March 29, 2002

[interview] A Proposal for Public Fund Investment Schemes on the Swedish Model

Yuri Okina: A senior fellow of the Research Department of the Japan Research Institute Limited.

Okina graduated from Keio University's Economics Department in 1982 and finished her Masters in Business Administration in 1984. She joined the Bank of Japan in the same year and became a deputy chief researcher of the Research Department of the Japan Research Institute Limited in 1992. She has been incumbent since 2000. She worked concurrently as a visiting professor for the graduate school of Keio University from September of 2001 to March of 2002. She is an author of The Information Disclosure, The Japan's Financial System and The Financial Futurology etc.

The investment of public funds in Japan's financial institutions in 1999 protected depositors and temporarily stabilized the financial markets. However, this step postponed the resolution of its problems as a large number of banks still exist and they have still not implemented the necessary innovative changes in their operations. There are several intertwined reasons why the profitability of Japanese banks does not improve. In particular, there is a delay in structural transformation of the whole industry in Japan, the financial structure has an excessive number of banks, and the continuance of asset deflation.

In order to disentangle these difficulties, it is crucial that we accelerate the structural transformation of Japan's industry, improve bank profitability by creating innovative business models, and speed-up the disposal of non-performing loans. By practicing such measures, Japan's financial institutions will be reorganized and screened, and the excessive number of banks will be reduced.

As to the injection of public funds, exciting laws must be observed. However, those institutions that will receive public funds must be chosen carefully on the basis of their ability to survive and turn profits.

More specifically, taxpayers' money should be injected only in those banks whose financial soundness is reasonably assured without closing out their overseas operations in case of banks with positive shareholders' equity. As for those that are not sound, their operations should be limited domestically and the public funds should not be injected in them.

The lessons of 1999 tell us that when injecting public funds, it must be implemented on the premise that the bank can generate a sufficient return compared to risks associated, which means that banks must reform to earn large profits. The public funds should be injected as “capital” which can be utilized to absorb losses from disposal of non-performing loans. Moreover, clarification of management responsibility is another essential condition, where management responsible for bad financial results should resign. Shareholders should also take responsibility, and the bank management has to be reformed fundamentally.

投稿者 gnpo : 12:18 PM

[paper] The Pressing Need for Management Reform in Banks Rather than Public Capital Injections

Yuko Kawamoto: McKinsey Japan Senior Expert

Yuko Kawamoto is a graduate of Tokyo University's Literature Department School of Social Psychology, and holds a Master's Degree in Economics from Oxford University. Before joining McKinsey & Co.'s Japan office in 1988, she worked at the Bank of Tokyo (now Bank ofTokyo-Mitsubishi). She has published several books on banking, notably Banks Profit Revolution. She is a member of the Finance Service Agency Minister's discussion committee on the future vision of the Japanese financial system and administration in Japan. She is also a member of the Finance Service Agency Deliberation Council's Working Group, which was created to review the regulations governing capital asset ratios.

Currently another public investment of capital into Japanese banks is popularly being discussed in both the private and public sectors, but the question, "for what reason public capital will be injected?" or more simply stated, the original purpose of the capital injection has not been talked about. If the purpose of the public injection of capital into the banks is aimed at resolving the non-performing loan problems of the banks, then first and foremost the soundness of bank management should be made a priority. Similar to the way it became clear after the details of the 1999 public injection of capital into the banks, if there is no management reform to make the banks independent, then no matter how much capital you inject into the banks it will be a waste.

The Japanese banking sector as a whole is already in a situation of excess capital. For example the amount of capital the Japanese banks invest for profit is 3 times the amount of French banks and 10 times the amount of English banks. That in itself is a situation of excess capital, and if additional public capital was injected, the efficiency of the banking sector, as a whole, would drop a level.

If banks retreat from international affairs, that in itself would drop the capital adequacy requirements from 8% to 4%, and for large city banks this would give them access to trillions of yen in capital. In order to compress capital and break up over-banking, there are many options that should be tested including this type of domestication of banks.

The government, which through the capital injection of 1999 has become the banks' main shareholder, should strongly push bank management towards the realization of the management options stated above, before there is another injection of public funds.

Up until now, from the management side, there has been no indication that they have the clear goal of speeding up the process of disposing non-performing loans. Right now what is important for the banks is to show a clear commitment toward the goal of disposing of non-performing loans. They should commit to achieving the goals as management itself should decide the next course of action and make business results their goal using indicators such as the return on assets (ROA) and the return on earnings (ROE) as to show progress.

What the banks should do is: strengthen profitability by matching the cost of trust with fair interest loans, and decrease costs by revising services from the point of cost efficiency. If this can't be done and management reforms conclude without a serious effort, banks will continue to constantly depend on public capital.

It is true that by nature the Foreign Ministry's affairs do not involve vested interests, but it is only too naive of them to say that they have nothing to do with such interests. This naivete is the very cause of those faults of which the zokugiin, and other politicians such as Suzuki who work for their constituency rather than the nation, could take advantage. "Muneo House" is a good example. Foreign Ministry officials are inexperienced in bidding and that must have made them sitting ducks for zokugiin like Suzuki. The ministry officials were Suzuki's mere puppets in the recent scandals. Professor Hasegawa is concerned that if the Suzuki scandals will not be thoroughly investigated, similar incidents will certainly occur in the future.

投稿者 gnpo : 12:16 PM

[paper] Flawed Logic Destabilizing the World Financial System

Warren B. Mosler

A founder and principal of III Associates and III Offshore Advisors, Prior to starting III Associates in 1982. Also a director and majority shareholder of Enterprise National Bank, Systems and Services Technologies, and Consulier Engineering. Frequently writing and lecturing on macro economics, monetary policy and money. He is the author of Soft Currency Economics, West Palm Beach, 1994 and numerous other papers.

Repeated downgrades of Japan by the ratings agencies due to flawed logic have been destabilizing both Japan and the financial world in general. Their monumental error can be traced to a lack of understanding the operational realities of a Government that issues its own currency.

For the Government of Japan, payment in yen, its currency if issue, is a simple matter of crediting a member bank account at the BOJ (Bank of Japan). There is no inherent operational constraint for this process. Simply stated, Government checks (payable in yen) will not bounce. The BOJ has the ABILITY to clear any MOF check for ANY size, simply by adding a credit balance to the member bank account in question. Yes, the BOJ could be UNWILLING to clear ANY check, but that is an entirely different matter than being UNABLE to credit an account. Operationally, concepts of the BOJ not having 'sufficient funds' to credit member accounts are functionally inapplicable.

As a point of logic, the concept of ABILITY to pay being inherently revenue constrained is not applicable to the issuer of a currency. Any such constraints are necessarily self-imposed (including various 'no overdraft' legislation in some countries for the Treasury at the Central Bank). The issuer can always make payment of its currency by crediting the appropriate account or by issuing actual paper currency if demanded by the counter party.

An extreme example is Russia in August 1998. The ruble was convertible into $US at the Russian Central Bank at the rate of 6.45 rubles per $US. The Russian government, desirous of maintaining this fixed exchange rate policy, was limited in its WILLINGNESS to pay by its holdings of $US reserves, since even at very high interest rates holders of rubles desired to exchange them for $US at the Russian Central Bank. Facing declining $US reserves, and unable to obtain additional reserves in international markets, convertibility was suspended around mid August, and the Russian Central Bank has no choice but to allow the ruble to float.

All throughout this process, the Russian Government had the ABILITY to pay in rubles. However, due to its choice of fixing the exchange rate at level above 'market levels' it was not, in mid August, WILLING to make payments in rubles. In fact, even after floating the ruble, when payment could have been made without losing reserves, the Russian Government, which included the Treasury and Central Bank, continued to be UNWILLING to make payments in rubles when due, both domestically and internationally. It defaulted on ruble payment BY CHOICE, as it always possessed the ABILITY to pay simply by crediting the appropriate accounts with rubles at the Central Bank.

Why Russia made this choice is the subject of much debate. However, there is no debate over the fact that Russia had the ABILITY to meet its notional ruble obligations but was UNWILLING to pay and instead CHOSE to default.

Note that even Turkey, with lira debt in quadrillions, interest rates in the neighborhood of 100%, annual currency depreciation in the neighborhood of 50%, little 'faith' in government, and only inflation keeping the debt to gdp ratio from rising, has never missed a lira payment and never had a lira 'funding crisis.' Turkey has had problems with its $US debt, but not with its ability to spend lira. Government spending of lira is limited only by the desire to purchase what happens to be offered for sale. It is not and cannot be 'revenue constrained.' Operationally, Turkey has the same unlimited ABILITY to pay in its own currency as does Japan, the US, or any other issuer of its own currency.

The Turkish example, and many others, makes it quite obvious that ABILITY to pay in local currency is, in practice as well as in theory unlimited. 'Deteriorating debt ratios' and the like do not inhibit a sovereign's ABILITY to pay in its currency of issue.

So why have the ratings agencies implied that default risk for holders of Japan's yen denominated debt has increased to the point of deserving a downgrade? Do they understand that ABILITY to pay is beyond question, and therefore are basing their downgrade on the premise that Japan may at some point be UNWILLING to pay? If so, they have never mentioned that in their country reports.
A few years back, due to political disputes, the US Congress decided to default on US Government debt. The only reason the US Government did not default was because Treasury Secretary Robert Rubin was able to make payment from an account balance undisclosed to Congress. The US Government clearly showed an UNWILLINGNESS to pay that Japan has NEVER shown or even hinted at.

Furthermore, again unlike Japan, the US continues this behavior just about every time the self imposed US 'debt ceiling' is about to be breached. And yet the ratings agencies have never even considered downgrading the US on WILLINGNESS to pay.

Therefore, one can only conclude 1) Japan has been downgraded on ABILITY to pay, and 2) The ratings agencies logic is flawed. In a world where currently there are serious 'real' financial problems to address, the ratings agencies have introduced a 'contrived' financial problem of substantial magnitude, as many regulations regarding the holdings of securities specify ratings assigned by the leading ratings agencies. Governments have chosen to rely on the ratings agencies for credit analysis, and downgrades often compel banks, insurance companies, pension plans, and other publicly regulated institutions to liquidate the securities in question.

Japan's yen denominated debt qualifies for a AAA rating. ABILITY to pay is beyond question. WILLINGNESS to pay has never been questioned, even by the agencies engaged in recent downgrades. The destabilizing downgrades are the result of flawed logic.

投稿者 gnpo : 09:43 AM

March 16, 2002

[interview] Economic reform in Japan and the role of journalism and public opinion

Heizo Takenaka: State minister in charge of economic and fiscal polic

Born in 1951; Ph.D in Economics from Osaka University; Takenaka joined the Japan Development Bank in 1973 and later worked at the Ministry of Finance's Institute of Fiscal and Monetary Policy as a senior economist, and Harvard University as a Visiting Associate Professor. He then became a Professor in the Faculty of Policy Management at Keio University. He has been submitting policy proposals as a member of the IT Strategy Headquarters and the Economic Strategy Council and working actively in a wide range of fields including TV programs and magazines

At the end of February, the government announced a comprehensive anti-deflationary package. From an early stage, Minister Takenaka had been appealing for the need for anti-deflationary measures, but he says that it took time to gain the people's understanding. This is because it is widely understood by the public that there is both good and bad deflation. An opinion that states that deflation is not bad clearly confuses the prevailing price with the relative price. When the price declines as a whole, the real amount of liabilities increases; and deflation can be a large burden for companies and households that are trying to adjust their balance sheets.
His opinion has now developed into the social role of journalism and public opinion. Although Minister Takenaka thinks it is inevitable for a fourth estate to criticize the government, it would be no more than ridicule without constructive development unless the discussion could be based upon the common knowledge of policymaking.

One of the frequently cited examples is a comparison between the Koizumi and Thatcher Administrations, or the Koizumi and Reagan Administrations. This comparison is usually used to point out the lack of speed for "Koizumi Reforms." However, Minister Takenaka claims that this is not true. It was 1984 when the Thatcher Administration, installed in 1979, privatized British Airways; and the Reagan Administration implemented the complete deregulation of airfares in its third year of administration. On the other hand, the Koizumi administration privatized or abolished no less than 64 government-backed corporations (out of the 160 in total) within one year.

In order to further speed up the reform, Minister Takenaka names tax reform as the largest issue of this year. Canons of taxation had hitherto been "fair, indifferent and simple," but Minister Takenaka thinks this should be vitalized. Taxation is a subsystem of an economy, and it exists to improve the economy. He says that he hopes to promote the tax reform based on such principles as keeping a balance between revenue and expenditure and maintaining an open forum for discussions.

投稿者 gnpo : 07:39 PM

[talk] What does 'anti- deflation policy' really mean?

Robert Feldman: Chief Economist, Morgan Stanley Securities

Born in 1953, he received his undergraduate degree from Yale University, and his Ph.D. in economics from MIT. He worked at the NY Federal Reserve Bank and the IMF before attaining his present position as chief economist of Morgan Stanley Securities. His publications include "Nihon no Suijyaku" ( roughly translated as “Debilitating Japan”) and “Nihon no Saiki"( roughly translated as "Recovery of Japan”). He won the first place at the All-Asia Research Team Poll conducted by the magazine called Institutional Investor.

Jesper Koll: Chief Economist, Merrill Lynch Japan Securities

Jesper Koll holds a master's degree from the Johns Hopkins University, SAIS and graduated from the Lester B Pearson College of the Pacific in 1980. Before becoming the Chief Economist for Merrill Lynch, his current position, he was a Managing Director of Tiger Management L.L.C. and he was the Chief Economist and Head of Economic and Market Research for J.P. Morgan in Tokyo. Koll joined Merrill Lynch in 1999. He has been serving on several Japanese government advisory councils, including the MITI committee on "Big Bang 2001" Japan' financial system reform." Recently, he was chosen as a member of a task force within the Economic Planning Agency that reassesses the viability of the economic indicators now in use. His major published work includes Towards a New Japanese Golden Age.

Yasuyoshi Masuda: Senior Economist, Fuji Research Institute Corporation

Born in 1958 in Tokyo, he graduated Kyoto University's Faculty of Economics, and was at the Research Bureau of the Fuji Bank and the Fuji Research Institute Corporation (from 1988) as the head of the London office before attaining his current position (in April 2001). In April 2002 he will be appointed as a professor in the Faculty of Economics at Toyo University. His publications include "Tettei Yosoku Nihon Keizai Korekara 10 Nen" (roughly translated as "A Thorough Prediction of the Japanese Economy over the Next Ten Years") and "Kinyu-Kaikoku"( roughly translated as "Opening Japan's Financial System")

The "comprehensive anti-deflation measures" announced by the Japanese government served as a starting point for their discussions.
Mr. Feldman said the biggest point is whether or not the Financial Services Agency will thoroughly implement the special inspection of banks.
Prime Minister Koizumi endorsed strict bank inspections because the agency has been known for lax inspections.
The agency cannot conduct strict inspections because there are many areas that have vague regulations and are therefore left to the agency's discretion.

Due to this fact, banks do not have clear criteria by which they can categorize debtors and they cannot dispose of their bad loans more rapidly.

Mr. Feldman pointed out that objective quantitative criteria such as shareholders' capital over total assets should be established in order to solve these problems.

Mr. Masuda is concerned that the government is now strongly calling for anti-deflationary measures. Initially, the Koizumi cabinet called for sacrifices in enduring the pains caused by deflationary pressures, such as a temporary increase in the number of bankruptcies and/or the unemployment rate, because Japan's economic recovery could not be achieved without this period of suffering. This initial principle of policy now seems to have changed.

He asserts that the government should maintain its principle of policy, which means that as long as many Japanese companies possess a large amount of excessive debt, Japan cannot fundamentally settle the problem of non-performing loans and other related issues.

Mr. Koll stated that the government has not regressed, which is good news for the people, because the Koizumi cabinet has neither increased its fiscal spending nor postponed again the starting date of a pay-off system.
Mr. Koll also maintained that taxation reforms are important to implement real anti-deflationary measures.

He indicated that the cornerstone of cabinet policy is the philosophy of taxation reforms, which are to be made public this June.
Because the current taxation system includes various kinds of tax exemptions and deductions, 70% of Japanese firms do not have to pay taxes, while heavy taxes are levied on the remainder.

The significant points of the philosophy embedded in tax reforms are how it is amended and who is given what kind of incentives.
All the three discussants agreed that the government must brave declining approval ratings and the people should again put pressure on the government to carry out reforms.

投稿者 gnpo : 07:34 PM

[talk] Second Round Table Meeting ―Evaluation of Koizumi Scheme of Reform among Foreign Entrepreneurs―

James Ian Yellowlees Ph.D.: CEO of Global Daigaku.com Inc.

James Yellowlees was born in Canada in 1957. He took a B.A. in East Asia studies at the University of Toronto, and a Ph.D. in Modern Japanese Politics and Economics at Tokyo University. He served as a producer/director for Canadian Broadcasting Corporation Japan Branch, and a director in the Office of the Agent General for British Columbia in Tokyo, before becoming the President of Pacifica Consultants, which is a company providing business-consulting services for the Asian markets, especially Japan, in 1995. His major published work includes Cross-Cultural Issues, Kokusaika Seyo..

Nicholas E. Benes: President of JTP Corporation

Nicholas E. Benes has a B.A. in Political Science from Stanford University, and received his MBA and law degree (JD) from UCLA. He worked for JP Morgan before becoming the President of JTP Corporation in 1997, a boutique investment bank specializing in M&A advice and complex financial transactions. He has written frequently for the editorial page of the Asian Wall Street Journal and other newspapers and magazines

Allen Minor: President of SunBridge Corp.

Allen Miner was born in the United States. He joined Oracle Corporation in 1986 after graduating from Brigham Young University. He was dispatched to Japan a year later as the Representative of Oracle Japan. Miner returned to Oracle's U.S. headquarters in 1996 as a Vice President in charge of Linux/open source. In 1999, he founded SunBridge K.K., a net venture supporting company in Japan. He established Sun Bridge Venture Habitat in April 2000.

Chairman:

Jesper Koll: Chief Economist at Merrill Lynch Japan

Jesper Koll holds a master's degree from the Johns Hopkins University, SAIS and graduated from the Lester B Pearson College of the Pacific in 1980. Before becoming the Chief Economist for Merrill Lynch, his current position, he was a Managing Director of Tiger Management L.L.C. and he was the Chief Economist and Head of Economic and Market Research for J.P. Morgan in Tokyo. Koll joined Merrill Lynch in 1999. He has been serving on several Japanese government advisory councils, including the MITI committee on "Big Bang 2001" Japan' financial system reform." Recently, he was chosen as a member of a task force within the Economic Planning Agency that reassesses the viability of the economic indicators now in use. His major published work includes Towards a New Japanese Golden Age.

We discussed the evaluation of the Koizumi Reforms with the above three foreign managers in Japan, all of whom are members of American Chamber of Commerce in Japan. These three executives each have experience founding a company in Japan and are very knowledgeable about the Japanese economy.
As for the basic policy of the reform being put forward by Prime Minister Koizumi, all three of them evaluated it positively to a certain degree. However, each of them expressed dissatisfaction about the current state, in that there have been no specific achievements in terms of reform. They were all clearly against the attitude of the government and banks: trying to extend the life of large companies that are in excessive debt.

This is a discussion with Mr. Benes, who operates a consulting company specializing in M&A and investment in Japan, Mr. Yellowlees, who operates IT-related ventures, and Mr. Miner.

While the above three individuals value the basic policy of the Koizumi Reforms, Mr. Benes points out that Prime Minister Koizumi lost his chance to carry out reform with the sharp decline of his approval ratings. On the other hand, Mr. Miner thinks that the fundamental reason for the lack of speed in reform is likely not a problem in the ability of Prime Minister Koizumi alone, but rather the political system of Japan, where the base of political power of the prime minister is always insecure.

Mr. Yellowlees raises the point that, although the current Cabinet members talk only about macroeconomics, there is no one who has detailed knowledge on the actual state of the economy, so it may be impossible to put forward effective economic policies. As for the disposal of the massive amount of bad loans, only measures to extend the life of large companies with excessive debt stand out, which takes away the opportunity of growth from new businesses. He warns that the government must speed up its venture supporting policies, including those related to taxation, or international competitiveness against Asian countries will only decline.

Mr. Benes insists that a substantial and uniform tax reduction, and not the conventional limited tax reduction measures, will be required in order to vitalize industries. He says that there are too many loopholes in the current Japanese tax legislation, and this generates a sense of unfairness and decline in tax revenues. Mr. Benes stresses the need for the Japanese government to introduce a substantial and uniform tax reduction, and at the same time to strengthen tax enforcement in order to realize taxation that takes little from many. His opinion is that although substantial uniform tax reduction is expected to generate strong opposition from bureaucrats, it would have a great effect on recovering the approval ratings, which would make it possible to defeat the bureaucrat-led system.

Mr. Miner says the government should utilize the cardinal rule for business in reform implementation, which is "selection and focus." In other words, select only one plan which Prime Minister Koizumi himself most keenly wishes to implement, and bring about a specific achievement by focusing on this plan. If he can show one successful case, it will lead to the second and third successes in the reforms.

投稿者 gnpo : 07:26 PM

[talk] A Politicians' round-table discussion ―Is it Possible to Create a Government-Led Political Decision-Making System?―

Yasunori Sone: Professor

Born in 1948. He is a Professor of Political Science and Governance at Keio University Graduate School of Media and Governance. His current research focuses on the relationship between the government and market in the policy-making process. Professor Sone's numerous publications include Ketteino Seiji Keizaigaku (The Political Economy of Decision-making), Gendaino Seiji Riron (Theories of Contemporary Political Analysis), and the co-edited volume, Political Dynamics in Contemporary Japan (Cornell University Press). BA, MA from Keio University. Visiting fellowships at Yale University (1974-76), The Australian National University (1983-4), The University of Essex (1984), and Harvard University (1998-99).

Ichita Yamamoto: Member, House of Councilors

He was born in 1958, graduated from the Law Department of Chuo University and received his master's degree in international relations from Georgetown University. After leaving the Japan International Cooperation Agency (JICA), he has been a member of the House of Councilors since 1995. He was the Liberal Democratic Party's Deputy Secretary-General in the House of Councilors and the Director of the Public Speeches Division before he was assigned as the Parliamentary Undersecretary of Foreign Affairs in the second Obuchi Cabinet in 1999. His current positions in the LDP include member of the National Defense and Foreign Affairs Committee in the House of Councilors, Director of Research Commission on International Affairs, Deputy Director of Foreign Affairs Division and Deputy Director of Youth Division.

Takumi Nemoto: Member, House of Representatives

The government-led reform and emergency measures plan released on March 13 by the National Vision Project Headquarters is designed to build a Cabinet led, political decision-making system to enforce the leadership of the Prime Minister and his functions. One important concrete example is the proposal to change the rule of voting on policies in the Party policy committee from unanimity to majority rule. Mr. Nemoto and Mr. Yamamoto say that it is necessary to integrate the ruling party and the government, and develop rules that will help policies flow from the party to the government, especially the elimination of prior review. On the other hand, Prof. Sone suggests a "parallel review" system in which there would be a simultaneous review by the ruling party and the government.

The government-led reform and emergency measures plan released on March 13 by the National Vision Project Headquarters is designed to build a Cabinet led, political decision-making system to enforce the leadership of the Prime Minister and his functions. One important concrete example is the proposal to change the rule of voting on policies in the Party policy committee from unanimity to majority rule. Mr. Nemoto and Mr. Yamamoto say that it is necessary to integrate the ruling party and the government, and develop rules that will help policies flow from the party to the government, especially the elimination of prior review. On the other hand, Prof. Sone suggests a "parallel review" system in which there would be a simultaneous review by the ruling party and the government.

The discussions on how the government should act to lead decision-making reform led to a discussion of the scandals involving House of Representatives member Mr. Muneo Suzuki. It is suspected that he shifted national contributions to African and Russian ODA to his own funds, gave ODA-related preferential treatment to some construction companies that maintain special relations with him, and that he exerted inappropriate pressure on bureaucrats of the Ministry of Foreign Affairs. There is a view that Mr. Suzuki is a typical example of the "petitioner type politician," referring to old style politicians who pressure public officials in the narrow interests of the voters of his or her electoral district. At the same time, it can be thought that this is only a part of a structural problem involving a reciprocal dependent relationship between the bureaucracy and the private sector that has continued since the war. There are bureaucrats who have to repay politicians for passing bills on the one side, and there are assemblymen who cannot make policy without bureaucrats' assistance on the other. We cannot expect to radically reform the behavior of politicians without changing this situation. Politicians must be completely independent of bureaucrats. We must immediately create a system in which politicians have real authority to decide policy and bear responsibility for those decisions and the role of bureaucrats is limited to submitting policy options to lawmakers.

The situation of assemblyman Mr. Koichi Kato, in which Mr. Kato's secretary illegally created political funds through tax evasion, highlighted the old system that requires huge amounts of money to run for a general election. But the exposure of this problem may also be a sign that the awareness of the electorate has changed, and that politicians will not be able to buy their voters' approval. The Prime Minister must clearly indicate his intention that the government will prosecute the cases of Mr. Suzuki and Mr. Kato to show that it is committed to political reform and ending the old ways.

投稿者 gnpo : 12:12 PM

[talk] "Breaking Down Cozy Relations between Politicians and Bureaucrats"

Mr. Michio Muramatsu: Professor of Law, Kyoto University;

Born in 1940 in Shizuoka Prefecture, he graduated in 1962 from the Department of Law, Kyoto University and has been a professor in that department since 1976. In 1981 he was a visiting professor at Cornell University and in 1988 a visiting professor of St. Antonys College, Oxford University. Among his works are "Post-war Bureaucracy In Japan, which won the Suntory Award, "Local Government", "Japanese Public Administration" and "A Strategy of Bubble Economy In Japan"

Mr. Shinji Fukukawa: Manager of the Research Institute of Dentsu Inc.

Born in 1932, he graduated in 1955 from the Law Department of the University of Tokyo. In 1955 he entered the Ministry of International Trade and Industry (currently the Ministry of Economy, Trade and Industry) and became the administrative vice-minister. In the meantime, he served as a Private Secretary to the Prime Minister.In 1988 he left MITI and in 1994 took the present position via Vice President and Vice-Chairman of Kobe Steel Co, Ltd. Concurrently, served as together with the adviser to Dentsu Inc. Currently, he is a member of the Research Committee of Resources and Energy (the Ministry of Economy, Trade and Industry) and a member of the govemment's deliberative council. His works include 21 Century: Japan's Choice and Age of Information Technology: Idea of Successes.

The issue of Muneo Suzuki cannot simply be resolved by removing him because it is a structural issue (Muramatsu). In order to resolve this structural issue between politics and administration, leaders must first "create a consensus as to what is the role of politics and what is the role of administration" (Fukukawa).

Politicians are elected in local areas, but that doesn't necessarily mean that they should always represent the interests of the local areas from which they are elected. Nevertheless, they tend to take actions in favor of their own constituencies because that is their electoral base. That is the reason why politicians interfere in matters such as spending on public works. It is through these actions that they will continue to be elected.

On the other hand, bureaucrats depend upon the power of members of the ruling party when presenting the budget. Hence, there is a mutual dependence, making it difficult for bureaucrats to reject the requests of the politicians upon which they depend. A government-led political decision-making system is immediately required. Under this system, the head office on state strategy of the LDP would propose that the leaders of the LDP should have administrative roles as ministers, vice ministers, or parliamentary vice ministers. However, if the current mutual dependence remains intact, and if influential people work in the government, they will have the authority to implement and allocate budgets, risking a further compounding of relations between bureaucrats and politicians.

In order to avoid this risk, fundamental policies and the management of the country, treaties, budget and laws are decided by politics. It is the administration which should implement that which is decided by politics. In this way the roles of politics and administration are made clear. Furthermore, politics should not interfere in the administration for its impartial, fair and efficient management. (Fukukawa). It is of fundamental importance that these distinctions be made real. In addition, "people evaluate politicians on what policies they propose" (Fukukawa). To change politicians' consciousness is also necessary. Unless the mental attitude of politicians toward these distinctions changes and a greater understanding is created, the structural issue of politicians' and bureaucrats' roles will not be resolved. To check whether politics and administration work well on this basis, "it will be important to have continued information disclosure and evaluation of policies" (Muramatsu). When the distinction between the roles and behaviors of politicians and bureaucrats takes root as part of the overall cleanup of society, the attitudes of politicians and bureaucrats will significantly change.

投稿者 gnpo : 12:09 PM

[talk] Reviewing the Bureaucratic Policy Decision-Making System ---The Role of Policy Aides---

MShigeru Satake: Policy Aide for Sayuri Kamata, Member of the House of Representatives
Koji Ogata: Polcy Aide for Takaichi Sanae, Member of the House of Representatives
Takaaki Sasaki: Researcher, Tokyo Foundation
Yutaka Matsuzaki: Secretary for Koji Yasuoka, Member of the House of Representatives

The mutual dependence between politicians and bureaucrats has been highlighted since issues regarding Diet Member Muneo Suzuki arose. The four policy aides who joined this round table discussion all agree that adhesion between politicians and bureaucrats has been constantly observed.

Even when develop policies, the situation where policy aides should naturally exert their abilities, policy aides often ask bureaucrats to perform the work, unless they have exceptional expertise in that area. Meaningful policy discussions should take place in Committees, but they are often no more than a venue where lobbyist-politicians look after their own interests. Therefore, the policymaking system does not function well.
While it is expected that Prime Minister Koizumi, with his strong leadership, will bring forward changes, he so far still seems to be waiting and watching the moves of the conventional factions. During this period, a suspicion arose that Kiyomi Tsujimoto, Member of the House of Representatives, might have unfairly diverted the allowances for her policy aide, resulting in her resignation from the Diet. Tsujimoto claimed that her aide advised her over the phone, but Mr. Sasaki concern that the role of the policy aide is underestimated here, and this incident may foster the idea that the system of policy aides should be eliminated. It has become apparent that allowances for policy aides are often pocketed, and participants of the round table discussion were in unanimous agreement that this is often the case.

While there is an opinion that salaries for policy aides are too high when compared with their function, Mr. Matuzaki asserts that one should not focus only on the negative aspects, but should revise the salary level for policy aides in accordance with their abilities and achievements.

The essence of the problem is whether the system allows political aides to perform their expected role in policy planning.

While Mr. Ogata insists that the absolute numbers of the policy aides are insufficient, Mr. Satake argues that in order to improve the current situation, quality is as important as quantity. The current "training system" is based on a requirement of 10 years experience as a secretary to become a policy aide. While the discussion has centered on such measures as a "pool system" and the elimination of policy aides, which would lead to an increase in the number of secretaries as working staff, no one is addressing methods aimed to improve the quality of policies. Everyone agreed that the time is right to begin the discussion of how to increase the quality of policies.

投稿者 gnpo : 12:06 PM

[paper] Article by Sir Hugh Cortazzi for Genron

Hugh Cortazzi: The former English Ambassador to Japan

Born In 1924. After serving in the Royal Air Force, he joined the Foreign and Commonwealth Office In 1949 and served as the Ambassador to Japan from 1980 to 1984. After leaving the Foreign and Commonwealth Office, he served as the Chairperson of the Japan Society In London. His major publications include "Higashi no shimaguni, Nishi no shimaguni"(The eastern Island, The western Island), and "Nichiei no aida de ---Hugh Cortazzi kaikkoroku" (Between Japan and the Great Britain --- the memories of Hugh Cortazzi). He continues to contribute many articles to newspapers and magazines.

Is the Japanese economy in terminal decline?

The general view in London on the future prospects for the Japanese economy remains gloomy despite the recent recovery in the Japanese stock market and in the yen. It is not yet clear that there is the political will to take the necessary action before the situation gets worse. In the longer term the problems of a declining population and an ageing society will make solutions even more difficult. But if determined action is now taken Japan's position can be ameliorated. Pessimists should not forget Japan's achievements not least in technology.
As interest in Japan declines Europeans are focussing more on China with its huge potential market. This is a mistake not least because such Europeans underestimate the huge problems faced by China in developing an effective market economy under a one party dictatorial regime. Political stability in China is not guaranteed.
In the bubble years the talk was of Japan as "number one' and of the United States as being in decline. Now the pendulum has swung back and Japan is seen as ailing. History teaches us that no country has remained dominant for very long except the Roman Empire, which lasted for many centuries. It is by no means certain that the US economy can maintain its supremacy over centuries but in my life time it seems unlikely to be replaced as the engine of economic growth by Europe, Japan or for that matter China.

Many Japanese can't grasp reality.

It is difficult for the casual visitor to Japan to perceive and understand the deep-seated problems facing the economy. Superficially Japan looks prosperous. The shops are full and people are still buying luxury goods while food is wasted in large quantities. Trains are packed and Japan has one of the best and most efficient train and underground systems in the world. We in Britain are envious; our trains are often late and the London underground is a disgrace, but we must remember that praise was heaped before the Second World War on Mussolini's Italy where it was said that the trains ran on time. The pre-war Italian economy, dominated by a fascist ideology, had serious weaknesses. Unfortunately many Japanese, currently enjoying a comfortable standard of living, fail to grasp the realities below the surface and remain complacent about Japan's difficulties.
British people envy Japanese superior engineering and infrastructure developments with so many new bridges, tunnels and roads, but they do not envy the despoiling of the Japanese countryside and the environment by huge swathes of concrete. According to a recent book by Alex Kerr ("Dogs and Demons: Tales from the Dark Side of Japan", New York 2001) sixty percent of Japan's coastline is now covered in concrete, mainly tetrapods, while the river bureau has damned or diverted all but three of Japan's 113 major rivers. 2,800 dams have been built and 500 new ones are planned. Ten per cent of Japan's workforce is dependent on construction work. Is all this contributing to Japan's quality of life? The answer must be "only marginally'. More important will these projects ever yield an economic return to the savers who have funded them through the Fiscal Investment and Loan Programme (FILP)? This seems very unlikely at least for decades to come.
The top agenda is significant political reform
I see no simple and quick solution to any of Japan's economic problems. Prime Minister Koizumi needs to tackle a vast range of problems. At the top of his list in my view should be significant and far-reaching reforms of the political system. Among the political reforms, which I think are essential, are the following.
Firstly the imbalance in the value of a vote in urban and rural constituencies must be rectified. It may not be possible to ensure exact equality but instead of a ratio of over two to one the immediate aim should be to bring the ratio down to no more than one to one and a quarter. This may well mean amalgamating some prefectures. This seems desirable in any case to cut out wasteful duplication and bureaucracy. Unless such a reform is implemented the urban population, on whom growth increasingly depends, will lose out to the pampered farming communities whose agricultural products are protected against foreign competition and whose high prices keep the cost of living high, thus reducing Japan’s overall ability to compete.
Secondly the role and powers of the zokugiin must be greatly reduced. This could be done by making it illegal for lobby groups to make political contributions and by ensuring that all donations to political parties and organizations over a limited amount are publicised. At the same time all contacts by members of either house of the Diet with bureaucrats should be reported to the Ministers in charge of the departments and the records of all such contacts should be open to scrutiny by the media and by interested parties. As politicians may deny what they are recorded as having said meetings with politicians may have to be tape-recorded.
Factions, especially those within the Liberal Democratic Party (LDP), should be effectively abolished. In theory they have been abolished on a number of occasions but this has never been achieved in practice. The factions exist because they are a useful way of channelling funds to individual members of the Diet to cover election and other expenses. One way to curb their power would be to set more stringent limits on the amount which candidates can spend in elections and decrease the number of multimember constituencies where there are too many electors.

What is necessary to increase public interest?

Mr Koizumi was absolutely right to insist on appointing members to his cabinet on the basis of ability and not because they were nominated by factions on the basis of "it's my turn now' like "kawari-banko' among children waiting for their turn on the swings. If Ministers are to be more than figureheads, who do the bidding of their bureaucrats, and develop their own policies they need to stay in their posts for considerably longer than the year or so, which has been the norm in the past.
More must be done to increase public interest in elections and the voting rate. There is no easy answer to this problem, which exists in other countries including Britain. But a prerequisite is to raise the prestige of politics and politicians. This means that political sleaze and corruption have to be firmly eradicated and politicians involved in such practices expelled from their party and in criminal cases expelled from the Diet. Politicians must be taught that they will lose their seats if they are involved in corrupt practices. They also ought to be forced to recognize that humility, including a willingness to admit when mistakes have been made, and not arrogance will be more likely to ensure their re-election.
In every parliamentary democracy it is essential that the governing party or parties should be held to account for their actions by effective parliamentary procedures and a courageous press. In Japan the kisha club system is an inhibiting factor. Journalists know that if they consistently report unfavourably on a certain department they are likely to find their sources of news curtailed. The system needs to be overhauled and liberalised. However good parliamentary procedures and media scrutiny are, they are no substitute for an effective parliamentary opposition capable of forming an alternative government. Unfortunately, unlike Britain where in general elections the governing party may lose its mandate and be replaced by the main opposition party, Japan has consistently lacked a credible opposition party, capable of taking over the reins of government, and has accordingly had to live under one party rule for over half a century. The LDP not surprisingly often seems to be complacent and unwilling to listen to public opinion.
Prime Minister Koizumi may retort that these suggestions for political reform are all very well in principle, but they are simply not practical politics in Japan today. Perhaps so, but it would be a step forward if the Prime Minister were to set these principles as his targets and reiterate his determination to achieve them in due course.
The point of view charged with the reform of the Civil Srvice.
The Japanese Civil Service also requires reform. Political corruption has bred bureaucratic corruption. The essential task of the Civil Service is to give informed advice to Ministers and make sensible recommendations on policies. Ministers must make the decisions and be prepared to defend their decisions personally in the Diet and with the media. Civil servants must then do their best to implement policies agreed at the political level. In the past Japan's senior bureaucrats consisted of an elite corps of highly intelligent individuals. Unfortunately, in the absence of an effective and incorruptible political leadership and constantly changing Ministers with little knowledge of the issues facing their ministries, they began to see themselves as the rulers rather than the servants. This situation is changing as a result of numerous scandals.
But while it may be popular to prick the bubble of civil service arrogance the fall in morale in the civil service, which is so apparent today, can be equally harmful to good government. Civil servants constantly criticised and bullied by politicians will not and cannot perform to the best of their abilities. A better balance needs to be achieved by guidance from the top.

How do they overcome the economic problem facing Japan ?

All the economic issues facing Japan today are interrelated and a solution to one problem will not mean that Japan is on the way to recovery, although even a few problems solved would constitute steps in the right direction. The independence of the Bank of Japan needs to be upheld if monetary policy is not to be subject to the vagaries of politics. Current political pressures on the Bank of Japan to set an inflationary target are, I think, unwise and the Bank's refusal to give way on this point is understandable not only to preserve its independence but also on policy grounds. Deliberately induced inflation could be difficult to stop. The "Latin American solution' of run-away inflation may succeed in wiping out indebtedness but it would destroy Japanese savings and condemn Japan's ageing population to penury and misery. It is also difficult to see how at this stage a limited inflation target of say two per cent could be achieved. The Japanese money supply with practically zero interest rates cannot be described as inadequate. The problem seems to lie in the lack of demand and above all confidence that deflation is being halted. Confidence will only return when it is apparent to Japanese people that reforms are being implemented and recovery is on the way.
Some have argued that Japan can lever itself out of deflation by allowing or forcing a decline in the value of the yen. Apart from the fact that lasting changes in exchange rates are dependent on market forces it is most unlikely that a lower yen would lead to a significant increase in growth. Exporting firms would benefit but because Japanese costs are so high more and more Japanese products are being manufactured abroad and this would reduce any benefit to Japan from an increase in Japanese exports. A significant decline in the value of the yen against the dollar might, according to some economists, lead in due course to up to one per cent increase in growth, but it would certainly increase trade friction with the USA which has in any case grown as Japanese demand has weakened and the US economy has suffered in the aftermath of the September 11 incidents.

Proceeding with banking management and disposal of non-performing loans.

The commercial banks are unwilling to jeopardise still further their viability by lending to companies, which may be forced into bankruptcy and healthy companies do not need to borrow to finance capital investment when they are facing falling demand. The unwinding of keirestu holdings has also reduced companies' need to borrow, but even when they want to borrow the commercial banks are constrained by the extent of their non-performing loans.
To many observers the banks and their problem loans are Japan's most intractable economic problem. There is a widespread feeling that Japan's FSA continues to underestimate the extent of the bad loan problem which many see as getting worse every day as more companies get into difficulties in the face of declining demand. I can well understand the reluctance of the Japanese government to pump more public money into the banks, but if there were to be signs of systemic failure they would be forced to do so or/and nationalise failing banks. The recent mergers of banks and other financial institutions should in theory lead to the development of stronger and healthier banks and insurance companies, but this will surely depend on the willingness of the merged institutions to rationalise their operations by streamlining management systems as well as cutting branches and staff. So far there are little signs of this happening.
The phasing out of the "pay-off" system should also lead to a decrease in the number of second tier banks, but it remains to be seen whether this can be carried out smoothly. If second grade regional banks have to close, there will surely be outcries from the regions affected and pressures to rescue local banks may be difficult to resist. The recent case of the Ishikawa Bank underlines the difficulties. The FSA rejects accusations of being too soft in their inspections, but foreign observers wonder whether their reports are any more reliable than those of the auditing profession whose reputation has fallen greatly as a result of the Enron scandal. It has been argued that the fundamental problem in clearing up the bad loan situation is not the large number of medium firms involved but the thirty or so large firms which are in such a bad way that the only way to prevent them from bankruptcy, which would lead to large increases in unemployment, and further undermine confidence, (apart from the implications for the Members of the Diet who are under an obligation to the firms in question), is to prop them up with further loans. The most serious problems arise in the construction industry. Some Japanese construction companies are thought to be basically insolvent and incapable of recovery; yet they continue to operate. The banking industry can probably only return to a healthy position, if companies such as Daiei, Yukijirushi and others are allowed to, or forced to, become bankrupt.

Evaluation of fiscal policy and reform of semi-governmental organizations and postal saving bank

Fiscal policy is constrained by Japan's overall indebtedness. This means that tax cuts unless they lead to an increase in demand and therefore growth, which expands the tax base, are likely to raise Japan's debt to GDP ratio. The government could gamble that cuts in income tax would lead to increased spending, but in the absence of confidence and, in view of Japan's high propensity to save, tax payers might simply decide to save the extra income they gain from tax cuts. It is even more doubtful whether a cut in consumption tax would lead to increases in spending or demand. However the Japanese government would be wise to carry out soon a major reform of the Japanese tax system. Cuts in income tax should probably be balanced by increases in indirect taxes, not only in the general consumption tax rate, but also in taxes on tobacco and happoshu. Greater incentives to invest in equity capital are needed and incentives generally improved. The kind of major tax reform, which is necessary, can only be forced through if the government have sufficient political courage to stand up to the lobby groups and determination to see reforms implemented rather than merely discussed and agreed in principle.
Previous Japanese governments have attempted to spend their way out of recession. This has failed in the past and is becoming increasingly difficult as the public debt rises. As most government bonds are owned by Japanese, who are disillusioned with equity investments in view of past losses and scared by exchange rate instability to invest abroad, some increase in government borrowing could probably be accepted without causing the cost of servicing Japan's public debt to rise too far and too fast, but present rates of return cannot be held for ever and debt servicing costs will rise as Japan's public debt is further downgraded. Mr Koizumi has been right to resist pressures to increase his self-imposed limit on new borrowing and to reject calls for increasing expenditure on under-used roads and on practically useless bridges and dams, which while benefiting construction companies, their workforces and the politicians beholden to them will not help the Japanese economy as a whole and will merely add to the burden of public debt. Increases in expenditure on information technology, on health and care facilities for the elderly as well as on improvements in education would be more beneficial, but these need to be combined with structural reforms to be effective.
Mr Koizumi was surely absolutely right to put high on his agenda the privatisation of the plethora of semi-governmental organizations whose economic value is at best problematic. The British were among the first to see that public utilities needed competition if they were to become more efficient and prices reduced to the consumer. Japan has been slow in privatisation even in telecommunications. There have been too many vested interests involved and Japanese governments have been generally unwilling to tackle the bureaucrats and politicians who have resisted change because it would affect their cosy monopolies. Mr Koizumi has been right to give priority to privatising the Dorokodan which has wasted huge amounts in building roads in e.g. Hokkkaido which are practically empty. Before construction projects were approved were adequate cost benefit analyses made? Were environmental impact studies published? Were communities affected properly consulted? Were fair competition rules applied before contracts were awarded or was the dango system allowed to operate? Another glaring example of wasteful investment has been the building so many new airports, which are almost certain to be underused for decades to come? The Kobe airport is surely unnecessary when Osaka International airport, which cost such huge sums, is so little utilised. The costs to carriers of operating to and from Japanese airports are so high that Japan will lose international traffic to China and Korea. If private firms had to build and finance these airports there would be many fewer such projects.
Mr Koizumi was also right to target the postal savings bank. Its operations with all the guarantees, which come from being a governmental organization, constitute unfair competition to the commercial banks. The government must also be worried about the way in which deposits have been used to finance uneconomic projects such as roads, bridges, tunnels and airports. The government guarantees of postal deposits amount to a huge increase in the Japanese government's indebtedness.

Reform of Japanese management and effective corporate restructuring

While government reforms have been slow in coming through, there has clearly been major restructuring in Japanese industries especially those subject to foreign competition. A few years ago mergers across keiretsu boundaries would have been unthinkable. Now it is commonplace, but it remains to be seen how quickly the often very different corporate attitudes can be married and efficient new managements instituted without too many personal tragedies. In many companies effective amalgamation will be difficult for the current generation. A change of generation, involving promotion on merit rather than seniority, is almost certainly needed and may already be taking place in some important companies. But there will also have to be changes in the consensus system, which has dominated Japanese management thinking. The consensus system often leads to delays in decision-making and to decisions when made, which amount to the lowest common denominator. Japan needs many more young and ambitious entrepreneurs who are often stifled by the seniority dominated bureaucracies in large Japanese companies.
Japanese management has for too long been dominated by a gerontocracy which has resisted fundamental changes in corporate governance. New rules on corporate governance ensuring that the interests of the owners are given greater weight in decision-making are a priority. Above all there needs to be much greater transparency, accompanied by clearer accountability rules.
Fundamental to effective corporate restructuring is an increase in competition brought about by widespread deregulation. There have been few announcements of significant deregulation, for instance in land transport. One British firm who wanted to import by air a special office table found that it took longer and cost more to get the table from Narita airport to their offices in Tokyo than it had cost to transport the table from the UK factory to London airport and from London to Tokyo by air. One problem was the Byzantine bureaucracy of Japanese Customs procedures; another was the way in which Japanese haulage firms, protected by elaborate licensing systems, operate. This story may have become exaggerated in the telling but it underlines the way in which Japanese regulations keep up the costs to be paid by Japanese companies and hence reduce their overall competitiveness. Competition, especially in service industries, is still insufficient while new ways are devised to protect Japanese firms against foreign competition. The legal profession is a particularly blatant example of Japanese protectionism.

Education, labour and women power

There has been much argument in the Japanese media about the decline in educational standards in Japan. Some ascribe this to the new curriculum. Others put the blame on the teaching profession and the examination system. Parents also cannot escape criticism for either overdriving their children or/and overindulging them. Foreign observers whose direct knowledge is inevitably limited guess probably correctly that all these factors have to be taken into account. Perhaps the fundamental problems lie in improving motivation, inducing a sensible degree of ambition, encouraging individuality and producing determination and willingness to question the "perceived wisdom’.
This is a very controversial and difficult area, but one thing is clear. Japanese young people will not be able to enjoy the old patterns of lifetime employment in one company. Japanese labour laws will have to be liberalised and employment patterns must become more flexible. This means a much greater emphasis on practical training and on specialisation. There will inevitably be fewer generalists and the demand will be for people with specialist skills and experience. The Japanese government's role must be to deregulate labour markets while at the same time improving safety nets and vocational training facilities.
Mr Koizumi, by his appointment of a record number of women as cabinet ministers, has recognized another lacuna in Japan's economic system. That is the way in which Japan's women power has been neglected and wasted. As the Japanese population ages and the net reproduction rate (already a mere 1.38) declines Japan will face an increasing shortage of productive workers. The burden on the working population to look after the ageing population and provide adequate pensions will rise. The age of retirement will have to go up and women power will need to be better used. Incentives for working women to have children should be increased by the provision of maternity leave and children's creches at offices and work places, but this will not be enough. A fundamental change in the male chauvinist attitudes permeating Japanese society will be required. Immigration will also have to rise and this will require basic changes in Japanese attitudes towards people of other races.
The Japanese pension system, already under strain, will have to change still further. "Pay as you go" pensions (i.e. pensions paid out of current revenue) cannot simply be replaced by funded schemes although there should be an increase in the coverage of such schemes to reduce the burden on the state. But unless funds are invested abroad and yield reasonable returns they will have to be invested in Japan. This means that a smaller number of Japanese workers will have to increase their productivity to ensure adequate returns.

Is Japan "NATO"?

Mr Koizumi's reform agenda is vast. Some of the problems, which I have mentioned, are beyond the scope of any government to rectify although governments can help to create the right conditions for change and can help to alter public perceptions. Mr Koizumi started with high popularity and an ambitious set of proposals. He emphasised that there could be no progress without pain and his rhetoric seemed to strike a chord with the Japanese public. Unfortunately it seems that opposition from short sighted and self- serving politicians and bureaucrats have stifled much of Mr Koizumi's efforts in effecting vital reforms. His opponents apparently suffer from what is known as NIMTO or "not in my time of office", i.e. let me enjoy the benefits and let my successors clear up the mess after I have retired. The term "NATO" in Japan, according to some, does not mean as it does here "The North Atlantic Treaty Organization" but "No Action Talk Only’. Certainly it is far from easy to produce a list of significant reforms adopted and implemented by Mr Koizumi's government. He would doubtless argue that radical reforms could not be put into effect over the months he has been in office. Transforming proposals into legislation and implementing major restructuring plans may take years. Mr Koizumi would also argue that deliberations in the Diet and opposition from within his own party, which squabbles all the time over sharing power, have slowed down the process.
Unfortunately his strongest weapon namely his public popularity has recently been eroded and this is making his task ever more difficult. Most foreigners find the popularity of Ms Makiko Tanaka difficult to understand and thought her dismissal justified. She was tactless, indeed often rude and a bully; moreover she seemed to be ignorant of foreign policy issues and was generally prevented by the Diet from representing Japan at conferences overseas for fear that she would damage Japan's image and prestige by further gaffes. No doubt her forthrightness and toughness with the allegedly arrogant and corrupt officials in the Gaimusho was popular, but it is hard to understand why her loss of office should have dented Mr Koizumi's popularity so much. It is apparent that Mr Koizumi's enemies in the LDP are determined to force him out, but who, do they envisage, should replace him? A return to the discredited policies of the past with more spending and more propping up of bankrupt construction companies would lead to a further erosion of confidence in the economy. Foreign observers might then be forced to conclude that Japan was in terminal decline and the sick joke, which asked "what was the difference between Japan and the Argentine?" and to which the answer was "five years", might not be so wrong after all.

Japan is not in terminal decline yet.

My answer to my own question "Is Japan in terminal decline?" is "not yet and it need not be if reforms are pushed with vigour and determination." I hope that Mr Koizumi will succeed and pray that there will be other Japanese leaders ready to carry on with determination the process of reform.

Question to Sir Hugh Cortazzi

1. What were themes of Political reform after Thatcher?

Political reform issues since Mrs Thatcher resigned include:

a) political sleaze. In Britain this has not generally involved politicians using their position for personal gain from government contracts. It has rather involved using their parliamentary position to further the interests of their friends e.g. through parliamentary questions and influence with Ministers. Sleaze accusations have led to failed libel actions and to two former Conservative politicians (Jonathan Aitken and Geoffrey Archer) being prosecuted and convicted of perjury. Accusations of sleaze were among the reasons for the defeat of the Conservatives at the election in 1997. The Labour Government has also suffered from sleaze and accusations against Ministers led to the resignations of Geoffrey Robinson and Peter Mandelson. Efforts are being made to improve standards in public life, but there is a good deal of cynicism in Britain about the likely success of these efforts. Sleaze has undoubtedly detracted from the prestige of politicians and is a factor in electoral apathy.

b) The most important reform issues in recent years have been constitutional:

(i) devolution and the establishment of the Scottish parliament and the Welsh assembly;
(ii) the establishment of a greater London council and the appointment of a Mayor of London following a popular election;
(iii) proposals for and debate about reform of the House of Lords;
(iv) enactment as part of UK law of the European code of human rights.
(v) discussions on amending the electoral law to bring in an element of proportional representation as demanded by the Liberal Democrats, Britain's third party.
(vi) Relations between Ministers and their political advisers on the one hand and civil servants on the other. There is pressure for legislation to clarify the relationship and to reassert the independence of the civil service while emphasising its function to carry out the will of parliament as represented by the government of the day,
The issues briefly described above have all aroused a great deal of debate and controversy with divisions along party lines. The Conservatives have in effect accepted b) (i), (ii) and (iv), but standards in public life, reform of the House of Lords, electoral reform and relations between Ministers, their political advisers and civil servants will continue to fuel controversy for many years to come. The British constitutional reforms are not really relevant to Japan: the elimination of sleaze is relevant, but our methods including judicial review are not in accordance with Japanese traditions. Relations between Ministers and Civil Servants are relevant to Japan but the problem in Britain is different from that in Japan where the problem seems to be between civil servants and politicians who are not Ministers.

2. What do you think of Prime Minister's leadership under the member cabinet system?

Traditionally the Prime Minister in Britain has been simply "primus inter pares" i.e. first among equals and government policy is supposed to be decided by consensus in cabinet with each Minister being responsible for his department but contributing as individuals to deliberations on the broad lines of government policy. Both Mrs Thatcher and Tony Blair have been accused of trying to establish a Presidential style of government with major issues being settled outside cabinet by cabals or by cabinet committees. Inevitably as the apparatus of government and the range of issues requiring political decisions has grown Cabinet committees have become increasing important. During the last war Churchill's war cabinet rarely consisted of more than seven senior Ministers. The Overseas Policy and Defence Committee has for decades been one of the more important cabinet committees. Individual Ministers assert their powers through membership of cabinet committees, through their relationships with fellow Ministers especially with the powerful Chancellor of the Exchequer and by their individual abilities and personalities. The British Civil Service is precluded from taking part in politics but it prides itself on serving its political masters faithfully and providing them with independent and as far as possible objective advice.

3. How do you evaluate Koizumi's process of reform?

I am not sure that I know what his "strategy" is. Presumably his aim is to carry out a wide scale reform of the way the Japanese economy is run and to improve the political process. I assume that he has relied on his popularity with the public to put pressure on his opponents in the LDP. He also presumably takes account of the difficulty which the LDP would have in finding an alternative leader who could ensure the party's re-election. Perhaps he also thinks that if the majority of the LDP turned against him he might be able to get some support from parts of the Democratic party, perhaps leading to a split in the LDP and a realignment in Japanese politics, but it seems to me that this would be very difficult to achieve. As I said in my draft article it seems to me that political reform including changes in the constituency system should be a high priority for Mr Koizumi. It will be difficult to defeat the zokugiin without changes of the kind I advocated, but I am conscious that such changes would arouse strong opposition in the LDP and may be unattainable without endorsement at a general election. The power of the Prime Minister to call an election at the time of his own choosing is strong weapon but one which Mr Koizumi can probably only use once. So he needs to "keep it up his sleeve" for the moment.

4. How is restriction of contact between politicians and bureaucrats in Britain?

You refer to "the British model such as restriction of contact between politicians and bureaucrats". There is no rule against civil servants having contacts with politicians but they have to be very careful to ensure that they do not become involved with political issues in such contacts. Normally a politician wishing to take up a matter affecting his constituency would either write to the relevant Minister or ask a parliamentary question. Civil servants would draft the appropriate reply which would issue from the Minister concerned, but Members of Parliament often seek briefings about particular issues from civil servants. This would be done with the approval of the relevant Minister and of course reported to him/her. For instance if a MP is going on a visit to a foreign country he may want to talk to the relevant officials.
As I have said cabinet committees are of long standing. There are also policy units in the Prime Minister's office and in the Cabinet Office. Each department of state also has its own policy units and in Whitehall ad hoc committees with representatives from relevant Ministries are set up to coordinate policy and ensure performance.
I certainly think that the "prior approval system by the LDP for legislation should be abolished". decisions of this kind should be a government responsibility.
Turning to the Asahi article, I would agree that the cabinet should take the leadership role, centring around the Prime Minister, but this is vague. Is he first among equals or should the Prime Minister assume a Presidential role?
"elimination of the influence of bureaucrats in the process". I don't see how this can be achieved. Nor does it make sense. Politicians need input and advice from civil servants who have detailed knowledge and experience of the issues. This does not mean that civil servants should make policy decisions which should lie with politicians.
"putting an end to party lobbies' ability to influence policy". Yes, of course.

投稿者 gnpo : 12:00 PM

[paper] Conquer the Culture of Co-Dependence Among Politicians, Bureaucrats and Businesses

Tokunosuke Hasegawa: professor, Meikai University

Born in 1936, he received his BA in Law from Touhoku University and worked in the Ministry of Construction and the Research Institute of Construction and Economy as executive director until assuming his current position in 1995. Hasegawa researched an international comparison of "mortgage financing crises in 1980s and 1990s" as a visiting scholar in the Department of Land Economy at University of Cambridge. His main publications include: "Tokyo no takuchi keisei-shi," "Fudousan kinnyuu-kiki saigo no shohousen" and many other books.

Diet member Muneo Suzuki's recent scandals have revealed faults in Japan's policy-making process and its administration's decision-making process. In postwar Japan, bureaucrats have accumulated all information so that it has been almost taken for granted that bureaucrats develop policies and politicians are to attend the Diet as their puppets.

Structurally, there is virtually no conflicting interest among politics, bureaucracy, and business in Japan. Although these three groups are independent of each other, those who share the same interests in the respective groups gather together to form a kind of guild to seek profit. Recently, in an attempt to rectify the situation, a few proposals have been presented such as prohibition of direct meetings between politicians and bureaucrats, and the establishment of alternatives to the bureaucracy; but it will be a long time before the problems are resolved.

These days, zokugiin (legislators who work for special interests or industries) have been regaining their influence over the decision-making process partly because high-ranking officials' terms of office have been declining rapidly. As a result, the three parties' roles have been changed, but the non-conflicting structure has not been affected at all. Zokugiin request the ministries to increase expenditures for public works in their constituencies in return for votes. Although both central and local governments have a set of rules to exclude any arbitrary influence over public works bidding, zokugiin somehow impose pressure on the administration so that the companies they favor receive the contract.

投稿者 gnpo : 11:57 AM

[talk] "The Crisis in Japan's Governance:the Deflation-fighting Program"

Discussion of Financial Problems
Moderator Yasushi Kudo: Representative of Genron NPO
Anonymous bureaucrats A, B, C

At the end of February, the Japanese government introduced its anti-deflationary measures. The measures incorporated increased special inspection of banks by the Financial Services Agency. Nevertheless, we wonder whether Prime Minister Koizumi is aware of the crisis in the Japanese economy and what his goals are in implementing these measures.
Stock Prices of Japanese banks have been falling 20-30 percent since the previous injection of funds. The result of the increased special inspection of banks will be made public after mid-April. If we regard the banks' capital as "core" capital excluding deferred tax assets and previously injected public funds, many banks should have already experienced a shortage in capital. If this is the case, any measures, including the injection of public funds, should be taken before a new crisis emerges.

However, bureaucrats of the Financial Services Agency flatly opposed such a view. Instead, they argued that the special inspection by the agency is in compliance with international standards and is therefore appropriate. Furthermore, since the examinations were carried out by audit corporations and the Bank of Japan, the state of Japanese banks have not been problematic.

They are cautious about the injection of public funds. The Financial Services Agency is seriously concerned about the risk of placing the banks under the control of the government through the injection of public funds. They emphasized that it is necessary to have a strict legal condition for the injection of public funds such as a serious threat to the financial stability of the country and/or the region. Accordingly, they proposed that the Bank of Japan take responsibility for the risk of "failure due to a funding crunch" expected to take place after the start of the removal of the full deposit protection. They also proposed that the Bank of Japan provide short-term liquidity through a special loan by the Bank, requiring legal conditions rather than the injection of public funds. The goal of the financial administration is to stabilize the financial system by rational rules.

However, this alone is unable to get the Japanese economy out of its current deflation. The most important point will be to create a governance system by which the Financial Services Agency, the Ministry of Finance and the Bank of Japan can put together each other's idea and by which they can strongly drive the policies of Japan.

投稿者 gnpo : 03:24 AM