96-J-16. Miwa, Yoshiro, "The Capability, Behavior, and Function of the State: Machinery Industry under the `Kikai Kogyo Shinko Rinji Sochi-ho' [The Act on Temporary Measures for the Promotion of the Machinery Industry]", Sept. 1996.

After the transition decade since the War, the Japanese government enacted the Kikai Kogyo Shinko Rinji Sochi-ho [The Act on Temporary Measures for the Promotion of the Machinery Industry]. Many argue that the policies based on this Act were tremendously effective in supporting the industrial success of the machinery industry and in promoting Japan's overall economic growth.

With a detailed investigation, however, of the related policies, the historical background and policy environment, the behavior of relevant parties, such as the Diet, MITI, Japan Development Bank and trade associations, and a critical examination of the literature on which the conventional view depends, this paper reaches quite an opposite conclusion: The core of the policies over fifteen years was the Japan Development Bank loan; the size, the allocation method, and a short distance of the loan rate from the market rate of which could have no notable impact on the behavior of firms in this sector.

Coupled with my previous paper, with the same title, on machine tool industry under the Wartime control, Miwa [1996], this paper studies the capability, behavior and function of the state, and draws a conclusion compatible with a common-sense view: Like a firm, the behavior and function of the state depends strictly on its capability, which is the result of the path it followed, and the state rarely makes new trials in the field beyond the capability.