The Okano Plan was initially rejected but its ideas were incorporated in subsequent statements of strategy, such as MITI's 1954 paper entitled "Outline of the New International Trade and Industry Policy".

The Okano ideas were later supplemented with the notion of complementarity between exports and domestic sales as means for promoting large scale and lowering costs. As stated in Johnson (1982, p. 229), the idea was thate: "MITI should promote both exports and domestic sales. When problems in the intemational balance of payments arose, the government could curtail domestic demand and promote exports; when the problems of paying for imported raw materials eased, the focus should be on enlarging sales at home. If this could be achieved, Japan's factories could keep operating throughout all phases of the business cycle." Another example of a successful vision was the "income doubling" plan that was adopted in the early 1960s. This is well documented in the JDB/JERI study (JDB/JERI 1994). The plan was characterized by tremendous success and overshooting of most targets, although there were substantial costs in terms of pollution, congestion and other aspects of the quality of life. In fact, the plan itself and the response to its side effects represent an example of effective shifting of focus and flexibility in the formulation of official visions and the design and implementation of policies.

Finaneial Sector Development. The adoption of credible visions also had implications for policy-based finance and the development of the financial sector. Credit policies are only one of the industrial policy instruments. Although Japanese officials emphasize the superiority of policy-based finance over direct budget subsidies and grants in promoting industrialization, Japan made extensive use of accelerated depreciation allowances and tax-free special reserves. These allowed profitable and successful firms in the promoted sectors to retain and reinvest a larger part of their profits than firms in nontargeted sectors. Particularly important because of its link with the overall strategy of export promotion and export push was the special reserve that was linked to past export perfonnance. These noncredit-based incentives reinforced the impact of credit policies and helped to stress the credibility of the programs.

Another aspect of the Japanese official vision regarded the somewhat low priority assigned to the development of the financial sector. Most statements of Japanese officials implied that industrialization and economic growth took precedence over the development of an efficient and modem financial sector.

6 This idea was attributed to Ishibashi and was implemented with a vengeance by Ikeda. Johnson makes much of the role of some influential MITI ministers, especially Ishibashi and Ikeda, who later in their career became prime ministers and adopted an activist approach in industrial affairs. Tanzan Ishibashi was MITT minister between October 1954 and December 1956 and served as prime minister between December 1956 and February 1957. Hayato Ikeda was MITI minister on several occasions (February to April 1950, October to November 1952, June 1959 to July 1960), finance minister between December 1956 and June 1959, and served as prime minister between July 1960 and November 1964 when the "income doubling" plan was adopted. Other prime ministers who served as MIT ministers include Bisaku Sato, Kiichi Miyazawa, Kakuei Tanaka and Yasuhiro Nakasone.

25