Persian In  major  Gulf  response  t o decrease  would continue by I s r a e l  proposed  East  a  their o i l  that  until  t h e next  the decrease  the  occupation  had ended and t h e r i g h t s had been  restored.  On  t o implement an o i l embargo  States. Following countries  joined  (Majors ) 6  this  Saudi  Arabia  and  i n t h e embargo.  to the o i l strategy  U.S. o i l c o m p a n i e s  held  5  Iraq,  i n Kuwait,  t h e o i l p r i c e by 2 1 % b e g i n n i n g  conference  18, L i b y a  October  Iran,  a conference  hand, m i n i s t e r s of OAPEC  October  to gain  o f OPEC c o u n t r i e s , t h e  decided  to increase  their  "(cont'd) c o u n t r i e s t o o b t a i n o i l supply from A r a b i a n o i l producing countries. OAPEC ( O r g a n i z a t i o n o f A r a b P e t r o l e u m E x p o r t i n g Countries) was e s t a b l i s h e d i n 1 9 6 8 . I t s m e m b e r s c o n s i s t o f t h r e e o r i g i n a l member c o u n t r i e s — K u w a i t , L i b y a a n d Sa,udi Arabia--and e i g h t other c o u n t r i e s — Q a t a r , B a h r a i n , Abu D h a b i , A l g e r i a , I r a n , I r a q , S y r i a a n d E g y p t . The o i l e x p o r t i n g c o u n t r i e s e s t a b l i s h e d OPEC ( O r g a n i z a t i o n o f P e t r o l e u m E x p o r t i n g C o u n t r i e s ) i n 1960 f o l l o w i n g t h e p r o p o s a l o f I r a q . The OPEC members c o n s i s t o f f i v e o r i g i n a l member c o u n t r i e s — I r a q , I r a n , K u w a i t , S a u d i A r a b i a , a n d Venezuela—and eight other countries--Qatar, Indonesia, L i b y a , U n i t e d Arab Emirates, A l g e r i a , N i g e r i a , Equador and G a b o n . W h i l e t h e m a i n p u r p o s e o f OPEC i s t o d i s c u s s t h e o i l s t r a t e g y o f o i l e x p o r t i n g c o u n t r i e s , t h a t o f OAPEC i s t o d i s c u s s b u s i n e s s o r i e n t e d i s s u e s . F o r i n s t a n c e , OAPEC discusses the establishment of o i l tanker f l e e t s of Arabian c o u n t r i e s a n d t h e i n d u s t r i a l i z a t i o n o f i t s member c o u n t r i e s . The f o l l o w i n g companies a r e u s u a l l y c a l l e d Majors: Exxon, Gulf O i l , Standard O i l of C a l i f o r n i a , Texaco, M o b i l , Royal Dutch S h e l l , B r i t i s h P e t r o l e u m and Companie F r a n c a i s e Petroles (CFP). 5  6  4 oil  prices.  their  o i l prices  policy  was  In  supply  Shell  to their  f o l l o w e d by  addition  National  It  Exxon and  customers,  the  to the  announced a  other  70%  t o A r a b i a O i l Co.  became c l e a r  i n the  that  of  increase,  i t would  this  c o n s i d e r e d an! u n f r i e n d l y  country  the  following  announced  their  o i l e x p o r t s to Japan At  a meeting  decided  level  November  the p r i c e barrel  on  to decrease  production from  the Majors  of  4 and  a  o i l (Arabian light)  1974.  (See  Vernon  by  1973  5,  are  3-10  usually  explains  the  10%  Arab that  i t s o i l  on  October that  24. Japan  countries. they  OAPEC 25%  would  On cut  countries  of  further  result  of  their  decrease these  US$11  i n Chapter  per  of  barrel  per in  Three).  r e c o g n i z e d as  process  i t by  policies,  i n c r e a s e d from US$3  t o more t h a n  Table  cut  Arab  *  o i l p r o d u c t i o n by  t o December. As  These events crisis.  November  This  10%.  i n September, and  i n October  January  by  by  the  announcement  was  day  Japan.  Majors.  L t d . i n Japan  light  increase in'  including  o i l price  O i l Company a n n o u n c e d  30%  the  the  1973 o i l  crisis  as  follows: D u r i n g those f i f t e e n month of c r i s i s , a s e r i e s o f t r a n s f o r m a t i o n s o c c u r r e d w i t h r e g a r d t o how the c r i s i s was p e r c e i v e d . A t f i r s t , i n t h e t w o o r t h r e e m o n t h s a f t e r O c t o b e r , 1 9 7 3 , t h e c r i s i s was generally seen as a t h r e a t t o the s e c u r i t y of the o i l i m p o r t e r s ' s u p p l i e s . Then, around the b e g i n n i n g of 1974, a f t e r t h e p r i c e o f c r u d e o i l had moved v i o l e n t l y upward, the f o c u s of c o n c e r n i n most c o u n t r i e s s h i f t e d t o t h e q u e s t i o n o f p r i c e . By m i d y e a r o f 1974, h o w e v e r , t h e c o n c e r n o v e r p r i c e had been c o n v e r t e d i n t o a c o n c e r n over the i n t e r n a t i o n a l monetary mechanism as a whole; c o n s i d e r a b l e doubt a r o s e o v e r w h e t h e r i n s t i t u t i o n s e x i s t e d o r c o u l d be c r e a t e d t h a t w o u l d be c a p a b l e o f h a n d l i n g t h e  5%  5 massive s h i f t s developing.  i nfinancial  resources  that  were  7  As  f o r t h e i m p l i c a t i o n s o f the  politics, Penrose  there  sees  interaction explains  the  are  crisis  several different  t h e 1973 o i l c r i s i s ofthree three  separate  for  views.  a s "the  Forinstance,  progressive  historical  developments  international  developments." She 8  as follows:  The b a s i c h i s t o r i c a l d e v e l o p m e n t s w e r e , f i r s t , the r i s i n g b a r g a i n i n g power o f the g o v e r n m e n t s o f the o i l e x p o r t i n g c o u n t r i e s o f the Middle East v i s - a - v i s t h e i n t e r n a t i o n a l companies t h a t had discovered, developed, and long c o n t r o l l e d Middle E a s t e r n o i l ; s e c o n d l y , t h egrowing dependence o f t h e United States on Middle E a s t e r n , and s p e c i f i c a l l y Arab, o i l ; and t h i r d l y , t h ee s t a b l i s h m e n t and expansion o f I s r a e l i nP a l e s t i n e against the b i t t e r o p p o s i t i o n o f the Arab c o u n t r i e s , butw i t h t h e strong support o f the United S t a t e s . 9  There are U.S.  some s c h o l a r s who s e e t h e  strategy t ostrengthen  energy.  i simportant  implications politics  of  i t s superiority  asa result of i nthe  field of  1 0  It  crisis  crisis  and interesting  o f t h e 1973 o i l c r i s i s  and t o a s k such  questions  t oinvestigate the for  a s Who b r o u g h t  a n d f o r what p u r p o s e ? However,  this  Whatever  thesis the  international  i t i s n o t the  t ot r y t o answer q u e s t i o n s  main causes  about t h e  ofthis  o f t h e 1973 o i l c r i s i s ,  purpose kind.  i t i s  R a y m o n d V e r n o n , " A n I n t e r p r e t a t i o n , " i n The Oil Crisis, ed. R a y m o n d V e r n o n (New Y o r k & L o n d o n : W. W. N o r t o n & C o m p a n y , 1 9 7 6 ) , p . 1. E d i t h P e n r o s e , " T h e D e v e l o p m e n t o f C r i s i s , " i n ibid., p. 39. Ibid., p. 39. 0 n e o f t h e s e s c h o l a r s , T s u n e h i k o Yamada e x p l a i n s t h e o i l c r i s . i s i nh i s paper "America no K o k u s a i S e k i y u S e n r y a k u no S h i n T e n k a i " i n Ni hon no Enerugi Mondai . e d . Y a s u z u m i I w a o ( T o k y o : J i j i T s u s h i n s h a , 1974) p p . 9 1 - 1 2 1 . 7  8  9  1 0  6  important  t o acknowledge  confusion  i n most c o u n t r i e s  producing  and r e t a i l i n g  price  increase, of this  country  which, because  2.  thesis  seems t o h a v e  reacted  o f i t s heavy welcomed  great  f o rthe o i l from  the o i l The  how J a p a n , t h e  dependence  on i m p o r t e d  t h e 1973 o i l c r i s i s ,  THESIS had various  I t s impact on each  reacted—differed background  between  difference  domestic  according  and s i t u a t i o n .  differences  to the country's particular  For instance,  t h e Japanese  i s based  a r e based  political  system,  business  attitudes.  indicated  forced  contributed industrial  Japan  there  on s o c i a l  These  are obvious  and the Canadian  on a g e o g r a p h i c a l  t h e economic  i n Table  i m p a c t s on t h e w o r l d  c o u n t r y — a n d how e a c h c o u n t r y  r e s o u r c e s of o i l and Japan  differences  does  elements  factor: not.  Canada has  such as the  structure,  1-2 i t i s o f t e n  reaction.  Some  and p r e v a i l i n g  are the focus of t h i s argued  that  thesis.  As  t h e 1973 o i l  t o make n a t i o n - w i d e e f f o r t s  t o i t s economic  which  recovery and increased  competitiveness.  i salso  disadvantages, forced  who b e n e f i t e d  i s to investigate  1973 o i l c r i s i s  economy.  It  about  of the world. Except  companies  least  THE FOCUS OF T H I S  crisis  brought  t o i t . (See Table 1-1).  The  One  the c r i s i s  most p e o p l e d i d n o t welcome t h e c r i s i s .  purpose  oil,  that  Japan  argued  that  including  t o pursue  various  a lack  geographical  of n a t u r a l  industrialization.  resources, has Moreover, i n  7 drastically that be  changing  a c o u n t r y ' s advantage  a d i s a d v a n t a g e and v i c e  aspects  of Japan's  attention after  chapters.  discusses  versa.  summarizes  Table  1-3  t o t h e 1973 o i l c r i s i s , and p o l i c y  structure  as w e l l  of Japanese economic  reviewed efforts  reactions  some  paying  before and  addition,  The r e a c t i o n s o f  are reviewed. Chapter  changes  Some  i n Japan's discusses the  The r o l e s o f  and b u s i n e s s l e a d e r s a r e perspective.  points  discussed  to support the conclusion i s an a p p e n d i x  reaction  aspects  The  management  a r e reviewed from t h e economic  The v a r i o u s  there  the p o l i t i c a l  business i n the reaction.  organizations  above,  i s investigated in  a r e reviewed. Chapter Four  of companies  summarized  stated  aspects of the r e a c t i o n .  as major  from t h e p o l i t i c a l  perspective.  Canada's  and t h e D i e t  t h e economic  economic  are  out t o  t o t h e 1973 o i l c r i s i s .  government  figures  major  run, turn  C h a p t e r Two d i s c u s s e s  economic  role  can, i n the long  t o t h e 1973 o i l c r i s i s  reaction  Japanese  Three  happen  t h e concept and argument  reaction  Japan's  the  situations,  the c r i s i s .  Japan's three  i t may  reaction  to the situation  Following  of  international  i n these chapters i n Chapter Five.  i n which a Japanese  t o t h e 1973 o i l c r i s i s  view  i spresented.  on  In  8 3.  TABLES  TABLE  1-1  S T R U C T U R E OF ENERGY D E P E N D E N C E OF MAJOR  - D e p e n d e n c e on O i l for Energy -Dependence on Imports f o r O i l -Dependence on t h e Middle East f o r Oil Imports - D e p e n d e n c e on t h e Middle East f o r Energy  INDUSTRIAL COUNTRIES  JAP.  W.G.  FRA. I T A .  - 1978, % C A N . U . S . OECD  73.5  5 4 . 7 64.1 5 9 . 9 7 0 . 3  39.7 48.9,53.4  99.8  96.6 43.4 99.0 98.5  12.9 45.7 65.9  78.5  48.9 80.6 76.9 68.5  44.7 38.5 68.6  57.6  25.8 16.5 45.6 47.3  U.K.  1  Source: Hokoku, 1980 OECD, Energy  18.6  24.1  J a p a n , E c o n o m i c P l a n n i n g A g e n c y , Nenji Keizai, (Tokyo: Economic P l a n n i n g A g e n c y , 1980) p. 210; Balance of OECD Count ri es , 1 9 7 8 .  Note: Figures 1  2.3  i n 1977..  1. J A P . = J a p a n , W.G.=West G e r m a n y , U . K . = U n i t e d K i n g d o m , F R A . = F r a n c e , I T A . = I t a l y , CAN.=Canada, U . S . = U n i t e d S t a t e s , OECD=The a v e r a g e o f OECD c o u n t r i e s .  9  TABLE  1-2  A B A S I C CONCEPT  IMPACT  i  P O L I T I C A L SYSTEM ECONOMIC S T R U C T U R E BUSINESS ATTITUDE  i  RESULT  AN A P P L I C A T I O N TO J A P A N ' S R E A C T I O N TO THE 1 9 7 3 O I L C R I S I S OIL  CRISIS  i  P O L I T I C A L SYSTEM ECONOMIC S T R U C T U R E BUSINESS ATTITUDE i NATION-WIDE EFFORTS  i  THE C O M P E T I T I V E POWER OF  INDUSTRY  INCREASED  10  TABLE SOME A S P E C T S OF  1-3  J A P A N ' S R E A C T I O N TO  SITUATIONS  THE  1973  OIL  CRISIS  POLICIES  S c a r c i t y i n Domestic Resources  Energy  i  Dependence Supplies OIL  on  Foreign  Decrease of V u l n e r a b i l i t y E f f i c i e n t Use of I m p o r t e d Resources  by  CRISIS  I  Higher  Increased Competitive of I n d u s t r y TRADE  N a t i o n - w i d e E f f o r t s on -Energy Conservation -Development of A l t e r n a t i v e Energy Sources - I n c r e a s e of P r o d u c t i v i t y  Vulnerability  FRICTION  Power*  J  CHAPTER THE  P O L I T I C A L A S P E C T S OF TO  The aspects in  purpose  of  of Japan's  Chapter  One,  THE  this  a  of Japan's  crisis  Japan's  "Japan  by  Inc."  government and  i n the  economic  explained  and  1970's.  CRISIS  1973  On  scholars  According to this initiative  has  the  War  As  noted  economic countries  in recovering the  I I has  from  secret  of  been  the concept  concept, the  Japanese  to establish  national  taken  the government  such a  role.  of  goals in  a r e , h o w e v e r , many a r g u m e n t s i n fact  is  the  utilizing  cooperates with  them. There  the government  that  the o t h e r hand, World  political  o i lcrisis.  industrialized  success  success after  takes the  accomplishing  other  REACTION  i s to review the  to the  relative  the business sector  whether  chapter  some W e s t e r n 1 1  OIL  JAPAN'S  i t i s sometimes argued  between Japan  oil  1973  reaction  friction result  TWO  as  to  1 2  N o b u y o s h i N a m i k i p o i n t s o u t t h a t t h e 1973 o i l c r i s i s r e n d e r e d the usage of the c o n c e p t "Japan I n c . " "out-of-date". Nobuyoshi Namiki, '"Japan, Inc.': R e a l i t y or F a c a d e ? " i n P o l i t i c s and Economics in Contemporary Japan, e d . Hyoe M u r a k a m i & J o h a n n e s H i r s c h m e r ( T o k y o : The J a p a n C u l t u r e I n s t i t u t e , 1979) p. 111. B e c a u s e of the i n c r e a s e i n the t r a d e imbalance between the U n i t e d S t a t e s a n d J a p a n , some A m e r i c a n s b e g a n c r i t i c i s i n g Japanese i n d u s t r i a l p o l i c y . For i n s t a n c e , a t the Japan-U.S. Businessmen's Conference h e l d a t Hakone, Japan, i n J u l y 1 9 8 2 , U.S. d e l e g a t e s p o i n t e d o u t t h a t t h e J a p a n e s e government s u p p o r t e d s e l e c t e d i n d u s t r i e s and p r o t e c t e d them a g a i n s t f o r e i g n c o m p e t i t i o n . The K e i d a n r e n , J a p a n F e d e r a t i p n of E c o n o m i c O r g a n i z a t i o n s , r e s p o n d e d t o s u c h c r i t i c i s m by p r e s e n t i n g a paper e n t i t l e d " F o r c e of Market S t r o n g e r Than 1 1  1 2  11  12 The  1973  political  and economic  accomplished responding what  o i lcrisis  i t was  able  a major  s y s t e m under  substantial  to that  was  economic  challenge,  t o do under  which Japan  had  growth.  the e x i s t i n g  a review of Japan's  some l i g h t  on t h e q u e s t i o n  of  t o the  In t h e p r o c e s s of  the Japanese  Therefore,  government a c t u a l l y  challenge  reaction  o f how  contributed  government political  system.  to the c r i s i s  much t h e  showed  sheds  Japanese  t o t h e economic  development  Japan. This chapter consists  section, the  the p o l i t i c a l  crisis  government major  situation  i s r e v i e w e d . The i s also  actions  of t h r e e  structure  t a k e n by t h e C a b i n e t and  In t h e t h i r d  political  a c t i o n s are i n v e s t i g a t e d .  t o the q u e s t i o n  political  section,  o f how  s y s t e m worked  first  the time of  of the  Japanese  In t h e second s e c t i o n ,  reviewed.  paid  In t h e  of Japan around  basic  explained.  sections.  the D i e t  are  the c h a r a c t e r i s t i c s Special  effectively  the  i n responding t o the  the  of the  attention  is  Japanese crisis.  ( c o n t ' d ) Any ' T a r g e t i n g ' P o l i c y " , i n w h i c h t h e K e i d a n r e n p o i n t e d o u t t h a t some o f t h e c r i t i c i s m s stemmed f r o m a wrong p e r c e p t i o n o f "Japan I n c . " K e i d a n r e n , " F o r c e of M a r k e t S t r o n g e r Than Any ' T a r g e t i n g ' P o l i c y " , KKC Brief No.8 ( T o k y o : K e i z a i Koho C e n t r e , June 1 9 8 3 ) . 1 2  1 1. THE J A P A N E S E SITUATION  I N THE E A R L Y  1970'S  (1)  The B a s i c  The  government of Japan  powers:  Structure  legislative,  legislative the  GOVERNMENT S Y S T E M AND THE P O L I T I C A L  Diet  power  of the Government consists  administrative  i srepresented  i sdefined  1 3  of three  independent  a n d j u d i c i a r y . The  by t h e D i e t .  The r o l e o f  by t h e c o n s t i t u t i o n a s f o l l o w s :  A r t i c l e 4 1 : T h e D i e t s h a l l be t h e h i g h e s t o r g a n o f s t a t e power, a n d s h a l l be t h e s o l e law-making organ of t h e S t a t e . 1 f t  The  constitution defines  which to  include  pass  laws,  treaties, judges,  1 9  The Cabinet. other the  1 8  functions  powers o f t h e D i e t ,  t h e powers t o d e s i g n a t e 1 6  t o approve  t o conduct  the budget,  trials  t h e prime 1 7  administrative  power  The C a b i n e t c o n s i s t s of state  of the Cabinet,  against  i s t h e r e s p o n s i b l i t y o ft h e of t h e prime  minister and responsible  of i t sa d m i n i s t r a t i v e 2 1  1 5  2 0  and i sc o l l e c t i v e l y  i n the exercise  minister,  t o approve  o f impeachment  a n d t o amend t h e c o n s t i t u t i o n .  ministers  Diet  the various  which  arealso  to  power. The  defined  by t h e  The description i n this subsection i s based on Nippon S t e e l C o r p o r a t i o n , Nippon The Land and Its People (Tokyo: G a k u s e i s h a P u b l i s h i n g Co. L t d . , 1982), pp. 54-57. " T h e C o n s t i t u t i o n o f J a p a n ( P r o m u l g a t e d o n N o v e m b e r 3, 1 9 4 6 ) , A r t i c l e 41 T h e E n g l i s h v e r s i o n o f t h e C o n s t i t u t i o n i q u o t e d from J a p a n , S e c r e t a r i a t , House o f R e p r e s e n t a t i v e s , 1 3  1  The Diet  National Diet of Japan Law, The Rules of the  - The House  Constitution of Representative  of  Japan, The (Tokyo:  S e c r e t a r i a t , House o f R e p r e s e n t a t i v e s , 1982) T h e C o n s t i t u t i o n o f J a p a n , A r t i c l e 67, i b i d . , p. 17. , A r t i c l e 59, i b i d . , p. 15. , A r t i c l e 60, i b i d . , pp. 15-16. , A r t i c l e 6 1 , i b i d . , p. 16. , A r t i c l e 64, ibid. , A r t i c l e 96, i b i d . , p. 23. The function of the Cabinet i sdefined i n Chapter Five of 1 5  1 6  1 7 1 8 1 9  2 0 2 1  14 constitution,  include administering  affairs,  concluding  enacting  cabinet  divided and  governmental  The  judiciary  inferior  courts  courts,  independent bound of  orders.  The  proposing  managing  only  functions  approved  twelve  courts,  a n d t h e summary  i n the exercise  the  constitutionality  and  such  courts, the  c o u r t s . A l ljudges a r e  of t h e i r  i s designated  conscience  The C h i e f  Judge  and  judges are appointed  I t i s w i t h i n t h e power  of the courts  of any and a l l laws and  P o l i t i c a l Situation  and a r e  by t h e C a b i n e t  by t h e Emperor. A l l o t h e r  (2) The  ministries  the d i s t r i c t  by t h e c o n s t i t u t i o n a n d t h e l a w s .  Cabinet.  are  agencies.  as the h i g h  the  and  of the Cabinet  c o n s i s t s o f t h e Supreme C o u r t  t h e Supreme C o u r t  foreign  the budget,  among m i n i s t e r s o f s t a t e h e a d i n g  major  family  treaties,  laws,  o f Japan  by  t o r u l e on  orders.  i n the  Early  1970's A.  The  As  shown  Liberal  under  maintained  1972.  States  2 1  2-1, u n t i l  Party  the strong  h i s p o s i t i o n f o r three  Nixon  contributed  1970's, t h e a  stable  l e a d e r s h i p of Prime M i n i s t e r  t o have Okinawa  t o J a p a n , a n d i t was  (cont'd)  the early  (LDP) had m a i n t a i n e d  The P r i m e M i n i s t e r r e a c h e d  President  that  i n Table  Democratic  majority who  Diet  terms,  from  an agreement returned  the success  to the increase  t h e C o n s t i t u t i o n . Ibid.,  from  pp.  16-19.  1964 t o  with  U.S.  the  United  of t h i s  i n the seats  Sato,  agreement  o f t h e LDP i n  15 the  thirty-second election  held  on December However,  majority  2,  1969.  i ti sc l e a r  2 2  from t h e t a b l e that  gradually decreased  1 9 7 0 ' s . On t h e o t h e r Party  o f t h e House o f R e p r e s e n t a t i v e s  (JSP)  increased.  and t h e Japan  1972  on  November  decided  occupying  the seats  271 s e a t s ,  fell  establishment  of t h e party  the  JCP increased  i t s seats  the of  gradually Sato  on J u l y  from  election,  t o the lowest  t h e LDP,  number  since  i n 1 9 5 5 . On t h e o t h e r  from  14 t o 3 8 . T h e J S P a l s o  87 t o 1 1 8 . T h i s  o f v o t e r s who w e r e  hand,  tired  result  reflected  of the long  dominance  t h e LDP. far as the s i t u a t i o n  dominance  of the Diet  o f t h e LDP h a d been weakened  crisis.  provided the  i t s seats  attitude  As  oil  (JCP)  Socialist  t o d i s s o l v e t h e House o f R e p r e s e n t a t i v e s  30, 1972. I n t h e f o l l o w i n g  only  oft h e  o f t h e Japan  Communist P a r t y  the  increased  the middle  P r i m e M i n i s t e r T a n a k a , who s u c c e e d e d  7,  23  hand,  towards  t h e LDP's  In other  words,  policies  of the Cabinet  just  the situation  the opposition parties  was c o n c e r n e d , before  the  t h e 1973  i n the Diet  with a position  more e f f e c t i v e l y  to criticize  than  before.  B. The C a b i n e t As was  noted  i n the previous  a transitional  period  subsection, the early  i n Japanese p o l i t i c a l  1970's  history.  Asahi Nenkan, 1970 (Tokyo: Asahi Shinbunsha, 1970), p. 267. T h e s i t u a t i o n of Tanaka's succession i s e x p l a i n e d i n S h i g e r u H a y a s h i & K i y o a k i T s u j i , e d . , Nippon Naikaku Shiroku, 6 v o l s . (Tokyo: D a i - i c h i H o k i , 1981), 6:216-237. 22  2 3  16 Prime M i n i s t e r and  a half  years,  On J u l y successor  t h elongest  as president  candidates:  term  5, 1972, t h e e l e c t i o n  twenty-seventh  result  Sato hadmaintained  2  of t h ef i r s t  Fukuda, election  t o choose  the second  election  Sato's out i n t h e  o f t h e LDP. T h e r e were  2 5  Miki,  2  6  and Tanaka.  2 7  four The  was a s f o l l o w s :  Tanaka:156; Fukuda:150; O h i r a : l 0 l ; In  f o r seven  a f t e r W o r l d War I I .  o f t h e LDP was c a r r i e d  ad-hoc meeting  Ohira, "  h i s leadership  between  only  Miki:69  Tanaka  and Fukuda,  " M a s a y o s h i O h i r a was b o r n i n t o a m i d d l e c l a s s f a r m i n g f a m i l y i nKagawa p r e f e c t u r e i n 1 9 1 0 . He g r a d u a t e d f r o m T o k y o U n i v e r s i t y o f Commerce a n d e n t e r e d t h e M i n i s t r y o f F i n a n c e i n 1 9 3 6 . He a c t e d a s s e c r e t a r y t o t h e M i n i s t e r s o f F i n a n c e , T s u s h i m a a n d I k e d a , a n d w a s e l e c t e d a member o f t h e D i e t i n 1952. He b e l o n g e d t o t h e m a i n s t r e a m o f t h e L D P f o l l o w i n g Y o s h i d a a n d I k e d a , a n d became t h e m a j o r s u p p o r t e r o f T a n a k a . A f t e r holding major m i n i s t e r i a l p o s i t i o n s such as t h e M i n i s t e r o f F i n a n c e a n d t h e M i n i s t e r o f F o r e i g n A f f a i r s , he became p r i m e m i n i s t e r i n 1 9 7 8 . He d i e d i n t h e p o s i t i o n o f p r i m e m i n i s t e r i n 1 9 8 0 . Ibid., p. 451. T a k e o Fuk-uda w a s b o r n i n t o a r i c h f a m i l y i n Gumma prefecture i n 1905. A f t e r g r a d u a t i n g from Tokyo U n i v e r s i t y he e n t e r e d t h e M i n i s t r y o f F i n a n c e i n 1 9 2 9 . He w a s a n e l i t e b u r e a u c r a t a c t i n g a s D i r e c t o r G e n e r a l o f t h e Budget Bureau o f t h e m i n i s t r y . He w a s e l e c t e d a member o f t h e D i e t i n 1952. He b e l o n g e d t o t h e K i s h i f a c t i o n . He h e l d i m p o r t a n t p o s t s such a s S e c r e t a r y G e n e r a l o f t h e LDP, M i n i s t e r o f F i n a n c e a n d M i n i s t e r o f F o r e i g n A f f a i r s , a n d became p r i m e m i n i s t e r i n 1 9 7 6 . Ibid., p. 424. T a k e o M i k i was b o r n i n t o a f a r m i n g f a m i l y i n Tokushima prefecture i n 1 9 0 7 . He g r a d u a t e d f r o m M e i j i U n i v e r s i t y . He went t o t h e U n i t e d S t a t e s t o s t u d y b e f o r e h i s g r a d u a t i o n f r o m u n i v e r s i t y . He w a s e l e c t e d a member o f t h e D i e t i n t h e year o f h i s graduation. After acting as leader of several p o l i t i c a l p a r t i e s , h e b e c a m e a m e m b e r o f t h e L D P . He maintained h i s p o s i t i o n independent from the mainstream o f the p a r t y . A f t e r h o l d i n g major m i n i s t e r i a l p o s i t i o n s he b e c a m e p r i m e m i n i s t e r i n 1 9 7 4 . Ibid., pp. 365-366. K a k u e i Tanaka was b o r n i n N i i g a t a p r e f e c t u r e i n 1918A f t e r g r a d u a t i n g from Chuo E n g i n e e r i n g S c h o o l , he e s t a b l i s h e d a c o n s t r u c t i o n c o m p a n y . He w a s e l e c t e d a member of t h e D i e t i n 1947. A f t e r a c t i n g a s M i n i s t e r o f P o s t s a n d T e l e c o m m u n i c a t i o n s , S e c r e t a r y G e n e r a l o f t h e LDP, M i n i s t e r of F i n a n c e a n d M i n i s t e r o f I n t e r n a t i o n a l T r a d e a n d I n d u s t r y , he b e c a m e p r i m e m i n i s t e r i n 1 9 7 2 . Ibid., p p . 216-228. 2  2 5  2 6  2 7  17  Tanaka o b t a i n e d  282 v o t e s ,  a n d Fukuda o b t a i n e d  190 v o t e s . As  a result,  Tanaka became p r e s i d e n t o f t h e LDP. On t h e  following  day he was d e s i g n a t e d  J a p a n . He was 54 y e a r s  o l d , and t h e youngest prime m i n i s t e r  in postwar Japanese p o l i t i c a l In a d d i t i o n t o t h e f a c t p r i m e m i n i s t e r , he h a d o t h e r types  of p o l i t i c i a n s  bureaucrat  as t h e prime m i n i s t e r o f  history. t h a t Tanaka was t h e y o u n g e s t unique  f e a t u r e s . T h e r e a r e two  i n t h e LDP: a p a r t y p o l i t i c i a n  politician.  2 8  T a n a k a was a p a r t y  and a  politician  b e c a u s e he h a d no e x p e r i e n c e  i n an e l i t e  position.  t h e three prime m i n i s t e r s  He c o n t r a s t e d w i t h  b e f o r e him,  Kishi,  Ikeda,  bureaucrat  politicians  activities  as e l i t e  because they  bureaucrats.  2 9  They were  called  had s t a r t e d  their public  M o r e o v e r , Tanaka d i d n o t  p o i n t i s e x p l a i n e d by B a e r w a l d a s f o l l o w s : "In J a p a n e s e p a r l a n c e , t h i s i s r e f e r r e d t o a s t h e d i v i s i o n between tojin ( p a r t y men) a n d kanryo ( b u r e a u c r a t s ) . I f Hatoyama e p i t o m i z e d t h e tojin by h a v i n g been r e - e l e c t e d t h i r t e e n t i m e s t o t h e House of R e p r e s e n t a t i v e s , Y o s h i d a was t h e a r c h t y p e o f t h e e x - b u r e a u c r a t who came t o d o m i n a t e t h e LDP i n t h e postwar p e r i o d . Indeed, n e a r l y a l l of t h e Prime M i n i s t e r s have been drawn f r o m t h e l a t t e r r a n k s : S h i d e h a r a K i j u r o ( F o r e i g n M i n i s t r y ) 1945-46, A s h i d a H i t o s h i ( F o r e i g n M i n i s t r y ) 1948, Y o s h i d a S h i g e r u ( F o r e i g n M i n i s t r y ) 1946-47, 1948-54, K i s h i Nobusuke (Commerce a n d I n d u s t r y M i n i s t r y ) 1957-60, I k e d a H a y a t o ( F i n a n c e M i n i s t r y ) 1960-64, S a t o E i s a k u ( T r a n s p o r t a t i o n M i n i s t r y ) 1964-72. In t h i s c o n t e x t , the a c c e s s i o n o f Tanaka Kakuei t o t h e p r e s i d e n c y o f t h e LDP a n d P r i m e M i n i s t e r s h i p i n t h e summer o f 1972 was a m i n o r r e v o l u t i o n " (H. H. B a e r w a l d , " P a r t i e s , F a c t i o n s , a n d t h e D i e t , " i n Politics and Economics in Contemporary Japan, e d . Hyoe Murakami & J o h a n n e s H i r s c h m e i r ' [ T o k y o : J a p a n C u l t u r e I n s t i t u t e , 1979], P. 3 9 ) . N o b u s u k e K i s h i was c h o s e n by t h e Emperor t o be M i n i s t e r o f I n d u s t r y a n d Commerce i n a prewar C a b i n e t . The r e l a t i o n s h i p between p a r t y p o l i t i c i a n s a n d b u r e a u c r a t s i s e x p l a i n e d by Watanabe w i t h r e l a t i o n t o f a c t i o n s i n t h e LDP. T s u n e o 2 8  2 9  This  and Sato.  bureaucrat  18 graduate status  from  of  a person  education, these  a university.  is largely  T a n a k a was  qualities,  In Japanese  he  affected  a unique  obtained  society, by  his level  prime m i n i s t e r .  the  political  history.  public  i n August  1972  the  people  surveyed  Major 2-2.  As  the  by  late  supported  members of  shown  occupied  held  i n the  the  the  following  In  showed  Prime M i n i s t e r  Tanaka Cabinet  table,  3 0  major  people  posts  Based  during  of  fact,  any the  t h a t 62%  shown  the  the  on  of  Tanaka.  are of  the  of  highest popularity  prime m i n i s t e r i n postwar opinion polls  where  in  Cabinet  o i l crisis  Table were in  1973.  Prime M i n i s t e r Kakuei Tanaka Vice Prime M i n i s t e r Takeo M i k i M i n i s t e r of Finance Takeo Fukuda M i n i s t e r of F o r e i g n A f f a i r s Masayoshi Ohira MITI M i n i s t e r Y a s u h i r o Nakasone *MITI: M i n i s t r y of I n t e r n a t i o n a l Trade and I n d u s t r y . * F u k u d a s u c c e e d e d K i i c h i A i c h i on November 25, 1973. All  the  Japan  politicians  i n the  above order  minister  after  that  Tanaka  the  leaders  of  Although strong  the  i t was  Cabinet  p r o b l e m s he  listed  Ohira  LDP  when  became p r i m e m i n i s t e r s o f  although  and  Cabinet  here  before  Nakasone.  c o n s i s t e d of  the  i t faced  1973  t r u e t h a t Tanaka t o overcome  faced,  Zenko S u z u k i  i t was  the  the  intended  political  3 1  became  I t can  most  be  prime said  influential  o i l crisis. to e s t a b l i s h and  a l s o t r u e t h a t he  a  economic was  obliged to  ( c o n t ' d ) W a t a n a b e , Habatsu, (Tokyo: Kobundo, 1958). H. H. B a e r w a l d u s e s t h e w o r d " r e v o l u t i o n " a s p r e v i o u s l y quoted. K i i c h i A i c h i d i e d o n N o v e m b e r 23 i n t h e p o s i t i o n o f M i n i s t e r of F i n a n c e . Zenko S u z u k i became p r i m e m i n i s t e r as O h i r a ' s s u c c e s s o r r a t h e r t h a n a s an i n f l u e n t i a l l e a d e r o f t h e L D P . S h i g e r u H a y a s h i & K i y o a k i T s u j i , op. c i t . , p . 458. 2 9 3 0  3  1  19 appoint  major  build  consensus  his  2.  a  THE  Cabinet  and  each  Middle  East.  declaration 1973.  The of  The  domestic  subject,  The the  b a s e d on  the  Following  A. The face  areas.  the  actions  a  of  i t s support  Diet  was  and  The  influence  and  those  was  of  the  stable  for Arabian domestic  two  to  through  were  laws a f t e r they  A c t i o n s T a k e n by  o i l crisis a difficult  of  Diet,  are  government policy from  are of  the the  countries  on  November  p o l i c y to  deal  with  control  laws.  On  this  implemented  replaced  of  the  the o i l  by  were p a s s e d  the  actions  in  bureaucracy  measures which  External  the  CRISIS  resulted  important  the  the  external  Cabinet  to  of  o i l supply  i s a more d e t a i l e d d i s c u s s i o n  The  i n order  government, the  the  the  passed  Cabinet  two  had  actions  One  maintain  other  administrative  (1)  by  o i l s i t u a t i o n i n order  shortage.  ministers  GOVERNMENT F A C I N G THE  s e c t i o n . The  to  as  leader  bureaucracy  i n t o two  Japan designed  THE  taken  the  in this  party  party.  actions  classified  to  the  A C T I O N S T A K E N BY  reviewed  22,  of  since  f a c t i o n i n the  Major the  leaders  the  by  these  the  several  measures Diet.  actions.  Cabinet  Policy in  1973  forced  the  s i t u a t i o n in which  Japanese i t had  to  government accommodate  20 two  differing  e c o n o m i c . As considered relations Affairs oil  meeting  f a r as  very with  was  crisis  Ministry  prior ities--one  of of  Japanese diplomacy  important the  United  particularly occurred. Foreign the  political  was  the  stable  S t a t e s . The  Ministry  Shinsaku Affairs,  about  other  concerned,  to maintain  concerned  m i n i s t r y as  and  this  i t  political of  Foreign  p o i n t when  Hogen, v i c e m i n i s t e r of expressed  h i s views at  the  a  follows:  I t i s i m p o r t a n t t o o b t a i n o i l , b u t we should n o t f o r g e t t h e d i g n i t y o f J a p a n a s a n a t i o n . We s h o u l d not ask f o r o i l p r o s t r a t i n g the d i g n i t y of J a p a n a s a n a t i o n . We s h o u l d n o t a s k f o r o i l b y p r o s t r a t i n g o u r s e l v e s o n t h e g r o u n d . We h a v e t o e x a m i n e w h a t i s m o s t i m p o r t a n t . The o i l i n d u s t r y m i g h t be s h a k e n b e c a u s e i t d e p e n d s on o i l . H o w e v e r , i t i s not the case w i t h the M i n i s t r y of F o r e i g n Affairs. We h a v e t o u n d e r s t a n d f i r s t w h e r e we p u r c h a s e o i l . E v e n t h o u g h we p u r c h a s e m o s t o i l f r o m t h e M i d d l e E a s t , we d o i t t h r o u g h O i l M a j o r s . J a p a n d e p e n d s on them f o r 60% o f i t s o i l i m p o r t s . They d e a l w i t h o i l not o n l y i n the M i d d l e E a s t but a l s o i n o t h e r r e g i o n s . We s h o u l d n o t i g n o r e t h e f u n c t i o n of the M a j o r s . J a p a n e s e d i p l o m a t i c p o l i c y i s b a s e d on c o o p e r a t i v e r e l a t i o n s w i t h the United S t a t e s . Japanese trade cannot e x i s t without the U n i t e d S t a t e s . I f we s u p p o r t A r a b i a n c o u n t r i e s b y v i o l a t i n g p r o - U . S . p o l i c i e s , t h e s u p p l y o f o i l by t h e Majors m i g h t be s t o p p e d , a n d J a p a n e s e e x p o r t s t o t h e U n i t e d S t a t e s m i g h t a l s o be d a m a g e d . S u c h r e s u l t s w o u l d h a v e a t r e m e n d o u s e f f e c t on J a p a n . I t i s i m p o r t a n t to adopt the most r e a l i s t i c policy. D i p l o m a c y s h o u l d be j u s t t o a l l p a r t i e s c o n c e r n e d . R e s o l u t i o n 242 a d o p t e d b y t h e S e c u r i t y C o u n c i l of the U n i t e d N a t i o n s i s w e l l accommodated. I t i s very important to emphasize t h a t the r e s o l u t i o n i s v e r y r a t i o n a l and i t goes 3 2  T h e R e s o l u t i o n , w h i c h was a d o p t e d o n J u n e 6, 1967, r e q u e s t e d b o t h A r a b i a n and I s r a e l i armies t o c e a s e f i r e . Asahi Nenkan 1976 ( T o k y o : A s a h i S h i n b u n s h a , 1 9 7 6 ) , p. 95. 3 2  was  the  21 along On and  with  t h e o t h e r hand,  Industry  industrial situation Kogoro  policy,  took  of Japanese  leaders  meet H e n r y  following  national  day.  policies.  theMinistry  (MITI), which  a pro-Arab 3 4  Prime  Kissinger,  Trade  of Japanese  stance considering the On N o v e m b e r  of the Keidanren,  visited  3 3  of International  was i n c h a r g e  industry.  Uemura, Chairman  business to  Japanese  Minister  U.S. S e c r e t a r y  The b u s i n e s s l e a d e r s  3 5  14,  and three other  Tanaka  who w a s g o i n g  of State,  stated  1973,  their  on t h e opinions as  follows: We came t o u n d e r s t a n d t h a t t h e M a j o r s w i l l n o t s u p p l y enough o i l t o J a p a n i ft h e s i t u a t i o n becomes m o r e s e v e r e . Now t h e J a p a n e s e g o v e r n m e n t s h o u l d t a k e a pro-Arab diplomatic stance i n order t o strengthen i t s c o o p e r a t i v e r e l a t i o n s w i t h Arab c o u n t r i e s . I t w i l l be a g o o d i d e a t o s e n d a s p e c i a l d e l e g a t e t o the Arab c o u n t r i e s . 3 6  The  business leaders  also  asked  t h e prime  minister to  K u n i o Y a n a g i d a , Ohkami ga Yatte Ki ta Hi ( T o k y o : B u n g e i S h u n j u ) , p p . 65-66 (Summary t r a n s l a t i o n b y t h e a u t h o r ) . "On N o v e m b e r 2 0 , 1973, M I T I M i n i s t e r N a k a s o n e r e q u e s t e d r e p r e s e n t a t i v e s of t h e Majors i n Japan t o cooperate w i t h Japan i n s u p p l y i n g o i l . The r e p r e s e n t a t i v e s p r o m i s e d t o t r a n s m i t t h e message from Nakasone t o t h e h e a d q u a t e r s o f e a c h c o m p a n y . Ni hon Keizai Shinbun, 21 N o v e m b e r , 1 9 7 3 . T h e K e i d a n r e n i s e x p l a i n e d i n C h a p t e r T h r e e . The F e d e r a t i o n h a d drawn t h e government's a t t e n t i o n t o t h e r e s o u r c e i s s u e b e f o r e t h e 1973 o i l c r i s i s a s C a l d w e l l p o i n t s out. "More t h a n a y e a r b e f o r e t h e o i l shock o f O c t o b e r 1973, t h e K e i d a n r e n e n e r g y c o m m i t t e e , under t h e l e a d e r s h i p o f S h o i c h i Matsune, c a l l e d f o r a c o m p r e h e n s i v e r e v i s i o n o f J a p a n ' s e n e r g y p o l i c y . The 'Matsune P l a n ' c a l l e d f o r a more i n d e p e n d e n t f o r e i g n o i l p o l i c y , i n c l u d i n g expanded p a r t i c i p a t i o n i n M i d d l e E a s t economic development projects" ( M . C a l d w e l l , "The D i l e m m a s o f J a p a n ' s O i l D e p e n d e n c y , " i n The Politics of Japan's Energy Strategy, e d . R o n a l d A. M o r s e [ B e r k e l e y : I n s t i t u t e of E a s t A s i a n S t u d i e s , U n i v e r s i t y o f C a l i f o r n i a , B e r k e l e y , 1981 ] , p . 6 8 ) . K u n i o Y a n a g i d a , op. c i t . , p . 7 8 . 3 3  3  3 5  3 6  22  moderate  the application  concerning The had  cartels.  government reported  on i t s basic  that  U.S.-Japan  Kissinger  would 5%.  t o Japan  compensate the  I t was  would  be i r r i t a t e d  might  situation  be damaged. Tanaka  would  cause  10.7%,  asked Kissinger  could  not help adopting  answered  pro-Arab policy on November  pro-Arab  3  could  followed  the United  replied  policies.  o f t h e Tanaka  States  i f Japan  that  such compensation. Tanaka  growth  e x p e c t e d , t o below  the United  f o r the o i l shortage i n Japan Kissinger  and the  explained  economic  w h i c h h a d been whether  adopted a  a decrease i n the o i l  b y 5% o r 6%, a n d J a p a n e s e  n o t make  was  direction.  Jewish Americans  would  announced  made b y t h e J a p a n e s e  i f Japan  U.S. s t r a t e g y .  The  diplomatic  o n N o v e m b e r 15  that,  decrease from  Tanaka  and Tanaka  explained  relationship  the current  supply  Kissinger  impact on t h e d e c i s i o n  pro-Arab p o l i c y ,  that  3 7  m e e t i n g between  a strong  o f t h e A n t i - M o n o p o l y Law o f Japan  that  States Japan  8  C a b i n e t was f o r m a l l y  22, 1973. The e s s e n c e  of the policy  as follows: 1. T h e J a p a n e s e g o v e r n m e n t h a s r e q u e s t e d t h e establishment ofa peaceful situation i n the Middle E a s t b y f u l f i l l i n g R e s o l u t i o n 242 o f t h e S e c u r i t y C o u n c i l o f the U n i t e d N a t i o n s and supported t h e R e s o l u t i o n o f t h e U n i t e d N a t i o n s G e n e r a l Assembly on the autonomy o f P a l e s t i n i a n s . 2. T h e J a p a n e s e g o v e r n m e n t s u p p o r t s t h e i d e a t h a t the f o l l o w i n g p r i n c i p l e s s h o u l d be f u l f i l l e d i n order t osolve the conf-licts i n the Middle East. (1) T h e o c c u p a t i o n o f l a n d b y m i l i t a r y p o w e r s h a l l not be p e r m i t t e d .  3 7  Ibid. Ibid., r  3 e  p. 79. pp. 79-80.  23 (2) The I s r a e l i army s h o u l d be w i t h d r a w n from the a r e a s i t o c c u p i e d d u r i n g the war i n 1967. (3) The peace a n d o r d e r i n t h et e r r i t o r y s h o u l d be guaranteed. (4) The r i g h t s o f P a l e s t i n i a n s b a s e d on t h e C h a r t e r o f t h e U n i t e d N a t i o n s s h o u l d be g u a r a n t e e d .  all  3. T h e J a p a n e s e g o v e r n m e n t r e q u e s t s I s r a e l t o f o l l o w the p r i n c i p l e s s t a t e d above. The Japanese government w i l l reconsider i t s I s r a e l i p o l i c y according t o any s e r i o u s change i n t h e s i t u a t i o n . 3 9  Following send V i c e on  the  announcement,  Prime M i n i s t e r M i k i  December  10.  On D e c e m b e r  4 0  friendly  n a t i o n a t the  The  Minister,  MITI  countries  Middle the  East  t o several Arabian  O i l M i n i s t e r s Conference  7 t o 18.  were Japan's  decided t o countries  2 5 , J a p a n was r e c o g n i z e d  Nakasone, v i s i t e d  from January  Nakasone's v i s i t  t h egovernment  4 2  Arabian  The main  economic  o f OAPEC.  4 1  and European  topics of  cooperation  countries and o i l transactions c a r r i e d  government.  as a  with o u t by  4 3  Nihon Kei zai Shinbun, 22 N o v e m b e r , e v e n i n g e d i t i o n , 1973 (Summary t r a n s l a t i o n by t h e a u t h o r ) . T h e e i g h t c o u n t r i e s are the U n i t e d Arab Emirates, Saudi A r a b i a , E g y p t , K u w a i t , Q a t a r , S y r i a , I r a q a n d I r a n . Asahi Shinbun, 10 D e c e m b e r , e v e n i n g e d i t i o n , 1 9 7 3 . Asahi Shinbun, 26 D e c e m b e r , 1 9 7 3 . N o t o n l y Nakasone b u t a l s o other m i n i s t e r i a l level p o l i t i c i a n s v i s i t e d f o r e i g n c o u n t r i e s i n J a n u a r y 1974 a s follows: Prime M i n i s t e r Tanaka (Jan.7-17, South East A s i a ) V i c e Prime M i n i s t e r M i k i (Jan.7-14, the U n i t e d States) Finance M i n i s t e r Fukuda (Jan.14-19, I t a l y ) Foreign A f f a i r s Minister Ohira (Jan.2-6, China) Kosaka (Special delegate) (Jan.15-Feb.2, Eight Arabian countries) K u n i o Y a n a g i d a , op. c i t . , pp. 257-258. **Ibid., pp. 257-272. 39  4 0  41  4 2  24  B. The Domestic P o l i c y The  domestic p o l i c y  concentrated control  on t h e s t a b i l i z a t i o n  o f o i l d e m a n d . On N o v e m b e r  established minister the  t h eUrgent  Policy  became c h a i r m a n  Cabinet completed  ministerial points  implemented  level  o f t h e "Urgent  16, 1973, t h e C a b i n e t and t h e prime  of t h e committee."*  held  Cabinet  of o i l supply and t h e  Committee,  t h e "Urgent  meeting  by t h e Tanaka  O i lPolicy  In addition, Text" a t the  o n t h e same d a y . T h e m a j o r  O i lPolicy"  a r eas follows:  1. B a s i c p r i n c i p l e s : The g o v e r n m e n t w i l l i m p l e m e n t a n e n e r g y c o n s e r v a t i o n campaign, a d m i n i s t r a t i v e guidance, and u r g e n t l e g a l p r e p a r a t i o n t o make a n a t i o n - w i d e e f f o r t t o deal with thec r i s i s through cooperation among t h e g o v e r n m e n t , b u s i n e s s a n d i n d i v i d u a l s . The government w i l l a l s o implement p o l i c i e s t o reduce a g g r e g a t e demand t o s e c u r e e n e r g y s u p p l y . 2. T h e i m p l e m e n t a t i o n o f a c o n s e r v a t i o n c a m p a i g n : C o n s i d e r i n g t h e f a c t t h a t o t h e r c o u n t r i e s have a l r e a d y adopted energy c o n s e r v a t i o n measures, t h e g o v e r n m e n t w i l l m a k e a n a g r e e m e n t o n i t s own o i l c o n s e r v a t i o n measures and w i l l urge b u s i n e s s as w e l l a s i n d i v i d u a l s t o j o i n a n a t i o n - w i d e movement t o conserve energy resources, p a r t i c u l a r l y o i l . 3. T h e i m p l e m e n t a t i o n o f a d m i n i s t r a t i v e g u i d a n c e : (1) A d m i n i s t r a t i v e g u i d a n c e w i l l b e i m p l e m e n t e d from November 20. The c o n s e r v a t i o n r a t e o f o i l a n d e l e c t r i c i t y by c o m p a n i e s w i l l be 10%. (2) S p e c i a l g u i d e l i n e s w i l l be i m p l e m e n t e d f o r l a r g e - s c a l e u s e r s o f e l e c t r i c i t y who c o n s u m e m o r e t h a n 3,000kw.  ""The f o l l o w i n g m i n i s t e r s b e c a m e v i c e - c h a i r m e n o f t h e c o m m i t t e e a n d o t h e r m i n i s t e r s o f s t a t e became members o f t h e committee. V i c e - C h a i rmen -Secretary General of Cabinet Secretariat - M i n i s t e r f o r I n t e r n a t i o n a l Trade and Industry -Minister f o r Finance - M i n i s t e r o f S t a t e f o r Economic P l a n n i n g Agency J a p a n , A g e n c y o f N a t u r a l R e s o u r c e a n d E n e r g y , Sekiyu Kiki to Jukyu Taisaku (Tokyo: S e k i y u T s u s h i n s h a , 1974), pp. 22-24.  25 (3) The government w i l l pay s p e c i a l c o n s i d e r a t i o n t o the supply of o i l t o i n d i v i d u a l homes, t h e a g r i c u l t u r a l s e c t o r , t h e t r a n s p o r t a t i o n s e c t o r , h o s p i t a l s , and s m a l l and medium s i z e d companies. 4. The p r e p a r a t i o n o f u r g e n t l a w s : U r g e n t laws w i l l be p r o p o s e d t o t h e c o m i n g D i e t session. 5. The r e d u c t i o n o f a g g r e g a t e demand and t h e s t a b i l i z a t i o n of p r i c e s : The government w i l l s t r e n g t h e n t h e a p p l i c a t i o n of t h e law p r o h i b i t i n g s u p p l y c o n t r o l by c o m p a n i e s . The government w i l l a l s o implement p o l i c i e s t o r e d u c e a g g r e g a t e demand. 6. E f f o r t s t o s e c u r e e n e r g y s u p p l y : The government w i l l make e f f o r t s t o s e c u r e o i l s u p p l y and d e v e l o p a l t e r n a t i v e e n e r g y s o u r c e s . " 5  The  text  urged  guidance" energy,  6  t h e government t o implement  a s a means o f d e c r e a s i n g  including o i l , to start  energy c o n s e r v a t i o n , to  secure  economy. The t e x t  also  of n a t i o n a l urged  the consumption of  a n a t i o n - w i d e campaign f o r  and t o p r e p a r e  the s t a b i l i t y  administrative  legislative life  arrangements  and t h e n a t i o n a l  t h e government  to strengthen  " Ibid., pp. 20-22 (Summary t r a n s l a t i o n by t h e a u t h o r ) . " " A d m i n i s t r a t i v e g u i d a n c e " i s one o f t h e key t e r m s i n u n d e r s t a n d i n g the c h a r a c t e r i s t i c s of Japanese i n d u s t r i a l p o l i c y . The a d m i n i s t r a t i v e g u i d a n c e n o t e d i n t h i s s e c t i o n i s b a s e d on t h e d e c i s i o n o f t h e C a b i n e t . A d m i n i s t r a t i v e guidance i n Japan i s g e n e r a l l y e x p l a i n e d as f o l l o w s : " E s s e n t i a l l y , a d m i n i s t r a t i v e guidance involves the use o f i n f l u e n c e , a d v i c e , and p e r s u a s i o n t o c a u s e f i r m s o r i n d i v i d u a l s t o behave i n p a r t i c u l a r ways t h a t t h e government b e l i e v e s a r e d e s i r a b l e . The p e r s u a s i o n o f c o u r s e i s e x e r t e d and t h e a d v i c e given by t h e p u b l i c o f f i c i a l s who may have t h e power t o provide—or w i t h h o l d — l o a n s , grants, subsidies, l i c e n s e s , t a x c o n c e s s i o n s , government c o n t r a c t s , p e r m i s s i o n s t o import, f o r e i g n exchange, a p p r o v a l of c a r t e l a r r a n g e m e n t s , and o t h e r d e s i r a b l e ( o r u n d e s i r a b l e ) outcomes, b o t h now and o v e r t h e i n d e f i n i t e f u t u r e " (Hugh T. P a t r i c k & H e n r y R o s o v s k y , Asia's New Giant [ W a s h i n g t o n : The B r o o k i n g s I n s t i t u t i o n , 1976], pp. 2 3 6 - 2 3 7 ) . 5  6  26 the p o l i c i e s  of c o n t r o l l i n g  aggregate  demand and  t o a d o p t a l l p o s s i b l e means t o m a i n t a i n  the  prices,  o i l supply  and  to  Japan. On  November  completed  the  Conservation Sector.""  7  carrying  out  "Text  the  of  and  On  metals 8  (except The  on  c o n t r a c t e d t o use 21  M e a s u r e s Law  government  i n such  Law  on  industries  as  steel,  appliances, aluminum,  f o r aluminum), p l a t e g l a s s ,  two  the  electricity  more t h a n  and  oil-related  Stabilization  consumption  of  3,000kw.  laws were p a s s e d  Supply  and  ( h e r e a f t e r t h e PSDN Law)  f o r the  started  the o i l  synthetic fibers,  l a w s were t h e P e t r o l e u m  Normalization  for  government a l s o i m p l e m e n t e d i t s  guidance  December  D i e t . The  the  ministers  i n the P r i v a t e  home e l e c t r i c a l  auto-tires,  paper."  who  Electricity  f o l l o w i n g day  heavy and  administrative users  of v i c e  of A d m i n i s t r a t i v e G u i d a n c e  l a r g e companies  petrochemicals,  pulp  the meeting  i t s a d m i n i s t r a t i v e guidance  automobiles,  non-ferrous  1973,  of O i l and  On  consumption  19,  of the  by  the  Demand  and  the  Emergency  People's  T h i s t e x t c o n s i s t s of the f o l l o w i n g items: 1. C o n s e r v a t i o n of g a s o l i n e by d e c r e a s i n g t h e u s a g e of private cars 2. C o n s e r v a t i o n of o i l by d e c r e a s i n g t h e u s a g e of commercial v e h i c l e s 3. C o n s e r v a t i o n of e l e c t r i c i t y by d e c r e a s i n g o f f i c e hours 4. C o n s e r v a t i o n of e l e c t r i c i t y by d e c r e a s i n g v a r i o u s u s a g e s s u c h as t e l e v i s i o n s and c o m m e r c i a l i l l u m i n a t i o n s . J a p a n , A g e n c y of N a t u r a l R e s o u r c e s and E n e r g y , op. c i t . , pp. 26-27. S u c h i n d u s t r i e s a s aluminum and s y n t h e t i c f i b e r s were d e f i n e d as slump r i d d e n i n d u s t r i e s by t h e law i n 1978. T h i s i s one a s p e c t of t h e o i l c r i s i s w h i c h c h a n g e d t h e i n d u s t r i a l s t r u c t u r e o f J a p a n . T o s h i m a s a T s u r u t a , Sengo Nihon no Sangyo Seisaku ( T o k y o : N i h o n K e i z a i S h i n b u n s h a , 1982), pp. 253-255. 4 7  a 8  27  Livelihood prepared  ( h e r e a f t e r t h e EM L a w ) . T h e PSDN L a w , w h i c h  by M I T I ,  contained  the  supply  oil  related industries."  the  Economic  5  Planning  9  Agency,  Present  concentrated  during  Committee  was p r e p a r e d  by  on t h e  materials  At  was  on " U r g e n t  Following  5 1  including  by t h e  hand,  by 2 0 %  t h e OAPEC O i l  to abolish the restriction  on December  of  2 5 , a n d t h e o i l demand  moderated.  the meeting  of the People's  January  11, 1974, t h e c o n s e r v a t i o n  January  16. W i t h  electricity  f o r the  o f o i l was t o be d e c r e a s e d  decided  t o Japan  Policies  t h e d e c i s i o n made  1 9 7 4 . On t h e o t h e r  Conference  exports  control  decided  the consumption  January  Ministers  after  regard  L i v e l i h o o d Committee rate  February,  addition  t o the a d m i n i s t r a t i v e guidance  arrangements,  of o i l and  the a d m i n i s t r a t i v e guidance  by t h e l e g a l  procedure  t h e government  based  the conservation  restraint  on d r i v i n g ,  vehicles,  and the conservation  was  o n t h e PSDN L a w . I n and  legal  e s t a b l i s h e d other  including  on  was s e t a t 1 5 % f r o m  to the conservation  replaced  of g a s o l i n e  the conservation  by  guidelines  voluntary  of o i l by  of e l e c t r i c i t y  " E v e r y a r t i c l e of the law i s explained N a t u r a l R e s o u r c e s a n d E n e r g y , op. cit., I b i d . , pp. 268-315. Ubi d. , p p . 3 1 - 2 4 . 5  of  23, 1973, t h e P e o p l e ' s L i v e l i h o o d  Situation."  committee,  5 0  stabilize  0  Stabilization  9  to  activities  T h e EM L a w , w h i c h  of the p r i c e s of basic  On D e c e m b e r  oil  designed  a n d demand o f o i l by c o n t r o l l i n g  stabilization o i l .  articles  was  by  commercial shortening  i n Japan, Agency o f pp. 91-197.  28 office  on  hours.  5 2  (2)  The A c t i o n s Taken  The  seventy-second  December  by t h e D i e t  ordinary  1, 1 9 7 3 , a b o u t occurred.  crisis  two  o i l r e l a t e d laws were p a s s e d  minister people  adopted  and t h e MITI o f f i c i a l s  by the Diet  were  17.  December  invited  18 f o l l o w e d  resolution  The  The p r o p o s a l  on December  The p r o p o s a l  enforced  5 3  on December  on December  8. V a r i o u s held  from  was s u b s e q u e n t l y with  was e x p l a i n e d  14. T h e h e a r i n g s  a r e s o l u t i o n on  i n t h e House o f were h e l d on  starting  o n December 19.  by t h e House o f C o u n c i l l o r s w i t h a 2 1 . " Both 5  laws were p r o m u l g a t e d and  22, 1973.  PSDN L a w h a d t h r e e  the appropriate  s e t out that  subsection, o n December 2 1 .  t othe hearings  by d i s c u s s i o n s  was p a s s e d  began  by t h e MITI  on December  12 t o 1 7 , 1 9 7 3 . T h e p r o p o s a l  Councillors  law  i n the previous  by t h e House o f R e p r e s e n t a t i v e s  December  secure  As noted  o f t h e PSDN L a w w a s e x p l a i n e d  concerned  December  of the Diet  one a n d a h a l f months a f t e r t h e  oil  The p r o p o s a l  session  purposes.  supply  level  t h e MITI m i n i s t e r  5 5  The f i r s t  was t o  of o i l . Therefore, should  determine  the  the o i l  I b i d . , pp. 17-18. T h e R e s o l u t i o n adopted by the Committee o f I n d u s t r y and Commerce o f t h e House o f R e p r e s e n t a t i v e s m a i n l y requested the government t o implement t h e law f a i r l y , t o r e p o r t t o t h e D i e t when t h e q u o t a s y s t e m was a d o p t e d , t o c o n s i d e r t h e d i s c u s s i o n o f t h e a d v i s o r y committee, and t or e s t r a i n o i l p r i c e i n c r e a s e s . Ibid., pp. 50-51. "The R e s o l u t i o n adopted by t h e Committee o f I n d u s t r y and Commerce o f t h e House o f C o u n c i l l o r s e m p h a s i z e d t h e importance o f i n t e r n a t i o n a l cooperation t o u t i l i z e o i l r e s o u r c e s . Ibid., p. 54. I b i d . , pp. 49-50. 5 2 5 3  5  S 5  29 supply their  t a r g e t , and o i l producers and d e a l e r s production  MITI m i n i s t e r plans.  was a b l e  o i l dealers  that  minister  decrease  o i l consumption.  ministers  concerned  large-scale follow  The second  consumers.  the o i l conservation  law.  Thet h i r d  5 9  implement 6  Since  stated  t osecure the was i n t e n d e d t o that the  consumers hadt o  s e t by MITI  according t o  o f t h e l a w was t o a l l o w  quota  system  t h e PSDN L a w h a d s e r i o u s  opinions  December  andt o  o f o i l when  MITI t o i t was  0  demand o f o i l , p e o p l e  their  small-scale  target  purpose  the distribution  necessary.  t o ask  c o n t r o l o i l consumption o f Even  5 8  purpose  from  a tthe hearing  impacts on t h e  the p a r t i e s concerned session  of the Diet  12 t o 1 7 . T h e f o l l o w i n g a r e some o f t h e  a tthe session.  supply stated  from opinions  6 1  T h e L P G a s i n d u s t r y h a s s u p p l i e d g a s t o 18 m i l l i o n houses a l l over Japan even i n t h e c o u n t r y s i d e s i n c e i t w a s e s t a b l i s e d 20 y e a r s a g o . . . . There a r e 47,000 d e a l e r s o f w h i c h 90% a r e s m a l l s c a l e d e a l e r s . . . . We a r e a f r a i d t h a t , i f t h e d i s t r i b u t i o n quota system i s adopted, 90% o f the 47,000 d e a l e r s w i l l f a c e t h e r i s k o f b a n k r u p t c y u n l e s s some t a x a t i o n a n d f i n a n c i a l b e n e f i t s a r e P S D N L a w , A r t i c l e 6, ibid., pp. 219-227. , A r t i c l e 1 0 , ibid., pp. 222-223. , A r t i c l e 7, ibid., p.221. , A r t i c l e 7, ibid., pp. 221-222. , A r t i c l e 1 2 , ibid., p. 223. T h e s e a r e some o f t h e o p i n i o n s q u o t e d f r o m ibid., 54-75 (Summary t r a n s l a t i o n b y t h e a u t h o r ) . 5 6  The  5 7  5 8 5 9  6  0  6 1  the  their  ort os e l l ,  I t was s p e c i f i e d  would  change  was a b l e  the association ofpetroleum dealers 5 7  report  I f necessary,  they  t o keep s t o c k s  o i l supply.  and  t o MITI.  t osuggest  national  the  plans  I n a d d i t i o n , t h e MITI  5 6  large-scale guide  and s a l e s  should  pp.  30 provided. ... We h o p e t h a t t h e g o v e r n m e n t w i l l e x p l a i n t o p e o p l e t h e p r e s e n t s i t u a t i o n so t h a t we c a n p e r s u a d e o u r c u s t o m e r s t o u s e LP Gas efficiently for a long time (Uchida, Vice Chairman, Federation o f LP Gas Industry). We h o p e t h e D i e t w i l l p a y e n o u g h a t t e n t i o n t o the f a c t t h a t the a g r i c u l t u r a l s e c t o r i s engaged i n p r o d u c i n g foods, which are b a s i c needs t o us, and t h a t t h e s e c t o r c o n s i s t s of v e r y s m a l l - s c a l e f a r m e r s (Kasahara, Managing D i r e c t o r , Farmers' A s s o c i a t i o n ) . We h o p e t h a t t h e l a w w i l l be p a s s e d a s s o o n a s p o s s i b l e (Matsumura, Chairman, N a t i o n a l O i l Dealers' Association). S i n c e the p u r p o s e of the law i s t o accommodate t h e s u p p l y and demand of o i l u n d e r t h e o i l s h o r t a g e s i t u a t i o n , t h e government s h o u l d c o n t r o l i t s demands to decrease a f t e r c o n s i d e r i n g the s u p p l i e r s ' s i t u a t i o n . T h e r e s h o u l d be b a l a n c e a m o n g p e t r o l e u m p r o d u c t s made f r o m c r u d e o i l . I n o r d e r t o increase t h e p r o d u c t i o n o f h e a t i n g o i l , we h a v e t o d e c r e a s e t h a t of heavy o i l , f o r i n s t a n c e . . . . We h o p e t h e government w i l l c o n s i d e r economic e f f i c i e n c y i n c a r r y i n g out any t y p e of c o n t r o l ( M i t s u d a , Chairman, P e t r o l e u m A s s o c i a t i o n of J a p a n ) . We u n d e r s t a n d t h e n e c e s s i t y o f t h e law. However, i t i s not adequate to c o n c e n t r a t e on c o n t r o l l i n g t h e c o n s u m p t i o n of l a r g e u s e r s . As f a r a s t h e s t e e l i n d u s t r y i s c o n c e r n e d , a 10% d e c r e a s e i n o i l c o n s u m p t i o n l e a d s t o a 12% d e c r e a s e i n s t e e l p r o d u c t i o n , and a 20% d e c r e a s e i n o i l l e a d s t o a 30% d e c r e a s e i n s t e e l (Okumura, S e n i o r M a n a g i n g D i r e c t o r , A s s o c i a t i o n of S t e e l I n d u s t r y ) . The f i r s t c a u s e o f a l a r g e o i l c o n s u m p t i o n i s t h e u s a g e o f m o t o r v e h i c l e s . I f we u s e t r a i n s i n s t e a d of c a r s , l a r g e amounts of o i l w i l l be c o n s e r v e d . The s e c o n d c a u s e i s t h e u s a g e o f c h e m i c a l s . F o r i n s t a n c e , we u s e m u c h d e t e r g e n t w h i c h i s a l s o a cause of e n v i r o n m e n t a l p o l l u t i o n . Therefore, the Agency of E n v i r o n m e n t s h o u l d p r o h i b i t t h e use of c h e m i c a l d e t e r g e n t . The t h i r d c a u s e i s r e l a t e d t o c o n s u m p t i o n h a b i t s . We c o n s u m e a l o t o f d u r a b l e c o n s u m p t i o n g o o d s . T h i s h a b i t c a u s e s an i n c r e a s e i n t h e c o n s u m p t i o n of s t e e l and plastics. I f we s u c c e e d i n t h e c o n s e r v a t i o n o f t h e s e products, I t h i n k , we d o n o t n e e d s t r i c t c o n t r o l s b y the government ( R i k i i s h i , P r o f e s s o r , Hosei U n i v e r s i t y ) . We a r e u s i n g n a p h t h a a s a m a t e r i a l t o p r o d u c e p e o p l e ' s n e c e s s i t i e s . S i n c e some o t h e r i n d u s t r i e s  31 a r e c o n s u m i n g n a p h t h a a s f u e l , we h o p e t h a t t h e g o v e r n m e n t w i l l p u t p r i o r i t y on t h e u s e o f n a p h t h a a s a m a t e r i a l . We a l s o h o p e t h a t t h e g o v e r n m e n t w i l l b r i n g about a decrease i n t h e consumption of g a s o l i n e f o r l e i s u r e purposes t o secure the use of o i l f o r i n d u s t r i a l purposes ( T o r i i , Chairman, Japan Chemical Industry Association). I t m i g h t be n e c e s s a r y t o i m p l e m e n t a s t r i c t c o n t r o l on o i l u n t i l t h e o i l s h o r t a g e p r o b l e m i s s o l v e d . . . . Since t h e law does not r e f e r t o t h e p r i c e o f o i l , we a r e a f r a i d t h a t c o n t r o l o n t h e o i l s u p p l y may c a u s e t h e c a r t e l t o i n c r e a s e o i l p r i c e s (Haruno, R e p r e s e n t a t i v e of Consumers' A s s o c i a t i o n ) . Transportation by t r u c k s o f t e n c o n t i n u e s d u r i n g the n i g h t . T h e r e f o r e , even though MITI M i n i s t e r Nakasone t o l d g a s o l i n e s e r v i c e s t a t i o n s not t o o p e r a t e a t n i g h t a n d o n S u n d a y s a n d h o l i d a y s , we h o p e t h a t some s e r v i c e s t a t i o n s w i l l o p e r a t e a t n i g h t a n d on S u n d a y s a n d h o l i d a y s (Muto, S e n i o r Managing D i r e c t o r , Japan Truck A s s o c i a t i o n ) . We h o p e t h a t t h e g o v e r n m e n t w i l l p a y s p e c i a l a t t e n t i o n t o the domestic sea l i n e s because the demand f o r t h e i r u s e i n c r e a s e s due t o t h e u r g e n t t r a n s p o r t a t i o n of s t e e l and c o a l as w e l l as the d e c r e a s e i n t r a n s p o r t a t i o n by t r u c k s (Yamashita, C h a i r m a n , S h i p Owners' A s o c i a t i o n ) . There groups: and  a  provided  t o increase  increase  their  the price  oil  and gas s u p p l i e r s  the  consumption  about oil  Japanese  excessive  suppliers  taking  mentioned  control  companies,  o i l and gas s u p p l i e r s  t o them  of t h e i r  major  the Majors, the  p r o f i t s . The i n c r e a s e  o i l a n d g a s was f a v o u r a b l e  turn  o i l and gas using  c o n s u m e r s . A s was t h e c a s e w i t h  o i l crisis  chance  of  o f v i e w s among t h r e e  o i l and gas s u p p l i e r s ,  general  1973  were d i f f e r e n c e s  i n that  products.  i n prices  they  could  in  Therefore, the  above b a s i c a l l y  agreed  by t h e government a n d o n l y  intervention  with  by t h e g o v e r n m e n t .  with  worried  Indeed,  were c r i t i c i z e d by members o f t h e D i e t f o r  advantage  of the o i l shortage  to increase  their  some  32 profits.  The  concerns  consumers were On were  the  r e l a t e d to  other  this  and  Since  communication  from  the  of  these  their  related sector  difference confusion  3.  in  strong  bureaucrats of  the  1973  o i l crisis  C H A R A C T E R I S T I C S OF  THE  OIL A  The  period  Turning  Point  of  the  Japanese p o l i t i c a l by of  the the  reviewed. F i r s t , party,  the  agreed  with  their of  against  desires the  of  the  any  in  that proposal  Diet.  r e f l e c t e d how  caused  THE  daily  The  much  Japan.  JAPANESE P O L I T I C A L REACTION  TO  CRISIS  (1)  reaction  session  shown a b o v e  THE  explained  obtaining  i t r a r e l y happened  objections  i n the  opinions  companies  and  the  Therefore,  the  share  bureaucrats,  government  made by  using  the  with  groups expressed  of  measures.  were u s u a l l y d i s c u s s e d  such  gas  a s s o c i a t i o n s maintained  channels with  beforehand.  representative  government. They a l s o  demand c o n t r o l  most  the  hand, most o i l and  treatment  supply  by  point.  interested in maintaining  special the  expressed  first  i n the  Liberal  section  and  the Diet,  Democratic  Political  o i l crisis  history. This  first Diet  i n Japanese  of  the  point  this  Cabinet  was  was  turning  during  point  partly  chapter,  majority  Party  a  History  the of  ( L D P ) , was  i n which crisis  the  the was  ruling  weakened  by  33 the  result  noted  of the election  that  i n late  t h e Japanese p o l i t i c a l  1972. system  two-party  system  two-party  s y s t e m t h e LDP a s t h e r u l i n g  Socialist  Party  initiative multi-party Komeito,  t o themulti-party  (JSP) a s t h e main  i n decision-making system, however,  the Democratic  Communist  Party  shifted  system.  third  be  from t h e  In the  6 3  party  i n theDiet.  their  I t should  opposition  Socialist  increased  6 2  and t h e Japan party  took  In the  p a r t i e s such ast h e Party  and t h e Japan  political  influence  i n the  Diet. Secondly, ministers 2-3,  before  was a l s o a c h a n g e  thecrisis  and a f t e r  t h e terms of prime m i n i s t e r s  crisis.  For instance,  1970's w h i l e for  there  this  there  there  were  were o n l y  established  party  members  the mainstream there  6 3  after the  o f power and Sato, four  o f t h e LDP. A f t e r  was c o m p e t i t i o n  formed  o f t h e LDP. T h i s  also with  other  i n the  i n t h e LDP. who  years, the resignation  among  leaders  by Fukuda, M i k i was t h e c a s e  prime m i n i s t e r s  (Tokyo: Asahi  of the  t h o u g h T a n a k a won t h e  a n d became p r i m e m i n i s t e r , he h a d t o d e a l groups  i n Table  prime m i n i s t e r s  Ikeda  p r e v i o u s l y . Even  Asahi Nenkan, 1973 244. I b i d . , p. 244. 62  four  shorter  p o s i t i o n s f o r more t h a n  however,  anti-Tanaka  but  their  as explained  election  became  c h a n g e was t h e d i v e r s i f i c a t i o n  maintained  Sato,  i t . A s shown  of prime  t w o i n t h e 1 9 6 0 ' s . One r e a s o n  Such prime m i n i s t e r s as Yoshida,  of  i n t h e terms  and other  not only  like  Miki  Shinbunsha,  with  with chief Tanaka  and Fukuda.  197.3), p .  34 When e a c h succeed  o f them became p r i m e  him organized  succession. minister  t h e movement  As a r e s u l t ,  to maintain  m i n i s t e r , t h o s e who  to  to accelerate the  i t became d i f f i c u l t  his position  wanted  f o r any  f o r more t h a n  prime  two  years. " 6  In the  a d d i t i o n t o changes  l e a d e r s h i p o f t h e LDP, t h e r e  political before  issues which  and a f t e r  government related  had t o concern  to World  War  Cooperation  relationship  priority. shifted  of t h e Japan-U.S.  was  t o Japan  restored i n 1972.  the inflationary to deal  6 7  6 6  issues  of Mutual  of Okinawa, The  i n 1 970.  The  and  6 5  Japan-China  The o i l c r i s i s  t r e n d and s t i m u l a t e d t h e  w i t h economic  I t i s suggested that  from postwar  issues  relationship.  i n 1972.  the  important  Treaty  was amended a n d e x t e n d e d  was r e t u r n e d  government  them, t h r e e  with  1970's,  with p o l i t i c a l  of the Japan-China  Japan-U.S. T r e a t y  accelerated  I I . Among  the early  and  i n major  had t o d e a l  and S e c u r i t y , the r e s t o r a t i o n  restoration  Okinawa  Until  itself  of the Diet  was a c h a n g e  t h e government  the c r i s i s .  were t h e e x t e n s i o n  the  i n the situation  political  problems  as a  the p o l i t i c a l  high  priority  i s s u e s t o economic  issues.  6 8  " S h i g e r u H a y a s h i & K i y o a k i T s u j i , op. c i t . , p p . 4 0 4 - 4 0 5 . Asahi Nenkan, 1971 ( T o k y o : A s a h i S h i n b u n s h a , 1 9 7 1 ) , p . 256. Asahi Nenkan, 1973 ( T o k y o : A s a h i S h i n b u n s h a , 1 9 7 3 ) , p p . 232-235. Ibid., pp. 218-231. I n t h e b a c k g r o u n d o f t h i s s h i f t , t h e r e was a c h a n g e i n t h e b a l a n c e o f p o w e r b e t w e e n J a p a n a n d t h e U n i t e d S t a t e s . On t h e one h a n d , J a p a n became a n i n d e p e n d e n t c o u n t r y n o t o n l y i n t h e p o l i t i c a l c o n t e x t b u t a l s o i n t h e e c o n o m i c c o n t e x t . On the other hand, t h e U n i t e d S t a t e s d e c r e a s e d i t s economic power i n r e l a t i v e t e r m s . T h i s p o i n t i s r e f e r r e d t o i n Frank 6  65  66  67 6  8  35 The solving  Japanese postwar  economic  growth  beginning well new 1973  government  took  initiative i n  political  problems and i npursuing  until  end o f t h e 1960's.  the  o f t h e 1970's, however,  as p o l i t i c a l direction  strong  power  Since t h e  t h en a t i o n a l  interest as  became d i v e r s i f i e d i n l o o k i n g  f o r Japan.  was a t u r n i n g  high  In this context,  point  of postwar  the  Japanese  for a  o i l crisis i n political  history.  that  (2)  The F u n c t i o n  The  Japanese p o l i t i c a l  the  crisis  occurred  Japanese p o l i t i c a l bureaucracy The  of the  vice-ministers governmental and  the  other  vice-minister permanent and  this  reaction  h i s t o r y . However, throughout  bureaucracy Cabinet.  under  the  section.  t o the  at a turning  was m a i n t a i n e d  Japanese  direction  of t h e Bureaucracy  point  this  minister  under t h e  two types o f  o f each m i n i s t r y o r  i s a permanent v i c e - m i n i s t e r .  vice-minister i s considered  vice-minister, A parliamentary  f r o m members o f t h e  i s appointed the  highest  of the  history.  One i s a p a r l i a m e n t a r y  i s appointed  shows  i n postwar  theinfluence  i s organized  There are  o i l crisis  from  the  position  Diet.  6 9  A  bureaucrats,  of the  ( c o n t ' d ) C. L a n g d o n , Japan' s Foreign Policy (Vancouver: U n i v e r s i t y o f B r i t i s h Columbia P r e s s , 1973), t r a n s l a t i o n ; S h i g e o F u k u d a , Sengo no Nihon Gaiko - ( T o k y o : M i n e r u b a S h o b o , 1976), p. 16. The position of a parliamentary vice-minister i s c o n s i d e r e d the f i r s t s t e p t o becoming an i n f l u e n t i a l p o l i t i c i a n . U s u a l l y a member o f t h e D i e t who i s e l e c t e d t h r e e t i m e s becomes a c a n d i d a t e f o r p a r l i a m e n t a r y v i c e - m i n i s t e r . T s u n e o W a t a n a b e , op. c i t . , p. 4 1 . 6 8  6 9  36 b u r e a u c r a c y . An e l i t e after  graduation  f o r around  bureaucrats  tend  cannot  vice-minister of  thirty  five  years.  recruited  ignore  the opinion  7 0  Foreign  on t h e b u r e a u c r a t s  the opinion  a s t h e permanent v i c e - m i n i s t e r Affairs,  h a d an impact  elite  a n d even a  Hogen, who e x p r e s s e d c o n c e r n a b o u t a d o p t i n g policies  i n s i d e the  o f t h e permanent  influence  In t h i s c o n t e x t ,  just  As a r e s u l t ,  t o have a s e n s e o f u n i t y ,  who h a s a s t r o n g  his ministry.  i susually  from u n i v e r s i t y and promoted  bureaucracy  minister  bureaucrat  of Shinsaku  pro-Arab  of the M i n i s t r y of  on t h e d e c i s i o n - m a k i n g  of the  government. In  the case of the M i n i s t r y  Industry has  (MITI),  external  influenced  p o l i c y during  importance  decided  sections.  from  of the bureaucracy  foreigners.  the o i l c r i s i s  the Cabinet  on s e v e r a l  7 1  texts  As f a r a s d o m e s t i c p o l i c i e s  established as noted  a special  often  committee  i n the previous  T h e s e p o l i c y m e a s u r e s were m a i n l y d r a f t e d by  to point  out that  a law i s u s u a l l y  b u r e a u c r a t s a n d p r o p o s e d by t h e m i n i s t e r is  The MITI  by e m p h a s i z i n g t h e  b u r e a u c r a t s and i m p l e m e n t e d by them. M o r e o v e r , important  Trade and  the decision-making process of the  of pro-Arab p o l i c i e s .  were c o n c e r n e d , and  t h e power and i n f l u e n c e  drawn s p e c i a l a t t e n t i o n  bureaucracy  of I n t e r n a t i o n a l  prepared  i t  is  p r e p a r e d by  i n Japan, while i t  a n d p r o p o s e d by members o f t h e S e n a t e a n d  Ibid. p p . 62-64. T h e h i s t o r y and r o l e o f MITI i s e x p l a i n e d i n C h a l m e r s A. J o h n s o n , MITI and the Japanese Miracle: the growth of industrial policy 1925-1975 (Stanford, C a l i f o r n i a : Stanford U n i v e r s i t y P r e s s , 1982), t r a n s l a t i o n ; T o s h i h i k o Yano, Tsusansho to Ni honno Kiseki ( T o k y o : TBS B u r i t a n i k a , 1982). 7 0  r  7 1  37 Congress The policy  i n the United basic  However, b o t h  parliamentary n o t have  enough  time  m i n i s t r y . On  ministry.  the other  Even  for instance,  though  the Diet  law-making  body  impossible  f o r a member  the  help  of  Since catch up,  to  that  the task  needs t h e h e l p of  t o answer q u e s t i o n s i s defined  of the Diet  the Meiji  7 3  i t i s almost  t o propose  Restoration  i n 1868, Japan  Western c o u n t r i e s . In the process  various  an i n s t i t u t i o n a l  power  i n t e r e s t s to accomplish  acted  permission  as a coordinator  on v a r i o u s  t o the development  liberalization bureacracy  raised i nthe  t o be t h e s o l e  a law  without  has t r i e d  to  of catching which  economic  by u s i n g  could growth.  their  right  issues. In spite of the fact  the discretionary authority gradually  according  of the  7  bureaucracy grant  they  t h e permanent  by t h e C o n s t i t u t i o n ,  t h e Japanese needed  The  that  bureaucrats. '  up w i t h  coordinate  and t h e  a l l the operations i n  with  a minister  the  of managing  so f r e q u e n t l y  hand,  i s well acquainted  As a r e s u l t ,  bureaucrats,  t o master  i s t o implement Therefore,  7 2  the minister  v i c e - m i n i s t e r change  vice-minister  Diet.  by t h e C a b i n e t .  o f each m i n i s t r y has t h e power  bureaucrats.  their  f u n c t i o n of the bureaucracy  measures adopted  minister  do  States.  decreased  of the Japanese  of t h e Japanese economic  economy a n d t h e  system, the  r e t a i n e d some r e s i d u a l a u t h o r i t y . I n s u c h a  T h e C o n s t i t u t i o n of Japan, A r t i c l e 73, Japan, S e c r e t a r i a t , H o u s e o f R e p r e s e n t a t i v e s , op. cit., p. 18. , A r t i c l e 4 1 , ibid., p. 12. " T s u n e o W a t a n a b e , op. cit., pp. 62-64. 7 2  7 3 7  38 critical  time  provided  an  major  a s t h e 1973 o i l c r i s i s ,  opportunity  to reactivate  the bureaucracy i t sinfluence.  c h a r a c t e r i s t i c of Japan's p o l i t i c a l  1973 o i l c r i s i s coordinator  was  that  t o overcome  the bureaucracy the  crisis.  reaction assumed  was The  to the  the r o l e of  39 4.  TABLES  T A B L E 2-1 THE NUMBER OF S E A T S  HOUSE OF REP. -Liberal Democratic P a r t y (LDP) -Japan Socialist Party (JSP) -Japan Communist Party (JCP) -Komeito, National Counc i l (NCK) -Democratic Socialist P a r t y (DSP) -Indep. -Vacancy TOTAL  -LDP -JSP -JCP -NCK -DSP - N U N CLUB -Indep. -Vacancy TOTAL  HOUSE OF COU.  1968 1 2/27 274  I N THE D I E T BY J A P A N E S E P O L I T I C A L PARTIES  1970 1/1 4  197112/31  1972 4/28  1 972 1 2/22  1 973 1/26  1974 1 2/27  300  300  299  284  284  279  90  90  90  118  1 18  1 17  1 4  1 4  14  39  39  39  25  47  47  47  29  .29  30  31  32  30  30  20  20  20  4 1 1 486  3 0 486  2 8 491  2 9 491  1 0 491  1 0 491  1 5 491  136 64 7 24 10 4 4 1 250  138 63 7 24 10 4 1 3 250  133 65 10 23 1 3 4 3 1 252  1 33 65 10 23 13 4 3 1 252  136 62 10 23 1 2 4 2 3 252  136 62 10 23 12 4 2 3 252  128 62 20 24 10 4 4 0 252  1 37 4  S o u r c e : Asahi Nenkan, Shinbunsha, 1969-1975).  1969-1975  (Tokyo:  Asahi  N o t e : HOUSE OF R E P . = HOUSE OF R E P R E S E N T A T I V E S , HOUSE OF COU.= HOUSE OF C O U N C I L L O R S , I n d e p . = I n d e p e n d e n t s .  40  T A B L E 2-2 MAJOR MEMBERS OF T A N A K A ' S C A B I N E T  -Prime Minister -Foreign Affairs Minister -Finance  Minister  F i r s t Term ('72.7.7-'72 Tanaka(T) Ohira(O)  12.22)  Ueki(T)  -MITI M i n i s t e r -Minister of State (Vice Prime Minister) -Minister of State for Economic P l a n n i n g Agency  Nakasone(N) Miki(M)  -Minister of State for Science and Technology Agency  Nakasone(N)  -Secretary General Cabinet Secretariat  Nikaido(T)  Arita(F)  Second Term ('72.12.22-'74.12.9) Tanaka(T) Ohira(O) Kimura(I) ('74.7.16-) Aichi(T) Tanaka(T) ('73.11.23-) Fukuda(F) ('73.11.25-) Ohira(O) ('74.7.16-) Nakasone(N)  Kosaka(O) Uchida(O) (' 7 3 . 1 1 . 2 5 - ) Kuranari(N) ('74.11.11-) Maeda(T) Morishima(M) ('73.11.25-) Adachi(T) ('74.11.11-) Nikaido(T) Takeshita(T) ('74.11.11-)  S o u r c e : S h i g e r u H a y a s h i & K i y o a k i T s u j i , Ni hon Naikaku Shiroku, 6 v o l s . ( T o k y o : D a i - i c h i H o k i , 1 9 8 1 ) , V o l . 6. Note: 1. T = T a n a k a F a c t i o n , 0 = O h i r a F a c t i o n , M = M i k i F a c t i o n , F = Fukuda Independents. 2. V i c e P r i m e M i n i s t e r M i k i a l s o General o f Environmental Agency u n t i l  Faction, Faction,  N = Nakasone I =  acted as Secretary J u l y 12, 1974.  41  TABLE P R I M E M I N I S T E R S OF May May Mar. Oct. Dec . Dec. Feb. July Nov. July Dec. Dec. Dec. July Nov.  22, 22, 10, 15, 10, 23, 25, 19, 9, 7, 9, 24, 7, 17, 27,  2-3 JAPAN  1 946 1947 1 948 1948 1954 1956 1957 1960 1964 1972 1974 1976 1978 1980 1 982  Yoshida, Shigeru Katayama, Tetsu Ashida, Hitoshi Yoshida, Shigeru Hatoyama, I c h i r o I s h i b a s h i , Tanzan K i s h i , Nobusuke Ikeda, Hayato Sato, Eisaku Tanaka, Kakuei M i k i , Takeo Fukuda, Takeo Ohira, Masayoshi S u z u k i , Zenko Nakasone, Y a s u h i r o  Source: A k i r a Nakayama, ed., K o h o C e n t r e , 1 9 8 5 ) ; Asahi Nenkan, Shinbunsha, 1985). Note:  The  (1946-1985)  dates  are  those  of  Japan 1984  1985 (Tokyo: (Tokyo: A s a h i  initial  cabinet  Keizai  formation.  CHAPTER THREE THE ECONOMIC  A S P E C T S OF J A P A N ' S  TO THE  This Japan's  chapter  reaction  One, J a p a n ' s three  It  will  t o the c r i s i s  at a turning  postwar  economic  the M e i j i stages.  aspects of  As noted  i n Chapter  c a n be e x a m i n e d  from t h e  economics and b u s i n e s s ; point of  this  view.  h a s a l r e a d y b e e n e x p l a i n e d t h a t t h e 1973 o i l c r i s i s  located  history.  stage  War  such  characterized  economic  i s usually  i s from  In this  the early stage  and ships.  The t h i r d  heavy  and chemical  other  products  heavy  and chemical  of heavy stage  industries,  industries  three  t h e end of the f i r s t  of l i g h t  industry,  The s e c o n d  stage i s  producing  i s characterized  developed  by  both  petrochemicals and  as a m a t e r i a l  42  into  i s from  industry,  producing  using petroleum  since  1900's t o t h e end  classification,  goods a s c o t t o n and s i l k .  steel  divided  by t h e development  by t h e g r o w t h  history  t h e 1860's t o t h e e a r l y  I I i n 1 9 4 5 . The t h i r d  i s characterized  political  was e q u a l l y i m p o r t a n t i n  i s from  stage  war t o t h e p r e s e n t .  producing  i n t h e postwar  Japanese  R e s t o r a t i o n (1868)  The f i r s t  World  point  This c r i s i s  1900's. The second  stage  t h e economic  c o n c e n t r a t e on t h e e c o n o m i c  o f Japan.  the  examine  t o t h e 1973 o i l c r i s i s .  reaction  history  of  1973 O I L C R I S I S  perspectives of p o l i t i c s ,  chapter  was  will  REACTION  or fuel.  following the  The  43 "energy energy the  revolution," source  energy  from c o a l  by t h e s h i f t  to o i l after  revolution contributed  accomplishment The  symbolized  7 5  of Japan's high  1973 o i l c r i s i s  W o r l d War  greatly  rate  severely  industry,  suffered  most  the c r i s i s .  necessary one t h a t  f o r Japanese was  petroleum-reliant  energy-conserving the  growth Since  conditions, other  Japan  of t e r t i a r y  i t was  industrialized economic  adjusted  This  from  accelerated  respect,  of t h i s  economic  f o r Japan  to adjust  their  but a l s o f o r industrial  i t i s sometimes argued process  and that  between Japan  economically  became  was  the world's  not only  countries  countries,  The p u r p o s e  on o i l ,  I t thus  t o one t h a t  i n the adjustment  friction  dependent  oil-based  t o change i t ss t r u c t u r e  changed  necessary  In t h i s  growth.  industry.  the o i l c r i s i s  succeeded  to the  and k n o w l e d g e - i n t e n s i v e .  industrialized  structures.  industry  Indeed,  weakened Japan's  s t r u c t u r e , and heavy during  II.  of economic  economic  severely  i n the major  chapter  this  better  success  and other  than  other  caused  countries.  i s to elucidate  that  how  7 6  Japan  t o t h e 1973 o i l c r i s i s .  I n K a n i c h i K o n d o & H i r o s h i O s a n a i , Sengo Sangyo Shi eno Shogen, 3 v o l s . ( T o k y o : M a i n i c h i S h i n b u n s h a , 1 9 7 8 ) , V o l . 3, t h e r e i s a s e c t i o n t i t l e d enerugii kakumei (energy r e v o l u t i o n ) " i n which l e a d i n g Japanese s c h o l a r s and businessmen d i s c u s s the process of Japan's postwar energy development. T h e d i f f e r e n c e between t h e economic performance of Japan and t h o s e o f o t h e r i n d u s t r i a l i z e d c o u n t r i e s i s a b a s i c c a u s e of t h e r e c e n t t r e n d of t h e yen a p p r e c i a t i o n . 7 5  7 6  44 1.  THE J A P A N E S E ECONOMIC  STRUCTURE  (1) J a p a n ' s P o s t w a r E c o n o m i c As Japan  shown  during  Doubling  Plan  government  i n Table  3-1, t h e economic  t h e 1960's was v e r y of Ichiro  i n November  Growth  high.  as the basic plan f o r  A c t u a l p e r f o r m a n c e was g e n e r a l l y h i g h e r  targets  as indicated  Japan's  rapid  lists  Income  by t h e Ikeda  growth.  Kanamori  rate of  The N a t i o n a l  Nakayama, e n a c t e d 1960, a c t e d  growth  than t h e  i n Table 3-2. four elements  economic  growth.  which c o n t r i b u t e d t o  7 7  1. H i g h s a v i n g s r a t i o : The h i g h s a v i n g s r a t e s u p p o r t e d increased investments a n d r a p i d economic growth. I f investments had increased without the high savings r a t e , they would have caused i n f l a t i o n a n d d e f i c i t i n t h e i n t e r n a t i o n a l b a l a n c e o f payments. I t was i m p o r t a n t t o i n c r e a s e t h e p r o f i t share n o t by unequal income d i s t r i b u t i o n b u t by i n c r e a s i n g t h e i n d i v i d u a l savings r a t e . [See Table 3 - 3 ] . 2. T e c h n o l o g y i m p o r t s : There were a c c u m u l a t e d t e c h n o l o g i e s i nt h e postwar western w o r l d w h i c h Japan was a b l e t o import a s a l a t e comer. T h e r e was a l s o e n t r e p r e n e u r s h i p t o a d o p t new t e c h n o l o g i e s a n d t o e x p a n d i n v e s t m e n t s u n d e r t h e c o m p e t i t i v e b u s i n e s s s i t u a t i o n i n Japan. The h i g h q u a l i t y o f l a b o u r a l s o c o n t r i b u t e d t o t h e u s e o f new technologies. 3. E x p o r t s : The i n c r e a s e i n t h e c o m p e t i t i v e p o w e r r e a l i z e d b y technical innovation andc a p i t a l investments c o n t r i b u t e d t o t h e i n c r e a s e i n Japan's e x p o r t s . The free trade system a l s o helped Japan t o increase i t s exports. 4. P o l i c y : Government p o l i c i e s a l s o c o n t r i b u t e d t o t h e growth. Zaibatsu dissolution, agricultural 7 8  H i s a o K a n a m o r i , Koza Nihon Keizai, 2 v o l s . ( T o k y o : Chuo K e i z a i s h a , 1 9 8 2 ) , 1:28-30. U c h i n o e x p l a i n s zaibatsu dissolution as follows: "On N o v e m b e r 2 , 1 9 4 5 , t h e g o v e r n m e n t o r d e r e d t h e 7 7  7 B  reform,  7 9  and labour r e l a t i o n s  reform  8 0  encouraged  7 8  (cont'd) freezing of the assets of fifteen of the l a r g e s t zai bat su, i n c l u d i n g M i t s u i , M i t s u b i s h i , Sumitomo, a n d Y a s u d a . I n May 1 9 4 6 , t h e H o l d i n g C o m p a n i e s L i q u i d a t i o n C o m m i s s i o n was e s t a b l i s h e d and, i n September 1947, t h e commission o r d e r e d t h e d i s s o l u t i o n o f M i t s u i Bussan and M i t s u b i s h i S h o j i . D u r i n g t h e same p e r i o d , GHQ [ G e n e r a l H e a d Q u a r t e r s ] c a r r i e d o u t a p u r g e o f p u b l i c o f f i c i a l s who w e r e considered m i l i t a r i s t s and of important f i g u r e s i n t h e f i n a n c i a l w o r l d who w e r e t h o u g h t t o h a v e cooperated with t h e m i l i t a r i s t s i n p u r s u i n g t h e war. T h e zai batsu w e r e b r o k e n u p i n t h i s w a y , b y s e v e r i n g t h e i r h o l d i n g companies, t h e core o f zaibatsu c o n t r o l , and by p u r g i n g t h e i r l e a d e r s , i n c l u d i n g m e m b e r s o f f o u n d i n g f a m i l i e s " ( T a t s u r o U c h i n o , op. c i t . , p.2 2 ) .  7 9  Uchino explains as follows: " A n t i c i p a t i n g f o r m a l d i r e c t i v e s f r o m GHQ, t h e government took t h e i n i t i a t i v e , a n d i n December 1945, p u s h e d t h r o u g h t h e D i e t a d r a f t p r o p o s a l t h a t would have r a d i c a l l y r e v i s e d t h e wartime A g r i c u l t u r a l L a n d s A d j u s t m e n t Law ( e n a c t e d i n 1 9 3 8 ) . The r e v i s e d l a w w o u l d h a v e f o r c e d t h e s a l e o f a l l a g r i c u l t u r a l land i n the possession of resident landholders exceeding five hectares, the national average f o r i n d i v i d u a l landholdings. Moreover, a l l t e n a n t l a n d s were t o be s o l d a t low p r i c e s t o former t e n a n t s w i t h t h e government a c t i n g a s t h e i n t e r m e d i a r y " {Ibid., p. 2 0 ) . Uchino explains as follows: " L a b o r r e f o r m , t h e s e c o n d p i l l a r o f GHQ's e c o n o m i c d e m o c r a t i z a t i o n program, a l s o proceeded r a p i d l y w i t h t h e e n a c t m e n t o f t h r e e b a s i c l a w s m o d e l e d on A m e r i c a n l a b o r l e g i s l a t i o n : t h e T r a d e U n i o n Law (December 2 2 , 1 9 4 5 ) ; t h e L a b o r S t a n d a r d s Law ( A p r i l 7, 1 9 4 7 ) ; a n d t h e L a b o r R e l a t i o n a d j u s t m e n t L a w (September 2 7 , 1947). T h e T r a d e U n i o n Law e s t a b l i s h e d , f o rt h e f i r s t time i n Japan's h i s t o r y , the freedom o f workers t oo r g a n i z e t r a d e unions and the r i g h t o f assembly. TheLabor R e l a t i o n s A d j u s t m e n t Law e s t a b l i s h e d methods a n d p r o c e d u r e s f o r d i s p u t e s e t t l e m e n t s and d e f i n e d l i m i t s on s t r i k e b e h a v i o r . T h e L a b o r S t a n d a r d s Law was a r e v o l u t i o n a r y advance i n l e g i s l a t i o n p r o t e c t i n g workers, which had lagged behind i n Japan. I t c a l l e d for the elimination o f f e u d a l i s t i c working conditions, prohibited forced labor, established the p r i n c i p l e s o f t h e e i g h t - h o u r work d a y a n d h o l i d a y s y s t e m s , s e t l i m i t s o n t h e e m p l o y m e n t o f women a n d minors, and p r o v i d e d f o rcompensation f o r w o r k - r e l a t e d i n j u r y . Together, these laws e s t a b l i s h e d the l e g i s l a t i v e foundation f o r one o f  8 0  46 h i g h e n t r e p r e n e u r s h i p and a h i g h l y c o m p e t i t i v e m a r k e t . They a l s o c o n t r i b u t e d t o the e x p a n s i o n of t h e d o m e s t i c m a r k e t and t h e e q u a l i z a t i o n of n a t i o n a l income. D e f e n c e e x p e n d i t u r e s were kept low and i n d u s t r i a l r e s o u r c e s were a l l o c a t e d t o p r o d u c t i v e i n v e s t m e n t s . In a d d i t i o n , t h e N a t i o n a l Income D o u b l i n g P l a n e n c o u r a g e d J a p a n e s e p e o p l e t o work h a r d , and t r a d e l i b e r a l i z a t i o n p r e s s u r e s from the l a t e 1 9 5 0 ' s u r g e d them t o p u r s u e an i n c r e a s e i n productivity. There very  i s no  important  since  processed  expanded  by  3-2.  external  Table  trade  balance  first  and  indicate 1970  the and  exceeded import  which  3-4  o i l crises.  the  import  exports of  products.  Moreover,  the  the  fact  33.5% in  from  1975,  external  0  that  the  (cont'd) in the  import  volume of  million  effect  trade  the of  was  of  the  clearly  in  about late  trade in  Japan's  1960's  Japan's  p e r i o d of  the  i n Table  3-5  items  and  steel  exports  of  petroleum steel  1970  steel  only  t o 263  1972,  the  and  iron  came t o  i n 1974.  Both  products  However, a f t e r  Considering  million  i n c r e a s e on  of  importance.  the most p r o g r e s s i v e l a b o r r e l a t i o n s w o r l d " {Ibid., pp. 2 0 - 2 2 ) .  N  exceed  increased  o i l price major  and  shown how  a  Japan  J a p a n e s e economy.  o i l imports  litres  of  external  f o r the  trade  iron  motor v e h i c l e s and the  197  of  been  materials  1960's as  the  the  petroleum.  exceeded  of  Major  s t r u c t u r e of  petroleum  exports  the  surplus except  of  the  raw  Indeed, Japan's  during  has  development  shows more d e t a i l s  showed a  1971  economic  increased. Since  basic  the  15%  external trade  imports  products.  has  second  that  i n the  more t h a n  trade  in  factor  i t i s a country  exports  Table  question  by  litres  Japan's  systems  47 (2)  O i l and  Throughout Japanese 3-6  the Japanese the  rapid  industrial  s h o w s how  the  Industrial Structure  economic  structure  structure  changed  changed  Following  the  g e n e r a l t r e n d of  secondary  and  tertiary  in  real  this the  real  was  possible  industrialization, agricultural in  the  increase farmers  had  including  1973  the  use  from  reflects  the  of  increase  accelerated  the  the  of  to  1973  shift  of  o i l as  total This  The  energy  drastic. Japan,  In the postwar  coal  first  took  economic an  role.  for  of  8 1  the of  Thirdly,  The  was  The  and  phenomenon  reconstruction  important  to  employees  number  p r o d u c t i o n and  sources  fishery  production  to oil-conserving  i n the major  First,  fuel  of  the  oil-consuming industry shift  a  in spite  o i lcrisis.  of  However,  This  increased.  1977.  both  i n c r e a s e d due  because  share to  the  and  1977.  v e r y much  occupations  1973  1977.  shares  forest  t h e number  T h i s was  industry's  employment d e c r e a s e d  from  from  decrease  secondary  impacts  to  long term.  because p r o d u c t i v i t y  d i d not  the manufacturing  1960  the a g r i c u l t u r a l ,  in productivity. who  from  characteristics.  production. Secondly,  industry  c o n s i d e r a b l y . Table  i n the  some s p e c i a l  increased slightly  the  industrialization,  employment  p r o d u c t i o n of  industries increase  exhibited  period,  sectors increased their  p r o d u c t i o n and  growth  growth  o i l price employment  industry. even  more  process  of  Japanese  0 f t o t a l f a r m e r s , t h e p e r c e n t a g e o f sengyo noka (farmers w i t h i n c o m e o n l y f r o m f a r m i n g ) d e c r e a s e d f r o m 3 4 . 3 % i n 1960 t o 1 3 . 4 % i n 1 9 8 0 . On t h e o t h e r h a n d , dai nishu kengyo noka ( f a r m e r s w i t h more income f r o m o t h e r j o b s l i k e f a c t o r y work t h a n f r o m f a r m i n g ) i n c r e a s e d f r o m 3 2 . 1 % i n 1960 t o 6 5 . 1 % i n 1 9 8 0 . H i s a o K a n a m o r i , op. c i t . , p . 4 9 . 8 1  ]  48  government  adopted  economy a f t e r  Priority  policies  as  major  t h e war.  Reconstruction the  two  One  Bank, and  policies  was  the  the  to r e c o n s t r u c t the  e s t a b l i s h m e n t of  o t h e r was  Production Concept.  the  Uchino  the  implementation  explains  these  of  two  follows:  E s s e n t i a l l y , the P r i o r i t y P r o d u c t i o n Concept was a n a t t e m p t t o r e v e r s e t h e v i c i o u s c y c l e b e t w e e n t h e c o a l and s t e e l i n d u s t r i e s t h a t had l e d t o massive b o t t l e n e c k s . A l l economic p o l i c i e s would c o n c e n t r a t e on i n c r e a s i n g c o a l p r o d u c t i o n ; t h e c o a l w o u l d t h e n be t h r o w n i n t o t h e s t e e l i n d u s t r y t o s t i m u l a t e s t e e l p r o d u c t i o n ; a n d s t e e l w o u l d t h e n be thrown back i n t o the c o a l i n d u s t r y . E x i s t i n g s h o r t a g e s o f c o a l i n t h e s e two i n d u s t r i e s w o u l d be f i l l e d by i m p o r t e d c r u d e o i l u n t i l i n c r e a s e s c o u l d be c h a n n e l e d g r a d u a l l y t o o t h e r b a s i c i n d u s t r i e s t o promote o v e r a l l economic r e c o v e r y . To a c h i e v e t h i s , c o n t r o l l e d c o m m o d i t i e s were a l l o c a t e d on a p r i o r i t y b a s i s t o t h e c o a l a n d s t e e l i n d u s t r i e s , a n d t h e R e c o n s t r u c t i o n F i n a n c e B a n k was e s t a b l i s h e d under the F i n a n c i a l I n s t i t u t i o n s C a p i t a l F i n a n c i n g R e g u l a t i o n to channel funds i n t o the p r i o r i t y i n d u s t r i e s ( u n t i l 1947 t h e b a n k h a d e x i s t e d as t h e I n d u s t r i a l Bank of J a p a n w i t h i n t h e Reconstruction Finance Department). 8 2  In  the  coal.  Priority  However, as  supply the more  source  than  from  share  domestically  the  of  supply  Tatsuro  from of  coal  coal  until  import  ratio  o i l was  3-7,  of  little  i n the  total  o i l was energy  Uchino,  op.  cit.,  pp.  36-37.  of. was  had  been  that  date  produced  in  supply increased  three-quarters in  to Japanese  supply  energy  increase in o i l imports. This related  the middle  energy  total  for  energy  t h e n . However, a f t e r  t o more t h a n  closely  substitute  Until  total  the  a  the major  to o i l .  i n the  o i l i n c r e a s e d . As  to the was  i n Table  Three-quarters  one-quarter  leading  8 2  50%.  share  Japan,  shown  shifted  1950's t h e  supplied the  Production Concept,  15  shift  postwar  years in  energy  economic  49 development.  (3) The Economic 1973  would  "Nixon It  Just  Before the  i t caneasily i f the price  i nless  than  i ne x p l a i n i n g  before the c r i s i s .  i n 1971  8 3  o f the Japanese  growth  trade.  the exchange  be i m a g i n e d  that  o f o i l was r a i s e d  the  economic  T h i s e l e m e n t was  .  partly  through  The e x p a n s i o n rate  economy  one y e a r . There was,  h a s a l r e a d y been p o i n t e d o u t t h a t  economic  external  seriously  element  of Japan  shock"  structure,  three times  another  situation  to  suffer  more t h a n  however,  its  the c h a r a c t e r i s t i c s  i t s industrial  Japan by  o f Japan  O i l Crisis Considering  and  Situation  Japan  the expansion  accomplished of  o f t r a d e was c l o s e l y  o f the yen. The.exchange  rate  i t s related  of the  A c c o r d i n g t o t h e e x p l a n a t i o n by U c h i n o , two i n c i d e n t s c o n s t i t u t e d the "Nixon shock:" "The f i r s t ' N i x o n s h o c k ' o c c u r r e d i n J u l y 1 9 7 1 , w h e n t h e N i x o n A d m i n i s t r a t i o n a n n o u n c e d i t s new C h i n a p o l i c y andNixon v i s i t e d B e i j i n g without c o o r d i n a t i n g t h i s major f o r e i g n p o l i c y s h i f t w i t h the J a p a n e s e government. . . . The second 'Nixon shock' o c c u r r e d on August 15, 1971, w i t h t h e a n n o u n c e m e n t o f N i x o n ' s New E c o n o m i c P r o g r a m , a n d was d i r e c t l y r e l a t e d t o t h e U n i t e d S t a t e s - J a p a n f r i c t i o n a n d , more g e n e r a l l y , t o t h e d e e p e n i n g i n t e r n a t i o n a l c u r r e n c y c r i s i s " (Ibid., p. 183). T h e e s s e n t i a l p o i n t s o f N i x o n ' s New E c o n o m i c P r o g r a m are summarized a s f o l l o w s : "1. S u s p e n s i o n o f c o n v e r t i b i l i t y o f t h e U.S. d o l l a r into gold and other currencies; 2. A 10 p e r c e n t s u r t a x o n i m p o r t s ; 3. A 10 p e r c e n t r e d u c t i o n i n f o r e i g n a i d expenditure; 4. A n i n e t y - d a y f r e e z e o n d o m e s t i c w a g e s a n d p r i c e s ; 5. A t a x c u t d e s i g n e d t o s t i m u l a t e t h e d o m e s t i c e c o n o m y " (Ibid., p. 184). 8 3  50 yen  against  25,  1949. T h i s  entry  of Japan  August and at  t h e US d o l l a r  into  1952. S i n c e  the beginning the "Nixon  process  s e t a t 360 y e n / d o l l a r  became t h e o f f i c i a l  the exchange  time  was  yen exchange  the I n t e r n a t i o n a l Monetary then  came shock"  rate Fund  t h e J a p a n e s e economy h a s  r a t e which had been c o n s i d e r e d t o be c o n s i d e r e d took  place.  April  on t h e (IMF) i n  developed, overvalued  undervalued  Ishimaru  on  by t h e  explains the  as f o l l o w s :  1 9 5 0 - 1 9 5 5 : Due t o t h e o v e r v a l u e d y e n a n d t h e d e c r e a s e i n p r o d u c t i o n f a c i l i t i e s b y W o r l d War I I , the Japanese f o r e i g n trade balance d u r i n g this p e r i o d was a n n u a l l y a 393 m i l l i o n d o l l a r deficit. The c u r r e n t b a l a n c e was a d j u s t e d b y t h e s u r p l u s i n i n v i s i b l e trade mainly owing t o s p e c i a l procurements f o r t h e K o r e a n War. 1956-1960: The i n c r e a s e i n e x p o r t s stabilized the trade balance, but t h e c u r r e n t balance d i d not improve because of the end of t h e s p e c i a l p r o c u r e m e n t . T h e y e n was s t i l l a weak c u r r e n c y . 1961-1964: The g r o w t h i n t h e J a p a n e s e production f a c i l i t i e s strengthened the i n t e r n a t i o n a l c o m p e t i t i v e power o f J a p a n e s e e x p o r t s . However, s i n c e J a p a n e s e i m p o r t s a l s o i n c r e a s e d due t o t h e high economic growth r a t e , t h e trade balance d i d not i m p r o v e . The y e n g r a d u a l l y s t r e n g t h e n e d . Japan b e c a m e a member o f IMF a r t i c l e 8 n a t i o n s , " a b o l i s h e d i t s i m p o r t r e s t r i c t i v e m e a s u r e s by means of the f o r e i g n exchange b u d g e t and s t a r t e d import 8  8 5  " A r t i c l e 8 o f t h e IMF c o d e o b l i g e s t h e member n a t i o n s t o a b o l i s h f o r e i g n exchange c o n t r o l s on c u r r e n t t r a n s a c t i o n s and d i s c r i m i n a t o r y c u r r e n c y c o n t r o l s , and t o r e s t o r e t h e c o n v e r t i b i l i t y o f t h e n a t i o n a l c u r r e n c y owned by f o r e i g n c o u n t r i e s . A r t i c l e 14 p r o v i d e s t h o s e n a t i o n s w h i c h c a n n o t implement the o b l i g a t i o n s i n A r t i c l e 8 w i t h exemptions f o r a t r a n s i t i o n a l p e r i o d . A n A r t i c l e 14 n a t i o n , t h e r e f o r e , h a s t o c o n s u l t a n n u a l l y w i t h t h e IMF a u t h o r i t y on i t s p r o g r e s s a n d e f f o r t s i n implementing the A r t i c l e 8 o b l i g a t i o n s . Japan, as a n A r t i c l e 14 n a t i o n , w a s s u g g e s t e d t o b e c o m e a n A r t i c l e 8 n a t i o n a t t h e 1 9 6 2 c o n s u l t a t i o n . A n IMF r e s o l u t i o n r e q u e s t e d t h a t J a p a n become an A r t i c l e 8 n a t i o n i n 1963 a n d J a p a n f i n a l l y became i t i n A p r i l 1964. T h e f o r e i g n exchange budget i s e x p l a i n e d as f o l l o w s : "The f o r e i g n exchange budget and the import deposit 8  8 5  51 liberalization policies. 1 9 6 5 - 1 9 6 7 : The s u r p l u s t r e n d i n J a p a n ' s ' i n t e r n a t i o n a l t r a d e b a l a n c e s t a b i l i z e d i n 1965, t h e y e n became s t r e n g t h e n e d . The t r a d e s u r p l u s d u r i n g t h i s p e r i o d a m o u n t e d t o 1,778 million dollars.  and  1 9 6 8 - 1 9 7 0 : The y e n became e v e n s t r o n g e r a r o u n d 1 9 6 8 . T h e t r a d e s u r p l u s d u r i n g t h e p e r i o d was 3,406 m i l l i o n d o l l a r s . T h e i n t e r n a t i o n a l b a l a n c e was a 1,592 m i l l i o n d o l l a r s u r p l u s . 8 6  The  yen  yen/dollar 1971.  8 7  at  a p p r e c i a t e d from the  Japan's  Smithsonian  trade balance  360  yen/dollar to  Conference of  the  year  308  i n December was  7,900  million  ( c o n t ' d ) scheme were u t i l i z e d t o g e t h e r t o b r i d g e t h e s h o r t a g e of f o r e i g n exchange e x i s t i n g a t the Y360 r a t e by c o n t r o l l i n g i m p o r t s . The b u d g e t c l a s s i f i e d i m p o r t a b l e goods i n t o t h r e e c a t e g o r i e s : fund a l l o c a t i o n ( w h i c h became i m p o r t q u o t a s a f t e r 1964), a u t o m a t i c f u n d a l l o c a t i o n ( w h i c h became a u t o m a t i c i m p o r t q u o t a s ) , a n d a u t o m a t i c a p p r o v a l . The import d e p o s i t s c h e m e , w h i c h was i n o p e r a t i o n u n t i l 1969, r e q u i r e d d e p o s i t of c o l l a t e r a l f o r imports a t the t i m e p e r m i s s i o n t o i m p o r t was r e q u e s t e d ; t h e c o l l a t e r a l was f o r f e i t e d i f t h e i m p o r t a t i o n was not e x e c u t e d . The r a t e s o f c o l l a t e r a l w e r e d i f f e r e n t i a t e d by c a t e g o r y o f goods (raw m a t e r i a l s , c o n s u m p t i o n g o o d s , c a p i t a l e q u i p m e n t , and so f o r t h ) . In a d d i t i o n t o the prime o b j e c t i v e of l i m i t i n g imports t o the a v a i l a b i l i t y of f o r e i g n exchange, these p o l i c i e s r e s t r a i n e d s p e c u l a t i o n i n i m p o r t e d c o m m o d i t i e s and d i s c r i m i n a t e d a g a i n s t t h e i m p o r t a t i o n o f c o n s u m p t i o n g o o d s . The i m p o r t d e p o s i t scheme a c t i n g t h r o u g h t h e c r e d i t s y s t e m a l s o r e i n f o r c e d a n a n t i c y c l i c a l m o n e t a r y p o l i c y " ( H u g h T. P a t r i c k & H e n r y R o s o v s k y , op. cit., p. 4 1 2 ) . T h i s q u o t a t i o n i s a summary o f I s h i m a r u ' s e x p l a n a t i o n t r a n s l a t e d i n t o E n g l i s h by t h e a u t h o r . Y o s h i t o m i I s h i m a r u , Endaka to Nihon Keizai (Tokyo: M a i n i c h i Shinbunsha, 1978), pp. 71-73. A t t h e S m i t h s o n i a n C o n f e r e n c e h e l d f r o m D e c e m b e r 17 t o 1 8 , 1971, t h e f o l l o w i n g m a t t e r s were d e c i d e d : ( 1 ) T h e p r i c e o f g o l d was r a i s e d f r o m 35 U.S. d o l l a r s t o 38 d o l l a r s p e r o u n c e . Y e t t h e c o n v e r t i b i l i t y o f t h e U.S. d o l l a r i n t o g o l d was not restored. (2) The e x c h a n g e r a t e s o f m a j o r c u r r e n c i e s t o t h e U.S. d o l l a r w e r e r a i s e d ( s e e T a b l e 3-8 a n d 3-9). ( 3 ) T h e f l u c t u a t i o n r a n g e was e x p a n d e d t o 2 . 2 5 % . 8 5  8 6  8 7  52 dollars  in surplus  dollars  in  Even  the  c u r r e n c y system  shifted  system.  The  the in  of  one  "dollar  the  by  one  drain,"  international  food shortage problem, major  b a l a n c e was  S m i t h s o n i a n a g r e e m e n t was  countries  collapse  the t o t a l  7,677  million  surplus.  international  8 8  and  industrialized  stable. to the one  a b l e to keep  Major  floating  of  increased  system  exchange of  rate  the  accompanied  inflationary  8 9  by  pressures  8 9  U c h i n o e x p l a i n s the process of going i n t o the f l o a t i n g system as f o l l o w s : "... The U n i t e d K i n g d o m s h i f t e d t o t h e f l o a t i n g e x c h a n g e r a t e s y s t e m i n J u n e 1972 a n d d e v a l u e d t h e pound, b u t t h i s had been n e c e s s i t a t e d by t h e pound being o v e r v a l u e d at the time of the agreement. . . . . . . F i n a l l y , on M a r c h 1 2 , ( 1 9 7 3 ) , W e s t G e r m a n y announced a 3 p e r c e n t upward r e v a l u a t i o n of the m a r k , a n d t h e EC c o u n t r i e s ( w i t h t h e e x c e p t i o n s o f E n g l a n d , I r e l a n d , and I t a l y ) announced a " j o i n t f l o a t i n g exchange r a t e system," under which they would m a i n t a i n f i x e d exchange r a t e s between c o m m u n i t y members b u t w o u l d a l l o w t h e i r c u r r e n c i e s to f l o a t against the d o l l a r . T h e s e moves s i g n a l e d t h e end of t h e S m i t h s o n i a n Agreement, o n l y f o u r t e e n months a f t e r the meeting of t h e G r o u p of t h e Ten i n W a s h i n g t o n . A f t e r J a p a n f l o a t e d t h e yen i n F e b r u a r y 1973, i t s v a l u e i n c r e a s e d r a p i d l y a g a i n s t the d o l l a r , and t h e d o l l a r d r o p p e d b e l o w t h e Y280 l e v e l i n t h e s e c o n d h a l f o f J u l y " ( T a t s u r o U c h i n o , op. cit., pp. 193, 1 9 5 ) . U c h i n o e x p l a i n s the f o o d s h o r t a g e p r o b l e m as f o l l o w s : "Shortage and subsequent p r i c e i n c r e a s e s began t o a p p e a r i n t h e f a l l o f 1972. . . . The abnormal weather c o n d i t i o n s a f f e c t e d soybeans, c o r n , sorghum, c o f f e e , s u g a r , a n d raw c o t t o n . The m o s t d r a s t i c i n c r e a s e s , h o w e v e r , were r e c o r d e d f o r s o y b e a n s a n d , f o r t h e J a p a n e s e p e o p l e , t h i s was particularly a l a r m i n g . Soybeans t r i p l e d i n p r i c e i n the space of o n e y e a r , f r o m $3 p e r b u s h e l t o $ 1 1 . W i t h a v i c i o u s c y c l e between worldwide s h o r t a g e s i n g r a i n s u p p l i e s a n d t h e s p r e a d o f s p e c u l a t i o n on i n t e r n a t i o n a l m a r k e t s , t h e N i x o n a d m i n i s t r a t i o n a n n o u n c e d a new s e t o f r e s t r i c t i o n s on g r a i n e x p o r t s a s a p a r t o f its anti-inflation policy, prohibiting soybean e x p o r t s t o J a p a n b e c a u s e o f s o a r i n g d o m e s t i c demand" 8 8  the  industrialized  the causes  monetary  countries.  not  53 The  yen a p p r e c i a t i o n  economy. F i r s t , monetary  pressure the  yen  t h e Bank o f J a p a n ,  Sato cabinet  i n June  i n order  appreciation.  international  Secondly,  competitive  cabinet,  power  succeeding  expansionary  the deflationary some  monetary  ledto inflationary  t h e Tanaka  Thirdly,  9 0  the Japanese  increased  1972, a d o p t e d  to battle  on t h e J a p a n e s e  process  The e x c e s s - l i q u i d i t y p r o b l e m  i n Japan.  policies  impacts  i n the yen a p p r e c i a t i o n  authority,  liquidity.  h a d many  e f f e c t s of the  industries lost  because  economic  their  of the yen  appreciation. It  i s an i m p o r t a n t  countries, pressures Japanese  i n c l u d i n g Japan, before  i s also  as  the f i r s t  important  that  challenge  Japan's  expansion one  adopted  i s recognized  stated,  that  suffered  t o Japanese  economic  goals  trade.  rate,  a f t e r Japan  the country  element,  the price  Nevertheless, economic  the yen a p p r e c i a t i o n  as the second  of foreign  Just  from i n f l a t i o n a r y  expansionary  industry  policies.  As  recognized the o i l previously  were r e a l i z e d m a i n l y  enabled  had faced  had t o face  the  i s  while  challenge.  The e x c h a n g e  of t h e key elements which  trade.  most i n d u s t r i a l i z e d  t h e 1973 o i l c r i s i s .  government  It  crisis  fact  rate  Japan  a change  a change  by t h e  o f t h e y e n was  t o expand i t s i n t h e exchange  i n another key  ofo i l .  ( c o n t ' d ) ( T a t s u r o U c h i n o , op. cit., p. 198-199). T h e T a n a k a c a b i n e t i n c r e a s e d t h e 1972 n a t i o n a l b u d g e t b y 18.7% f r o m t h e 1971 l e v e l .  8 9  9 0  54 2. THE I M P A C T S OF THE 1 9 7 3 O I L C R I S I S  AND J A P A N ' S ECONOMIC  REACTION (1) The Impacts  of t h e C r i s i s  on t h e J a p a n e s e  and W o r l d  Economy A. The Impacts As  referred  inflationary change the  trend  shock."  which  a r e shown  price  and consumer  According  by  supply  i n Table price  i sexplained  situation  increases  demand  from  increased The  indices  i n Table 3-11.  a s shown  P l a n n i n g Agency  from January  t o March  by t h e d o m e s t i c  reduction  finally  policy  caused  increase  40% of t h e  imbalance  between  by t h e i n c r e a s e i n o i l . "  9  1  I n December  implemented  an  the constraint  of the o f f i c i a l  interest  depressionary pressure  circumstance.  also  caused  payments. The EPA p o i n t s the deficit  o f 1974 i n c r e a s e d  including  and t h e increase  i n the inflationary  (EPA) o f Japan,  of 1973. Around  7% t o 9%. A s a r e s u l t ,  international  i n o i l prices, the wholesale  government  o i lprice  s y m b o l i z e d by  3-10, i n f l u e n c e d  of primary products including  t h e 1974 b u d g e t  which  economic  t h e same p e r i o d  t h e Japanese  aggregate  rate  s t r e n g t h e n e d by t h e  a n d demand, a n d 6 0 % i s e x p l a i n e d  the p r i c e  of  h a d been  The d r a s t i c  wholesale price  increase  1973  i n Japan  t o t h e Economic  35.4% from  Economy  to i n the previous section, the  i n the international  "Nixon  "the  on t h e J a p a n e s e  a deficit out five  i n international  i n Japan's elements  payments.  They  J a p a n , E c o n o m i c P l a n n i n g A g e n c y , Nenji Keizai Houkoku, 1974 ( T o k y o : M i n i s t r y o f F i n a n c e ) , p . 78 ( S u m m a r y t r a n s l a t i o n by t h e a u t h o r ) . 9 1  55 were t h e supply/demand exchange and  the  element  rate  element,  adjustment  special  element.  i s summarized  as  the o i l p r i c e  element, The  element,  the s t r u c t u r a l  EPA's e x p l a n a t i o n  of  the  element, each  follows:  1. T h e s u p p l y / d e m a n d element: The e x p a n s i o n a r y e c o n o m i c s i t u a t i o n i n E u r o p e and t h e U n i t e d S t a t e s c a u s e d t h e w o r l d - w i d e i n f l a t i o n a r y t r e n d and i n c r e a s e i n the p r i c e of p r i m a r y p r o d u c t s . The e x p a n s i o n a r y s i t u a t i o n c a u s e d the i n c r e a s e i n Japan's e x p o r t s t o Europe and t h e U n i t e d S t a t e s . On t h e o t h e r h a n d , h o w e v e r , t h e i n c r e a s e i n the p r i c e of p r i m a r y p r o d u c t s caused the i n c r e a s e i n t h e v a l u e o f J a p a n ' s i m p o r t s . The d e f i c i t i n Japan's i n t e r n a t i o n a l payments i s p a r t l y e x p l a i n e d by t h e f a c t t h a t t h e i n c r e a s e i n t h e v a l u e of i m p o r t s e x c e e d e d t h a t o f e x p o r t s . 2. T h e o i l p r i c e e l e m e n t : Since the o i l p r i c e increased d r a s t i c a l l y i n O c t o b e r and November 1973, t h e v a l u e o f J a p a n ' s imported o i l i n c r e a s e d from the b e g i n n i n g of 1974 d e s p i t e the decrease i n the q u a n t i t y of o i l i m p o r t e d . The p e r c e n t a g e o f o i l i m p o r t s i n J a p a n ' s t o t a l i m p o r t s b y v a l u e was 1 5 % w h e r e a s t h e p e r c e n t a g e s o f o t h e r i n d u s t r i a l c o u n t r i e s were 10% b e f o r e t h e o i l c r i s i s . The p e r c e n t a g e f o r J a p a n i n c r e a s e d t o 30% a f t e r the c r i s i s . 3.  The e x c h a n g e r a t e a d j u s t m e n t e l e m e n t : T h e y e n a p p r e c i a t i o n s i n c e F e b r u a r y 1973 c a u s e d the i n c r e a s e i n the v a l u e of Japan's e x p o r t s . However, the yen a p p r e c i a t i o n had a n e g a t i v e e f f e c t on t h e q u a n t i t y o f e x p o r t s . T h e d e f i c i t i n i n t e r n a t i o n a l payments i s p a r t l y e x p l a i n e d by t h e f a c t t h a t t h e l a t t e r e f f e c t of t h e yen a p p r e c i a t i o n exceeded the former e f f e c t . 4.  The s t r u c t u r a l e l e m e n t : The d e f i c i t i s p a r t l y e x p l a i n e d by s t r u c t u r a l change i n Japanese economic a c t i v i t i e s . For instance, the increase i n outgoing f o r e i g n investments caused the increase i n c a p i t a l outflow. 5.  The s p e c i a l e l e m e n t : The d e f i c i t i s p a r t l y e x p l a i n e d by t h e s p e c i a l element. For i n s t a n c e , the n a t u r a l c l i m a t e change i n 1972 c a u s e d t h e f o o d s h o r t a g e p r o b l e m a n d t h e increase i n the p r i c e of primary p r o d u c t s . 9 2  9 2  Ibid.,  pp.  35-40.  56 The  effects  economy well in  of the o i l p r i c e  resulted  in further  as economic  recession  international  payments.  B.  The  In  order  Japan,  Impacts on  country  This are  assessment  Even economic  i s not  of  the  of  other  hand,  rates.  prices  wholesale  price  to  i n the  economy a r e the  on this  each  the comparative shows  the  rates  States  decline  1973  index of Japan whereas  were  in  from  France,  the  crisis  w e r e c o n c e r n e d . On and  the United  in their  o i lcrisis  of a l l the major  GNP  as Canada,  than Japan rates  there  d i d not decrease  in real  countries  growth  negative  o i lc r i s i s ,  shows t h e w h o l e s a l e p r i c e  increase.  deficit  reviewed in  i m p a c t s on  because  growth  less  short-term  The  as  impact of t h e c r i s i s  1973  Such  suffered  the o i lc r i s i s  continued  increase  shows t h e g r o w t h  countries.  wholesale  after  the  Japan, the United  T a b l e 3-13  industrial  of  economic  showed a s i m i l a r  inflation  for Japan.  countries.  their  Japanese  experienced a temporary  because  Italy  of  each country  whose economic  industrialized  the  Economy  but a l s o  i m p a c t s on  s o m u c h . T a b l e 3-12  f a r as  World  because  the c r i s i s  growth  some c o u n t r i e s  as  only  though Japan  Germany and  the  the world  interrelated  implication  and  the  on  acceleration  to understand the  i t s i m p a c t s on  section.  increase  raised  countries.  stopped  Kingdom  economic indices  of  t h o s e of most o t h e r  growth major  the  However,  i t s rapid  the  the  increase countries  57 As  f a r as the balance  concerned, from  however,  of i n t e r n a t i o n a l payments  there  the industrialized  was a t r a n s f e r o f p u r c h a s i n g  countries  Table  3 - 1 4 . I n 1 9 7 4 , OPEC c o u n t r i e s  in  trade  and current  balances,  deficits  i n both  indicators.  in  current  balance  rapidly  increased  reserves  increased  10% o f t h e w o r l d  total  the o i l c r i s i s  mentioned  i n 1972 t o changes i n  a n d new p r o b l e m s  i n the Japanese Economic  i n the previous  phenomenon c a u s e d  inflation.  The f i r s t  how t h e i n f l a t i o n  thing  caused  and 1975. T a b l e  such as  wholesale  p r i c e index  s e c t i o n s , t h e most  t o be d i s c u s s e d  by t h e c r i s i s  3-11 c o n t a i n s  p r i c e index  i n this  was part i s  was m o d e r a t e d  major  economic  high.  steadily  during  indicators  r e l a t i o n s h i p t o note  declined  stayed  Situation  b y t h e 1973 o i l c r i s i s  t h e p e r i o d . An i m p o r t a n t  consumer  caused  These  of o i l dollars.  important  the  countries  from  (2) M a j o r Changes  during  3 - 1 6 , OPEC  order  countries  i n T a b l e 3-15.  reserves.  i n t e r n a t i o n a l economic  1974  o f OECD  f o r e i g n exchange  the  surplus  OECD c o u n t r i e s h a d  their  i n 1974. As a r e s u l t ,  As  showed a huge  The d e f i c i t s  i n Table  30%  recycling  while  a r e shown  M o r e o v e r , a s shown  power  t o OPEC c o u n t r i e s a s s h o w n  in  their  was  while the  i s that  58 Impacts and of  of the i n f l a t i o n  accelerated two t r e n d s .  propensity  First,  the inflation  equipment  investments.  the  rate  l e d t o a decrease  i s explained  of individual  a) t h e decrease  b) t h e d e c r e a s e  rate  of real  1973-74 w h i l e 26.8%.  consumption  i n the growth  i n the propensity  income  declined  that  of nominal  from  consumption  declined  The impacts on  inflation not only  income  inflation factors.  during  of real  income,  t o consume. The growth  rose from  t o 4.1%i n  13.8% t o  t o consume, t h e growth  that  and a f t e r  from  of real  the inflation  savings  and accordingly  savings  t o compensate  disposable  rate  the o i lc r i s i s  exerted  of real  but also  income  t o save  between  i s related  t o two  decreased the real  induced consumers  value of  t o increase  f o rthe decrease of r e a l  their  value of  J a p a n , E c o n o m i c P l a n n i n g A g e n c y , Nenji Keizai Houkoku, 1975 (Tokyo: M i n i s t r y o f F i n a n c e , 1975), pp. 35-44. 9 3  rate  4.3% i n  t o consume. The r e l a t i o n s h i p  and the propensity First,  rate  f o r the  5.3% t o 4.1%.  on t h e g r o w t h  the propensity  the previous record  expenditures declined  from  e x p e n d i t u r e was  5.3% i n 1972-73  1972-73 t o 1.1% i n 1973-74, w h i l e income  Planning  by t h e EPA,  o u t two r e a s o n s  Concerning the propensity  real  i n plant and  According to calculations  9 3  4.8% i n 1 9 5 4 . The EPA p o i n t s  and  demand.  by t h e Economic  2.3% i n 1974, w h i c h was l o w e r t h a n  decrease:  of  trend  as f o l l o w s .  growth  only of  first  shock"  heightened the  t o save and d e c r e a s e d consumption the inflation  Agency  by t h e " N i x o n  b y t h e o i l c r i s i s c a n be a n a l y s e d i n t e r m s  Secondly,  The  caused  59 their  savings. Secondly,  caused  by  the  economic  the  uncertainty  of  employment  d e p r e s s i o n made p e o p l e  refrain  from  consumption. The  second  inflation and  investment  reduction  policy  spending,  investment  spending.  The  process  of  decrease private  affected with  1973  (Such  so much  three basic  such as  and  the  service  consumers' the  the in  themselves  by  as machines and  the  led  industries  non-ferrous  c h e m i c a l s were  not  they were o p e r a t i n g  plans.) Thirdly,  investment  in  industry.  investment  and  aggregate  the decrease  investments  steel  plant  fiscal  investments. F i r s t ,  l e d to a decrease  private  the  elements  respect because  investment  in  the  in private  decreased  increase  in  investments.  i n response  to  the  o i l crisis.  1974  *Ibid.,  companies,  in private  goods  by  restricting  expenditure caused  in this  costs  result,  t r a d e b a l a n c e was  in o i lprices. increased  increase.  deficit  9  out  industries  long-term  increase  price  of  i n p r o d u c t i o n and  capital  Japan's  in  outlays  the decrease  investment a  means o f  shock"  decrease  mainly caused  decreasing private  a decrease  metals.  was  points  The  9  i n v e s t m e n t s m a i n l y by  producing  As  EPA  the post-"Nixon  follows. *  by  i n consumption  Secondly, to  following  i s e x p l a i n e d as  equipment  demand  trend  As  to a  For  13.7  result,  influenced  instance,  billion  i n the January-March  PP.44-50  also  the  Japan's  dollars  by  the  o i l payments  owing  to the o i l  t r a d e b a l a n c e moved  period  of  1974.  rapid  into  a  60 However, Japan actually period  expanded  recovered  into  a trade  o f 1974. A c c o r d i n g  explained  by t h e f a c t  was c o m p e n s a t e d  exports  and the decrease the increase  i n import  price  increase explained  the  total  import  1974. the  The  the  increase  i n the value  contained  q u a n t i t y of imports  imported  goods, t h e  of the increase i n  value  p e r i o d of  was m a i n l y  offset  by  the July-September  the i n f l u e n c e of the decrease  became  of the increase  Even  the January-March period t o the  prices until this  of  price  i n the October-December  i n export  of  t w o - t h i r d s of the i n c r e a s e i n  i n the import  o f 1974. A f t e r  influence  value  p e r i o d o f 1974. The peak  increase  period  from  occurred  the April-June  i n the value  o i l but a l s o other  value  and  i n the q u a n t i t y of imports.  oil  values  from  deficit  f o r by t h e i n c r e a s e  of not only  import  surplus  the increase  increases  April-June  the trade  t o t h e EPA, t h e r e c o v e r y i s  that  imports  though  from  s t r o n g . From A p r i l  in  1975 t h e  i n the q u a n t i t y of exports  became  strong. The  economic  recession, started  period  o f 1974, r e a c h e d  period  o f 1975. The J a p a n e s e  recovery  process  recovery  was  private spending  from  realized  i t s bottom  i n the January-March  economy s h i f t e d  the second quarter  into the  o f 1974. The  by t h e i n v e n t o r i e s a d j u s t m e n t  s i d e and the monetary expansion  i n the January-March  policy  relaxation  on t h e p u b l i c  and side.  on t h e  government  61 (3) M a j o r  In  discussing  special First, oil  Changes  attention there  efforts change the  changes  i n Japanese  should  be p a i d  to the following  this  Japan's economic  chapter  recovery  t o recover  from  i n Japanese  change a r e d i s c u s s e d As crisis  discussed  sectors. three  groups.  suffered their  damage  their  that  the c r i s i s .  on d e c r e a s i n g basic  suffered  The t h i r d  a  the  to their  general  some u n i q u e a s p e c t s  differed sectors  in of the  the influence  between  industrial  are categorized  includes  of the  the industries  into which  the c r i s i s  and had t o focus  production  capacities or  strategy. severely,  The s e c o n d  group  includes  b u t managed t o overcome t h e  by means o f p u b l i c  group  respect  been d i s c u s s e d  sections,  group from  i t discusses  section.  industrial  severely  of the  the process of  Secondly,  has already  Therefore,  industry  The f i r s t  reviews  industries with  i n this  from t h e c r i s i s  policies. their  most  efforts  changing those  Japanese  points.  the reaction  from t h e c r i s i s ,  i n previous  on J a p a n e s e  industry,  i n d u s t r i e s t o t h e 1973 o i l  industry  sections.  between  mainly  of o i l consuming  previous  Industry  major  and consuming  Since  situation  Japanese  were d i f f e r e n c e s  supplying  crisis.  in  includes  those  and p r i v a t e that  c o m p a r a t i v e a d v a n t a g e a n d grew b e c a u s e  increased of the c r i s i s .  62  A.  Depressed  Industries  Petrochemicals: which  e n j o y e d an  The  caused  economic  d e p r e s s i o n from  instance, material growth  by  boom b e c a u s e  the c r i s i s ,  of  started  the l a t t e r  the p r o d u c t i o n of  part  production  i n J-apan  i n 1958.  i n v e s t m e n t and  postponed.  Due  9 6  petrochemicals  first  time  of  of  1974.  For  was  basic  since  overseas projects  became one  from  a  recorded zero  In a d d i t i o n ,  t o i t s heavy  Japan,  the o i l p r i c e  ethylene, which  f o r the  of  to suffer  f o r the petrochemical i n d u s t r y ,  i n the period  capital  petrochemical industry  economic  increase  9 5  i t s first  many  schemes  of  were c a n c e l l e d  or  d e p e n d e n c e on o i l , the  slump  ridden  industries  of  Japan. Aluminum: Another was  the aluminum  Japanese prices price  aluminum  increase  Another the  industry. industry  t o the government.  increase  by  example of  in this  After  There  reduced  accepted,  but  experienced  supply of  an  The  by  i n the o i l . In  ridden  1973  1974  first  was  f o r the  the  aluminum  f o r the  the  price  increase.  of o p e r a t i o n s caused the proposal  a t t h e same t i m e , t h e a l u m i n u m  a n e g a t i v e growth  of  reasons  the o i l p r i c e  level  industry  o i lcrisis  increase  were two  proposal.  the decrease  slump  the  proposed  of e l e c t r i c i t y caused was  a  first  was  industry time.  The  T h e c l a s s i f i c a t i o n h a s b e e n d e c i d e d by t h e a u t h o r . The situation o f e a c h i n d u s t r y i s b a s e d on t h e d e s c r i p t i o n i n Asashi Nenkan, 1975 (Tokyo: A s a h i S h i n b u n s h a , 1975), pp. 364-376. T h e p o s t p o n e d schemes i n c l u d e d o m e s t i c e t h y l e n e f a c t o r i e s w h i c h w e r e a l r e a d y a p p r o v e d by M I T I . The p e t r o l e u m c o m p l e x t o b e b u i l t i n T h a i l a n d b y M i t s u b i s h i a n d M i t s u i was o n e o f s c h e m e s c a n c e l l e d . Ibid., pp. 374-375. 9 5  9 6  63  aluminum  industry,  heavily,  became  which  a slump ridden  Shipbuilding: depressed newly  by t h e o i l c r i s i s . ships  of ships  launched  increase  over  industry's ships  was  the l e v e l  share  the  transportation  the  over-supply  catch-up  the other  the market  industry.  As a r e s u l t ,  ships  decreased  million  tons  cancelled.  9  t h e amount  35.0 m i l l i o n  but  Surviving  The J a p a n e s e  the  o i l crisis  the  three  steel  of  launched  the decrease i n  tons  accelerated  market.  (NICs)  also  orders  i n 1973 t o  contracts  The  shipbuilding  of received  to i t s relative  the steel  or Revived industry  b u t went t h r o u g h  i n d u s t r i e s mentioned  contributed  crisis  countries  11.6%  f o r new  12.8  were  7  Steel:  the  launching  shipbuilding  tanker  of the Japanese  i n 1 9 7 4 . Some l a r g e  B. D e p r e s s e d  that  i n the world  share  from  however,  a  to the o i l c r i s i s  industrialized  decreased  in  tons,  t o t a l amount  hand,  o f o i l due  also  i n 1974 w h e n t h e t o t a l  i n 1973. The J a p a n e s e  situation  by n e w l y  was  record  17.5 m i l l i o n  i n the world's  5 2 . 1 % . On  industry  The h i g h e s t  occurred was  on o i l i n d i r e c t l y b u t  industry.  The s h i p b u i l d i n g  constructed  amount  i s dependent  industry  on t h e i r  own  i t more  also  suffered  successfully  above. Several  success.  was a b l e inputs  Industries  than  elements  The main  t o pass  from  element  the cost  on t o t h e p r i c e s  of  impact of their  T h e c a n c e l l e d c o n t r a c t s i n c l u d e d one w i t h M i t s u i S h i p b u i l d i n g f o r a 136 t h o u s a n d t o n t a n k e r o r d e r e d b y a L i b e r i a n s h i p - o w n e r . Ibid., p. 371. 9 7  was  64 products. steel  The  industry  products  should  proposed be  raised,  ranging  allowed  an  different  products.  MITI  increase.  This  shows t h a t  fact  the  steel industry  The  control  capital  investments  over-production "Nixon steel  shock."  billion  in  world  from  example of  recovering machine effect for such  from the  one  6.3  the  value  billion  example of  in  the  In  Japanese  of  of  the  increasing  local  natural  extent. of  of  by  the  Japanese  1973  to  12.0  s t e e l shortage  of  as  avoid  a case where  influence  addition,  some  caused  the  strategy  of  t o o l s : The an  from  tool the  machines.  in  public  o i l crisis  industry  to  steel  overseas  resources  of  Japanese machine  industry the  the  adopted  increasing suffered  through  instance,  machine  by  mainly  o i l crisis For  which  crisis  industry  i n d u s t r i e s as  inventory  the  the  and  recover industry  investments and  t o o l s to  tool  in  o i l  the  industry  strategy  was  of  i t s exports.  from the decrease  industry  21,664 i t e m s ,  The  demand-side i n the  c a n c e l l a t i o n of  automobile  T h e investments include Nippon K a w a s a k i S t e e l ' s i n B r a z i l . Ibid., 9 8  recession  world-wide  the  to  for  well  suspension  1973  24%  price as  to  of  9 8  Machine an  and  to  16.9%  control the  price  18%  s t e e l market  on  hand,  the  from  s i t u a t i o n helped  t o make u s e  dollars.  other  moderated  a  1972  that  average  public  economic  to  was  crisis.  implemented order  due  market  the  during  the  the  agreement  increased  This  intervention the  On  1974  1974.  an  i n the  exports  early  were under  included  t o MITI  demand  contracts  increased  by  the  w h i c h was  Steel's in Australia, p. 364.  twice and  65 as  many a s t h e m o n t h l y  rate  level  ratio  of t o t a l  the economic automobile  orders  i n c r e a s e d from machine  recession  industries  industry's  export  C. G r o w i n g  tool  ratio  1970's a s b o t h  The J a p a n e s e  automobile  of industries  the  increase i n the gasoline price,  I t recorded a n e g a t i v e growth  domestic  demand  f o r cars.  the c r i s i s  became m o d e r a t e d . M o r e o v e r ,  economical  Japanese  greatly  Electronics; suffered oil  crisis.  "Asahi 346.  since  The J a p a n e s e  1980  during  small,  from  which  2.0 m i l l i o n i n  automobile eventually  the o i l c r i s i s . electronics  t h e economic  For instance,  Nenkan,  started  of consumers  i n 1975. The Japanese  from  initially  demand  c a r s became e v e n more p o p u l a r i n  was a n e x a m p l e a n i n d u s t r y  benefitted  from t h e  decreased the  c a r e x p o r t s i n c r e a s e d from  t o 2.7 m i l l i o n  was n o t  i n 1974. B e s i d e s  However, domestic  i n 1975 a s t h e r e s t r a i n t  markets,  industry  t h e r e was a l s o a n  i n a u t o m o b i l e - r e l a t e d taxes which  industry  s t e e l and  of recovery  suffering  increase  1973  from  i n c r e a s e d t o 44.4% i n 1 9 7 8 . "  crisis.  again  recovered  recovered. In the process  oil  overseas  i t s  2 8 . 2 % i n 1973 t o 3 4 . 0 %  industry  i n the early  exception to the l i s t  growing  t o 60% of  Industries  Automobiles: an  decreased  o f o p e r a t i o n . On t h e o t h e r h a n d , t h e e x p o r t  1975. The J a p a n e s e  the  of p r o d u c t i o n . As a r e s u l t , t h e  of operation i n the industry  usual  in  level  recession  the decrease  (Tokyo:  Asahi  industry  caused  i n domestic  Shinbunsha,  also by t h e  sales and  1985),  p.  66 exports  of TV  restraint  s e t s due  c a u s e d a 40% d e c r e a s e  p a r t s . As a r e s u l t , closure firms. TV  and  early  retirement  increased  15 m i l l i o n  i n 1974  a l s o appeared spite  i n Japan  of t a b l e  became one  enjoyed a comparative  It this  has a l r e a d y  calculators i n 1975.  industry  out  the  Japanese  industrial  s t r u c t u r e was  increase  material  industry  and a l s o  p r o d u c t s of t h o s e d i r e c t their  had  forced both high  industries  production  around the  1975.  In  Japanese volumes  and  i n which  cost  Japan  user  i n the second  the  1973  shown t h a t related  from  the s h i f t to the  used. Indeed,  in  level  the o i l  e n e r g y and p e t r o c h e m i c a l  industries industries  p r o c e s s e s . The  section  o i l crisis.  above have  price  from  after  introduced  each  increased  shift  examples  energy which  In  a quantitative  The  of  the  Micro-computers  industries  pointed  t h e r e was  to t e r t i a r y  expanded.  of i t s s a l e s  of the  i n many  advantage.  been  chapter that  secondary  because  factory  and a b r o a d , and  companies  t o 32 m i l l i o n  industry,  such as  t h e demand f o r c o l o u r  i n t h e e l e c t r o n i c s market  efficiencies,  of  i n 1975,  o f t h e s e t b a c k of t h e o i l c r i s i s ,  electronics  and  i n t h e demand f o r e l e c t r o n i c  electronics  the p r o d u c t i o n  pessimism  were i n t r o d u c e d  again both  o p e r a t i o n s o f major addition,  initial  short-term p o l i c i e s  However, s t a r t i n g  1 0 0  sets  to consumer's  efforts  which to  used  the  rationalize  o f t h e machine  tool  M a t s u s h i t a E l e c t r i c s e n t 2,000 e m p l o y e e s as a s s i s t a n t s r e t a i l i n g s h o p s . Sanyo and S h a r p a l s o s e n t 370 and 65 employees r e s p e c t i v e l y . Asahi Nenkan, 1975 ( T o k y o : A s a h i S h i n b u n s h a , 1975), p . 368. 1 0 0  to  67 industry  t odecrease  in  demand  their  their  material costs  for inputs.  In turn,  industries  suffered n o tonly  production  costs  for  their  products.  structure to  butalso This  from  from  the direct  the increase  the decrease  shift  was a c c e l e r a t e d  l e d t o decreases user i n their  i n t h e demand  i nthe Japanese  industrial  by t h er e a c t i o n o f each  industry  t h e 1973o i l c r i s i s .  3. T H E C H A R A C T E R I S T I C S OF T H E J A P A N E S E ECONOMIC R E A C T I O N TO THE O I L C R I S I S In  investigating the characteristics  economic  r e a c t i o n t o t h e 1973o i l c r i s i s ,  elements  c a n be d i s c e r n e d .  vulnerability reviewed oil,  i np r e v i o u s  particularly  country's the  if  economic  Japan impacts  Japan  should  One was t h e c o u n t r y ' s was i t s economic  oil,  was a major  vulnerability. Within  decrease  Japan  hadsucceeded Many  This  point  earlier  would  economic  economic  e f f i c i e n c y . As dependence on cause  of the  became c l e a r i n  i t was g e n e r a l l y  i t s economic  of the o i l c r i s i s  vulnerability.  twobasic  s e c t i o n s , Japan's high  imported  1973o i l c r i s i s .  that The  andthe other  o f Japan's  argued  vulnerability.  n o t have  been  1 0 1  so serious  i nd e c r e a s i n g i t s  people c r i t i c i z e d  the policy  of high  M o t o o K a j i , P r o f e s s o r o f Tokyo U n i v e r s i t y , a n d o i l s p e c i a l i s t s from Japanese companies p u b l i s h e d a r e p o r t i n 1969 i n w h i c h t h e y p o i n t e d o u t t h e v u l n e r a b i l i t y o f J a p a n due t o i t s h i g h d e p e n d e n c e o n M i d d l e E a s t o i l a n d d i s c u s s e d l o n g term supply/demand schemes on o i l i nt h e P a c i f i c r e g i o n ( s e e M o t o o K a j i , e d . , Asia Taiheiyo ni okeru Seki yu Jukyu no Kozo [ T o k y o : A s i a K e n k y u j o , 1969]). 1 0 1  68 dependence the  1973  coal  on M i d d l e E a s t  o i l crisis  o i l as  occurred.  the  become d e p r e s s e d due  oil  imports.  business  For  leaders  confusion  Among them, p e o p l e  industry strongly c r i t i c i z e d  had  c a u s e of  t o the  i t because  earlier  from  that  Japanese c o a l  the  industry  rapid increase  i n s t a n c e , K i c h i t a r o H a g i w a r a , one i n the  industry,  when  of  in the  stated:  The most s e r i o u s m i s t a k e the government made was t h a t t h e y t h o u g h t t h e o i l s u p p l y from t h e M i d d l e E a s t w o u l d c o n t i n u e f o r e v e r . They had not recognized t h a t M i d d l e E a s t o i l w o u l d n o t c o n t i n u e t o be i n e x p e n s i v e u n t i l t h e 1973 o i l c r i s i s o c c u r r e d , whereas o t h e r i n d u s t r i a l i z e d c o u n t r i e s had a l r e a d y recognized this d a n g e r . " 1 0 2  At  the  the  same t i m e , H a g i w a r a h i g h l y commended t h e  United  coal  Kingdom and  i n d u s t r y as On  the  other  accomplished of  an  hand,  its utilization  Middle East.  For  West Germany i n m a i n t a i n i n g  a l t e r n a t i v e energy  i t s high of  policies  source.  i t i s also true  r a t e of the  instance,  that  their  1 0 3  Japan  economic growth p a r t l y  inexpensive  supply  Saburo O k i t a  of  because  o ' i l from  comments:  The f a c t t h a t J a p a n i s i m p o r t i n g a l a r g e amount of p e t r o l e u m from the M i d d l e E a s t now does n o t p r e s e n t much o f a h a n d i c a p t o o t h e r i n d u s t r i a l n a t i o n s . In t h e p a s t , a l a c k of raw m a t e r i a l s i n the h o m e l a n d was a l w a y s r e g a r d e d a s a g r e a t d i s a d v a n t a g e t o t h e economy. But more r e c e n t l y t h e l a c k of raw m a t e r i a l s a t home and t h e c o r r e s p o n d i n g need t o i m p o r t m a t e r i a l s f r e e d t h i s c o u n t r y from t h e d i s a d v a n t a g e o f use of uneconomic raw m a t e r i a l s w h i c h c o u l d have been n e c e s s i t a t e d by t h e p r o t e c t i o n of d o m e s t i c i n d u s t r i e s p r o d u c i n g raw m a t e r i a l s . Thus, t h e l a c k o f i n d i g e n o u s n a t u r a l r e s o u r c e s has t u r n e d i n t o one of the f a v o r a b l e f a c t o r s s u p p o r t i n g r a p i d economic growth.. 1 0 4  K a n i c h i Kondo & H i r o s h i O s a n a i , op. cit., (Summary t r a n s l a t i o n by t h e a u t h o r ) . i ° I b i d . , pp. 104-105. S a b u r o O k i t a , Japan in the World Economy J a p a n F o u n d a t i o n , 1975), pp. 62-63. 1 0 2  pp.  105-106  3  1 0 < t  of  (Tokyo:  The  the  69 It  was  coal to  reasonable f o r Hagiwara,  industry  criticize  important  which  suffered  the government  to note  that  such a h i g h rate  maintained  i t s coal  Germany d i d . The its  economic  In 1973 to  to supply  o i lcrisis  economic  t o the  recovery  was  adjustment  The  the  risk  of  shipbuilding, government  key  had  the  other hand,  off  government  phenomenon effectively  intervention  examination of  by  the  to  i f i t had  by  West  increasing  i n d u s t r i e s as i n the  intervention,  risk  of  always  the wise  of  increasing  managed  to recover  the Japanese  and  economic  Facing  the  p e t r o c h e m i c a l s and 1960's  i n which  the  industries.  which  became a g r o w i n g  had  industry.  Indeed,  r e d u c i n g t h e damage  the o i l c r i s i s .  On  fought  mechanism worked  intervention.  c a m e t o f o c u s on  the  rapid  industry.  industry,  the market  than government  after  not  became d e p r e s s e d  the automobiles  that  influence  flexible  of Japanese  intervened,  industries  unable  in t h i s chapter suggests that  industries  indicated  i t is  increasing i t s  i t was  e f f i c i e n c y at the  some p a r t s such  been  growth  the economic  shows t h a t  o i lcrisis  o i lcrisis,  revolution,"  disruptions.  made p o s s i b l e  of  have  i n the  t h e U n i t e d Kingdom and  v u l n e r a b i l i t y . However, Japan  the c r i s i s .  depressed  well  economy d e v e l o p e d  Japan  economic  reaction  1973  on  "energy  economic  as  involved  p o l i c y . However,  might of  summary, t h e r e f o r e ,  increase  from  Japanese  the  energy  industry  e f f i c i e n c y at  vulnerability  from  Japan  accomplish  as a person  This  more  government of  70 4.  TABLES  T A B L E 3-1 ECONOMIC GROWTH R A T E S OF MAJOR C O U N T R I E S 1950-1960 Canada U.S. Japan France W.Germany Italy U.K. Source: ( T o k y o : Chuo Statistics.  4.6 3.2 C 5 2 - ) 8.0 4.6 8.0 C 5 1 - ) 5.5 C 5 2 - ) 3.1  - annual 1960-1970  rate, % 1970-1979  5.2 3.9 11.2 5.6 4.7 5.7 2.8  H i s a o K a n a m o r i , Koza Nihon Keizai, Keizaisha), 1 : 2 4 ; OECD, National  4.4 3.2 5.4 3.9 2.9 3.0 2.2 2 vols. Account  71 TABLE  3-2  C O M P A R I S O N OF T A R G E T S S E T BY THE N A T I O N A L I N C O M E - D O U B L I N G P L A N AND A C T U A L ECONOMIC PERFORMANCE N a t i o n a l Income Doubling Plan Target Targeted Growth Levels f o r 1 970 R a t e (%) -Total Population (10,000) -Persons Employed (10,000) -Employees (10,000) -GNP ( 1 9 5 8 p r i c e s , 100 m i l l i o n yen) -Gross National Income (1958 p r i c e s , 100 m i l l i o n yen) -Per C a p i t a Income (1958 p r i c e s , yen) -Personal Consumption Expenditures (1958 p r i c e s , 100 m i l l i o n yen) -Per C a p i t a Personal Consumption Expenditures (1958 p r i c e s , yen) -Structural Components o f N a t i o n a l Income  Actual  Performance  Actual levels for 1970  Actual Growth R a t e (%)  10,222  0.9  10,372  1 .0  4,869  1 .2  5,094  1 .5  3,235  4.1  3,306  4.3  260,000  8.8  405,812  11.6  213,232  7.8  328,516  11.5  208,601  6.9  317,678  10.4  151,166  7.6  203,863  10.3  147,883  6.7  204,079  9.4  (%)  (Primary Industry) (Secondary Industry) (Tertiary Industry) -Mining and Manufacturing Production  431 .7  10.1  7.4  38.6  38.5  51 .3  54. 1 1 1 .9  539.4  13.9  72  -Agricultural, Marine and Forestry Production - T o t a l Demand for Energy ( u n i t = 1,000 tons of coal) -Value of Exports (costum clearing basis, 100 m i l l i o n dollars) -Value of Imports (costum clearing basis, 100 m i l l i o n dollars)  130.3  2.1  1 44.1  2.8  302,760  7.8  574,095  12.0  93.2  10.0  202.5  16.8  98.9  9.3  195.3  15.5  S o u r c e : T a t s u r o U c h i n o , Japan's Kodansha I n t e r n a t i o n a l L t d . , 1983),  Postwar p. 112.  Economy  (Tokyo:  Notes: 1. G r o w t h r a t e s a r e i n c o m p a r i s o n t o t h e a v e r a g e f o r 1956-58. 2. F i g u r e s a r e b a s e d o n 1 9 5 8 p r i c e s . 3. F o r a l l i n d i c e s 1 9 5 8 = 1 0 0 .  73 TABLE HOUSEHOLD  1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980  3-3  S A V I N G R A T E S OF MAJOR C O U N T R I E S  %  JAP.  U.S.  U.K.  W.G.  FRA.  ITA.  18.2 18.0 18.2 20.9 23.7 22. 1 22.4 21.0 20.6 18.3  8.2 8.3 6.7 8.9 8.7 8.8 7.1 5.8 5.4 5.4 5.7  6.6 4.7 6.7 8.1 9.7 9.1 8.1 7.0 9.0 10.1  17.9 17.0 15.5 14.0 14.8 15.2 13.4 13.4 13.3 13.8  12.6 13.5 13.7 14.2 14.1 15.3 12.9 13.4 14.4 13.3  16.1 23.4 24.5 23.9 22.4 23.2 22.9 22.5 23.7  —  —  S o u r c e : H i s a o K a n a m o r i , Koza Ni hon K e i z a i , 2 (Tokyo: Chuo K e i z a i s h a , 1 9 8 2 ) , 1 :107.  -  vols.  N o t e : J A P . = J A P A N , U.S=UNITED S T A T E S , U.K.=UNITED KINGDOM, W.G.=WEST GERMANY, F R A . = F R A N C E , I T A . = I T A L Y .  74 TABLE  3-4  THE GROWTH OF J A P A N E S E Value  Exports 1961 1 962 1963 196*4 1965 1966 1967 1968 1969 1970 1 971 1 972 1973 1974 1975 Source: 1 985.  4,236 4,916 5,452 6,673 8,452 9,776 10,442 12,972 15,990 19,318 24,019 28,591 36,930 55,536 55,753 Japan  Tariff  (million  Imports  FOREIGN  TRADE  US d o l l a r s )  Balance  5,810 5,637 6,736 7,938 8, 169 9,523 11,663 12,987 15,024 18,881 19,772 23,470 38,314 62 , 1 1 0 57,863  -1 , 5 7 5 — -720 -1,284 -1,264 283 254 -1,222 -16 966 437 4,3.07 5, 120 -1 , 3 8 4 -6,5.75 — -2,110  Association,  Gai koku  Ratio to the previous y e a r (%) Exports 104.5 116.1. 110.9 1 22.4 162.7 1 15.7 106.8 1 24.2 1 23.3 1 20.8 1 24.3 119.0 1 29.2 150.4 1 00.4 Boeki  Gaikyo,  Imports 129.4 97.. 0 119.5 117.8 102.9 116.6 122.5 111.4 115.7 125.7 1 04.4 1 1 9.. 1 163.2 162. 1 93.2 July  75 TABLE  3-5  MAJOR J A P A N E S E T R A D E IMPORT  1970 1971 1972 1973 1974 1 975 1976 1 977 1 978 1979  EXPORT 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979  Total  18,881 19,712 23,471 38,314 62,110 57,863 64,799 70,809 79,343 103,032  Total 19,318 24,019 28,591 36,930 55,536 55,753 67,225 80,495 97,543 110,672  - million Petroleum, crude & partly defined 2,236(11 3.048(15 3,923(16 6,000(15 18.898(30 19,643(33 21 185(32 23,573(33 23,433(29 33,471(30 T  .8) .5) .7) .7) .4) .9) .7) .2) .5) .2)  ITEMS  US d o l l a r s , Petroleum products  550( 574( 539( 726( 2,263( 1 ,351( 2,101( 2,217( 2,273( 4,500(  ( s h a r e , %) Coal  2 .9) 2 .9) 2 .3) 1 .9) 3 .6) 2 .3) 3 .2) 3 .1) 2 .9) 4 .1)  1 , 0 1 0 ( 5. 3) 1 , 0 0 5 ( 5. 1) 1 , 0 7 8 ( 4. 6 ) 1 , 3 5 4 ( 3. 5 ) 2 , 8 6 4 ( 4. 6 ) 3 , 4 5 4 ( 6. 0 ) 3 , 5 6 0 ( 5. 5 ) 3 , 5 4 7 ( 5. 0) 3 , 0 7 7 ( 3. 9 ) 3 , 5 4 9 ( 3. 2 )  Motor vehicles  Iron & steel products  Vessels  1 , 3 3 7 ( 6.9) 2 , 3 7 3 ( 9.9) 2,029(10.4) 3 , 6 1 2 ( 9.8) 5 , 2 2 7 ( 9.4) 6,190(11.1) 8,903(13.2) 11,552(14.4) 15,531(15.9) 17,021(16.5)  2,844(14.7) 3,542(14.7) 3,610(12.6) 5,304(14.4) 10,758(19.4) 10,176(18.3) 10,485(15.6) 10,519(13.1) 11,855(12.2) 14,113(13.7)  1 , 4 1 0 ( 7.3) 1 , 8 4 9 ( 7.7) 2 , 3 9 9 ( 8.4) 3,819(10.3) 5,600(10.1) 5,998(10.8) 7,049(10.5) 8,129(10.1) 7 , 1 7 2 ( 7.4) 3 , 8 6 9 ( 3.8)  Source: Japan T a r i f f A s s o c i a t i o n , September 1978, August 1981.  Gaikoku  Boeki  Gai  kyo,  76 TABLE  3-6  THE S H I F T I N THE J A P A N E S E POSTWAR  INDUSTRIAL  Share  1960 Nominal production -Agriculture, forestry & fishery(AFF) -Mining -Manufacturing -Construction -Service TOTAL Real production -AFF -Mining -Manufacturing -Construction -Service -TOTAL Real exports -AFF -Mining -Manufacturing -Construction -Service TOTAL Employees -AFF -Mining -Manufacturing -Construction -Service TOTAL  8.2  1973  3.7  (%)  1977  STRUCTURE Annual growth (average) (%) 1973 1977 /1960 /1 9 7 3  3.9  8.7  13.6  1.0 51.4 8.3 27.2 100.0  0.5 46.7 13.0 32. 1 1 00.0  0.4 44.7 10.0 37.5 100.0  10.0 14.7 19.7 17.1 15.6  7.0 11.2 5.3 16.8 12.4  10.5 0.8 42.0 8.5 34.8 100.0  3.4 0.5 49.7 10.7 31 .9 100.0  3.6 0.4 48.6 10.0 33.8 100.0  1 .3 7.4 11.8 12.4 9.6 10.4  2.3 -3.2 0.6 -0.6 2.6 1.2  4.3 0.0 75.1 0.4 15.9 100.0  0.7 0.1 79.8 0.0 15.4 1 00.0  0.2 0.0 84.4 0.0 13.4 100.0  -2.3 17.9 13.4  -11.2 -1 .7 17.2  12.6 12.9  11.8 15.6  32.6 1 .2 21 .8 6.1 38.2 100.0  14.8 0.3 26.9 8.7 49.3 100.0  12.3 0.2 25.7 8.9 52.8 100.0  -4.4 -9.9 3.2 4.3 3.6 1 .6  -4.5 -2.6 -1.1 0.7 1 .7 0.0  Keizai,  2  S o u r c e : H i s a o K a n a m o r i , Koza Nihon ( T o k y o : Chuo K e i z a i s h a , 1 9 8 2 ) , 1:48.  -  vols.  -  77 TABLE  3-7  THE S H I F T I N J A P A N E S E  ENERGY  SUPPLY  Petro.  - coal basis, 1,OOOt(1t=7x10 kcal) ( s h a r e , % ) , < i m p o r t r a t i o , %> LNG Hydro Atomic Wood TOTAL  6,733 523 (44.9) (3.5) <1.5> <43.2> 14,176 767 (72.2) (3.9) <1.2> <46.0> 26,922 770 (79.6) (2.3) <3.0> <34.7> 31,001 3,023 (70.5) (6.8) <9.6> <85.0> 60,175 6,379 (71.1) (7.5) <16.4> <92.6> 35,170 4,316 (39.6) (7.3) <2.4> <89.1> 40,195 16,145 (50.3) (20.1) <8.8> <96.3> 56,428 50,528 (42.1) (37.7) <17.0> <98.3> 64,916138,148 (27.4) (58.3) <30.0> <99.2> 91,891313,944 (20.7) (70.8) <61.0> <99.6> 88,300388,220 (16.7) (73.4) <78.5> <99.7> 95,887370,964 (17.0) (65.8) <81.8> <99.8>  7,749 15,005 (51.6)(100.0) <2.8> 4,526 19,624 (23.1) (100.0) <2.7> 4,953 33,841 (14.6)(100.0) <3. 2> 5,226 43,984 (11.9)(100.0) <12.6> 9,460 8 4 , 6 2 3 (11.2) (100.0) <18.7> 6,176 5 9 , 0 4 2 (10.5)(100.0) <7.9> 6,309 7 9 , 9 6 5 (7.9)(100.0) <24.0> 5,179133,928 (3.9)(100.0) <44.2> 3,853236,757 (1.6)(100.0) <66.1> 2,293445,441 (0.5)(100.0) <83.2> 1 ,430529,230 (0.3)(100.0) <88.0> 270564,026 (0.5)(100.0) <85.3>  6  Coal 1900 1910 1920 1930 1940 1950 1955 1960 1965 1970 1975 1980  Source: ( T o k y o : Chuo  157 (0.8) 43 (0.1 )  1 , 1 55 (3.4)  49 (0.1)  4,865 (10.7)  65 8,554 (0.1 ) ( 1 0 . 1 ) 82 1 3 , 2 9 8 (0.1 ) ( 2 2 . 5 ) 340 (0.4)  16,976 (21.2)  1 ,324 2 0 , 4 6 9 (1.0) (15.3) 2,869 (1.2)  26,759 (11.3)  5,677 2 8 , 0 2 9 (1.3) (6.3) <32.7> 12,780 29,750 (2.4) (5.6) <71.4> 35,767 32,231 (6.3) (5.7) <90.7>  1,603 (0.4) 8,750 (1.7) 28,907 (5.1)  H i s a o K a n a m o r i , Koza Nihon Keizai K e i z a i s h a , 1982), 2:22-23.  ,  2  vols.  78 TABLE SMITHSONIAN Currency Japan W.Germany Switzerland France U.K.  Yen Mark S.Franc F.Franc Pound  Italy Canada U.S.  Lira C.Dollar US.Dollar  RATES  3-8  OF MAJOR  CURRENCIES  New r a t e  Old rate  308 3.22 3.84 5.12 2.60  360 3.66 4.08 5.55 2.40  582 float 38  625 float 35  S o u r c e : Y o s h i t o m i I s h i m a r u , Endaka to Ni hon (Tokyo: M a i n i c h i S h i n b u n s h a , 1978), p. 20.  TABLE U.S.  INTERNATIONAL  Gold and f o r e i g n currency reserves 1 949 1971  26.0 13.2  Appreciation r a t e .(%) 16.88 13.57 6.36 8.57 8.57 (/pound) 7.48  -  -7.89 (/one o u n c e gold) Keizai  3-9 LIQUIDITY  POSITION  - b i l l i o n US d o l l a r s International International debt credit 6.9 67.8  S o u r c e : Y o s h i t o m i I s h i m a r u , Endaka to Ni hon (Tokyo: M a i n i c h i S h i n b u n s h a , 1978), pp. 16-18.  1.1 16.1 Keizai  79 TABLE 3-10 CHANGE I N O I L P R I C E S - Arabian 1970 Aug.31 1.800  1971 1972 Feb.15 Jan.20 2.180 2.479  1973 Jan. 1 2.591  Apr.1 Jun. 1 2.742 2.898  light,  J u l . 1 Aug. 1 2.955 3.011  US  dollars/barrel  Oct.16 5.119  Nov. 1 Dec.1 5.176 5.036  1974 Jan. 1 11.651 Source: Japan, Agency of N a t u r a l Resource and Energy, Sekiyu Kiki to Jukyu Taisaku (Tokyo: Sekiyu Tsushinsha, 1974), p.3 4 1 .  T A B L E 3-11 MAJOR J A P A N E S E ECONOMIC (1972-1975)  INDICES  - budget year, 1 972 1973 N o m i n a l GNP R e a l GNP Production of mining manufacturing Wholesale price Consumer price Export Import  &  g r o w t h r a t e (%) 1974 1975  17.3 11.0 10.8  23.0 5.4 14.8  17.9 -0.6 -9.4  9.4 3.1 -3.6  3.2 5.2 19.4 25.2  22.6 16.1 32.3 77.2  23.4 21 .8 47.3 39.3  2.1 10.4 -2.4 -7.1  S o u r c e : J a p a n , E c o n o m i c P l a n n i n g A g e n c y , Nenji Hokoku, 1973-1976 (Tokyo: Economic P l a n n i n g Agency, 1973-1976).  Keizai  80 TABLE GROWTH OF  R E A L GNP I N S E V E N I N D U S T R I A L C O U N T R I E S AND THE OECD From Year 1973 II  Previous  (%) Half-  1974 I  II  4.5 4.8 1 .0 4.8 -3.3 -0.5 -1 .8 -0.3  4.5 5.4 0.5 9.4 2.8 0.3 1.9 2.6  5.6 4.5 2.0 4.9 -9.3 -3.4 -3.4 -2.0  3.0 5.0 -2.5 0.3  0.3  3.0  -1.3  0.5  From Year  Previous  1973  1974  5.0 5.8 4.9 5.5 11.0 3.1 4.1 5.5  6.8 6.0 5.3 6.0 10.2 5.3 5.9 6.5  5.4  6.3  Average 1959-60 to 1971-72 Canada France Germany Italy Japan U.K. U.S. Total of above countries T o t a l OECD  3-12  2.5 4.3 0.0  a.o  S o u r c e : C a n a d a , M i n i s t r y o f F i n a n c e , Economic Review, A p r i l I 9 7 5 ( 0 t t a w a : I n f o r m a t i o n C a n a d a , 1 9 7 5 ) , p . 9; OECD ( O r g a n i z a t i o n f o rEconomic C o o p e r a t i o n and Development), Economic Outlook, December, 1974. Note: 1. F i g u r e s a r e s e a s o n a l l y a d j u s t e d a t a n n u a l r a t e s : estimates 2. F i g u r e s o f F r a n c e a n d t h e U . K . ( U n i t e d K i n g d o m ) a r e b a s e d o n GDP. 3. T o t a l f i g u r e s a r e c a l c u l a t e d u s i n g 1 9 7 3 w e i g h t s a n d exchange r a t e s .  81 TABLE 3-13 WHOLESALE P R I C E  INDICES:  INTERNATIONAL  COMPARISON -  1971 JAP. U.S. CAN. U.K. ITA. W.G. FRA.  99.2 103.2 101.2 1 04.6 102.7 104.3 96.8  1  2 3  1972  1973  100.0 107.9 108.3 109.2 106.8 107.0 99.1  115.8 122.7 131.5 144.5 125.9 114.1 124.8  1974 1 52.2 145.9 1 38. 1 201 .9 1 77.2 129.4 1 66.2  S o u r c e : Asahi Nenkan, 1981 A s a h i S h i n b u n s h a , 1 9 8 1 ) , Kokuren N a t i o n s , September, 1980).  1 975 156.8 158.4 153.7 232.6 192.4 135.5 136.8  1 976 1 64.6 165.7 161.6 295.4 236.4 1 40.8 1 54.6  1970=100 1977 1978  1 67.8 1 75.9 1 74.3 338.7 277.5 1 44.5 1 66.9  163.6 189.7 190.3 336.3 300.8 146.3 169.5  (reference edition) (Tokyo: Toukei Geppo (United  Note: Basic materials i n d u s t r i a l products Materials 1. J A P . = J a p a n , U . S . = U n i t e d S t a t e s , U . K . = U n i t e d K i n g d o m , W.G.=West G e r m a n y , 1  3  CAN.=Canada, FRA.=France.  82 T A B L E 3-14 B A L A N C E OF I N T E R N A T I O N A L  Industrial countries  OPEC countries  Non o i l produc i n g LDCs  1972 -73 1 974 1975 1 972 -73 1 974 1975 1 972 -73 1 974 1975  Trade balance  Service  7.2  4.6  -28.5 6.8  PAYMENTS  - b i l l i o n US d o l l a r s Current Capital Total balance balance balance 11.8  -7.2  4.6  5.0 -0.8  -23.5 6.0  2.8 -8.5  -20.7 -2.5  17.3  -13.2  4. 1  0.0  4.1  83.4 58.5  -13.4 -12.0  70.0 46.5  -33.2 -36.3  36.8 10.2  -6.5  -2.5  -9.0  16.4  7.4  -5.5 -11.5  -27.8 -38.0  29.0 34.7  1.2 -3.3  -22.3 -26.5  .  S o u r c e : J a p a n , E c o n o m i c P l a n n i n g A g e n c y , Nenji Keizai Hokoku, 1976 (Tokyo: Economic P l a n n i n g Agency, 1976), p. 76; I M F ( I n t e r n a t i o n a l M o n e t a r y F u n d ) , Annual Report '75; , IMF Survey; OECD, Economic Outlook No.18. Note:  'Service'  includes  private transfer  payments.  83 TABLE CURRENT B A L A N C E S <  -15 OECD C O U N T R I E S - billion  1973 Whole year  By o i l cost increase from 1973 Japan -0.14 -13.00 U.S. 0.51 - 1 4 . 7 5 W.Germany -6.25 4.54 France -0.68 -6.25 U.K. -3.11 -5.25 Italy -2.42 -5.00 Total -1 .30 - 5 0 . 5 0 of above countries Total 2.50 - 5 9 . 0 0 OECD  1974 I  II  -4.1 0.5 5.4 -3.2 -4.7 -4.6 -10.7  -0.4 -1 .8 3.9 -2.8 -4.5 -3.3 -9.0  -4.5 -1 .2 9.3-6.0 -9.1 -7.9 -19.3  -16.8  17.5  -34.3  Whole year  US d o l l a r s 1975 Jan-Mar I  0.4 1 .5 2.3 -0.3 -0.7 0.2 3.4  -  0.5 3.5 4.5 -1 .3 -3.0 -1 .5 2.7  -7.0  S o u r c e : J a p a n , E c o n o m i c P l a n n i n g A g e n c y , Nenji Kei zai Hokoku, 1975 (Tokyo: Economic P l a n n i n g Agency, 1975), p. 65; OECD, Economic Outlook, December 1974; Bank o f E n g l a n d , Quarterly Bulletin, June 1975.  84 T A B L E 3-16 T O T A L F O R E I G N EXCHANGE R E S E R V E S OF MAJOR C O U N T R I E S AND OPEC C O U N T R I E S End  of Year  Industrial countries -Belgium -Canada -France -W.Germany -Italy -Japan -Netherlands -Switzerland -U.K. -U.S. TOTAL Percentage Change OPEC countries -Algeria -Ecuador -Indonesia -I ran -I raq -Kuwait -Libya -Nigeria -Oman -Qatar -Saudi Arabia - U n i t e d A.E. -Venezuela TOTAL Percentage Change  INDUSTRIAL  - b i l l i o n US d o l l a r s 1 973 1974 Total Of Total Of Total Of reserves which reserves which reserves which foreign foreign foreign exchange exchange exchange 1972  3.9 6.1 10.0 23.8 6.1 18.4 4.8 7.5 5.7 13.2 99.5  1.1 4.4 5.1 17.2 2.2 16.5 1 .4 4.3 4.1 0.2 56.5  -  5.1 5.8 • 8.6 33.1 6.4 12.2 6.6 8.1 6.5 14.4 106.8 7.1  2.0 3.9 3.7 25. 1 2.2 10.2 3.3 4.6 4.7 0.1 59.8 5.6  5.3 5.8 8.9 32.7 6.9 13.5 6.9 9.0 6.9 16.1 112.0 5.0  2.2 3.8 3.8 24.3 3.2 11.3 3.5 5.4 4.9 0.1 62.5 4.3  0.5 0.1 0.6 1 .0 0.8 0.4 2.9 0.4 0.2  0.2 0.1 0.5 0.8 0.6 0.2 2.8 0.3 0.2  1 .2 0.2 0.8 1 .2 1 .6 0.5 2.1 0.6 0.1  0.8 0.2 0.8 1 .0 1 .3 0.4 2.0 0.5 0.1  1 .7 0.4 1 .5 8.4 3.3 1 .4 3.6 5.6 0.2  1 .4 0.3 1 .4 7.7 3.0 0.9 3.5 5.5 0.2  2.5  2.3  3.9  3.7  -  -  -  -  -  -  14.3  -  13.4  -  -  -  -  -  —  1 .7 11.1  1. 1 9.1  2.4 14.5 30.6  1 .7 12.5 37.3  6.8 47.2 225.5  5.4 42.7 241 .6  -  -  S o u r c e : C a n a d a , M i n i s t r y o f F i n a n c e , Economic Review, 1975 (Ottawa: I n f o r m a t i o n Canada, 1975), p . 17;IMF, International Financial S t a t i s t i c s , F e b r u a r y , 1975.  C H A P T E R FOUR THE  B U S I N E S S A S P E C T S OF TO  In  Chapter  reaction of  the  to the  Two  the  1973  bureaucracy aspects  economic  efficiency the  1973  OIL  political  o i l crisis  was  economic  chapter  THE  were  reviewed  aspects  of  Japan's  were d i s c u s s e d and In Chapter  and  the  vulnerability  business  REACTION  CRISIS  emphasized.  and  Japanese  JAPAN'S  the  Three  the  relationship  between  investigated.  reaction  to the  role  In  crisis  this  is  discussed. As  p o i n t e d out  initiatives  taken  i n Chapter  by  the  responding  to the  successful  o n l y when t h e  cooperated  with other  that  most p o l i c y  implemented no the  legal  of the  but  and  these  business  of  by  the  political  organizations  expected In  business  p e r s p e c t i v e , the  chapter,  from  role  leaders  two  taken  were which  most  the  had  of policy  reaction  p e r s p e c t i v e s . From by  major  is investigated.  management e f f o r t s 85  and  remember  cooperation  i n implementing this  i s reviewed  p e r s p e c t i v e , the and  to  a d m i n i s t r a t i v e guidance  o i l crisis.  business  them  government  the  in  became  sector accepted  measures adopted  s e c t o r was  f o r the  politicians  sectors. I t i s important  form  strong  initiatives  binding character. Therefore,  Japanese  economic  t h e r e were  bureaucracy  crisis,  i n the  business  measures  Two,  economic From  undertaken  the in  86  companies a r e  1.  investigated.  T H E P O L I T I C A L R E A C T I O N OF J A P A N E S E B U S I N E S S TO T H E O I L CRISIS (l)Major  There which  take  sector.  Japanese  a r e four major a role  Organizations)  and than  1 0 5  ,  (Japan  o r g a n i z a t i o n s i n Japan  the opinions  Federation  supported  by more t h a n  800 c o r p o r a t e  centre  of the business  o f Economic  e s t a b l i s h e d i n 1946, i s t h e l e a d i n g  o r g a n i z a t i o n . I t i s independent  political the  1 0 5  Organizations  business  i n expressing  The K e i d a n r e n  economic  Business  t h e government  115 a s s o c i a t i o n members a n d m o r e  members. B e c a u s e  i n f l u e n c e , the Keidanren of Japanese  from  business,  o f i t s wide  coverage and  i s sometimes d e s c r i b e d as  and t h e chairman of  M c M i l l a n e x p l a i n s the o r g a n i z a t i o n as follows: "There i s no e q u i v a l e n t t o t h e K e i d a n r e n , although France's ' p a t r o n a t ' ( L a C o n f e d e r a t i o n Generale du Patronat F r a n c a i s ) and B r i t a i n ' s Confederation of B r i t i s h I n d u s t r y , f o u n d e d i n 1 9 6 5 , come c l o s e s t i n terms o f power a n d p r e s t i g e . However, t h e K e i d a n r e n o p e r a t e s w i t h a p a n e l o f 39 s t a n d i n g c o m m i t t e e s i n v o l v i n g t h e most s e n i o r e x e c u t i v e s o f m a j o r corporations-committees which do d e t a i l e d r e s e a r c h on i s s u e s r a n g i n g f r o m s m a l l b u s i n e s s a n d t a x a t i o n t o t e c h n o l o g y a n d i n d u s t r i a l p o l i c y . T h i s work i n v o l v e s an e x t e n s i v e and c o n s t a n t process o f c o n s u l t a t i o n a c r o s s companies, academe, o t h e r economic groups and, o f course, government. While the b a s i c ideology of t h e Keidanren i s essentially c o n s e r v a t i v e a n d f r e e e n t e r p r i s e , i t d e r i v e s much o f i t s s t r e n g t h from i t s understanding n o t j u s t o f t h e p r i v a t e s e c t o r b u t t h e government decision-making apparatus and Japan's r e l a t i v e economic and t e c h n o l o g i c a l s t a n d i n g as compared t o c o m p e t i t o r s " ( C h a r l e s J . M c M i l l a n , The Japanese Industrial System [ B e r l i n & New Y o r k : W a l t e r d e G r u y t e r , 1 9 8 5 ] , p . 5 7 ) .  87 Keidanren business  Nissho  industry.  medium  of l o c a l  I t evolved  1 0 7  associations  and v a r i o u s  i s a confederation  6  1 0 7  trade  interests in and  and l a b o u r  K e i z a i Doyukai  of Employers'  of r e g i o n a l  associations.  group concerned w i t h  working c o n d i t i o n s  1 0  with  Commerce  i n c l u d i n g those of s m a l l  (Japan F e d e r a t i o n  Association)  The  Industry)  "businesses.  Nikkeiren  specialized  and  from t h e T o k y o Chamber o f  economic p r o b l e m s  scale  The  or Japanese  chambers of commerce a n d  i n 1878 by s p e c i a l l e g i s l a t i o n  regional  o f zai kai  ( J a p a n Chamber o f Commerce  a confederation  founded  the prime m i n i s t e r  society.  The is  i s called  employers'  It is a  t h e p r o b l e m s o f wages,  management  ( J a p a n Committee  relations. f o r Economic  M c M i l i a n e x p l a i n s the o r g a n i z a t i o n as f o l l o w s : "The JCCI has t r a d i t i o n a l l y r e p r e s e n t e d small b u s i n e s s , but t h e o r g a n i z a t i o n f e l l on h a r d t i m e s a f t e r t h e War when t h e P r e s i d e n t , F u j i y a m a A i i c h i r o , became a v i c t i m o f t h e O c c u p a t i o n ' s e x e c u t i v e p u r g e . W h i l e r e i n s t a t e d i n 1950, F u j i y a m a was u n a b l e t o b r i n g a b o u t a r e o r g a n i z a t i o n o f t h e J C C I , and i t was not u n t i l a s u c c e s s o r , Nagano S h i g e o , t o o k o v e r as s u c c e s s o r i n 1970 t h a t t h e s m a l l b u s i n e s s o r g a n i z a t i o n began t o g a t h e r s t r e n g t h a n d g a i n i n f l u e n c e i n b o t h b u s i n e s s a n d government c i r c l e s " {Ibid., pp. 5 8 - 5 9 ) . M c M i l l a n e x p l a i n s as f o l l o w s : " I n a d d i t i o n t o t h e wage g u i d e l i n e f u n c t i o n , N i k k e i r e n c o n d u c t e d a p u b l i c r e l a t i o n s campaign a g a i n s t the l e f t l e a n i n g p r e s s , but i t i s not c l e a r t h a t t h i s f u n c t i o n had much s u c c e s s when compared t o t h e impact o f r i s i n g p r o s p e r i t y and b e t t e r wages on the p u b l i c ' s a t t i t u d e towards s o c i a l i s m or f r e e e n t e r p r i s e . A more s u c c e s s f u l r o l e f o r N i k k e i r e n has been an e d u c a t i o n a l one: t r a i n i n g young e x e c u t i v e s t h r o u g h i t s own o f f i c e s a n d o f f e r i n g on t h e j o b t r a i n i n g f o r foremen f o r t h e 29,000 member c o m p a n i e s and 54 i n d u s t r y a s s o c i a t i o n s " {Ibid., p. 5 8 ) .  1 0 6  88 Development) join to  as i n d i v i d u a l s .  provide  out  i s an o r g a n i z a t i o n  1 0 8  business  freely  (2) In  sector  government  tried  policy.  In that  strengthening Development  issues.  Leaders  the Japanese  a consensus and t o i n f l u e n c e  one y e a r  Corporation  before  on J a p a n e s e  the Keidanren  and emphasized  the importance of  and H i r o k i visited  On N o v e m b e r 1 4 ,  Kogoro Uemura, Chairman o f  T o s h i o Doko, V i c e - C h a i m a n  Matsune, Chairman  of the Keidanren,  of t h e Energy Committee  Imazato,  President  Prime M i n i s t e r  pro-Arab p o l i c i e s .  1  0  9  on  Petroleum  OPEC c o u n t r i e s .  the c r i s i s ,  energy  insisted  of t h e Japan  with  theo i l  Tanaka  of the  of Kaigai  Sekiyu  and requested  that  On t h e f o l l o w i n g d a y ,  McMillan explains as follows: " I t s most famous d e c l a r a t i o n was a p r i n c i p l e t h a t the business o r g a n i z a t i o n c o n s i s t e d of three equal stakeholders—management, labour, and s h a r e h o l d e r s — a n d t h a t t h e supreme d e c i s i o n - m a k i n g body s h o u l d c o n s i s t o f a c o u n c i l r e p r e s e n t i n g these t h r e e g r o u p s . W h i l e t h i s d e c l a r a t i o n was w i d e l y denounced and l a t e r s h e l v e d , i t gave t h e organization a reputation f o rconciliation i n management-labour m a t t e r s , a r e p u t a t i o n i n c o n t r a s t t o t h e a n t i - l a b o u r , f i g h t i n g N i k k e i r e n " {Ibid., p. 5 8 ) . Ninon Keizai Shinbun, 15 N o v e m b e r , 1 9 7 3 .  1 0 8  y09  statement  the function  Keidanren,  adopt  t o meet a n d speak  and s o c i a l  made a s t a t e m e n t  one month a f t e r  Kaihatsu, he  t o reach  o i l transactions  Keidanren,  a place  Taken by Japanese B u s i n e s s  1972, a l m o s t  Keidanren  Soichi  economic  who  policies.  crisis,  the  with  leaders  of the o r g a n i z a t i o n i s  t o t h e 1973 o i l c r i s i s ,  In December  1973,  leaders  The A c t i o n s  business  direct  The main p u r p o s e  on v a r i o u s  response  f o rbusiness  89 K a z u t a k a K i g a w a t a and meeting with LDP,  and  Doyukai  other  officials  representatives a  r e p r e s e n t a t i v e s had  Tomisaburo Hashimoto, D i r e c t o r General  other  proclaim  Doyukai  s t a t e of  of  the  p a r t y . At  insisted  emergency  that  the  the  government  to  facilitate  in order  visited and  18,  Sohei  Taizo  explained  East.  Mizuno, P r e s i d e n t  the  Following  serious  business with  In  the  response  s e c t o r , the  related  the  government  to  called  from the  in d e a l i n g with  lobbying  industrial  by  activities  u s u a l l y represent s e c t o r . In J a p a n of Japanese  maintaining  the  development  of  the  meeting and  cooperate  leaders  actions  of  the  could  different  States  where  of a company or  leaders they  the  processes  United  interests  i n d u s t r y , and  the  o i l crisis.  a c t i o n s were  business  Middle  from  they  sense t h e i r  i n the the  the  organizations  decision-making in this  Keidanren,  to hold a  that the  Ltd.,  the  a c t i o n s Japanese business  i n f l u e n c e the  the  approaches  l o b b y i n g . However, t h e s e  lobbyists  interests  to e x p l a i n  to these  On  1 1 0  Mizuno v i s i t e d  f r o m major b u s i n e s s  J a p a n e s e g o v e r n m e n t , and be  meeting  i n d u s t r i e s to request  Through these intended  suggestion  a  O i l Co.  concerning  government d e c i d e d  representatives  energy with  1 1 1  situation  Ishizaka's  prime m i n i s t e r a f t e r situation.  of A r a b i a  I s h i z a k a , H o n o r a r y C h a i r m a n of  the  meeting  n a t i o n - w i d e movement t o w a r d e n e r g y c o n s e r v a t i o n . November  of  a  represented  tried  Japanese  an the  to protect i t economy.  Asahi Nenkan, 1974 ( T o k y o : A s a h i S h i n b u n s h a ) , p. 393. " S e k i y u Kiki ni Tsuyoshinakatta Z a i k a i no Maedareshiki G a i k o " , Shukan Toyo Keizai, New S p r i n g E d i t i o n , 1974, p. 39. 110  1 1 1  90 On fourth  t h eother Middle  customers  Even  some p e o p l e  Chairman  stop  were  October,  said,  Association  t o s i x months t o r e t u r n  situation  even  though  of  Kyushu E l e c t r i c  the  price  1973,  increase further  from  Kiyoshi  Power C o . I n c . ,  we e x p e c t e d .  electricity  severe  Hirotaka  rates  said,  leaders  t o have been o v e r l y  shows t h a t  specialists  President  "We e x p e c t e d  increase  that  was much  t o decide t o  i s no room  sector  understanding  for  explained  and support p e o p l e now  optimistic considering the occurred  after that  underestimated  time.  the influence  " C h u t o Senso de D e n r y o k u Neage Tsuyomaru" Keizai, 3 November, 1973, p . 4 0 . /6/rf. /&/d., p. 40. 1 1 < l  of  d o l l a r s i n 1972 o r  i n t h eenergy  situation t o obtain  incidents which  1 1 3  A t t h e same  1 1 3  theprospects  we h a v e  there  will  1 1 1 1  historical  1 1 2  "It  t o t h e normal  thep r i c e  since  States  Mitsuda,  said,  t h e p u b l i c . However, t h e comments o f t h e s e  appear  doubtful  Kawarabayashi,  five  Therefore,  rationalization."  These b u s i n e s s the  rates.  o f o i l would be a r o u n d  than  1 1 2  companies explained  b u t we c a m e t o know t h a t  larger  " I t i ss t i l l  t h e war i s s u s p e n d e d . "  most e l e c t r i c i t y electricity  Takiguchi,  of Japan,  four  raising  r e l i e v e d when t h e  t h e o i l embargo t o t h e U n i t e d  from  time,  theo i l shortage  Takeo  restraint strategies."  of Petroleum  by t h e  o i l suppliers and their  of Nihon O i l Co. L t d . ,  production  take  t h e " o i l war" caused  concerns about  i nlate  w h e t h e r OAPEC w i l l and  their  though  was s u s p e n d e d  President  facing  E a s t War, major  expressed  situation. war  hand,  Shukan  This of the Toyo  91 1973  o i l crisis. In Chapter  government deal  with  existed  Two, i t was p o i n t e d  there  This  i n thebusiness  faction  Industrial of  included  Corporation. natural a  priority.  concerned strong  Mitsubishi  with Heavy  t o solve  States  maintains  the  with  of Japan  emphasized  also  Industry  Kaihatsu,  Matsune  o f MITI, and  Petroleum  on making  States.  said,  Development  their  stable  supply  stance  based  "Japan  will  lose i t s  our basic face.  diplomatic  Since  o i l s t r a t e g y , Japan  States."  Doyukai,  on t h e  Bunzo Kohno o f  i f we c h a n g e  i t s powerful  and Yoshizane  o f Japan  t h e importance of  p r o b l e m s we p r e s e n t l y  theUnited  faction).  w a s a l s o a g r o u p who w e r e  theUnited  of theKeizai  Nissho,  Sekiyu  thediplomatic  i ndiplomacy  stance  how t o  (resource  Morozumi, Adviser  and i n s i s t e d  changing  ha  Nakayama, A d v i s e r  President  However, t h e r e  credibility  Kigawada  Sohei  These people  with  ties  cooperate  shi gen  Yoshihiko  resources  about  s e c t o r . There was, f o r example, a  Bank, Imazato o f K a i g a i  Shimada,  i n the  Such d i f f e r e n c e s o f o p i n i o n  zaikai  called  t h eKeidanren,  Yoshihito  even  were d i f f e r e n c e s o f o p i n i o n  theo i l crisis.  group of people  out that  1 1 5  This  group  the United should involved  S h i g e o Nagano, Chairman o f  Iwasa, Vice-Chairman  of  the  Keidanren. In sector  spite  of such d i f f e r e n c e s of o p i n i o n ,  actively  establishment  tried  a c o n s e n s u s . The  o f t h e E n e r g y D e v e l o p m e n t C o m m i t t e e was one o f  t ? / 7 . c i t . , Shukan pp. 38-42 1 1 5  t o reach  the business  Toyo  Keizai,  New S p r i n g  E d i t i o n , 1974,  92 such  attempt.  The committee  the  chairmanship  its  activities  developing  was f i n a l l y  established  o f Nakayama on November  2 1 , 1973,  under a n d began  by g a t h e r i n g e n e r g y - r e l a t e d i n f o r m a t i o n ,  national  projects  and exchanging  views  with the  government. Another  concern  over-intervention recovering Mondai  from  of the business sector  o f t h e government  thecrisis.  political  issues,  November  21. There  Sanken  of businessmen  presented were  i n theprocess of  For instance,  Kenkyu K a i ) , a group  i t s statement  t h r e e major  c e n t r e d on t h e  (Sangyo  discussing  to thepublic  a  statement  positive  but  also  stance  was a n o t h e r  i t s basic  budget  the moderation Asahi 393.  over-intervention  view  I n i t s statement  national  116  thebusiness sector  problem  had t o pay a t t e n t i o n .  announced law.  that  not only t o cooperate  t o prevent  Inflation sector  implied  Nenkan,  1974  (Tokyo:  the business  of the corporate  insisted giving  On D e c e m b e r Asahi  take  1 the Keidanren  on t h e amendment  of i n f l a t i o n .  should  w i t h t h e government  t o which  s h o u l d be e s t a b l i s h e d  1 1 6  by t h e government.  On O c t o b e r  theKeidanren  on  p o i n t s i n t h e statement:  1. M a j o r o i l c o n s u m i n g i n d u s t r i e s s h o u l d s u p p o r t p o l i c y measures a d o p t e d by t h e government a n d p r e p a r e h o r i z o n t a l l y c o o p e r a t i v e c o n d i t i o n s among the i n d u s t r i e s . 2. I n c a s e t h e r e e x i s t s a n y d o u b t o f v i o l a t i n g anti-monopoly law i n the process of v o l u n t a r y adjustment i n the business sector, the r e l a t e d ministries should discuss better solutions. 3. T h e b u s i n e s s s e c t o r s h o u l d s h a r e s o c i a l r e s p o n s i b i l i t y t o solve problems caused i n t h e process of dealing with the o i l shortage problem. This  mainly  that  the  1974  toppriority t o  10 K e i d a n r e n  Shinbunsha,  1974), p.  93 leaders  had  a meeting  succeeded A i c h i . on  moderating  As  an  the  approach dealt  of  issues  the time  Nikkeiren was  management  expect  they  to  acted  Thirdly, economy  wage  to  to  on  stop  this  increases. taken  by  build  view  was  the  major  prevent  May  20%. sector  is in  charge  25,  1973,  i n f l a t i o n at  against  that  Nikkeiren increases  labour  insisted  business  On  the  who  around  i n f l a t i o n was  the  price  a  of  the  the  temporary  urged as  unions  much not  as to  1 1 7  Japanese  business  what t h e y  can  represented  government  a consensus  declared  to  Nikkeiren  that  f o l l o w s . F i r s t , they the  increase  (The  out  view,  four  leaders  previously.)  that  commodity  influence  they  This  insisted  wage  to  issues.  pointed  requested  as  Keidanren  i n f l a t i o n , the  explained  already  actions  summarized industry  as  Based  and  high  The  with  which  adjustment.  meeting  a g g r e g a t e demand  a v i c i o u s one.  government  possible  the  Finance M i n i s t e r Fukuda  to moderating  actively these  At  with  policies.  i n the had  over-intervention  business  t o do by  the  for  be Japanese Secondly, sector. the  Japanese  government.  94 2.  THE ECONOMIC R E A C T I O N OF J A P A N E S E B U S I N E S S TO THE O I L CRISIS  (1)  The Reduction of Production  The  role  of Japanese  section  i s mainly  business  leaders  aspect  business  concentrated  discussed  on t h e p a r t i c i p a t i o n o f  i n the policy-making  of the role  taken  made b y m a n a g e m e n t a n d l a b o u r  recover  from  crisis,  by d e c r e a s i n g  enabled  Agency  decrease  business  inflation  production.  fixed  production inflation  cost  will  after  cost  d i dnot increase  production  These Planning Planning author). 1 1 B  by i n f l a t i o n  production. out three  t o decrease  increase  after  theo i l  The Economic elements  which  production.  1 1 8  f o rcompanies t o that  theper  i f a company  decreases  r e c e s s i o n . However,  since the  contributed  and d e p r e c i a t i o n c o s t s ,  t o the decrease i n the per unit  s o m u c h . On t h e c o n t r a r y ,  including the material cost  production  involves the  i n companies t o  I t i s generally expected  the c r i s i s  financial  if  sector  generally dealt with the  made i t e a s i e r  i n economic  both  costs  their  (EPA) p o i n t s  or forced  First,  unit  business  r e c e s s i o n , accompanied  Planning  Another  t h e 1973 o i l c r i s i s .  1974 J a p a n e s e  economic  process.  by t h e b u s i n e s s  efforts  In  i n the previous  increased.  were e x p e c t e d  Threrefore,  was p o s s i b l e a n d  fixed  variable to increase  the decrease i n  inevitable.  t h r e e p o i n t s a r e e x p l a i n e d i n Japan, Economic A g e n c y . Nenji Keizai Houkoku, 1975 (Tokyo: Economic A g e n c y , p p . 8-11 ( S u m m a r y t r a n s l a t i o n b y t h e  95 Secondly,  the  profits  enabled  rate  internal  of  manufacturing 1974  partly  inflation. profit years  due  their  gradually  to t o t a l  increased  to the  the  a part  of  so  stabilize  the  price  Business  the  the  i n 1965  to  stock  low  caused the  the  internal  to maintain necessary  the  production. in  to maintain  Even  increased during  of  their  i t was  production.  capital  a v e r a g e of  companies t r i e d and  their  f r o m 9%  expansion  sales at  companies m a i n t a i n e d  (2)  to decrease  reserves  spending  products,  increase  l a r g e amount of u n d i s t r i b u t e d  Companies were a b l e  Thirdly, their  companies  sector  to t o t a l by  relatively  13% by  rate  in  the of  previous  10  reserves. the  price  level  f o r them not  though t o t a l  of  to  demand  J a n u a r y - M a r c h p e r i o d of  level  The  of p r o d u c t i o n  1974,  to  level.  Reactions  i n the  Changing  Industrial  Structure In t h e  general  trend  of  reducing  production,  mechanism worked w i t h i n  the m a n u f a c t u r i n g  explains  In t h e  as  processing increase  follows.  1 1 9  c o m p a n i e s were not  i n m a t e r i a l s to the  competitive able  price  Therefore,  i t became n e c e s s a r y  production  f a c t o r s such as c a p i t a l ,  fuels  to  sector.  of  market,  their  price  products. recombine  labour, a  market  Tsuruta  t o t r a n s f e r a l l the  f o r them t o  i n c r e a s e p r o d u c t i v i t y . As  the  result,  materials in  and  the  T h e f o l l o w i n g i s t h e a u t h o r ' s summary t r a n s l a t i o n of T s u r u t a ' s e x p l a n a t i o n i n T o s h i m a s a T s u r u t a , Sengo Nihon no Sangyo Seisaku ( T o k y o : N i h o n K e i z a i S h i n b u n s h a , 1982), pp. 247-250. 1 1 9  96 processing the  total  Table  companies,  the ratio  production  factor  4-1. The d e c r e a s e  possible  by i m p r o v i n g  technologies result,  increased  after  On t h e o t h e r  the  for  productivity  hand, t h e decrease  As p o i n t e d  tools.  a s shown  i n the cost  As a  of  i m p a c t s on The  i n t h e demand  out i n Chapter  phenomenon a c c e l e r a t e d t h e change  intermediate  market.  the decrease  industry  i n T a b l e 4-2.  imposed  industry and the labour  products.  Such  of the processing  i n productivity  i n d u s t r y s u f f e r e d from  their  i n p u t s w a s made  technologies.  t h e 1973 o i l c r i s i s ,  raw m a t e r i a l  material  of intermediate  r o b o t i c s and machine  inputs and the increase  inputs i n  i n p u t s d e c r e a s e d , a s shown i n  production  included  the labour  of intermediate  Three,  this  i n the industrial  structure. The about in  1 9 7 4 w a s 1.8% a n d l o w e r the United  Economic  which  productivity  caused  labour  that  (3.4%)  t o keep  rate  of t h e United  a n d West Germany  Agency p o i n t e d  out three  i t s unemployment  since the lifetime  by l a r g e companies  force caused  adjusted  than  concern i n Japan States (5.1%).  elements  rate  lower  first  employment  i n Japan,  by t h e d e c r e a s e  by t h e r e s t r i c t i o n  system  was  the decrease  i n production  adopted  i n the was  o f o v e r t i m e work a n d  J a p a n , E c o n o m i c P l a n n i n g A g e n c y . Nenji Keizai Hokoku (Tokyo: Economic P l a n n i n g A g e n c y , 1975), p p . 12-14. 1 2 0  than  1 2 0  First, least  Kingdom  Planning  enabled Japan  others.  at  i n labour  unemployment. However, t h e unemployment  (9.2%), The  increase  97 salary  cuts,  1  2  a n d then by t h e c o n t r o l  1  of marginal  e m p l o y m e n t a n d s u s p e n s i o n o f new r e c r u i t m e n t . of  companies  were  of  employment a d j u s t m e n t ,  implemented  suggested  Secondly, for  companies  the  payment  of  spent  t o prevent  10.2 b i l l i o n  t o support  decreased.  I t covered  companies.  a t home. T h o s e  female  I t i s reported  caused  this  fund. As a  US d o l l a r s )  was  rate  of female  many  f o r females  female  workers  employees  workers  decreased decided  who g a v e u p g e t t i n g  a  as unemployed.  r e c o v e r y from  to theefforts  two-thirds  absentees.  recession,  were n o t c a l c u l a t e d  friction  50 m i l l i o n  Since the j o bopportunities  Japan's due  scale  f u n d was a v a i l a b l e  The f u n d c o v e r e d h a l f o f  absentees.  t h e unemployment  t o t h e economic stay  job  adjustment  yen (about  temporary  kinds  or lay-off.  lay-off.  a n d medium  certain  7% o f t h e c o m p a n i e s  retirement  f o r temporary  Thirdly,  to  only  implemented  12,776 b u s i n e s s e s t a b l i s h m e n t s u t i l i z e d  result,  due  t o have  t h e employment  i tf o r small  that  reported  Though 74%  1 2 2  t h e 1973 o i l c r i s i s  was  largely  o f m a n a g e m e n t a n d l a b o u r who r e d u c e d t h e  by changes  i n the industrial  structure.  1 2 3  4 3 . 4 % o f companies i n t h e m a n u f a c t u r i n g s e c t o r were r e p o r t e d t o have i m p l e m e n t e d t h e r e d u c t i o n o f o v e r t i m e work a n d 2 6 . 1 % o f t h e m i m p l e m e n t e d a s a l a r y c u t s . Asahi Nenkan, 1976 ( T o k y o : A s a h i S h i n b u n s h a , 1 9 7 6 ) , p . 5 3 3 . T h e r a t i o o f l a b o u r demand t o l a b o u r s u p p l y d e c r e a s e d f r o m 1.92 i n N o v e m b e r 1 9 7 3 t o 0 . 9 6 i n O c t o b e r 1 9 7 4 a n d 0.53 i n O c t o b e r 1 9 7 5 . Ibid. I t i s s o m e t i m e s a r g u e d t h a t t h e J a p a n e s e management system i sa p p l i e d only t o l a r g e s c a l e companies i n Japan's d u a l economic s t r u c t u r e and does n o t e x p l a i n t h e performance of t h e J a p a n e s e economy. I n d e e d , i t i s s m a l l a n d medium s i z e d companies w i t h o u t t h e l i f e t i m e employment system which have o f t e n a b s o r b e d t h e shock o f economic c h a n g e s . The e c o n o m i c p e r f o r m a n c e o f J a p a n e s e i n d u s t r y m i g h t be 1 2 1  1 2 2  1  2  3  98  3.  THE  C H A R A C T E R I S T I C S OF  THE  OIL  As  reaction  actions.  was  economic  the  change  the  order  existence  the  both  zai  Managing D i r e c t o r  hand,  the  i n Japan  of  i n the This the  micro  political t o pay  through  reaction  industrial  o i l crisis.  i n macro and  i n f l u e n c e d the  business  element  characteristics  i n Japan. of  the  Japanese  i t i s important  kai  business  o i l crisis  major  1973  to understand  business, of  i n the  as  major  1973  other  to the  business  Japanese  the  recognized  investigates  In  to the  On  reaction  Japanese  TO  CRISIS  accelerated which  JAPANESE BUSINESS REACTION  a l r e a d y d i s c u s s e d , Japanese  political various  THE  structure Japanese  section role  taken  terms. i n f l u e n c e of attention  to  Masaya M i y o s h i ,  Senior  e x p l a i n s zai  as  Keidanren,  by  kai  the  follows:  1. Zai kai e x i s t s i n no o t h e r c o u n t r y b e s i d e s J a p a n . 2. T h e l i t e r a l t r a n s l a t i o n o f zai kai is "financial c l i q u e " , b u t i t h a s a much b r o a d e r m e a n i n g ; "business world's statesmen". 3. Zai kai i s not a c o h e r e n t group but a l o o s e group for the i n f o r m a l e l i t e c o o r d i n a t i o n . 4. Zai kai i s c o m p o s e d o f a few h u n d r e d b u s i n e s s p o w e r e l i t e s who o c c u p y t h e l e a d i n g r o l e s i n t h e four major business o r g a n i z a t i o n s . 5. E l d e r b u s i n e s s s t a t e s m e n who m a k e u p zai kai have no c o u n t e r p a r t i n o t h e r c o u n t r i e s b e c a u s e o f t h e e x t r a o r d i n a r y amount o f t i m e t h e y d e v o t e t o p u b l i c l e a d e r s h i p n o t r e l a t e d t o t h e i r own companies. ( c o n t ' d ) a t t r i b u t e d t o t h e s e v e r e c o m p e t i t i o n among t h o s e s m a l l and medium s i z e d c o m p a n i e s . However, c o n c e r n i n g t h e 1973 o i l c r i s i s , l a r g e s c a l e c o m p a n i e s w e r e i n v o l v e d m o r e h e a v i l y i n employment a d j u s t m e n t t h a n s m a l l and medium s i z e d c o m p a n i e s , a s shown i n T a b l e 4-3. J a p a n ' s r e c o v e r y f r o m t h e o i l c r i s i s c a n n o t be e x p l a i n e d b y o n e e l e m e n t , b u t t h e employment adjustment measures under the l i f e t i m e employment system were d i s t i n c t i v e t o the Japanese r e c o v e r y . 1 2 3  99 a . F o r example, Mr. Inayama, C h a i r m a n o f K e i d a n r e n and H o n o r a r y C h a i r m a n of N i p p o n S t e e l , s p e n d s 80-90% of h i s t i m e a t K e i d a n r e n . b. Most V i c e - C h a i r m e n o f K e i d a n r e n spend 20-30% of t h e i r t i m e a t K e i d a n r e n and o t h e r b u s i n e s s organizations. c . Many Committee C h a i r m e n o f K e i d a n r e n a l s o spend 20-30% o f t h e i r t i m e a t K e i d a n r e n and o t h e r organizations. d. T h i s i s a s t a r k c o n t r a s t t o b u s i n e s s l e a d e r s i n o t h e r c o u n t r i e s who g e n e r a l l y d e v o t e l e s s t h a n 10% o f t h e i r t i m e t o p u b l i c l e a d e r s h i p w h i c h i s not r e l a t e d to t h e i r companies. 6. The b a c k g r o u n d and l i f e s t y l e o f zaikai-jin (zaikai p e o p l e ) i s not so d i f f e r e n t from t h e m a n - o n - t h e - s t r e e t . The v a s t m a j o r i t y a r e t e c h n o c r a t s , t h o s e who a r e f r o m o r d i n a r y f a m i l i e s , t h o s e who have a modest l i f e s t y l e and s a l a r y , and t h o s e who a r e h a r d w o r k i n g , s o b e r , c o n s c i e n t i o u s and a c u t e l y aware of t h e i r p u b l i c l e a d e r s h i p responsibilities. 7. The p u r p o s e o f zaikai i s to r e p r e s e n t the i n t e r e s t s of b u s i n e s s v i s - a - v i s the government, the p u b l i c and i n t h e i n t e r n a t i o n a l a r e n a . a . Zaikai r e p r e s e n t s g r e a t economic power and possesses considerable p o l i t i c a l influence (sometimes by means of p o l i t i c a l f u n d i n g ) . b. Zaikai d e s e r v e s much o f t h e c r e d i t f o r t h e p o s t - w a r emergence of t h e J a p a n e s e economy. 8. Zaikai c o n t i n u e s t o be i n f l u e n t i a l b e c a u s e o f i t s g r e a t a c c o m p l i s h m e n t s and b e c a u s e t h e J a p a n e s e p e o p l e c o n t i n u e t o have c o n f i d e n c e i n i t . a. Japanese p e o p l e r e c o g n i z e t h a t the b u s i n e s s s e c t o r has been t h e p r i m a r y e n g i n e of economic g r o w t h and has p l a y e d a m a j o r r o l e i n s h a p i n g J a p a n ' s economy. b. J a p a n e s e p e o p l e have c o n f i d e n c e i n and g r e a t e x p e c t a t i o n s f o r zaikai b e c a u s e i t c o n t i n u e s t o be i n f l u e n t i a l i n harmoniously amalgamating p o p u l a r o p i n i o n w i t h p u b l i c o p i n i o n , and p u b l i c o p i n i o n w i t h l e a d e r s h i p o p i n i o n . In so d o i n g , zaikai is i n s t r u m e n t a l i n a t t a i n i n g the g o a l s of a mature d e m o c r a t i c s o c i e t y , w h i c h , t o borrow from t h e F r e n c h p h r a s e , a r e : l i b e r t e , e q u a l i t e , and fraternite. 1 2 0  As of  social  business  1 2  shown i n M i y o s h i ' s e x p l a n a t i o n o f zaikai,  "This  responsibility society.  summary  For  i s emphasized  i n the  i n s t a n c e , on December  i s quoted  the  sense  Japanese  28,  from M i y o s h i ' s s p e e c h  1973,  draft.  then  100 MITI M i n i s t e r four  major  Nakasone  requested the representatives  business organizations  responsibility  to restrain  side  to this  responded  social price  responsibility increase  possible. business  Statesmen"  i s seen  relationship  kinds  The  power  costs  between  and Rosovsky  World's  explain  benefits  Two, shows t h e u n i q u e  (see note  business with from v a r i o u s  t o m a i n t a i n a good To do t h i s ,  bureaucrats,  4 6 , p a g e 2 5 ) , many  s u g g e s t e d by t h e  Keizai  benefits  or imposing  such as t h e a u t h o r i t y  t o grant  T h e r e f o r e , i ti s importantf o r relationship  companies  often  with the  recruit  retired  c h a n n e l between t h e  government.  Shinbun,  guidance.  kinds of authorities  who w o r k a s a c o m m u n i c a t i o n  company a n d t h e  to the  and business i n Japan.  and costs  and c e r t i f i c a t i o n .  social  relationship.  i n d u c e b u s i n e s s t o obey a d m i n i s t r a t i v e  government.  Nihon  i n Japanese  i n response  i n Chapter  by t h e government,  a company  as  was one o f t h e p o l i c y  t h e government  on i t i s d e r i v e d  permission  }25  as reviewed  of providing  possessed  effort  of t h e Japanese  o u t by t h e government  of potential  government  i t was t h e  t o absorb the  of "Business  characteristic  guidance, which  o i lcrisis  Patrick  The b u s i n e s s ,  responsibility  i n the government-business  measures c a r r i e d  As  of s o c i a l  to" t h e concept  unique  Administrative  1973  rationalization  social  i n Miyoshi's explanation.  Another system  increase.  of the business sector  b y a s much  i srelated  the price  their  r e q u e s t by e x p r e s s i n g t h a t  The sense  1 2 5  t o implement  ofthe  29 D e c e m b e r , 1 9 7 3 .  101 zai  The  kai  activities  c a n be i n t e r p r e t e d a s a n  form o f p a r t i c i p a t i o n by Japanese  business  implementation  of government  administrative  g u i d a n c e , on t h e o t h e r  recognized  as a passive  relationship kai  between  by  zai  to  the flexible  policies.  activities  i n the  The a c c e p t a n c e o f hand,  c a n be  form o f p a r t i c i p a t i o n . The  t h e government  and b u s i n e s s  and a d m i n i s t r a t i v e  reaction  of Japan  active  close  symbolized  guidance  contributed  t o t h e 1973 o i l c r i s i s .  However, t h e unique government-business r e l a t i o n s h i p does  not explain  recovery  the basic  from the c r i s i s .  explained  crisis. strong  I I . Through  movements  i n t h e 1960's,  Japanese  kinds  measure  1 2 6  a u t h o r i t i e s . On  increased  Japanese  each  government  government  took  process after liberalization gradually  enforced  the other  i t s international over-intervention  industry  This  after the  t h e government  Indeed, t h e government  to protect  by  p o w e r w h i c h was m a i n l y  p o w e r a n d came t o w o r r y a b o u t government.  recovery  and c a p i t a l  however,  of approval  industry  i s still  mechanism.  the Japanese  the trade  i t sadministrative  various  feature  performance  i n t h e economic  W o r l d War  lost  that  economic  o f how m u c h t h e  economic  i s no d o u b t  initiative  that  f o l l o w i n g t h e market  t o Japanese  There  of Japan's  e f f o r t s made  i s related to the question  contributed  a  Indeed,  by t h e r a t i o n a l i z a t i o n  company and i n d u s t r y point  feature  by  hand,  competitive by t h e  h a d no e f f e c t i v e f r o m t h e 1973 o i l  M I T I emphasized t h e importance of t h e market mechanism i n economic a c t i v i t i e s i n t h e i r v i s i o n f o r t h e Japanese i n d u s t r i a l s t r u c t u r e announced i n 1974. 1 2 6  1  crisis,  and  the s t r u c t u r a l  facilitated  by  intervention to  the market  by  change force.  the government  the governmnt and  effective The  division Japanese  of  In t h i s  The  between  also  r e c o v e r y from the o i l c r i s i s .  elements  which  characteristics the  lifetime  employees'  Chapter  employment  that  system,  to their  these elements  Three,  employees  major  Japanese  still  paid  by  There  the  instance,  effective  in increasing  production.  The  temporary  transfer  under  because the  employees  lifetime  expected  that  economic  situation  interpreted employees.  as  they could  an  of  and  come b a c k  improved.  Such  to their  expectation  that  maintaining  i t . The  loyalty  they w i l l  Japan's  as  noted  and  was  loyalty  i s only  to  in sent These  companies,  but  suspending  possible  system.  employed It  was  company when  a t t i t u d e s can  a s p e c t of company  However, the  difficult  t h e y were  seniority  are  and  to  sales  labor  understood that  employment  They  retailers.  original  was  the  three  e l e c t r o n i c s companies to their  to  system  I t i s not  contributed  their  about  major  seniority  policy  partly  are  management s y s t e m .  For  f a c t o r y employees  were  brought  contributed  out as  company.  from the o i l c r i s i s .  some o f t h e i r  this  the Japanese  loyalty  demonstrate recovery  of  industry  them.  Japanese  pointed  of  unique r e l a t i o n s h i p  management s y s t e m  are usually  was  the lack  Japanese  b u s i n e s s i n Japan  labour  industry  sense,  encouraged  r e c o v e r from the o i l c r i s i s .  between  i n Japanese  02  on  the  be the part  maintained with  of the  eventually  obtain  benefits  by  labour-management  system  i n Japan  should  1 03 be  interpreted  labour.  the  the concept of s o c i a l  the unique  business  beneficial  relationship  are also  particular  the result  geographical  o f more  Historically, homogeneous have,  at  the Japanese  f o r more  sometimes  which  a time of  than  leads  and  system based  and h i s t o r i a c l c o n d i t i o n s  homogeneous  identity  and  of business  t h e government  o f an e c o n o m i c  Japan  population  responsibility  between  Japan. Geographically,  people  t o management  1 2 7  Both and  as mutually  i s an i s l a n d than  100  population 1,000  years.  potentially,  to a strong  country  with  on  of a  million.  remained  nearly  As a r e s u l t ,  a strong  Japanese  national  sense of n a t i o n a l  unity  1  2  8  crisis.  I n t h i s r e s p e c t , t h e a u t h o r does not agree w i t h t h e e x p l a n a t i o n t h a t Japanese employees have a s t r o n g e r sense o f l o y a l t y t o t h e i r company t h a n W e s t e r n e r s do. J a p a n e s e employees work h a r d f o r t h e i r company m a i n l y b e c a u s e t h e y b e l i e v e t h a t i t i s t h e b e s t ( o r t h e o n l y ) way t o i n c r e a s e t h e i r own b e n e f i t s . T h e d i f f e r e n c e i s s e e n i n t h e s y s t e m r a t h e r than i n t h e i r sense of l o y a l t y . T h e d e f e a t i n W o r l d War I I s e e m e d t o s t r e n g t h e n t h e s e n s e of n a t i o n a l u n i t y i n J a p a n b e c a u s e J a p a n e s e p e o p l e had t o work t o g e t h e r i n o r d e r t o r e c o n s t r u c t t h e J a p a n e s e economy. 1  2  7  1 2 8  1 04 4.  TABLES  T A B L E 4-1 CHANGES I N I N T E R M E D I A T E  Nominal -Total intermediate inputs -Value added -Employer's  income  -GDP Real -Total indermediate inputs -Employer's income -GDP  Seisaku  I N P U T S I N THE  PROCESSING INDUSTRY  - b i l l i o n y e n , ( s h a r e , % ) , 1975 b a s i s 1970 1975 1978  -  15,884 (64.3) 8,799 (35.6) 4,068 (16.5) 24,684 (100.0)  25,725 ( 6 3 . 1) 15,039 (36.9) 8,070 (19.8) 40,763 (100.0)  37,471 (64.6) 20,550 (35.4) 11,545 (19.9) 58,021 (100.0)  24,661 (75.9) 9,309 (28.7) 32,479 (100.0)  25,725 ( 6 3 . 1) 8,070 (19.8) 40,763 (100.0)  35,995 (61.4) 8,943 (15.3) 58,489 (100.0)  S o u r c e : T o s h i m a s a T s u r u t a , Sengo Ni hon no (Tokyo: Nihon K e i z a i Shinbunsha, 1982),  Sangyo p.248.  Note: 1. T h e p r o c e s s i n g i n d u s t r y i n c l u d e s g e n e r a l m a c h i n e r y , e l e c t r i c machinery, t r a n s p o r t a t i o n machinery and p r e c i s i o n machinery. 2. C o n c e r n i n g t h e d e t a i l s o f d e f l a t o r s , s e e ibid.  105 T A B L E 4-2 P R O D U C T I V I T Y I N C R E A S E I N THE P R O C E S S I N G  1970 1975 1977 1978 1979 1980 Growth Rate 1 970-75 1975-80  Seisaku  INDUSTRY - 1975 b a s i s P.M. M.G.  G.M.  E.M.  T.M.  95.0 100.0 125.3 139. 1 162.6 180.9  75.5 100.0 131.1 150.5 168.0 191.4  83. 1 100.0 113.8 118.1 129.3 149.7  79.2 100.0 159.3 179.8 .233.5 311.6  86.2 100.0 1 19.2 129.6 141 .7 150.6  20.3 49.7  26.3 211.6  16.0 50.6  4.7 80.9  32.5 91 .4  S o u r c e : T o s h i m a s a T s u r u t a , Sengo Ni hon no (Tokyo: Nihon K e i z a i Shinbunsha, 1982),  Sangyo p.249.  Note: 1. G . M . = g e n e r a l m a c h i n e r y , E . M . = e l e c t r i c m a c h i n e r y , T . M . t r a n s p o r t a t i o n machinery, P.M.=precision machinery, M.G.=manufacturing i n general. 2. L a b o u r p r o d u c t i v i t y = p r o d u c t i o n i n d e x / e m p l o y e e s . T A B L E 4-3 THE  R A T I O OF B U S I N E S S E S T A B L I S H M E N T S I M P L E M E N T I N G ADJUSTMENT  I&II M o r e t h a n 1,000 employees 300-999 100-299 30 - 9 9  1 974 III  IV  EMPLOYMENT  - Manufacturing, % 1975 IV I II III  31  52  76  85  81  79  74  30 21 17  49 35 25  70 62 43  77 70 53  76 64 51  69 53 47  56 47 33  S o u r c e : J a p a n , E c o n o m i c P l a n n i n g A g e n c y , Nenji Keizai Hokoku, 1976 ( T o k y o : E c o n o m i c P l a n n i n g A g e n c y , 1 9 7 6 ) , p . 177. Note: I ; January-March, I I ; A p r i l - J u n e , I I I ; July-September, I V ; October-December.  CHAPTER  FIVE  CONCLUSION  The  major  summarized The Cabinet itself and  a transition  i n the Diet inside  economic these  than  reflected  economic  accomplishing  before.  the  was  evident  from  political  rapid  the fact  growth,  economic  Democratic the factional  that  i t . A t t h e same t i m e ,  i n the context  the interests of unified in after  the influence of the  increased.  of t h i s  occurred,  i n the differing  issues to the growth.A l l  became d i v e r s i f i e d  political  causing  the Japanese p o l i t i c a l  government  trends.  priorities in  w h i c h had p r e v i o u s l y been  1973 o i l c r i s i s  within  Thirdly,  from postwar  J a p a n e s e economy on t h e w o r l d It  Secondly,  occurred,  t h e p a r t y made p r i m e m i n i s t e r s ' t e n u r e s i n  shifted  Japanese people, pursuing  dominance of the L i b e r a l  issues arising  trends  system  when t h e 1973 o i l c r i s i s  became w e a k e n e d .  1970's s h o r t e r  policy-making  The J a p a n e s e p o l i t i c a l  was c h a r a c t e r i z e d b y t h r e e  the p o l i t i c a l  struggles  c a n be  system c o n s i s t s of the D i e t , the  and the bureaucracy.  that transition  Party  chapters  follows.  Japanese p o l i t i c a l  faced  First,  the  as  conclusions of the preceding  scene.  opinions  and i n the c o n f l i c t  considerable  voiced  that  confusion  The c o n f u s i o n  was  inside the  of interests  106  situation  among  industrial  1 07 sectors.  These  Japanese  political  character. which  f a c t s make  i t inappropriate  system  by  I t i s important  operated  emphasizing  to  the  i t s unified  investigate  to c o o r d i n a t e the  to explain  the  conflict  of  mechanism interests  which  arose. In  that  important  coordination  role.  I t was  bureaucracy  which  implemented  the urgent  Meiji  mechanism,  the Cabinet  first  the  supported  reacted to the policies  bureaucracy  1973  i n order  Bureaucrats  were p r o v i d e d v a r i o u s k i n d s of  and  through  the p r i v a t e  custom  of  with  the  is  The by  of  three factors. based  on  maintain their  amakudari  the  their  of the  often  of  War  and  the  First,  i n the  lifetime  C a b i n e t . On recruited  the  the  economic  i n Japan  bureaucracy  o f , or the  by  of  decreased  employment  in spite  meaning  rights  bureaucrats  bureaucracy  r e t i r e m e n t ages.  (literally  constitutional  economy and  obeying  of  procedures,  II the  political  the  regulatory  certification  Japanese  power  i n the  bureaucrats are  companies around called  World  the Japanese  frequent changes  senior  the  influence  a continuity  bureacrats the  of  of  However, the custom  explained  kind  and  countries.  authorization  acquired a  them. A f t e r  development  persisted.  and  After  role  w i t h Western  t o g r a n t p e r m i s s i o n and  liberalization system.  sector  obeying  government  licensing  it.  the  coordinator  authority  t o c a t c h up  assumed  an  the  o i lcrisis  t o overcome  R e s t o r a t i o n the bureaucracy  by  took  is there  system. because  other  The of,  hand,  o r g a n i z a t i o n s and  This  recruitment i s  "descending  from  108 heaven").  bureaucracy often on  amakudari  The  i n Japan.  implements  l a w . The  reflects  relationship  influence between  with  bargaining  with  companies  to  and  Japan's The  inflationary  basic  elements  growth, at  a  only  law with  i s not  based  guidance the  also  special  politicians  the Japanese the  1973  had  a great  caused  but  also  i t s special  bureaucracy  contributed  o i l crisis. impact  the  on  the  time of  the  m a i n l y by  i n e x p e n s i v e supply of enabled Japan shook  business i n Japan.  Thus, using  i t occurred during  the o i l c r i s i s  the  "Nixon  o i l was  shock"  one  of  to accomplish  the Japanese  Japanese  in  the  economic  economic  structure  i t sfoundations. Japan  crisis the  by  overcame changing  Japanese  chemical  the d i f f i c u l t i e s i t s industrial  industrial  industries  knowledge-intensive this  change.  energy  and  increased was  administrative  the p u b l i c .  which  which  the b u r e a u c r a c y and  not  situation  Since the  bureaucracy  provides the bureaucrats  o i lcrisis  1971.  the  to draft  r e c o v e r y from  economy b e c a u s e  guidance  of  and  influence,  1973  influence  the government  power and  of  the  the Japanese  administrative  the a b i l i t y  position  Secondly,  i m p l e m e n t a t i o n of  the  Thirdly,  reflects  One  was  structure  industries.  shifted  Two  the e f f o r t s  the p r o d u c t i v i t y  the o i l  The  from  f o c u s of  heavy  of companies  energy  and  and  phenomena were  of Japanese  industrial  by  structure.  to the processing  develop alternative  t h e c h a n g e among  caused  to  behind  conserve  s o u r c e s . These industry.  sectors.  For  The  efforts other  instance,  the  109 raw  material  industry  the  increase  i n the o i lprice  the  demand  for  materials  made by  for their was  a  suffered  result  dependent  on  of  companies  in  the Japanese  recovered  an  economic  reaction  efficiency  economic  vulnerability. coal  For  by  economic  increased  the  e c o n o m y . One  instance,  efforts  the  change  Japan  essential  labour  f o r the sake  There  o i l crisis  of the  Japanese  economic  element was  put of  a c c o m p l i s h e d by  of  economic  up w i t h  economic decision  efficiency  on  to  but  the  Japanese  flexibility.  the decrease i n  to For  their  the decrease i n t h e i r  term b e n e f i t s  also  vulnerability  which enabled Japan  up w i t h  long  was  Increased  impact of the o i l c r i s i s  rationalization  of  industries.  1973  the p o l i t i c a l  vulnerability.  management p u t  and  to the  at the r i s k  instance,  from the c r i s i s  business  most  through which  development  o i l increased  increased  income  result,  efforts  mechanism caused  important characteristic  pursuing  profits  demand  the r a t i o n a l i z a t i o n  structure  economic  recover  from the decrease i n  became d e p r e s s e d  that  economy. J a p a n e s e  replace  a  from  from the o i l c r i s i s .  Japan's revealed  only  decrease i n the  As  the market  industrial  not  of the r a t i o n a l i z a t i o n  o i l use  i s i m p o r t a n t t o remember on  The  industry.  It  based  but a l s o  products.  the processing  industries  from the c r i s i s  real  i n the  process.  were two  reactions  business leaders  main  characteristics  to the o i l c r i s i s . to influence  the  One  of  Japanese  was  political  the  reaction  ^  110 decision-making  process  of  to  was  e a c h company the  recovery  influence recovery business It  between  relations  do  The  the  the  not  labor  of  based  on  the  severe  i n other  It  contributed efforts  to  to the  for  of  situation  of  occurred.  responsibility damage done  This  was  cooperative  performance  of  reaction lay  in  industrial flexibility  i n Chapter  business  should  to cooperate  Three  was  of a  cooperative but  to pursue  the  sense  individual  society.  The  be  in  Japan the  found  attitude  paying  i n s t a n c e , the  to  only  in  with each other  of  the when  does not  a t t e n t i o n to  social  e m p h a s i z e d when t h e  contrary  to the  between  countries. Therefore,  exclusively  o t h e r s . For  I t was  business  and  such  economic  i s a phenomenon not  companies  big businesses  However,  m a r k e t m e c h a n i s m . The out  cooperative  business  among c o m p a n i e s a n d  Japanese  each other  are  competition.  with a c r i s i s .  helping  of  Japanese  industrial  f e a t u r e of  willingness faced  process.  environment  there  e x p l a i n the  Severe competition also  that  i n Japan.  the  competition  this  unique  reaction  also contributed to  appropriate  J a p a n e s e economy p o i n t e d  result  the  However, the  government and  really  essence  severe  sectors  but  crisis.  i s o f t e n p o i n t e d out  management and  the  an  was  which mainly  decision-making  preparing  other  i t s production  efforts  the  The  activities.  relations  the  from  political by  Japan.  rationalize  rationalization  Japan's  Japan.  of  mean the  responsibility  o i l crisis social  b e n e f i t s by  ignoring  c o o p e r a t i v e " a t t i t u d e was  the  111 also  seen  labour not  unions  make  there  i n t h e labour-management  requests  attitude  answers  major  of severe  conclusions  t o two q u e s t i o n s .  the Japanese  successful 1973  system,  Japanese  o i l crisis?  Japanese other  they d i d  companies.  competition  of t h i s  business  Indeed,  and a reaction to  Which  t h e s i s are focused  o f t h e two major  government  important  on t h e  components  l e a d e r s h i p or t h e market  determinant  of the  r e s o l u t i o n of the problems caused  Secondly,  what was d i s t i n c t i v e  reaction to the o i l c r i s i s  fact  universal  these  outside  essentially  as opposed  two q u e s t i o n s  by t h e  about the t o that of  view  consensual,  are interrelated.  of the Japanese drawing  system  together  consensus  supposed  t o be r e a c h e d .  homogeneity  of Japanese  does not d i s p r o v e  this  w e r e many  opposed  sharply  the o i l c r i s i s crisis The  rested finding  easing  more upon  process  almost  i s that  i t  sectors  i s helped  by t h e  this  study  i t a l s o shows t h a t  there  f a c t i o n s w i t h i n Japan different  opinions  a t the time a s t o how  be r e s o l v e d .  of the c r i s i s  i n t h e e n d seems t o have  t h e commitment  a solution  rather  than  of various on a c l e a r  i s  i n t e r f a c e s which  society. While  viewpoint,  and v a r i o u s  should  This  An  the various  the s o c i e t y i n a s e r i e s of i n s t i t u t i o n a l  allow  the  i n Japan,  most  countries? In  of  bankrupt  i n the Japanese  m e c h a n i s m , was a more  of  unions  Since  crisis. The  of  which would  was a c o e x i s t e n c e  cooperative the  were company-based  relationship.  factions to consensus  1 12  concerning Thus  the  energy  what a c t i o n s  private  use;  business  the  and  sector  consumers  for  by  government  Japanese which was  oil-based  industry  industry  responsible  profits  during  way  the  with  market  find  be  the  lack  period.  to  the  This  to  of  solution.  reduction  argument  of  direct  able  the  crisis.  energy  intervention  to  in  determine Business  excessive that  distinctive  Japanese  commitment  to  suggests  was  in  with  reduce  was  thesis  o i l crisis  sectors  a  s t r u c t u r a l change  market  adaptable  to  them t o  l i m i t e d d i r e c t government  society  the  in  the  were  national  intervention  goals  in  the  mechanism. the  understanding  more r e s e a r c h  commitment rather  because  various  Ultimately involve  The  stimulated  t o make a v o l u n t a r y  only  to  a moral  to persuade  even  this  reaction  willing  taken  i n r e f r a i n i n g from pursuing  Japanese that  used  energy.  could  be  v o l u n t a r i l y agreed  government  demand the  should  than  to  national  the  into this goals  at  i n v e s t i g a t i o n of  of  the  question  Japanese of  the  a l l l e v e l s of the  concept  may  voluntary  the of  system  society  consensus.  BIBLIOGRAPHY A k i r a Nakayama, 1985. 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Tokyo:  Bungei  APPENDIX A  J A P A N E S E V I E W ON  In  order  reaction  to understand  to the  attention  this  reaction  to the  Table  reactions  appendix  compares  to those  information  1-3  Canada's  reaction  reviewed  from  political  THE  POLITICAL  Oil is  an  important  domestic Canada this the  i s no  less  to the and  important  item  the  1973  the  pay  this  reaction.  reaction  adding  One.  to  differences  Canada's by  Japan's  Canada's  Canadian  the  In the  economic  to  the  related  following  o i lcrisis  f o r Canada  f o r Japan  is  aspects.  are  historical  than  because Japan  I t i s also  the p o l i t i c a l  o i lcrisis  the  on  reaction  an  f o r Japan. i s lacking  important  item for  large  domestic  reserves.  a s p e c t s of  Canada's  reaction  because Canada p o s s e s s e s  1973  review  focusing  CRISIS  ASPECTS  o i l reserves.  section  OIL  In  some a s p e c t s o f  i n Chapter  sections  1.  other countries.  some a s p e c t s o f  to Table  1973  i t i s worthwhile  reaction'and the  of Japan's  the  of  reviews  o i lcrisis  THE  the c h a r a c t e r i s t i c s of  o i lcrisis,  the Japanese  A-1  crisis  1973  to the  respect,  between  CANADA'S R E A C T I O N TO  investigated.  development 1 16  I t i s necessary  of Canadian  energy  It in  In to  to policy  1 17 after  World  War  II before  investigating  the  political  aspects. Canadian be  divided  and  into  ended  ended  two  i n 1959.  i n 1973.  Leduc,  In  Alberta,  incident  western  was  that  the  market  western  policy  The  second  1946  by  a new  Imperial  mechanism. Most  domestic  On  Venezuela  at  t h e U.S.  mostly was as  reasonable "domestic  system.  by  o i l " by  letting  people  and  was  of  existed  situation  continued until  the  the  beyond  scene  first  o i l industry this  in stage  based  price the  because  i n the  i t be  their  such the  international  an  U.S. price  i t  Canadian o i l  e x c e p t i o n t o the because  o i l reserves which,  their concern of  due  o i l was  o i l companies,  this policy  t h e end  the  as  Since Canadian  o f U.S.  for scarcity.  the  1950's.  The  reports  as  quota  they they This Royal  Prospects d e s c r i b e d the  in i t s final  on  the e a s t e r n  countries  policy.  Canada's Economic  energy  1946  discovered in  o i l produced  foreign  welcomed  believed,  Canadian  i n 1959  o t h e r hand,  subsidiaries  needed c a p i t a l t o develop  on  started  f o r the U n i t e d S t a t e s to t r e a t  Canadian  Commission  the  higher than  o i l import quota  produced  in  c h a r a c t e r i s t i c of  international  was  started  O i l L t d . I t was  the  can  stage  o i l field  of  imported o i l from  price  o i lcrisis  exported to the United States at  o i lprice.  the  1973  i n Canada were g e n e r a l l y  provinces  to  stage  p r o v i n c e s . A major  p r o v i n c e s was  first  development  o i l transactions  domestic  before the  s t a g e s . The  i n the postwar  the  U.S.  energy  follows:  Our r e s o u r c e s of t h e s e f o s s i l f u e l s , a l t h o u g h v e r y l a r g e , a r e n o t o f c o u r s e i n e x h a u s t i b l e ; a n d i t may  118 be t h a t i n r e t r o s p e c t t h e p e r i o d w i l l s e e m l i t t l e more t h a n a n i n t e r l u d e . B u t i t p r o m i s e s t o be a great feast while i t l a s t s . 1  On between  t h e other economic  Prospects" as part  (Davis  attention  growth and energy  Commission  therelationship  use i n "Canadian  R e p o r t ) w h i c h was p u b l i s h e d  Prospects.  on  The D a v i s R e p o r t drew t h e energy use.  a t t e n t i o n , t h e government on E n e r g y  Energy  i n M a r c h , 1957  o f t h e Royal Commission  of Canadian people t o t h e i r  the increased  Royal  9  John D a v i s analyzed  of thea c t i v i t i e s  Canada's Economic  to  hand,  2  i nOctober,  Responding  established the  1957.  The commission  emphasized  the importance of marketing s t r a t e g i e s i n further  developing  t h eCanadian  o i l industry.  The commission  stated:  The h i s t o r y o f t h e i n d u s t r y i n C a n a d a s i n c e t h e d i s c o v e r y o f t h e L e d u c f i e l d i n A l b e r t a i n 1947 s h o w s t h a t some s e c t i o n s o f t h e i n d u s t r y h a v e d i r e c t e d greater e f f o r t s towards t h e f i n d i n g and production of o i l rather than t o c o n s i d e r a t i o n s of m a r k e t s . I t i s o n l y w i t h i n recent months t h a t world c o n d i t i o n s i n t h e i n d u s t r y have emphasized t h e importance of expanding markets simultaneously with the p r o v i n g and development o f r e s e r v e s . 1 3 0  Based  on t h i s  establishment of  understanding, t h ecommission of a National  t h e b o a r d was e x p l a i n e d  Energy  recommended t h e  B o a r d . The main  character  as follows:  The N a t i o n a l E n e r g y B o a r d , a s a p e r m a n e n t body o f the Government o f Canada, p r o v i d e s a forum where t h e industry can discuss i t s problems a t t h e Canadian g o v e r n m e n t l e v e l . What i s p e r h a p s o f more importance, t h i s Board a s an agent o f t h e Government can and should keep i n c l o s e t o u c h a t a l l times w i t h the i n d u s t r y , i n a l l i t s phases, and w i t h i t s C a n a d a , R o y a l C o m m i s s i o n on C a n a d a ' s E c o n o m i c Prospects, Final Report, ( O t t a w a : E d m o n d C l o u t i e r C.M.G., O.A., D . S . P . Queen's P r i n t e r a n d C o n t r o l l e r o f S t a t i o n e r y , 1958), p. 127. C a n a d a , R o y a l C o m m i s s i o n o n E n e r g y , Second Report Ottawa: E d m o n d C l o u t i e r C.M.G., O.A., D . S . P . Q u e e n ' s P r i n t e r a n d C o n t r o l l e r o f S t a t i o n e r y , 1 9 5 9 ) , p p . 6-33 - 6-34. 1 2 9  1 3 0  119 p r o b l e m s , a s t h e s e have a b e a r i n g upon t h e p r o s p e r i t y o f t h eC a n a d i a n economy a n d o f t h e industry i t s e l f . Consequently, we b e l i e v e t h a t t h e problems i n v o l v e d i n such l i c e n s i n g procedure c a n and s h o u l d be r e s o l v e d t h r o u g h d i s c u s s i o n s between that Board and t h e industry i t s e l f . 1  The  commission  supply was  a l s o suggested  the Montreal  refinery  that  3  1  "Canadian  area."  1 3 2  This  crude  should  recommendation  further explained as follows: In o t h e r w o r d s , i n o u r o p i n i o n , i f i t s h o u l d become a d v i s a b l e t o move C a n a d i a n c r u d e . t o M o n t r e a l i n order t o m a i n t a i n a h e a l t h y o i l i n d u s t r y i n Canada, t h e n a l i c e n s i n g s y s t e m i n v o l v i n g r e s t r i c t i o n s on the i m p o r t a t i o n o f o v e r s e a s o i l would be necessary. 1 3 3  Canadian when  energy  theroles  energy  related  electricity  production  subject  region  o i l market  west  United  Ubid. , Ibid. * Ibid.,  through  t h e NEB s t a r t e d . T h e  and international  became  p. 6-28. p. 6-29.  t h e government  pipelines,  a n d a d v i s i n g t h eCabinet trade  on  i no i l , gas and  o f t h eCabinet.  In  1961  was a n n o u n c e d . A s a r e s u l t , t h e  was s e p a r a t e d  into  o f i t was open  t h eN a t i o n a l O i l P o l i c y  y 3 2  3 3  stage,  two r e g i o n s . The  o f t h e O t t a w a V a l l e y was r e s e r v e d  States  stage  of this  t o t h ea p p r o v a l  and t h eregion east Under  t h esecond  (NEB) was e s t a b l i s h e d i n  issues, and l i c e n s i n g  National O i lPolicy  Canadian  into  o f r e g u l a t i n g t h ec o n s t r u c t i o n and  of interprovincial  monitoring  1 3  Board  i n t h eo i l market  was g i v e n  operation  oil,  entered  As a main c h a r a c t e r i s t i c  intervention  the  policy  the N a t i o n a l Energy  1959.  NEB  energy  f o r domestic  f o r imported  o i l .  theinfluence of the  stronger. Canadian  energy  policies  120 during  t h e 1960's were even  American oil  mandatory  produced  region oil  west  import system."  b y U.S.  capital  of t h e Ottawa  and  the late  the United  side  "  Reserved  f o r Canadian  i n the western provinces, the  Valley  became a p a r t  t h e U.S. 1967,  1960's t h e r e l a t i o n s h i p  States  the increased  strengthened  gradually  energy  the energy  consumption  security  especially  after  t h e U.S.  government  became  b o y c o t t s by A r a b  decrease Canadian  countries  trade.  o f t h e U.S.  States.  its  desire  for contracting  For  instance,  Canadian  concept  of Canadians.  increasingly  into  a long  Minister  r e s p o n d i n g t o t h e U.S.  concerned  influence  the United energy  Greene  on t h e  o i lexports to States  expressed  pact with  energy  emphasized  Canada.  from  agreement. three  import c u t :  6  J a m e s L a x e r , Canada's Energy Crisis ( T o r o n t o : James L o r i m e r & Company P u b l i s h e r s , 1 9 7 5 ) , p. 7 1 . / f c / r f . , p. 75. /6/rf. 1 3 f t  1 3 5  1 3 6  1 3 5  points  . . . Canadian public opinion i s i n t e r p r e t i n g t h i s a s a p r e s s u r e p l a y , t o s q u e e z e C a n a d a i n t o some f o r m o f e n e r g y d e a l w h i c h w o u l d n o t be t o t h e C a n a d i a n advantage. . . . C a n a d i a n g a s w i l l be a v a i l a b l e t o s u p p l e m e n t United States supplies only i f our petroleum i n d u s t r y as a whole r e c e i v e s t h e i n c e n t i v e s of p r o g r e s s i v e growth and a s s u r e d s t a b i l i t y of a c c e s s to e x p o r t markets f o r o i l and n a t u r a l gas 1 3  over  also  cut o i l imports term  On  War i n  The o i l b o y c o t t s w o u l d  t h e Nixon government  Energy  the ^ 6 0 ' s  the Arab-Israeli  a formal  Canada  the Canadian  during  and t h e i r  As a r e s u l t ,  t o p r e s s Canada  between  On  o i l imports and Canadian  the United  Canada  changed.  side,  U.S.-Canada energy  in  1 3  as " e x t e n s i o n s of  market. From  oil  recognized  121 liquids. . . . I t must be l e f t t ou s , t o C a n a d i a n s , t o evaluate the matter o f o i l supply s e c u r i t y i n e a s t e r n Canada a n d t ot a k e any a p p r o p r i a t e action. 1 3 7  1 3 8  Responding identity"  t ot h i s  President  i n h i s speech  during  Nixon  emphasized  his visit  "Canadian  t o Ottawa  i n 1972.  However, a s f a r a s the g a s e x p o r t s a n d the o i l s u p p l y t o eastern really 1970,  Canada were c o n c e r n e d , t h e U n i t e d have  the Canadian  exports by  t o worry  about  Greene's  government  t othe United  States  t h e U.S. g o v e r n m e n t  was s t i l l  Greene's  successor a s energy  admitted  that  with  the United  Canada.  Energy  report  capital  discussed Even  oil to *  Policy  had large  cases  the o i l import cut  c o n t i n u e d . I nJanuary Donald  i nsecret  1973,  Macdonald,  negotiations  concerning the o i l supply t o eastern  concerns f o r energy  discusses  required 1973  largest gas  1 3 9  Canadian "An  States  the  though  minister,  he h a d been engaged  did not  s t a t e m e n t . I n September  approved even  States  f o r Canada" four  security  p r e s e n t e d i nJune  cases o f energy  costs. " 1  0  development  went beyond  before the c r i s i s ,  o f how t h e i r  This  with of late  any of the  four  report. the gradually  was d r a w i n g more a n d more a t t e n t i o n problem  1973.  However, the o i l c r i s i s  impacts which i nthe  were embodied i n  rising  price of  o fCanadian  domestic o i l might  people  b e s t be used.  Ibid. p." 7 6 . Ibid. /fc/rf., p. 77. C a n a d a , M i n i s t r y o f E n e r g y , M i n e s a n d R e s o u r c e s , An Energy Policy for Canada, Phase 1, V o l . 1: Analysis (Ottawa: I n f o r m a t i o n Canada, 1973), pp. 210-216. 3 7  1 3 B 1 3 9  1 f l 0  r  122 Under  the  natural  British  resources  hand, the  federal  Canadian and  America  within  federal  interprovincial the  North  their  or  government  insisted  c o n t r o l s to begin  not  so  a l r e a d y become t i g h t ,  strengthened addition,  this  scrapped. freezing  1 a 1  i n which  His  the  moderating  o i l price  pipelines.  federal  On  c o n s i s t e d of  i n Canada  until  high  one  hand,  the  Canadian domestic  international  o i l price.  o i l exports  and  domestic  used  On  and  In  o i l price  points: 30,  1974;  i n the  U.S.  industries  other of  manufacturers  the  lower  hand, tax  mainly  on  intended  than  the  i t imposed  revenue  o i l  tax  to  located in Ontario  Quebec. The  western  reserves  Lougheed,  provinces also intended  for their  Premier  James L a x e r ,  op.  benefits.  of A l b e r t a ,  cit.,  pp.  to u t i l i z e  In February  1973,  declared,"Alberta  84-85.  an  was  Trudeau government  the  a part  steadily  T r u d e a u made  January  1,  o i l supply  three  o i l prices  March  Energy  increased.  Prime M i n i s t e r  over  on  government  National O i l Policy  i n f l u e n c e of  the  the  rule,  boundaries,  National  because  discussion with provinces  keep the  1  the  o i l prices  1973, the  s e t by  the as  international  mainly  announcement  the  m a r k e t ; and  subsidize  stance  i n September  announcement  "  i t s jurisdiction  o i l export  restrictive  1  on  the  involving  trade. Following this  announced crude  quota  owned other  commerce  and  was  oil  the  provincial  Board  and  On  o i l across  export  on  provinces  boundaries.  international  Though the  to  the  government c o n t r o l l e d  1973.  had  Act,  their Peter  crude  123  belongs the  t o t h e people  federal export  royalties. * 1  decided  The  provinces profits  John  1 4 4  government  to destroy  provincial  of Saskatchewan  t a x on o i l c o m p a n i e s  i n December 1973. t h e f e d e r a l government and t h e  o f the. o i l c r i s i s .  historical  and economic  In "Ontario  were  Report"  the  also  I t was s o m e t i m e s  develop  the higher  Energy  described  There  elements.  had helped  i n d u s t r y by p a y i n g  J . Deutch  He t r i e d  was c h a r a c t e r i z e d b y t h e s t r u g g l e f o r  out that Ontario  petroleum 1960's.  between  2  by r a i s i n g  a provincial  i n the province  important pointed  The B l a k e n e y  conflict  windfall  1  taxpolicy  to introduce  operating  western  3  of A l b e r t a . " *  the Alberta  o i l price  published  during the  in  the National O i l Policy  1973,  as  follows:  The N a t i o n a l O i l P o l i c y was d e s i g n e d t o s t i m u l a t e western Canadian o i l p r o d u c t i o n and t o promote C a n a d i a n development by m a x i m i z i n g t h e d o m e s t i c u s e of Canadian o i l w h i l e a l l o w i n g i m p o r t s t o s e r v e t h a t part of eastern O n t a r i o i d e n t i f i e d w i t h t h e Ottawa V a l l e y and t h e remainder o f e a s t e r n Canada. P r i o r t o 1961, O n t a r i o ' s d o m e s t i c c r u d e o i l s u p p l y was augmented by d e c r e a s i n g , b u t s t i l l a p p r e c i a b l e , q u a n t i t i e s of lower cost imported crude o i l . 1  It  i s observed  interests government province. both  "  2  1 4 3  the Ontario  of manufacturers represented  important  e d . Energy  5  represented the while  of o i l producers  manufacturers  p. 79. A. S o b e l ,  government  i n the province  that  I t i s even more  Ontario's  I b i d . , Lester  that  4  the Alberta  i n the  t h a t major  segments of  and A l b e r t a ' s o i l producers a r e  Crisi  s,  Vol.  1  (1969-1973)  (New Y o r k : F a c t s o n F i l e , I n c . , 1 9 7 4 ) , p . 2 3 9 . J a m e s L a x e r , op. c i t . , p. 92. C a n a d a , O n t a r i o , A d v i s o r y C o m m i t t e e o n E n e r g y , Energy in Ontario, 2 v o l s . ( T o r o n t o : The Government o f O n t a r i o , ' 1973), p. 132. 1 4 4 1 4 5  124 owned by U.S. c a p i t a l . oil  crisis  but  also  2.  reflected  Canada's p o l i t i c a l  not only  i t s economic  t othe  i t s g e o g r a p h i c a l background  background.  THE ECONOMIC A S P E C T S (1) M a j o r Changes i n t h e C a n a d i a n As  f a ras b a s i c  economic  situation  o f Canada around  Three,  Canada m a i n t a i n e d h i g h growth  first  half  of Japan.  As shown  was c o n s i d e r a b l y  -3.3%  i n 1974. (However, t h e r a t e half  The economy  decreased  price from  indicated indices  except  b a l a n c e s of major  further  show t h a t  than  the growth  until rate of  11.0% i n 1971-72 t o  increased  t o 3.0% i n t h e  of t h e Canadian  by t h e i n t e r n a t i o n a l  comparison of annual  f o rthat  rate was  o f Germany. The c u r r e n t  industrial  countries  i n T a b l e A-3  Canada m a i n t a i n e d a c o m p a r a t i v e l y good  situation.  was d e f i c i t ,  smaller  from  at least  i n T a b l e A - 2 . The a v e r a g e  account  1974  rates  3-12 o f C h a p t e r  1973 t o 1974 was 1 0 . 9 % f o r C a n a d a , w h i c h  lowest figure  economic  i n Table  was  o f 1 974.)  i salso  change  the  t h e 1973 o i l c r i s i s  c o m p a r a t i v e l y good c o n d i t i o n  consumer  a r e concerned, the  o f 1 9 7 4 . On t h e c o n t r a r y ,  Japan  second  Economy  statistics  than  the  that  economic  better  of  reaction  Though t h e c u r r e n t  t h e amount  b a l a n c e s o f Canada i n  of the d e f i c i t  those of the United States  was  s t i l l  and Japan.  125 There  a r e , however, s e v e r a l  economic  problems  Canadian  trade.  rate 1975. was  As a  was  result,  in deficit  partly  i n C a n a d a . T a b l e A-4  In t h i s  of imports  higher  however, both and  labour  usually  profits there  was  GNP.  d e m a n d . On  effort  both  trade  imports  is  labour from  1973 t o  t h e one h a n d , t h e  contributed the other  to the  hand,  p r o d u c t i v i t y decreased  increased.  power  These  elements  of the i n d u s t r y .  to the increase people.  on C a n a d i a n  i n both  Therefore,  industry to  contrasted  with  profits  the Japanese  and  labour  i n d u s t r y had t o i n c r e a s e i t s  t o overcome t h e c r i s i s .  out that  decreased  pressure  On  and  domestic  increased  the o i l c r i s i s decreased  income and Japanese  the  in real  i t s productivity. This  productivity  that  income of Canadian  not strong  i n which  point  shows  1973 o i l c r i s i s c o n t r i b u t e d  increase case  A-5  the competitive  and labour  increase  i n 1974  i n Canada's  of Canada's  per u n i t of output  decrease  The  increase  u n e m p l o y m e n t .and l a b o u r  cost  the  of Canada's merchandise  income and p r o f i t s  of the domestic  indicate  the volume of  of exports  per u n i t of output  the decrease  i n labour  expansion  that  by t h e e x p a n s i o n  income and p r o f i t s  increase  than  Table  shows  i t i s clear that  the balance  demand. F o r i n s t a n c e ,  1974 d e s p i t e  table  i n 1975. The  explained  s t a t i s t i c s which  I t i s important  the a v a i l a b i l i t y of o i l i n Canada  to increase  the p r o d u c t i v i t y and  the competitive  power  of Canadian  to  discouraged  i n the long industry.  run  1 4 6  D o n a l d J . Daly pointed out that the increase i n per u n i t l a b o u r c o s t s i n Canada d e c r e a s e d t h e c o m p e t i t i v e power o f C a n a d i a n i n d u s t r y . See D o n a l d J . D a i l y , "Canada's I n t e r n a t i o n a l C o m p e t i t i v e P o w e r " ( T h i s p a p e r was prepared 1 4 6  126  (2) The The A-6  Basic Characteristics  industrial  and Table  industrial  c o m p o s i t i o n of Canada  3 - 7 . T a b l e A-6  sectors.  The  shows  share  and those  of secondary  gradually  increased.  This trend  i s more  employment  share  of primary  industry  decreased,  and o n l y t h a t  As  concerned,  i t i s important  t o Japanese  of companies and t h e i r  ownership  The  A-8.  As shown  and c o n t r o l  foreign  of  of Canadian  industry  sector  were  52% and  i n the table  most  of the  were  petroleum  and n a t u r a l  gas s e c t o r .  I n 1967, b o t h  more  6 0 % . The  decreased  from  than  and c o n t r o l  50%. Though  i s and  foreign companies.  higher  i n the  of them  were  by t h e U n i t e d  the foreign  ownership  6 2 % i n 1967 t o 5 9 % i n 1 9 7 3 , t h e  ( c o n t ' d ) f o r N a t i o n a l Economic Conference f r o m M a r c h 22 t o 2 3 , 1 9 8 5 . ) 1 4 6  The  57%  i n t h e h a n d s o f U.S.  ownership  has  ownership  were s t i l l  were more  of  secondary  geographical location.  and c o n t r o l  States  are  foreign  ownership  than  industry  industry  In 1967, t h e f o r e i g n  i n the manufacturing  ownership  secondary  the s i t u a t i o n  Canadian  the high ratio  and c o n t r o l  i n Table  respectively.  and  of the t e r t i a r y  industry,  ownership  control  i n Table  them.  characteristics:  summarized  industries  apparent  industry  of  gradually  of o i l and gas and  two major  foreign  industry  to investigate  as a s u p p l i e r  as a consumer of  Compared  i n Table  f a r as the e f f e c t s of the o i l c r i s i s  industry  industry  i s shown  and t e r t i a r y  A-7. The  increased.  Industry  the production shares  of primary  decreased  primary  of Canadian  foreign  held  i n Ottawa  127 control  increased  from 74%  to  location  of major  industries  The following  tables.  T a b l e A-9  exploitable  o i l reserves  Alberta  14%  hand,  and  sector.  manufacturing  worked  value  total  added  level. Canada.  3.  THE  in Ontario  80%  i s located the  two  Quebec  engaged  which had  account f o r the  shows t h e t o p  companies  in Ontario.  o f U.S.  i n the  of employees  and  were Four  o i l companies  10  in  62%  of  the same  industrials  subsidiaries of the r e s t  exploring  in  other  Both the p r o d u c t share and  T a b l e A—11  companies  subsidiaries western  More t h a n 75%  share of these provinces  Among t h e m ,  automobile  About  of  i n S a s k a t c h e w a n . On  population.  Moreover,  i n the  shows t h e s h a r e s of p r o v i n c e s  manufacturing  Canada's  i s shown  shows t h e l o c a t i o n  i n Canada.  i s located  T a b l e A-10  79%.  of  in U.S.  were  mainly  in  provinces.  C H A R A C T E R I S T I C S OF  THE  C A N A D I A N R E A C T I O N TO  THE  OIL  CRISIS There and  are three  the Canadian First,  under  major  differences  between  the c e n t r a l i z e d  from the c r i s i s .  diversified  among t h e  Therefore,  i t was  power  represented  that  political  Japanese  reaction. political  Japanese bureaucracy implemented v a r i o u s recover  the  In Canada  federal  difficult  conflicts  and  between  policy  the p o l i t i c a l provincial  to find  the public  system  a  strong  interests  the federal  and  the  measures power  to was  governments. bureaucratic of Canada. provincial  The  128 *  governments  reflected  that  interests  of  consensus  among C a n a d i a n s .  less  i t s supporters  expected  should  each government  i n Canada  protect  rather In  than  the  public  the  1973  than  other  for  to create  words,  i n Japan  interest  worked  a  i t seemed  that  the  against  the  to  be  government  individual  interests. Secondly, Japanese  economy was,  s h o w e d how  flexible  e c o n o m y was oil  was  a  the  Japan's  Japanese  Indeed,  revenue  increase  subsidize eastern  provided  Canadian  labour  result,  f a r as  the  the  took  rather  than  industry  p o w e r when o t h e r  Japan  recovered  short  term  from  benefit  the  for  Canadian  of  increase  a  chance  in  provinces  a  with o i l crisis  increase  a  in i t s  countries  example  i n d u s t r y damaged t h e  including  s h o w s how  industry  a  in  the  role  in  term. Thirdly,  Japan's crisis  Japanese  reaction to was  the  crisis.  played  an  Japan's  important  recovery  from  to  the  rationalization  Japanese companies based  on  the  m a r k e t m e c h a n i s m . On  hand,  largely  business  owing  other  profit  p r o d u c t i v i t y . As  decrease  This  1973  to  of  the  f e d e r a l government  industrial  crisis.  The  o i l producing  increase  faced  crisis  availability  The  the  the  advantage  manufactures.  industry with  income  Canadian  competitive  long  economy was.  Canada  and  vulnerable  reaction to  o i l prices provided  funds to  and  as  s h o w e d how  i n i n t e r n a t i o n a l o i l p r i c e s . The  international with  and  less vulnerable  concerned.  increase  o i l crisis  the  Japanese cooperated  with  the  the  efforts  by  the  government  in  129 inplementing  p o l i c y measures  including  guidance.  is difficult  imagine  of  It  administrative  Canada. F i r s t , government Secondly, means t o benefit is  not  often  to  take  the  r o l e of  or  process  be the  reaction  Chapter of  apparent  One,  more  by  considering influence  decision-making areas.  were s u b s i d i a r i e s of Japanese  o i l supply.  had  to  ask  companies  For  to  foreign  diplomacy  with  States,  the  included  i t was  had  been  The  the  the  able  survive  o i l crisis  Middle  East.  I t was  on  term  other  to  As  in  the  stated the was  companies  of  on  a  o i l  Secondly,  close  the ban  announcement against  Japan  to  hand,  Japan  wouldn't have  reported  that  the this  take  the  for  without  for  Nakasone  U.S.  Japan.  Since  benefit.  independent  U.S.  to  i t  o i l companies  Even  o i l export  difficult  Japan,  influence  based  States.  H o w e v e r , on the  strong  a  term  compared  Tokyo o f f i c e s  stance.  the  very  as  benefit  influence.  o i l supply  United  of  then MITI M i n i s t e r  of  their  long  most J a p a n e s e  instance,  maintain  Arab countries  to  was  used  longer  term  be  o i l companies.  representatives  relationship  United  U.S.  in Japan.  First,  U.S.  can  the  coordinator.  benefit  the  o i l companies were dependent  the  Japan's  reaction  the  short  than  expect  is usually  for  model  like  seem t o  central  broader  important  Canadian  U.S.  i n two  the  the  Japanese  in a country  guidance  the  the  does not  business a c t i v i t i e s  industry  seems t o  Japanese  of  the  that  work  business  e f f e c t i v e i n Canada where  Finally,  in  on  would  administrative  control of  guidance  Canadian  since  to  administrative  pro-Arab  o i l supply dilemma  was  been  from  130 expressed  by  then Prime M i n i s t e r  t h e n U.S.  State  Secretary  Compared w i t h the  Canadian  imported Canada  was  instance,  not  able  Energy  5,  1973  if  r e q u e s t e d by  that  petroleum  Minister  Canada might  maintaining  U.S.  influence  with  on  issues,  Japanese  one.  cut  their  pointed  was  the  development  States paid  Canada  gasoline.  s e e m e d t o be issues. case  companies  energy  * Lester 7  A.  Sobel,  after  first  ed.  op.  and  cit.,  the  in of  to  were  second  p.  of  requested to  and  the  Moreover, in  Japan's  o i lcrises,  239.  made  the  the severe  reviewing  the  government  efficiency  For  1  term,  sources.  situation.  through the  efforts  conservation  process in order to survive  policies  States.  contrasted  term,  production  instance,  windfall  stronger  short  energy  energy  increased  of  t o d e c r e a s e the use  In the long  importance of  Canadian  In the area  was  In the  i n November  the  t o the use  Companies were a l s o  of a l t e r n a t i v e  For  were of c r u d e o i l .  exports to the United  guidelines  operation.  countries,  However, most of  7  In the case of Japan, major  and  out  Japanese  some r e f i n e d  the Canadian  announced  electricity  t h e OPEC  product exports  decrease o i lconsumption.  government  above,  bar  Canada's domestic  domestic  to  attention  of  t h e OPEC i n t e r e s t .  exports to the United  by  stated  said  1  profits  of Japan  Donald Macdonald  the A r a b s . *  major  with  more c o m p l i c a t e d . S i n c e Canada  to ignore  Therefore,  dealing  position  o i l f r o m V e n e z u e l a , one  was  at a meeting  Kissinger.  the basic  position  Tanaka  their economic energy P.  Nemetz,  131 I.  Vertinsky  a n d P. V e r t i n s k y  concluded as follows:  It i s a l s o probable that Japan w i l l continue i t s pragmatic respect o f long-term i n t e r n a t i o n a l market r e a l i t i e s and w i l l not myopically e x p l o i t opportunities f o r short-term gains that generate high, longer-term costs of uncertainty. " 1  There  was a g e n e r a l  consensus  i nJapan  Japan's dependence on o i l . I n t h e case more d i f f i c u l t provinces, the from  a s OPEC c o u n t r i e s ,  o i l price  increase  i tas Japan  subsidies and  t o b u i l d consensus.  capital.  strategy  economic  t h eeastern  (The e a s t e r n didn't.)  Secondly,  on a n a t i o n a l  problems which  increased  political  can  be a t t r i b u t e d t o t h el a c k  the western  provinces  provinces  i t became v e r y  the  economic  First,  i t was  were b a s i c a l l y p l e a s e d  i n Canada a s a c o u n t r y  industrial  t o decrease  o f Canada,  companies were m o s t l y  As a r e s u l t ,  consensus  Canadian  did.  which Japan  o i l producing  while  8  both  manufacturing  c o n t r o l l e d b y U.S. to build a  and t o b u i l d long  have  and economic  suffered  obtained  difficult  basis.  with  term  Some a s p e c t s o f  become more tension  serious i n  i n t h e 1980's  of consensus and n a t i o n a l  strategies.  " P . N . N e m e t z , I . V e r t i n s k y a n d P. V e r t i n s k y , " J a p a n ' s E n e r g y S t r a t e g y a t t h e C r o s s r o a d s " , Pacific Affairs V o l . 57, No. 4 ( V a n c o u v e r : U n i v e r s i t y o f B r i t i s h C o l u m b i a , W i n t e r 1984-85), p. 576. 1  8  1 32 4.  TABLES  T A B L E A-1 SOME A S P E C T S  OF T H E J A P A N E S E AND C A N A D I A N 1973 O I L C R I S I S  =JAPAN= POLICIES  TO T H E  =CANADA=  SITUATIONS Scarcity i n domestic energy resources  Decrease of * vulnerability by e f f i c i e n t use o f imported resources  REACTIONS  i  Dependence on foreign supplies  OIL ./  N a t i o n - w i d e «— H i g h e r e f f o r t s on vulnerability -Energy conservation -Development of a l t e r n a t i v e energy sources -Increase of productivity I => I n c r e a s e d competitive power o f industry  SITUATIONS Wealth i n domestic energy resources i Regional divergence  POLICIES  Development of domestic o i l i n d u s t r y by National O i l Policy  CRISIS \i  S h i f t o f power-*Federal from East t o government West a n d intervention conflicts by between them -Export control -Taxes -Subsidies Decreased «_ competitive power o f industry  TRADE F R I C T I O N  133 T A B L E A-2 CONSUMER  PRICE INDICES:  INTERNATIONAL COMPARISON -  1973 I CAN. U.S. U.K. FRA. GER. ITA. JAP.  111. 9 110. 7 1 2 2 .2 1 1 5 .9 1 1 6 .0 117. 5 1 1 6 .9  II  1974 IV I  I I I  1 1 4. 5 1 1 7 . 7 1 1 3. 1 1 1 5 . 6 1 25.2127. 7 118 . 2 1 2 1 . 1 •118 . 2 1 1 9 . 3 121 . 3 1 2 3 . 6 1 22 . 7 1 2 6 . 5  119 118 131 124 121 127 131  .8122. .3121. .8137. .4129. .7124. .2133. .9144.  7 6 2 0 6 6 1  1970=100, II  I I I  126. 8130. 6 1 2 5 . 1 1 2 8 .9 145. 3149. 4 1 3 4 .31 3 8 . 7 1 2 6 .6 1 2 7 . 8 1 4 0 .81 5 0 . 4 1 5 0 .51 5 6 . 1  1970 w e i g h t s A . A . R.C. I V 1973 1974  1 3 4 .2 7. 6 1 3 2 .6 6. 2 156. 1 9. 2 1 4 3 .1 7. 3 1 2 9 .5 6. 9 1 6 0 .0 1 0 . 8 1 6 2 .7 1 1 .7  10. 9 1 1 .0 16. 0 13. 6 7. 0 19. 1 24. 4  S o u r c e : C a n a d a , M i n i s t r y o f F i n a n c e , Economic Review, A p r i l 1 9 7 5 , ( O t t a w a : I n f o r m a t i o n C a n a d a , 1 9 7 5 ) , p . 1 0 ; OECD. OECD Main Economic Indicators. F e b r u a r y , 1975 N o t e : CAN.=Canada, U . S . = U n i t e d S t a t e s , U . K . = U n i t e d K i n g d o m , F R A . = F r a n c e , GER.=W.Germany, I T A . = I t a l y , JAP.=Japan, A.A.R.C.=Average a n n u a l r a t e o f change.  134 TABLE A-3 CURRENT B A L A N C E S OF MAJOR I N D U S T R I A L - OECD e s t i m a t e s  seasonally adjusted,  Canada United States Japan Australia-New Zealand Belgium-Luxemberg France Germany Italy Netherlands Sweden Switzerland U n i t e d Kingdom T o t a l OECD  COUNTRIES  billion 1 973 -0.43 0.51 -0.14 0.79 1 .40 -0.68 4.54 -2.42 1 .75 1.14 0.28 -3.11 2.50  US d o l l a r s 1974 -1 .50 -3.25 -4.75 -3.20 0.25 -7.50 9.00 -8.30 1 .50 -0.70 0.00 -9.00 -37.50  iew, Economic Rev Source: Canada, M i n i s t r y of F i n a n c e , A p r i l , 1975, (Ottawa: I n f o r m a t i o n Canada, 1975), p. 13; OECD, OECD Economic Outlook, D e c e m b e r , 1 9 7 4 . Notes: 1. T h e f i g u r e s o f B e l g i u m - L u x e m b o u r g a r e b a s e d o n t h e e s t i m a t e by t h e s e c r e t a r i a t on a t r a n s a c t i o n b a s i s . 2. T h e f i g u r e s o f F r a n c e a r e b a s e d o n t r a n s a c t i o n s w i t h all countries.  135 TABLE  A-4  CANADIAN MERCHANDISE TRADE 1973 Exports Imports Trade balance  25,461 22,726 2,735  - m i l l i o n Canadian d o l l a r s 1974 1975 1976 32,591 30,893 1 ,698  33,347 33,986 -639  S o u r c e : Canada, M i n i s t r y o f F i n a n c e , Economic May 1977, ( O t t a w a : M i n i s t e r o f S u p p l y a n d S e r v i c e , 58; S t a t i s t i c s C a n a d a , Quarterly Estimate of the Balance of International Payments, C a t . 67-001.  38,019 36,887 1 ,132  Review, 1977), p, Canadian  136 TABLE A-5 CHANGES I N LABOUR COSTS AND P R O F I T S P E R U N I T OF OUTPUT - Percentage change, year -over-year 1972 1973 1974 R e a l GNP Employment Labour p r o d u c t i v i t y "Labour income" Labour income p e r employed person Labour cost p e r unit of o u t p u t P r o f i t s per unit of output Price deflator Total domestic demand P r i c e d e f l a t o r - GNP  5.8 3.1 2.6 11.0 7.6  6.8 5.2 1 .5 12.5 7.0  3.7 4.3 -0.6 16.8 12.0  4.9  5.4  12.6  14.5  27.0  23.9  4.6  6.2  11.2  4.8  7.6  13.1  S o u r c e : C a n a d a , M i n i s t r y o f F i n a n c e , Economic Review, April, 1975 ( O t t a w a : I n f o r m a t i o n C a n a d a , 1 9 7 5 ) , p . 5 3 ; S t a t i s t i c s C a n a d a , The Labour Force, Monthly, C a t . 71-001; , National Income and Expenditure Accounts, Quarterly, Cat. 13-001. .  1 37 T A B L E A-6 P R O D U C T I O N S H A R E S BY S E C T O R S , S E L E C T E D Y E A R S  - % of Primary -Agriculture -Forestry -Fishing & trapping -Mining, quarrying, o i l wells Secondary -Manufacturing -Construction -Transportat ion & communication - E l e c t r i c power, gas & water utilities Tertiary -Wholesale r e t a i l trade -Finance, insurance, real estate -Public administration, defence -Service TOTAL  1870-1974  Gross Domestic Product a t Factor 1870 1911 1970 1926 1960 46.2 34.3 9.9 1. 1  39.4 30.8 4.6 1 .5  0.9  2.5  22.6 NA NA NA  29.7 18.8 10.3 NA  NA  0.6  Cost 1980  23.4 18.1 1 .3 0.8  10.4 4.9 1 .3 0.2  8.3 3.3 0.8 0.2  10.9 3.3 0.9 0.2  3.2  4.0  4.0  6.5  44.8 26.4 6.0 9.6  41 .4 23.3 6.3 8.9  39.4 21.6 5.8 8.5  2.8  2.9  3.5  38.7 21.7 4.1 12.9  31 .2 NA  30.8 NA 1  37.9 11.6  44.8 12.8  50.2 12.4  49.1 11.0  NA  NA  10.0  10.6  11.3  10.6  NA  NA  7.3  7.5  NA 100.0  NA 100.0  19.2 100.0  20.6 100.0  1  3.4 12.9 100.0  6.9 13.5 100.0  S o u r c e : C h i s t o p h e r G r e e n , Canadian Industrial Organiztion and Policy, 2nd e d . ( T o r o n t o : M c G r a w - h i l l R y e r s o n L i m i t e d , 1 9 8 5 ) , p . 4; M.C. U r q u h a r t a n d K . A . H . B u c k l e y , Historical Statistics of Canada (Cambridge: M a c m i l l a n , 1965), S e r i e s E 46-45, E 202-213, E 214-44 f o r 1970, 1 9 1 1 , a n d 1926; s e c o n d e d i t i o n , 1 9 8 3 , s e r i e s F 56-75 f o r 1 9 6 0 a n d 1 9 7 0 ; S t a t i s t i c s C a n a d a , National Income and Expenditure Accounts, C a t . 31-201 ( O t t a w a : December 1 9 8 1 ) , T a b l e I I I , p. 97, f o r 1980. Notes: 1ncludes industries. 1  income g e n e r a t e d by t h e r a i l w a y  and telephone  138 T A B L E A-7 EMPLOYMENT S H A R E S BY ECONOMIC SECTOR AND  Primary -Agriculture -Forestry -Fishing & trapping -Mining, quarrying, o i l wells Secondary -Manufacturing -Construction -Transportation & communication Public utilities Tertiary -Trade (wholesale, retail) -Finance, insurance, real estate -Community, business, personal services (incl. health, education) -Public admini s t r a t ion TOTAL  1947  1960  27.5 24. 1 1 .2 0.7  INDUSTRY  - % -  1970  1975  1980  14.3 11.3 1. 1 0.4  9.3 6.5 0.9 0.3  7.8 5.2 0.9 0.3  7.3 4.5 0.7 0.3  6.9 4.4 0.6 0.3  1 .5  1 .5  1 .6  1 .4  1 .8  1 .6  40.3 26.7 5.2 7.7  40.7 24.9 7.2 7.5  37.5 22.7 6.0 7.7  37.3 22. 1 6.5 7.6  34.0 19.7 5.8 7.3  32.0 18.2 5.6 7.1  0.7 32. 1 12.3  1. 1 45.0 16.2  1 .1 53.2 16.7  1. 1 54.9 17.2  1 .2 58.7 17.2  1. 1 61.1 17.4  3.8  4.6  4.9  5.7  5.7  25.7  26. 1  28.9  30.8  6.2  6.7  6.9  7.2  100.0  100.0  2.7  17.1  1 00.0  1982  25.0  100.0  1 00.0  100.0  S o u r c e : C h r i s t p h e r G r e e n , Canadian Indust r i al Organization and Policy, 2nd ed. (Toronto: McGraw-hill R y e r s o n L i m i t e d , 1 9 8 5 ) , p . 6; M.C. U r q u h a r t a n d H. B u r k l e y , Hi storicai St at i s t i cs of Canada, S e r i e s C 130-151 f o r 1947, 1 9 6 0 ; S t a t i s t i c s C a n a d a , The Labour Force, C a t . 71-001 f o r 1970, 1 9 7 5 , 1980 a n d 1 9 8 2 .  139 TABLE A-8 FOREIGN  Manufacturing Mining & smelting Petroleum & n a t u r a l gas Railways Public utilities A l l sectors  OWNERSHIP CONTROL OF C A N A D I A N  INDUSTRY  19 6 7 ( U S ) FO FC  19 7 3 FO FC  52 61  57 65  44 51  45 56  53 51  58 56  53 43  45 30  62  74  51  60  58  75  74  49  19 19  2 5  8 18  2 5  10  6  7  4  35  35  29  28  34  30  25  33  1977 FC  - % -  19 67 FO FC  1  1981 FC  1  S o u r c e : C h r i s t o p h e r G r e e n , Canadian Industrial Organization and Policy, 2nd e d . (Toronto: McGraw-hill R y e r s o n L i m i t e d , 1 9 8 5 ) , p . 3 5 ; Foreign Ownership and the Structure of Canadian Industry (Queen's P r i n t e r , 1968), p. 4 2 2 ; f o r 1 9 2 6 , 1 9 4 8 , 1 9 6 3 ; Foreign Direct Investment in Canada (Gray-Report) (Ottawa: I n f o r m a t i o n Canada, 1972), T a b l e 4, p . 2 0 , f o r 1 9 6 7 ; S t a t i s t i c s C a n a d a , Corporations and Labour Union Return Act, Report for 1973; 1977; 1981; Cat. 61-210, s e l e c t e d t a b l e s . D a t a on f o r e i g n o w n e r s h i p , o f Canadian as w e l l as non-resident c o n t r o l l e d c o r p o r a t i o n s , was n o t p u b l i s h e d b y CALURA i n 1977 a n d 1 9 8 1 . Notes: Does n o t i n c l u d e s m e l t i n g . FO: F o r e i g n o w n e r s h i p r a t i o ; w h i c h i s d e f i n e d a s e q u i t y and d e b t c a p i t a l owned by n o n - r e s i d e n t s , a s a p e r c e n t o f total capital i n industry. FC: F o r e i g n c o n t r o l r a t i o ; w h i c h i s d e f i n e d a s e q u i t y and d e b t c a p i t a l owned by r e s i d e n t s a n d n o n - r e s i d e n t s i n f i r m s whose v o t i n g s t o c k i s c o n t r o l l e d (50%+) by non-residents, as a percent t o t a l c a p i t a l i n industry. 1  140 TABLE A-9 EXPLOITABLE O I L RESERVES  I N CANADA  m i l l i o n b a r r e l ( s h a r e , %) Light o i l Heavy o i l Total Northwest T e r r i t o r i e s British  Columbia  Alberta Saskatchewan Manitoba Ontario TOTAL  Kannai 229.  Source: Gaikyo  33 .9 ( 0 . 9) 151 .3 ( 4 . 0) 3 , 3 6 9 .6 ( 8 9 . 5) 159 .3 ( 4 . 2) 46 .3 ( 1 . 2) 3 .9 ( 0 . 1) 3 , 7 6 4 .3 ( 1 0 0 . 0)  _  2 6 2 .2 ( 3 5 . 5) 4 7 6 .2 ( 6 4 . 5)  -  -7 3 8 .4 ( 1 0 0 . 0)  33 .9 ( 0 . 7) 151 .3 ( 3 . 4) 3,631 .8 ( 8 0 . 7) 6 3 5 .5 (14. 1 ) 46 .3 (1 . 0) 3 .9 ( 0 . 1) 4 , 5 0 2 .7 ( 1 0 0 . 0)  J a p a n , M i n i s t r y o f F o r e i g n A f f a i r s , Zai ka (Tokyo: M i n i s t r y o f F o r e i g n A f f a i r s , 1983), p.  141 TABLE A-10 P R O V I N C I A L S H A R E S I N T H E M A N U F A C T U R I N G SECTOR  (1980)  - m i l l i o n C a n a d i a n <d o l l a r s ( s h a r e , %) Employees Shipment Value Value added added /enployee Newfoundland  14,379 (1.1) P r i n c e Edward I s l a n d 2,380 (0.2) Nova S c o t i a 29,001 (2.2) New B r u n s w i c k 25,155 (1.9) Quebec 389,901 (29.0) Ontario 648,765 (48.2) Manitoba 43,027 (3.2) Saskachewan 15,264 (1.1) Alberta 56,988 (4.2) B r i t i s h Columbia 120,961 (9.0) Yukon & N o r t h West 399 Territories (-) TOTAL 1 , 3 4 6 , 1 60 (100.0)  Kannai 256.  1 ,097 (0.7) 234 (0.1 ) 3,454 (2.1) 3,561 (-2.1) 44,619 (26.6) 82,171 (48.9) 4,364 (2.6) 2, 107 (1.3) 10,521 (6.3) 15,893 (9.5) 30 (-) 168,051 (100.0)  488 (0.7) 78 (0.1 ) 1 , 1 95 (1.8) 1 ,080 (1.6) 18,361 (27.8) 32,247 (48.9) 1 ,770 (2.7) 788 (1.2) 3,376 (5.1) 6,567 (10.0) 10 (-) 65,960 (100.0)  34 33 41 43 47 50 41 52 59 54 (-) 49  S o u r c e : J a p a n , M i n i s t r y o f F o r e i g n A f f a i r s , Zai ka Kokan Gai kyo (Tokyo: M i n i s t r y o f F o r e i g n A f f a i r s , 1983), p.  142  TABLE THE  TOP  Rank by S a l e s o r sales operating revenue ($•000) 1  13,805,450  2  12,759,297  3  8,919,000  4  8,874,700  5  8,580,600  6  6,418,339  7  5,652,000  TEN  A-11  INDUSTRIALS  Company office)  (head  General Motors of Canada Ltd-. (Oshawa, Ont.) Canadian Pacific Ltd. (Montreal) Imperial O i l Ltd. (Montreal) B e l l Canada Enterprise Inc. (Montreal) F o r d Motor Co. o f Canada (Oakville, Ont.) Alcan Aluminium Ltd. (Montreal) T e x a c o Canada Inc. (Toronto)  5,300,000 S h e l l Canada Ltd. (Toronto) 9 10  5,078,000 G u l f Canada Ltd. (Toronto) 4,625,100 C a n a d i a n National Railway (Mtl.)  (1983)  Foreign ownership (%)  Major shareholders  100 G e n e r a l Motors Corp. Detroit Power C o r p . of Canada 12% 70 Exxon C o r p . , New York Wide distribution 90 F o r d M o t o r Co. , Dearborn, Mich. Wide distribution 90 T e x a c o I n c . 68%, Texaco International N.Y. 22% 79 S h e l l Investments Ltd. Netherland / Britain 60 G u l f O i l Corp. Pittsburg Federal government 100%  S o u r c e : C h r i s t o p h e r G r e e n , Canadian Industrial Organization and Policy, Second e d i t i o n , ( T o r o n t o : M c G r a w - h i l l R y e r s o n L i m i t e d , 1985) pp. 22-23; The Financial Post 500 (June  1984), pp.  70,71,74.  

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