Historical Background: Japan's Ministry of International Trade and Industry (MITI) was formed in 1949 from the union of the Trade Agency and the Ministry of Commerce and Industry in an effort to curb postwar inflation and provide government leadership and assistance for the restoration of industrial productivity and employment. MITI held primary responsibility for formulating and implementing international trade policy, although it did so by seeking a consensus among interested parties, including the Ministry of Foreign Affairs and the Ministry of Finance. MITI also coordinated trade policy, on issues affecting their interests, with the Economic Planning Agency, the Bank of Japan, and the ministries of agriculture, construction, forestry and fisheries, health and welfare, posts and telecommunications, and transportation. As trade issues broadened in scope, these other ministries became more important in international negotiating, so that in the late 1980s MITI had less control in formulating international trade policy than it had had in the 1950s and 1960s. The prime minister, the National Diet (Japan's legislature), and the Fair Trade Commission also circumscribed MITI's operations.
MITI was responsible not only in the areas of exports and imports but also for all domestic industries and businesses not specifically covered by other ministries in the areas of investment in plant and equipment, pollution control, energy and power, some aspects of foreign economic assistance, and consumer complaints. This span has allowed MITI to integrate conflicting policies, such as those on pollution control and export competitiveness, to minimize damage to export industries.
MITI served as an architect of industrial policy, an arbiter on industrial problems and disputes, and a regulator. A major objective of the ministry was to strengthen the country's industrial base. It did not managed Japanese trade and industry along the lines of a centrally planned economy, but it did provide industries with administrative guidance and other direction, both formal and informal, on modernization, technology, investments in new plants and equipment, and domestic and foreign competition.
The close relationship between MITI and Japanese industry led to foreign trade policy that often complemented the ministry's efforts to strengthen domestic manufacturing interests. MITI facilitated the early development of nearly all major industries by providing protection from import competition, technological intelligence, help in licensing foreign technology, access to foreign exchange, and assistance in mergers.
These policies to promote domestic industry and to protect it from international competition were strongest in the 1950s and 1960s. As industry became stronger and as MITI lost some of its policy tools, such as control over allocation of foreign exchange, MITI's policies also changed. The success of Japanese exports and the tension it has caused in other countries led MITI to provide guidance on limiting exports of particular products to various countries. Starting in 1981, MITI presided over the establishment of voluntary restraints on automobile exports to the United States to allay criticism from American manufacturers and their unions.
Similarly, MITI was forced to liberalize import policies, despite its traditional protectionist focus. During the 1980s, the ministry helped to craft a number of market-opening and importpromoting measures, including the creation of an import promotion office within the ministry. The close relationship between MITI and industry allowed the ministry to play such a role in fostering more open markets, but conflict remained between the need to open markets and the desire to continue promoting new and growing domestic industries.