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Some indication of the extent to which steelmakers

  Some indication of the extent to which steelmakers discount the list prices to their trading companies is given in table 4.13. The year 19...


Some indication of the extent to which steelmakers discount the list prices to their trading companies is given in table 4.13. The year 1968 was a recession year for steel demand, and 1969 and .early 1970 was a boom period. Yawata Steel offered discounts of approximately 20 percent off its list price (JOSP) in 1968, but the discounts narrowed in 1969 and were virtually eliminated on plate and hot rolled sheet in early 1970. , In the first three to four years after the formation of the kohan system, the direct ion of MITI helped to preserve its meaningfulnes. In the recession years of 1962 and 1965, however, transactions prices were so significantly below list prices that the list price system virtually collapsed. 67/ For additional d~tails on this subject see, Krause and SeJdguchi (15, pp. 3819-397) ¡ (13, pp. 97-101) ¡ and Schneider ( 27, pp. 1 - 1 2 i. I -211- 

TABLE 4.13 List and Transactions Pr ices of Steel Products, Between Manufacturers and The ir Distr ibutors (1,000 Yen per metr ic ton) Month Product and pr ice Hot rolled , Cold rolled Plates sheet sheet JOSSP JOSP YAvJATA JOSSP JOSP YAWATA JOSSP JOSP YAWATA iN-N i 1968 June 46.0 44.0 32.5 52.0 47.0 33.0 56.0 55.0 JUly 33.0 34.5 Aug. 43.5 Sept. 35.0 36.5 . 44.5 .~ Oct. 37 .0 38.5 4

6.0 Nov. 46.5 1969 May 40.0 47.5 June 38. a 41.0 48.0 Aug. 40. a 43.0 49.0 1970 Feb. I I i I 46. a I I 51.0 March 43.0 Source: Kiyoshi Kawahito, "The Japanese Steel Industry: ' Pr ices and Costs,. August, 1974, where it was reprinted from Tekko Shimbum Sha, Tekko Nenkan, var ious issues. :'.';¡ 1..n~ G1~t '\,,~ As a result of the low level of steel pr ices dur ing the 1962 and 1965 reçessions, MITI intervened. "Administrative guidance" and production-cut agreements on raw steel prod~ction were adopted through open discussion. 681 As indicated in taDle 4.14, MITI called for production cutbacks dur ing the 1975 recession. The eight integrated companies were called upon, and they submitted quarterly production plans to MITI. The move by MITI~was int~nded to reduce inventories and help maintain prices. In the case of merchant bars, a formal "recession cartel" was implemented. 681 See Kawahito 113, p. 109). During the 1962 recession executives of MITI and the Japanese Iron and Steel Federation administered a monitoring committee. Monitoring staff were stationed at 53 plants of 28 companies. Dur ing the 1965 recession a monitoring committee was formed in August. However, the well-known "Sumitomo Incident" in 1965 represents an example of the d iff icul ties in enforc ing such ag reements: According to Imai (9, p. 39): when Yawata tr ied to exercise its leadership by cutting crude steel production and raising steel prices, Sumitomo Metal Industries resolutely opposed it because of its discontent with the assigned quota.

 The MITI intervened in the dispute, la conference between the Minister of MITI and the president of Sumi tomo was held on December 27, 1965) threatening Sumitomo by hinting at a cut in its coal quota. Moreover, contracts between large end users and large steel producers were also negotiated separately. These big producerbig user relationships were character ized by long-term contracts, establishing relatively stable pr ices. -213- I '"-.. I TABLE 4.14 MITI Guideposts for Steel Production and Shipments: 4th Quarter 1975 Rolled ord inary steel mill products ".." Revised 4th Quarter Guidepost (1~000 metric tons) Percentage Change from 3d Qtr '75 4th Qtr '74 Total shipments Domestic shipments Exports Production Stocks, end of period 18,020 12,820 5,200

 17,270 7,568 -8.7 -16.4 -5.2 - .8 -16.8 -39.7 -13.3 -20.3 - 7.9 + 2.8 -11.2 -18.5 Crude steel production 23,340 Source: Ministry of International State Department, Embassy December 5, 1975. Trade and Industry: obtained through U. S. Tokyo, unclassified d~Fument number A-55l, ~~~ l,:\ \~4 According to MITI, the cartel' s ~roduction cut stipulations ( succeeded in r educ ing inventor ies of mer chant bar s. ~/ Under production -guideposts,- quotas are not allocated , among companies. MITI's -guidepost- is essentially its quarterly demand forecast. Since August 1966, companies, voluntarily submit their own quarterly production plans to MITI on the bas is of the gu idepost. MI TI then publ ishes these .~ . reports. On the other hand, the steel industry must file an application with the Japanese Fair Trade Commission (JFTC) to obtain a -recession cartel.- This obligation is based on the Antimonopoly Act. JFTC regulations, with respect to the appl ication and hear ing procedure under the appl ication, stipulate that supporting cost and price data must be turned over to the JFTCat the time of application for a recession cartel.

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