MITI (METI)'s Policies for Industrial Adjustment in Postwar Japan

This paper takes a retrospective review of the policies for "industrial adjustment" conducted by the Ministry of International Trade and Industry (MITI) and its successor, the Ministry of Economy, Trade and Industry (METI), in postwar Japan, and examines the effects of their completion which occurred from the end of the 1990s to the beginning of the 2000s.

The industrial adjustment policy, in the general meaning, aimed to revitalize the declining industries and/or promote resource (capital and labor) allocations from declining industries to growing ones. As such, shifting was not necessarily promoted smoothly, and the government provided various support to firms and the labor side to facilitate it. In Japan, industrial adjustment policies historically have been practiced on such industries as textiles, coal mining from the 1960s, and basic materials industries from the 1970s, based on the legislation of Act on Temporary Measures concerning Stabilization of Designated Depressed Industries (1978), Act on Temporary Measures concerning Improvement of Structure of Designated Industries (1983), Act on Temporary Measures for Facilitating Industrial Structure Adjustment (1987), and so on.

The essentials of these policies are 1) adjustments of supply and demand at production or investment level in the depressed industries and 2) mitigation of unemployment problem or social conflicts, through which the industrial adjustment of such industries would be achieved more or less smoothly. MITI had played the role of coordinator among various concerned interests as needed to reflect changing circumstances in successive periods.

However, in the latter half of the 1990s and on, the conventional industrial adjustment policies were ended, and some parts of the policies related to the restructuring and industrial revival were inherited by the "industrial revitalization policy" which MITI (METI) established as one of the new lines of policies at that time. Although this policy was based on market mechanism in principle, the policy intervention on the industries, especially on the specific firms to protect them, persisted in different forms, whereas some aspects of the labor were excessively "marketized." This situation could possibly cause negative effects on the Japanese economy in the medium-and long-term, thus re-examining the policy system might be required.