"Fund Allocation Policy in Postwar Japan: Industrial Policy and Banks"(in Japanese)

The aim of this paper is to evaluate the degree of government intervention in the allocation of private bank funds in 1950's Japan. As a part of the transition process to a market economy, financial controls dating since the period of WWII, were abolished in 1949. By the early 1950's, the government was able to achieve the intended fund allocation through the control of public finance, because public funds had a large share in long-term funds supply. In the middle of the 1950's, while public funds decreased relative to private funds, a huge demand for the public funding of social infrastructure programs emerged in the context of high economic growth. This situation caused a serious shortage of capital for "basic industries," including electricity, coal, steel, shipping, which had until then heavily depended on public funds. To cope with this situation, the party in power tried to reinstate the control of fund allocation of private financial institutions. Although this was not realized owing to hard opposition from financial and industrial associations, the potential threat of financial control continued to exist. This in turn, urged private financial institutions to set up a system for the voluntary adjustment of fund allocation. In 1956 the Council of Financial Institution Fund was established under the Ministry of Finance, in which such issues as allocation policy of private financial institutions and adjustment of investment plans of private companies were discussed. In order to ensure that the policies established by the Council were implemented by the private financial institutions, the National Federation of Banking Associations set up the Fund Adjustment Committee. Meanwhile, the Ministry of International Trade and Industry (MITI) established the Industrial Fund Branch under the Council for Industrial Rationalization, where MITI and representatives of industrial society discussed the adjustment of investment in accordance with the capacity of private financial institutions' capital supply. The Council of Financial Institution Fund, the Fund Adjustment Committee, and the Industrial Fund Branch came to be a basic framework for the policy-based adjustment of private fund allocation in the early part of the high growth period.