Policy Update 107

Cornerstone of RIETI's Industrial Policy Research – In memory of Dr. Ryutaro Komiya

President and CRO, RIETI

Dr. Ryutaro Komiya passed away on October 31, 2022.

Dr. Komiya was the first director general of the Research Institute of International Trade and Industry (MITI/RI), established in 1987, and served as its leader for 10 years until 1997. MITI/RI was the predecessor to the Research Institute of Economy, Trade and Industry (RIETI), which was established in 2001, and Dr. Komiya laid the “foundation of the foundation” of RIETI’s current research system. In his autobiography (Komiya, 2013), Dr. Komiya recollected that it was like “a bolt from the blue” when he was asked to become the director of MITI/RI, as he was known for his critical stance on the policies of MITI during several phases of the period of rapid economic growth. The fact that MITI invited a first-class economist with critical views toward MITI to serve as director general of MITI/RI is a testament to the insight and open-mindedness of MITI at that time.

Dr. Komiya established a procedure whereby research results are published as discussion papers, which are then peer-reviewed by external experts, and a system whereby university-based economists are invited to participate in research activities as visiting research fellows. The current RIETI has maintained these systems, although in different forms. Unlike in recent years, when it was not possible to easily download journal articles from the internet, the researchers also benefited from being able to browse through the past English-language economic journals owned by Dr. Komiya, which were kept in the director’s office.

In the mid-1990s, I became a senior researcher at the institute, with Dr. Komiya as my “boss.” When I was a university student, I studied using textbooks on microeconomics and international economics that he had co-authored, so of course I knew his name, but that was the first time I had met him in person. I was nervous at first because he was a well-known economist who wrote controversial articles on economic policy, but his warm personality soon made me comfortable and we often had lunch or dinner together. As Dr. Komiya himself wrote (Komiya, 2013), he believed it was important to visit the actual sites of economic importance around Japan, and he was a careful reader of the “Survey of Production Areas,” a document published by MITI. I had the opportunity to accompany him on a tour of a local factory, and he was a man of wide-ranging curiosity, asking many technical questions.

At that time, most of the full-time researchers at MITI/RI were assigned researchers from MITI or private firms and organizations. For the researchers who lacked an academic research background, Dr. Komiya provided cordial and detailed instructions on how to write papers based on his teaching experience. I strongly remember that he emphasized (1) the need to have a clear hypothesis when writing a paper, and (2) the need to have a proper list of references formatted and organized correctly. He did not highly value any research that only consisted of analysis of data that presented observed facts without hypotheses. This form of research is called “anatomical” research. As was the case with his own writing, he highly valued research that led to conclusions that differed from the accepted wisdom. Recently, I have been more involved in guiding and reviewing thesis writing, and without a doubt, I am still strongly influenced by Dr. Komiya.

At that time, Japan’s trade surplus was strongly criticized by the U.S., and Dr. Komiya argued that it was wrong to regard a trade surplus as a problem, based on the idea of a savings/investment balance (Komiya, 1994). 1995 saw the rapid appreciation of the yen, and interest in the policy field was growing. Against this backdrop, I had the opportunity to co-author a paper titled “How Exchange Rates are Determined?” Later, it was included as a chapter in An Economic Analysis of Japanese Industry and Trade (Komiya, 1999), which is a compilation of papers written by Dr. Komiya during his time at MITI/RI. Although formally a co-authored paper, it was a written version of Dr. Komiya’s theories and became valuable on-the-job training for me. It contains several arguments, but one point is that the real exchange rate reflects the terms of trade in the long run, which is also important when considering the recent depreciation of the yen in Japan’s economy.

Japan’s industrial policy attracted worldwide attention, and research by economists became more active around 1980. This was a time when the Japanese economy was doing well before entering a prolonged period of stagnation, and when research on the theoretical basis for industrial policy, such as new industrial organization theory, new trade theory, and endogenous growth theory, was flourishing in the field of economics. Few economists, including those before that time, have written as much about industrial policy as Dr. Komiya. For example, in the introduction to Industrial Policy of Japan (Komiya, Okuno, and Suzumura, 1984), the first comprehensive book on industrial policy in Japan, he describes “what industrial policy is,” “theoretical foundations of industrial policy,” “excessive competition,” and “decision-making process of industrial policy.” In An Economic Analysis of Japanese Industry and Trade (Komiya, 1999), two chapters, “Japan’s industrial policy in the 1980s” and “Japan’s industrial adjustment assistance” are directly related to industrial policy.

After making careful reservations, Dr. Komiya defines industrial policy as “those aspects of government economic policy in which policymakers use various means to influence the allocation of resources among industries, whether to address so-called ‘market failures’ or for other purposes, and to regulate, restrain or promote certain types of economic activity in the private sector” (Komiya, 1999). The basic argument is that Japan’s postwar economic development was achieved mainly through the creativity and vitality of private companies, and that the role of industrial policy was marginal.

On the other hand, the report does not deny that industrial policy has a role to play, of course, as it lists various policies such as the protection of infant industries, promotion of R&D, information effects of policy taxation and finance, industrial adjustment assistance, and environmental protection as industrial policies that correct for market failures. By organizing industrial policy using common and well-understood economic concepts as a “common language,” the dialogue between researchers and practitioners was established, and it led to RIETI’s current principle of building bridges between academic research and policy practice. However, he stated that it is difficult to evaluate the effects of specific industrial policies on industry and the economy, and that he would not attempt to undertake these evaluations. This would have been a natural decision at a time when methodologies for elucidating the causal effects of policies were in their early stages and high-quality empirical research on industrial policies was limited.

We would like to be able to ask Dr. Komiya where the problems of the current Japanese and global economies lie and how he would evaluate recent economic policies, including industrial policies, but unfortunately that is no longer possible. With technological advances in econometric analysis and greater availability of data than at the time, the scope for research that can be useful in evidence-based policy formation has expanded. There is a growing understanding of the importance of such research among policy practitioners. We would like to repay Dr. Komiya’s kindness by conducting objective and neutral research and making good policy recommendations.

November 15, 2022
  • Ryutaro Komiya (1994). The Economics of Trade Surplus/Deficit: The Foolishness of Japan-U.S. Friction [Boeki Kuroji/Akaji no Keizaigaku], Toyo Keizai Inc.
  • Ryutaro Komiya (1999). An Economic Analysis of Japanese Industry and Trade [Nihon no Sangyo/Boeki no Keizai Bunseki], Toyo Keizai Inc.
  • Ryutaro Komiya (2013). Economics: My Progress as a Scholar and a Teacher [Keizaigaku Waga Ayumi: Gakusya to shite Kyoshi toshite], Minerva Shobo.
  • Ryutaro Komiya, Masahiro Okuno and Kotaro Suzumura (eds.) (1984). Industrial Policy of Japan [Nihon no Sangyo Seisaku], University of Tokyo Press.

March 8, 2023

Article(s) by this author