Administrative Reform

Abstract

The reform of the parliamentary system and public administration in the late 1990s is the subject of this chapter. The role of liberal modernism is clearly evident in the transformation process. Contrary to the beliefs of many journalists and academics, the parliamentary system was totally transformed.

1 The Background of Reform

1.1 The Emergence of the Administrative State

The expected role of the state or government in society has been described using different concepts in different time periods. These include “night watchman state,” in the case of the nineteenth century, and “welfare state” in the twentieth century. The state in the nineteenth century played a minimal role, conducting foreign and security policy and maintaining domestic order, while leaving the people alone in their social lives. The role of the state expanded in the twentieth century, with growing intervention in people’s lives through the establishment of social security institutions and other measures. The term “night watchman,” which is practically an obsolete term today, refers to a person whose role was to patrol the streets at night for crime prevention and other purposes.

In the nineteenth century, as the Industrial Revolution played out in Europe and the United States, the role of government was limited. It was common practice not to constrain the autonomous growth of the economy and society. Governments at the time relied principally on tariffs for revenue, and thus had insufficient financial resources to grapple with socioeconomic challenges. Because tariffs are indirect taxes, if high rates are imposed to increase revenue, they can have a negative impact on economic activity (trade). This, in turn, can end up constraining revenues rather than increasing them. In the case of Japan, the Industrial Revolution began a little later, coinciding with modernization and the formation of the nation-state. The role of the state, such as the Meiji government’s promotion of new industry, was more expansive in Japan than in other countries, although still quite small in current terms. In particular, the textile industry, which was an early engine of the Industrial Revolution, had a high degree of autonomy in its development, and the environmental and labor issues that accompanied the progress of the Industrial Revolution were left for later.

The global situation changed dramatically in the first half of the twentieth century. On the one hand, the Industrial Revolution produced worsening labor conditions and income inequalities between the rich and poor. On the other hand, the establishment of universal male suffrage in many countries amplified voices demanding that the government tackle socioeconomic problems. The focus of revenue collection also shifted from tariffs to personal income taxes and corporate taxes, and progressive taxation became more common, which also greatly expanded the revenue available to the government. In more than a few countries, the increased revenue was at first directed to military and national security—including during the two world wars—but domestic spending also steadily grew.

Additionally, pensions for veterans and bereaved families were introduced worldwide during the period of the world wars, and many countries introduced public pension systems, which had originated in Germany in the late nineteenth century. It was also during this period that labor law was established in Germany and spread to other countries. After World War II, the number of countries that expanded their medical insurance systems, which had partially existed before, increased. In the United Kingdom, which kickstarted this trend, the National Health Service (NHS) was established soon after WWII and was based on the “Beveridge Report,” compiled by economist William Beveridge in 1942. In the 1960s, universal health insurance was also established in France and Japan. In addition to the development of these social security programs centered on pensions and health insurance—in other words, the construction of a welfare state—the role of government dramatically expanded to include public works and other economic policies to manage the business cycle and industrial and education policies that play an instrumental role in the medium- and long-term national development, as well as including government investment in major industries.

As the government came to tackle socioeconomic problems proactively, its larger role was inevitably accompanied by an expansion of the organizations and personnel with jurisdiction over the issues. The main source of revenue for governments had shifted to direct taxes, where tax revenues were more likely to vary with economic growth and the business cycle, and it was easier to secure financial resources during the long period of economic growth that followed World War II. Therefore, an expansion of the size of government was seen in virtually all major countries. This meant in turn an expansion in the scope of government operations and an increase in the number of civil servants.

Japan was no exception. In 1950, during the Occupation period after World War II, the number of national public servants was 1.58 million. The total increased to 1.7 million in 1960, and then to 1.91 million in 1965. If the 2.23 million local civil servants are included, the number of public sector employees accounted for 8.6% of the employed population. However, as is often pointed out, these figures are far below those of other industrialized countries. For example, even as of 1965, the number of public sector employees was 6.16 million in the United Kingdom (24.3% of the employed population) and 4.92 million in West Germany (18.3% of the employed population).¹ Even so, there was no doubt that the number of civil servants was gradually increasing.

1.2 Administrative Reform as an Issue

At this point, the question of what to do with the bloated public sector, in other words, the necessity of administrative reform, became a recognized issue. As early as the 1960s, an argument emerged that growth in the number of civil servants should be curtailed without considering the expansion in the scope of government activities.

There are several reasons why the idea of framing the problem as an increase in the number of civil servants became popular. First, there was the recognition that there still existed many tasks that ought to be handled by the government, but were not. In other words, problem-solving by the government was seen as inadequate, and so it was difficult to reduce the amount and scope of officials’ work. In the mid-1960s, Japan was at the height of high-speed growth, but was not uncommon for their benefits often the benefits failed to trickle down to individuals and regions that faced the adverse effects of economic growth. Second, the prewar tendency to treat civil service as a “status” rather than an occupation remained, and there was probably an undercurrent of resistance to this attitude. The perception that civil servants were pampered, securely employed, had time to spare, and had generous pension benefits after retirement was not uncommon, even if it was at odds with reality. The National Personnel Authority (NPA) at the time was aggressive about raising civil service salaries, but trying to raise salary levels while avoiding a bloated public sector led to expanding workloads without increases in personnel numbers.

The First Provisional Administrative Research Council (First Rinchō), established in 1961 during the Ikeda Hayato cabinet, published reports that addressed many of the issues facing the administrative sector, but it only succeeded in reducing the number of bureaus in each ministry and in reducing the number of civil servants. However, the 1969 enactment of the so-called “Act for the Total Number of Civil Servants” (Sōteiin-hō) capped the total number of national civil servants, and thereafter became a powerful check on the increase in government officials. Okamoto Masakatsu, a longtime bureaucrat in the former Ministry of Home Affairs and the Cabinet Office, characterizes the administrative reforms of the First Rinchō as “restraining the expansion of organizations and personnel and regulating their total number.”² A typical example from the Act for the Total Number of Civil Servants is the idea of avoiding an increase in the number of civil servants by promoting the efficient management of the public sector while raising the level of civil servant salaries, but leaving the role played by the government untouched. Maeda Kentarō, a scholar of public administration, notes that this became the standard way of thinking in Japanese debates about administrative reform.³

Movements to check the expansion of the government’s activities, rather than simply increasing or decreasing the number of civil servants, arose in some countries from the end of the 1970s, and the trend spread worldwide in the 1980s. This is the “small government” theory, of which the administrations of Ronald Reagan in the United States, Margaret Thatcher in the United Kingdom, and Helmut Kohl in Germany were the standard-bearers.

While this approach sought to directly address problems that accompanied the expansion of the scope of governments’ activities, such as growing budget deficits, in a larger context, it was characterized by an emphasis on the autonomy of the economy vis-à-vis the government—particularly the role of the free market economy. This was often called neoliberalism, in the sense that it emphasized the activities and functions of the market economy.⁴ Major European countries introduced consumption taxes as a stable source of revenue from the late 1960s onward, in an attempt to cover the fiscal demands of the welfare state. However, the first oil shock of 1973 ended the economic growth of the post-World War II era, and a change in the role of government became unavoidable. Thatcher was the figure who most embodied this change. When she became prime minister in 1979, she carried out decisive actions to privatize telecommunications, airlines, and other industries, despite criticism and resistance from the opposition Labor Party as well as from within her Conservative Party, earning her the nickname “Iron Lady.”

In Japan, too, a movement to control the scope of government activities rather than personnel emerged during the administration of Nakasone Yasuhiro, who took office in 1982. The administration, based on the findings of the Second Provisional Administrative Research Council (Second Rinchō), privatized the three major public corporations: Japan National Railways, Nippon Telegraph and Telephone Public Corporation, and the Japan Tobacco and Salt Public Corporation. This was a reduction in the scope of the government’s activities through partial withdrawal from specific fields of operations. Although fundamental reform of the social security system failed, the administration halted the trend towards system expansion by, for example, scrapping the provision of free medical care for the elderly, which had been in place since 1973. Under the succeeding administration of Takeshita Noboru, a consumption tax was introduced in 1989, which represented a belated shift towards increasing the ratio of indirect taxes to revenues. Okamoto summarizes this as the “era of aiming for small government.”⁵

2 What Was the True Aim?

2.1 The Emergence of a New Direction

The administrative reforms promoted in the 1990s have been described as neoliberal reforms that were based on the “small government” orientation of the 1980s. For example, political scientist, Nakano Kōichi, whose interpretation of political reform as a rightward shift in Japanese politics was mentioned in Chap. 1, states that administrative reforms were a “new right turn relayed from Nakasone to Ozawa to Hashimoto.”⁶

However, it is doubtful whether there was a coherent neoliberal or “new right-wing” philosophy. First, such a view lacks persuasiveness in terms of personal ties. At the time that administrative reforms were initiated, Ozawa Ichirō and Hashimoto Ryūtarō, who according to Nakano were part of the “relay of the new right-wing turn,” had been in a fierce rivalry, dating back to the split in the Takeshita faction in 1992, as opposing leaders helming the New Frontier Party and the LDP, respectively. It would be difficult to find a “relay” between the two in the direct sense of the word, unless one makes the strong assumption that since they both had belonged to the LDP and its Takeshita faction, their policy positions had remained consistent and unchanged. As for Hashimoto’s own ideology, he had emerged as a representative of the so-called labor and social welfare policy tribe (zoku), and is said to have been more sympathetic to social democracy than neoliberalism.⁷

Meanwhile, there is no evidence that Nakasone Yasuhiro, who is considered a pioneer of the “New Right,” was actively involved in the administrative reforms that Hashimoto was trying to promote. When looking at the lineup of the Administrative Reform Council (Gyōsei Kaikaku Kaigi) during the Hashimoto Administration, which examined reform proposals, there is little continuity from the Second Rinchō in the 1980s. Regarding the reorganization of ministries and agencies in particular, its starting point appears to have been the Third Provisional Council for Administrative Reform, which was established in the early 1990s (1990–1992).⁸ This was after the Nakasone administration, and there is little evidence that this Council inherited the policies of the Second Rinchō or Nakasone.

Second, even in terms of its conception, the administrative reforms advanced during the Nakasone administration were significantly different. The Administrative Reform Council submitted its final report in December 1997, and what is indicated therein is an orientation towards a better-functioning government rather than reductions in the number of government employees or the scope of government activities. The sense that government itself is the problem is not visible. Clearly this is different from strong neoliberalism, which tends to consider the government itself as evil. The Council instead assumed that government had an important role to play and concerned itself with how to make it play that role more effectively.

The “Philosophy and Goals of Administrative Reform—Why We Must Engage in Administrative Reform Now,” placed at the beginning of the final report, sets forth the following goals.⁹

• 1. We plan to reconstruct the “shape of this country” with the aim of forming a freer and fairer society, while building on the prevailing achievements of the Japanese people.

• 2. In order to reconstruct the “shape of this country,” first and foremost, we will reform the bloated and ossified government organization to realize a simple, efficient, and transparent government that is fit to carry out important state functions effectively.

• 3. On the basis of such a government, we will actively play a leading role as a member of the international community, aiming at the formation and development of a free and fair international society.

This text was written by Satō Kōji, a constitutional law scholar who was one of the members of the Council, in close consultation with Matsui Kōji, a bureaucrat who had been seconded to the Cabinet Secretariat from the Ministry of International Trade and Industry (MITI) and was working in the Council’s secretariat.

The personal continuity between Nakasone and Ozawa is also broken here. Satō was not a member of the Eighth Electoral System Advisory Council, which played a major role in electoral reform, nor did he participate in the Political Reform Forum in which Sasaki Takeshi and others were involved. Matsui, meanwhile, joined MITI in 1983, and was studying in the United States in the late 1980s and early 1990s and was therefore not directly involved in electoral reform. Matsui later became a DPJ member of the House of Councillors and served as deputy chief cabinet secretary in the Hatoyama Yukio cabinet, and he consistently belonged to Hatoyama’s faction and continued to be a member of the DPJ even after Ozawa left the party in 2012. From this, we can see that administrative reform during the Hashimoto administration proceeded from different roots to those of Nakasone and Ozawa.

2.2 Administrative Reform as Part of Political Reform

Hashimoto’s administrative reforms are an important part of the political reforms discussed in this book, and there is no doubt that they shared the characteristics of the reforms of this era. Underlying these reforms was the strong sense of crisis that Japan could no longer rely on its successes up to the 1980s, as the socioeconomic and international environments that Japan confronted had changed drastically. Although it is somewhat lengthy, let me quote again from the final report of the Administrative Reform Conference.

As a result of the longstanding pursuit of an efficient and adaptive industrial society, this country is covered with both state regulations and customs and traditions, and society seems to have become extremely standardized and fixed. In the process of rising from the ruins of wartime [WWII] defeat and pursuing an economically prosperous society, we may have unwittingly created a new national mobilization system. With the end of ever-increasing economic growth, along with the maturation of society and the diversification of people’s values, the same system that once stimulated the public’s work ethic and brought vitality to society is now becoming a factor that fosters a structure of mutual dependence, strengthens the sense of social stagnation, and inhibits the people’s desire to create and will to take on new challenges.

The Japanese state and social system, including the bureaucracy and public-private relations, is excellent at implementing fixed goals that have been provided, but it is difficult to say that they are first-rate at creating original ideas or new value systems or in their ability to respond to novel situations. The various events that have recently affected the Japanese state and society have made us keenly aware of this fact.

This administrative reform is a reform of the “administration” but, at the same time, it is also a reform of the “way of this country” itself, in which under the Meiji constitutional system people become accustomed to being the objects of governance, and even during the postwar period tended to be dependent on the administration. It is, in short, about how “We The People” ourselves shape the form of this country.

The basic principle of this administrative reform can be summarized as follows: change the postwar administrative system, which is overcome with institutional fatigue, and replace it with a twenty-first-century-style system that is based on the autonomous individual while being suitable for creating a freer and more just society.

Here the modernist understanding of postwar Japanese politics is presented almost as an ideal type. There exists a structure of “mutual dependence” that hinders individual and economic autonomy from the government and has weakened the ability to “create original ideas or new value systems or respond to novel situations.” What is needed is not just reform limited to administrative structures, but a “reform of ‘the way of the country’ itself, which has tended to depend on the administration.” In other words, a change in the “state of ‘We The People’ ourselves.” Furthermore, it is believed that what should be aimed for is a government “that is based on the autonomous individual while being suitable for creating a freer and more just society.” To put it differently, this is not simply a government that is smaller in size and scope, but a government that can respond appropriately to the new challenges it faces.

The idea that administrative reform should, on the basis that the scope of the government’s activities has been reduced to a manageable extent, increase problem-solving abilities and responsiveness in the areas that remain, is called “New Public Management” (NPM). This was a philosophy that was already gaining attention in the United Kingdom and other countries. In the context of Japanese politics in the 1990s, it overlapped with the philosophy of liberal modernists. And what was deemed indispensable for realizing an efficient and responsive executive branch was strengthening the functioning of the cabinet. Regarding the need for this, the final report states the following:

The “administrative department”-centered view of public administration, and the principle of apportioned management by which administrative affairs are managed by the respective ministries and agencies, while appropriate for times in the past, are revealing their limitations and dysfunctions in making prudent value judgments and policy development in response to increasingly complex national goals and rapidly changing domestic and international environments. Now, what is needed is an administrative system that is able to engage in comprehensive, strategic policymaking that looks across the whole of government and renders decisions nimbly.

In order to realize this, it is necessary to strengthen the functions of the cabinet, taking seriously the fact that under the Constitution, the Cabinet’s functions are high-level governance and politics—“the overseeing of affairs of state”—that is, setting the state’s comprehensive and strategic direction, taking into consideration information from administrative departments.

Under the Meiji constitutional system, the prime minister was positioned as “first among equals” alongside cabinet ministers, and his leadership was subjected to significant constraints. This situation had its origins in the Meiji Constitution’s decentralized decision-making structure. But after WWII, it was linked with the bottom-up decision-making mechanism of the LDP, which was a majoritarian ruling party under the MMD-SNTV system. It was not the prime minister or even cabinet ministers who could wield influence over ministries and agencies under the principle of apportioned management, but rather members of the LDP’s policy tribes. Strengthening the cabinet’s functions was an attempt to change this structure and to rationalize the management of the central government by establishing prime ministerial leadership. This was undoubtedly consistent with the changes in party competition and internal party organization envisioned in the electoral reforms.

2.3 Between “Small Government” and “Strong Government”

However, it would be a bit naïve to think that only the ideas of liberal modernism—namely, that increases in individual autonomy and the rational management of the public sector can improve the state’s responsiveness to policy needs—were solely responsible for shaping the Administrative Reform Council and the Hashimoto reforms.

As mentioned previously, administrative reform in postwar Japan was first and foremost conceived as personnel cuts and organizational contraction. Nakasone’s reforms in the 1980s further added to squeezing the scope of government activities. Without due consideration of these circumstances, it would not necessarily have been the case that everyone would support the existence of more functional administrative authorities capable of responding to socioeconomic needs and the international environment.

It is in this context that the final report of the Administrative Reform Council called for reforming “the bloated and ossified government organization.” Since the phrase “fit to carry out important state functions effectively” immediately follows, it is clear that in the reform of government organizations, the emphasis is placed on getting rid of “ossification.” We can see the awareness of—or perhaps the painstaking attention to—continuity with previous administrative reforms. This aspect was indispensable for securing the support of the business community and the mass media, as well as public opinion. Specifically, it was stated in a chapter of the final report titled “Streamlining (Outsourcing) and Efficiency Gains of Administrative Functions” that “the basic perspective for reviewing the role of the national administration is ‘from public to private’ and ‘from national to local.’”

The first matter addressed here is reform of the government’s operational work, which covers the postal service, national forestry, coinage, printing, and the like. It is assumed that reforms will be taken ultimately with an eye towards privatization, although this is not explicit. However, at this point, the majority of LDP politicians, starting with Prime Minister Hashimoto, opposed postal privatization, and it is highly likely that postal privatization was floated to maintain the coherence or logic of the report as a whole. Another significant feature is that the role of administration was divided into policy planning and policy implementation, and the creation of incorporated administrative agencies (Dokuritsu Gyōsei Hōjin; also independent administrative corporations or agencies) was proposed to take on responsibilities for policy implementation other than those already undertaken by existing departments. An incorporated administrative agency is an organizational form that has a certain degree of autonomy from government intervention, that must maintain the profitability of its operations, and can be staffed by non-civil servants. This was modeled after the NPM-style administrative reforms in the United Kingdom, which were discussed earlier.

The perspective of “reducing administrative functions” is also applied to central government ministries and agencies. While the final report is based on the core premise that central government ministries and agencies must enhance their functions “in terms of comprehensiveness, flexibility, efficiency, transparency, and internationality,” it added that “it is necessary to deregulate and decentralize and thoroughly divide roles between public and private—leaving as much as possible to the private sector and local governments—and to actively promote administrative streamlining and prioritization.” The specific direction to be taken was the systematic separation of the policy planning and implementation functions of central government ministries and agencies. Following the separation, implementation functions would be entrusted to incorporated administrative agencies as previously mentioned, but the status quo would also be changed for policy planning functions. Regarding the arrangement of ministries and agencies, it was proposed to organize and consolidate them by policy dimension, and the necessity of comprehensive coordination among ministries and the consolidation and elimination of advisory councils were also strongly advanced.

3 Reorganizing Ministries as a Means of Localization

3.1 In the Vortex of Inter-party Competition

Administrative reform literally means institutional change of administrative departments, but this does not mean that majority formation is unnecessary. Whether it be the strengthening of cabinet functions or the reorganization of ministries and agencies, it is essential to have the support of a majority of Diet members, since the basis for such reforms must be found in legislation. More specifically, it was necessary to secure support within the ruling party. At the time of the inauguration of the Hashimoto government, the ruling parties were the LDP, the Socialist Party, and the New Party Sakigake. But after the general election of October 1996, the Social Democratic Party (which changed its name from the Socialist Party in January 1996) and the New Party Sakigake shifted to extra-cabinet cooperation, so the ultimate key to administrative reform was developments within the LDP. However, in understanding Hashimoto’s administrative reforms, the influence of inter-party competition cannot be ignored.

Hashimoto raised administrative reform as a major policy initiative in his general policy speech (shoshin hyōmei enzetsu) at the start of his second administration, following the general election of 1996. In the speech, Hashimoto first proposed “five great reforms”—administrative reform, economic structural reform, financial system reform, social security reform, and fiscal structural reform—and in the following January, he appealed for “six great reforms,” adding education reform. As anticipated by Nakasone Yasuhiro, who said of these reforms—“Aren’t they spread too widely?”—most of these reforms ended up failing and were abandoned along the wayside, but administrative reform was engraved in history as the Hashimoto government’s achievement.¹⁰

The “precursor” or antecedent of this development was the general election of October 1996. The New Frontier Party (NFP), which aimed to compete with the LDP in a bid to take power, emerged through the collaboration of the ruling parties of the Hata administration (the Japan Renewal Party, the Japan New Party, Komeito, the Democratic Socialist Party, etc.). As one initiative of NFP leader Ozawa Ichirō’s “Five-Point Contract,” the party stressed that it would “decisively carry out bold administrative reform, decentralization, and deregulation, and reduce national and local expenses by more than ¥20 trillion.” Ozawa said, “The central government ministries and agencies will first be arranged into 15 ministries and agencies, and eventually reorganized into 10 ministries. National civil servants will be reduced by around 25%. Among these, the number of senior bureaucrats will be halved.” He also asserted that the LDP and the SDP were incapable of such reforms.¹¹ The seeds of the argument that would later lead to the DPJ’s election manifesto can already be seen. In response, the LDP also pledged in the general election to promote administrative reforms including halving the number of ministries and agencies. In other words, one motivation for the LDP’s administrative reform proposal was to blunt the appeal of that of the NFP.¹²

Because the starting point for reform was inter-party competition over the reduction of ministries and agencies, which had become an issue in the general election of 1996, the focus of the first phase of Hashimoto’s administrative reform was the reorganization of ministries and agencies and the reduction of their power and influence. Evaluations at the time also focused strongly on this point.

For example, in September 1997 when the Administrative Reform Council issued its interim report, political scientist Shinoda Tomohito noted, “It is unlikely that the ruling parties will come together as one, due to the inevitability of the Social Democratic Party’s opposition on the issue of employment [of civil servants] in relation to administrative reform. If the LDP is shaken internally by the relationship with the SDP [which had been cooperating with the Hashimoto administration from outside the cabinet], cooperation with the Ministry of Finance—the so-called elite of the elite in the bureaucracy—would be necessary to push forward administrative reform.” Hashimoto expressed the outlook that he could not truly tackle reforms that would reduce the power and influence of the bureaucracy, and that his reforms would end up being inadequate compared to Nakasone’s reforms, which were advanced by the Second Rinchō based on a clear philosophy.¹³

Ministerial reorganization and the reduction of the power and influence of the bureaucracy similarly attracted attention within the LDP. At this stage, ministries and agencies cooperated with LDP lawmakers and attempted to modify the Administrative Reform Council’s interim report. In particular, this report emphasized a “broad consolidation and reorganization” of ministries and agencies which included the merger of the Ministry of Education and the Science and Technology Agency; the reorganization of the Ministries of Construction, Transportation, and Agriculture, Forestry, and Fisheries to establish a “Ministry of Land Development” and a “Ministry of Land Conservation”; the division of the Ministry of Posts and Telecommunications into three parts, the privatization of the postal life insurance business, and the downgrading of the postal service to an “agency” status. This prompted a strong reaction. At this time, agencies were not defined as analogous to the incorporated administrative agencies of later years, but they shared the goal of greater separation from the government.

Although the public’s assessment of the interim report was not poor, and Hashimoto was unopposed in his reelection as leader of the LDP in September 1997, he made a great mistake in the cabinet reshuffle that followed. He appointed Satō Takayuki as director-general of the General Affairs Agency (Sōmuchō), which was heavily involved in administrative reform. Satō had allegedly been involved in the Lockheed scandal in the 1970s, and as a result had not been given a cabinet position despite repeatedly winning elections. He had served as head of the LDP's Administrative Reform Promotion Headquarters, and there was no doubt that he was well-versed in administrative reform, but he was appointed largely due to circumstances within the party. A leading figure in the former Watanabe faction, Satō detested the LDP’s collaborative relationship with the SDP, and wanted a coalition with the New Frontier Party. It is said that his appointment was intended to win over his backers, who included Nakasone.¹⁴

The entrance of so-called crooked politicians into the cabinet was strongly criticized, and some LDP legislators took advantage of this opportunity to strengthen their opposition to the interim report. Their specific aim was to block the reorganization of ministries and agencies, including the dissolution of the Ministry of Construction and the Ministry of Posts and Telecommunications. It goes without saying that both were deeply connected to the LDP’s support base, through their centrality in the distribution of public works and the management of special post offices. At the time, the close relationships between LDP lawmakers, bureaucrats, and related organizations that had been built under the 1955 system still remained. In the final report, the Construction Ministry was not dissolved but instead integrated with the Transport Ministry and the National Land Agency into the Ministry of Land, Infrastructure, Transport and Tourism. The Ministry of Posts and Telecommunications was also merged into the Ministry of Internal Affairs and Communications, without being split up. The privatization of the postal life insurance business was also avoided.¹⁵

In early December 1997, just after the final report, political scientist Sone Yasunori offered a harsh assessment, arguing that “the ideological aspects of the interim report have completely vanished, making it entirely a “dragon’s head and snake’s tail”—an idiom referring to something that impresses at the beginning but fizzles by the end.” His reasoning was that the reorganization of ministries and agencies had not been accompanied by careful examination of the volume and scope of their activities. It merely “changed the width of the yōkan (a bean-based sweet) without changing the volume” and followed a scenario that “was written by Ministry of Finance and the Ministry of International Trade and Industry,” two of the most powerful ministries in Japan.¹⁶

3.2 The Effective “Preservation” of the Strengthening of Cabinet Functions

On the one hand, this interest in the reorganization of ministries and agencies and the reduction of the power and influence of bureaucrats meant that the Hashimoto government’s administrative reforms were of the same lineage as that of the Nakasone administration in aiming for “small government.” On the other hand, it meant that the other pillar—strengthening the functions of the cabinet—was not fully examined. In other words, because realizing the “small government” by reorganization of ministries and agencies was the battleground for obtaining majority support for reform, the “strong government” orientation, as epitomized by the strengthening of cabinet functions, survived the political process intact and could be implemented after the final report of the Administrative Reform Council was issued.¹⁷

From the perspective of the analytical framework of this book, the strengthening of the cabinet, which was a heretical or non-mainstream element of reform, survived because ministerial reorganization was prioritized. The view that stressed reductions in personnel and shrinking of bloated administrative organizations was the central element that shaped postwar Japan’s debate on administrative reform. Strengthening the cabinet—a novel part of Hashimoto’s reforms—could be localized as one feature of a package of administrative reforms whose overall orientation fit with the “small government” philosophy.

Of course, it was recognized at the time that strengthening the functions of the cabinet was a new and important development. I would like to look at a few specific examples. Sone Yasunori, whom I have already mentioned, offered harsh comments on the final report, but also observed that “many people say that they value the strengthening of cabinet functions.”¹⁸ Furthermore, Morita Akira, a scholar of public administration who served as a counselor to the Preparatory Committee for the Reorganization of Central Government Ministries and Agencies, a body that was involved in the Basic Act on Central Government Reform, observed, “One focal point for the Administrative Reform Council is the transfer of policy-formation leadership from bureaucrats to politicians.” And he argued that relaxing the principle of apportioned management and allowing the prime minister to command and supervise bureaucrats in ministries and agencies directly were important changes that would lead to greater political leadership in the policymaking process.¹⁹

However, these commentators also did not expect the reforms proposed by the Administrative Reform Council to achieve their aims. Let us return to the views of the commentators above. According to Sone, “Strengthening the functions of the parliamentary system is a fine argument, but it ignores the problems posed by the parliamentary system. The parliamentary system is based on the relationship between the leaders of political parties and the prime minister” … “Resolving these relationship problems can strengthen the cabinet’s functions and the prime minister’s leadership.” By this, Sone means that it is insufficient to simply expand the prime minister’s authority and responsibilities vis-à-vis other ministers and bureaucrats.²⁰

Morita questions whether the Cabinet Office and the Ministry of Internal Affairs and Communications (MIC) are capable of coordinating across ministry boundaries. “It is natural as an organizing principle of the parliamentary system,” he says, “that authority and responsibility for integrating policy among ministries and agencies, and formulating and executing policies, systematically belongs to the cabinet, and ultimately the prime minister who is selected by the Diet.” However, regarding the Cabinet Office, which was to be responsible for this kind of integration and coordination, he adds, “What is described in the final report is a step backward from the original image of a cabinet institution for managing ministries and agencies.” He further questions the MIC’s role, arguing that while “it has the function of managing the organization of ministries and agencies, its institutional status is only equal to—and not above—other ministries and agencies,” making it difficult to see how it can act according to the political will of the prime minister and the cabinet. In the case of the Cabinet Office, Morita also charged that although there was room for the minister in charge to implement policies in line with the intentions of the prime minister over the heads of ministers and bureaucrats in each ministry—a point that was laid out clearly in the Administrative Reform Council’s final report—this authority was made ambiguous during the legislative process that followed.²¹

These points suggest why the goal of strengthening the cabinet’s functions survived the political process that followed the final report. Broadly speaking, there were three reasons. First, since strengthening the cabinet was seen as a means of ensuring the general supremacy of the political executive over the bureaucracy, it was difficult for it to become a target for revisions by politicians during the legislative process. In fact, this was not the case, but if the Hashimoto reforms are seen as reforms aiming for a “small government” or “small bureaucracy,” an extension of the Nakasone reforms, and if strengthening the cabinet is understood as an attempt to weaken the bureaucracy relative to politicians, there was little reason for the politicians of the time to oppose it.

On the other side of the coin, the second reason was that while revisions were almost exclusively sought by bureaucrats, working through the LDP, the bureaucrats were primarily occupied with fending off the large-scale reorganization of ministries and agencies. It is natural that the issue of cabinet authority was given less priority at a time when a scalpel was being taken to the basic structure of ministries and agencies, such as organization, personnel, and budgets. Moreover, this authority was understood to be related to coordination between ministries, and it was thought that this could be adequately handled if organizational restructuring could be avoided. Third, the prime minister and the cabinet’s relationship with the ruling party, which had been a constraint on their ability to play a leading role in the policy process, was not a direct target of the reforms based on the final report of the Administrative Reform Council, and thus it was thought that strengthening cabinet functions would have little effect. The linkage with electoral reform was not yet widely recognized at the time.

4 What Happened?

4.1 The Decisive Effects of Strengthening Cabinet Functions

The administrative reforms pursued under the Hashimoto administration became law in 1998 as the Basic Act on Central Government Reform, and the reorganization of ministries and agencies, including the creation of the Cabinet Office, was implemented in January 2001. The prime minister was legally specified as the Cabinet Office’s competent minister. The Cabinet Act was also revised, clearly stipulating that the prime minister, as the presiding officer at cabinet meetings, “may propose motions regarding basic objectives and other matters concerning important policies of the cabinet.” Moreover, the maximum number of special advisors to the prime minister was increased and the Cabinet Secretariat was reorganized.²² At the time these changes were implemented, Mori Yoshirō was serving as prime minister, but he was replaced by Koizumi Jun-ichirō in April of that year, and the fruits of administrative reform were first put to the test by the Koizumi administration. During that administration, a new and larger building housing the prime minister’s office was completed. Its size embodied the strengthening of the cabinet’s functions.

An entirely different policy process emerged under the Koizumi administration. While I will not delve into it deeply, its most distinctive feature was prime ministerial leadership or Kantei (prime minister’s office) leadership.²³

Koizumi made use of the Cabinet Office, a new political resource granted to the prime minister through the strengthening of the cabinet’s functions, to launch his economic policy of “Structural Reform Without Sanctuary” with the Council on Economic and Fiscal Policy (CEFP) as the main stage for the reform. The CEFP was established under the aegis of the Cabinet Office and was led by Takenaka Heizō, who effectively headed the Council as Minister of State for Economic and Fiscal Affairs. It included four private-sector members drawn from the business community and academia, as well as Iwata Kazumasa and Ōta Hiroko, political appointees (appointed without having passed the national civil service examination) who were added to the council’s secretariat as Cabinet Office directors-general for policy planning in order to advance the policymaking process.²⁴ The CEFP also presented the so-called Honebuto Hōshin, or “Big Boned Policy,” the nickname for a strategic blueprint—officially titled Basic Policies for Economic and Fiscal Management and Reform—that guided annual budget-planning. Although the Ministry of Finance seconded bureaucrats to serve as the prime minister’s executive secretaries, and in the secretariat of the CEFP, its influence was greatly reduced.²⁵ As structural reforms were oriented toward changing the policymaking process, the decline of ministries other ministries, especially those that had once made their presence felt through public works projects, such as the Ministry of Land, Infrastructure, Transport, and Tourism, and the Ministry of Agriculture, Forestry, and Fisheries, was also evident.

This policy process, known as Kantei leadership, momentarily became less conspicuous after Koizumi stepped down in 2006. This is because the six prime ministers who followed, starting with Abe Shinzō’s first administration, were each in office for only about a year, thus—whether they were from the LDP (2006–2009) or the DPJ (2009–2012)—they were largely unable to leave their mark on policy. However, even during this period, the influence of the prime minister on the policy process was by no means small, as seen by the substantial role played by Fukuda Yasuo in the establishment of the Consumer Affairs Agency, which aimed to unify administration of consumer issues, a longstanding problem, or Hatoyama Yukio’s advocacy of the relocation of the Futenma Air Station outside of Okinawa, which ignored established policy and sowed confusion. There was a striking increase in the number of bills submitted by the cabinet under the jurisdiction of the Cabinet Secretariat or the Cabinet Office, the number of tasks assigned to the Cabinet Office, and the number of Cabinet Office personnel. Around 2012, near the end of the DPJ administration, there was even discussion about transferring some of the Cabinet Office’s administrative tasks back to individual ministries in order to alleviate its excessive workload.²⁶

Since the start of the second Abe administration at the end of 2012, Kantei leadership has strengthened to the extent that it is sometimes derided as “Abe supremacy” (Abe Ikkyō). Even the Ministry of Finance, once known as the “Ministry Above All Ministries,” has clearly lost its influence.²⁷ In 2014, the National Security Secretariat was established, making it even clearer that the prime minister has also become directly responsible for foreign and security policy. Moreover, the Cabinet Personnel Bureau was established in the same year to promote the unified management of senior bureaucratic personnel appointments from the deputy director-general level and higher in each ministry and agency. Although it is too early to tell whether personnel matters have been decisively and irreversibly changed, it is possible that this has had the effect of strengthening the concentration of power, as in the much-discussed issue of bureaucrats’ “surmising the intentions” (sontaku) of the Kantei. Additionally, in the legislative process surrounding the passage of national security legislation (anpo hōsei) in 2015, the director-general of the Cabinet Legislation Bureau was replaced and the constitutional interpretation of the right of collective self-defense was changed to align with the Abe administration’s policy. The impression is that the Cabinet Legislation Bureau, which in the past maintained its autonomy based on its legal expertise despite being housed within the cabinet, has seen its role change dramatically.²⁸

The case of the Abe administration differs somewhat from the Koizumi administration’s Kantei leadership, which made use of the CEFP and other bodies established in the Cabinet Office. Abe’s Kantei was characterized by a preference for policymaking by a small group centered in the Cabinet Secretariat, including the chief cabinet secretary and the prime minister's executive secretaries. However, the institutional resources that made these different approaches to Kantei leadership possible were provided by the administrative reforms of the Hashimoto administration. Strengthening the cabinet’s functions, contrary to skeptical evaluations prior to implementation, led to major and decisive changes in the policy process in the central government.

However, while it is certain that the policy process has become prime minister- or Kantei-led, it is premature to assume that this is all a result of the strengthening of cabinet functions. The prime minister is also the leader of the ruling party, and the power he possesses as the head of a major political party overlaps with the strengthened power of the prime minister, enabling him to exercise greater influence in the policy process. It is the internal organization of the ruling party that defines the nature of the party leader’s power, and it is the electoral system that provides the background for it. ²⁹ In other words, the centralization of power in political party organizations has occurred as a result of the electoral system reform discussed in the previous chapter.³⁰ For people who aspire to become Diet members under the parallel SMD-PR system, the fastest way to win election is to become an official candidate of a major party. It is therefore difficult for aspiring politicians to resist the intentions of party executives, which have the right to nominate candidates. The prime minister, as the head of the ruling party, is at the top of the party organization, and it is a big risk for ruling party lawmakers to disagree with the prime minister’s policies. The strengthening of the cabinet’s functions, combined with electoral reforms that share the same orientation, has changed the policy process.

4.2 The Apparent Arrival of “Small Government”

What were the consequences of the reorganization of ministries and agencies in the Hashimoto reforms? As we have already seen, the final report of the Administrative Reform Council called for the separation of the policymaking and implementation functions of ministries and agencies and the “broadening” of their visions, so that the administrative departments of the central government could focus on policymaking to address important national issues from multiple perspectives. In addition, it was assumed that policy implementation would be borne by incorporated administrative agencies, in order to realize a “small government.” The separation of policy formulation and implementation was referred to as “vertical reductions (outsourcing)” in the interim report, but in the final report this was changed to the phrase “reduction of administrative functions,” perhaps because the term “vertical” could be misleading. In any case, there is no doubt that “broadening” and “outsourcing” or “agency-fication” were key concepts in the reorganization of ministries and agencies.

Regarding this “broadening,” major organizational changes were implemented through the establishment of the Ministry of Health, Labor, and Welfare from the merger of the Ministry of Health and Welfare and Ministry of Labor; the Ministry of Internal Affairs and Communications from the merger of the Management and Coordination Agency, the Ministry of Home Affairs, and the Ministry of Posts and Telecommunications; the Ministry of Education, Culture, Sports, Science and Technology (MEXT) through the merger of the Ministry of Education and the Agency for Science and Technology; and the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) through the merger of the Ministry of Transport, the Ministry of Construction, the National Land Agency, and the Hokkaidō Development Agency. Additionally, the establishment of the Cabinet Office through the merger of the Prime Minister’s Office, Economic Planning Agency, and Okinawa Development Agency, among others, was an enormously significant change in terms of improving policy coordination across ministries. In the case of the Cabinet Office, rather than simply bundling together and retaining the pre-merger duties of these organizations, it became a driving force for prime ministerial leadership in the policy process. The prime minister served as chief minister, and would appoint ministers of state in charge of special portfolios to implement his vision, while the chief cabinet secretary also participated in administrative matters. As mentioned previously, the Council on Economic and Fiscal Policy and the Council for Science and Technology Policy (now the Council for Science, Technology, and Innovation) were also established in the Cabinet Office, and it has become routine today for these bodies to be a source of policy ideas and to lead major policy changes, especially in matters of strong interest to the prime minister and his administration.

On the other hand, critics have noted that the negative side of this “broadening,” notably an excessive increase in workload, may be greater than any positive effect from coordinating policymaking across former ministries. A typical example is the Ministry of Health, Labor, and Welfare. By unifying the Ministry of Health and Welfare, responsible for health care and social security, with the Ministry of Labor, responsible for employment and labor, the aim was to draft policies without segmenting human life into “time at work” and “time not at work.” However, the unified ministry’s recent policy concerns are issues that do not map onto these dimensions neatly, such as the declining birthrate and aging population, related issues with the health of the social security system, and supporting women’s advancement in society. Therefore, in September 2018, the LDP’s Administrative Reform Promotion Headquarters made a proposal to the prime minister (i.e., the party president) with a view to splitting up the Ministry of Health, Labor, and Welfare.³¹

What about “outsourcing,” the other key concept? The Act on General Rules for Incorporated Administrative Agencies was enacted in 1999. Based on this law, 57 incorporated administrative agencies were established in April 2001. Then, as a result of the Koizumi administration’s public corporation reforms, 34 corporate bodies were transformed into 32 incorporated administrative agencies in October 2003. In addition to these periods of large-scale realignment, there have continued to be minor increases and decreases, and as of April 2020, there were 87 incorporated administrative agencies.³² Moreover, in 2004, all national universities were converted into incorporated administrative agencies by means of a separate law called the National University Corporation Act. However, it is difficult to say that the Administrative Reform Council’s vision of newly outsourcing the implementation portion of the central government’s operations has been realized. A significant number of the incorporated administrative agencies were former special corporations, and national universities have traditionally had a high degree of operational autonomy already. Rather, we should say that the greatest effect has been that public sector work that had already been de facto outsourced is no longer performed by civil servants.

On the one hand, the seeming reduction in the number of civil servants would appear consistent with the movement for “smaller government.” However, the number of civil servants had stopped being a significant issue some time previously, and the reduction likely proceeded with the awareness that it would have only symbolic meaning. Instead, what stands out in practice is that outsourcing through incorporated administrative agencies has had unanticipated negative effects. In more than a few cases, incorporated administrative agencies with non-civil service employment standards have taken over work that is essentially the responsibility of the public sector. This has actually strengthened their relationship with the ministry that has jurisdiction without increasing their independence, and given rise to a trend whereby it becomes increasingly difficult to ensure political accountability.

The establishment of incorporated administrative agencies related to higher education is a typical example. In addition to the national universities, institutions like the National Center for University Entrance Examinations, which plays a major role in the selection of university applicants, the Japan Society for the Promotion of Science, which distributes research funds indispensable for the promotion of scholarship, and the National Institution for Academic Degrees and Quality Enhancement of Higher Education, which is involved in budget allocation to universities, are all incorporated administrative agencies with a non-civil service model of employment. However, as they bear responsibility for policy implementation, they are all operated under the strong influence of the Ministry of Education, Culture, Sports, Science and Technology (MEXT), whose officials often take posts at universities after retirement (amakudari, literally “descent from heaven”). However, because these incorporated administrative agencies are legally disconnected from MEXT itself, the process of ensuring accountability for their operations has become more indirect. Conversely, it is not widely understood that MEXT bears accountability for issues related to education-related agencies, even though it regulates the incorporated administrative agencies in its jurisdiction and delegates many implementation tasks to them. The confusion seen in higher education policy and the university admissions system in recent years may be due in part to this division of duties, in addition to a high degree of voter attention and susceptibility to intervention from the administration.

Considered in this way, the effects of the reorganization of ministries and agencies with the aim of “broadening” and “outsourcing” can be seen on two fronts. One is the reduction in the number of civil servants, which was necessary to localize the Hashimoto administration’s administrative reforms in the context of the time. The other is the changes that conformed with the reform’s fundamental goal of strengthening the cabinet’s functions. We should consider the reorganization of ministries and agencies as a kind of wrapping paper that ensured the survival of the reform plan, which was too novel as it was. Hashimoto’s reforms had as their main focus the pursuit of “strong government,” not “small government.” In the background were voters who sought to generate and utilize political power, and the legitimacy they gave to such a form of government. This idea is in the same vein as electoral reform, which is why administrative reform became an important part of the political reforms of the 1990s.