& BUSINESS

17th

ANNUAL REPORT

i:li'`"e;/Ew

THE

RESEARCH INSTITUTE FOR
AND BUSINESS ADMINISTRATIONECONOMICS
KOBE UNIVERSITY

l970

t

KOBE
ECONOMIC & BUSINESSREVIEW
l7th

ANNUAL REPORT<`ire':2

THE RESEARCH INSTITUTE FORECONOMICS AND BUSINESS ADMINISTRATIONKOBE UNIVERSITY

t970

CONTENTS
Page

An Outline from Odice Management to MIS
in Japan..................................................................Minoru BEiKA

1'
Japanese Economic Growth since the Meiji Restoration:
A Social Accounting Approach..,..,........................ Nobuko NossE

9

EMciency of Optimal Growth Policies forDevelopment................,.....................,.................. Hikoji KATANo

3S

Decasualization of Dock Labour
Experiences at the Port of Kobe ............Hiromasa YAMAMoTo

43

The Characteristics of Recent Corporate Mergers
in Japan............................................,...........................Jiro ONo

Estudos Brasileiros no Japio .,...............................Yoshiaki NisHiMuKAi

S3

69

A Note on the Integration of Economic Theory
and Organization Theory....................................Hideki YosHiHARA

79

AN OUTLINE FROM OFFICE MANAGEMENTTO MIS IN JAPAN
Minoru BEIKA

I
The subject to be dealt with here covers some characteristic features ofcomputerization or the so-called management information system in the business world of Japan. For these purposes it will be necessary to begin with theoutline of its development in the United States of America, because its enor-

mously rapid development has a great influence on many other industrializedcountries including Japan,
Since electronic computers were developed after World War II, the historyof computerization itself seems to be similar in the United States of America
and Japan. The latter country has only a timelag of a few years, But the background conditions of the two computerization histories are very different, especially regarding their business industries. Our business industries have had
few experiences of business mechanization such as the many kinds of calculatingmachines, accounting machines and punch card system machines, before theelectronic computer. Business mechanization in the United States has a historyof several decades beginning in the fourth quarter of the 19th century. Japan
had little experience in oMce management. But it has energetically introduced

computers since the latter half of 1950, and now has 5,OOO or more computer
sets. This represents only 10 O/o of the number of computers in use in the UnitedStates, but it is nearly equal to the number of some of the European countries;

namely, West Germany, the United Kingdom, France and Italy. Therefore,at first, the short history of business mechanization in the United States will be

reviewed here from the view point of Japan, and then the case of Japan will be

examined.

II
The history of business mechanization in the United States began in thelast quarter of the 19th century. For example, the typewriter for practical use

was invented in 1868; the' listing adding machine was developed in 1889; thecash-register in 1879; and corresponding to these inventions, the National Cash-2

MINORU BEIKA

Register Co., Ltd. was established in 1884; the Remington Standard Typewriter Co. in 1886; and the Burrough Adding Machine Co. in 1905. As theresult of these developments, the more integrated business machines, such as

the accounting machine and bookkeeping machine, were developed from thesingle-purpose machines stated above, in the first decade of the 20th century.

The so-called punch card system machine was invented by Herman Hollerith
in 1887 and an other type of punch card system machine by James Powers in
1907: both served the purpose of data processing in the national census. The
Tabulating Machines Co., the predecessor of I. B. M., was established in 1896,

and the Powers Accounting Machines Co., the predecessor of Remington Rand,
in 1911. The first step of business mechanization was accomplished by theseoMce machines including the punch card system machines.
It is remarkable that the scientific management approach originated aroundthe same 1910's thanks to F. W. Taylor and others. In the same years, manylarge scale industrial enterprises developed in the United States. The growthof large enterprises, the progress of scientific management techniques and thedevelopment of a variety of business machines, brought a new concept of clerical

work in the business oMce: the concept of oMce management. A considerable
number of books explaining the concept of the oMce management has been
published since about 1915.

The National OMce Management Association of the United States (NOMA)
was established in 1919. A few representative companies adopted the oMce
management concept for eMcient management and set up an oMce manager intheir organizations. W. H. LeMngwell, who was the president of NOMA andpublished in 1925 the representative book of oMce management, emphasized
the importance of the function of ofice management and othce managers at thegeneral meeting of NOMA in 1925. The concept of oMce management wasalso clarified in the 1920th thanks to the business mechanization of the preceding

30 or 40 years and the scientific management techniques. At the same time, thefunction of the controller was created, based on the same considerations as forthe oMce management. The internal control was realized through the introduction of the punch card system machines. The Controller's Institute of America
was established in 1931.

After the Great Depression just before and after 1930, the clerical works
in the oMces of the business firms increased constantly due to the relations be-

tween business firms and the government of the New Deal policies.

During the Great Depression and at the beginning of World War II, thetechniques of oMce management and the application of business machines did
not change greatly, but the business machine industries developed considerably

ANTO
OUTLINE
FROM OFFICE MANAGEMENT 3
MIS IN JAPANdue to the increase of clerical works. On the contrary to the United States, thebusiness firms in Japan had few business machines, and relatively little interest

in oMce management in the days before World War II. It will be explained indetail later.

III

The electronic computer was invented in 1946 in the United States: it wascalled ENIAC and only for scientific use. The computer for business use wasdeveloped only in 1951 and used practically first by the Census Bureau. It wasin 1954 that business enterprises began to use electronic computers for clerical

works for the first time: among them were G. E., U.S. Steel, Du Pont and otherlarge-scale enterprises. In 1958 the transistorizedcomputer appeared and in1964 the computer with integrated circuit (I. C.) opened the third generation of

the computer world. The history of the hardware of the computer is well knownby many people. It can be omitted here. The writer is greatly interested in
the history of the process of computer applications in business in the UnitedStates. Without being an expert regarding this process, he dares to say that theprocess of computer applications in the United States is related to that in Japan.

In the same way as the development of different kinds of business machines

brought forth the concept of oMce management before the War, the development in the application of the computer has brought forth new concepts in data-processing and information handling. Therefore these processes will be traced

here. The concept of the integrated data-processing system (IDPS) is wellknown now. In the understanding of the writer, this concept was formulated in

1954 by the U.S. Steel Corp.: the company created the new concept for using
the new tool in business management. Some other new concepts of the samekind in computer applications can be found. The concept of the total system is

one of them. It seems that it was first used by the Carborundum Co. in 1958
or 19S9. The writer does not know the accurate origin of these concepts, but
this is immaterial. Some say that the IDP of 1954, the Data Processing Centerof 1956 by the Sylvania Electric Co. and the total system are the three milestonesin the computer world of the 1950's.

At the same time, bank automation progressed thanks to the Banker's Association of the United States. One of the representative experiments was the

adoption of the MICR (Magnetic Ink Character Recognition). The researchcommittee for new means to overcome increasing clerical works related to check

handling was organized in 1954. It was in 1958 that the committee deeided toadopt the MICR system in most of the commercial banks.

4

BEIKA
MINORUThe approach to apply new techniques of electronic data processing foroMce works by trial and error changed generally the concept of oMce manage-

ment and its function. For example, the name of the OMce Management Division of the American Management Association was changed to "the Administrative Service Division" in 1960. It means that the function of oMce management
should be enlarged and given added importance as the fundamental factor inbusiness management, and therefore the status of the head of oMee management
should be raised from that of the middle management to the top management.
In 1960, the volume of the memory storage of the computer was enormously
enlarged and the access time was rapidly speeded up; and important applicancesand communication facilities were further developed. On this background, the

new concept for computer applications in business management developed
creatively. This concept is the management information system. The Management Information System and the Computer by J. D. Gallagher was published in1961 by the American Management Association. This book seems one of therepresentative books related to the MIS of the earlier time. The third genera-tion of the computer accelerated the approach of the MIS. The on-line-realtime and time-sharing systems are influential means to promote it. As for thedevelopment of electronic data processing, three factors-the hardware of thecomputer, its software and their management applications-should be developedside by side balancedly. A certain concept of management application of thecomputer is necessary for guiding the development of these factors. The management information system is surely such a concept. Because computer application generally begins in ordinary routine clerical works, such as those related

to purchasing, selling, production, accounting and static operations, and thengradually to control functions, such as stock control, production control, financial

control and personnel control and so forth, after these experiments, the top

management could use the more or less accumulated informations processed bycomputers for decision making, These trials for computer applications needcoordination and cooperation in every function and at every level of management.

The concept of the management information system is the promoter to leadthese trials of computer applications.

The management information system generally means that the system
supplies necessary informations for decision making in every function and of
every level of the management (top, middle and supervisory levels) in the business firms. But the historical processes of several developed concepts, brought
forth in the computer applications for these fifteen years or more, are more im-portant than the concept of the MIS itself. The concept of the MIS is not
only the goal of a certain stage of management innovation and the expectation

AN OUTLINE FROM OFFICE MANAGEMENT 5
TO MIS IN JAPANof computer application, but also one of the means to lead every level and func-tion of management, as the concept is not meant to be static but dynamic andchangeable.

The concept of the MIS is a thought including some kind of means andtechniques. This is how the writer understands the developing process of thecomputer applications in the United States. Now the Japanese case should beconsidered.

rv
The development of the electronic data processing system in Japan has
already been outlined by the same writer in Kobe Economic and Bust'ness Review

12th Annual Report 1965. But now the development from the stage of oMce
management to that of the MIS concept is to be discussed from the view pointof the processes of computer applications, related to those in the United States
as stated above.

In Japan the business world before World War II demonstrated little in-terest in othce management. Few books concerning oMce management were
published at that time. The movement of rationalization expanded widely inJapan from the late 1920's, due to the Great Depression and the introduction ofscientific management. But the movement was chiefly oriented to the problem
of production and little to that of oMce work. Some specially far-sighted busi-

nessmen introduced the concept of oMce management to the business world, andsome business firms imported business machines, such as punch card system
machines. A few experiments for a rational improvement in business oMces
were made some business firms. But these were exceptional cases. There
were not yet any accounting or beolrkeeping machines. These conditions lasted
till World War II. And then, due to the destruÅëtion by the War, the Japanesefirms were not in a position to consider business mechanization for several years.

It was after the Korean War (1950) only that the importance of oMce mamagement was recognized and all types of business machines, such as accounting andbooklceeping machines, punch card system machines and others began to beimported by Japanese industrial enterprises.

The Nippon (Japan) OMce Management Association was established in1949. Since 1956 the post of "oMce manager" was introduced in the organization of many business firms by our business missions. At that time the adoptionof the "internal control •system" for management improvement was encouragedby the Department of Trade and Industry of the Government. Since 1949
business mechanization exhibitions have been held every year by the Nippon

6

MINORU BEIKA

OMce Management Association. Business mechanization through punch card
system machines was enthusiastically adopted by many business firms and study

groups were organized national-widely by each user group of IBM and RR
machines respectively in 1953 and 1955, It seems that the age of the introduction of the PCS covers the 10 years from 1949 to 1958-9, when in Japan electronic

computers began to be used widely for business.

Therefore the concepts of IDPS, the total system and others were introduced all at the same time, before electronic computers found access to business
oMces. Since 1960 electronic computers are increasingly used and as the result,business firms in Japan learned in a short time, not only the concept and tech-niques of oMce management which was developed in the United States alreadyin the 1910's, but also those of the IDP and the total system developed in the

1950's. Accordingly, they were confronted with many kinds of management
problems resulting from business mechanization.

The concept of the MIS as stated above also is now fairly well understoodby the managements of Japanese industries. Already around 1963-4 this concept was introduced and studied by many specialists concerned with computer
applications. It was also recognized by middle managements in charge of busi-

ness mechanization, but top managements showed a lack of understanding for
it at that time. In autumn 1967 a business mission of top management people
visited the United States to observe the actual situation caused by the rapid
diffusion of computers and the concept of MIS in the American business world.

Since then many top managements have emphasized the importance of the MIS
in management improvement in Japan. The concept of MIS, so-to-speak, is
now over-prevalent in Japan. The popularity of the mere word `MIS' seems
to mislead rather the process of management improvement in some points, because there is such a big gap between the actual conditions in management andthe concept of MIS.
Without doubt the concept of MIS is very significant for the Japanese business world, but the real conditions, as I said before, that is literally rapid diffusionof every stage of business mechanization at one stroke should be understoodwell.

Still more attention should be paid to the necessity of creating new conceptg and ideas for computer application leading to the improvement of management, taking into account the actual conditions in Japan. The energetic in-troduction of electronic computers and its hardware and software and new concepts is a strgng point, but is tends to hinder the creation of new and original

concepts and new ideas leading the improvement of management. In otherwords, for us Japanese the systems approach by the computer is one of the im-

OFFICE MANAGEMENTAN OUTLINE FROMTO MIS

7

IN JAPAN

portant problems. The consciousness ofproblems in management improve-

ment is necessary for the systems approach.

These are indeed urgent problemsof business management in Japan.

MEIJI
JAPANESE ECONOMIC GROWTHTHESINCERESTORATION: A SOCIAL ACCOUNTINGAPPROACH
Nobuko NossE

g1 Introduction
In this paper I shall try to do two things; first, to describe the Japanese

economic growth since the Meiji restoration of 1868 by means of the social ac-

counting approach, second, to compare the model of the economic growth ofthe late comer Japan with two other models i.e. that of the U.K. as an example
of an advanced economy and that of less developed countries in Asia.(i)As our observation spreads over an entire century, there are some obstacles
to be overcome; first, there have been changes of prices, of composition of thecommodities and of the state of technology, all of which make it diMcult tocompare in a consistent method, second, there is a lack of reliable information
especially for earlier period, and the data of social accounts in a standardized
system are provided only after 1930; for the earlier period the available data on
the working gainfu11y occupied population is only in round figures and the estimates of the national income before 1930, established by a few private pioneers

like those Prof. Ohkawa and Prof. Yamada before 1900 are not so reliable.(2)We shall solve some of these problems by way of compromise. First, likemost social accountants do, I consider mostly the change of prices by adjusting

nominal aggregates such as nominal national income by the general deflator of
GNE. Second, the explanation of statistical materials will be sketchy for theearlier periods, as I shall not use in my analysis real income per head of the
population of the labour force, but real income per head of the entire population

as a general index. Third, in this article we use the data of national income

during 1878-1929 estimated by Prof. Ohkawa and the data estimated by the
Economic Planning Agency for the period after 1930.
We shall survey first the Japanese economic development in a series of
(1)

(2)

These data have been given by Prof. Sir J. R. Hicks. As for the model of the advanced
economy, we find it in Ch. 16 of The Socr'al Framezvork (3rd ed., 1961), pp. 192-208. He
wrote the model of less advanced countries in Part II of Essays in VVorld Economics, 1959.
The reliability of the estimates before 1900 has been discussed recently. See J. I. Nakamura, `Growth of Japanese Agriculture, 1875-1920,' in The State and Economic Enter-

prise in 1apan (ed. by W. W. Lockwood), 1965, pp. 249-324. Also J. I. Nakamura,
Agriculturat Production and the Economic Development of Japan 1873-1922, 1966.

10 NOBUKO NOSSE
social accounts of the four periods which represent the stages of economic growth ;the transitional period, the first stage of economic development, the second

stage of economic development and of the postwar economic growth. We examine, then, the contributing factors of each period and compare the Japanese
ecofiomy with those of other nations.

g2 The Japanese economy in the successive four periods.
The four periods mentioned above coincide i) with the period from 1868
to 188S, the transitional period in which Japan started to go her way from thefeudalistic system to the modern capitalistic system, ii) with the period from1886 to 1919, the first stage of economic development when successfu1 industri-alization began, iii) with the period from 1920 to 1942, or the pre-WorldWar II period, called above the second stage of economic development when themodernization of the Japanese industry was accelerated, and iv) with the
postwar period from 1945 to the present date, called above the postwar periodof economic growth, when Japan started to reconstruct out of the ruins of the
war and has grown rapidly in economic power. In this article I shall subdivide
these periods into shorter time intervals as follows; the first stage of development(1886-1919) will be subdivided into a first period covering the year between
1886 and 1909, and a second period covering the years from 1910 to 1919; thesecond stage of development (1920-1942) will be subdivided into a first period

covering the years from 1920 to 1930 and a second period covering the yearsof 1931 to 1942. The postwar stage (1945 to the present time) will be subdivided
into a first period covering the years 1945 to 1954 and a second period after 1954
to the present time.{3}(1) The social accounts of the transitional period.

In the Japanese economy before the 1860s, there was an accumuiated thelatent wealth or a `slack' which was readily the heritage of the Tokugawas; making it possible for Japan after the restoration to transform the feudalistic social

framework into a modern capitalistic system.(4)It seems that the items of the first national balance sheet of the transitional( 3 ) In this article the inter-war period is omitted because it was an abnormal period during
which the military production greatly expanded, and we have not reliable data for maineconomlc aggregates.
(4) Prof. Ranis wrote as follows: "Taking up the slack in any economy means making
potential increments of productivity socially available, largely by means of reshuMing

resources with a minimum need for additional investment." See G. Ranis, `The
Financing of Japanese Economic Development,' The Economic History Revieav, XI, Apr.,
1959, p. 440. As forasurvey ofthe heritage of the Tokugawas, see E. S. Crawcour, `The
Tokugawa Heritage,' in The State and Economic Enterprise in Japan, ibid., pp. 17ag.

JAPANESE ECONOMIC GROWTH SINCE THE MEIJI 11

RESTORATION: A SOCIAL ACCOUNTING APPROACH
period included only items measurable in terms of money, representing theheritage of the Tokugawas, i.e. a kind of national wealth, a certain stock of goldand silver, the level of productivity of industries, especially of agriculture, theorganization of the market and credit system, the network of transportation, thepopulation, the labour power with a certain level of education, the pattern of

human behavior toward economic objectives, etc.
In this period, the main reshuMer of the economic resources for creating a
new economic system was the government, as in the case of all underdeveloped.
countnes.
After reallocating to a new national social class through a government's
reform, the working people who had belonged to the feudalistic social class suchas `Samurai' was now gainfully occupied in the primary industry up to 83.60/.
and in the non-primary industry up to 16.40/. respectively, as Table 1 shows.

On the other hand, using forced saving in the form of land tax as a main
source, the government began to invest a large amount of the social overhead
capital in order to construct modern industries. In this period, it is remarkablethat the ratio of transfer paypaent to government expenditure was very high.(s)This transfer payment was a payment accompanied by stipends for the `Samurai'
class and this was nothing less than expenses for the abolishment of the feudal
system and the creation of a modern social system.

There was little capital formation accumulated of the government investment
or private capital formation in the traditional technology. And as a source ofinvestment, the traditional sector which had attained a high level of productivity

than of subsistence, financed itself thanks to traditional technology and thesurplus was absorbed by transfer payments such as a land tax levied by thegovernment in order to finance governmental investments and by deficits inthe balance of payment. There were also funds for construction from abroad,
among which the most famous are the bonds issued in 1869 at London for theconstruction of a railway from Tokyo to Yokohama-the first railway in Japan-.
The production structure in the transitional period, according to the labourbalance of Table 1, was largely traditional, in the composition of the gainfu11y

occupied population in industries being 82.30/. in the primary industry, i.e.
agriculture, fishery and forestry and 17.70/, in the non-primary industry, i.e.

mining, manufacturing, service, etc. To what extent the traditional industries
were dominant is also shown in Table 1.
The allocation of capital stock by the industries was 72.40/. in the primary(5) See K. Emi and Y. Shionoya, `Government Expenditure,' No. 7 of Long-Term Economic Statistics ofJapan since 1868, 1966, p. 29.

NOBUKO NOSSE

12

industries and 27.60/, in the non-primary industries while the national incomein the primary industries and that in the non-primary industries was 61.8O/. and38.20/. respectively of total national income. During this transitional period,
the situation of the industry did not change as much as the figures of the open-

ing balance compared with those of the closing balance. It is remarkable thatthe traditional industry not only occupied a dominant position, but also sustained
Chart 1 National income per head (nominal and real)

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1878 1886 lg94 19. (}2 1910 191S 1926 1934 1942 19. ,[ie 19Sg 19. 66

Remarks; The full line and the dotted line denote the nominal national income per head
Source :and the real national income per head respectively.
Hundred- Year Statistics, ibid., pp. 12-13, p. 32 and pp. 44-45.

JAPANESE ECONOMIC GROWTH SINCE THE MEIJI 13

RESTORATION: A SOCIAL ACCOUNTING APPROACH
its growth during the period although the rate of growth was smaller than thatof the modern sectors as shown in the supplementary Table A.

The Chart 1 and Table 2 show the nominal national income per head andthe real national income per head in the transitional period. The nominal national income per head fluctuated especially during the so-called `Matsukata-

Reform' period between 1881 and 1885. The trend of growth was 8.40/o per
annum in the average. On the contrary, the trend of the real national income
per head was 70/, per annum, thus less than the former. The level and the rateof growth of real consumption per head were low; the latter 4.60/, per annum.
The transitional period, therefore, is said to be the period of reshuMing of theresources which had been accumulated for the modernization of the Japanese
economy and the level and composition of the industries themselves were notdifferent from those of earlier periods.(6}(2) The first stage of development (1886-1919)
This was the period during which the non-primary industries grew remarkably and tried to catch up with the primary industries.

The composition of the national income by the industries shown in Table
1, explains clearly this fact, as the ratio of the national income by the primaryindustries was 53.7 O/o at the beginning of this period of the total national income
and fell to 38.2 O/. at the end of the period. Also, the ratio of the gainfully occupied

population in the primary industries was 78.60/, of the total gainfully occupied
population at the beginning of the period and fell to 56.00/. at the end of theperiod, while 22.6O/. of the gainfully occupied population moved from the traditional primary industries to the modern industries. This means neither did pri-mary industries fall to the level of output, nor did the modern industries develoP uniformly in this period. Far from it. The primary industries still grew,

improving their technology and expanding investments especially for the work-

ing capital formation. And among the non-primary industries, the textile industry especially which started from the small scaled and labour intensive type,developed into a textile industry with modern technology, built by the government and then handed over to private ownership, while the heavy industry (i.e.
meta1, machinery, etc,) began later in the period.
The process of indusuialization in this period is characterized by the chang-

ing structure of export and import. According to Table 3, primary export goods
at the beginning of the period were tea, raw silk, china ware, etc. But exportsof cotton yarn, cotton fabrics and silk fabrics increased year by year in the latter

half of this period. Above all, the export of cotton yarn recorded a peak in 1915,( 6 ) See J. R. Hicks, Essays in World Economz'cs, ibld., pp. 180-188.

14

NOSSE
NOBUKOOn the other side, imports of finished goods recorded a higher level in the firsthalf of the period under review than before, but it decreased especially during

World War I, while imports of food and raw materials grew at an accelerated
rate. The import and export of capital goods during this period are also interesting to note. The imports of general machinery, rolling stock, tools, fixtures,

automobiles and other vehicles which began in the transitional period increased
continuously and these goods brought capital goods after industrialization andnew technology-namely borrowed technology-to the Japanese economy,
while in the middle of this period, exports of general machinery to the Japanesecolonies i.e. Formosa and Korea, began in 1896 and those of rolling stock, tools

and fixtures followed. We wish to emphasize this fact because i.) Japan reached
now the stage where she could produce part of the capital goods by herself andsave the funds for her own imports and ii.) the Japanese economy got the benefit
of international trade for economic development after this period. This develop-

ment, which appeared in the period for the first time, continued and obtained
greater ,strength in the following periods.(7)During the first stage of development, the weight of foreign trade in thegeneral economic activity increased greatly. As Table 5 shows, e and Y (E,Y, M stand for; exports, national income and imports respectively) which were
5.3 O/, and 3.5 O/. at the beginning of the period, increased especially in the latter

half of the period and reached 18.5O/. and 19.60/, respectively at the end of theperiod. The export quantity index q. which was 3.1 at the beginning of theperiod rose to 28.2 at the end of the period, while the import quantity index q.

stood at 2.6 at the beginning of the period and rose to 30.4 at the end. As forthe terms of trade during the period, they turned to the worse with the excep-

tional interval of the First World War boom, as Table 3 shows. The temporalgain caused by the First World War boom, was a nest-egg for the Japanese economic growth thereafter. In the period of this first stage of development, foreign

capital flowed into Japan too. Japan received reparations amounting to 300
million yens as a result of the victory in the Sino-Japanese War and was utilized

for importing capital goods. Among government expenditures, current expenditure and governmentinvestment increased, while transfer payments sharply
went down compared with those of the transitional period. It is interesting toobserve the following two categories of government expenditure; the investment
for social overhead capital and the military expenditure. Many ports, railways,(7)

See H. Rosovsky, Capital Formation in Japan, 1868-1940, 1961, p. 94, Table 25.
Ohkawa and others, The Growth Rate of theJapanese Economy st'nce 1878, 1957.

Also

JAPANESE ECONOMIC GROWTH SINCE THE MEIJI 15
RESTORATION: A SOCIAL ACCOUNTING APPROACH
roads, electric power, stations and schools were constructed by the government.

Above all, construction of railways recorded a peak during the Russo-JapaneseChart 2 Fluctuation of price indexesr--t - --

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1879 1887 1895 1903 19. 11 1919 1927 19. 35 1943 1951 1959 1967

Remarks :( i) The thick full 1ine, the thin full 1ine and the dotted line denote the index

of the general price index, the consumer price index and wholesale priceindex respectively.
(ii) All indexes are estimated by setting the average price levels of 1934-36=1

Sources :Hundred-Year Statistics, iin'd., p. 32 &p. 51. 0hkawa and others, `Prices,'
No. 8 of Long-Term Econemic Statistics ofJapan since 1868, 1966, p. 22, pp.
135-136. p. 208.

NOBUKO NOSSE

16

War of 1904-190S when the ratio was 74,20/o as the supplementary Table Bshows.(s)Table 1 also indicates the changing structure of capital stock in the Japanese economy. The ratio of capital stock in the primary industries was 70.20/.
of the total stock or the beginning of the period, 40.3 O/, in the middle and 29.3 O/,

at the end of the period, while the ratio of capital stock of non-primary industries was increasing to 29.8O/o, 59,7O/o and 70.7O/o respectively of the total capitalstock. The changes of composition corresponded to the changes of production
structure, and this coincided with the fact that the output of the Japanese manufacturing industries exceeded the output of agriculture in 1919 at the end of theperiod.

According to Table 1, the trend of the nominal national income per head
increased during the period in a circular fluctuation. These upward movements
became stronger after the recovery from the 1910 depression. The nominal
national income per head in 1919 amounted to 247 yen which was 13.4 times
the national income per head of 1886, the beginning of the period. The rate of

the growth of nominal national income per head was 6.50/. per annum in thefirst half and 16,40/. per annum in the latter half of the period, as shown in
Table 2. 0n the other hand, due to the rapid growth of general prices, the rateof growth of the real national income per head was at 3.50/. per annum in thefirst and 4.6 O/. per annum in the latter half, smaller than that of the nominal one.

As for real consumption per head, it rose 60 O/. during the period as Chart
3 shows. The rate of growth was 1.70/, in the first half and 2.5O/. in the latter

Chart 3 Realconsumptionperhead

N
N
t
N
s
s
s
x

N

100

!

50
l874 ]g7g lgg2 1886 189U lg{)4 181}8 IP02 19(E; 1[)1() l91t lf)IS 19. 22 192(l IY:IO 19:-;4 lE)I}H IY•tL) 19 l6 19,r,O 1!)i,•1- 1Vr,S ivfi! 1Eif;6

Source: M. Shinohara, `Personal Consumption Expenditures,' No. 6 of Long-Term
Economic Statistics ofJapan since 1868, pp. 140-141. p. 32.

(8) R. Minami, `Railway and Electric Power,' No. 12 of Long-Term Economic
Japan st'nce 1868, 1966, p. 6.

Statistics of

JAPANESE ECONOMIC GROWTH SINCE THE MEIJI 17

RESTORATION; A SOCIAL ACCOUNTING APPROACH
half. Due to the rising level of the living standard, the rate of increase of theJapanese population reached 100/, or more after the middle of the period andthis high rate was continued into the next period.(9) It is remarkable howeverthat primary education spread in the entire country. In 1900, (this was indeed
les, s than 70 years after the restoration), the percantage of primary school atten-

dance was 81.5 O/.,(iO) which is a very high rate in a developing country, as Japanthat was. '•'• ''i •''To summarize the period: traditional industries developed first followed bymodern industries especially by the light industry, which followed with great

speed. The products of these industries were exported and with the proceedsof the exports the Japanese economy financed to their imports and enjoyedeconomic development, thanks to the imports of capital goods and borrowed
technology. In the latter half of the period, the modern heavy industry in Japan•was born. The boom in the export industry induced by the needs of the FirstWorld War, extended the scale of the Japanese economy as a whole, accentuatedthe rising trend of national income per head and the real consumption per head.

(3) The period of the second stage of development (1920-1944)
During the period of the second stage of development the Japanese manufacturing industry grew on the firm foundation built in the preceeding period.
In the first half of this period, the light industry was most flourishing, while

agriculture which kept developing during previous period was now stagnant as

the supplementary Table A shows. The labour balance of Table 1 shows thatthe ratio of the gainfu11y occupied population engaged in the primary industries
to the total working population was still 54.5 O/. at the beginning of the period,

and then turned to 43.SO/, in 1942, while the ratio of the gainfully occupied
population in the non-primary industries to the total working population increas-

ed by more than half. The index of the changing structure of the industry isgiven also by the data on the changing composition of national income by theindustries in Table 1, as the ratio of national income earned by the primary industries to the total national income which was 34.0O/o at the beginning of theperiod fell to 15.1 O/, at the end of the period.

The information on the changing structure after 1930 is available from thesaving-investment account, the national capital account and the rest-of-the-world account provided by the Economic Planning Agency after 1930.
The ratio of the capital formation to GNE as shown in Chart 5, rose to(9)

The Bank of Japan, Hundred- Year Statistdes of the Japanese Economy, 1966, pp. 12-13.
The highest rate of Japanese population increment is 16.8 e/. in 1925. As for the generalsurvey of the Japanese population, see I. B. Taeuber, The Population ofJapan, 1958.

(10)

Hundred- Year Statistics, ibid., pp. 368-369.

NOBUKO NOSSE

18

10.80/, in 1930, 24.80/. in 1937 and 27.60/, in 19". The path of the investmentshows that a capital-deepening process was taking place during this period. On
the other side, the structure of capital stock by industries changed as the ratioof the capital stock employed by the primary industries to the total capital stock

was 29.30/. in 1919, 22.30/, in 1931 and then fell to 18.90/, in 1937, while theratio of the capital stock in the non-primary industries increased to 70.70/, in

1919, 77.70/, in 1931 and 81.10/, in 1937. This great rise coincided with therise of the manufacturing industry, especially of the heavy industry, in the latter

half in this period. The other indexes concerning the structure of the Japaneseindustry are given in the figures of foreign trade. According to Table 3, thequantity index of exports of raw silk recorded peak in the first half and theexport of silk fabrics, cotton fabrics and of china ware recorded their peaks inthe middle of the period.
In the latter half of the period, exports of capital goods, i.e. vessels, cement,

iron etc., grew, while exports of producers' durable equipments grew too. Boththe quantity indexes of exports and imports, q. and q. respectively, increased
as q. at the beginning of the period was 23.9 and q. at the end of the period 71,2,

while q. was 29.9 at the beginning of the period and 48.6 at the end of theperiod. Meanwhile, the ratio of exports to GNE and of imports to GNE wassmaller than that of the highest record in the previous period. This is especiallytrue for the ratio of exports to GNE in the great depression of 1931 during which
it recorded a dip in the real income curve.

As for the terms of trade, they fluctuated according to the short businesscycles; the down swing carried over from the previous period turned to the peak

Chart 4 Terms of trade
:IOO

200

h

s

100

'"
.N

Ss

lg6R IS7L? 1876 lg&) 18El4 18g8 1892 1896 I900 19. 04 1908 1912 1916 19. 20 I924 1928 19. 32 1936 1940 19, 44 194g 19. .52 19t56 1960 19. 64

Rsmaks :'Irhe index numbers of the terms of trade for the prewar period is at thebase of the prewar period (1934-36) and those for the postwar period is at
the base of 1960. 'Ilie reliable coeMcients between these are not obtainable.

Source :`Prices,' ibid., p. 212.

JAPANESE ECONOMIC GROWTH SINCE THE MEIJI 19

RESTORATION: A SOCIAL ACCOUNTING APPROACH
in 1923 and then fell again after 1924 with intermittent rises in 1923, 1927 and1931. The terms of trade rose again in the latter half of the period, especially in1938. Years of unfavourable conditions were 1935, 1937 and 1930 the extent
of being unfavourable in this order and the biggest down swing of terms of trade

was the interval of 1931-1936, which coincided with the depression of 1930s.
The relationship between the swing of the terms of trade and the swing ofexports and imports in this period seems rather diMcult to understand, as theexports increased during 1931-37 and the terms of trade were unfavourable in
1925-26 while the imports increased during 1925-26, and as the exports diminish-

Chart 5 CompositionofGNE

1oo

90

80

70

j
'

tt

tt

60

tt
rt
ti

50

lr
•J'

4U

,1'/
tflt>G!V -- v

:so

20

./--. .t.Y

tt
1{)

t4t

ttX

i} tt vhx it

1 tXt vt"1'1'itvi/'ANv/ASsv.xvttttt

Nvt

iV--'SNdr.t'N.N..-.t.N....t""V'-

..1
l

()

l9i;V

Remarks :1935 194o 19, •l5 1950 IV5to 1960 1965is• the ratio of the private comsumption expenditure to GNE.
••••••-•-•-

Source;is the ratio of the gross capital formation to GNE.

is the ratio of the government expenditure to GNE.

Hundred-Year Statistics, ibid., pp. 50-51. Economic Planning Agency,
Annual Report on National lncome Statistics 1968 Edition, pp. 46-47,

20 NOBUKO NOSSE
ed in 1930, and the terms of trade were favourable in 1938. .

. As for government expenditure, it gradually increased, as the ratio of government expenditure to GNE moved higher in the latter half, as Chart 5 shows.

For example the ratio was 15.10/, in 1931 and 28.20/, in 1940. The ratio of
military expenditure to the total government expenditure increased more, being
11.30/, for the years 1917-1923, and then rose to 58.3O/. in 1945 (according to

the supplementary Table B).
' The rate of growth of the nominal national income per head and the real
national income per head, shown in Table 1, illustrate also the economic development in this period. This period, compared with the prosperous previous
period of the war boom, suffered from the great depression of the 1930s and themost negative interval concerning the nominal national income per head theinterval from 1930-1933 which succeeded the already stagnant period up to 1929.

The nominal national income per head in 1931 was level at 163 yens which wasequal to the level of 1881. However the general price level was falling in theearly 1930s as Chart 2 shows, and therefore the path of real national income perhead was more steady and rising in this interval and then intersected with thatof the nominal income. The move of prices in the 1930s is quite exceptional
for Japan where inflational trends have been prevailing since the restoration up

to the present time. The nominal national income per head rose continuously
after the recovery of the economy in 1934 and in 1944 it was 771 yens or fivetimes that of 1931, and the rate of growth was -2.S e/, per annum during thefirst half and 11.20/, per annum during the latter half, while the rate of growthof the real national income per head was 3.5 O/. per annum during the first halfand 1.1 0/, during the latter half. 'Keeping pace with real national income per head, real consumption perhead increased during the first half and fell near the end of the period. The

amount of real consumption per head was 158 yens in 1920, 179 yens in 1925,
190 yens in 1939, only half of the level of the 1930s in 1944.

On the other hand, the ratio of being personal consumption to GNE tended
to decrease during the period, being 76.3 O/, in 1930 and 35.7O/. in 1944.(ii)The second period of economic growth can be characterized as follows: inthe first half of the period light industry was predominant while in the latter
half heavy industry grew; also the nominal national income per head declinedin the first half, but then recorded a sharp rise in the latter half while the real
national income per head rose in the first half and rose also in the latter half at

'

'

'

(11) This is exemplified by using the data of real consumption and population provided by the

EconQmic Planning Agency. Hundred- Year Statistics, ibid., pp. 12-13 & p. 37.

JAPANESE ECONOMIC GROWTH SINCE THE MEIJI 21

RESTORATION: A SOCIAL ACCOUNTING APPROACH
a smaller rate than that of the growth of nominal income. At the end of theperiod, the price ievel, the military expenditure, and the war industry increased
klEt ?81tlh. real Consumption per head and the ratio of personal consumption to
WGh(4) The period of the postwar economic growth (1945-1966)
This period covers about the first 20 years after the war, including the post-

war economy under SCAP, the period of recovery, and the period of the economic growth at a rapid rate.

There is a great difference with regard to economic conditions between
this period and the prewar times. There were:a) i. a loss of 45 O/. of the territory, ii. a loss of 41 O/o of the national wealth in-cluding personal estates, iii. a loss of 44% of durable equipments of pro-

ducers. •. • '.

b) 200/. increase of the population.

c) Disposition of militafy elements (war industry, military service, government expenditure for military purposes etc.) in the whole economy.
d) Institutional changes, i.e. Iand reforms, introduction of democratic acts forthe labor force, and dissolution of the "Zaibatsu" or exemption of the heavy
property tax, etc.
e) Big gaps in the level of science and technology between Japan and the ad-vanced countries. Moreover, ashortage of food and cloths, alow level ofproductive activity, and confusion in social life. Thus, the Japanese economy was caught in the mechanism of a hyper inflation and the anti-infla-

tion policy of the government under SCAP was hardly able to produce aa satisfactory effect. Both the real national income per head and the realconsumption per head fell to the level of the first stage of development, i.e.
to the subsistence level.

The opportunity for recovery from the ruins was given by the Korean War

boom of 1950. The• autonomous demand for commodities and services fromabroad brought a chance for remedy of the deficit of the balance of payment
after 1945 and a nest-egg for the reconstruction thereafter. The composition ofnational income by the industries also suffered from a considerable change inthe postwar economic situation. In 1947, two years after the end of the war, theratio of the national income by the primary industries to the total national in-come increased to 38.80/o, equal to that of the first stage of the developmentlevel. This phenomenon of regression reflected the relative shortage of food incities in those years. But this ratio fell again to 21.60/, at the end of the firsthalf of the' postwar period and to 11.7 O/o in 1964, i,e, the last half. The diminish-ing scale of the national income by the primary industries is reflected in the

22

NOBUKO NOSSE

changes of the composition of the working population. The ratio of the employed population by the primary industries to the total employed population
was 490/. in 1948 and 26.80/, in 1964. This means thatapart of the working
population returned to their native villages in the immediate postwar time andthen moved again to the cities and into the non-primary industries. Once they

moved into the non-primary industry, the ratio changed rapidly. And in thelatter half the structure of the Japanese industry shows a basic change.

This economic change is reflected in the composition of the exports andimports, as Table 3 demonstrates. The principal export commodities of the
prewar period i.e. raw silk, cotton yarn and tea diminished, while the export ofcapital goods i.e, vessels, iron and other metal products and machinery gradually
increased. As mentioned above, this tendency began in the latter half of the periodof the second stage of economic development, and in the postwar period, especially in the latter half of the period, it gained force.

As for the expenditure side, the ratio of expenditure to GNE changed too.
Most remarkable is the rise of the ratio of investment to GNE, accompanied bya fall of the ratio of government expenditure to GNE. The gradual recovery of
the ratios of exports and imports to GNE are interesting too.

The rate of the investment growth recorded 57.80/o per annum in the firsthalf and 18.8O/. per annum in the latter half, as seen in Table 1. Investment has

performed the role of a leading factor which gave a strong impulse to the Japa-

nese economy. There were several reasons inducing an enormous investment
drive in postwar Japan: i. a high reconstruction demand, ii. a high rate of profits

in a demand pull situation, i.e. a) the extraordinary export demand in the

Korean War boom, b) the strong demand for consumption induced by theequalization effect on income as the result of the land reform, trade unions etc.(i2)c) the demand for capital stock for replacement which had been delayed by thewarandfornewinvestmenttocatchupwithforeigntechnology, and d) the competitive situation in the business world after the abolition of the `Zaibatsu' enter-

prises, the economic policy of the government to encourage investment.
The rate of investment growth in the latter half sustained, albeit the level
was lower than in the first half when there was a high increase of nominal priceand the investment growth was often checked by the ceiling of the balance of
payment which suggests that in this period the capital-deepening process proceeded at a higher speed than in the latter half of the previous Period.

The ratios of exports to GNE and imports to GNE fell to the level of the(12) Prof. Shinohara called this "high pressed economy." M. Shinohara,
SeichO'-to-Junkan, 1961,

Nipponkel2ai-no-

JAPANESE ECONOMIC GROWTH SINCE THE MEIJI 23

RESTORATION: A SOCIAL ACCOUNTING APPROACH
transitional period in the first years after the War, the balance of payment show-

ed a deficit and the terms of trade were unfavourable. Just after the Korean
War boom, these negative factors as the unfavourable terms of trade, the lowlevel of the ratio of imports to GNE and of exports to GNE, and the quantity
indexes of exports and of imports turned gradually again toward improvement.
First of all, the ratio of exports to GNE and of imports to GNE improved.
The fu11 recovery of the quantity indexes was attained after 1955, and even theterms of trade improved in the latter half of the postwar period. In the 10 years
after 1955 the terms of trade were relatively favourable for the Japanese economy

and this facts contributed to its rapid growth, because the balance of payment
was `a ceiling' against the continuous growth in postwar Japan, as in any economyof less developed countries.

As for the government expenditure, it diminished compared with the levelof the prewar period. The ratio of government expenditure to GNE was low,
as Chart 5 shows. Among the items of government expenditure, current expenditure and transfer payment for social security increased, while military
expenditure, which was the main item in the previous period decreased greatly.
It seems that the role of the government itself changed in this period, namely,
it changed from the role as a state enterpreneur and as a supporter of the militaristic system to the role of a guardian of the downward rigidity of the economy
as a whole.

As for consumption per head in the period, there were some encouraging
factors i.e. the effect of the equalizing of personal income due to the democratic

reforms mentioned .above. In spite of this the ratio of personal consumption
to GNE did not exceed 65 O/, in the period except in 1946, as shown in Chart 4.
The smallest ratio was in 1961. It is remarkable that this year was the year inwhich investment strongly increased. According to the international comparisonof theratio of consumption to GNE by Prof. Kuznets, the Japanese ratio ofconsumption to GNE was the smallest, while her ratio of investment to GNE
was the biggest among the countries while he mentions; under-consumption,
therefore, was one dominant factor contributing to the Japanese rapid economic

growth of the postwar period.

The movement of the nominal national income per head and the real national income per head in the postwar period are shown in Chart 1.
The former increased greatly, the rate of its growth being 47 O/. per annum
in the first half and 12.40/o per annum in the latter half according to Table 2.

The curve-in the list of the national income in Chart 1 represents the interwar period where information is lacking. Compared the postwar period with the
prewar periods separated by the dotted line, the nominal national income per

24

NOSSE
NOBUKO

head recorded a sharp rise as a result of the postwar inflation, while the real
national income per head recorded a big fall. It could not recover the level ofreal national income per head of 1939, the highest in prewar times, until 1957,

or just 12 years after the end of the Second World War. The rate of growth of
the real national income per head was only 8,4O/o per annum in ,the first half and
8.7 O/. per annum in the latter half of the period. The big diff.erence between the

curves can be explained by the great rise of the general price level, as Chart 2

shows.
On the other hand, real consumption per head could not reach the level ofreal consumption of 1930 until 1953. The rate of growth of real consumption
per head was 1.7 O/, per annum in the first half and 7.1 O/. per annum in the later

half of the period. The price index of consumer goods of this period is shownin Chart 2.

To sum up the four periods of the japanese economic growth for the purpose of comparison with the different patterns of development :A. The Japanese industrialization started out with the light industries especiallythe textile industry based on already well developed and traditional indus--tries. Throughout the three prewar periods, the funds for industrializa-tion i.e. the funds for imports from advanced countries i.e. buying raW
materials, durable equipment for producers derived from exports of the
products of the traditional industries, Thus by changing the structure ofindustries of the three prewar periods, the postwar economic growth wasattained.

B. The process of modernization of the Japanese economy is observable fromi) the labour balance, ii) the composition of the national income byindustries and iii) the capital stock. As for i, there is a downward move-•ment of the ratio of the gainfully occupied population in primary industries

to the total working population. The decrease was continuous except fora short time some years after the war and considerable in the latter half ofthe postwar period. As for ii, we observe that the same downward movement of the ratio of the national income by the primary industries to thetotal national income becomes more obvious. And as for iii, it also shows
the downward movement of the ratio of the capital stock accumulated in
the primary industries to the total capital stock and gives the data of thecapital deepening in the second stage of development and the postwar period.

C. The sources for investment were utilized sparingly through all the periodsin the following manner: (i) borrowed technology was utilized withintelligence to modernize industries, (ii) the light industry was developed
to the high level and industrial exports financed imports, (iii) the capital-

JAPANESE ECONOMIC GROWTH SINCE THE MEIJI 25

RESTORATION: A SOCIAL ACCOUNTING APPROACH
output ratio was relatively low as there were plenty of schooled labourers,(iv) windfall gains, i.e. reparations, profits from the war boom were utilized

as a source of economic development.
D. In the prewar periods, the principal item of GNE was government expendi-ture, especially military expenditure, while private investment was a dominant factor in the postwar period, especially in a latter half of the period.

E. The main sources of funds for development were forced savings, voluntarysaving and credit creation, i.e. forced savings in the form of land tax in thetransitional period, savings and forced savings after the second period andcredit creation in the postwar period.

F. Prices rose continuously except only for a short period .early 1930s while

real consumption was maintained at a low level during all periods underreview. The level rose gradually but was still low compared with other.
countrles.
G. The terms of trade were unfavourable as a general trend. To overcome
this handicap, the Japanese economy adjusted its commodity structure ofexports according to its changing industrial structure, in other words, Japan
exported the output of the traditional industries in the earlier periods, theoutput of light industry in the second stage of the development and theoutput of heavy industry in the latter half of the postwar period. And she
tried to increase the exports to cover the amount of imports.

The points summarized above show the features of the development of theJapanese economy as a late commer.

g3 The model of the Japanese economic growth, compared with thetwo types of economies; the model of the advanced eeonomy andthe model of the under-developed economy.
In this section then, we shall try to compare the model of the Japanese
economic growth with the model of a mature economy with a low rate of growth
and with the model of stagnant low income countries, both of which were having
been defined by ProÅí J. R. Hicks.

First, a mature economy as that of the UK has, according to Prof. Hicks,i) a solid background of accumulated capital stock i.e. working capital, durable

equipments of producers, go;d or international currency, ii) a well developed
industrial structure where leading industries are interwoven with the other domes-

tic industries and without a pool of disguised unemployment, iii) technology oflabour and organization of business both of which are well developed; for thistype of an economy, an increase of the national income, the economic policy of

26

NOSSE
NOBUKOthe Keynesian type, can effectively be applied. The real national income perhead fluctuates due to changes of i) the effective demand, ii) the terms of trade,iii) general prices, iv) the amount of international currency in hands and theinternational liquidity position. Even such an economy, when there is a stateof the scarcity of resources like in the immediate postwar years, most to be sup-ported by the following conditions: i) investment goods must be allocated in

optimum proportion between investment for working capital and for capital
equipment, ii) military expenditure must be maintained at a minimum level,iii) the national currency must be kept at a stable value if economic growth isto be attained. Prof. Hicks, applying the model of the UK economy since theGreat Depression to the postwar economy, explains as follows:(i) In the 1950s the nominal national income per head of labour power fell as
the result of the shortage of demand, but the real national income per headof labour power, especially that of the employed population recorded acertain rise due to the general price fall.

(ii) British terms of trade in those days were favourable and compensated thedecrease of the quantity of exports, also it brought an earlier recovery thanin other countries which suffered from the great depression.
(iii) In the postwar 'periods before 1955, the large amount of the resources was

exhausted by the reconstruction and reinvestment of capital equipment,
the terms of trade became extremely bad, and military expenditure increased because of rearmament. The national product intended for investment was not only in suthcient but aliocated inadequately, therefore
the result was a shortage of productive investment. Those were the factors
which brought the rate of growth of real national income per head to a low
level.

Secondly, underdeveloped countries, like the Asian low income countries,
according to Prof. Hicks, are characterized by the following traits:(i) A plural society composed of many communities or tribes with their own
customs and cultures.
(ii) Little food surplus over the subsistence level and traditional industries

predominant even when some modernized sectors exist in the economy.
(iii) Agriculture in which the majority of people are engaged is stagnant anddisguised unemployment is prevailing.
(iv) Technology of labour and organization of business are not yet developed.
In such economies, monetary reliefs like the Keynesian economic policy is
not helpful at all, in spite of their aim to increase income and wealth. Whether

industrialization promoted by the government as a state entrepreneur would bea success or not depends on the relationship between the income created by

JAPANESE ECONOMIC GROWTH SINCE THE MEIJI 27

RESTORATION: .A SOCIAL ACCOUNTING APPROACH
industrialization and the real saving from the time when investment is undertaken

to the time when the stream of new products through the investments flows out,
i.e. sustaining the stream of real saving suMcient to absorb wage income createdin this period of time is a key problem for attaining successfu11 industrialization.

It is easily understandable that accumulation of capital is scarce and forcedsavings by means of taxation and credit creation are insuMcient in such economies,
therefore, there is a high possibility of big deficits in the international balance of

payment and of inflation. To sustain economic growth, it is necessary to fulfill
the following conditions:(i) To increase the productivity of agriculture.
(ii) To develope the light industry with a low capital-income coethcient in thefirst stage for exporting the products of the industry and financing theimports of capital goods for industrialization.

(iii) To create real savings by taxation or by litte consumption.
(iv) To fu11y utilize capital transfers from abroad like foreign grants as a nucleus.

(v) To improve technology of labour and organization of business by meansof education.
(vi) To introduce private business systems instead of publicly owned systems
to obtain eMcient production.
Those conditions which were suggested by Prof. Hicks are not easy to workin practice, so that there are sustained stagnant situations in most low income

countries. Now it is interesting to compare the anatomies of these two types of

economies with the model of the Japanese economic growth as summarized
above.

First, the Japanese economy in 1868 resembled the second type model.
Only the difference between the two is that Japan is not a plural society, but aconsolidated society. Fortunately, in the process of economic development,
she fu1fi11ed the conditions advocated by Prof, Hicks for industrialization. Sec-

ondly, the model of the Japanese economy after the period of the second stageof development had a resemblance with the first type model. For example inthe divergence of the nominal national income per head and the real national

income per head in the UK economy during the great depression, we observe
the same situation as in Japan during the great depression. And some of theconditions which determine the rate of growth in a state of scarcity like in the

UK economy of the postwar period are applicable and instructive for the Japa-

nese economy. They are: i) minimum amount of military expenditure and ii)
optimum allocation of resources between working capital, fixed capital and social
overhead capital which are required for sustaining productive investment.

As for i, everybody agree that in the postwar Japanese economy the reduc-NOBUKO NOSSE

28

tion of military expenditure contributed to the rapid growth of investment. And
as for ii, people also agree that the biased allocation of resources to private fixed

capital and social overhead capital contributed to the high rate of economic
growth. Then, let us consider the terms of trade, on which economic growth

also depends. In the Japanese economy since the restoration there are few
favourable changes of the terms of trade i.e. only in the First World War boom
and as a trend it has been declining. The problem of the terms of trade, likethat of deficit in the trade balance, has been the nightmare for Japan during the

century of development as for all other less-developed countries. But different

from the postwar UK economy which suffered a sudden worsening and was
obliged to sustain a low rate of economic growth, the Japanese economy attained
a high rate of growth in this period.

Further, we must analyze the reason why the Japanese economy was able
to grow although subject to the same conditions as the UK economy. It seems
that there was certain mechanism operating in different directions to compensate

for the handicap of the Japanese economy.
One direction of this mechanism was that in the export industry, i.e. cotton
fabrics or shipping industry, was able to increase the quantity of the their exports

by introducing large-scale methods and rising productivity compensating thehandicap of the unfavourable balance of payment.('3) Another direction was thateven in the period of prosperity, wages (nominal and real) were maintained ata relatively low level to compensate for the handicap of the unfavourable termsof trade. As to the former, we have given by showing the changes of the commodity structure of exports and imports during the four periods, while as to thelatter, we may indicate that the pool of disguised unemployment existed in Japanas a down swing movement of the ratio of the gainfully occupied population in
the primary industries which survived in all the periods.

As indicated above, it is now understandable that i. the model of the Japanese economic growth is a model of a less developed economy with rapid growth,and ii. the model of the Japanese economy is a medium between the model of amature economy and of a developing economy.

g4 Further remarks
Short summaries of each period of the Japanese economy are at the end of thedescription of the corresponding stages; therefore, we intend only to note some(13) Prof. Shinohara added that in postwar Japan the exchange rate of 360 yens is relatively
low and this helped to increase Japanese exports. Shinohara, NiPPonker'gai, ibid.

JAPANESE ECONOMIC GROWTH SINCE THE MEIJI 29
RESTORATION: A SOCIAL ACCOUNTING APPROACH
problems remaining for the future.
First, the present analysis is a type of aggregative analysis, namely, it is ananalysis based on the informations collected from national accounts. It is usefu1,
of cause, but if the analysis would be able to rely on more detailed information,i.e. on the constituent transactions in sector accounts of the system of national

accounts, on the system of FOF and individual commodity accounts, it would
be more prospective for the anatomy of the economic development in Japan.
Secondly, the present analysis should be complemented by the stock approach, that is to say, by the national balance sheet with the sector balance sheets.

Moreover, the commodity balance sheets of the leading industries, i.e. the balance

sheets for foods, cotton fabrics and railway service and the balance sheet of
the working capital i.e. the balance sheet of the inventory of export industries
duting all the periods under review would be worth while to be consulted.

Thirdly, measuring the effect of learning on labourers and the progress oftechnology would not only be suggestive for our analysis but an important task
to be accomplished by social accounting for history.

Fourthly, in the present paper we have treated the primary industries asrepresentatives of all non--modernized sectors. As a matter of fact, however,traditional business actually exists also in the non-primary industries, it survives

for example, even in the manufacturing industries. A separation of the traditional

sector from the non-primary industries is, therefore, needed for a more meaningfu1 analysis of the Japanese economy which should be undertaken in future.

REFERENCES[ 1 ] Allen, G. C., A Short Economic History of Modern JaPan 1867-1937, 1946.
[ 2 ] Allen, G. C., Japan's Economic Recovery, 1958.
[ 3 ] The Bank of Japan, Hundred- Year Statistics of the Japanese Economy, 1966.
[ 4 ] Bureau of Statistics Oflice of the Prime Minister, RePort on the Revised Figures of Labour
Force Survey from January 1953 to September 1961, 1963.
[ 5 ] Bureau of Statistics OMce of the Prime Minister, RePort of the Labour Force Survay, Average

Figures of 1963, 1964.
[ 6 ] Bureau ofStatistics Oflice of the Prime Minister, Report on the Labour Force Survay, Average

Figures of 1964, 1965.
[ 7 ] Emi, K., and Shionoya, Y., `Government Expenditure,' Estimates of Long-Term Economic
Statistics ofJapan sc'nce 1868, No, 7, 1966.
[8] Hicks, J. R., Essays in VVorld Economics, 1959. Chapters 8 and 9.
[9] Hicks, J. R., The Social Framework, 3rd ed., 1961, Ch. 16.
[10] Economic Planning Agency, Annual Report on National Income, 1969 ed., 1969,[11] Economic Planning Agency, Nippon-no-Ket'xaito-hei (JaPanese Economic Statistics), vol. 1,

1959.
[12] Economic Planning Agency, Sengo-Kelxaishi (Economic History of Postwar Japan), 1957.
[13] Kuznets, S., `Quantitative Aspects of the Economic Growth of the Nations,' VII, The
Share and Structure of Consumption, Economic Developntent and Cultural Change, vol.

X, No. 2, 1962, pp. 62-63.

NOBUKO NOSSE

30

[14]

Lewis, A. C., `Economic Development with Unlimited Supplies of Labour,' The Man-[IS]

Lockwood, W. W., The Economic Development ofJapan: Growth and Structural Change,
l955.

[16]
[17]

Lockwood, W. W., (ed.), The State and Economic Enterprise in Japan, 1965.
Minami, R., `Railway and Electric Power,' No. 12 of Estimates of the Long-- Term Economic
Statistics ofJapan since 1868, 1966.

[18]

Miyamoto, M., Sakudo, Y., and Yasuba, Y., `Economic Development in Preindustrial[19]

Nakamura, J., `Growth of Japanese Agriculture, 1875-1920,' The State and Economic

chester Schoot of Economic and Social Studies, May 1964, pp. 140-191.

Japan, 1859-1894,' Review of Economic History, Dec., 1965, pp. 541-568.

[22]Enterprise in Japan (ed. by W. W. Lockwood), 1965, pp. 249-324.
x
Nakamura,J., Agricultural Production and the Economic Development ofJapan 1873-1922,
1966.
Ohkawa, K., and others, The Growth Rate of theJapanese Economy since 1878, 1957.
Ohkawa, K., Nippon-Kreigaibunseki: SeichO-to-Ko'xo' (An Analyst's of the Japanese Economy[23]

Ohkawa and others, `Capital Stock,' No. 3 of Estimates of Long-Term Statistics of Japan[24]

since 1868, 1966.
Ohkawa and others, `Prices,' No. 8 of Estimates ofLong-Term Economic Statistics of Japan[25]

Ranis, G., `Factor Propotions in Japanese Economic Development,' American Economic[26]

Ranis, G., `The Financing of Japanese Economic Development,' The Economic History[27]

Ranis, G., `The Capital-Output Ratio in Japanese Economic Development," Review of

[20]
[21]

-Its (]rowth and the Structure), 1970.

st'nce 1868, 1966.

Review, Sept., 1957, pp. 59zF607.

Review, XI, Apr., 1959, pp. 440454.

[28]

[29]
[30]
[31]
[32]

Economie Studies, Oct., 1958, pp. 23-32.
Rosovsky, H., CaPital Formation in Japan, 1868-1940, 1961.
Shinohara, M., Nipponkeizai-no-Seiche-to-Junkan, 1961.
Shinohara, M., and Fujino, S., Nippon-no-Ker'xaiselchi 1967.

Shinohara, M., `Personal Consumption Expendimres,' No. 6 of Long-Term Economic
Statistics ofJapan since 1868, 1966.
Taeuber, I. B., The Population ofJapan, 1958.

[33]

Tsuchiya, T., Nihonkec'xai-shi-Gaisetsu, 1968.

[34]

Yamaguchi, K., Mec['ixenkikeixai-no-Bumseki, 1960.

JAPANESE ECONOMIC GROWTH SINCE THE MEIJI 31
RESTORATION; A SOCIAL ACCOUNTING APPROACH
Table 1.

Balance-sheet of labour power and of capital stock.

Composition of national income
The first

Trans-

stage ofeconomlc develop-

The postwar economic growth

1886-1909 1910-1919

1940--19M 1955-1964

ment

itionalperiodbegin endbegm endbegin endbegin endbegin end begin end begin end
49. 0 43. 4 40. 2 26. 8
Labour balance L, 83, 6 79. 2 78.6 59.263.0 56.0 M,5 49.751.1 43.
45.
5
50.
3
48.
9
56.
5
51.0 56. 59. 8 73. 2
L, 16. 4 co. 2L4 40.837.0 44.0

K, 72. 4
K, 27. 6

70. 2 57. 9(1895) 40. 3 29. 3

22.3 18.9

29. 8 42. 1(1895) 59. 7 70. 7

77. 7 81. 1

Y, 61. 8

56. 4 53.7 4Ll

38. 5

38. 2

national income Y, 38. 2

42. 6 46. 3 58. 9

61. 3

61. 8 os. O

Capital stock

Composition of

Remarks :Sources:

M.O 19.517.3 15.1 38.8 2L6 22. 7
80. 5 82. 7 84. 9 6L2 78. 77. 3

IL7
88. 3

( i) L, K and Y denote working population, capital stock, and national
income respectively, while subscripts 1 and 2 denote the primary indu-•
stry and the non-primary industry respectively.
(ii) The estimate L at the beginning of the postwar economic period is thatof 1948 and the estimate K in the transitional period and at the end of
the second stage of eÅëonomic development are those of 1881 and 1937
respectively.
"Capital Stock," ibid., p. 15. K. Ohlcawa, The Growth Rate, ibl'd., p. 145 &p. 245. Hundred- Year Statistics, iin'd., p. 72 & pp. 44-4S. Eeonomic Planning Agency, Annual Report on Natienal Ineome Statistics, 1968 Edition, pp.
40---41.

Table 2.

Rates of growth o f national income, consurnption and dornestic investment

The first

Trans-

Rates of growthitionalperiodNominal national

income per head
Real nationalinÅëome per head

Real consumption
per head
Domestic inves-stage ofdevelo.
economlc

pment

The second stage

ofeconomicdevelop- The postwar economic growthment

1886-1909 1910-1919 1920-1930 1931--1944 1946-1954 1955-1os5

8. 4

6.5

16. 4

7.0

3.5

4. 6

3.5

4.6

1. 7

2. 5

8.3

Remark :

47. 7

12. 4

1. 1

8. 4

8. 4

1. 7

7. 1

57. 8

18. 8

22. 1.

tment
Sources ;11 2-The rate of investment growth in 1931 was -13.3 O/. in this period.
Hundred- Year Statistics, ibid., pp. 4849. Annuai Report on National income
Statistics, ibld., pp. 36-37.

Table 3. Exportsofprimarycommodities
Cotton Cotton China
slk
MachinCementVessels &Iron
Tea Raw
fabrics yarn
fabricssilksteelery
Beginning ofexports

The period of
increasing export

The period of

s

1868

1868

1868

1890

1868

ware
1868

1896

1886

19101896

1875

1875

1901

1897

1900

1916

1930

1935

19351938

1917

1031

1935

1914

1935

1935

1957

1065

19651964

maximum exports
Source : Hundred-Year Statistics, ibld., pp. 282-285.

NOBUKO NOSSE

32

Table 4. Exports of and imports of producers durable equipments
General machinery

Automobils &Rolling stock

etc.
d

e

op ao

a -o qA"oYear

Beginningcots o'a

:

s

es E

x

1868

1897

o

m

1897

co

:

o
a
E

H

1883

ee ao

co

C .9 vko
oog
Aeo
x
es
E pta
1902

.
Tools, equlpment,

others

1935

co

:

o
pt
E

ca co

U .9

e
a

ca

u

ooc
A"O
di
E es

o
pt
g

co co

e .2

ooq
q-o
es
E

co

-

ts

o
xa

m
N
-1 1897 1880 1873
1904 1896

1869

The year of the

maximum ratioof exports tocolonies to imports
The year of the

1936

1935

1939

1920

maximum ratio

1936

1935

1939

1920

of exports toimports"

Remark: "Imports in 1915 which fell greatly are excluded.
Source: Capital Stock, ibid., pp. 198-201.
Table 5. Indexes ofJapanese transaction with the rest of the worldTransitio-

nal period

The first stage of
economic develop-

The second stage

rnent

ment

postwar ecoofeconomicdevelop- ThenomiÅë growth

1zz6--1909 1910-1919 1920-1930 1931--1944 1946-1954 1055--1965
Ratioofexports.tonational

begin end begin end begin end begin end begin end begin end begin end
incomeAO/. 3.5 4.4 5.3 13.2 14.6 18.5 16.7 15.7 14. 1 19. 7 O.3 9.8 IL 2 IL5

Ratioofimports
tonational

5. 6

incomeO/,
Quantityindexof
exports

1.1 2.5

Quantityindexof.1rnPOrtS

1. 5

max.ofA
Notes:

1.

2.

Source :3. 5

3.5 13.0 15.4 19.6 20. 4 17. 1 16.1 18.8 3.1 14.4

13. 7

13. 2

3.1 14.3 17.0 28.2 23.9 4L8 43.2 71,2

51. 6127. 910.8 48.6 49. 6

129. 02.4 2.6 16.1 17.7 30.4 29.9 41.5 46. 1 44. 6

6. 1 39. 2

26. 2(1917)'

The quantity indexes are estimated by setting the quantity of 1960==100.
The figure of the end of the second stage of economic development, of the
beginning of the postwar economic growth, and of the end of the postwar
economic growth are those of 1938, 1948 and 1962 respectively.
Economic Planning Agency, Japanese Economic Statistics, vol. 1, 1957, pp.

267-268.

JAPANESE ECONOMIC GROWTH SINCE THE MEIJI 33
RESTORATION: A SOCIAL ACCOUNTING APPROACH
Table 6. International comparison oftheratio of consumption to GNP and theratio of gross investment to GNP.
Private consumptiono/oGross investment

GNP

GNP

U. K.

es. 7

15. 2

u. s.
France

63. 7

17. 8

67. 0

18. 8

W. Germany

ss. 7

23. 8

Italy

os. 2

20. 9

Brasil

73. 4

15. 5

CeylonThailand

74. 9

11. 4

76. 8

14. 3

Japan

59. 5

29. 2

Source : Kuznets,CQuantitiveAspectsofthe Economic Growth of Nations,' VII, The
Share and Strtteture of Consumptien, Economic Development and Cultural
Change, vol. X., No. 2, 1962, pp. 62-63,'Supplementary Table A. Indexes ofreal income(1928-32 =1oo)

The primary industry

The seeond industry

1878- 82
1883- 87
1888- 92

38. 2

4.4
7.8

45. 1

10. 5

1893-- 97

57. 5

15. 7

1898-1902

68. 6

23. 5

1903-- 07

70. 2

23. 8

1908- 12
1913- 17
1918- 22
1923- 27!928- 32
1933- 37
1938- 42

79. 9

30. 7

79. 3

43. 8

94. 4

54. 1

35. 6

1oo. O

66. 8

1oo. O

1oo. O

112. 1139. 7123. 7209. 0Source : Ohkawa and others, The Growth Rate of theJaPanese Economy since 1878, 1957,
p. 18. Table 2.

NOBUKO NOSSE

34

Supplementary Table B, Ratio of the rnilitary expenditure to the government expenditure
Military

expenditure

Year

Government expenditure
1894--1895

49. 2

1900

29. 5

1904--1905

74. 2

1914-1920

27. 1

1917--1923

11. 3

1931-1932

12. 7

1937-1940

42. 7

1941-1945

58. 3

Source ; Emi, K., and Shionoya, Y.,

Government Expenditure, ibid., p. 22.

o/oEFFICIENCY OF OPTIMAL GROwrH POLICIESFOR DEVELOPMENT
Hikoji KATANo

1. introduction
Two distinct policies have been advanced to secure enough capital accumulation in a developing economy. The first, originated by F. P. Ramsey [2], is apolicy to accumulate enough capital to maximize total consumption over a certain
time horizon. The second, advanced by L. G. Stoleru [3], is a policy to accumu-

late enough capital to secure full employment in minimum time. In this paper,
we attempt to clarify some characteristics of these development policies and to
examine the eMciency of these policies. Our conclusion is that the optimal growthpolicy to secure fu11 employment in minimum time is eMcient from the view pointof capital accumulation, and that the optimal growth policy to maximize total
consumption over a certain time horizon is not eMcient from the same point ofview.

2. TheModel.
In the analysis that follows we shall work with a two sector closed economy.
The first sector inputs capital (K,) and labour (Ni), and produces capital goods(X,); the second sector produces consumer goods (X,) by inputs of capital (K,)

and labour (N,). Then the production functions are(2.1) X,-P,K,(2.2) Ni=aiKi
where pi and ai stand for output-capital ratio and labour-capital ratio respectively.

We assume no foreign aid, no lag between production ofcapital goodsand
investment, no possible shift of existing capital from one sector to the other, nodepreciation prevailing in either sector. Then, u'
sing the general notation ab ==dx/dt, the equation of capital accumulation is(2.3) x,=-k,+k,, k,lo.
We now introduce a control variable u defined as a ratio of gross investmentin the capital goods sector to total gross investment,

36 HIKOJI KATANO.
Ki(2.4) u==. .
K,+K,
Then we have the investment allocation equations,.
K,==uPlK,(2.5> • •• t K,.=(1-u)PiK,•
Total labour supply (L) grows at a constant rate (n) at the same time thetotal population grows,(2.6) L(t)=L(o)en`.
Growth of total labour demand (N) depends on capital accumulation in either
sector,(2.7) N(t)=a,K,(t)+a2K2(t)•Now let us assume that there is unemployment at initial time point (t=O), andthat fu11 employment is expected to be attained at time T. Then we have(2.8) L(O)e"tsa,K,(t)+a2K2(t)for Ogts T, and(2.9) L(O)e"T=a,K,(T)+a2K2(T)•at time T.

3. Ful1 employment in Minimum Time.
' tt

Our first problem is to find the optimal growth process to accumulate enoughcapital to secure fu!1 employment in minimum time. Postulating that full employment can be achieved at time T, the demand-supply situation at time T is

(3.1) L(O)enT=a,K,(T)+a2K2(T)•'' growth process to minimize theThus the problem
is, in turn, to find the optimal
time T.

' growth process, our planning authority can control so
To find the optimal
as to minimize(3.2) J:dt
subject to.K;=uP,K,EFFICIENCY OF OPTIMAL GROWTH POLICIES 37
FOR DEVELOPMENT•
K,=(1-u)P,K,

O<u<1(3.3) L(O)>a,Ki(O)+a2K2(O)
L( T) = a, K,( T) + a,K2( T)

K,(O), K,(O), L(O)=given

O<t< T.
The optimization will be carried out by using the Pontryagin's Maximum
Principle.(i)The Hamiltonian is defined as(3.4) H=-1+p,k,+p,k,•
The necessary conditions for the control u(t) to be optimal are(a) the control variable u(t) is chosen at value u*(t) so as to maximize Hsubject to the conditions (3.3),(b) there exists continuous functions p,(t) which, together with Ki(t), satisfy
the cannonical differential equations,• OH Pi=-aK,'• OK(3•5) Ki=6-p,,(c) for the optimal control u*(t), we have(3.6) Max.H=constantthrough OstK T,(d) as the transversality condition, we have,3.7);,iii;/lll-Z-',To be on the optimal growth process, the Maximum Principle suggests us
to choose the control variable at the value of(3.s) u"(t)-=(6 for ?,it,2Ti.

This means that investment must be concentrated on the first sector through thefirst stage (OgtgTi) and it must be concentrated on the second sector throughthe second stage (T,gtsT). And the turning time point (r,), the terminal time
point (T), and the terminal capital stock situation [K,(T), K,(T)] are uniquely(1) see,Pontryagin, L. S. [1].

38 . . HIKOJI KATANO'
determined byKi(T)=K,(O)ePt'i
K,(T) =K,(O)+B,K,(O)ePiTi(T-T,)(3,9)
i?i( T-T,)= 1 .. 1,

a2
L(O)enT=a,K,(O)+a,K,(O)ePir'.

where(3.10) P,>nmust be maintained for existence of the solution.

4. Maximization of Tota1 Consumption.
Our second problem is to find the optimal growth process to accumulate
enough capital to maximize total consumption over a certain time horizon T.
Here the time horizon T is the same as postulated in the preceding section forachieving fu11 employment in minimum time. 'For the purpose, our planning authority can control so as to maximize(4.1) f[iP,K,(t)dt
subject to.K,=uPlK,. = (1-u)P,K,
K,(4,2) Ogusl
K,(O), K,(O)==given

O<t< T.
We use the P6ntryagin's Maximum Principle for the optimization to be

carried out. In this case, the Hamiltonian is defined as '(4.3) H==B,K,+p,k,+p,JII,•
The necessary conditions for the control u(t) to be optimal are. (a) the control variable u(t) is chosen at value u*(t) so as to maximize Hsubject to the conditions (4.2),(b) there exist continuous functions p,(t) which, together with Ki(t),satisfy the cannohical differential equations• OH • OH(4•4) Ki=:dii;r,,Pi=-bltZ,sEFFICIENCY OF OPTIMAL GROWTH POLICIES 39
FOR DEVELOPMENT(c) for the optimal control u* (t), we have(4.5) Max.H=constantthrough Osg ts T,(d) as the transversality condition, we have(4.6) p,(T)=P,(T)=O.
To be on the optimal growth process, the Maximum Principle suggests us
to choose the control variable at the value of(4.7) u"(t)-(6 for .O,`-.tiTil.

This means that investment must be concentrated on the first sector through thefirst stage (Of{;tE{T,) and it must be concentrated to the second sector through thesecond stage (T,sgtf{;T). Such a time-pattern of investment allocation is thesame as we found for achieving fu11 employment in minimum time. However,
we should notice that the turning time points Ti and T2 might be different. The
turning time point (T,), the terrninal capital stock situations [K,(T), K,(T)], andthe initial values of auxiliary variables [p,(O), p,(O)] are uniquely determined by

K,(T)=K,(O)ePiT2
K,(T)==K,(O)+P,K,(O)ePiTz(T-T,)

1(4•8) zi'PiP,(T2-T;)-P,P,(O)(T-r,)+p,(O)e-P`"'==O

P,(O)==B,T
Pi(O)=:t9,ePir2(T-T,)
Solving these simultaneous equations, we can have(4.9) P,(T-T,)==2.
This shows the turning time point (T2) between the first stage and the second

stage of the optimal growth process for maximizing total consumption over acertain time horizon (T). Correspondingly, the turning time point (Ti) between
the first stage and the second stage of the optimal growth process for securing
full employment in minimum time (T) is, as shown in (3.9),(4.10) P,(T-T,)=1-a-'.
a2
From (4.9) and (4.10), it is clear that T, is different from T,. This means that the

optimal growth process for securing fuII employment in minimum time (T) isHIKOJI KATANO

40

different from the optimal growth process for maximizing total consumption
over a certain time horizon (T) as the attainment of full employment in minimum
time requires.

5. Growth Frontier.
For both the optimal growth processes, their time patterns of investment
allocation are identified. That is, in both cases, investment is concentrated on
the first sector through the first stage and it is concentrated on the second sector

through the second stage. The only difference is their turning time points.
Now let us consider all the terminal capital stock situations generated fromthe same time pattern of investment allocation over O f{; t :{g T as mentioned

above, where the turning time point T is variable through O-<Tf{; T. Here we
consider a locus of the terminal capital stock situation [K,(T), K,(T)] which is

pictured on Ki-K, plane.
This locus can be defined as

K,(T)
log
K,(O)
K,(T)=Kr,(O)+P,K,(T)]• [TPi(5.1)
K,( T) 2 K,(O)This is pictured as curve ABC on Figure 1.
It is clear from the characteristics of curve ABC that the part BC of the curveis an eMcient growth frontier and the part AB is an ineMcient growth frontier.

Thus, if the optimal growth process must be eMcient from the view point of
K,C t'FK,c t) -K,( o)

B/
/

G

A
1
x

/

lt

/

1

/

l

l

l

1

'

l

l

-

1

x

E

1

-

/t

'------'

Ki( t) - Ki(o)

SF

D

H

C
K,( t)oFigure 1.

EFFICIENCY OF OPTIMAL GROWTH POLICIES 41
FOR DEVELOPMENT

capital accumulation, the terminal capital stock situation must be on the edicient

growth frontier BC. For the purpose, the turning time point (T) of time patternof investment allocation should satisfy the following condition,

dK,(T)=P,(T-T)-1E{;O,
dK,(T)(5.2)

where T is given and constant.

6. Efliciency of Optimal Growth Policies
Now we are in a position to examine the eMciency of optimal growth policies

mentioned above.
(a) Full Employment in Minimum Time: For the optimal growth policy
to secure full employment in minimum time, the turning time point satisfies thecondition (5'.2),(6.1) P,(T-T,)-1=:-a-'<O.
a2
It follows that the terminal capital stock situation for this optimal policy can beontheeMcientgrowthfrontier. This is shown as point E on Figure 1. Thus wefind that the optimal growth policy to secure full employment in minimum timeis ethcient from the view point of capital accumulation.

(b) Maximization of Total Consumption: For the optimal growthpolicy
to maximize total consumption over a certain time horizon, the turning time point
does not satisfy the condition (5.2),(6.2) P,(T-T,)-1==1>O.
It follows that the terminal capital stock situation for this -optimal policy can not

be on the eMcient growth frontier, but it must be on the ineMcient growth fron-tier. In this case, this is shown as point G on Figure 1. Thus we find that the
optimal growth policy to maximize total consumption over a certain time horizon
is eMcient from the view point of capital accumulation.

REFERENCES[1]

Pontryagin, L. S., et. al., The Mathematical Theory of OPtimal Processes, Interscience, New[2]

Ramsey, F. P., "A Mathematical Theory of Savings", Economic Journal, 1928.
Stoleru, L. G., "An Optimal Policy for•Economic Growth", Econometrica, 196S.

York, 1962.
[3]

DECASUALIZATION OF DOCK LABOUR
Experiences at the Port of Kobe

Hiromasa YAMAMOTO

The Dock Labour Decasualization Act was passed in the Diet in May, 1965
and the main part of the act is enforced since July, 1966.(i) This act- aims atsecuring the necessary dock labour at important ports on the one hand, and tostabilize employment and earnings of dock workers on the other hand.

Since the end of World War II dock workers' unions had demanded forlegislation in order to overcome the fluctuation of employment peculiar to theindustry. In 1961 port congestions occurred in many ports in Japan due to theshortage of port facilities and low labour productivity of the dock indUstry in faceof the increasing import and export cargo. In addition, short supply of docklabour in recent years made room for illegal activities of people who gathered day

workers privately and placed them in the dock industry so as to gain intermediate
profits. All these conditions led to the legislation in the act of 1965.

In this anicle we intend to point out the merits and demerits of the act inrelation to the enforcement of the act at the Port of Kobe, and then to make aproposal for remedies of the act.

I. Outline of the Dock Labour Decasualization Act.
The Dock Labour Decasualization Act is enforced at the six important portsof Japan including Kobe.(2) The act includes provisions concerning the Dock
Labour Decasualization Scheme, the registration of dock labour, employment,
job training, welfare and the retirement allowance plan.

An outline of the provisions which relate to the decasualization of employment of dock labour follows:

1. Formulation of the Dock Labour Decasualization Scheme
The Ministry of Labour formulates respective Dock Labour Decasualization

Schemes for each of the six main ports every year. The scheme of each port
specifies the following points:

a. the necessary number of dock workers for loading and discharging

(1)
(2)

Law No. 120 of 1965 and Law No. 37 of 1967.

The six important ports are TOkyO, Yokohama, Nagoya, Osaka, Kobe and Kammon.

"

HIROMASAYAMAMOTO
cargo at the port,

b. among them, the number to be fi11ed by the registered day Workers,
c. hiring procedure, job training and other practices necessziry to adjust

demand and supply of dock workers, andd. regulation of employment of dock workers.
2. Registration of dock workers
a. registration of permanent employees

When an employer intends to employ a specified dock worker permanently,
he must report the name and the kind ofjob of the worker to the local employment

security oMce. Then the oMce will issue the permanent employee card to theworker.

b. Registration of day workers
The worker who intends to work continuously in the dock industry at one of
the six main ports is required to register his name and his qualification as dockworker in the register book of the local employment security oMce at the port.
The oMce will accept applications of registration upto the number of registered

day workers which is determined by the Dock Labour Decasualization Scheme.
The registration is valid for a year. The registered day worker must carry his
register card when he engages in dock work.

3. HiringProcedure.
The registered day workers must present themselves at the employment
security oMce every morning in order to be hired in the dock industry. On theother hand employers are forbidden to hire dock workers through other agencies

than the employment security oMce.(3) Employers are to order the necessary
number of gangs to the employment security oMce by the evening of the previous
day. According to the orders, the oMce will despatch the registered day workers
on a rotation basis, and if the registered men cannot fi11 the demand of the day,then casual day workers are sent to employers.

4. Employmefit Security Payment
When the registerd day worker is not despatched although he has reported
to the pthce or when he is not employed without any fault of his own, he is qualified

to receive the employment security pay. Employment security pay is also paid
to the registered day workers when they attend a job training course for dockworkers. The daily amount of payment for registered men varies according totheir wage rates and the period of their employment. The fund for this payment

is composed of the contributions by employers, the deductions from daily wage

(3)

As an exceptional case, the act permits employers to hire dock workers directly when theemployment security oMce cannot despatch the necessary number of qualified workers.

DECASUALIZATION OF DOCK LABOUR

45

paymens for the registered men and a subsidy from the government.

II. Merits and Demerits of the Act-Experiences at the Port of KobeThe enforcement of the Dock Labour Decasualization Act has achieved
several improvements in the employment of dock workers at the Port of Kobe.
Since the enforcement of the Act stevedoring agents employ more dock workers

as permanent employees. In the Dock Labour Decasualization Scheme of 1966
the number of permanent employees of the Kobe area was estimated at 9,660
men which reflected the actual employment at the end of 1965 when the scheme
was formulated. But in October 1966 the permanent employees amounted to
13,046 men or an increase of about one third of the estimated number. The
number of permanent employees has shown a gradual increase in the following
years, too. The status of permanent employees may be desirable in itself for theworkers because of the stability of employment, but the actual reason why thepermanent employees have increased will be discussed later.
As for day workers including the registered men and also casuals, all are hired

through the employment security oMce. Though the act permits the practice of
hiring dock workers by means of "shape-up" or other methods as an exceptionalcase if the employment security oMce cannot despatch enough qualified workers,

seldom use of these practices has been made in Kobe. Thus, the enforcement of
the act deems useful to prevent employers from relying upon evil hiring practices

such as shape-up by which gangsters had often exploited dock workers.
Together with the introduction of the registration system for those who intend

to work continuously in the dock industry, the act provides the registered day
workers with favorable hiring practices by which they are given the priority overcasuals to be despatched, and they are hired on a rotation basis in order to allocate

employment opportunities.
However, the enforcement of the act is accompanied by diMcult problgms
to be solved at the same time. One of the most important problems is that the
Estimated number of dock workers to be registered in accordance with Dock

Labour Decasualization Schemes, Port of KQbe

Permanent employees

1%6

1967

9, 66014, 1801968
14, 180

1969
F

14, 930

1

Registered day workers

7, 7sc3, 5803, 5803, OooTotal

17, 410

17, 760

17, 760

17, 990

1oo102. 01966 :1oo

Source: Employment Security Othce.

;'102. 0l103. 3,

HIROMASA YAMAMOTO

46

Actual number of the registered dock workers, Port of Kobe

Permanent employees
Registered day workers

Oct. 1966

Oct. 1967

Oct. 1968

Sept. 1959

13, 046

13, 691

14, 493

14, 487

1oo104. 9111. 1

11L O

3, 497

2, 8322, 8571, 9g7

1oo

8L O

81. 7

57. 1

Source: Employment Security OMce.
Total man-days worked by perrnanent employees and day workers,

Port of Kobe (1,OOO man-days)}

Permanent employees

Oct. 1966

Oct. 1967

Oct. 1968

Apr. 1969

265. 6

as7. 5291. 1260. 61oo108. 3109. 6

98. 1

42. 6

41. 1

so. 9

•27. 1

1oo

se. 4

72. 6

es. 6

Day workersi)

Note; i)includes the registered day workers and also unregistered men.

Source: Employment Security OMce.

registered day workers who should make up a stable labour pool have not necessarily the stability of their employment or earnings secured. The registered day

workers were, in the average, hired 14.7 days a month in 1968 and 13.9 days in1969 . When we consider the workable days of registed men engaged in the various

kinds ofjobs, we find large fluctuations. For example, holdmen had 5.5 workabledays in January 1969, being the lowest number per month of the year and 23.7
workable days in August of the same year as the highest, while odd-job men had
14.4 workable days in January 1969 as the lowest number and 24.4 workable daysin August 1969 as the highest. Together with the fact that the registered day

workers had fewer workable days than the permanent employees who worked
usually twenty-five days a month, the daily and seasonal fluctuations of workabledays for the registered day workers resulted in unstable and poor earnings forthem.
As previously noted, when registered day workers cannot be hired notwithstanding their presence at the employment security oMce, they are qualified toreceive employment security pay. But the administration ofthe security payment
does not necessarily meet the needs of the registered day workers in Kobe. According to the provisions of the act, the amount of the pay is calculated on thebasis of days the registered man worked during previous two months and on the
average daily earnings he received. If he was able to work more than twentyfour days during previous two months, he is qualified to receive the full amountof pay which comes to about sixty per cent of the daily wage earning he usually

DECASUALIZATION OF DOCK LABOUR

47

gets. But the amount of pay decreases in proportion to the days he was out of

employment. Therefore, though the employment security pay is meant to coverand stabilize poor earnings of the registered day workers when the demand isslack, in effect this payment is not satisfactory if the demand fluctuates largely

and falls below to a level where they can work only a few days a month. For

example, in March 1969 holdmen received security payments that were in the
average as low as a quarter of their average daily earnings because of fewer em-

ployment opportunities in January and February. Needless to say, the amountof pay was far from enough to maintain their living. Moreover, if the registerd

day worker is not employed more than seven days a month, he loses his qualification to receive the day worker health insurance benefits.

As a result, since the enforcement of the act the decasualization scheme has
failed to maintain the projected number of registered day workers, and the actual
number of them has been decreasing. In response to the situations, the employers

have tended to employ more permanent employees.(4) Though stevedoring
companies have gradually introduced various kinds of labour saving devices tomeet the demand of service, they have had to rely upon the increase to permanent
employees in the face of the decrease of day workers.

In the previous passage the increase of permanent employeeg is regarded as
one of the merits of the act. Indeed the status of permament employee may bedesirable for the employees themselves. However, we should not overlook thatthe increase of permanent employees is at the root of the failure to maintain the
projected number of registered day workers, and at the same time it resulted in

making the employment for the rest more unstable.

Problems to be Solved.

III.

1. Large Fluctuations of Demand for Dock Labour-Characteristics of thePort of Kobe---As it is well known, dock labour is characterized by the fluctuations of de-mand. That is especially true in the case of the Port of Kobe. It suffers frommuch larger fluctuations of demand for dock labour than the other ports where
the Dock Labour Decasualization Act is also enforced.
The Port of Kobe is the last port of call in Japan for many liner services(4)

The reason why stevedoring agents have come to employ more permanent employees is
not simple. At first they employed as permanent employees those who had been hired as
regtilar gangs attaching to the company in order to secure reliable labour force. But, as
the registered day workers decrease, they have to employ more permanent employees so
as to secure moire workers.

HIROMASAYAMAMOTO

48

connecting various parts of the world. The entries and clearances of liners toand from Kobe in a month are concentrated on a limited number of days which
include the last few days and the beginning few days of a month. Consequently
at the Port of Kobe the daily demand for dock labour becomes largest during
these days, and the difference between the peak and the off-peak demand is very
great. Moreover, in rainy days the demand falls to nearly zero. In addition to
the daily fluctuations, there are seasonal fluctuations. The volume of cargo which

passes through the Port of Kobe usually becomes larger in summer and in

December.
Daily fluctuations of the number

unloading aboardof gangs: Gangs engaged loading andships, Port of Kobe
101-150 151-2oo 201-250 251-300 301-350

No.of gangs

O-50

51--1ooOct.1968
No.of
daysina Nov.1968
month

o

o

1

4

5

4

1

o

o

Dec.1968

4

o

o

o

351and

12

9

over
o

5

8

o

4

5

11

5

o

Jan.1969
Feb.1969

1

o

3

2

12

7

2

2

o

2

3

7

7

6

o

Mar.1969

2

2

2

4

5

10

6

o

Source:Association of Stevedores.

When the demand for dock labour fluctuates and the disparity between peakand off-peak demand is large, it is quite dificult to attain stability of employment

if the supply of labour is to be fu11y adjusted to the changing demand. The device

to reduce to a minimum the fluctuations of demand may be a desirable way toattain stable employment and earnings for dock labour, if the total demand canbe maintained without reduction. For this purpose the customs, the Port Authority of Kobe and other governmental agencies, have tried to get the cooperationof the shipping companies and shippers. But their efforts have had little success.

The shipping companies and shippers have not been cooperative enough to change
their sailing schedules or shipping dates. Because lading at the end of a monthis advantageous for shippers due to the commercial custom of Japan, and 1iner
companies tend to set sailing schedules which make possible to get more cargoes.(5)Therefore, the large fluctuations of demand for dock labour at the Port of Kobe

still remain, though a part of the peak demand at the end of a month has been
moved to make another peak in the middle of a month. Consequently, at present(5).

Customs OMce of Kobe, Funaxumi Kamotsu no Getsumatsu, Gessho Shdichti ni tsuite(Concentration of Lading at the End of a Month), Dec. 1968, (pamphlet written in Japanese).

DECASUALIZATION OF DOCK LABOUR
stevedoring agents have to adjust the supply of their service to the daily change-

abie demand,(6) and that leads naturally to the unstable employment of dockworkers.

2. Reconsideration of the Dock Labour Decasualization Scheme
As we have mentioned before, the Decasualization Scheme intends to estimate

and secure the necessary number of dock workers as permanent employees andregistered day workers. However, the scheme does not necessarily make clear
whether the necessary number of dock workers corresponds to either the peakdemand or the average demand. In the case of the Port of Kobe where there arelarge fluctuations of demand for labour, the determination of which principle
should be adopted will greatly influence the execution of the scheme and also theinterests of the groups concerned.

If the scheme determined the scale of the regular labour pool such as to correspond to the peak demand, it will be acceptable for the shipping companies andshippers while it burdens stevedoring agents: that is, the employers of dockworkers with heavy contributions to the employment security fund in order tomaintain a large volume of unemployed labour during the days of the off-peakdemand while the increase of costs is not easily absorbed by the increase of cargohandling charges.(') In contrast, if the scale of the regular labour pool isset cor-

responding to the average demand, the peak demand will naturally be met unsatisfactory for the Port of Kobe where there is a limited availability of casual

day workers. In the Kobe area there are relatively few casual day workers andcomposed mainly of aged unskilled men, being thus Iess qualined for dock work
and which can be employed only as odd-job workers. Therefore the possibilityof adopting the latter criterium to fix the regular labour pool, depends upon

whether or not the shipping companies and shippers accept cutoffs during thepeak demand or delays in loading and unloading of cargo.

From the above considerations regarding the determination of the scale of aregular labour pool, it becomes clear that the interests of the stevedoring agents

do not necessarily coincide with those of the shipping companies and shippers.
It becomes'also clear that the successful enforcement of the scheme cannot be

attained without the cooperation between the employers of dock workers: thatis, stevedoring agents and the users of their service, irrespective of which principle(6)

However, in the summer season stevedoring agent often cannot meet the peak demand
for their service because of short supply of labour. At that time delays of sailing occurrs(7)

some time, but fortunately there are now few severe port congestions.
The change of charges for cargo handling requires the permission by the Ministry ofTransport, and the Ministry is deemed to be reluctant to increase charges because of its
economic policy against inflation.

49

50

HIROMASA YAMAMOTO

being adopted to determine the scale of the regular labour pool, If this scale isset corresponding to the peak demand, the users of the cargo handling service
must share the costs of maintaining the unemployed labour force, unless an increase of charges for cargo handling is granted by the Ministry of Transport. If
the average demand sets the scale of the regular labour pool, the users have torenounce the quick despatch of cargo in the days of peak demand.

For the purpose to secure the cooperation between the employers of dockworkers and the users of the cargo handling service, it is essential to determine
first of a!l the optimal size of the regular labour pool to minimize the handlingcosts of the cargo flow through the port, and secondly to find a reasonable way of

sharing the cost burdens among the groups concerned. In estimating the optimal
size of the regular labour pool, the main factors to be considered are the warehouse

charges and extra expenses of the shipping companies which occur due to delayed
sailings and the costs for maintaining a variable size of the regular labour pool ata time when port facilities and the productivity of the dock labour are constant,

The costs for maintaining a regular labour pool depend in part on the hours ofwork, and these should be determined in consideration of the conventional hiring
practice and also from the standpoint of preventing labour accidents.{8}After the optimal size of the regular labour pool is estimated, the costs formaintaining should be added to the charges of cargo handling. The Ministry ofTransport should grant a charge if this becomes necessary. It means that theusers of the cargo handling service such as the shipping companies and shippers,
have to share the responsibilities of maintaining an adequate labour pool, so as

to secure a constant flow of cargo without hindrance through the port. This
proposition is based on the fact that stevedoring agents who employ dock workers
are not in a positionto make monopolisticprofits in the market for their services.

In the dock industry there are many small scale firms, and the charges for theirservices are essentially competitive, though the charges cannot be changed without

the permission of the Ministry of Transport. In addition, stevedoring agents arein many cases controlled by the shipping companies and warehouse companies
through financial and personnel connections. Therefore, the shipping companies

and warehouse companies may be regarded to a certain extent as the employersof dockworkers.

The cooperation between stevedoring agents and shipping companies andalso shippers may be secured under the present Port Labour Decasualization Act,if the act is properly interpreted. But, in order to tighten the cooperation be-(8) The concept of optimal hours of work is vague in content and cannot be determined
adequately. Refer to Y. Utsumi, Ro-dofikan no Riron to Mondai, 1962.

DECASUALIZATION OF DOCK LABOUR
tween them, it is necessary to change the framework of the act. As mentioned
above, the users of the cargo handling services may be regarded as the employersof the dock workers. The act should be amended so that the concept of theemployer in the act includes not only the direct employers of dock workers but
also the indirect employers : that is, the users of the cargo handling services.

The act has another point to be revised. The present act allows employers
to keep permanent employees as they wish without any restriction. Certainly thesystem of permanent employees is desirable for both the employers and theemployees. It provides the workers with a stable employment. It also provides

the employers with a reliable labour force and good teamwork. But when theratio of permanent employees becomes bigger in comparison with the regularlabour pool, the registered day workers are threatened by intensified fluctuations

oftheir employment opportunities. An unbalanced demand and supply of labour
may appear among the individual stevedoring agents because each firm has moreor less specified customers and the existence of a large number of permanent
employees makes it diMcult for the individual stevedoring agents to adapt the
supply of their service to the changing demand. Therefore, from the standpointof the effective use of dock labour, the Decasualization Scheme should not permit

the employment of permanent employees except for jobs as supervisors and crane

operators of special kinds. Also the present permanent employees should be
integrated into the regular labour pool, and the employment security oMce should
despatch the registered members to the employers on a rotation basis as the orders

come in. Except for permanent employees, the integrated regular labour poolcan afford a reliable labour force when adequate job training courses are open tothem.

rv. Conclusion.
Based on four years of experience since the Dock Labour Decaualization Act
has been enforce at the Port of Kobe, we have pointed out the necessity of revising

the act. The most important amendment concerns the concept of the employers,which must be widened to include the users of cargo handling services so that the

shipping companies which have the responsibility to secure stable emp!oyment
and earnings of the dock workers will have to bear their share of the expense.

Another amendment should prohibit permanent employees or limit the numberof workers who may have the status of permanent employees.
The revision of the act becomes more urgent if we take into considerationthat the economic circumstances of ports are going to change. In the near future
most liner cargo will be containerized. Containerization, intorduction of new type

51

52

HIROMASAYAMAMOTO

of loading machines and also the change in packaging, all will contribute on a large

scale to the reduction of the demand for dock labour, and severe unemployment
will be inevitable, if no measures are taken. The shipping companies take thelead in the introduction of economic and technical innovations which affect thedemand for labour. Stevedoring agents play a minor role. Henceforth, without

the cooperation of the shipping companies, the employment problems of docklabour, including the retraining and reallocation of labour, cannot be solved
adequately.

THE CHARACTERISTICS OF RECENT CORPORATEMERGERS IN JAPANJiro ONoI

A big economic problem, that of CorPorate Mergers is now widely andseriously disputed in Japan, as everybody is aware.

The following questions arise:

What are the main motives for the recent corporate mergers in Japan? Can
some of the mergers, especially the so-called "Large-scale CorporateMergers"

be the major cause of economic concentration in Japan? Will the economic
powers concentrated through the mergers control the price-behaviour of various

kinds of commodities? Can larger firms created through mergers be operated
much more eMciently than before? What kinds of other business problems areconnected with the mergers?
Many questions remain indeed unsettled in Japan, as Weston has appropriately pointed out in his excellent study treating the mergers in the UnitedStates.{i)In this paper and the ones to follow, the writer intends to analyze the eco-nomic background and the characteristics of the recent corporate mergers inJapan, with special reference to the postwar period.
(1) Weston, J. Fred; The Role of Mergers in the Growth of Large Firms, 1953, pp. 1-2.

II

The success of Japan's postwar industrial growth has been accomplishedthanks to various political and economic conditions as its background.

First, the occupation forces abolished the Japanese military and made theJapanese people enforce the so-called "New Constitution" which stipulates therenunciation of every kind of war. It had as a result the USA-Japan security
treaty, exempting Japan from the major expenditure for its national defense.
Therefore, the Japanese government, formed by the present Liberal Democratic

Party and its antecedents being in power ever since the end of war except
for a short period, was able to utilize the thus saved resources for the industial

54

JIRO ONO

recovery of the country by means of its fiscal-and monetary-policy, for example,

through the public investment in various kinds of transportation facilities andthrough financing, with specially advantageous loan-terms, of several key
industries by some public financing corporations specially established for theindustrial reconstruction and development.

The agricultural reformation implemented following the instruction of theoccupation forces also had a great effect on the postwar industrial growth of Japanin that it resulted in a much higher agricultural productivity than that of the
prewar period, and increasing the agricultural income, which contributed to thepolitical stabilization of postwar Japan and also increasing the demand for production of other industrial sectors.

The democratization policy of the occupation forces also gave a rise to active

labor movements for the purpose of an increase of the wage level, especially inlarge firms.

All these: the renunciation of war, the agricultural reformation and theappearance of active labor movements changed the prewar distribution structure
and resulted in the increase of disbursement for the people's living of a higher
grade than that in the prewar period, which in turn has steadily enlarged the demand for various kinds of industrial products andjustified the extremely aggresive
investment of firms.(2)Secondly, even after the war Japan was still pursuing its traditional industrial

technology and its capability of R&D, which had been developed for military purposes during the war. Later this invisible asset piayed important role in expanding

exports and in applying various kinds of imported new foreign technology toJapan's current industrial production.

Imported foreign industrial technology after the war is said to have been
related to about 8,500 items,(3) and it was readily digested to strengthen thenational industrial competitive power althoughmanyyet undeveloped but important fields, such as space-development, petro-chemicals, aircrafts, etc. were

neglected. From the viewpoint of technological innovation, at least up to thepresent, the huge amount of investment seem justified.

Thirdly, Japan has maintained its own educational system which can sufficiently stipply industrial firms with various kinds of cheap labour, as well as

engineering and managerial competence. This advantage is now losing grounddue to the so-called "High Economic Growth Policy" resulting in the availabilityof abundant employment opportunities,• and a shortage of employees in many
firms. In the traditional social system of Japan, however, the cost of intellectual
labour, for example, that of teaching, medical treatment, legal advice, etc., is still

rated very low in comparison with the other developed countries.

THE CHARACTERISTICS OF RECENT CORPORATE 55
MERGERS IN JAPAN

Fourthly, however, it must be stressed that Japanese corporations havedepended on debt financing from ordinary commercial- or savings-banks, that is,mainly on short-term bank loans. This state of affairs, which can easily be seenfrom the average debt--to-net-worth ratio in the capital structure of Japanese
corporations of about 4 to 1 as of September 1966,{4) and which makes the structure of Japanese corporations very vulnerable. At least till now, in the closed
economic system, this vulnerability has had the effect of adjusting the postwar
business cycles and the international balance of payment through the government's
monetary policy: that is, the aggressive investment which is usually financed by

the short-term loans of commercial-or savings-banks can easily be discouraged

or again promoted by the manipulation of the central bank's oMcial discountrate.

In other words, various measures taken by Japan following the instructionof the occupation forces, together with the heritage of traditional systems, changed

the structure of income distribution, established a suMcient domestic market forvarious kinds of industrial products, and promoted the investment and technological innovation of individual firms. Furthermore, aggressive investment andimported or developed new technology have changed the industrial structure andstrengthened Japan's capability to export. On the other hand its internationalbalance of payment which tends to fluctuate according to the process of businesscycles, especially the behaviour of equipment investments by firms, has beensuccessfu11y adjusted through a monetary policy which is very effective owing to
the financial vulnerability of firms, though a number of small- and medium-scale
firms have to be sacrificed in the process.

In April 1964, however, Japan joined the Organization for Economic Cooperation and Development (OECD), accepted Article 8 of the International
Monetary Fund (IMF) obligations, and liberalized trade restrictions on all but

a few products which have to beprotected for the time being against foreigncompetition for Japan's economic growth and stabilization. At the same time,
Japan decided to liberalize the restrictions on the entry of foreign capital.

These developments mean that Japanese industrial firms can no longer
operate within the protected closed national economic system and that they will
now be exposed to the rigor of international competition.(5) That is, Japanesefirms can no longer depend on their own domestic market for their aggressive
investment and technological innovation because the products of other developedand developing-countries can be imported if they are cheap, and a large share ofbusiness of Japanese firms may be lost in its domestic market. Moreover, anumber of Japanese firms are exposed to the danger of being easily acquired andcontrolled by .American or European giant firms, as it had been witnessed in

JIRO ONO

56

Europe where a few American giant corporations bought up extremely aggressively

stocks of some important European automobile firms and finally acquired thepower to control them. The danger is considered much more serious in Japanbecause of the financial vulnerability of Japanese firms.

Therefore, the key Japanese business leaders, the leading oMcials of the

Ministry of International Trade and Industry (MITI) and some well known
economists are afraid that Japanese industrial firms may have to face such kindsof great trials as the above-mentioned, which will necessarily follow from Japan's

joining the international open economic system and from its playing a role in thedevelopment of the welfare of the whole world. It is stressed that a number ofJapanese firms have to keep up the growth of their own domestic market at thepresent rate, and that the key industries must not be owned or controlled byforeign firms because their controll would have an important influence on Japan's

own economic, social and political developments which might be unwillingly
distorted, although the liberalization of restrictions on international transactions
is certainly necessary.

Under these circumstances which characterize the present environmental
conditions the motives of "Corporate Mergers" have become quite different fromthose at prewar period.

In the next section, we will outline "Corporate Mergers" in Japan after thewar.
(2) Yoshino, M. Y.;Japan's Managerial System, 1968, pp. 30-40 and p. 166.
(3) Arizawa, Hiromi ed.; Sangyo no Ko-xO-Kaixen to Kigyo'-Gappei (The Improvement ofIndustrial Structure and Corporate Mergers in Japan), 1969, p. 29.
( 4 ) Yoshino, M. Y. ; ibid., p. 139 and p. 180.

(5) Yoshino, M. Y:ibid, p. 177.

III

The prewar industrial structure of Japan was characterized by the so-called"Zaibatsu" system, which was a private enterprise grouping owned and controlled

by one family. There were the Big Four: that is, the Mitsuis, the Mitsubishis,the Sumitomos and the Yasudas as the most popular Zaibatsu families, though,strictly speaking, there must be mentioned also other smaller Zaibatsu families.

Anyway, the main part of the prewar Japanese industry was firmly owned andcontrolled by a few wealthy families.

In the powtwar period, however, the Zaibatsu system was abolished by orderof the occupation force : that is, the shares of corporations owned by a few Zaibatsu

families were offered for sale in the open stock market to be portioned out among

Table 1

Number of Corporate Mergers in Industry between

1949 and 1967

Year

'"
N.t.'E-

CategoryofIndustry
Agriculture,ForestryandFishing
Mining

19491950 1951 1952 1953 1954 1955 1956 1957 19ss 1959 1960 1961 1962 1963 1964 1965 1966 1967
9

2

4

5

5

11

5

22

4
4
9

19

13

sc

14
co

160

155

169

173

185

32
rs

x22

22

as

311
55
36

u 9 10 10 11 9 15 10 10m-9 "9 ' 7 -6 -6 -7 ' 8
12 gg

14

sc
za
8

254
51
so
6

20

76
ss
22

3

5

9

-11

4
12

10

16

5
9

11

Construction

13

10

Manufacturing

275 2so
ng sc
65 57

Food
TextilesLumber
PaperandPulp

8

PrintingandPublishing
Chemicals,PetroleumandCQalProducts 49 41
RubberandLeather-Products-15 -22

4
6
3

2
9

2
4

6
6

2

3

5

5

4
4

18

17

13

19

19

190

197

169

159

151

32
47

26
es

26
35

35
21

32

36

ff

7

as

36

52

53

18

17

M
zz

7

18
17

15

3

10

g:

9

12

17

15

13

13

Q{M

gg
6

29
3

21

26

3

2

ee

20
42
74

47

37

-14

-4

rm

15

11

' 6 -2 -8 ' 6

3

16

13

16

13

ca

26
32

26

ns

6

8

7

4

1

ss
8

91

73

97

87

89

Banking,TrustandInsurance

9

10

7

11

6

Real-Estate

7

TransportationandCommunication
Warehousing
GasandElectric
Amusements

gg

9

4
26
3
o
4

OtherServices
OtherIndustry

6

2

o

17

de
8

20
49

109

98

106

11

16

19

122
7

10

35
16

10

4

14

18

14

16

14

23
39

10

30
81

79
110

56
85

11

9

11

42
74
27

62
62
20
267

8

93
10

127

144

184

241

243

7

7

8

11

9

18

17

27
60
8

38

"3

72
97

51
74

261
25
40
ss

4

4

3

7

1

2

1

3

1

o

o

M
-o

oo

gg

so

101

12

329
19
78

8

8

9

8

15

112
8
17

18

15

32

32

2

3

"2

36

2

27
3

3

3

2

o

1

o

o

o

2

1

6

7

8

5

11

8

8

19

pa

1!

5

8

9

10

11

13

2

3

1

7

1

6

9
14
9

8

3

5
6

o
14

4

1

9

20
18

36
o

-3 -20 -15 -8 -o

as 420331385

sw 325

338

381

398

381

413

"o

591

715

997

5

o

27

9
25

5

o

1

gi

53
20

5

8
as
8

g

sc
24

32

30

M

e

se
ss

1

16

9

ms am 313 ms 315

12

10

Total

7

22

10

CommerceandForeignTrade

9

19

26

41

Machinery
OtherManufacturing

um

18
12

11

in
6

22

8
21
as

16

21

9

8
39

30

32

as
31

Ceramics
Metals

15

7
ll

M
5

864

894

11

61

62

871

995

lil

s

zHO.

vts

:8
z3

E
8
i:l

s

t(l

en
oo

Table 2 Number of Corporate Mergers According to

Amount"X'---..Year
x-x
ofPaid-in"'•x.Å~Size of Firms (in Paid-in

between 1950 and 1967

Capital)

1950

1951

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

lessthanO.5

27

12

15

10

6

11

10

2

4

3

2

2

6

o

3

1

1

3

O.5-1

M

su

z

9

15

13

18

18

10

9

8

6

9

11

5

6

11

6

1-5

215

139

162

156

151

141

150

135

152

149

144

147

146

188

182

220

205

218

5-10

62

ss

71

52

sa

47

75

M

ss

95

1oo

125

131

187

160

169

142

181

10-50

os

as

70

M

73

zz

ss

98

81

sc

en

176

221

320

313

318

341

367

50-1oo

7

8

17

za

15

11

17

so

16

18

ss

63

72

115

67

57

os

77

1oo-500

7

12

19

19

as

15

13

18

as

so

41.

as

91

116

oo

93

67

94

500-1000

o

2

4

5

5

4

2

4

2

7

8

9

10

15

14

16

'11

9

1000-5000

o

o

3

5

4

7

6

9

7

8

9

13

23

28

17

8

23

ee

5000-10000

o

o

o

o

o

1

1

o

1

o

o

3

3

5

4

3

2

4

10000and.over

o

o

o

o

o

o

o

o

o

o

1

2

3

12

9

3

5

7

Total

420

331

am sw

325

ms

381

398

381

413

mo

591

715

wr

8M

8sc

871

995

1967

.al
CMa
,P,i gt ,,a {t.':'monyenX)

=
x
o
o
z
o

THECHARACTERISTICS OF RECENT CORPORATE59
MERGERS IN JAPAN

Figure 1 NumberofCorporateMergersbetween1947and1967

1,ooO

900

8oo

700

600
ts

pE
=
z

500

,x
ts

In4ustry tt Ss

400

t IS
ss

IN
IN

t'
''
'NSSsss i.N Manufacturing ltttl /'/-'-3oo

Å~ 1..
Xstf't'-t'

200

Vt SN-..-.......------.-.--'-t !tt-Commerce & Foreign Trade ...-'
100

o

-...

. .t.N..../!'N.t.-

N!

47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

66 67
Year

Japanese people. All firms, whether large or small, were liberalized from theownership of Zaibatsu and became independent of any type of private control
imrnediately after the war, though a few types of new private enterprise groupings-so•-called "Kigyo-Shyudan"--were reconstructed after 1953 as we shall see
later. At the same time, in 1945-46, the movement towards "Corporate Mergers"
restarted in the postwar industry of Japan.

The number of mergers accepted by the Fair Trade Commission (FTC)
between 1949 and 1967, classified according to categories of industry, is shownin Table 1,(G) from which we can find the following facts about the corporate
mergers in Japan :60

JIRO ONOFirst, the corporate mergers have some relations with business cycles though

they are vague. According to the MITI's report on the mergers, it seems thatthey took shape in depression periods, and that, the actual mergers were realized
only within six or eighteen months later,(7) at least before 1962. Another report
also points out that, as a whole, the curve of the number of mergers has two peaksin the postwar period, the first being in the depression period of 1949 to 1950,

during which the government tried hard to reduce the drastic inflation throughfiscal- and monetary-policies following the so-called Dodge-policy, and the secondin the depression period of 1962 to 1963.(8) The writer, moreover, would like to
add a third peak in the depression period of 1966 to 1967 which is called a struc-tural depression brought about as the result of Japan's extremely aggressive
industrial investment frorn 1956 to 1965, though, at the same time, also an in-ventory-adjustment had to be performed as usual.

Secondly, as everybody will infer, the above-mentioned trend of corporate
mergers can be explained, though only partly, as a means to achieve one of theirprincipal motives. The first peak in the number of mergers appeared in theserious depression period just before the Korean War. It is said that about eleventhousand firms went bankrupt between September 1949 and March 1950, andthat the number of unemployed increased from 260 thousand to 430 thousand in
the same period.(9) One of the main motives for mergers in that period was toacquire a depressed firm, to reorganize a bankrupt firm and to conclude a settle-

ment with its creditors. (We can often find the mergers where the new company
was established for the sole settlement of debts.)

On the other hand, the second and the third peaks were characterized byquite different motives. The Chamber of Commerce and Industry of Tokyo, in
its recent report, points out that the mergers just for the settlement or the reor-

ganization of bankrupt firms have decreased. For instance, according to thereport, the corporate mergers promoted for this kind of financial purposes were311 (31.2 0/,) in 1963, 175 (19.6 O/,) in 1965 and 136 (17.8 O/.) in 1968.('O)

Especially as regards the corporate mergers in 1963 which amounted to thelargest number - 997 - in the postwar period, the FTC says in its annual report :"The number of mergers accepted by the commission showed an increase of 312
cases, 34 O/, in comparison with 1962." The reason was that Japan had to liberalize
its restrictions on foreign trade and foreign capital entry, following the acceptancein 1964 of Article 8 of the IMF obligations. The leading businessmen and officials of the MITI thought that Japanese industrial firms were to face a much

more serious international competition. Domestically, moreover, Japan was in
the recovery process from the depression of 1962. That is, the reorganizationof an industrial structure more adaptive to the new developments was required,THE CHARACTERISTICS OF RECENT CORPORATE 61
MERGERS IN JAPANwith the result that "Corporate Mergers" were carried out as the most effective
and useful solution.(n)Therefore, as to the main motives or the aimed effects of mergers in the recent

two peaks' periods, we notice several more constructive consideration on comparedwith the first peak.(i2)(1) Regarding the sales of the corporations, their increase in revenue or the
expansion of their domestic market share was the most important factor of themergers, though it was feared that the new corporations might lead to a restrictionof free competition and the reconstruction of monopolistic systems in the future.

At the same time, the mergers were effective in decreasing the local sales oMces
and warehouses, in reestablishing new rational sales-networks and in strengthening the corporation' sales-forces, with the result that they were able to reduce
their sales- and advertisement-expenses, in comparison with their increased sales.

(2) As for the production activities of the merged corporations, the mostobvious effect was the cost-reduction expected to be achieved by expanding the
production scales and by redistributing the production activities among the various

factories in a more rational way, which did mean not only a horizontal concentration, but also a rationalized vertical consolidation of the manufacturing activities

located in various places of the country. Moreover, it was considered naturally
to control or to readjust the merged corporations' investment-plans and to in-

novate their technology and management, because horizontal concentration andvertical rationalization were usually obtained by closing old ineficient factories

and by building new ones of higher productivity. The MITI specifically stressed
the effect that mergers allowed corporations to avoid duplicated excessive invest-

ment of un•-merged companies, reducing their competition. The optimum
products-mix and stabilization by the diversification of products or services also

appeared as a major motive in some cases.

(3 ) The mergers had an unexpected effect on the corporations' personnel
practices, and at the same time, they brought about other dithcult problems as

will be mentioned later. The recruitment of new young employees was madeeasier, as Japanese people are inclined to think that the larger a firm is, the morereliable it is. Moreover, many obsolete executive people could be abolished andthus the corporations' general ofice expenses reduced. Of course, qualified
people were expected to be relocated to rnore suitable posts in order to savepersonnel expenses. Especially important were the effective transfers of excellent
managers, engineers and other specialists because of their shortage at the presenttime.

( 4 ) The mergers had a substantial effect also on the purchasing activities ofcorporations. That is, the relations between the mother corporations and their

62

JIRO ONO

aMliated firms (the so-called Shita-Uke-Kigyo) were readjusted and rationalized
after the mergers, because as a rule each of the merged corporations had had its

own old ineMcient group of aMliated firms. The reorganization or the modernization of the old affiliated firm systems is one of the most significant tasks of theJapanese industry and, if realized, is considered one of the most worthy effeetsof corporate mergers.

( 5 ) According to various kinds of reports and papers, the R&D activities offirms are expected to be rapidly improved and strengthened by corporate mergers,

and some corporations report that their R&D activities have been promoted since
their mergers and also that the import of new technology became easier owing to
the increased research-staff and R&D budget. It is true that the R&D activities
have to be expanded because Japan must be in a position to develope new industrial technology in order to overcome a much more serious international competitionin the near future. However, it is still doubtful whether the.R&D activities canbe so rapidly strengthened as the very result of corporate mergers or not, thoughsome specialists have emphasized the importance of so-called large-scale research
projects, which are expected to be carried out much more easily by larger merged.
corporatlons.
( 6 ) Some corporations stressed that their financing ability would be improvedby the mergers, that is to say, the larger the firms were, the easier they could bor-

row from banks. An improvement of their capital structures or an increase of

their equity capital, however, may not be expected, though the MITI has emphasized the necessity of improvement, there is no reasonalbe relation between
the mergers of corporations and their sound capital structures.

( 7 ) In some cases, especially in the maritime transportation and the securities

industry, the mergers were promoted in accordance with the instruction of thecompetent authorities or the recommendation by the big commercial- or savings-

banks. The MITI, the Ministry of Finance and the Ministry of Transportation
have often tried hard to promote mergers of corporations under their supervision

to rescue or to improve them. In the maritime transportation, the corporations

were hard hit by the instruction of occupation force dated November 24, 194S

which stopped payments "upon any claim arising-from war damage" (memorandum of the Supreme Commander for the Allied Powers to the Japanese government). In order to survive, most shipping firms were merged and reorganized
into six large corporations between 1963 and 1964, following the instruction of

the Ministry of Transportation. Many securities corporations carried theirtraditional speculative management-consciousness even to the postwar period,
which brought about the well known business failure of the Yamaichi Securities

Corporation in 1965, with the result that the Ministry of Finance advised theTHE CHARACTERISTICS OF RECENT CORPORATTE 63
MERGERS IN JAPANmergers of securities corporations as one ofseveral devices for their modernization.

On the other hand, as everybody is aware, the postwar Japanese industrial firms
have always owed about eighty percent ef their financing to the main commercialor savings-banks, which are called `fcity-banks" in Japan, with the result that a

special type of enterprise groupings (Kigyo-Shyudan) developed in which thedifferent firms of a group firms center round a main city bank. These banks also

promoted mergers of corporations under their control in order to make the corporations' business activities sounder and to protect their own interests or themoney borrowed from them.
To summarize, the main motives and the aimed effects of the corporate
mergers in the last two peaks periods were to reduce the corporation expenses-in fact, there are a number of corporations whose increase of profits or profitability was one of the most significant effeets of the mergers-, to strengthen the
R&D activities, to increase the financing- or borrowing-capability and to overcome

the much more serious international competition of the future. They are substantially different from those of the first peak period. We can see here how
severely the leading businessmen and the leading oMcials of the competent authorities consider the international trials expected in the not too distant future,

though, of course, such diMcult problems cannot be solved only by the so-called
reorganization of the industrial structure or the "corporate mergers".

Thirdly, we must mention the diMcult problems or the obstacles('S) in theforegoing corporate mergers, which are well characterized by the managerial
system of Japan (Nihon-teki Kcier').

(1) It was the labour problem or the personnel management problem thatproved to be one of the greatest obstacles on the way to the mergers of most of
the merged corporations.

In Japan, with rare exceptions, the employees of corporations are now allunionized. By 1965, the union membership exceeded the ten million mark,representing approximately thirty-six percent of the entire work force.(i`) The
core, however, is usually a labour union organized on an enterprise basis to whichalmost all employees belong, whether they are mechanicians or programmers of
EDP or oMce workers, except those in the shipping iridustry. That is to say,unions are not organized along the lines of craft, industry or region. A numberof such unions in a certain industry, then, forms an bigger industrial union, which

in turn is aMliated with the S6hy6 (the General Counci! of Trade Unions ofJapan supporting the Socialist Party) or the D6mei (the Federation of Labour
supporting the Democratic Socialist Party). In other words, each of the merged
corporations had had its own agreements with the labour union in regard to thesystems of wages, retirement allowances and other kinds of employees' welfare.

64

JIRO ONO

In some cases, the labour unions were against mergers plans that might result ina disadvantage for the employees. At best, they required the top-managements
to secure their existing interests, that is, the level of wages, the position of each

employee, the fringe benefits and other working conditions. Thus, the managements of corporations which were to merge had to confer with the unions about
the possible readjustment of the level of wages and retirement allowances, thepossibility of relocation of the employees, the necessary conditions to lay off someof the employees and other problems of working conditions. In almost every case,the level of wages was readjusted to accord with the highest of the merged corpo-

rations, and the paid retirement allowances-for the employees who seized theopportunity to leave the corporation at the time of merger-mounted up to suchhuge amounts that most merged corporations had diMculties to finance thepayments.
Also in the viewpoint of the labour unions, the mergers were very serious
problems, because, if one of the unions in the merged corporations belonged toa different mother organization (for example, the S6hy6) from the other's (forexample, the D6mei), they had to reexamine their fundamental labour-movement
policy and, sometimes, also their political ideology to consolidate and to determine

their new mother organiz.ation. The decision-making, thereafter, would have adecisive influence on the reactions to various kinds of the government's politicalor administrative commitments for the new union and its members.
On the other hand, the Japanese traditional system of life--time employment
and the seniority-based reward system made it diMcult to relocate or to dismiss
employees and managerial staff. Especially, a few top-managers opposed in somecases the merger plan only to protect their own present status in the corporation.
Almost all merged corporations were troubled by the dithculty to deal with persons

who had belonged to different kinds of managements before and who became
excessive after the merger.

The improvement of human relations and the emotional harmony among
the workers in the newly merged firm was also an important problem, because
the Japanese life-time employment system had formed its own traditional climate(the so-called Shafti) for each corporation, which had to be reformed now into a

new one.
(2) Certain kinds oftax and expenses connected with the mergers must not
be disregarded.

As for the tax, it must be examined on the consideration that the income ofshareholders of the "purchased" or "merged" corporations resulting from theirliquidation is taxable as valuation-profits of the corporations at the time of merger

and that a registration fee must be payed.

THE CHARACTERISTICS OF RECENT CORPORATE 65
MERGERS IN JAPANThe first kind of tax on the so-called liquidation income and the valuationprofit, being the balance between the book value of the new stock issues after themerger and the amount of the old capital stock accounts before the merger, istwice imposed on the same object viewed from different standpoints and its rate
amounts to a considerable large percentage.
Theoretically, the real value of the stock issues of the new corporation isusually established as the sum of the capital stock, the capital surplus, the reval-uation surplus, the earned surplus and so forth: all of which have to be adjusted

on the so-called going-concern basis and compared with the sum of the abovementioned accounts of the old corporations in order to determine the liquidation

income and the revaluation-profit. According to the Japanese income revenue
code, however, only the capital stock account is taken as a capital item to be re-valued in order to determine the taxable liquidation income. Therefore, it ispossible for the corporations to manipulate the book values of various kinds ofaccounts in order to make the liquidation income null, to be exempted from thetax, if the top-management dislikes to establish a new accounting- or admmis-trative-responsibility of the corporation at the time of the merger. The detailsof these kinds of accounting and tax problems of merger will be discussed in oneof the following papers, but, anyway, these kinds oftax are practically imposed
upon only a small number of the merged corporations (4.40/o to 17.6O/.), though
in an exceptional case one of the corporations of which the paid-in capital after
the merger was over four billion yen had to pay a tax of 368 million yen.
The registration fee is O.15 O/. of the increased amount of capital stock in thecase of mergers through "acquisition", and O.15 O/o of the amount of the capitalstock of the newly established corporation in the case of fusion, but O.7 O/, for theexcessive amount of the new corporation's capital stock over the old. This fee isan unavoidable charge, and it is considered as one of the motives promoting
mergers by acquisition.

In other words, there remain several important theoretical problems concerning tax and fees of corporate mergers, and the possibility that taxes may
become a heavy burden for the merged corporation.(is)Regarding the income tax system, we have to point out that the special
treatment for deferred loss, especially for deferred depreciation charges, by which
this kind of expense items is usually permitted for revenue of the next five years,
can not be applied in the case of mergers. This is said to be a serious obstacle forthe improvement of financial structure of merged corporation.

(3) Since 1953, we have reconstructed the enterprise groupings of the Zaibatsu
type, although their character is quite different from that of the prewar firms,

besides the above-mentioned new type of enterprise groupings centering around66

JIRO ONO

a main city-bank. The leading corporations, the main city-banks and the brain

councils of these groupings promote sometimes mergers within an enterprisegrouping, but, in other cases, they were against mergers of corporations to protect
their own interests, for example, in order to keep an excellent supplier or a soundborrower under their control. The same attitude against mergers is often foundamong minor shareholders of merged corporations, though their influence is not
signincant.

However,. it is a recent tendency that mergers between competitive corporations are being promoted, though we can say that till 1968 mergers meant theconsolidation of corporations aMliated with each other in such a way that both

had the same main city-bank or belonged to the same enterprise grouping. In
other words, corporate mergers in Japan are a step forward the very reorganization of the industry, beyond the rigid framework of existing enterprise groupings.

(4) The merged corporations had to readjust and to unify their oMcemanagement systems, the data processing systems and the traditional customsof various kinds of working-systems, which were very complex problems evenin an ordinary firm. Moreover, they had to make use of idle plants and machines

and oMces inherited by the merger, as profitably as possible. The process ofreadjustment and unification of the various kinds of physical and immaterial
working-systems into a new one was substantial!y important in the mergers,
though it required an unexpected long time.
( 5 ) The attitude and the decision of the FTC in each case of corporate mergers

has been the most important factor to determine whether the merger would bepossible or not. At least till now, however, the decision criterion of the com-mission whether or not to grant a merger has been only the concentration of themarket-share of firms, that is, the degree of influence it would have on the price-

behaviour of a certain commodity. Of course, this infiuence must not be disre-garded, and we have experienced that mergers were rejected by the commission
in two famous recent cases; one concerning three major paper- and pulp-corporations and the other two major steel-corporations at least in the original form.
But it is also true that the effects of corporate mergers must not be evaluated only

from the viewpoint of free competition of firms. It seems that the FTC is assuming a more flexible attitude, especially regarding present mergers.

Fourthly, we must mention, though briefly, the number or tendency ofcorporate mergers according to the different categories of industries (Table 1) andaccording to the scale of the firms measured by the amount of paid-in capital(Table 2).

It is said that the number of mergers was the largest in the categoryof manufacturing industries but the fact remains that the number of mergers inTHE CHARACTERISTICS OF RECENT CORPORATE67
MERGERS IN JAPANthe commerce and foreign trade category has rapidly increased too and that it

was higher than that in the manufacturing industries between 1966 and 1967.
These phenomena, of which details will have to be reexamined later, are considered to refiect the recent drastic change in the domestic and international
distribution systems. On the other hand, as regards the scale of corporate mergers,
it seems that their weight has shifted from small- or medium-scale firms to Iarge
corporations. Certainly, there are the examples of so-called large-scale corporate
mergers, which were sensationally reported in the press. However, it is the small-or medium-scale firms with a paid-in capital after the merger from one million
to ten million yen that occupy the first place regarding the number of mergers(Table 2). The situation, of which the reasons will be also examined later, may
reflect the character of the Japanese industrial structure, that is, its own type ofvertical aMliation between large-scale corporations and small- or medium-scale
firms.

***
In conclusion, we have tried to outline the background and the situation of corpo-

rate mergers in Japan and pointed out several important problems involved. The

details of individual problems will be reexamined and discussed in following
papers in such a way as to form a complete systematic study.

0ctober 28, 1969
(6)

The number for 1949 is the data for June 18, 1949 to March 31, 1950. Strictly speaking,

571 mergers were accepted by the Fair Trade Commission from April 1, 1949 to March
31, 19SO, though we can not give the details. MITI, ed.; Kigyo'-Gappei no Ko-ka to
Mondaiten - Kigyo--Gappei Hakttsho (The Effects and Problems of the Corporate Mergers

in Japan - JVhite Paper on Corporate Mergers), December 1962, pp. 5--6. FTC;
Annual Report, 1963-1968 (These reports are generally ealled Dokusen-Hakusho- PVhite
Paper on Monopoly).

(7)
(8)

MITI, ed.; ibid., p. 7.

Osaka Ichiritsu Daigaku Keizai Kenkyttsho (Research Institute of Economics, esaka
City University); Sangyo--Saihenser' to KigyO-GaPpci (The Reorgani2ation of Industry andCerporate Mergers in Japan), 1967, pp. 79-80 and p. 82.

(9)Osaka Ichiritsu Daigaku Keizai Kenkynsho (Research Institute of Economics, Osaka(10)

T6kyO Sh6k6 Kaigisho (Chamber of Commerce and Industry of T6ky6); Kigyo--Gappei

City University); ibid., p. 80.
no Jittai (The Investigation of Corporate Mergers), 1969, p. 11.
(11)
(12)

FTC; Annual Report, 1968, p. 21.

MITI, ed.; ibid., pp. 72--74. TOky6 ShdkO Kaigisho (Chamber of Cornmerce andIndustry of Tokyb); ibe'd., pp. 11-16. Nihon Seisansei Honbu (Japan Productivity
Center); Kigyo--Gappei ni Kansuru Cbosa-Ho-kokttsho (The Research on the Recent Corporate Mergers in JaPan), 1967, pp. 22-26.

(13)

(14)
(15)

MITI, ed.; ibid., pp. 30-43 and p. 75. T6kyO ShOkO Kaigisho (Chamber of Commerceand Industry ofT6ky6); iin'd., pp. 26-106. Nihon Seisansei Honbu (Japan Productivity
Center); ibid., pp. 7-8. 0saka Ichiritsu Daigaku Keizai Kenkyasho (Research Instituteof Economics, Osaka City University); ibid., pp. 263-288.
Yoshino, M.Y.; ibld., p. 114.
MITI, ed.; ibid., pp. 40-ZL2.

ESTUDOS BRASILEIROS NO JAPAO
Yoshiaki NIsHIMUKAI

I.-Situag5o atual dos estudos brasileiros no Jap5o.
Como 6 do conhecimento geral, ap6s a II Guerra Mundial, a situagio nomundo sofreu transformagao estrutural acentuada, tendo sido criados problemas,
novos e graves, de natureza polftica e econ6mica.

No campo da politica a relagio entre o "Oriente e o Ocidente", isto e, a
relagao entre o mundo livre e o mundo socialista, constitu{ ainda hoje um pro-

blema importante, e no campo econ6mico "problemas do Norte-Sul", isto 6, as
solug6es dos problemas existentes entre os paises econ6micamente desenvolvidos

e aqu61es subdesenvolvidos se erigem como igualmente importantes.
Em face dessas novas realidades do mundo, hs ciencias sociais coube a incumbencia de fornecer novos sinstrumentos te6ricos para possibilitar a elucidagSo

das mesmas. Por exemplo, no campo das ciencias econ6micas surgiram, como
nova ramificagao das pesquisas, as teorias de desenvolvimento econ6mico dos
paises subdesenvolvidos ou em vias de desenvolvimento. E no processo dessas
pesquisas foram sendo reconhecidas as necessidades e importancia das pesquisas
e levantamentos politicos, econ6micos e sociais desses paises. Estas assertivas

ngo se limitam apenas hs ciencias econ6micas. Elas sio vilidas tambem nos
campos de outras ciencias sociais. Em todos os campos, sente-se a necessidadeda realizagao dos ditos "estudos dos paises estrangeiros".

Entretanto, a necessidade. dos estudos de paises estrangeiros nio nasceu
apenas por exigencias priticas baseadas na realidade do mundo de ap6s-guerra.

Fundamentalmente, adv6m do fato de que todos os paises sentem a necessidadede aprofundar a compreensio m6tua. Tendo como momento a Segunda Grande
Guerra, todos os paises experimentaram na pr6pria carne de como eram prechrios os conhecimentos s6bre os outros povos.
Porisso mesmo, trata-se de um esf6rgo natural de todos os paises as tenta-

tivas, nos dias de hoje, de intercambio cultural internacional mais intenso eaprofundamento de suas compreens6es mtituas. Nesse sentido, se faz misterum maior impulso nos estudos dos paises estrangeiros.
Sob esta perspectiva, ao voltarmos as nossas vistas para a situagao atual dos

estudos brasileiros no Japio, deparamo-nos com uma realidade assda acabrunhadora. Nio poderemos deixar de dizer que os estudos brasileiros no Jap5o se

YOSHIAKI NISHIMUKAI

70

acham num estigio acentuadamente insatisfat6rio. O n6mero de pesquisadores
e reduzido, como sio absolutamente insuficientes os 6rgios de pesquisas, como
precirias sio os aparelhamentos adequados. Em decorr6ncia disso mesmo, sio
pobres os resultados alcangados. Dos 17.758 trabalhos cientificos, dados, comen-

tdrios, etc., publicados no Japio nos anos de 1967 e 1968, apenas 119 trabalhosdiziam respeito h Am6rica Latina, isto e O,660/, do todo, sendo que os assuntos
brasileiros participaram com 22 trabalhos, com a insignificante porcentagem deO,120/,. Se forem considerados apenas os trabalhos cientificos essa participagio

diminui ainda mais sensivelmente. Relativamente h Am6riga Latina eram de
51 trabalhos, dos quais 16 versaram s6bre temas brasileiros, panilhando O,310/. e

O,090/, do todo, respectivamente. Para aqueles que conhecem as relag6es entre
o Japao e o Brasil, que veem de longa data, essas cifras sio efetivamente dificeis

de serem acreditadas, mas infelizmente sio o retrato da realidade.

Entio, por que se encontram em tio baixo nivel os estudos brasileiros no

Japao?
Bhsicamente, as suas causas podem ser procuradas:a) na atividade tradicional, em fase dos estudos. dos paises estrangeiros,

vigorante no Japao;b) na atitude, em face das pesquisas por parte dos cientistas sociais, vigo-

rante no Japao.
Inicialmente, faremos um retrospecto dos estudos dos paises estrangeiros

no Japao. Desde o advento da era Meiji, o objectivo tradicional dos estudos
dos paises estrangeiros no JapSo foi a absorgao das culturas dos paises adiantados

a fim de servir na promogio da sua modernizag5o. Ao Japao, um pais atrasado
sensivelmente em face ao avango do mundo inteiro, em decorrencia do longo
periodo de clausura de suas portas aos paises de fora, se era necessirio, para asua moderniza'gao, a absorgio e introdugio da t6cnica e conhecimentos pertencentes aos paises mais adiantados, as atitudes acima sao perfeitamente explicaveis, justificiveis e de certa maneira inevitiveis. Entretanto, o grave 6 quetranscorridos 100 anos desde o advento da 6ra Meiji persista ainda, fortementearraigada, essa atitude. Voltando aos mesmos dados anteriormente citados, dos

trabalhos, artigos, comentirios, etc. que enfocaram exclusivamente os temas
estrangeiros, constata-se que a maior parte se refere h Europa, com 44,30/o do

todo, sendo que os Estados Unidos participam com a porcentagem de 19,70/o.
Quer dizer que as hreas ditas adiantadas ocupam 640/. da cifra total. Quantobs hreas subdesenvolvidas, com excegao das regi6es asiiticas, que mantem relag6es muito especiais com o Jap5o e cujas participag6es montam em 20,30/o, os

trabalhos que se referem h Am6rica Latina envolvem 40/, e a Africa registra

a porcentagem de 3,80/o. Como demonstram essas porcentagens, os estudos

ESTUDOS BRASILEIROS NO JAPAO 71
dos paises estrangeiros, que se levam a efeito no Japio, podem ser entendidoscomo pesquisas relativas aos paises mais desenvolvidos. Pode-se dizer que essa

maneira de encarar a questao forma uma tradigao.

Esta tradigio trouxe a introdu'gio de uma metodologia err6nea no que serefere hs pesquisas dos paises estrangeiros. Quer dizer, as ciencias sociais in-•

troduzidas no Japio eram aquelas desenvolvidas dentro do ambiente do sectarismo da especializagao, vigorante na Europa do s6culo XIX. Em decorrencia
disso, quando o Japio pretendia compreender os paises estrangeiros, revelou-se

o inconveniente de tender para o aprofundamento da questio atrav6s do prisma

exclusivo das especialidades. Na Europa, onde os clissicos gregos e romanos
foram herdados e as tradig6es do Cristianismo servem de alicerce comum atodos, as pesquisas podem ser imediatamente conduzidos pelos canais da esnypecializagio sem os seus inconvenientes. Isto porque, dentro da anilise defen6menos nacionais peculiares, ha perfeita possibilidade de encontrar-se os

principios comuns. E mesmo antes disso, havia a compreensZo mGtua, aprioristica, baseada no ambiental cultural comum. Entretanto, quando o Japao,
possuidor de ambiente cultural diverso, se prop6s a estudar na Inglaterra, na

Franga, na Alemanha, e outros paises, a adogio da metodologia corrente na
Europa, pura e simplesmente, serviu-se da absorg5o dos conhecimentos e dat6cnica dos diversos campos das especifidades. Ora, isso nao foi de molde a serde perfeita utilidade para a apreensio global, unitiria, das caracteristicas dos
povos, das suas terras, das suas culturas, dos seus regimes, como nao foi sufi-

cientemente atil para compreender-se que paises eram a Inglaterra, a Franga,a Alemanha. Entretanto, no quadro dos objetivos colimados pelos estudos dos
paises estrangeiros pelo Japao, isto de certa maneira era inevitivel.

Surge aqui uma davida importante. Nao seriam, ou teriam sido, naturalmente diversos do tradicional, os estudos brasileiros no Japio? Como 6 do
dominio de todos, a relasgo direta entre o Japio e o Brasil foi-se aprofundando
atraves da migragio. Nesse caso, distinta da absorgio de uma cultura adiantada,deve ter-se constituido o centro das preocupag5es a indagagio a respeito do
Brazil como pais recebedor de seus nacionais. E, para!elamente, deve ter sido
necessario o esf6rgo no sentido de fazer os brasileiros entenderem o Japao e osjaponeses. Nesta acepgio, os estudos brasileiros no Japio deveriam existir sob
o imp6rio de atitude inteiramente diversa daquela tradicional, subsistente nas
pesquisas dos paises estrangeiros no Japao.

Entretanto, antes da guerra, nos estudos dos paises estrangeiros persistia,
como principal corrente, a tendencia de considerar-se as pesquisas dos paises'

desenvolvidos como estudos dos paises estrangeiros. Os pesquisadores deciencias sociais, criadas na Europa e nos Estados Unidos, valiam-se de seus

72 YOSHIAKI NISHIMUKAI
instrumentais de anilise para procederem o exame dessas sociedades. E as
metodologias, as teorias e os modelos desenvolvidos a partir dessas pesquisas
referentes a essas sociedades, foram sendo considerados vilidos e adequados paraas demais sociedades. E em decorrencia disso, nio se sentiu a necessidade deefetuarem-se pesquisas e levantamentos de regi6es onde os dados quantitativos
seriam dificeis de obtengio, a fim de se aprimorar cada vez mais essas teorias e

6sses modelos. Os cientistas sociais consideraram que melhor poderiam contribuir, e com maior facilidade, para as teorias socio16gicas, pesquisando-se a

Inglaterra, do que estudando o Brasil que demandaria muito mais trabalho e
esf6rgo. Este tipo de pensamento foi sobremaneira acentuado e de uso correnteentre os economistas do Japio, economistas que se dedicavam aos estudos do
Brasil ou das coisas da Am6rica Latina eram considerados nao muito ortodoxos.
Assim, antes da guerra, os estudos brasileiros foram conduzidos por um reduzidissimo nUmero de pesquisadores e por pessoas ligadas aos trabalhos deemigragao. E de se notar aqui que o objetivo dessas pesquisas era, fundamentalmente, a promog'io da emigragio, dando-se, pois, enfase especial h consolidagio direta da politica emigrat6ria. Assim, eram absolutamente insatisfat6rios no que diz respeito h compreensio da interioridade do Brasil.
Entretanto, as transformag6es sofridas nas relag6es nipo-brasileiras no ap6s-

guerra, conferiram acentuadas motivag6es aos estudos brasileiros. Para o Japio,

que perdera parte do seu territ6rio e para quem deixaram de existir os paises
imigrat6rios na Asia, a Am6rica Latina, e particularmente o Brasil, transform-

aram-se em regi6es de suma importancia no que diz respeito a sua imigragao.
E a pr6pria emigragSo se modificou de cariter. De temporiria passou hquelade cariter definitivo. Ademais, desde o inicio da d6cada de 1950, acentuaram-se

as implantag6es de empreendimentos japoneses no Brasil, e ultimamente essas
rela,g5es caracterizam-se pela maior preferencia do capital h mio-de--obra, pela

maior cooperagio econ6mica do que pela migragao. Essas mudangas exigiramo aparecimento da necessidade de maior compreensao do mundo interior vivido
no Brasil e do brasileiro, transcendendo aquela compreensao adstrita apenas ao

quadro da migragio. Assim, tiltimamente o interesse para com o Brasil e suascoisas se esta elevando a um nivel verdadeiramente cientifico. Isto e maisacentuado no campo das ci6ncias humanas como a hist6ria, a geografia e a antropologia, valendo ainda tal assertiva, de certo modo, para as ci6ncias sociais.

Entretanto, o m6todo de pesquisa dos assuntos brasileiros no Japio, hsemelhanga da absorgao da t6cnica e dos conhecimentos provenientes de paises
adiantados, como acontecera outrora limita-se a abordar os assuntos considera-

dos de ac6rdo com as respectivas especializag6es. Com a abordagem semelhantetorna-se extremamente dificil a apreensao do Brasil como um todo. Osjaponeses

ESTUDOS BRASILEIROS NO JAPAO 73
vinham estudando a China, dedicando-lhe longo tempo, e institucionalmente opais possui orgios que pesquisam a cultura chinesa, como existem centros educacionais para tal fim. Entretanto, as experi6ncias, tanto de antes da guerra comode p6s-guerra, disseram bem da insuficiencia da compreensio global da China,
da apreensao da interioridade da sociedade chinesa, em virtude de ter-se adotado

o m6todo de pesquisa de aproximar-se ao objeto atrav6s dos campos das respectivas especializag6es. Da maneira como estio, os estudos brasileiros no Jap5o
seguirio os mesmos destinos dos estudos chineses. E diverso, 6bviamente, parao Jap5o, em face da gravidade do problema, de que ao estudar o Brasil,-queapresenta diferenciag5o qualitativa frente aos paises europeus desenvolvidos e

frente aos Estados Unidos,-os cientistas sociais japoneses estio tentando aabordagem estribando-se nas especializag6es conferidas pelos conhecimentos
europeus ocidentais. Por exemplo, ao explorar-se o campo das ciencias econ6micas, constata-se a tendencia de dar solugCSes cabais valendo-se do instrumental
da analise eco'no"mica oferecido e utilizado pelos paises capitalistas desenvolvidos.

Entretanto, o instrumental da ciencia econ6mica moderna, precisa e altamente
abstrata, ao ser empregado nas pesquisas da economia brasileira, sofre jA de persi uma limitagao no seu ambito da aplicagio. E ji ai residem os limites daspesquisas da economia brasileira. E um outro ponto do problema 6 a existancia

de uma acentuada diferenga no grau de profundidade nos estudos de ac6rdo
com o campo de especialidade. Por exemplo, mesmo que os estudos de ac6rdo
com o campo de especialidade, mesmo que os estudos s6bre a t6cnica de planejamento referente ao programa de desenvolvimento econ6mico do Brasil sejam
elaborados com acentuada profundidade, se as pesquisas dos `background' politico

e social dasse programa nio forem efetuados simult2neamente e com a mesma
acuidade, esses estudos nio poderao converter•-se numa verdadeira compreensao

vivida do plano de desenvolvimento do Brasil. No presente estigio, em que as
pesquisas nos diversos campos das especializag6es nSo se acham desenvolvidas
num mesmo nivel, as pesquisas integradas e combinadas prhticamente inexistem.

Alis, o desenvolvimento de pesquisas e estudos, separados em especialidade
estanques, tem sido a tendencia cientifica em todos os campos, e nao s6 no campo
das ciencias sociais.

II.-Metodologia dos estudos brasileiros.
A meu ver, muitos pontos obscuros que dificultam a compreensio cientifica
perfeita entre os dois pafses residem na inconsistencia, no que se refere h metodo-

logia dos estudos estrangeiros no Jap5o. Se essa metodologia bisica adquirir aconsistencia necessiria, acredito que "os estudos brasileiros", no Japao, se74

YOSHIAKI NISHIMUKAI

desenvolverio bastante.

Um m6todo de "estudos estrangeiros" que tem aparecido com destaque,tiltimamente, e o de `area studies,' utilizado com freqUencia pelos pesquisadores
americanos, ingleses, franceses, alemies e russos.

Esse m6todo surgiu, principalmente ap6s a II Grande Guerra, pela necessidade de cada povo conhecer mais integradamente o povo vizinho, refletindo afase hist6rica em que as nag6es se aproximam cada vez mais. Contrastando com
o espirito analitico, de vis6es parceladas relativamente profundadas, cresce oespirito de sintese, de conhecimento global integrado. Na disciplina de "estudos

estrangeiros" a compreensao da `biography of a nation' tornou-se a tarefa primordial.

Por outro lado, o movimento de revisio processado no mundo da ciencia
contra o espirito demasiadamente analitico-cientifico do s6culo XIX contribuiu

para o desenvolvimento desse m6todo.
A especializagao e a objetivagio do estudo que, no seculo XIX, propiciou
um grande avango hs ciencias exatas, quando atinge as ciencias humanas, distorce a realidade viva e dinamica que, por ser um todo integrado, nao pode ser

departamentalizado em comportamentos estanques para a sua compreens5o
verdadeira. Foi uma rezigao ao conhecimento enciclopedico do s6culo XVIII,
que abrangia uma irea muito grande, mas pouco profundo, apesar da forte tendencia em considerar a ciencia humana como em todo integrado.
A r6plica ao espirito demasiadamente analitico do seculo XIX aparece logo
no inicio do s6culo XX. Nos Estados Unidos a implantagio do sistema educacional de `general education' nas universidades, mostra nitidamente o espirito
de sintese que vigora entre os cientistas sociais. O metodo da `area studies' exige

do pesquisador uma atitude permanente de analise e de sintese. A integrag5o,
a generalizagao, a departamentalizagio e a especializagio dos aspectos fisicogeogrifico, hist6rico, politico, econ6mico, social, ideo16gico e cultural torna-se

imprenscindivel, quando se visa, a16m do conhecimento objetivo da irea estudada,a sua compreensio exata.

Porem, alguns profess6res como E. O. Reischauer afirmam que ainda ometodo da `area studies' nio ultrapassou o estigio de um simples coordenador dediversas disciplinas especializadas, nao se constituindo em disciplina aut6noma.

O metodo da `area studies' utilizado principalmente nos Estados Unidos
poderi trazer contribuig6es valiosas ao desenvolvimento dos "estudos brasileiros" no Japio e ao desenvolvimento dos "estudos japoneses" no Brasil. Para
isso, acho necessiria a combinagio do conhecimento da lingua da regiio a serestudada (area language), do conhecimento objetivo da regiio (area knowledge)
com o trabalho de pesquisa na pr6pria area (area work).

ESTUDOS BRASILEIROS NO JAPAO 75'
O conhecimento da lingua da regiio a ser enfocada e indispensavel comoum meio para se chegar a compreens5o fiel de t6da a estrutura cultural. Na
disciplina de estudos estrangeiros, a lingua e ensinada independentemente, ou

6 aprendida separadamente pelo interessado. O ideal seria o ensino da lingua
coordenado com o ensino de outras materias. Nos Estados Unidos, por exemp!o,no desenvolvimento de estudos estrangeiros, sao efetuados seminhrios s6bre
diversos aspectos da regiao a ser estudada: hist6ria, geografia, antropologia,
estrutura juridica, politica, econ6mica, social, artistica, literatura, etc. Esses

seminirios sio ministrados por profess6res especialistas de cada materia, paraque o estudioso de "Estudos Estrangeiros" tenha uma visao integrada e global
da regiSo antes de se processar a 'especializagio da pesquisa. Para evitar dis-

torg6es que, muitas vezes sao causadas pelo individualismo do pesquisador, 6bastante incentivada a "pesquisa em grupo" (group research). O estudo s6bre

uma regiio, ou um pais estrangeiro devera sempre ser concluido com um programa de pesquisas e estudo no pr6prio local enfocado. Dependendo da especializagio do estudioso, o estigio in loco pode ser realizado no arquivo hist6rico, se se trata de historiador, na cidade se se trata de soci61ogo, ou numa

vila se se trata de antrop61ogo. A pesquisa deve obedecer a uma sistemitica
pr6-estabelecida; instala--se no local o "centro de pesquisa de campo" (fieldresearch center) que dispori de biblioteca, de todo um instrumental necessdrio

h pesquisa; nomeia-se o coordenador da pesquisa de campo (field director),processando-se, sob a sua coordenagio, um treinamento cuidadoso de pesquisa-

dores de campo. A pesquisa no campo 6 uma realizagio que, por sua envergadura, nao pode ser realizada sem a colaboragio de 6rgios como as faculdades
locais, que poderio dispor de suas instalag6es e materiais para auxiliar a pesquisa,

assim como de entidades ptiblicas e privadas para custearem os pesados encargos

do trabalho no campo.
III.-m-Estudos Brasileiros no Jap5o.
Uma vez descrito como se processa o desenvolvimento de estudos estrangeiros nos Estados Unidos, quanto ao desenvolvimento de estudos brasileiros
no Japgo, as seguintes medidas poderiam ser tomadas:a) em primeiro lugar, ampliar o ntimero de faculdades que ministram oensino da lingua portuguesa. A maioria dos cientistas sociais do Japio olvidam

a import{incia da lingua espanhola e da portuguesa para o estudo dos paises
latino-americanos. A difusao maior das linguas inglesa, francesa e alemio,
atesta a mentalidade dominante ainda hoje no Japio, de que estudos estrangeiros sao feitos, sbmente, para absorver conhecimentos de paises estrangeiros

76 YOSHIAKI NISHIMUKAI
desenvolvidos, nio se importando com os paises sub-desenvolvidos. Atualmente,sbmente 10 faculdades, ministram aulas de lingua espanhola, somando-se o nrtmero

de seus alunos apenas 525. A maioria desses, entretanto, especializam-se em
literatura espanhola, dando-se pouca importancia ao estudo dos palses latino-americanos. Ainda existem algumas escolas que ministram especificamente oensino da conversagio espanhola.

Quanto ao ensino da lingua portugesa, apenas duas das dez Escolas minis-

tram-no, somando o nUmero de alunos apenas 50. Essa insuficiencia no
ensino da lingua portuguesa tem concorrido para o desinteresse, por parte dos
cientistas sociais, do estudo latino-americano. Muitos cientistas sociais, considerados como especialistas em estudos latino-americanos sio deficientes quanto

ao dominio da lingua, e tentam analizar o Brasil com um instrumental forjado

pelos cientistas europeus e americanos, totalmente inadequado para a compreensio do fen6meno latino-americano. Apenas o fato de se confiar menos nas
publicag6es em lingua francesa e inglesa, e buscar na pr6pria fonte os dados
essenciais do estudo, trari um grande progresso ao desenvolvimento dos "Estudos
Brasileiros" no Japio.

b) Em segundo lugar, a introdugio de um sistema universithrio que possibilite o desenvolvimento do m6todo `area studies'. As 10 faculdades japoneses

que ministram a lingua espanhola e portugesa, dao maior atengio ao ensino dalingua prbpriamente dita. Uma das faculdades, por exemplo, que possui estrutura adequada para a introdug5o do metodo `area studies' dedica 780 horas das
2160 horas que disp6e durante 4 anos, para o ensino da lingua. 600 horas sao
dedicadas ao ensino generalizado das ci6ncias sociais. As horas restantes, que

equivalem a 360/. do total das horas de aula, sio dedicadas mais especificamente ao estudo utilizando o m6todo `area studies,' nio se limitando ao Brasil,

mas ht6da America Latina. ''Se tomarmos o exemplo de uma outra faculdade, das 2220 horas de aula que

disp6e durante 4 anos, sio dedicadas 90 horas para assuntos econ6micos latino-americanos, 30 horas para assuntos culturais, 60 horas para teoria econ6mica
latino-americana, correspondendo o total de horas dedicadas a assuntos latinoamericanos, apenas a 180 horas, o que significa 8,10/. do total geral de horas

de aula. O Brasil e considerado apenas uma parte da America Latina, diminuindo o n"mero de horas a ele dedicadas.
Essa deficiencia deve-se, em grande parte, h insuficiencia quantitativa deprofess6res. Quando nos Estados Unidos, para uma mat6ria especifica existem
um grupo de profess6res, muitas vezes com orientagio diferenciada, no Japio,
um s6 professor ministra, no caso de estudos estrangeiros, todos os aspectos de-Al -uma reglao estrangelra.

ESTUDOS BRASILEIROS NO JAPAO

77c) Em terceiro lugar, 6 preciso oferecer maiores oportunidades de pesquisa
de campo. Muitos pesquisadores, profess6res ou nao, visitam anualmente paises

estrangeiros desenvolvidos como os Estados Unidos, a Inglaterra, a Alemanha,a Franga, sendo prhticamente nulo o interesse pela pesquisa de campo, no quese refere a paises latino-americanos, em particular ao Brasil. Quando o interesse cultural cientifico pelo Brasil e baseado emrelag6essimplesmentepessoais
ou casuais, acredito ser muito dificil o desenvolvimento de um intercambio cul-tural entre os dois paises, de maneira s61ida. Conhego casos de pesquisadores

jovens que ap6s uma aprendizagem satisfat6ria da lingua portuguesa e munido
de conhecimento b6sico suficiente s6bre o Brasil, nao tiveram oportunidade derealizar uma pesquisa de campo no Brasil, tendo que contentar-se com um
estigio precario no Centro de Estudos Latino-Americanos nos Estados Unidos.

rv.--Conclus"ao.
Desenvolvi, do ponto de vista do metodo `area studies' as dificuldades que
os cientistas sociais, interessados na Am6rica Latina, encontram na atual con-juntura do mundo cultural-cientifico do Jap5o. Essas dificuldades nio sio
exclusivas ao estudo s6bre o Brasil. No mes de setembro de 1964, cerca de 60
cientistas sociais participaram de um simp6sio onde foram debatidos virios
aspectos da regiio latino-americana.

Destacamos o avartgo dos estudos s6bre o Brasil, dentro os estudos s6bre
os demais paises da regiao. Esse avango 6, por6m, muito relativo, e 6 at6 incon-

cebivel que um pais estrangeiro que conta com uma populagao de 600.000 pes-soas de origem japonesa, que mant6m com o Japao um intercaambio comercial
considerivel, com mais de 50 empresas japonesas operando intensamente, seja
tio esquecido pelos cientistas sociais do Japio.

A NOTE ON THE INTEGRATION OF ECONOMIC
THEORY AND ORGANIZATION THEORY
Hideki YosHiHARA

I

Typical modern firms are large-scale, multiproduct firms existing in an
oligopolistic market. A considerable proportion of goods and services which weneed in our daily life is produced and distributed by these firms. Moreover,they exert a predominant influence on many medium and small firms. The
modern large firms are the most important component of our national economy.
Thus, we may well say that without the knowledge of their behavior, we can notunderstand or even discuss economic problems of our day.
Then, do we have an adequate theory which can explain the behavior of ourmodern large firms?

When we pick up and open any standard textbook of economicg, we gurely
find a theory dealing with the behavior of firms. This theory is usually called"the theory of the firm" or "the classical economic theory of the firm." In thistheory, it is assumed that (1) the firm decides the output quantity and price levelto the point where marginal costs are equal to marginal revenues, and (2) the
firm achieves the least costly combination of factors of production. In otherwords, the theory assumes that the firmbehaves in a perfectly rational manner
toward the goal of profit maximization.(i} Then, is this theory able to explain andpredict adequately the actual behavior of firms?

As early as in the 1930's, a group of economists in Oxford University conducted an empirical research on the behavior of firms to test this theory. The
research revealed that in the case of the representative firms in England of thattime neither marginal costs nor marginal revenues played any role in the output
and price decision making processes. Instead, buginessmen set prices by applying
standard mark-up to costs, that is, they used the full-cost (or mark-up) method of

pricing. This research finding cast a doubt on the validity of the theory of thefirms for the first time.(2)Since that time many empirical and theoreticalstudies have been made andat present the following tentative agreement has been reached on this theory.
The theory can not adequately explain and predict the actual behavior of firms.

It is primarily a theory of markets, which has the purpose of assisting in the

80

HIDEKI YOSHIHARA

theoretical investigation of the way in which resources are allocated by a pricemechanism.(s)Next, let us turn our attention to the field of organization theory. Both theclassical theories of organization such as the "scientific management theory," the"human relations theory" and the "management process theory," and modern
organization theory as developed by Chester I. Barnard, Herbert A. Simon andJames G. March, are primarily concerned with problems of organization andmanagement of the business firm. Then, are these theories of organization
perhaps to be regarded as the theory of firm behavior which we need?
Much of organization theory has aspirations toward a general theory applicable to all kinds of organizations, and therefore the property of being businessorganization tends to be abstracted in these theories. In addition, in the study oforganizational behavior, organizational theorists generally relegate economic theory

and analysis to a secondary place and instead give first place to sociological andpsychological approaches. Thus, while organization theory has succeeded toa considerable extent in casting light on the human behavior in an organizationalsetting, it has failed, at least in the direct sense, to cast light on the economic
behavior of business firms,

From above argument it becomes clear that neither the theory of the firm ineconomics nor organization theory, although both seem to satisfy our need at thefirst glance, can be regarded as a theory of firm behavior. In fact, until quite
recently our modern large firrns remained a "no man's land" in this respect.(4)This unpleasant and challenging state has induced many students interested

in firm behavior to make an active search for a new theory of the firm. There
are various search efforts for a new theory, but we can identify two main approaches., One is the approach taken by economists trained chiefly in the classical.
economic theory of the firm and the otheris the approach taken largely by thoseorganization theorists who have a profound knowledge of modern organization
theory. We 'shall consider these two approaches in the following two sections
and see if they have succeeded to advance a new theory of firm behavior.

II

Since inadequacies of the classical economic theory of the firm were revealed,

many economists responded by introducing elements of organization theory into
its framework. Among them are the well-known economists William W. Cooper,

William J. Baumol, James D. McNulty and Oliver E. Williamson. In addition,
Richard M. Cyert and James G. March, now famous as initiators of "the be-havioral theory of the firm," adopted this approach in the early days. We shallA NOTE ON THE INTEGRATION OF ECONOMIC 81
THEORY AND ORGANIZATION THEORY

ca!1 these theoretical efforts "the new economic theory of the firm."{5)Has this new economic theory of the firm realized the anticipated result ofovercoming the inadequacies of the classical theory? We would like to answer
this question by examining the early Cyert-March model as an example.(6)What Cyert and March attempted to do was "to augment oligopoly theory
by introducing into it some fundamental propositions of the theory of organizational behavior." For this purpose they chose the following four propositions.

1. Decisions by a group will, in general, be more dependent upon firm
policy than will decisions by an individual.
2. If a decision contrary to firm policy is reached by a decision-making unit,

it will be more stable if made by a group than if made by an individual.

3. As the length of the communication chain is increased, factors are introduced that have the effect of inhibiting change.

4. The character of the communication chain introduces a bias into theinformation transmitted to the deciSion-making unit.
They then proceeded to present two extreme model firms which incorporated
the above four propositions in the following way.

In Firm 1, the decision-making unit consists in a committee of equals anddoes not have responsibility for establishing the criteria for pricing decisions (i.

e., the unit is decentralized and is subject to dicta from above with respect toprice policy). At the same time, communication chains between the decisionmaking unit and the primary sources of information are long; and information

on demand, competitor's behavior, and oMcial firm policy are all channeledthrough a relay point (e. g., an accounting department) that emphasizes theimportance of costs and cost conservatism. In Firm 2, the decision-making unit
is an individual and he has responsibility both for the specific decisions and forthe criteria for pricing (i. e., the unit.is centralized). Communication chainstend to be short, and information on demand, competitor's behavior, and firm

policy are channeled through a relay point (e. g., a sales department) thatemphasizes demand and the importance of sales.
Firm 1 would be a firm in which price changes tend to be infrequent andreaction to competitors primarily passive; conversely Firm 2 would exhibit
frequent price changes and price leadership with respect to competitors. Cyert

and March then explored to determine the effects of these organizational

characteristics on market equilibrium. . . .
Let there be two duopolists in the market (Firm 1 and Firm 2). Following
Cournot, let there be no costs, let the market demand function be:

Xl+X2
p==253

HIDEKI YOSHIHARA

82

where p= =pricexi=output of Firm 1
x2=output of Firm 2
and assume that each duopolist expects no reaction on the part of the other in
response to a change in output:

dxl dx2

ifiti==atti=O (Conjectural variation terms)
Then, an equilibrium is reached atxl=25
x,==25p=8.33To explore some of the implications of the organizational models, Cyert andMarch assumed that in the market specified above, Firm 1 and Firm 2 had reached

the Cournot equilibrium point. They then postulated a shift in market demand,such that

Xl+X2
P==3Od3
Under the assumptions previously outlined, it can be predicted that Firm 1
will tend to: (a) be slow in changing its perception of the market demand; (b)underestimate demand when its perception does change; and (c) give a positive

value to the conjectural variation term. To provide a specific solution, it
is argued that Firm 1 might have expectations with regard to the market demand
function and the conjectural variation term as follows:

Xl+X2
p =2S3du-'=1dxl
Similarly, it can be predicted that Firm 2 will tend to: (a) change its per-ception of market demand quickly: (b) overestimate demand: (c) give a value ofzero to the conjectural variation term. Thus, it is asserted that Firm 2 might
have the following estimates of key information:p==100-x,-x,
drm.i..odx2

A NOTE ON THE
INTEGRATION OF ECONOMIC
THEORY ANDORGANIZATION THEORY
Under these conditions, the market solution obviously deviates

signi ficantly

from the standard Cournot solution.

xl=10
x,=45
p == 11.67
The effect is to make Firm 2 dominant in the market.

Cyert and March thus presented us an example of the approach whereorganization theory variables were introduced into the framework of the classicaleconomic theory of the firm. Now, has their attempt succeeded in overcoming
the inadequacies of the classical theory?

It must be pointed out that they attempted to add some propositions oforganization theory to the classical economic theory of the firm only in a sup-plementary way, leaving the basic framework of the classical theory unchanged.
In their model no innovative changes were introduced into the basic frameworkof the classical theory. Therefore, all the familiar inadequacies of the classicaltheory remain in their model.
Now, we must examine more closely the inadequacies of the classical theory.

We may identify three points as its major inadequacies.
1. Its motivational assumption that the firm seeks to maximize profits andits cognitive assumption that the firm operates with perfect knowledge are unrealistic in the sense that they lack empirical evidence. What evidence we havecontradicts to a great extent both assumptions. Therefore, it may be said that theclassical theory is based on unrealistic assumptions.(')

2. The classical theory views the firm as an impersona1 "black box." Theinternal machanisms and workings of this black box are outside its attention
fOCUS.{8)3. The classical theory is primarily interested in the firm behavior in equilibrium. As a result it is usually difficult to find empirical data for testing thevalidity of the theory. Moreover, it has neither an interest in nor an ability todeal with the actual behavior of firms whiÅëh are not in equilibrium.(9}The early Cyert-March model, when it takes over the basic framework of
the classical theory, inherits these inadequacies at the same time.

On the basis of the critical examination of the early Cyert-March model wemay well conclude that the new economic theory of the firm, so long as it adopts
an approach of augrnenting the classical theory by introducing into it elementsof organization theory in a supplementary way, can not be expected to be a theoryof firm behavior. To develop such a theory, we must abandon the basic frameworkof the classical theory and find a new basis.

83

HIDEKI YOSHIHARA

84

III

The second approach to integrate the economic theory of the firm and organization theory consists of adding some elements of the economic theory to organization theory. In this approach, as opposed to the first one, the basic frameworkis that of organization theory, especially modern organization theory. This approach is chosen by Cye'rt and March in their research project which goes by thename of "the behavioral theory of the firm."(io)Cyert and March say:
Viewed as a theory of organizations, the behavioral theory of the firm belongs

to the third, "decision-making," branch of organization theory describedin Chapter 2. It postulates the same basic structure of the decision-making

process and the same fundamental psychological mechanisms as does theother literature belonging to that branch, applying them to the specific context
of the business firrn.{n)In short, Cyert and March focused their attention to modern organization
theory which concerned itself at a general level with the decision making process
in an organizational context and they attempted to redevelop it specifically as thetheory of decision-making process in business organizations.

This behavioral theory of the firm is described by Cyert and March as
follows :{i2)1. It takes the firm as its basic unit.

2. It takes the prediction of firm behavior with respect to such decisions as
price, output, and resource allocation as its objective.

3. It puts an explicit emphasis on the actual process of organizational
decision making as its basic research committment.

In developing their theory, they have started with the conception that anorganizational decision is the execution of a choice made in terms of objectives
from a set of alternatives on the basis of ayailable information. This conception
has led them to the construction of the following four major subtheories:(i3) ( 1 )A theory of organizational goals that explains how goals are formed, how they
are altered, and their influence on organizational behavior. (2) A theory oforganizational expectations that treats the search procedure and information-gathering behavior of organizations. (3) A theory of organizational choice
to treat the organizational selection of alternatives and the decisions made among

them. (4) A theory of organizational control to explain the differences that

occur between decision making and implementations. In the course of theconstruction of these subtheories, they have developed four critical concepts. TheyA NOTE ON THE INTEGRATION OF ECONOMIC 85
THEORY AND ORGANIZATION THEORY

represent the heart of the behavioral theory of the firm.(i4) First, the quasi-

resolution of conflict; most organizations exist and thrive with considerable
latent conflict of goals. Second, uncertainly avoidance; organizations tend to
avoid uncertainty rather than deal with it by calculations of expected return.
Third, problemistic search; search is stimulated by a problem and is directed

toward finding a solution to that problem. Fourth, organizational learning;organizations learn from their experiences and mOdify procedures over time.

Cyert and March, and a number of collaborators at the Graduate School ofIndustrial Administration, Carnegie Institute of Technology have applied these
critical concepts to the development of models of decision making in businessorganizations. Three different models have been developed.(i5}Each of the models is in the form of a computer program and the analyses
have been made by simulation. The first model is a specific model of price andoutput determination in one department of a large department store. The second
model is a specific model of output determination in a major American duopoly,

the can industry. The third model is a general model of price and output
determination. It is an abstract representation of organizational decision making

in an American oligopoly.
What are the contributions of the behavioral theory of the firm? As its con-tributions, we must above all point out the development of a new theory of firm

behavior which represents a marked success in overcoming inadequacies of theclassical economic theory of the firm.

1. The behavioral theory is built upon "realistic" assumptions. Fourcritical concepts, that is, quasi-resolution of conflict, uncertainty avoidance,
problemistic search and organizational learning all have their empirical evidence.

2. The behavioral theory treats the decision making process in businessorganizations and thus casts.light on the internal workings of the "black box" ofthe firm.

3. The behavioral theory is concerned with the actual firm behavior which
is not in equilibrium and uses a computer simulation technique to test its proPOSitions.

The behavioral theory of the firm may thus well be considered as a mostpromising new theory of firm behavior.
But we must point out here that it has some deficiencies and limitations.
They may be classified as follows.

1. It focuses on a specific kind of decisions made by the firm, that is,operating decisions. Other kinds of decisions such as administrative decisions
and strategic decisions do not receive enough attention.
2. The behavioral model ofthe firm thus far developed has the characteristic

HIDEKI YOSHIHARA

86

of a short-run adaptive model. In this model short-run feedback-react decision

procedures are emphasized, but instead long-run adaptive mechanisms of thedecision processes do not receive adequate consideration.

3. The behavioral theory is a descriptive theory which describes how
decisions are made in the business organization. But it is not yet translated into
a normative theory aiming at aiding and improving the decision making process.(i6)4. The analysis of the decision making process within a business organization requires both the theory of choice mechanism and the theory of organizational influence.{i'} But the behaviorhl theory relies too heavily upon the theoryof choice mechanism that the theory of organizational infiuence is not fu11y
utilized.

Encouraging to us is the series of studies following the same line of thoughts

as Cyert and March's poineering work. The most important of these are;

A Model of Budget Control••.... Andrew C. Stedry(is)A Model of Trust Investment Behavior...... Geoffrey P. E. Clarkson(ig)A Model of Information and Decision Systems...... Charles P. Bonini(ee}A Model of Investment Decision...... Robert W. Wright(2i)A Mode! of Diversification Decision•••••. H. Igor Ansoff(2x}A Model of Long-Range New Product Planning•••... Raymond M. Haas<2s)
These studies have succeeded in overcoming some of the above mentioned deficiencies of the poineering work by Cyert and March and thus brought the newtheory of firm behavior a step further.

rv
Modern large firms play an important role in our economic system. But
until quite recently these firms remained a no man's land in the sense that we
lacked a theory which could explain their behavior. Neither the classical economic

theory of the firm nor the theories of organizational behaivor, although they areconcerned with such firms, can be regarded as a theory of firm behavior which

we need.
Recently a number of students interested in firm behavior have initiated asearch for a new theory of firm behavior. Economists have attempted to revise

A NOTE ON
THEINTEGRATION OF ECONOMIC
THEORYANDORGANIZATION THEORY
the classical theory by introducing into it some results of organization theory andthus developed a new economic theory of the firm. But this theory, so long as it
accepts the classical theory as its basic framework, can not be expected to bea

theory of firm behavior which we pursue.
The second approach of integrating the economic theory of the firm and thetheory of organizational behavior has been attempted in the research project,"the behavioral theory of the firm." In this project modern organization theory
has been adopted as the basic framework and redeveloped as a theory of decision

making process in business organizations. This behavioral theory of the firm,
while tests of the theory are not yet completed and some deficiencies are not yet
ellminated, has made a long stride towards developing a theory of firm behavior

which can explain adequately how modern large firms behave.

REFERENCES[ 1 ] See Jarnes M. Henderson and Richard E. Quandt, Microeconomic Theory: A Mathematical

Approach (New York, McGraw-Hill, 1958), pp. 42-75.
[ 2 ] R. L. Hall and C. H. Hitch, "Price Theory and Business Behavior," T. Wilson and P. W. S,
Andrews, ed., Oxford Studies in the Pn'ce Mechanism, (Oxford, Oxford University Press,

1951), pp. 107-138.
[ 3 ] See Richard M. Cyert and James G. March, A Behavioral Theory of the Firm (New Jersey,
Prentice-Hall, 1963), pp. 5-16.
[ 4 ] See Herbert A. Simon, "New Developments in the Theory ofthe Firm," American Economic
Review, Vol. 52, May 1962, p. 2.
[ 5 ] William W. Cooper, f`A Proposal for Extending the Theory of the Firm," 9ttarterly JoarnalofEconomics, Vol. 65, No. 1, February 1951. William J. Baumol, Business Behavior, Valueand Growth, 1959. Jarnes D. McNulty, Some Economic Aspects of BttsaEness Organi2ation,

1964. 01iver E. Williamson, The Economics of Discretionary Behavior: Managerial
Obiectives in a Theory of the Firm, 1964.

[6] Richard M. Cyert and James G. March, "Organizational Structure and Pricing Behavior
in an Oligopo!istic Market," Amert'can Economic Review, Vol. 45, No. 1, March 1955, pp.

129-139. See also Richard M. Cyert and James G. March, `COrganizational Design,"
W. W. Cooper, H. J. Leavitt, and M. W. Shelly II, ed., New Perspectives in Orgnixation

Research (New York, John Wiley & Sons, Inc., 1964), pp. 557-566.
[7] See Richard M. Cyert and James G. March, op. cit., 1963, pp. 8-13.
[ 8 ] See Charles P. Bonini, Simulation of Information and Decision Systems in the Firm (New
Jersey, Prentice-Hall), 1963, p. 4.

[9 ] See Kalman J. Cohen and Richard M. Cyert, "Computer Models in Dynamic Economics,"
Quarterly Journal of Economt'cs, Vol. 75, No. 1, February 1961, pp. 112-127.
[10] Richard M. Cyert and Jarnes G. March, op, cit., 1963, pp. 1-3.

[11] lbld.,p.284.
[12] lbt'd. p.19.
[131 lbi'd.,pp.19-21.
[14] Iin'd. pp. 116-125.
[1 5] lin'd., Chapters S, 7 and 8. Also see Richard M. Cyert and James G. March, "The Behavioral

Theory of the Firm: A Behavioral Science-Economics Amalgam," W. W. Cooper,
H. J. Leavitt and M. W. Shelly II, ed., New Perspectives in Organization Research, 1964,

pp. 3oo-3o4.

87

HIDEKI YOSHIHARA

88

[16]

See Richard M. Cyert and James G. March, op. cit., 1963, Chapter 11. See also Richard
M. Cyert and James G, March, C`Organizational Design," W. W. Cooper et al., op, cit.,

[17]
[18]

See Herbert A. Simon, Models of Man (New York, Wiley, 1957), Preface pp. vii-viii.
Andrew C. Stedry, Budget Control and Cost Behavior (New Jersey, Prentice-Hall, 1960).

[19]

Geoffrey P. E. Clarkson, Portfolio Selection : A Simulation of Trttst Investment (New Jersey,

[20]
[21]

Charles P. Bonini, Simulation of Information and Decision Systems in the Firm (New Jersey,
Prentice-Hall, 1963).
Robert W. Wright, Investment Decist'on in Industry (London, Chapman and Hall, 1964).

[22]

H. Igor Ansoff, Corporate Strategy (New York, McGraw-Hill, 1965).

[23]

Raymond M. Haas, Long-Range New Product Planning in Business (Morgantown, West

pp. 557-566. ' ''Prentice--Hall, 1962).

Virginia, West Virginia University Library).

KOBE ECONOMIC & BUSINESS REVIEWCONTENTS
NO. 1 (1953)
Present Day Significance of Free Ports..........,...............................Giiijiro Shibata
Development of Devaluation-Problem in Post-War Japan . . . . . . . . . . . . . . . . . . . . . Kiyo2o Miyata

Japan's Trade with South and South-East Asian Countries......,..........,Fukuo Kawata
The Exchange Control Policy in Post-War Japan...........................Masahiro Fuiita
Ori the OMcial Statistics of Foreign Trade in the Post-War Japan.........Hikoji Katano
On Business History..................,...............................................Tadakatsu Inoue

Problems of Regional Industrialization in Japan............,....................Minoru Beiha
A Research of Wage Income in Post-War Japan.................................Nobttko Nose'
Revaluation in Japan.................,.............................................Susttmu PVatanabe

Last-In, First-Out Inventory Method under
the Japanese Tax Law................,.........................Munehiro Masuxaki

NO. 2 (1954)
Movements for the Establishment of Free Ports in Japan...............Ginjiro Shibata
Japan's Trade with Latin Arnerica in the Post-War Years..................Fukuo Kauata
The Maritime Competitions in the Early Meiji Era..............................Sei'i Sasaki
Two Deflations in the Showa Era................................................Masahiro Fnjita

Estimation of the Effectiveness of Devaluation on
Balance of Payment Deficit in Japan..,...........................Hiko.ii Katano

The Recovery Method of the Japanese Shipping Industry ,in Post-War Period....................,........................Hiromasa Yamamoto
Business Accounting and Tax Accounting........,...........................Susumu VVatanabe
Spatial Characteristics of Industries Relative to Their
Business Features ......................................................Minoru Beika
Stages in Factory Organization...................................................Tadakatsu Inoue

Accounting for Fixed Assets Revaluation: Recent Views in Japan...Munehiro Mastcaaki
On the Structure of the National Income Distribution in Japan............Nobuko Nose'

NO. 3 (1956)
Industrialization and International Trade..........................................Fukuo Kawata

Econometric Deterrnination of Foreign Exchange Rate of Japanfor 1926-2953 ............................................................Hikoji Katano
Present Status of Japan's Shipping.................,.................,............Ginjiro Shibata

The Distinction between "Shasen" and "Shagaisen" as Historical' Concepts in Japanese Shipping................................,.......,.Seci'i Sasaki

The Banking System in the Middle Meiji Era (1870-1910)...............Masahiro Ful'ita
Disposition of Cost Variances in Japanese Tax Law.....................Susttmu Watanabe
Structure of Industrial Districts in Japan..........................................Minoru Bec'ka

Note on the ZAIBATSU Combines.............................................Tadakatsu Inoue
On the Model-Building for Social Accounting Design........................Nobuko Nose'

NO.4(1957) .

The Impact of Exchange Policy on the International Economy

of Japan during the Period 1930-1940.....................Laurence P. Dowd
A Note on the Recent Trends of Japan's Foreign Trade.....................Fukuo Kafvata

The Development of Overseas Banking System in Japanin the Meiji Era......................................................Mastthiro Fuiita

More on the Structure of National Income Distribution in Japan .........Nobuko Nosi
Reconstruction of the Theory of Purchasing Power Parity ..................Hikoji Katano
Tramp Shipping Freights and International Trade...........................Gi'niiro Shibata
A Little Study on the Transition from the Sailing Vessel to
Steamer in Japan ............................................................Sei'i Sasaki

On the Regulating Policy of Japan against the Shipping
Conference -- Especially in Relation to the Refusal of
the Entry to New Comers ....................................Hiromasa Yamamoto
The Price Fluctuation Reserve System in Japan...........................Sttsumu Matanabe

Locational Problem in the New Major Branches of JapaneseIndustries from 1954 to 1956 ..........................................Minoru Ber'ka
Business Problems in an International Situation....,.........................Tadakatsu Inoue

NO. 5 (1958)
History of Yen- Its Developments in the Japanese Economy (1).........Hiroshi Shinio
Fundamental Features of the Accumulation of Capitalin the Late Meiji Era ................................................Masahiro Fuj'ita

Some.Aspects of Japan's Trade with South andSouth-East Asia, 1950-1957 .........................................,Fukuo Kawata

Curves of Diminishing Values of Japanese Merchant Ships
in Proportion to Their Age ..........................................GinJ'iro Shibata

The Modernization of Japanese Shipping Based on the 'Transportation of Hokkaido Marine Products ...............,........Serl'i Sasaki

Development of the Marine Insurance Industry in Japanin the Meiji Period .............................................Hiromasa Yamamoto
A Assimilaggo do Imigrante Japones no Brasil .................................Hiroshi Saito
Rate of Profit and Interna.tional Specialization of Production ............Hikoji Katano
Replacement Cost and Lifo Cost.....................................,........,.Sttsumtt Watanabe
Spatial Problems of Business Activities.............................................Minoru Belka
The Nature of the Morgan Control .............................................Todtzkatstt Ineue

On the Effect of Accelerated Amonization for Tax Purposes ...............Nobuko Nose'

NO. 6 (1959)
History of Yen- Its Developments in the Japanese Economy (2).........Hiroshi Shinio
The Central Banking Policy in the Meiji Era.................................Masahiro FuJ'ita

Economic Growth, Balance of Payment and Capital Movement .........Hikoji Katano
World Trade and Japan's Export-1953-1957-..............................Fukuo Kawata
Alguns Aspectos da Mobilidade de Japoneses no Brasil........................Hiroshi Saito
Problems of Emigrant-Transportation in Japan ........................Hiromasa Yamamoto
Port Labor Conditions in Japan ...................................................Gt'njiro Shibata

The Deve!opment of the Concept "Operator" in Japan ........................Serl'i Sasaki
Single Industry Towns in Japan.............,........................................Minoru Beika

On the Application of the Social Accounting
Principle to Business Accounting.......................................Nobuko Nose'
Valuation of Work in Process ...................................................Susumu PVTatanabe

Developmental Stages Relating to Theories
of Stock-Equity Aecounting .............................................Rytlii Takeda
On the Rate of Interest in Business Administration ................................•Jiro Ono

Various Classes of Data Processing by Means of Electronic
Computer ..........,...,......................................................Hideo Kitani

Company Histories in Japan ........................Tadakatsu Inoue and Yoshiro Ikttshima

NO. 7 (1960)
Japanese Emigration ancl Its Effect on International Payments............Gi'nl'iro Shthata

One-to-One Correspondence between Goods and Factor Prices............Hikoji Katano'I'he Gold Standard and Banking Capital in Japan ........................Masahiro Fnjita
World Trade and Economic Growth ................................,............Fuhuo Kawata
Singularity in the Structure of the Seamen's Union of Japan......Hiromasa Yt"ntmioto
Some Reflections on lnter-Comparability of Social Accounting ............Nobuko Nose'
The Meaning of Inventories ...................................................Sttsumu JVatanabe

Structure of Income Detemination on the Balance Sheet ..............••.•Ryuii Takeda
On the Value of Stock Rights and Its Significancein Corporate Finance............................................................Jiro Ono

Business Features and Management Policies of Industrial
Enterprises in Local Districts of Japan..............................Minoru Beika

NO. 8 (1961)
The Industrial System and Industrial Education in Southeast Asia Now on
the Threshold of Reform, and Japan's Position Therein....,.Kiyoxo Miyata.
Industrial Structureand Educational System in India.....................Tadao Miyashita
Industrial Education in India......................................................Tadao Miyashita

Technical Education in India......................................................Tadao Miyashita

Industrial Structure and Vocational Education in Thailand ..................Fukuo Kawata
The Industrial Structure and Industrial Educationin the Philippines .....,..................,..........................Tei-ichi Yainasaki

Industrial Structure and Vocational Education in Indonesia.........Hiromasa Yamamoto

NO. 9 (1962)'

Problems in Port Administration and Finance in Japan.........,.....,.....Giniiro Shibata
Types of Early Modern Japanese Shipowners.......................................Serl'i Sasaki

On the Ernployment System of Seamen in Japan .....................Hiromasa Yamamoto
A Study on Japan's Invisible Trade.............,..................................Fukuo Kawata

Problems of Industrial Location Relating to Regional Developrnent inJapan .......................................................................,...Minoru Belka

The System of Inside Contracting................................................Tadakatsu inoue

A Critique on Professor Mahalanobis Model of Economic
Planning in India .........................,...............................Hikoii Katano
National Income Concepts: Reconsidered .....,....................................Nobuko Nese'
Sorne Problems of the Installment Basis ....................................Susumu Watanabe

On the Purposes of a Going-Concern Valuation and Its Natures ...............Jiro Ono
Die Betrachtungsweise der neueren betriebswirtschaftlichen
Kostentheorie.............................................,..............Tetsuo Kobayashi

NO. 10 (1963)' Provisions of the Commercial Code of Japan
Revised Accounting-With Special Reference to the
Corporation Income Tax Law-.................................Sttsumu vaatanabeSocial Accounting as an Instrument of Policy ....................................NObuko Nose'
Industrial Estates for Small Businesses in Japan.................................Minoru Ber'ka
Rise of the Mutual Financing Business in Japan ...........................Tatiakatsu Inoue

The Introduction of European-Style Vessels in Japan:
A Historical Survey ..,..••••••........•.....................................Ser:'i Sczsaki

On Industrial Relations in Japan's Shipping Industry-With
Special Concern on Personnel Management-............Hiremasa Yamamoto
Regional Disparities in the Brazilian Economy:
A Case Study on the BrazilianNortheast..................Yoshiaki Nishimukai
The Basic Concepts of Going-Concern Valuation ....................................Jiro Ono
A Study on the Current Cost 'IEheory of Fritz Schmidt .....................Isao Nakano

Die Kostenbegriffe ftir die betriebliche Planung..............................Tetsuo Kobayashi
Introducing Prof. Shinjo's History of the Yen ...........................Zentaro Matsumura

NO. 11 (1964)
Accounting Profit and Taxable Income.......................................Susumu Watanabe
On Integration in Economic Accounting.............................................Nobuko Nose'
Uber ,,Cost Accounting Standards" in Japan.................................Tetsuo Kobayashi
A Note on the Lohmann-Ruchti Effect..........,..................................Isao Nakano

Management Approach to Regional Development Problems in Japan......Minoru Beika
A Research Report on OMce Automation of Middle-Scale Cities in Japan.....Jiro Ono
Die Geschichte der Privatisierung...................................................Masaya Okada

Recent Trends in the Balance of Payments of Japan........................Fuhuo Kawata
Long-Terrn Finance in Post-War Japan (1)....................................Masahiro Fuiita

A Chronological Table of Modern Japanese Shipping No. 1: 1600 tv1799 ................................,........................Sei'i Sasaki

The Continuous Employment of Searnen in American Shipping
Industry .........................................................Hiromasa Yamamoto

Some Problems of the Brazilian Economic Development Plan
(1963-1965) ......................................................Yoshiaki Nishimukai

NO. 12 (1965)
Special Depreciation and Reduced Entry....................................Susumu Watanabe
Electronic Data Processing System in Japan....................................Minoru Belka

A Chronological Table of Modern Japanese ShippingNo. 2: 1800AJ1912 ......................................................Sei'i Sasaki

Overseas Operations of Japanese Business Enterprises in Brazil.........Tadakatsu Inoue
A Note on Economic Accounting for Government Sector.....................Nobuko Nose'

International Liquidity and the Tokyo Meeting of the International
Monetary Fund.........................................................Masahiro Ful'ita

Intersectoral Transaction Table with Endogenous Foreign Trade Sector
in the Indian Economy: 1955156....................................Hikol'i Katano

The System of Reserved Members for Seamen before World War II- The Employment System of Searnen in Japan -. . . . . .Hiromasa Yamamoto
On the Automation of Banking in Japan...................................................Jiro Ono

A Presente Etapa do Desenvolvimento Econ6mico do Japio......... Yoshiaki Nishimukai
Kostentheorie und dispositiver Faktor..........................................Tetsuo Kobayashi
Grundproblerne der Privatisierung...................................................Masaya Okada

NO. 13 (1966)
Annual Income under the Corporation Income Tax Law...............Sttsumu Watanabe
Trade Controls in Occupied Japan (1945N1949)..............................Fukuo Kawata

Patterns of Domestic Shipping Services-Characteristics of Japanese Coastwise Shipping-............Sei'i Sasaki
Approaches to the History of Individual Business Units..................Tadakatsu Inoue
Cumulated Cost Ratios for the Japanese Economy in 1955.....................Nobuko Nose'
Accelerated Growth of National Income.........................,................Hikoji Katano

Technological Development and Labour Relationsin the Japanese Shipping Industry........................Hiromasa Yamamoto
Brazilian Positidn in the Latin American Free Trade Association...... Yoshiain' Nishimukai

Information Specification for Business Management (I)-A Case Study -............................................................Jiro Ono
Die Privatisierung der PreuBag.,....................................................Masaya Okada

NO. 14 (1967)
A Return on the Confirmed Settlement of Accounts.....................Susumu VVatanabe

Problems of Regional Industrial Development
Relating to National Planning in Japan...........................Minoru Beika

The Development of Japanese Trade with the British
Commonwealth in Asia................................................Fukuo Kawata
On the Kihansen (Japanese Wooden Coastwise Vessels)........................Sei'i Sasaki
Approaches to Company History...................................................Tadakatsu lnoue

Cumulated Cost Ratios for the ECAFE Countries........................,.....Nobuko Nose'
International Liquidity Controversy in Japan (1)...........................Masahiro FuJ'ita

Investment Criterion for Maximizing
the Rate of Capital Accumulation.................................Hikoji Katano

Peculiarities of Maritime Labor-With Special Reference to the
Supply of Maritime Labor-.,............................Hiromasa Yamamoto

Los Estudios Del Brasil En El Jap6n-Con Referencia a las Ciencias Sociales...............Yoshiaki Nishimukai

NO. 15 (1968)
Characteristic Approach for Regional Development in Western Europe
and U.S.A.-Relating to the Case in Japan..................Minoru Beika
Export Patterns of Leading Industrial Countries..............................Fukuo Kawata
The Early Development of Kobe Port........................................,.......Serl'i Sasaki

Rise of Modern Shipbuilding in Japan and Promoters........................Tadakatsu Inoue
A Note on the Redistribution of Profits.............................................Nobuko Nose'

International Liquidity Controversy in Japan (2)...........................Masahiro Fuiita

Factors to Determine the Relative Share: The Case of India.........,..Hikoii Katano
Maintenance of Capital Based on Earning Power ...................................Jiro Ono
Recent Chariges in Japan's Trade with Latin America and Brazil...... Yoshiaki Nishimuhai
Some Inventory Accounting Problems...............................................,Isao Nakano
Organizational Slack and Adaptive Behaviour in the Firm..................Hideki Yoshihara

NO. 16 (1969)
The Change of Regional Characteristics of Industries in Japan............Minoru Beika
Functions of Screen Account .........................................................Nobuko Nose'On Mr. Stoleru's Optimal Policy for Economic Growth.....................Hikoji Katano
A Note on Shogter Working Hours for Seamen........................Hiromasa Yamamoto
Objectivity Reexamined ..................................................................Isao Nakano

A Note on the Behavioral Theory oE Innovation...........................Hideki Yoshihara

KOBE UNIVERSITY ECONOMIC REVIEW 15, 1969
Edited by Faculty of Economics,
Kobe University, Kobe, JapanCONTENTSStates Funds and Agriculture in China ...........,...........................Tadao Miyashita

Specific Factors of Production and the Comparative Costs Theory......Kiyoshi Ikemoto..1-11tl--..,-L..,-d+llti-L...1-...,dltlld-...ql-..,-itlll---..,-t...-11dlt--,.,tl-,.,-11tlrl--..,-1...-tt:It--...il...,-i-ILt---...e-..,-dttlll4.,.d)--.-dlttld--...-t-,..iltetl---.,lt..--ltl-i--1,..-t-...ddlllilt.

THE ANNALS OF THE SCHOOL OF
BUSINESS ADMINISTRATIONKOBE UNIVERSITY 1969
Edited by the School of Business Administration,

Kobe University, Kobe, JapanCONTENTS
Medium and Small Industrial Capitals and Monopoly Capital-Concrete Development of Problems of Medium andSmall Industries (2)- ................................................Naboru Inaba
Internal Rates of Interest and Growth of Capital........................Kaxtthisa Matsuda

The lndividual as Toal and the Total as lndividual •-Schmalenbach on Aperiodic Income - ..................Hisashi Tanihata
The Structure of Basic Accounting Postulates....................................Ryuii Takeda-ll-i-it.-IL,.tdilelliJ-t.dl',t-Jdltdl-/-'.-1-',tt-ltlld+--t"lttt/iJtil)-i-',-J/',--Ld)14-i-ttd--'-Lil-1"-J-Lt,-d-',./dLiFdlt'..dt',.-idllbii/"..iL'.tiilllli-".Jl"..tJlt4i-t't.--''.tddrtllt-t,,i-',t-iltblJit.,,di

KOBE UNIVERSITY LAW REVIEWInternational Edition No. 7, 1970
Edited by Faculty of Law
Kobe University, Kobe, JapanCONTENTS
Law elnd the Student Revelt: An Arnerican View .................'..........Samuet Mermin

Exchange and the Law of Exchange: Their Two Sources ............Taneomi KrumitoshiTHE RESEARCH INSTITUTE FOR ECONOMICS AND
BUSINESS ADMINISTRATION, KOBE UNIVERSITY

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HISTORICAL SKETCH
In 1919, a research organization named the Institute for Commerce wasfounded in Kobe Higher Commercial School, one of the chief predecessors ofKobe University, with a gift made by F. Kanematsu & Company, a leading
mercantile firm in Kobe. The organization was designed to carry on and facilitate integrated research on business and commerce and to formulate andpublish the results of these studies and investigations in such form as to makethem available to the business community.

With the founding of Kobe University of Commerce, successor of Kobe
Higher Commercial School, in 1929, the Institute extended its research activities by adding several divisions. One was the famous Latin-American
Library, which soon became the center of research in this field in Japan. A
room for statistics equipped with various computing machines was establishedand began publication of 1ayo Ker'xai Tokei monthly and Sekai Boeki Tokeiannually. A filing room was prepared to deposit press clipping Mes systematicallyarranged by topics and dates. Another room was designed to become the centerof all possible original records and data having to do with the beginning andprogress of Japanese business.

On the campus of Kobe University of Commerce, another organization
named the Institute for Business Mechanization was founded in 1941 utilizing

business machines donated by the IBM Corporation and others. With
Professor Yasutaro Hirai as its head a broad and forward-looking plan forbusiness mechanization in Japan was developed.

In 1944, Kobe University of Commerce changed its name to Kobe University of Economics. After the war, however, the University was consolidated with three other colleges in Hyogo Prefecture to become Kobe University.

With this development, the two Institutes were also amalgamated into the
Research Institute for Economics and Business Administration, Kobe University. At present, the Institute, with its sixteen fuII-time professional staff

members, carries on studies and investigations in international economy,business administration, and information systems in Japan.

BUILDINGSLOCATION AND
The Research Institute for Economics and Business A(lministration is
located on the campus of Kobe University, Rokko, Kobe. It is a three-storiedbuilding named the Kanematsu Kinenkan and has a floor sPace of about 2,900
square meters, which includes a president's room, forty-one othces, six rooms
used as a library, a room for statistics, three conference rooms, etc. Adjoining
is a one-story building recently built to install business machines.

ORGANIZATION
Under the directorship of the president, the Institute operates with two

research groups, each has five sections respectively. Each research groupand its sections are as follows:

A Group of international Economy(1) International Trade(2) Economy of Latin-America(3) Maritirne Economy(4) International Finance(5) International Law of Economy

B Group of Business Administration(1) Business Administration and Information Systems(2) Accounting(3) International Management(4) Business Statistics(5) International Labor Problems
Besides the regular work ofthe Institute, research committees may be createdto carry on any special work requiring the joint study of academic and businesscircles. At present, there are three committees, that is, International FinanceCommittee, the Committee of International Economic Cooperation and Overseas
Business Operations in 1970's and Information Systems Committee.
For gonvenience and greater ethciency in carrying out its research activities,

the Institute has a general oMce which is responsible for 1) the collection andpreservation of a comprehensive collection of books, periodicals, parnphlets,and original records and data of finance, trade, commerce, industry and businessgenerally; 2) the classification, cataloguing, indexing, arranging, annotation andcompilation of these research materials; and 3) the formulation and publicationof the results of the investigations and studies accomplished by the professional

staff members of the Institute.
As an aMliated institute, the Documentation Center for Business Analysis
has been recently established. It is the first systematic information facility
in the field of business administration in Japan that has been recognized andauthorized by the Ministry of Education. The purpose is to collect and to
make intensive control of all kinds of materials on business administrationand to make them available to scholars, universities, governments, and businessworld with the aid of modern documentation techniques.

l/1

THE RESEARcH INSTiTuTE FoR li

ECONOMICS&BUSINESS ADMINISTRATION lll

KOEE UNIVERSJTY
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Director: Seiji SASAKI i
Secretary: Hirotake SAKAI i

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GROUP OF INTERNATIONAL
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ECONOMIC RESEARCHl Fukuoit

KAWATAll•l Seiji sAsAKIli',

1, Jiro YAot[1:!' Masahiro
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Hikoji KATANO: HiromaealJi: Yoshiaki
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Professor of International 1'

Dr. of Ecenomics i Nobuko NossE Professor of Business l'

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Ph. D. in Statistics i and lnfermation Systems-l

Associate Professer of i laao NAKANa Associate Professor of l
YAMAMOTONISHLMUKAt

gional Study on Latin l Hideki YosHIHARA Research Associate of i

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America i Internationall/ Management :,OMce: The Kanematsu Mernorial Hall l'

KOBE UNIVERSITY i'
ROKKO, KOBE,
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