The Ministry of Finance: Bureaucratic Practices and the Transformation of the Japanese Economy

The Ministry of Finance: Bureaucratic Practices and the Transformation of the Japanese Economy

The Ministry of Finance: Bureaucratic Practices and the Transformation of the Japanese Economy

The Ministry of Finance: Bureaucratic Practices and the Transformation of the Japanese Economy

Synopsis

The Ministry of Finance in Japan, perhaps one of the most powerful bureaucracies in the world, has created an economic superpower out of postwar shambles. This book details the Ministry's evolution as well as its current attempt to retain its position in a transformed economy.

Excerpt

The impetus for this book arose out of my experiences in the former Soviet Union. Having spent considerable time in the Newly Independent States, I had a chance to observe the economic transformation of these countries. This entailed the casting off of a centrally planned economy in favor of one more reliant on open markets. in general, policy makers in these countries looked to the United States as the primary model to emulate.

Implementing the U.S. model meant an elimination of restrictions on foreign exchange, Darwinian competition premised on survival of the fittest and the unrestricted entry of foreign capital. the role of the government was to be minimized, with market forces driving most economic decisions. While no economy of the former Soviet Union fully accepted this model, it was the philosophical benchmark used to judge the evolution of the post-command economies.

Absent was a debate over other models that may have been more appropriate in promoting economic recovery. Japan represented perhaps the best example of a country that chose an alternative path to recovery. in the post-occupation period, Japan eschewed open markets in favor of a system in which the government (read bureaucracy) played an activist role in the economy.

Among other things, the system placed a premium on stability, the avoidance of excessive competition and the availability of affordable capital to key industries. Foreign exchange controls, interest rate regulation and intrusive government involvement in the corporate decision-making process were all prominent features of the system. Moreover, the system worked. Japan's economy recovered far more quickly than anyone, including the Japanese, expected.

Many aspects of the Japanese model were widely used by other countries in Asia. High-growth economies tended to rely on debt rather than equity funding . . .

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