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 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

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
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

Nov. 46.5
May 40.0 47.5 June 38. a 41.0 48.0
Aug. 40. a 43.0 49.0
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 re├žessions, 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.

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.
I '"-..
TABLE 4.14
MITI Guideposts for Steel Production
and Shipments: 4th Quarter 1975
Rolled ord inary steel
mill products
Revised 4th Quarter
(1~000 metric tons)
Percentage Change from
3d Qtr '75 4th Qtr '74
Total shipments Domestic shipments Exports Production
end of period
18,020 12,820 5,200

-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

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