Perspectives on Political Reform

Abstract

This chapter provides a general introduction to the book. It begins with the prehistory of political reform in the middle of the 1980s. It also gives a critical overview of major existing works on the topic, as well as discussing the analytical framework of this book.

1 The Path to Political Reform

1.1 The Bubble as Precursor

When we look back today, the Bubble period of the 1980s and the beginning of the long stagnation of the 1990s are often lumped together. This book will deal exclusively with the 1990s and beyond, but first, let us look at the socioeconomic and international environment of Bubble-era Japan, which was an important harbinger of the necessity for reform.

The term “Bubble” here refers to a phenomenon in which extremely aggressive investment activity akin to speculation, with no direct relationship to real economic activity, is practiced and, as a result, the economy overheats. According to economist Yanagawa Noriyuki, the standard definition in economics is “the phenomenon of asset prices rising or falling in a way that deviates from fundamentals.”¹ The genesis of the Bubble was found in the international political economy of the early 1980s. At that time, Japan’s trade surplus, which was the result of the expansion of exports during the high-growth period, had led to economic friction with the United States and other countries. Under the Republican administration of Ronald Reagan, who was inaugurated in 1981, the United States adopted a philosophy of “small government” and soon faced an enormous increase in its budget deficit due to large-scale tax cuts, as well as large trade deficits with Japan and other major countries. To rectify this, on September 22, 1985, the Plaza Accord was adopted in order to weaken the dollar against other major currencies. The Plaza is the name of the famous hotel in New York which was the venue for the meeting of G5 finance ministers and central bank governors that produced the agreement. The hope was that if other currencies appreciated relative to the dollar, the dollar-denominated price of other countries’ goods would rise, their exports to America would fall, and the trade imbalance would be fixed.

For Japan, the Plaza Accord brought about rapid yen appreciation and a loss of international competitiveness. Before the accord, in February 1985, one U.S. dollar was worth a substantial ¥260. By January 1986, the dollar had crashed to ¥200, and by that March it had reached ¥170. Due to the rapid appreciation of the yen—the flip side of a falling dollar—many Japanese export industries, mainly in manufacturing, fell on hard times, and the term “strong-yen recession” (endaka fukyō) was born. The government’s ability to respond to the recession with fiscal stimulus was severely limited: under the orders of Dokō Toshio, head of the Second Provisional Commission on Administrative Reform (the so-called Second Rinchō), a policy of “fiscal reconstruction without tax hikes” (zōzei-naki zaisei saiken) had been in place since the early eighties.

It was also necessary to respond to international criticism that Japan’s exports were excessive due to insufficient domestic demand. In April 1986, Prime Minister Nakasone Yasuhiro’s private advisory body—the Advisory Group on Economic Structural Adjustment for International Coordination (Kokusai Kyōchō no tame no Keizai Kōzō Chōsei Kenkyū-kai)—drafted a report that proposed expanding domestic demand and enacting financial liberalization, among other measures. This report was referred to as the “Maekawa Report,” after the advisory group’s chairman, former Bank of Japan Governor Maekawa Haruo; although these proposals had been repeatedly made before.²

In response to these developments, the Nakasone administration decided to introduce aggressive monetary easing to achieve economic recovery through domestic demand. Private financial institutions such as major banks (toshi ginkō, or “city banks”) also had surplus capital, as demand for capital had been falling due to the internationalization of the financing methods used by Japanese companies. In this way, an ample supply of money flowed mainly into the real estate and securities markets, inflating asset prices beyond their real value and triggering a bubble. The “divergence from fundamentals” in the economic definition of a bubble mentioned previously refers to this aspect.

Of course, the Bubble was not entirely unrelated to the boom and bust of the real economy. Although the loss of export competitiveness and the measures adopted to alleviate economic friction with trading partners fueled the offshoring of manufacturing industries, there is no doubt that aggressive investment prompted by monetary easing helped Japan overcome the “strong-yen recession.” The resulting boom in the securities market birthed the term “zai-tech” (financial engineering) and the fact is that, from large corporations to pensioners, many organizations and individuals dreamed of making a fortune from their investments. It was in 1986 that NTT (Nippon Telegraph and Telephone), privatized by the Nippon Telegraph and Telephone Public Corporation, was publicly listed, and applications from general investors, including individuals, totaled six times the number of shares offered for sale.

Meanwhile, sharply rising real estate prices made it difficult, on the one hand, to realize the “common people’s dream” of purchasing a home in an urban area. On the other hand, the anticipation of rising prices for their real estate holdings led many companies to use property as collateral to borrow more investment capital from financial institutions. In Tokyo, many of the large-scale developments of the present day, such Rinkai-Fukutoshin (Tokyo Waterfront City) or Roppongi Hills, were conceived during this period. The face of the city changed greatly as a result of the Bubble, as did those of other major cities besides Tokyo.

A large number of employees of companies that were enriched by the Bubble enjoyed ample entertainment expenses as well as other perks and benefits. Since generous raises were promised under the lifetime employment system, employees’ families also benefited indirectly. Additionally, these benefits also extended to the areas where they lived. Whatever the reason, if money is abundant and it is circulating, it will provide material well-being to most people in society.

1.2 Strengthening Satisfaction with the Status Quo

The Bubble also had the effect of supporting qualitative changes that had begun in Japanese society. After the era of high-speed, double-digit GDP growth ended in the mid-1970s, Kanagawa Governor Nagasu Kazuji first proposed the “Era of Localities,” (Chihō no Jidai), and an expert study group (The Ōhira Study Group) convened by Ōhira Masayoshi, who served as prime minister from 1978 to 1980, advocated the “Garden City State Concept” (Den-en Toshi Kokka Kōsō). These developments suggest that some people were beginning to question the centralized and uniform social structures that had been pursued since the opening of the country during the Bakumatsu period, that is, the closing era of Tokugawa government in the 1850s and 1860s, in order to catch up with Europe and the United States.

In education, strict school rules, compulsory hairstyles, and other issues came to be seen as problems in the 1980s, and there was new talk of respect for individuality. Although in hindsight social pressure was still quite strong, social norms regarding dress and behavior gradually relaxed, and in major metropolises the atmosphere became freer. In sum, there was a growing movement to emphasized decentralization over centralization and individuality over uniformity.

Because the Bubble created financial surpluses not only for private companies but also for the public sector, including local governments, this trend was also accelerated in policy terms. In 1988, the Takeshita Noboru administration, under the name of “Hometown Revitalization” (Furusato Sōsei), announced it would provide ¥100 million yen grants to each municipality. The fiscal timing seemed appropriate. The central government had been deficit-free since fiscal 1990, and local governments had achieved primary fiscal surpluses as well.³ Local governments decided to focus on the construction of cultural facilities and support for local sports. It was during this period that the Japan Soccer League began considering professionalizing its operation, leading to the birth of the J-League in 1993, but the embrace of local boosterism by municipal governments and their cooperation in the development of stadiums was related to the Bubble period and its afterglow. In the early 1990s, soccer was treated as a symbol of the era of freedom and individuality.

For better or worse, Japanese society changed in fundamental ways. Prosperity and freedom contributed to the growth and maturation of local culture. However, the enormous sums of money that flowed into securities and real estate markets led to a large number of loans based on collateral that had virtually no value, and the market gradually acquired a more speculative flavor, with “Gentlemen of the Bubble” (baburu shinshi) making enormous profits in a short period of time and wining and dining members of the financial institutions who were the source of their funds, and regulators. Moral decadence and public anger, as a reaction, gradually became apparent.

However, Japanese society was blanketed in a euphoric satisfaction with the status quo that outweighed any disappointments. Postwar Japan’s high-speed economic growth or, from a longer perspective, catch-up modernization since the opening of the country at the end of the Tokugawa shogunate in the 1850s and 1860s, was achieved by the willingness of elites from the worlds of politics, administration, and finance to adapt to precedents from the developed countries of Europe and the United States, even at a cost to their own self-interest. The consumption tax (analogous to a sales tax), which was successfully introduced in the late 1980s after repeated debate since the late 1970s, is probably the last example of this. However, seen as a whole, Japanese elites had completely lost sight of any ideals by this time, and Japan, which had become a developed country, had grown completely intoxicated by its booming economy. The Liberal Democratic Party (LDP), which dominated politics, had become thoroughly absorbed in pork-barrel politics, which distributed the fruits of economic growth to its support base. The bureaucracy placed so much emphasis on cooperation with LDP administrations that its ability to think about a long-term vision of the state declined. The business community was so overwhelmingly confident in the Japanese style of business that it no longer felt much need for change. And the general electorate was primarily concerned with preserving their affluent lifestyles, and they accepted the elites’ desire for the status quo.

1.3 1989 as a Turning Point

The environment surrounding Japan, which had appeared to be smooth sailing, changed dramatically in 1989. In January of that year, the Shōwa Emperor passed away and the era name was replaced by Heisei. The new era began quietly, amid a mood of self-restraint that had prevailed as the Emperor’s condition worsened in the latter half of the previous year, but before long Japan was met with a series of major events at home and abroad.

The first was the widening of the Recruit scandal. The Asahi Shimbun reported on June 18, 1988, that Ezoe Hiromasa, the founder and president of Recruit Co., had transferred unlisted shares in Recruit Cosmos, Recruit’s real estate development subsidiary to an official in Kawasaki City, near Tokyo, which was pursuing a redevelopment plan. The transfer had occurred several years before the report, but since it was early in the Bubble period, Recruit Cosmos’s shares would surely grow in value once it went public, and so the transfer during the pre-listing period was effectively a profit-sharing scheme, or, more simply, something akin to a bribe. If this were all, it would have been nothing more than typical collusion between a real estate company and a local government. This is because Recruit, a rapidly growing company that had started out as a magazine for job seekers, was still a relative newcomer to the real estate industry.

But, in reality, Ezoe had transferred shares to many of the major national politicians and business leaders of the day. Ezoe, who had started his own business as a student at the University of Tokyo and had great success with what would now be called a startup, said the transfers were made to enhance his and his company’s reputation in political and business circles. Some of those who received the Recruit Cosmos shares sold them soon after the company went public, and they reaped profits in the hundreds of millions of yen. The recipients of the transfers included key cabinet members, including Prime Minister Takeshita himself, and with each report the Takeshita administration found itself backed into a tight spot. The soaring land prices caused by the Bubble had adversely impacted the quality of life for many people by causing housing shortages, long commutes, and other issues, and the fury of voters that elites were taking advantage of this situation was considerable. As 1989 began, the introduction of the consumption tax in April also caused the Takeshita cabinet’s approval ratings to fall to record lows. The cabinet finally resigned in June.

The Takeshita administration had strong internal party support—its foundation was the Keisei-kai (Takeshita faction), a successor of the Tanaka faction, the LDP’s largest—and it had successfully introduced the consumption tax, an achievement that had eluded former prime ministers Ōhira and Nakasone. It had been anticipated that it would become a stable, long-serving administration. The bitter competition between factions within the LDP that had prevailed until the early 1980s had ended. Abe Shintarō, who like Takeshita had aimed to succeed Nakasone as prime minister, took office as the party’s secretary-general, and Miyazawa Kiichi became deputy prime minister and finance minister, meaning that the Takeshita administration had the support of the party’s leading factions. Relations with the bureaucracy were also good.

The sudden collapse of the Takeshita administration came as a major blow to the LDP. To add insult to injury, Uno Sōsuke, who succeeded Takeshita, faced a sex scandal soon after his inauguration, and the LDP suffered a historic defeat in the July 1989 House of Councillors elections, resulting in the opposition parties commanding a majority in the upper house. While at the time this phrase was not used, it marked the appearance of what we today call a “twisted Diet” (nejire Kokkai), or a divided parliament with different parties constituting majorities in each chamber.

At the same time, the world was experiencing even greater upheaval. In 1985, Mikhail Gorbachev was inaugurated as the General Secretary of the Communist Party of the Soviet Union and became the country’s de facto supreme ruler. He embarked on domestic reforms known as Perestroika. Gorbachev concurrently attempted to revive diplomacy towards the Free World and relations with the Communist bloc countries of Eastern Europe. While this was favorably received by the United States and other liberal countries, the Soviet and Eastern European communist regimes were already past the point at which they could be sustained via reforms.

A vicious cycle emerged whereby the stronger the pro-democracy forces criticized the regime, the more they were suppressed, the more opposition and resistance was generated. At the start of 1989, it became clear to all that reform without regime change was completely untenable. One after another Communist regimes in Eastern Europe were overthrown, and in November the Berlin Wall was finally torn down. At this point, the Cold War, as a confrontation between the Free World and the Communist bloc, was effectively over. In addition, in the same year, China, which had also invited the rise of democratization forces internally, changed course and thoroughly suppressed them in the Tiananmen Square massacre in June. From this point on, China began to take a path different from the Soviet Union and Eastern European countries.

If one looks at the domestic economy, the Bubble was finally coming to an end. The Tokyo Stock Exchange’s Nikkei Index, which had been steadily rising since 1986, momentarily hit ¥38,957 on December 29, 1989, the last trading day of the year, which to this day is its highest value ever. From January 1990 onwards, stock prices began to fall. The real estate bubble continued for another year or so but reached its peak around the end of 1990, and thereafter began to decline.

Both stock prices and land prices had surged beyond their real values. Many companies and individuals arranged additional loans and made further investments based on the expectation that prices would recover. This compounded the problem for financial institutions, as the loans became non-performing. The decline in stock prices and land values, which reversed the course of the Bubble economy, caused serious and long-term damage to the Japanese economy from the 1990s onward. The age of Japanese money leaving its mark on the world (for example, the purchase of New York’s Rockefeller Center by a Japanese firm in 1989) and the glory of Japanese-style management enabling this, was clearly over. An era of long and painful stagnation and declining international competitiveness had arrived. This era would roughly coincide with the era of political reform.

2 How Has Political Reform Been Represented?

2.1 Growing Momentum for Reform

Few would disagree that the electoral reform implemented in 1994, under the non-LDP coalition of the Hosokawa Morihiro administration, was the first tangible product of political reform. If the origins of political reform can be traced back to the Recruit scandal of the late 1980s and the end of the Cold War, then today, at the beginning of the 2020s, more than 30 years have passed. Because this period coincides with the Heisei era, the series of political reforms that began with electoral reform and its consequences are sometimes referred to as “Heisei Democracy.”⁴

At the time that reforms were being formulated, there is no doubt that there was substantial support for the overall direction of changing the political status quo, regardless of whether a specific proposal was right or wrong. One backdrop for this was the change in political news reporting, beginning with commercial television. In the 1980s, the mass media gradually made their political positions clear. The pioneer of this trend was TV Asahi’s affiliate “News Station,” which began broadcasting in 1985. News Station not only reported what was happening, but anchor, Kume Hiroshi, and commentators who were former newspaper reporters, actively interjected with their impressions and commentary to indicate to viewers how they evaluated what had happened. It was often extremely critical of power, and its stance was similar to that of weekly and monthly magazines, which were said to have earned the displeasure of an LDP accustomed to just-the-facts reporting without editorializing. However, there is no doubt that News Station smashed the prevailing ideas of television news, and in the late 1980s it gained more and more attention.

TV Asahi also launched the debate-style programs “Asa Made Nama Terebi!” in 1987 and “Sunday Project” in 1989, which often dealt with political themes. A common format was established: politicians from the ruling and opposition parties would appear as guests, and the host, Tahara Sōichirō, would flood them with questions and let them speak in their own voices and debate the issues among themselves. The success of these programs spread to other television networks and newspapers. In October 1989, TBS, a commercial broadcaster with an established reputation for news reporting, hired former Asahi Shimbun reporter Chikushi Tetsuya and began broadcasting “Chikushi Tetsuya NEWS 23.” Fuji TV started its debate-style program “Hōdō 2001” in April 1992. Both became long-running programs and were on the air for more than 10 years. The wave of change eventually reached the political reporting of the broadcaster including NHK (Japan Broadcasting Corporation) and newspapers.

This is not simply a matter of a change of style or an anti-authority stance being accepted by viewers and readers. The Bubble economy and the changes in the socioeconomic environment that accompanied its collapse, as well as the end of the Cold War and the changes in the international environment that followed, were witnessed by many viewers on a daily basis during this period, and expectations for political reporting appropriate for these changes were rising. Above all, the fall of the Berlin Wall in 1989 and the Persian Gulf War in 1991 left striking impressions. The Cold War, which had been taught as an unchanging state of affairs in school textbooks, ended all too easily, and what followed was not the expected era of world peace but a series of bloody regional conflicts. Furthermore, the failure of Japan’s politics and foreign policy to work out an appropriate response to these new circumstances substantially changed the status quo mood of the late 1980s. Anger over the negative aspects of the Bubble economy probably had a similar effect. Facing a new situation, people wanted to know why these problems were occurring and what politicians were thinking.

After the general election of 1993, the head of the news bureau at TV Asahi, the home of the new political reporting, revealed that the network had intentionally reported on the election with the aim of bringing about a non-LDP government. This statement attracted much criticism: the head of the news bureau was fired, and the Ministry of Posts and Telecommunications issued administrative guidance. However, any assumed causation between the change in government and media reporting is overstated. Support from voters for the Hosokawa administration after its inauguration was overwhelming. Opinion polls conducted by various news organizations showed that the cabinet’s approval ratings were the highest ever recorded at the time. The opportunity for change had clearly strengthened in response to the dramatic changes in circumstances since the late 1980s, and some of the mass media seemed well attuned to these changes and took advantage of them.

At the same time, it is noteworthy that during this period, voters recognized political reform as an important issue. For example, in a March 1993 poll by the Yomiuri Shimbun and an April Mainichi Shimbun poll, a majority of respondents favored the introduction of a system of public election for prime minister. Many voters had high expectations for reform. There were also many who approved of reform proposals that would enable the prime minister to exercise stronger leadership on urgent policy issues. Political scientist Sakaiya Shirō notes, “Many voters may not have been well versed in the substance and implications of each reform proposal. However, what was demanded at this time was that the current system be changed in one direction or another.”⁵ Political reform was what the public demanded.

2.2 Unsettled Evaluation

Although political reforms were promoted with wide-ranging expectations, their impact and value remain undetermined. Especially concerning electoral reform, the switch in ruling and opposition parties following the 2009 and 2012 general elections has been regarded by some as a major turning point in postwar Japanese politics.⁶ However, the period in which two major parties were competitive enough that voters had a real chance to choose their government—probably the most highly emphasized and anticipated part of electoral reform—was all too brief. Today, LDP has reasserted its long-term dominance.⁷ Many journalists and political commentators have criticized electoral reform, saying that under the single-member district system the quality of individual legislators has declined, with an increase in the number of small-minded legislators (kotsubu, or “small grain”) with questionable morals and policy acumen.⁸ These assessments are understandable in the light of electoral reform and its consequences.

However, this is too limited a perspective on the past 30 years of Japanese politics. Electoral reform was just the first of a series of institutional changes to systems that governed politics and public administration in Japan; and the fact that so many reforms were undertaken in a relatively short period of time cannot be ignored. These include administrative reforms centered on strengthening the cabinet and reorganizing ministries and agencies (which began in 1996), as well as decentralization reforms (from 1993) that dramatically changed power and financial relationships between the national and local governments. Judicial reform (from 1999), which included the introduction of the lay judge system and the establishment of postgraduate law schools, was another significant reform without precedent in the postwar period.

What took place was a total transformation of the “shape of the country” (kuni no katachi). Even if one wishes to avoid such abstract terms, the term “institutional reform” is too narrow, and should rather be replaced by “political reform” in the broadest sense. That said, the fact that such reforms extended into so many different institutional domains makes them extremely difficult to evaluate. It would be extremely shallow to say that the reforms were meaningless and that all that remained were the “lost two decades” or “lost three decades” of economic malaise. Even if it is true that Heisei Japan faced socioeconomic stagnation and a feeling of hopelessness, these are better attributed to the decline in international competitiveness amid inadequate responses to globalization and technological innovation, or to low birthrates and an aging, shrinking population.

That said, political reform began more than 30 years ago. Over the course of three decades, generations change, children become parents, and parents become elderly. The Bubble period mentioned earlier is, for many people, the distant, ephemeral past. After that much time, it is inevitable that people will forget why reforms were demanded, what they were intended to achieve, and what kind of process was used to pursue them. There is a growing tendency to evaluate past choices from a present-day point of view. We need to try to grasp the entirety of political reform with a theoretical approach, rather than relying on a common-sense, impressionistic understanding of pertinent events, or by merely describing events chronologically.

2.3 Previous Explanations

Many previous studies have examined what political reform meant or entailed. These can be organized into three overarching categories.

One position is that political reform was a kind of fad, motivated by a temporary fever with unclear foundations and intentions. Let us term this the “fever theory.” Political scientist Uchiyama Yū, discussing electoral and administrative reform, argues that the results were meager because the reforms lacked an adequate theoretical foundation. According to Uchiyama, “Despite inadequate theoretical and empirical investigations, a ‘mood’ of demanding institutional reform prevailed…Careful examination of the problems to be addressed and the suitability of proposed solutions was sacrificed…Some raised doubts, but their voices were drowned out by the ‘fever.’”⁹ On a similar point, Gerald Curtis, an American scholar of Japanese politics, noted that electoral reform was promoted by Ozawa Ichirō and others “under the illusion that a two-party system could be created…and the mistaken idea that at any rate, the bad parts of Japanese politics arose from the medium-sized electoral district system,” which, Curtis argued, “Japanese political commentators and some political scientists also assumed to be true.”¹⁰

Another position is that political reform was a means to realize neoliberal socioeconomic policies.¹¹ Neoliberalism in this context refers to the approach of the Reagan administration in the U.S. and the Thatcher government in the U.K. during the 1980s, which questioned the ability of governments to solve socioeconomic problems. Instead, it emphasized the problem-solving power of markets and the private sector, as well as the self-determination and self-responsibility of individuals. However, in pointing out that political reform is linked to neoliberalism, more emphasis is placed on the interests of big business. According to Nakano Kōichi, a political scientist who is a leading advocate for this position, the goal of Ozawa Ichirō and his brain trust, who led the electoral reform process, was the promotion of the neoliberal “new right-wing turn” (shin-uha tenkan) in Japanese politics that had begun during the Nakasone administration. By this he means following the lead of the United States and advancing the interests of political, bureaucratic, and financial elites. This position will be called “neoliberalism theory” in this book.

The third view is that the wide-reaching political reforms can be understood as a series of coordinated movements to create a new fundamental structure of Japanese politics.¹² This position, which can be called “Heisei Democracy theory,” holds that reforms reflected changes in the domestic and international environment surrounding Japan from the 1980s to the 1990s. These include the end of the Cold War and the growth of the urban white-collar middle class—the so-called “new middle mass” (shin chūkan taishū)—as well as the decline in the ability of politics to respond to these changes. In other words, it recognizes that political reform was an internal movement from within the Japanese electorate, driven by a consistent way of thinking. In pointing to changes in the domestic and international environment, Heisei Democracy theory has much in common with neoliberalism theory, but it does not see political reform simply as a means to an end and does not take the position that it favored the U.S. or particular domestic actors.

2.4 Remaining Questions

All three of these perspectives include reasonable components which are not mutually exclusive. For example, political scientist Sasaki Takeshi, who takes the position of Heisei Democracy theory and himself promoted electoral reform and other important political reforms, uses the term “fever” in the sense that there was enthusiasm and exuberance among those involved when reforms were implemented.¹³ Indeed, without such enthusiasm and exuberance, it would have been impossible to proceed with extensive institutional reforms. Both neoliberalism theory and Heisei Democracy theory point to the changes of the 1980s as a precondition for political reform. The fact that the prevailing conditions of postwar Japan had dramatically changed in the 1980s was certainly widely recognized in the 1990s. There is no doubt that this recognition, coupled with the atmosphere or excitement of the times, were driving forces behind political reform.

At the same time, however, doubts remain as to whether these positions tell the full story. The fever theory overstates the rapidity with which reform activities were undertaken, but this is often the case when changes involve many actors. In fact, political reform did not stop at electoral and administrative reforms, but extended over 10 years and involved changes in the core actors. It is impossible to see this all as a boom or fever. Neoliberalism theory, meanwhile, may be too fixated on the partisanship of reform. The forces that pushed for reform spanned the ruling and opposition parties of the time, and the majority of the mass media also insisted on the necessity of institutional reform. Above all, the majority of voters viewed political reform favorably. That is why, when examining these changes retrospectively, many espouse the fever theory. To ignore such facts and portray reform as the reflection of the interests and positions of particular actors is inaccurate analysis, akin to idle criticism or the airing of one’s biases.

Of course, political reform cannot be attributed to the ideas and actions of any one individual. Ozawa Ichirō is often named as the standard bearer of reform. As a young and influential member of the LDP’s Takeshita faction, he served as deputy chief cabinet secretary in the Takeshita administration and LDP secretary-general during the Kaifu administration from the late 1980s to the early 1990s, and become a central figure in his late forties—a relatively young age in Japanese politics. In his Blueprint for a New Japan, published in May 1993, Ozawa advocated electoral reform by introducing the single-member districts (first-past-the-post constituencies) system, the strengthening of the Cabinet, and decentralization.¹⁴ These reform proposals from within the heart of the LDP were greeted with great surprise, and are probably the source of Ozawa’s image as a leading proponent of reform to this day. In fact, Ozawa did play a large role in revising the electoral system. However, that was not the end of political reform. Ozawa’s book made no mention of reforms to the judicial system or the central bank, and it cannot be said that the book is a blueprint or plan for political reform as a whole.

Nor is Ozawa necessarily a neoliberal. In his Blueprint for a New Japan, he called for deregulation, but his rationale overlapped with criticism of the excessive influence of bureaucrats, voiced at the time by reform-minded politicians such as Hosokawa Morihiro. In fact, the governments in which Ozawa was involved as a ruling party lawmaker after leaving the LDP (the Hosokawa, Hata, Obuchi, Hatoyama, Kan, and Noda administrations) are generally not thought of as having a neoliberal orientation. Furthermore, it is known today that a number of researchers and bureaucrats contributed to the writing of Blueprint for a New Japan. It is likely that their goal was to establish a more rational politics and public administration that could break through the widespread preference for the status quo in the late 1980s and adapt to the conditions of a new age. As I will discuss in more detail later, this is the “modernist orientation” (kindai-shugi shikō) referred to in this book.

Compared to the fever theory and the neoliberalism theory, the Heisei Democracy theory is the most reliable lens through which to consider the perceptions and choices made at the time. However, it arguably places too much emphasis on the underlying principles and plans for political reform, and does not pay enough attention to the mutual inconsistencies that existed in these wide-reaching reforms and the resultant problems that emerged.

Public administration scholar Itō Masatsugu has already noted such inconsistencies in his comparison of decentralization reforms with those in other areas (e.g., administrative reform and fiscal reform).¹⁵ For example, the Hashimoto Ryūtarō administration pursued structural fiscal reforms and decentralization simultaneously. But the reforms were undertaken by different organizations, which proposed conflicting reduction targets for the same national subsidies, causing confusion. However, because the object of analysis is limited to the Hashimoto administration, his research shows some concrete examples but does not offer general reasons for such inconsistencies. Itō points to “changes in the core executive,” or differences in the linkages between the prime minister and cabinet ministers, ruling party officials, and ministry officials (depending on reform domain) but some ambiguity remains as to how these relate to inconsistencies in the purpose and content of reforms.

To understand why inconsistencies emerged, it is essential to consider causes other than variations in personal networks, and the effects of those causes on how large-scale, wide-reaching reforms were carried out, in parallel or in succession. In other words, because the reforms were extensive and time-consuming, it is possible that—despite a widely shared sense of direction and a common recognition of contemporary problems—they ultimately proceeded down different paths. Taking this recognition as a starting point, this book aims to fill in the shortcomings of the Heisei Democracy theory and other prevailing explanations and draw a slightly different picture of political reform.

3 This Book’s Approach

3.1 “Ideas” and Their “Localization”

In this book, I will examine the breadth of political reforms since the 1990s and consider why they were so far-reaching, what commonalities and differences can be found across institutional domains, and what their consequences for Japanese politics have been. At this juncture, let me discuss the concepts from political science that will be used.

Political science research on the nature of institutions has progressed markedly in recent years, providing new perspectives from which to understand broad political reforms. In particular, a key concept in this book is the perspective of the “multilevel mixture,” which is used to analyze the linkages between political institutions across multiple domains. There is no widely used definition for the multilevel mixture, but I would venture to call it “linkage among multiple institutions” or “combination among multiple domains.” Taking this into consideration, it is possible to explain how changes implemented separately in each area can have unintended consequences if they lack appropriate linkages.¹⁶

The breadth of the political reforms that were undertaken also suggests the existence of a common understanding of the issues or philosophies involved. Political science often examines these kinds of perceptions using the analytical concept of “ideas.” Ideas are factors that influence the long-term, wide-ranging decision-making behavior of individuals and organizations (collectively referred to as “actors”) involved in policy choices and institutional design, by furnishing them with a perspective and framework for understanding status quo conditions and future outlooks. One point that is often emphasized is that ideas can also lead to irrational decisions tied to outdated cognitive frameworks, or unpopular decisions that do not benefit many actors. But ideas essentially refer only to the cognitive frameworks or philosophies that govern the behavior of actors, and it is not necessarily the case that idea-based choices are irrational.¹⁷

That said, even when common ideas exist across a broad range of areas, individual reforms are often pursued as separate, domain-specific institutional changes. Even if one is aware of the trends and outcomes of reforms in other areas, a specific reform will not be adopted if it does not have the support of a majority in that area. This formation of majorities is achieved through the “localization” of ideas. Localization is a concept introduced in the arguments of Amitav Acharya, a political scientist in the United States, who analyzes the spread and acceptance of norms in international relations.¹⁸ According to Acharya, even if norms are widely accepted internationally, to be accepted in each country, they must be transformed for the political context of that country into something understandable to domestic political actors. Something similar may happen in the process of political reform.

3.2 What We Think Was Happening

From the perspective of ideas and their localization, I see political reform as institutional changes that alter the multilevel mixture. What can we see through this analytical process? Let me summarize my conclusions briefly.

Political reform was not a fever or a fad, nor was it the means or spadework for the development of neoliberal economic policies. Nor was it driven solely by the attention and capabilities of a particular actor such as Ozawa Ichirō. It was, instead, an attempt to change political institutions based on conceptions of Japan’s historical development as a modern nation, its politics, economy and society through the 1980s, and a vision of the nation’s future. The reforms also shared a common goal of further modernizing or rationalizing Japan’s politics and economy, or “modernism.” In other words, modernism existed as a fundamental idea that underlay political reform.

The term “modernization” used here also includes the connotation of “contemporization,” or of making things compatible with the contemporary environment. However, as will be discussed in Chap. 2, the ideas that are the source of political reform are arguably continuations of a way of thinking that traces back to the opening of the country at the end of the Edo period, or at least the early postwar period. This way of thinking involves a desire to change the behavior of people living in Japanese society, as well as the political, administrative, and economic institutions that are the accumulation of that behavior, in order to make it more rational and independent.

This conceptualization of an ideal society and ideal individuals is related to ideas that developed in Western Europe and the United States in the modern era. Autonomous individuals are expected to establish political power, control it, and run the government through their choices and consent. Understood in this way, and in this larger context, the term “modernization” is more apt and suitable than “contemporization,” and so this book will use the terms modernization and modernism instead.

Modernism needed to be localized, putting it into the context of addressing the challenges that existed in each institutional domain when reform was undertaken. If the challenges recognized by the leading actors in each domain differed, the appropriate prescriptions would also differ by area, even if they all started from the same idea of modernism. The localization of such ideas was essential to the formation of majority support and the realization of area-specific reforms. However, this also meant that the content of specific reforms was determined on a domain-by-domain basis, and it was not possible to choose a consistent direction across a wide range of domains, which could lead to unintended consequences in multilevel mixture. As a result, while each area has changed from its pre-reform conditions, the overall effect has been ambiguous.

Note that there already exist other studies that use different concepts to analyze the formation of majority support in the political reform process. For example, Kawai Kōichi, a scholar of public administration, has observed that majority formation within ruling parties and between ruling and opposition parties was key to recent administrative reorganization efforts, including those undertaken during the age of political reform covered here. Kawai calls this a “consensus cost,” referring to the concessions needed to forge agreement.¹⁹ Although similar in focus, “localization,” as used in this book, is a broader concept. It refers not only to the concessions required to form the majority needed to enact reform, but also an entire breakdown of domain-specific reform processes, connecting the basic principles undergirding their implementation and establishment to the concrete plans that were undertaken.

3.3 Why Did Reform Happen This Way?

Although it was based on basic shared ideas, localization was so indispensable that it produced institutional change in different directions, which collectively did not necessarily deliver the expected results for the public sector as a whole. This book contends that this fragmentation is the key issue to understanding political reform. Why was localization so important, and how did it lead institutional reforms—which arose from the same modernist ideas—into different directions? The following hypothesizes the causal relationship and is a theme throughout the entire book.

This book focuses on the fact that political reform proceeded with the same political processes that had been in place throughout the 1980s. I previously noted that electoral reform was the first great achievement of political reform. Unsurprisingly, electoral reform was largely prepared through the decision-making structure of the 1980s, in which consensus building within the LDP was of decisive significance but the wishes of other parties were also taken into account. The overall political process underwent major changes following the reform of the electoral system. Just before the 1996 general election, partisan competition between two major parties began to emerge, due to greater coordination amongst opposition party legislators. However, the LDP-centered government remained unchanged, and since many Diet members had been in office since before the reform, changes in ruling party policymaking were slow to follow.²⁰

The strengthening of cabinet power and the reorganization of ministries and agencies, which were the main parts of administrative reform, were intended to centralize policymaking. These measures, along with electoral reform, have had the effect of changing the behavior of principal actors, such as politicians and bureaucrats. Today’s Kantei leadership is a product of that initiative. However, it was not put into practice until 2001. Decentralization reforms were pursued in the late 1990s, at almost the same time as administrative reforms, and by that point, the influence of actors who had been involved in decentralization for a long time was substantial. Reforms of the Bank of Japan and Ministry of Finance also took place during the same period. It is fair to say that judicial reform is the only reform whose framework has solidified in the twenty-first century, after the centralization of power within the central government had become more pronounced. In other words, the political reforms covered in this book were strongly colored by the political process up to the 1980s, or were the product of the first stage of changes in the reform process.

What then were the political processes at the national level through the 1980s? Their most important characteristic was their decentralized nature, with many actors involved. Neither the LDP nor the ministries and agencies could decide matters solely at the discretion of top leaders.

First let us look at the LDP. The House of Representatives employed a medium-sized electoral district system, in which three to five legislators were elected from each constituency. Although the LDP had long enjoyed single-party control of the government, it was common for multiple LDP candidates to compete in a single district, which meant that the party did not have strong internal cohesion. LDP candidates relied on their factions and personal support groups (kōenkai) for votes, and were under little pressure to conduct their election campaigns and legislative activities in accordance with party policy. Decision-making in the party started from internal subcommittees of the Policy Affairs Research Council and was thoroughly bottom-up in nature.²¹

What about the bureaucracy? One of the most significant elements of postwar Japan’s bureaucracy was the “principle of apportioned management” (buntan-kanri gensoku). In this concept from administrative law, the work of each ministry and agency is managed by that ministry or agency’s appointed minister. The principle of apportioned management has been in place since the pre-WWII period. Cabinet ministers had the authority to direct and supervise bureaucrats but the prime minister did not, greatly constraining the latter’s leadership as the head of the executive branch.²² Moreover, decision-making within ministries and agencies was based on the ringi-sei or “large room” system, just as in postwar Japan’s private companies. This system had a strong bottom-up aspect, with mid-level officials such as section chiefs and assistant directors playing a significant, substantive role.²³

This decentralized, bottom-up approach to decision-making was accompanied by fragmentation of the loci of issues and decision-making. Policy decisions were effectively made by the bureaus and divisions of each ministry and agency, or by the LDP’s Policy Affairs Research Council. When such fragmentation occurs, even matters based on the same principles and ideas can manifest as different problems. For example, let us consider a policy based on the principle of “increasing productivity to grow the Japanese economy.” In this case, the concrete means necessary to increase productivity are not the same in the industrial sector as in the agricultural sector. In the industrial sector, the focus might be on technological innovation, whereas in the agricultural sector, the emphasis might be on the entry of corporate landholders and the concentration of arable land. If technological innovation is applied to the agricultural sector as well as industry, priority may be given to policy measures that do not fit the needs on the ground.

Therefore, even if fragmentation itself is effective in dealing with the complex issues of contemporary society, the question of which approach is supreme—the basic direction set from the top or the actual problems and means recognized from the bottom—must be solved in the end. In this case, more bottom-up decision-making is likely to result in policies that reflect local, on-the-ground needs and conditions. This approach is not in itself a bad thing, and is a major characteristic of Japanese decision-making beyond policymaking, but it contains the risk that the individual (micro) will be superior to the whole (macro) and the basic direction will be lost. One might even say that localization dominates over fundamental ideas.

Ideally, of course, one would expect to make choices that are individually effective while maintaining the overall direction, or to make appropriate adjustments to avoid contradictions between the two. This, however, is not easy. Coordination requires a hierarchy among individual policy areas, something with which Japanese politics had been exceedingly uncomfortable until the 1980s. There was, therefore, a strong tendency to make across-the-board policy decisions so that no one would complain. A typical example of this is the promotion of fiscal consolidation in the 1980s, when uniform rules on fiscal spending regardless of policy issues—the “zero ceiling” (no year-on-year growth) and the “negative ceiling” (a flat percentage reduction from the previous fiscal year)—were adopted. Furthermore, “inner circles” consisting of interested parties and experts developed in each policy area, and the risk of ignoring their wishes was significant for senior leaders. Political reform therefore proceeded by a process whose fundamental character was decentralized, parallel policymaking.

3.4 Notable Points and the Structure of the Book

Based on the ideas and observations that I have laid out thus far, I will focus on the following two points in the narrative and analysis in this book.

The first regards the documents that provided the basic direction for the promotion of reform in each area. Most of these take the form of findings and reports of the advisory councils that drafted the reforms, but in cases where other proponents are clear, I will also look at groups that promoted reform and individuals who advocated for various issues. For example, in the case of electoral reform, the Eighth Electoral System Advisory Council issued its first report in April 1990 and its second in July of the same year, with the first report focused mainly on the electoral system for the House of Representatives. Therefore, I will naturally pay attention to this report. I also cannot ignore trends in the mass media and the “Political Reform Forum,” a group of experts who promoted reform at the time. Since this book is interested in the ideas on which reforms were based, I will try to interpret the basis of those ideas from discussions among the forces pushing for reform.

The other point regards the process of linking documents that set the direction for reform with specific institutional changes made after those documents were issued, i.e., the process of localization. It could also be called the process of forging a majority in a particular area. Institutional reform is not so simple a task that a majority can be assembled based on an idea for reform immediately after it is presented. There are of course forces that are fundamentally opposed to reform, but they are not likely to join a majority to promote change and are not very important for this analysis.

Rather, to consider the process of localization, it is critical to pay attention to forces or actors that “favor the general but oppose the specific”—those that approve but seek exceptions, and those that seek to make reform proposals more advantageous for themselves. The actions of these forces will have a decisive influence on the substance of institutional change. Since a considerable amount of time has passed since political reform began, there are fortunately many reliable studies on the formation of majorities for individual reforms. This book, by relying mainly on these studies, will attempt to show, albeit quite briefly, how majorities that pushed for reform in each area were formed and what resulted from the process.

Let me describe the structure of the following chapters. In Chap. 2, I will examine political reform as a whole, look at what internal or domain-specific demarcations are possible, and then discuss the ideas underlying reform. Based on that classification, Chaps. 3 and 4 will address central government reforms, with particular reference to the electoral system and to administrative structures (the strengthening of the cabinet and the reorganization of ministries and agencies). These reforms concern the institutions that are fundamental to the day-to-day activities of the central government, i.e., the legislative and executive branches. These two reforms have had an extremely significant impact on Japanese politics since the start of the twenty-first century.

Then, Chap. 5 deals with the reform of the Bank of Japan, the central bank, together with the reform of the Ministry of Finance, with which it was closely related, and Chap. 6 examines the reform of the judicial system. These are organizations that are essentially part of the central government, but whose institutional independence has been assured. The crucial question here was whether they should be reformed in the same way as the electoral and administrative systems, or whether their independence should be emphasized. Chapter 7 discusses decentralization, an important case of changes to governing systems outside the central government. Local governments are inherently capable of making (or not making) institutional changes independent from the central government. However, in the case of postwar Japan, local governments have collaborated closely with the central government, despite having a certain amount of autonomy.²⁴ Therefore, the focus of decentralization must be on their conformity with central government reforms. In Chap. 8, the final one, after re-summarizing the overall argument, I will consider what the political reforms discussed in this book have brought Japan.