Autonomy or International Cooperation The Japanese

Business and Politics
Volume 2, Issue 2 2000 Article 5
Autonomy or International Cooperation? The

Japanese Space Industry Responds to U.S.
Pressure
Seungjoo Lee
Recommended Citation:
Lee, Seungjoo (2000) "Autonomy or International Cooperation? The Japanese Space Industry
Responds to U.S. Pressure," Business and Politics: Vol. 2: Iss. 2, Article 5.
DOI: 10.2202/1469-3569.1009
©2000 by the authors. All rights reserved.
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Business and Politics, Vol. 2, No. 2, 2000
Autonomy or International
Cooperation? The Japanese Space
Industry Responds to U.S. Pressure
SEUNGJOO LEE
University of California, Berkeley
ABSTRACT The examination of the U.S.–Japan con icts from the mid-1980s to early 1990s
over the space industry sheds light on our understanding of the Japanese political economy. The
Japanese response to U.S. pressure was not so strategic as conventional wisdom suggests. Under
U.S. pressure, Japan shifted to international cooperation, abandonin g the autonomous develop-
ment policy it had sought for four decades. This unexpected policy change primarily resulted from
the lack of clear jurisdictional authority among the government actors over the rapidly changing
space industry. This study’s ndings will apply to other high technology industries such as
telecommunications and information technology, where bureaucratic boundaries are ambiguous
and technological change is rapid.
1. Introduction1
During the mid-1980s, Japan’s technological sophisticatio n posed a strategic
challenge to American high-technolog y industries. In particular, Americans saw
the space industry2 as one of the few areas in which the United States retained
a competitive advantage, but feared that Japan was quickly closing the gap in
some areas. Worried that recent experience in other industries, such as electron-
ics, automobiles, and semiconductor s might repeat itself, the U.S. government
began to mount an attack on Japan’s space industry in the mid-1980s. The U.S.
government demanded that Japan stop industrial targeting and preferential
procurement of non-R&D satellites. For Japan, it meant the abandonment of an
autonomous development policy that had been sought for four decades.
This con ict over the space industry poses an interesting theoretical puzzle.
First, developmental state theory conceptualizes Japan as a strong and ‘smart’
state with a government capable of strategically responding to foreign pressure
while skillfully controlling domestic forces.3 It is seen to possess developmental
goals and consistent strategies to achieve them.4 Resting upon a conceptual
backdrop of state–business reciprocity, Richard Samuels argues that the govern-
ment and industry see national (high) technologica l autonomy as important for
military as well as broader economic security—a phenomenon he calls ‘tech-
Correspondence: Seungjoo Lee, Doctoral Candidate, University of California, Berkeley, CA, USA.
1369-5258/00/020225-26 Ó 2000 Taylor & Francis Ltd 225

DOI: 10.1080/1369525002000647 0 Authenticated
Seungjoo Lee
nonationalism ’. In a technonationalis t agenda, therefore, Japan pursues national

economic strength through the rapid indigenization , diffusion, and development
of high technologies.5
Second, drawing on strategic trade theory, many scholars argue that high
technology industries such as the space industry are likely to stimulate active
government action and they further argue that those efforts will be largely
unimpeded by domestic complications . Helen Milner and David Yof e argue
that ‘government of cials are more apt to favor the strategic trade demands from
high technology industries, because they are perceived as having potential as a
future source of competitiveness ’.6 From this perspective, as guardian of the
national interest, the Japanese government will respond strategically if high
technology industries are under foreign pressure because it sees these industries
as a source of future growth.7 Therefore, this school would predict that the
Japanese would pursue a concerted strategy of industrial dominance in high
technology industries.
However, the space industry case challenges this conventional wisdom’s
understanding of the Japanese political economy. The space industry should
have been an ‘easy case’ for these theories, yet they failed to predict the actual
outcome. The Japanese response to U.S. pressure was less strategic than
expected. 8 In addition, the goal of autonomy, which Japan had pursued for more
than three decades, was largely abandoned under U.S. pressure. To explain this
unexpected result it is necessary to examine exactly what constitutes the
Japanese response to U.S. pressure.9 In dealing with U.S. pressure, under what
conditions and through what mechanisms did Japan succeed or fail to translate
its strategic goals into policy choices?
I argue that the Japanese government’s translation of strategic considerations
into policy choices was in uenced by the institutiona l arrangements structuring
the way key actors interact in a given industry. The institutiona l structure in the
space industry signi cantly conditioned key actors’ interests and created differ-
ent incentives for them to defend their goals. That is, Japan’s unexpected policy
change from autonomy to international cooperation was closely related to the
disintegratio n of strategic consensus among the key actors. This collapse mainly
derived from actors’ changing interests in the face of U.S. pressure, which in
turn was considerably constrained by the institutiona l structure in the space
industry. Therefore, I will examine the interests of relevant actors in relation to
their organizational goals, and the pattern of interaction under institutiona l
constraints.
I hypothesize that when jurisdictiona l boundaries among government agencies
are not clearly de ned but instead overlap, Japan will have trouble translating its
strategic goals into policy outcomes. In the case of the space industry, before
U.S. pressure the goal of autonomous development was shared among govern-
ment actors. However, in the face of U.S. pressure and the changing structure of
the industry, their interests began to diverge. The diverging interests among
government actors were mainly due to the growing in uence of user companies.
U.S. pressure further accelerated this divergence. As a result, the Japanese
government actors rede ned the existing autonomous development policy in
terms of their organizationa l objectives, their level of autonomy vis- a`-vis the
industry actors, and the scope of their policy instruments, all of which affected
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Autonomy or Internationa l Cooperation ?
Japan’s overall capacity to respond to U.S. pressure. That is, U.S. pressure
dismantled the existing consensus in Japan. This in turn brought an end to the
Japanese government’s autonomous development policy. This line of argument
could be extended to other industries with similar structures: those where
technological change is rapid, bureaucratic jurisdiction unclear, and market
forces strong.10 Under such conditions government actors are often not able to
adopt a uni ed position in dealing with U.S. pressure and thus make policy
shifts.
The applications satellite industry is a good test case for the existing
explanations of Japanese political economy. Given its huge spillover effects onto
other industries, Japan should have maintained its momentum for nurturing the
satellite industry indigenously . However, Japan gave up this effort because key
actors’ interests diverged in the face of U.S. pressure. In the following sections
of this article, I explore the institutiona l structure and its impact on key actors
in the space industry. Then I trace the process whereby key actors in the
Japanese satellite industry interacted with each other in the face of U.S.
pressure. 11 Finally I examine the impact of U.S.–Japan negotiation s on the
Japanese space industry.
As a point of departure, however, we must rst examine Japan’s approach to
this industry prior to U.S. pressure. There is ample evidence that Japan realized
the strategic importance of the satellite industry. First, the Japanese government
provided massive support to this segment of the space industry, anticipating the
satellite industry to be a most prominent candidate for the ultimate goal of
commercial success. Thanks to government support, the satellite industry,
together with the rocket industry, showed rapid growth and now accounts for the
largest portion of the Japanese space industry.12 When the U.S. government
invoked its bluntest trade weapon, Super 301, in 1989, it unsurprisingl y chose
the Japanese satellite industry as a primary target for retaliation.13
Second, Japan thought a robust satellite industry would create enormous
positive externalities, not only in other segments of the space industry but also
throughout its economy more generally. Given that the Japanese rocket industry
had not yet achieved international competitiveness in commercial launching, a
large number of domestically manufactured satellites were needed to prevent a
loss of payload s for Japanese launch vehicles and to achieve the necessary
economies of scale for Japanese rocket producers to become competitive in the
world market.
The Japanese government also recognized that the satellite industry’s huge
spillover effects were not con ned to the space industry. These positive external-
ities ranged from the satellite communications service industry to the medical,
energy and environmental sectors. The Japanese government clearly kept these
effects in mind in promoting and protecting the satellite industry. The Ministry
of International Trade and Industry (MITI), for instance, identi ed the areas to
which the satellite industry could bring both spin-on and spin-off effects,
including satellite telecommunication s systems, PC software, remote sensing,
electric heater thruster, and cryogenic propellant insulation technology, among
others. 14 The United States was equally aware of the possible spillover effects of
a thriving space industry and thus was particularly sensitive to Japanese
movements in the area.
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Seungjoo Lee
2. Key actors in the space industry: multiple actors and diverging interests
Since this study mainly focuses on the U.S.–Japan con icts in the applications
satellite industry, detailed discussion of the institutiona l structure in this segment
of the industry is in order. I will rst identify key actors and their jurisdictiona l
authorities, and examine the relationship s among them.
Government actors15
The formal authority for overall control of the policymaking process belongs to
the Space Activities Commission (SAC). Composed of government bureaucrats,
academics, and representatives of space-related companies, and chaired by the
Minister of Science and Technology, SAC sets long-term guideline s for space
policy. 16 SAC’s primary role is to coordinate the different interests among
various government agencies, thereby facilitating the effective development of
the space industry. However, the speci c implementation of government policy
is mostly relegated to other agencies such as the Institute of Space and
Astronautical Science (ISAS) and the National Space Development Agency
(NASDA). ISAS is in charge of pure scienti c research while NASDA oversees
development on the applications side of space programs.17
NASDA is the most important actor on the government side in the develop-
ment of applications satellites and launch vehicles arena.18 As a public organiza-
tion under the Ministry of Science and Technology (STA), NASDA plays the
role of project manager rather than actual development agency. In terms of
policy goals, NASDA is geared toward the autonomous development of the
commercial applications of space technology, a goal shared by manufacturing
companies. 19 NASDA and space rms have maintained a long-term relationship
through a series of cooperative development projects. However, although
NASDA and manufacturers pursue similar strategies, their focuses differ
signi cantly. NASDA is primarily committed to developing new technologies to
close the technological gap with the United States. In contrast, the space
manufacturers are more interested in reducing the costs of existing technologies
to facilitate the commercialization of the space industry.20 Therefore the space
manufacturers have insisted that NASDA place a priority on the transfer to them
of already developed technologies .
Although it wields major in uence over the space industry, NASDA has
several organizationa l liabilities . Because it is concerned mainly with issues of
technical development, NASDA’s bureaucratic ties rarely go beyond a small
circle of scientists and manufacturing companies. As a result, it has limited
in uence in the user community, which works to NASDA’s disadvantage when
dealing with other government agencies such as MITI and the Ministry of Posts
and Telecommunications (MPT) that maintain close relationship s with both the
manufacturing and user companies.
MPT is the second government agency involved in the space industry. In
terms of jurisdictiona l boundary, MPT is in a unique position within the
Japanese government because it deals with both the manufacturing and the user
228 Authenticated
companies. Its interests range from manufacturing satellites to licensing satellite

communications businesses. Thus MPT is the agency with the most extensive
network of bureaucratic ties to the space industry.21
MITI is also an active player in space policymaking . In its famous The Vision
of MITI Policies in the 1980s, MITI identi ed the (aero)space industry as a
springboard of future growth.22 However, MITI is primarily a ‘user’ organization
whose priority is to identify commercial opportunitie s for the space industry.23
In addition, as a pilot agency committed to various industrial policies, MITI
promotes space policy in the broad context of enhancing Japan’s overall
industria l competitiveness . Also, largely in an effort to avoid trade con icts with
the United States, MITI maintains a very exible position on the idea of
international cooperation with foreign companies in this industry.
All of the above government agencies have a role in space policymaking , but
no one single government actor enjoys comprehensive decision-making authority
over the space industry. To address this problem, SAC undertook an internal
reorganization in 1991, establishin g a Planning Coordination Bureau. But SAC
still lacks the policy tools to coordinate different interests among government
agencies and the resources necessary to enforce the projected policies. As a
result, the policymaking process is still often riddled with con icts among the
government actors. The power to implement policy often depends on shifting
alliances among these actors. The diversity of interests and the competition for
power among government actors has opened the way for industry actors to come
into the space policymaking process.24
Industry actors
A group of about ten companies is committed to the manufacturing of space
systems, subsystems and equipment.25 Beneath them are some eighty subcontrac-
tors. These companies have maintained long-term relationships with both
NASDA and ISAS.26 Each manufacturer has special expertise in certain areas:
MHI in systems integration and turbo-pumps; KHI in rocket rings; Nissan in
solid rocket motors; and NEC in transponders.27 In the area of satellite manufac-
turing, the primary contractors are MELCO, Toshiba, and NEC.28
These rms are divided into two categories: scienti c and applications. As the
most technologically advanced, NEC has been awarded most of the scienti c
satellite programs.29 The manufacturing of applications satellites was divided
into three categories: communications satellites (CS), broadcasting satellites
(BS), and geostationary meteorologica l satellites (GMS). As will later be
discussed in detail, MELCO, Toshiba, and NEC became the primary contractors
in the CS, BS and GMS categories, respectively.
Also important are user institutions . Broadly speaking, there are three groups
of user institutions . In the rst category are several government agencies such as
MPT, the Ministry of Transport (MOT), and the Japan Meteorological Agency
(JMA). The second category includes public and private user institution s (mainly
telecommunication s and broadcasting companies) such as NTT, NHK, JSB and
KDD. In the mid-1980s Japan’s general trading companies also sought to
diversify into the new area of satellite-based telecommunications , resulting in the
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TABLE 1. Key actors in the satellite industry
Government actors Industry actors
Supplier User Supplier User
Applications satellite NASDA MPT (licensing MELCO—CS* NTT—CS

authority)
MITI NHK Toshiba—BS** JC-SAT (led by
C. Itoh, Mitsui, &
Hughes)—CS
MPT MOT NEC—GMS***
Public SCC (led by
corporations Mitsubishi)—CS
Japan
Meteorological NHK—BS
Agency
Scienti c satellite ISAS—scienti c NEC—scienti c
satellite satellite
Notes: *CS: communications satellite; **BS: broadcasting satellite; ***GMS: geostationary

meteorological satellite.
establishment of Japan Communication Satellite (Nihon Tsushin Eisei, or JC-

SAT, jointly owned by C. Itoh, Mitsui & Co. and Hughes Communications) and
Space Communications Corporation (Uchu Tsushin, or SCC, mainly funded by
the Mitsubishi Group).30 The third category of users consists of a growing
number of private companies interested in the utilization of space. From the
early 1980s to early 1990, many industry consortia, foundations and corporations
committed to space utilization were created with government support. Indicative
of this growing interest, by 1991 the number of the member companies in the
Space Activities Promotion Council had increased to ninety-nine.31
3. Pattern of interaction among key actors: autonomy versus commercial

interests
NASDA and the space manufacturers : driving force of autonomy
Forming a powerful coalition with the space manufacturers, NASDA has
maintained its autonomous development policy since its establishment in 1969.
Unique to this relationship , the Japanese government and the space manufactur-
ers interact more as equal partners than as leader and follower, and each is
mutually dependent and sensitive to changes in the other.32 The Japanese
government in uences the industry not by unilaterally imposing its policies but
rather by creating an environment in which private companies manage compe-
tition in a relatively small market.
Mutual dependence between the government and the space manufacturers
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derives from the unique situation of the Japanese space industry. In stark
contrast to the United States, where government policy drives the space pro-
gram, the Japanese government lacks the resources to implement the projected
space programs.33 The fundamental difference is related to the lack of a large
military establishment in Japan as a primary consumer and supporter of the
space industry. As a result, the Japanese government’s space budget has been
quite modest compared to that of the United States. In 1989, for example, while
the U.S. Department of Defense’s space-related budget was $13.9 billion and
NASA’s budget was $8.8 billion, the entire Japanese space budget was $1.2
billion. 34 In light of the state’s limited resources for space, the Japanese
government policy relies on the private sector’s cooperation to achieve national
goals.
The report by the Consultativ e Committee on the Long Term Policy of the
Space Activities Commission illustrate s this point. The report estimated that to
achieve its projected goals the Japanese government’s space budget in the
1985–2000 period would have to be approximately 5Y 6 trillion and the private
sector would have to contribute another 5Y 3 trillion. 35 In other words, the
government’s plan could not be sustained unless private rms augmented its
budget. Therefore, how the government induced private companies to join
government-initiated programs was of more than casual interest. The Japanese
government has adopted various direct and indirect measures—encompassing
R&D policy, procurement policy, and work-sharing arrangements—to induce
such cooperation. It is through these policies that NASDA and the space
manufacturers, the two main promoters of the autonomous development policy,
have cooperated to nurture indigenous technologies and improve the Japanese
space industry’s competitiveness .
R&D and procurement policy. Since the establishment of NASDA, the Japanese
government has been directly involved in the research and development (R&D)
process by collaborating with companies in developing an indigenous space
technological base. These policies were widely adopted and utilized in other
industrie s as well during Japan’s catch-up era from the 1960s to early 1980s.
Though not unique to the space industry, the need for these development
policies was stronger in this sector, as the huge cost and high risk in the
development process and long gestation period to commercialization deterred
companies from investing in R&D without heavy government support. The
Japanese government often shared the risk with the companies by defraying
these high development costs. With the government’s help in R&D, Japanese
companies were rapidly able to steepen their learning curves and reduce costs.
Japanese space manufacturers have also suffered from small domestic de-
mand for space products. Unlike other high technology industries, the Japanese
space manufacturers could not take advantage of a large domestic market to
support its commercial development. By protecting the public procurement
market, therefore, the Japanese government tried to induce private companies to
participate in the space industry. Given their underdeveloped competitive
strength, the Japanese space manufacturers might have eventually been driven
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out of their own domestic market if foreign companies had been allowed to
export to Japan in this developmental period.36
The objective of the public procurement policy was twofold. First, although
public procurement was limited in size, this policy catalyzed the space manu-
facturers’ interest in the space industry. Both the government and space manu-
facturers anticipated that, with a protected domestic market as a springboard ,
the Japanese space industry would eventually achieve commercial success.
Second, if the companies had the government’s assurance that they would be
able to sell their products, they could be more actively committed to an
autonomous development strategy by taking a long-term view.
Work-sharing system. Although R&D and procurement policies did play a

positive role in maintaining the autonomous development policy, they had to be
supplemented with another measure: the work-sharing system. The work-
sharing system has functioned as important governance structure in the space
industry, its primary function being to keep major companies in business by
sharing scarce resources. Why did the Japanese government and space manufac-
turers create such a cooperative system in which rival rms could share the
work? Under what conditions could it be maintained? The Japanese government
created the work-sharing system in close consultatio n with space manufacturers.
In short, the decision resulted from both the Japanese government’s and
industry’s sense of an urgent need to overcome various problems that had
seriously hampered Japanese space rms’ efforts to lower their manufacturing
costs and thus become commercially competitive in the world market: small
market size, limited government budget, low pro tability, and so on. In re-
sponse to such problems, both government and industry designed the work-
sharing system so that every major company could survive. Under this
consensus, even when rms failed to deliver the satellites, they managed to
keep participating in the Japanese government development and procurement
plans without serious interruption , thereby staying in business.
The origin of the work-sharing system dates back to the GMS-CS-BS plan in
1977–78.37 Based on the consensus among key actors, the most sophisticated
system was created in the area of applications satellite business in which the
space manufacturers were most interested . NEC became a primary contractor
for GMS, MELCO for CS, and Toshiba for BS. This system was largely
maintained until the early 1990s. None of these three rms have been excluded
from the satellite development. Only after 1994, other companies such as IHI
were invited into the satellite development.38 As illustrated in Table 2, NEC,
MELCO, and Toshiba each specialized in one area until the early 1990s. In
other words, in recognition of the companies’ needs, the Japanese government
deliberately spread contracts among rms to keep everyone in business.39
Since similar long-term oriented cooperative relationship s can be easily found
in other industries, what makes the space industry distinctive? The answer lies
in the goal that this cooperative arrangement originally aimed to achieve and the
way in which key actors interacted . In other hi-tech industries, rms—with the
help of government—often committed to the cooperative relationship by
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TABLE 2. Work-sharing system in the applications satellite
MELCO NEC Toshiba
Project Launch date Project Launch date Project Launch date
CS 1977/12 GMS 1977/2 BS 1978/4

ECS 1979/2 GMS-II 1981/8 BS-IIa 1984/1
ECS b 1980/2 GMS-III 1984/8 BS-IIb 1986/2
CS-IIa 1983/2 GMS-IV 1989/9 ETS-III 1992/9
CS-IIb 1983/8 GMS-V 1994/9
CS-IIIa 1988/8 BS-IIIa 1990/2
CS-IIIb 1988/9 BS-IIIb 1991/8
ETS-II 1977/2 ETS-I 1975/9
ETS-IV 1981/9 MOS-I 1987/2
ETS-V 1987/8 MOS-Ib 1990/2
ISS 1976/2 OICETS 2000
ISS-b 1978/2
JERS 1992/2
OREX 1994
ADEOS-II 1999
DRTS-W 2000
DRTS-E 2002
Source: Nihon Uchu Foramu, NASDA Note 1998 (Tokyo: Nihon Uchu Foramu, 1998).
forming research consortia, but limited cooperation to the R&D stage.40 A

typical example is the VLSI Project led by MITI in the 1980s.41 Once a
prototype was developed , rms would compete in the commercialization stage.
The key difference with the space industry is that in the latter the cooperation
to minimize competition lasts throughout the process from R&D to production
and government procurement.
In declining but politically well-entrenched industries such as construction and
basic materials, the cooperative relationship —often called ‘relational contract-
ing’—has been ubiquitou s as well. In these industries, rms maintain long-term
stable relationship s with one another, even if doing so is temporarily disadvan-
tageous. 42 Such cooperative relationship s aim to buffer the industry from the
shocks of sectoral decline. In addition, because rms believe that the other party
would never abandon them even in hard times, rms in these stable relationship s
have been able to take a long-term view in their business.43
Cooperative relationships in the space industry resemble those in declining
industrie s in that they place emphasis on producers’ rather than users’ interests.
But the cooperative relationship in the space industry is distinctive in two
aspects: the key actors’ primary objective in maintaining the system, and the way
their interests shaped the system’s creation. First, in other industries the Japanese
government and the producers established a cartel-like relationship when the
industry was in decline, allowing individua l producers to stave off bankruptcy.
In the space industry, however, key actors created the work-sharing
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system to promote and sustain the space industry because it was one of
the important high technology industrie s with a strong potential for future
growth.
Second, in dividing the development projects into three categories, the
Japanese rms’ strategic relationship with U.S. rms directly in uenced how the
work-sharing system was structured . That is, considerations of technology
acquisition were crucial. Each company had a strategic relationship with an
American rm: MELCO with Ford, Toshiba with General Electric, and NEC
with Hughes. Both the Japanese government and the space manufacturers found
it necessary to create the work-sharing system on the foundations of these
strategic relationships . Because these af liations were the source of advanced
technologies , Japan needed to acquire technologies by maintaining these
strategic relationships . By taking advantage of these strategic relationships,
Japanese rms could successfully specialize in their area of satellite manufactur-
ing and acquire all the government projects in that area to master the acquired
technologies.
MPT/MITI and the user institutions : countervailin g force of autonomy

We have examined how the Japanese government and the space manufacturers
interacted to maintain the autonomous development policy.44 However, counter-
forces to the autonomous development policy also emerged in space policymak-
ing, due in part to the rapid growth and transformation of the user industry. The
rst sign of the user institutions ’ in uence came in the early 1970s. MPT was
the traditional proponent of the autonomous development policy, but at that time
tried to import U.S. technologies to introduce satellite broadcasting as soon as
possible. This policy change was a re ection of the needs of the users’ under its
jurisdictio n such as NHK (broadcasting satellites) and NTT (communication
satellites). 45
Developments of the 1970s in space policymaking , such as importation of
U.S. technologies for broadcasting satellites, clearly indicated that the users’
voice was becoming ever stronger. Until the mid-1980s, however, the articula-
tion of their interests was largely held in check by the autonomous development
camp. As a result, the Japanese space community as a whole did not abandon
the goal of autonomous development of applications satellites. In particular,
public companies such as NTT and NHK, that were the major users of the
applications satellites, remained supporters of the existing policy.
New developments in the mid-1980s, such as the privatization of NTT and the
introductio n of private service in satellite communications , however, radically
altered the dynamics in space policymaking as well as the user companies’
thinking. Worried about intensifyin g competition, the user companies were
forced to be more sensitive to pro tability. U.S. pressure, which picked up after
1985, accelerated this trend. The immediate impact was that user companies no
longer showed a rm preference for domestic products. Rather, the changing
interests under U.S. pressure dealt a serious blow to the autonomous develop-
ment policy that Japan had pursued since 1969.
234 Authenticated
FIGURE 1. Institutional structure in the applications satellite industry.
4. U.S.–Japan con icts in the satellite industry, 1989–92

The source of the con ict
Con ict over the space industry rst started in the mid-1980s when the United
States pushed Japan to open the door to the private sector market in the Japanese
space industry. The dispute came to a head in May 1989 when the United States
designated the Japanese government’s practices of satellite procurement under
the Super 301.46 In the course of the con ict, however, it became obvious that
the United States’ concern went well beyond the narrow issue of market access.
The Super 301 designation of the satellite industry resulted from U.S. recogni-
tion that satellites had become one of the key industries in which Japan
challenged U.S. leadership in the world market.47 At the same time, the United
States saw the Japanese autonomous development policy as the potential source
of a long-term technological and commercial challenge to the U.S. space
industry.
The timing of the challenge suggests that the United States was pursuing a
two-tiered goal: to deny Japanese rms the luxury of the captive government
market, and to undermine Japan’s perceived industrial strategy, the autonomous
development policy.48 Not coincidentally , Washington designated Japan’s satel-
lite industry just as the latter launched a multi-functiona l satellite, a major
success on the road to the commercialization of its space industry.49 The U.S.
government believed that Japan could become a formidable competitor in the
near future if it continued to independently develop applications satellites. By
seeking to force Japan to discard the autonomous development policy, the United
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States tried to prevent Japan’s early industrial achievements from spreading into
commercial success.
Moreover, the United States was concerned about the potential spillove r
effects from Japan’s satellite production into other industries. With the introduc-
tion of mobile telecommunication s technology, global positionin g system (GPS),
and remote sensing in the 1980s, the satellite-related business seemed to promise
high-growth. With these new developments unfolding in the late 1980s, propo-
nents of applying Super 301 became stronger within the U.S. government.
Undersecretary of Commerce J. Michael Farren’s testimony before the Senate
Commerce Committee on the Japanese space industry on 4 October 1989,
illustrate s this point:
In 1978, Japan established a policy of developing an indigenous

capability in space applications , particularly satellites. To the
Japanese, satellites are not an industry unto itself but a window on
the whole space industry for the 21st century. Japan is looking to
[aero]space as a source for its future growth and prosperity. The
Japanese Ministry of Internationa l Trade and Industry stresses
that growth in aerospace leads to growth in other industry areas.
MITI’s ‘space industry tree’ branches out into the automotive,
energy and electronics industries among others. Why do they
continue to support an indigenous satellite development policy
despite when high quality, less expensive satellites can be pur-
chased outright from other sources?50
Contending issues: strategic targeting and preferential public procurement

U.S. criticism of Japan’s autonomous development policy focused on two
issues: (1) the mixed nature of the fourth communications satellite CS-4
project that NASDA, MPT, and MITI planned to jointly launch; and (2)
import barriers erected by government-af liated institutions . First, the United
States claimed that because the newly privatized NTT was planning to make
extensive use of the CS-4, it was essentially commercial and thus the Japanese
government should stop funding the project. In fact, 90% of the CS-4s produced
were to be used by NTT for commercial activities.51 NTT was to bear three-quar-
ters of the estimated ¥90 billion of development costs, and NASDA the
remainder.52
From the Japanese perspective, however, the CS-4 was research-oriented and
government funding of approximately 25% of its development costs was
appropriate. Therefore, the Japanese government steadfastly denied the U.S.
contention of the commercial nature of the CS-4 project, arguing that it
developed the CS-4 to nurture the technology for various government-led space
activities, not for commercial use.53 Speci cally, Japan asserted that the ‘CS-4
is mainly intended to autonomousl y develop the technology that could load and
use transponders with ve different bands in one communications satellite for
the rst time in the world’ (emphasis added).54
236 Authenticated
The Japanese government tried to extend the same argument to the issue of
its targeting of the space industry, stressing that state support of the space
industry did not aim for commercial development of space technologies. Rather,
it contended the main goal was the advancement of basic science and technol-
ogy, the exploration of space, and participation in international cooperative
efforts in space.55 The Japanese government’s stated goal was to develop an
autonomous noncommercial space program, and as such it was necessary to keep
foreigners out, and further, that Japan had a sovereign right to such an
autonomous space program with noncommercial objectives.
The second focus of U.S. criticism concerned import barriers, in particular,
Japanese public procurement practices. The United States argued that the ‘buy
Japanese’ policy constituted an unacceptable barrier to U.S. rms’ activities in
Japan.56 In fact, as of 1989, the public agencies were still not allowed to
purchase foreign satellites. Invoking Super 301, the U.S. government demanded
that public satellite procurement be liberalized . The Japanese government in-
sisted that the Japanese market was already open to imports, pointing out that
some government-af liated agencies had already begun to import satellites.57
The Japanese response

In the initial stage of the dispute, the Japanese government made a series of
tactical moves not only to keep the CS-4 project intact, but also to maintain the
autonomous development policy. Sensing U.S. determination, a few months
before the Super 301 designations in early 1989, the Japanese government made
several gestures intended to preempt U.S. retaliation. In January 1989, after close
consultatio n with the government, NTT decided to lease thirteen of sixty-four
transponders on a Hughes-built satellite, which was imported by JC-SAT. In
February 1989, the public NHK purchased a broadcasting satellite (BS-2A) from
General Electric to back up its malfunctionin g satellite.58 MPT also granted a
license to Japan’s third satellite communications company, Satellite Japan,
because it was expected to purchase two U.S. satellites from General Electric.59
Furthermore, Toyama Shimichi, vice president of NASDA, announced that even
after Japan succeeded in developing the H-II rocket it would not enter the
commercial launch market, another area of U.S. concern in the space industry.60
As he indicated, Japan did not want to jeopardize the autonomous development
policy by aggravating the relationship with the United States. And this series of
preemptive moves suggests that Japan acted to save its existing autonomous
development policy. These strategic moves were possible because at this stage
of the con ict NASDA took the initiative in formulating the response within the
Japanese government. From the perspective of NASDA, a strong proponent of
autonomous development, it would be the primary loser if Japan were to concede
to the U.S. demands.
The result of the negotiatio n

These Japanese efforts—the purchase of U.S. satellites, grant of a license to a
third private satellite communications service company, and announcement of
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Seungjoo Lee
Japan’s not entering into the commercial launch market—did not have the
intended effect. Not only did U.S. pressure not diminish, it grew even stronger.
As negotiation s proceeded, therefore, Japan’s uni ed front supporting the stra-
tegic goal started to show signs of fraying. U.S. pressure encouraged some actors
to move out of the existing coalition of the autonomous development policy.
Taking advantage of U.S. pressure, for example, user companies such as NTT
and other newly established satellite service companies began to raise their voice
for importing cheaper foreign satellites. It meant the end of the autonomous
development policy.
The result of trade pressure from the United States was Japan’s agreement to
revise the CS-4 project completely.61 The size of the CS-4 project was reduced
signi cantly: of the two satellites originally planned, only one CS-4 would be
built by NASDA. Its development was merged with that of the Experimental
Data Relay and Tracking Satellite (EDRTS) to make the project less commercial
in nature. 62 The original development plan of loading transponders using ve
different bands shrunk as well.63 NTT would no longer participate in the project,
leaving the program as a fully government-funded research effort. Moreover
NTT became free to buy foreign communications satellites.64
The Japanese government also agreed that all commercial satellites—includ -
ing broadcasting and meteorological satellites—would be open to international
bidding. Only R&D satellites, which were de ned as those ‘designed and used
entirely, or almost entirely, for the purpose of in-space development and/or
validation of technologies new to either country, and/or noncommercial scienti c
research’, were excluded .65 The rst test of the new procurement policy came in
June 1991 when NTT invited bids for two N-Star communications satellites
worth $500 million.66 Three U.S. rms and no Japanese rms responded . The
NTT contract was awarded in December 1991 to Loral Space Systems, which
had merged with Ford Aerospace. In September 1992 General Electric won a bid
to supply NHK with a $70 million broadcasting satellite.
The impact of the agreement was not con ned just to the CS-4 project.67 In
the wake of the agreement, Japan had to cancel some of its autonomous program
already underway because the government support would be restricted to the
production and launch of research satellites. NASDA was expected to abandon
about 50% of its satellite projects planned , including a geostationary meteoro-
logical satellite GMS-5 and a new generation of broadcasting satellite BS-4. The
cancellation dealt a signi cant blow to Japan’s plans to use a closed domestic
market as a step toward developing large-scale communications satellites to
eventually sell to non-Japanese customers. Japan’s capacity to follow policies of
autonomous development in the space industry was weakened as well. For
example, the loss of the communications satellite program made it more dif cult
for Japan to overcome its lag in key satellite technology.68
Key actors’ changing interests under U.S. pressure

Changing interests among the main actors explains the Japanese response to
American pressure. This change was mediated by the institutiona l structure of
the space policymaking community. Once the division among key actors in
238 Authenticated
Japan started to materialize, the shaky coalition among them was doomed to fall
apart, for actors who had already found it necessary to shift policy focus actively
took advantage of U.S. pressure. That is, the anti-autonomou s development camp
established its position as a viable option. That made it dif cult for Japan to
pursue a concerted, strategic response to the United States.
The entire process of policy shift was triggered by a change at MITI that
eventually signi cantly constrained Japan’s response to U.S. pressure. From the
early 1980s, not only did MITI’s interest in the space industry expand but its
policy preferences increasingly diverged from those of NASDA. MITI sought a
new approach to space development, suggesting that Japan should no longer rely
solely on an autonomous development strategy but rather should also be open to
strategic alliances and other forms of cooperation with foreign rms. For MITI,
such openness would both gain access to the global space market and ease trade
tensions with the United States.69
MITI also tried to focus on areas with economic potential in which inter-
national competitors were not already well entrenched , including materials
processing, earth observation, and robotics.70 MITI’s concern was how to resolve
the somewhat con icting interests of the manufacturing and user companies:
should it favor one or the other, or seek a balanced approach? Positioned
between the manufacturing and user companies, MITI saw the possibilit y of a
trade-off in simultaneously promoting both. With only a limited budget allocated
to space-related industry, massive support to the space manufacturers would
deplete the resources needed for investment in the user industry. MITI, however,
soon recognized the increasing importance of satellite service and other space
utilization businesses. With the Cold War over and data needs expanding, such
as satellite digital imaging of natural resources, the worldwide demand for a
remote sensing service was growing by 20–30% a year in the early 1990s. And
many other countries such as France, Sweden, and Belgium competed with the
United States to turn remote sensing into a commercial enterprise.71 Sensing this
new possibility for commercialization of space, MITI tried to nd a way to
emphasize the user industry over the manufacturing industry.72
In short, while NASDA stressed the autonomous development of space
manufacturing technologies , MITI focused on the development of space utiliza-
tion technologies aimed at commercial success.73 The difference mainly origi-
nated from their pursuit of different organizationa l interests within the space
industry. Prior to the con ict with the United States, MITI was not able to
successfully push its position to fruition since NASDA’s nationalisti c position
was more rmly established within the Japanese government. However, the
combination of U.S. and domestic industry pressure strengthened MITI’s hand
against NASDA. Here NASDA was at a disadvantage: NASDA’s bureaucratic
ties were mainly with the immediate circle of scientists and manufacturing
companies, leaving it with very limited in uence on the user community. Since
MITI has traditionally enjoyed a close relationship with both manufacturing and
user companies, it was in a better position to know both industries’ needs than
was NASDA.
In this process, MPT also played a key role in space policymaking in Japan.
Until the mid-1980s, MPT’s development policy was closer to NASDA’s than
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Seungjoo Lee
to MITI’s. MPT placed more emphasis on the development of autonomous

manufacturing technologies , seeking to nurture the indigenous technological
base so that Japan would no longer be subject to restrictions on transferred
technologies . Communication and broadcasting satellites were of the most
immediate interest to both MPT and the user industry under its jurisdiction.74
Beginning in the late 1980s, however, MPT began to shift its development
strategy towards giving more emphasis to the user industry. Two factors
contributed to this shift. First, in line with its recent effort to elevate its status
to a ‘policy’ ministry, MPT began to monitor carefully the changing
con guration of the space industry.75 After rapid growth of the overall space
industry since the mid-1980s, MPT predicted differential growth rates of the
various subcategories of the space industry. In the period of 1989–2000, the
world market for satellite-based telecommunications —one of MPT’s primary
targeting areas—was expected to grow to $10.7–13.7 billion, nearly twice the
gure of the previous period of 1980–88.76 Though formally committed to both
the manufacturing and user industries, MPT anticipated that the space-based user
industry would become an engine for future growth of Japan. What’s more, MPT
came to realize that failure to accommodate inevitable change would ruin its
reputation as a policy agency. Based on these assessments, MPT gradually
changed its existing policy from supporting manufacturing to supporting user
companies. 77
Second, in the domestic arena, intense competition within the telecommunica-
tions and broadcasting industries also motivated MPT to change tack. The
establishment of private satellite service companies in the 1980s had an import-
ant impact on Japanese space policymaking : although government users and
other public agencies still favored domestic satellites, the newly established
private rms did not have a preference for national products. For example,
JC-SAT and SCC contracted with Hughes Aircraft and Ford Aerospace, respect-
ively. 78 Meanwhile, NHK—though it remained public—began to be more
concerned about pro tability as competition from private companies entering the
broadcasting industry began to bite.79 In an increasingly competitive market,
even the traditional buyers of domestic satellites, such as NTT and NHK,
became reluctant to purchase the more expensive domestic satellites. More
generally, after its privatization NTT became less willing to fund development
projects led by MPT and NASDA.
Diverging policy preferences did not necessarily mean that NASDA and
MITI/MPT held fundamentally different policy goals. They shared the view that
Japanese dependency on U.S. space technology had hindered the development of
more applicational and commercial technologie s in Japan. Moreover, they shared
the view that, while minimizing its dependence on U.S. technology, Japan
should nd a way to be committed to commercial areas. However, this vision
was shared only at an abstract level; their views diverged when it came to
targeting speci c areas within the space industry. MITI thought that Japan was
more likely to succeed in space utilization because it was an emerging area with
great potential for commercial development. In contrast, NASDA thought that
Japan should keep focusing on nurturing state-of-the-art manufacturing technolo-
gies to achieve autonomy.
240 Authenticated
These diverging interests among the government actors spilled over to

government–business relations in the space industry as well. The slight initial
difference in focus between NASDA and the manufacturing companies widened
as the industry realized their needs could be more effectively served by MITI.
This is illustrated in the remarks of a Mitsubishi Heavy Industries executive who
said that the space industry was getting more critical of NASDA’s approach
because ‘the Japanese government’s push for high-technolog y development may
be hindering Japan’s ability to compete in the commercial endeavors’.80
The space manufacturers’ primary concern was about how to reduce pro-
duction costs to facilitate commercialization. These rms saw technology trans-
fers from NASDA to companies as the basis for ful lling this goal. However,
NASDA made little effort to transfer existing technologies to private companies.
In its 1988 report, the Space Activities Promotion Council of Keidanren voiced
this complaint, criticizing NASDA (and SAC) for pursuing an approach that ‘has
focused almost entirely on technologica l development’ not directly related to
commercial use. It called for ‘a more balanced approach that addresses the need
for practical uses of space, as well as technologica l development’.81 By weaken-
ing NASDA’s position within the government, the space manufacturers’ change
in position dramatically in uenced Japan’s response to the American pressure.
The user companies also undermined the autonomous development policy.
Because of the small scale of production, Japanese satellites were considerably
more expensive than U.S.-made satellites. Furthermore, U.S. satellites were not
only less expensive—sometimes as little as half the price of the Japanese
models—they were clearly of higher quality.82 Understandably, user companies
were fundamentally dissatis ed with having to purchase vastly more expensive
yet inferior domestic satellites. The steep cost of using the C-3 was one of the
reasons that NTT switched to other private communications satellites.
In summary, MITI’s policy change and the industry’s support of this change
triggered a series of con ict-ridden interactions among key actors, helping to
shift the balance of power in MITI’s favor while signi cantly weakening
NASDA’s position. U.S. pressure further strengthened MITI’s position in this
battle. With increasing domestic and U.S. pressure against the autonomous
development policy, Japan was on the verge of a fundamental change in its
approach to satellite development.
5. Impact on the Japanese space industry

From autonomy to internationa l cooperation
The U.S.–Japanese agreement on non-R&D, satellite procurement procedures
brought drastic change to Japan’s development strategy in the space industry.
Space policy in Japan has been based on a tenuous consensus among various
actors that often pursued con icting goals, ranging from a purely indigenous
development strategy for technological autonomy to international collaboration
for penetration of the international space market. SAC’s dif culties in reconcil-
ing it contradictory guiding principles—autonomy and internationa l cooper-
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Seungjoo Lee
ation—were often the source of policy con ict among the Japanese government
agencies.
Ultimately the strategy of pursuing international cooperation with foreign
companies to develop space prevailed . In its revised Long-Term Vision released
in July 1994, SAC clearly stipulated the policy emphasis on international
cooperation to promote space development.83 In particular, it stated that Japan
would promote internationa l cooperation in elds such as joint construction of
earth observation systems, mounting of observation sensors on other countries’
satellites and space probes, and construction of mutual data networks.84 This new
trend was reaf rmed in the 1996 Fundamental Policy of Japan’s Space Activi-
ties.85 As a result, strategic relationship s between U.S. and Japanese rms
became more complex and intertwined , with the latter establishin g multiple
relationships with U.S. companies while maintaining existing relationship s with
their traditiona l partners.86 For example, MELCO established a cooperative
relationship with both Loral and Hughes, while NEC collaborates with Lockheed
Martin and Hughes.87
Changing dynamics of commercial interaction: from work-sharing to technol-

ogy-sharing
The U.S.–Japanese agreement altered the pattern of commercial interaction
among Japanese rms as well, most conspicuousl y in the work-sharing system
in applications satellite development.88 In the absence of U.S. pressure, the
work-sharing system in the space industry, described above, was maintained
until the early 1990s. However, work-sharing took a different form after U.S.
pressure was brought to bear against the relatively stable relationship between
both the Japanese government and industry, and among the manufacturers
themselves.
A new pattern emerged in the way the development work was apportioned ,
although the spirit of keeping everyone in the business did not disappear. The
new arrangement was that MELCO, NEC, and Toshiba would jointly develop
most of the major applications satellites, including engineering test satellites
(ETS-6, 7 and 8), advanced earth observing satellite (ADEOS), a communication
and broadcasting engineering test satellite (COMETS) and Advanced Land
Observing Satellite (ALOS).89 This arrangement marked a turning point in the
organization of the space industry. Previously, work-sharing meant that each
rm specialized in a separate area. Afterwards, work-sharing came to mean all
rms cooperating on the same project within each area of applications satel-
lites. 90 As illustrated in Table 3, through the existing work-sharing systems still
continued , since 1993 these three rms and IHI have collectively carried out
applications satellite projects.91 This was a bold departure from the three-decade-
long arrangement about how to share development work. The shift came as a
direct result of U.S. pressure, as illustrated by NEC’s quick response to the result
of the U.S.–Japan negotiation . Through the new system, the Japanese space
companies tried desperately to improve their competitiveness by jointly develop-
ing satellites.92 This effort was also supported by NASDA.93
242 Authenticated
TABLE 3. Work-sharing system after 1993
Satellite Developer Launch date
ETS-VI Toshiba 1994/8

MELCO
NEC
IHI
ADEOS MELCO 1996/8
NEC
Toshiba
ETS-VII Toshiba 1997
MELCO
NEC
COMETS NEC 1997
Toshiba
MELCO
IHI
ETS-VIII MELCO 2002
Toshiba
NEC
ALOS NEC 2002
MELCO
Toshiba
Source: Nihon Uchu Foramu, NASDA Note 1998

(Tokyo: Nihon Uchu Foramu, 1998).
Also contributin g to the changes in the work-sharing system was Japanese

companies’ need to share technologie s with each other. In the past, Japanese
rms successfully acquired advanced technologies from U.S. companies and
then mastered those technologies by concentrating in one area. However, this
method became virtually impossible in the 1980s as U.S. companies became
more reluctant to transfer technologies . Japanese rms began to turn to other
Japanese companies, each of which possessed superior technologies in certain
areas. By diffusing technologies through joint projects, Japanese companies
found a way to enhance their competitiveness. Three decades of cooperative
relationships helped Japanese rms to adapt to this shift from work-sharing to
technology-sharing.
6. Conclusion
The case of the Japanese space industry shows that Japanese policy changed as
a result of the intersection of key actors’ changing interests and the govern-
ment’s need to respond to increasing U.S. pressure. The Japanese policy shift
signi cantly changed the overall structure of the space industry. Japan had to
scrap many of its existing programs and modify its autonomous development
policy—a policy shift that resulted ultimately from the lack of a single coordi-
nating government body.
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Seungjoo Lee
The problems of policy coordination were compounded by the lack of clear

jurisdictiona l authority in the rapidly changing space industry. On the one hand,
NASDA continued to try to protect existing bureaucratic goals and the space
manufacturers’ interests. Conversely, other government actors such as MITI and
MPT, which traditionall y had a more exible posture towards international
cooperation, were forced to rede ne their policy goals.
Ambiguous jurisdictional authority allowed industry actors to exert added
in uence over the government’s policy choice. As the industry’s overall
con guration changed in favor of the user companies, government actors felt the
need to re ect user companies’ interests in their policy choices. This stronger
voice of the user companies made Japanese policy more vulnerable to U.S.
pressure, forcing the Japanese government to jettison its long-standin g auton-
omous development policy and undermining technonationalism .
This study’s ndings also apply to other high technology industries where
bureaucratic boundaries are ambiguous and the interests of the industry are
rapidly changing. In other important industries, such as telecommunications and
information technology for example, Japan has also failed to come up with
well-coordinated government policy even in the absence of U.S. pressure. When
the United States has applied pressure, it has only exacerbated these problems.
This in turn made it even more dif cult for Japan to formulate a strategic
response.
The analysis here of the Japanese space industry presents a useful alternative
to conventional wisdom. Theories of developmental state and strategic trade
would expect the Japanese government to be actively committed to promote
indigenous development of strategic industries. However, Japan made a sudden
policy change to international cooperation, abandoning its long-standin g auton-
omous development policy. Under U.S. pressure, key actors’ interests diverged
to a greater extent and the existing consensus favoring the autonomous develop-
ment policy fell apart. It became impossible to reconstitute a uni ed position to
respond to this pressure. Suffering from a lack of coherent policy choice, Japan’s
initial response was sharply modi ed under U.S. pressure. The result was a
considerably higher degree of market opening in the satellite industry than Japan
initially intended . Finally this pressure also signi cantly altered patterns of
cooperation among manufacturing companies. Although the fundamental spirit
of work-sharing was maintained , a new pattern of working-sharing emerged—
from a work-sharing in which the rms specialized in different areas of
applications satellites to a technology-sharin g in which all cooperated within the
same area of applications satellites—re ecting the changed market situation.
Notes
1. I thank Vinod Aggarwal, Kevin Donovan, Jeff Keele, Atsuo Shibota, Tadashi Hatano and anonymou s
referees for comments and encouragemen t in re ning this article.
2. The space industry includes both satellite and rocket manufacturing and services such as rocket launchings
and satellite-based telecommunication s services. In this article, I speci cally examine the satellite
manufacturing industry, which was a direct target of U.S. trade pressure.
3. For a classic statement of this view, see Pempel (1978), pp. 139–190; and Krasner (1986), pp. 787–806.
244 Authenticated
4. On the other hand, diverging views of the Japanese political economy have also emerged. Although they
emphasize different aspects of the Japanese political economy—such as pluralism, political dominance,
or transnational coalitions between Japanese domestic interest groups and their foreign counterparts—the
Japanese government ’s dif culty in formulating coherent policy has become more salient since the
1980s. These studies present a view of a less strategic Japan in the face of foreign (U.S.) pressure. See
Destler et al. (1979); Destler and Sato (1982); Kusano (1984); Funabashi (1987); Encarnation and
Mason (1990), pp. 25–54; Krauss (1993), pp. 265–299; Fukui and Weatherford (1995), pp. 226–252; and
Schoppa (1997).
5. Samuels (1994), pp. 42–58.
6. Milner and Yof e (1989), p. 271.
7. Krauss and Reich (1992), p. 862.
8. This assessment could be applied to other sectors as well. Examining the results of all Section 301 cases,
Bayard and Elliott concluded that Japan was more responsive to U.S. pressure than the European
Community and even other East Asian nations such as Korea and Taiwan. See Bayard and Elliott
(1994), pp. 51–97. Schoppa (1997) also argues that Japan was most responsive to U.S. pressure. In a
more recent study, however, Schoppa points out Japan’s increasing resistance to U.S. demand s in recent
years. He attributes this new trend to changes in the social context that led to Japanese elites’ renewed
recalcitrance toward the United States. See Schoppa (1999), pp. 308, 318.
9. Schoppa (1997) makes important contributions to the debate on the interaction of international and
domestic level of politics. However, he mainly focuses on the effectiveness of strategies adopted by
negotiators, and does not explicitly examine how key actors in Japan interact to pursue their primary
organizationa l goals.
10. Calder (1988), p. 529.
11. For an excellent discussion of the process-tracing approach, see George and McKeown (1985), pp. 21–
58; King et al. (1994), pp. 226–228; and Aggarwal (1985), pp. 38–39.
12. As of 1996, the combined sales of satellite and launch vehicles account for 65.9% of the total sales
amount, whereas the sales of ground facilities and software development were 28.3 and 5.8%, respect-
ively. Nihon Koku Uchu Kogyokai (1998), pp. 148–149.
13. Drawing on relative gains theory, Michael Mastanduno examined America’s policymaking on selecting
the satellite industry. Mastanduno argues that, although the U.S. decision was to some extent compli-
cated by interest group meddling, the decision was heavily in uenced by the government ’s concern
about the asymmetries in gains from cooperation between two countries. That is, the U.S. governmen t
selected the satellite industry as a target because it believed the relationship between two countries at
that time would adversely affect the American satellite industry in the future. See Mastanduno (1991),
pp. 93–101.
14. Tsusho Sangyosho Uchu Sangyoka hen (1988), pp. 197–201.
15. In reality, various government ministries are committed to space-related industry, but by budgetary
standards, the major government agencies are NASDA (under STA), ISAS (under MOE), MITI, MPT,
and MOT. See Science and Technology Agency, Research and Development Bureau (1991), pp. 78–79.
16. The SAC’s guiding principles are well expressed in the ‘Fundamental Policy of Japan’s Space Develop-
ment’ (Choki Bijon). Another important policy guideline is the annual Space Developmen t Program
(Uchu Kaihatsu Keikaku). By publishing these documents, SAC oversees the Japanese space program in
a coordinated , consultative fashion among all parties involved . Wray (1991–92), p. 466.
17. Although scholars often disagree on the effect of this bifurcated approach, Alassdair McLean and
Michael Sheehan argue that the Japanese approach has been a positive asset throughou t its space
development process. See McLean and Sheehan (1992), pp. 68–77.
18. For the history of NASDA establishment, see Uchu Kaihatsu Jigyodan (1980).
19. NASDA is funded primarily by, and operates under the policy guidance of, the Science and Technology
Agency (STA), but also receives direction and funding from the Ministry of Transportation (MOT) and
the Ministry of Posts and Telecommunication s (MPT).
20. Aviation Week & Space Technology, 23 March 1992, p. 73.
21. On the MPT’s role in satellite communication s businesses, see Gershon and Kanayama (1995), pp. 217–
231.
22. MITI (1980).
23. Johnson-Frees e (1993), p. 73.
24. Wray (1991–92), p. 467.
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25. They include Mitsubishi Heavy Industries (MHI), Ishikawajima Harima Heavy Industries (IHI), NEC,
Nissan, Kawasaki Heavy Industries (KHI), Mitsubishi Electric (MELCO), Toshiba, Hitachi, Fujitsu, and
Nihon SDC. See Matsuura (1997), pp. 106–111. On NEC, see Nikkan Kogyo Shinbun, 22 December 1987.
On IHI, see IHI (1992), pp. 285–299, and IHI (1987).
26. Nihon Koku Uchu Kogyokai (1982).
27. For these rms’ technologica l expertise, see Komahashi (1989), pp. 86–241.
28. For these rms’ long presence in the space industry, see Takeuchi (1985), Do Kaisha Kaihatsu Honbu,
MELCO Research Institute (1986), Toshiba (1977), NEC (1987).
29. NEC was the rst Japanese rm engaged in satellite-related research in the 1950s and 1960s. Its earlier
work in telecommunications gave it a head start. By the late 1980s, NEC had achieved world leadership
in transponde r technology by integrating and developing its earlier research in radio applications, rocket
guidance, lasers, and microwave transmissions. NEC (1987), pp. 160–162.
30. As of 1989, when the con ict over satellites broke out, Japan’s satellite communication s business was
proceeding smoothly, even compared to that of the United States. Of the JC-SAT1’s sixty-four transpon-
ders, thirty-seven were contracted and twenty-two of Super Bird A’s thirty transponder s were leased, while
in the same period in the United States 380 of 600 transponder s were contracted . These comparable ratios
gave the Japanese companies cause for optimistic predictions. For example, Hiroshi Kamiya, president of
JC-SAT was quoted as saying, ‘We expect to make a pro t within three years. In ve years, we will clear
out our cumulative de cit and be able to pay a dividend ’. Tokyo Business Today, October 1989, p. 34.
31. Space and Technology Agency, Research and Development Bureau (1992), p. 35.
32. Richard Samuels, for example, argues that in formulating industrial policy the Japanese state has depended
upon the cooperation and preferences of private actors. See Samuels (1987), p. 2.
33. For a comparative study on U.S. and Japanese space policy, see Wells and Hastings (1991), pp. 233–256.
34. Ibid., p. 241.
35. Space Activities Commission (1989).
36. Author’s interview with NASDA of cial, Tokyo, Japan, 26 November 1998.
37. Nihon Uchu Foramu (1998), pp. 36–41.
38. Takeuchi (1985), pp. 149–151.
39. Johnson-Frees e (1993), p. 77. The only major exceptions were the loss of Toshiba in broadcasting satellite
works: BS-3A and BS-3B. When Toshiba’s previous broadcasting satellite, BS-2A, malfunctioned and did
not achieve its full operational capability, the Japanese governmen t awarded NEC the next developmen t
work of BS-3A and BS-3B. See JEI Report, no. 33B, 30 August 1991, pp. 8–9. The decision was really
an early sign of growing in uence of the primary user: NHK. On the malfunctioning of BS-2a and NHK’s
growing in uence in the space policy making, see Saito (1992), pp. 208–229.
40. Okimoto (1989), pp. 66–83.
41. On the VLSI Project, see Callon (1995).
42. Tilton (1996), p. 6. For cooperative—often collusive—relationships among rms in the construction
industry, see Woodall (1996).
43. Ronald Dore argues that rms form this relationship not only out of self-interest but also moral obligation.
See Dore (1986), p. 84.
44. The primary forum in which Japanese rms can articulate industry’s perspective is the Space Activities
Promotion Council of Keidanren, the in uential economic federation of Japanese rms. The Space
Activities Promotion Council has traditionally stressed the need for budget increases to ful ll projected
plans. For the Keidanren’s recent position toward the space industry, see Keidanren (1985).
45. In the early 1970s, the BS-1 project began as an initial partnership between the Japanese governmen t and
NHK. At the same time, NHK’s push for early import of U.S. satellites was also strong. See Gershon and
Kanayama (1995), p. 220.
46. For a detailed discussion of Super 301, see Bhagawati and Patrick (1990); Mastel (1996), pp. 11–25.
47. Prestowitz (1989), p. 59.
48. The policy of strategic reaction to the industrial policy activism of other government s is in keeping with
the logic and spirit of strategic trade policy. See Richardson (1990), p. 130.
49. Nature, 335, 29 September 1988, p. 387.
50. U.S. Senate Committee on Commerce, Science, and Transportation (1989), pp. 13–14.
51. The CS-4 was planned to be launched by the H-II rocket and to provide new capacity, especially for the
rapidly growing market in mobile communications . Japan Economic Journal, 17 February 1990, p. 3.
52. Nature, 22 February 1990, p. 685.
53. Japan Economic Journal, 1990, p. 3.
246 Authenticated
54. Nihon Keizai Shimbun, 20 January 1990.

55. Nihon Keizai Shimbun, 26 May 1989.
56. For a discussion of the U.S. position in these trade negotiations, see U.S. Senate Committee on
Commerce, Science, and Transportation (1989).
57. In fact, NTT had leased transponder s (combination transmitter responders) on the Hughes satellite.
58. JEI Report, no. 33B, 30 August 1991, pp. 8–9.
59. MPT had held back the license on the grounds that three companies were too many for Japan’s
immature satellite communication s market. JEI Report, 17 February 1990. Sony (one of the primary
owners of Satellite Japan) and Marubeni took advantage of U.S. pressure to push MPT to grant a
license. Nihon Keizai Shinbun, 30 January 1990.
60. He was quoted as saying that Japan would not have to aggravate the situation by competing with the
United States, when U.S. trade de cit with Japan rapidly grew. Nihon Keizai Shimbun, 18 October 1987.
61. Nihon Keizai Shimbun, 4 April 1991.
62. Nihon Keizai Shimbun, 28 March 1991.
65. The U.S. side was largely satis ed with the result of the negotiations, as evidenced in the U.S. trade
of cial’s remark that the agreement would present a signi cant setback to the Japanese commercial
satellite development plan. U.S. satellite companies in general also welcomed the result of the nego-
tiation, anticipating that they would signi cantly increase their sales in Japan. On the other hand, the
Japanese side expressed dissatisfaction. For example, an MPT of cial stated that ‘the result of the
negotiation was more severe than we had initially expected, because the agreement covered all commer-
cial satellites, not just communications satellites’. Nihon Keizai Shimbun, 29 March 1991.
66. The speci cations for the N-STAR satellites resemble those envisioned for Japan’s scrapped CS-4
project. JEI Report, 28 June 1991, p. 11.
67. The agreement consists of several exchange s of letters between USTR Carla Hills, Japanese Ambassador
to the United States Ryohei Murata, and NHI chairman Keji Shima.
68. The effect of trade con ict on satellite developmen t and marketing strategies had an impact on the other
industries as well. NASDA of cials worried about loss of payload s for the new H-II rocket, which was
scheduled for the rst launch in 1993. The satellites that NASDA had to give up would have been the
rst to be launched by the H-II. Nature, 344, 12 April 1990, p. 578.
69. This tendency was further strengthened when MITI, together with ISAS, announced that it would initiate
R&D on recovery-type capsule satellites for microgravity experiments in cooperation with Germany.
Nikkan Kogyo Shimbun, 9 June 1990.
70. Logsdon (2000), p. 208.
71. Aviation Week and Space Technology, 13 July 1992, pp. 47–51.
72. Tsusan Sangyosho Ucha Sankyoka hen (1988), pp. 39–178.
73. The number of newly established space foundations and corporations under the jurisdiction of MITI—
three in remote sensing satellite utilization, three in space utilization, and two in microgravity experi-
ments—demonstrates its emphasis on utilization of the space environment .
74. MPT’s focus on R&D included long-range space communications concept s and complex satellite
systems, and a pilot plan for promoting satellite utilization and advanced satellite communication
systems.
75. For various discussions about MPT’s rise as a policy ministry, see Nakano (1998), pp. 95–97.
76. Space Policy, 1990, p. 255. See also Johnson et al. (1998), p. 67.
77. Author’s interview with MPT of cial, Tokyo, Japan, 18 October 1998.
78. Nihon Keizai Shimbun, 15 February 1988.
79. MPT in general loosened its regulation in the broadcasting industry, thereby allowing numerous
companies to enter. Technologica l changes, such as advances in satellites and digital compression of
video signals, also facilitated entrance. On the technologica l impact on the MPT’s regulatory policy, see
Noble (2000).
80. Aviation Week & Space Technology, 23 March 1992, p. 73.
81. Space Activities Council of the Keidanren (1988), pp. 2–3.
82. Mastanduno (1991), p. 95. However, these cost comparisons are not necessarily de nitive because the
Japanese satellites were designed to carry out research purposes as well, rather than maximize commer-
cial ef ciency. For detailed discussions on this point, see McKnight (1989), p. 6.
Authenticated 247
Seungjoo Lee
83. In line with this policy shift, Japan has further strengthened its commitment to the International Space
Station (ISS) project since the agreement was reached . See Nomura (1995), p. 12.
84. Space Activities Commission (1994).
85. Space Activities Commission (1996), chapter 4.
86. Keizai Dantai Rengokai Hen (1996), pp. 115–116.
87. On the international strategic collaboration among space companies, see Williamson (1997), pp. 285–294.
88. Nihon Keizai Shimbun, 7 April 1990, and Nikkan Kogyo Shimbun, 5 June 1993.
89. Nikkan Kogyo Shimbun, 5 June 1990, and Nihon Uchu Foramu (1988), pp. 76, 84, 90, and 92.
91. The work-sharing has also been prevalent in the launch vehicle industry. A series of the Japanese
launch vehicles have been built by the concerted efforts of major competing players such as MHI,
Nissan Motors, IHI, and Kawasaki Heavy Industries. The H-II rocket, rst launched on 4 February 1994,
is the most recent example. MHI made the rst and second stage engines, Nissan Motors the booster, and
IHI the liquid propellant and supply systems. Nihon Uchu Foramu (1998), pp. 113–144.
92. NEC announced that it would attempt to jointly develop and bid for the next broadcasting satellites. Nihon
Keizai Shinbun, 28 March 1991.
93. Nihon Keizai Shinbun, 29 March 1991.
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Business and Politics

Volume 2, Issue 2 2000 Article 5

Autonomy or International Cooperation? The

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1369-5258/00/020225-26 Ó 2000 Taylor & Francis Ltd 225

nonationalism ’. In a technonationalis t agenda, therefore, Japan pursues national

companies. Its interests range from manufacturing satellites to licensing satellite

TABLE 1. Key actors in the satellite industry

Government actors Industry actors

Supplier User Supplier User

Applications satellite NASDA MPT (licensing MELCO—CS* NTT—CS

Notes: *CS: communications satellite; **BS: broadcasting satellite; ***GMS: geostationary

establishment of Japan Communication Satellite (Nihon Tsushin Eisei, or JC-

3. Pattern of interaction among key actors: autonomy versus commercial

Work-sharing system. Although R&D and procurement policies did play a

TABLE 2. Work-sharing system in the applications satellite

MELCO NEC Toshiba

Project Launch date Project Launch date Project Launch date

CS 1977/12 GMS 1977/2 BS 1978/4

forming research consortia, but limited cooperation to the R&D stage.40 A

MPT/MITI and the user institutions : countervailin g force of autonomy

FIGURE 1. Institutional structure in the applications satellite industry.

4. U.S.–Japan con icts in the satellite industry, 1989–92

In 1978, Japan established a policy of developing an indigenous

Contending issues: strategic targeting and preferential public procurement

The Japanese response

The result of the negotiatio n

Key actors’ changing interests under U.S. pressure

to MITI’s. MPT placed more emphasis on the development of autonomous

These diverging interests among the government actors spilled over to

5. Impact on the Japanese space industry

Changing dynamics of commercial interaction: from work-sharing to technol-

TABLE 3. Work-sharing system after 1993

Satellite Developer Launch date

ETS-VI Toshiba 1994/8

Source: Nihon Uchu Foramu, NASDA Note 1998

Also contributin g to the changes in the work-sharing system was Japanese

The problems of policy coordination were compounded by the lack of clear

54. Nihon Keizai Shimbun, 20 January 1990.

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Notes: CS: communications satellite; BS: broadcasting satellite; GMS: geostationary

4. U.S.–Japan con icts in the satellite industry, 1989–92