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Dynamic and Immobilist Politics in Japan

J. A. A. Stockwin Nissan Professor of Modern Japanese Studies, Director of the Nissan Institute of Japanese Studies, University of Oxford and Fellow of St Antony's College, Oxford

Alan Rix Professor of Japanese Studies, Department of Japanese and Chinese Studies, University of Queensland

Aurelia George Senior Lecturer in Politics at the University of New South Wales, Australian Defence Force Academy, Canberra

James Horne Officer of the Australian Treasury, Canberra

Daiichi Ito Professor of Public Administration, Faculty of Law, Hokkaid6 University, and Professor of Public Administration, Graduate School for Policy Science, Saitama University

Martin Collick Director, Centre of Japanese Studies, University of Sheffield

M MACMILLAN PRESS

in association with PALGRAVE MACMILLAN

© J. A. A. Stockwin 1988

Softcover reprint of the hardcover 1st edition 1988 978-0-333-46786-2

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First published 1988

Published by THE MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world

Typeset by Wessex Typesetters (Division of The Eastern Press Ltd) Frome, Somerset

British Library Cataloguing in Publication Data Dynamic and immobilist politics in Japan. -(St. Antony's/Macmillan series). 1. Japan-Politics and government-1945-I. Stockwin, J. A. A. II. St Antony's College 320.952 JQ615 ISBN 978-1-349-10299-0 ISBN 978-1-349-10297-6 (eBook)DOI 10.1007/978-1-349-10297-6

Contents

List of Tables vii

Preface ix

Glossary of Terms xn

Notes on the Contributors xvi

1 Dynamic and Immobilist Aspects of Japanese Politics 1 J. A. A. Stockwin

2 Parties, Politicians and the Political System 22 J. A. A. Stockwin

3 Bureaucracy and Political Change in Japan 54 Alan Rix

4 Policy Implications of Administrative Reform 77 Daiichi Ito

5 Japanese Interest Group Behaviour: An Institutional Approach 106

Aurelia George

6 The Economy and the Political System 141 James Horne

7 Politics and the Japanese Financial System 171 James Horne

8 Social Policy: Pressures and Responses 205 Martin Collick

9 Japan and the United States: Dependent Ally or Equal Partner? 237

Aurelia George

v

vi Contents

10 Dynamism, Foreign Policy and Trade Policy Alan Rix

11 Conclusions J. A. A. Stockwin

Index

297

325

333

List of Tables

2.1 House of Representatives election results, 1958--86 29 2.2 Third Nakasone cabinet, 28 December 1985 38 2.3 LDP lower house members, factional affiliation and

cabinet experience 41 2.4 Frequency of ministerial changes by ministry,

November 1964--July 1987 42 2.5 Average length of tenure of portfolio, by ministry,

November 1964--July 1987 43 2.6 Ministers holding a portfolio for a total of twenty

months or more, November 1964--July 1987 44 2.7 Ministers holding portfolios in Ministry of Finance,

Ministry of Foreign Affairs, Ministry of International Trade and Industry, Economic Planning Agency and as Chief Cabinet Secretary for a total of thirty months or more, November 1964--July 1987 45

2.8 Ministers held over from administration of one prime minister to that of the next, November 1964--July 1987 46

4.1 Distribution of researchers among departments 84 4.2 Ratio of dependency on bonds 86 5.1 Number of interest group officials in the Diet by

type of group, 1980--3 110 5.2 Interest group representatives in the Diet by type

of group 138 7.1 The regulators 177

vii

Preface

This book originated in a series of discussions held at the Australian National University in Canberra in the latter half of 1981, between several people whose main research interest lay in the field of Japanese politics. We thought that by pooling our quite diverse expertise we ought to be able to produce a book that would throw new light on the relationship between Japan's political system and how decisions were actually made. The most puzzling aspect of that relationship seemed to us to be that whereas in certain areas decision making was imaginative and fast-moving, in other areas it was very difficult for decision makers to do anything beyond following precedent and hoping for a quiet life. We suspected that the way political institutions had evolved during the modern period, and especially since the American Occupation following the Second World War, had a great deal to do with this curious dichotomy, which in recent times has exasperated some of those who have had to deal with Japan. The dichotomy could be expressed by the words 'dynamism' and 'immobilism', and hence the title of this book.

Those involved in the original discussions and who agreed to participate in this book were Aurelia George, James Horne, Alan Rix and myself. For all of us the Australian National University, with its strong commitment to the study of Asia, including Japan, had been a formative influence. Subsequently we recruited two more participants whose particular expertise was especially relevant to the project, Martin Collick of the Centre of Japanese Studies, University of Sheffield, and Daiichi Ito, a most distinguished Japanese political scientist, of Hokkaido and Saitama Universities. We all shared a belief, not only that Japan was important (which is obvious) but that a precise analytical understanding of Japan was important, and we also shared a dislike of stereotypes which have been all too common in writing on Japan.

Between 1981 and the present the members of the original group have moved to diverse institutions and locations. Not long after the original discussions took place I myself moved to my present position in Oxford, which meant that most of the job of coordinating the project had to be done by correspondence. Unfortunately the varying demands on our time and in particular my own tardiness have delayed the completion of the work for longer than we would have liked.

IX

X Preface

Nevertheless, we believe that the chapters taken separately and together constitute, if not a resolution, at least a partial unravelling, of the basic conundrum we sought to address. We hope also, that in the course of addressing our central problem we have also told the reader something about what Japanese politics in its various aspects is really like and how it is developing. It did not prove possible to time the writing of all the chapters so that they were completed at the same time, and although some subsequent updating has taken place, some of the chapters refer to a rather earlier period than others. They should be read, therefore, as case studies from slightly different time-frames, rather than up-to-the-minute accounts of the current state of play. In any case the field of Japanese politics and political decision making is so capacious that we have done little more than sample its richness. We feel reasonably confident, however, that we have focused on central aspects and issues.

There is no need to summarise the chapters here except in the most cursory fashion. In Chapter 1 the central problems of the book are introduced, and in Chapter 2 the main focus is on political parties, in particular the Liberal Democratic Party, which is central to the system as a whole. Chapter 3 analyses the equally important government bureaucracy, Chapter 4 is a case study of the Provisional Commission on Administrative Reform (Rincho), one of the most fascinating experiments in recent Japanese political history, and Chapter 5 investigates the way interest groups operate in the Japanese context. In Chapter 6 the ways in which the economy intermeshes with politics is discussed, while in Chapter 7 the focus is on the politics of the financial system. Chapters 8, 9 and 10 are essentially case studies, respectively of social welfare, defence and the US relationship, and of policy in relation to exports. Some conclusions are drawn in Chapter 11.

In this book Japanese names are given in the normal Japanese order of surname first and personal name second, except for citations of works written in English, where the name has been changed to the order which is usual in English. (In some cases, however, the Japanese order is preserved in English language publications, and where this is so, that order is kept.) Macrons are used to distinguish long from short vowels in Japanese (since this often makes a difference to the sense), except for the word 'Tokyo'. Abbreviations, technical terms and expressions in Japanese are explained at first use, but the

Preface xi

reader may refer to the Glossary of Terms. Works cited in Japanese are all published in Tokyo, unless otherwise stated.

I should like to thank my family, and Rikki Kersten, for help in proof-reading the text in sad and difficult circumstances over Christmas/New Year 1987-8, and for so many friends for their support. This book is in memory of TJS.

J.A.A.S. Nissan Institute of Japanese Studies,

University of Oxford

Glossary of Terms

AMA

amakudari

ASW

bakufu

BOJ

CDs

ch6sakai

Diet (National Diet)

D6mei

DSP

EPA

FEITCL

FILP

FTC

gaikaku dantai

genr6

gensaki market

hakuchii

han

Homen lin

ICAF

Administrative Management Agency

'descent from Heaven': senior government servants retiring to responsible jobs in the public or private sector

Anti-Submarine Warfare

'military camp government': referring in particular to the Tokugawa Shogunate up to 1868

Bank of Japan

Certificates of Deposit

advisory committee/investigatory committee

Committee on Financial System Research

command, control, communications and information

Japan's Parliament

Japan Confederation of Labour

Democratic Socialist Party

Economic Planning Agency

Foreign Exchange and Foreign Trade Control Law

Fiscal Investment Loan Programme

Fair Trade Commission

extra-departmental groups

'elder statesmen', arbiters of power in prewar politics

a market in short-term negotiable financial instruments

a situation of near parity of Diet seats between the LDP and the Opposition parties

feudal domains or clans, abolished 1871

Welfare Commissioners (prewar)

Investigating Committee on Administration and Finance (of LOP)

XII

IRAA

JAL

JCP

JANZUS

JOB

JDL

jiban

JMA

JNR

JSP

JTU

kan

kanri

Keidanren

kodan

kokkateki churitsusei

kokumin kenk6 hoken

Kokumin Ky6kai

kokumin nenkin hoken

Kokumin Seiji Kyokai

kondankai

K6meit6

k6sha

ky6sai kumiai

LOP

Lockheed scandals

MAFF

Glossary of Terms

Imperial Rule Assistance Association

Japan Airlines

Japan Communist Party

Japan, Australia, New Zealand and the United States (suggested security pact)

Japan Development Bank

Japan Doctors' League

XIII

'constituency' or electoral support network

Japan Medical Association

Japan National Railways

Japan Socialist Party

Japan Teachers' Union

government, official power, the authorities

an official (prewar)

Federation of Economic Organisations

public body

(state) neutrality

national health insurance

People's Association (see Kokumin Seiji Kyokai)

national pensions insurance

People's Political Association (formerly Kokumin Kyokai): funding organisation, mainly for the LOP

advisory committee

'Clean Government Party': political offshoot of the Soka Gakkai

public corporation

mutual aid association

Liberal Democratic Party

scandals first revealed to the US Congress in 1976 concerning alleged bribes to Tanaka Kakuei and others in order to promote Japanese purchase of Lockheed aircraft

Ministry of Agriculture, Forestry and Fisheries

xiv

Meiji Restoration

MFA

MITI

MOF

MPT

MTDPE

National Diet

NDPO

'negative gerrymander'

NLC

nokai

Nokyo

NTT PARC

PH&W

Rincho (Rinji Gyosei Chosakai)

sakidori Jukus hi

sangyo kumiai

SCAP

SCJ

SDF

SOL

Seikatsu Hogo Ho

seikei bunri

Shakai Hoken Shingikai

Shakai Hosho Seido Shingikai

Glossary of Terms

The 'restoration' of the emperor in 1868, being part of a regime change which was a key condition for Japan's modernising revolution

Ministry of Foreign Affairs

Ministry of International Trade and Industry

Ministry of Finance

Ministry of Posts and Telecommunications

Mid-Term Defence Programme Estimate

see Diet

National Defence Programme Outline

failure to redraw constituency boundaries to reflect adequately shifts in population

New Liberal Club

agricultural associations

Agricultural Co-operative Union (Association)- for definition see note to Table 5.1

National Telephone and Telegraph

Policy Affairs Research Council (of LOP)

Public Health and Welfare Section (of SCAP)

Provisional Commission on Administrative Reform

'pre-emptive welfare'

producer co-operatives

Supreme Commander, Allied Powers (often used as blanket term for the Occupation Authorities)

Security Council of Japan

Self Defence Forces

Social Democratic League

Livelihood Protection Law

separation of politics and economics

Social Insurance Commission

Social Security System Commission

shingikai

sh6rei

Soh yo

Soka Gakkai

SSBN

Taish6 Democracy

tekkakusei

tokubetsu kaikei

tokushu hojin

transcendentalism; transcendental government

tsutatsu

unmei ky6d6tai

zaibatsu

zaikai

Zennichin6

Zenn6

zoku

Glossary of Terms

advisory council (advisory commission)

ministerial ordinance

XV

General Council of Japanese Trade Unions

'Value Creation Association', a Buddhist organisation which established the K6meit6 in the 1960s

Strategic nuclear-powered ballistic missile submarine

A relatively liberal political period associated with the Taish6 era (1912-26), but in fact spanning most of the 1920s

specialist competence

special accounts budget

'special legal person'/public authority

a prewar government neither formed from members of the House of Representatives nor responsible to it

notification

community bound together with a common destiny

'financial cliques'/big prewar conglomerate firms

'financial world'/the influential sections of big business

All-Japan Federation of Farmers' Unions

National Farmers League

'tribes' of LOP Diet members, specialising in a particular issue area

Notes on the Contributors

Martin Collick is Director of the Centre of Japanese Studies at the University of Sheffield, and the author of papers and articles on Japanese social policy and industrial relations.

Aurelia George is Senior Lecturer in Politics at the University of New South Wales, Australian Defence Force Academy, Canberra, and the author of papers and articles on the politics of Japanese agriculture and defence.

James Horne is an officer of the Australian Treasury, Canberra, and the author of Japan's Financial Markets: Conflict and Consensus in Policymaking.

Daiichi Ito is Professor of Public Administration, Faculty of Law, Hokkaido University, and Professor of Public Administration, Graduate School for Policy Science, Saitama University. He is the author of Gendai Nihon kanryosei no bunseki (An Analysis of Modern Japanese Bureaucracy), as well as papers and articles on the Japanese cabinet system and civil service.

Alan Rix is Professor of Japanese Studies, Department of Japanese and Chinese Studies, University of Queensland, and the author of Japan's Economic Aid and Coming to Terms: The Politics of Australia's Trade with Japan, 1945-57.

J, A. A. Stockwin is Nissan Professor of Modern Japanese Studies, Director of the Nissan Institute of Japanese Studies, and Fellow of St Antony's College, Oxford. He is the author of The Japanese Socialist Party and Neutralism and Japan: Divided Politics in a Growth Economy.

xvi

1 Dynamic and Immobilist Aspects of Japanese Politics J. A. A. STOCKWIN

In November 1987 Nakasone Yasuhiro was replaced as prime minister of Japan by Takeshita Noboru, a politician of the same party that had ruled without interruption since 1955, the Liberal Democratic Party (LOP). Nakasone had been widely regarded abroad as a thrusting dynamic leader determined to exercise personal power in order to 'settle accounts with the postwar period'. By contrast Takeshita - little known outside Japan hitherto - comes over as a behind-the-scenes politician who hesitates to move politically until he has constructed a broad consensus of opinion behind him. Does this mean, then, that Japan has once again entered a period of immobilist politics after five years of unusually dynamic leadership? Why did an established leader who seemed to have given the government and politics of Japan a much more modern image than it had previously enjoyed have to yield office to someone whose approach appeared traditional and unexciting?

This kind of question is merely one example of a much broader issue: why is Japan at one and the same time dynamic and immobilist, and what is the relationship between these two apparently opposite aspects of politics and policy making? This issue is what this book is about.

The world, which has grown accustomed to the extraordinarily vigorous and innovative ways in which the Japanese have gone about developing a competitive and formidable economy over the past four decades, is often confronted with what seems like policy paralysis in many areas. Contemporary examples include slowness in the liberalisation of commodity and financial markets, some aspects of defence policy (at least until the very recent past) and issues of administrative and educational reform and of agricultural protectionism.

We believe that the nature of this paradox cannot be grasped adequately without an understanding of the political system as a

1

2 Dynamic and Immobilist Aspects of Japanese Politics

whole. This book, therefore, is both about decision making and about the character of Japanese politics as a whole. The attempt to combine these two things rather than tackle them separately will make this book a wide-ranging one. Part of the problem with analysing the politics of Japan is that it is easy to fall into a pattern of assumptions based on the norms of one's own political system. Although comparison with other systems is legitimate - even essential - if we are to comprehend Japanese politics, it is also quite crucial that we examine our own assumptions about politics and about the relation of politics to decision making.

In this book, therefore, we shall address ourselves in particular to the effectiveness and responsiveness of political decision making in Japan; effectiveness, in the sense of the ability of the system to achieve goals, and responsiveness, meaning the extent to which both internal and external pressures are reacted to positively rather than ignored or resisted. We shall pay attention to the constraints and opportunities provided by the nature of the nation's broad political and administrative arrangements. We shall concentrate on two polar possibilities of decision-making styles and outcomes: dynamism and immobilism. Dynamic decision making, in our definition, is where decision makers and the decision-making process as a whole are responsive to circumstances and demands. A dynamic decisionmaking process is one where in retrospect it would be possible to say that the decision makers had not simply been constrained by a complex environment, but had succeeded in transcending the limitations provided by the nature of the political system, pressures of competing demands and so on, so as to arrive at policy based on the merits of issues and incorporating structural change where necessary.

Immobilist decision making, by contrast, may be defined in negative terms. It involves an inability to do more than accommodate competing pressures and effect a 'lowest common denominator' compromise between them. Another variant is 'satisficing', in other words giving everybody something of what they want but nobody everything of what they want. Where pressures are few and not particularly insistent, then this is unlikely to present a serious problem, but where politics is a battlefield between entrenched interests, then the challenge to the decision makers is proportionately greater. On the other hand a lack of challenge from the decision-making environment may also, in certain circumstances, lead to a relatively immobilist outcome or series of outcomes.

Whether decision-making patterns are predominantly dynamic or

J. A. A. Stockwin 3

immobilist obviously relates to the merits of alternation in office versus one-party dominance. We may note at this point that in many (though not all) western democratic countries alternation in office used to be regarded as generally beneficial, whereas today it tends to be regarded rather more sceptically.

In this regard we could put forward two alternative, and in a sense opposite, hypotheses concerning the conditions for dynamic versus immobilist decision-making patterns.

One hypothesis would be that where decision makers are securely in power over a long period, with little prospect of being replaced for the foreseeable future, there may be a problem of immobilism stemming from excessive stability. In such circumstances, it may be argued, the extent to which the decision makers are forced to react to outside pressures and expectations is limited by the weakness of the opposition to them and the entrenched nature of their own position. From this may stem a failure to respond creatively to changing parameters of the policy environment, including pressures coming from abroad, and the danger therefore that difficult but necessary decisions will be avoided.

An opposing hypothesis would state that a political elite which is relatively unchecked by the necessity to respond to and accommodate an electorate whose loyalties and preferences are fickle, is likely to be dynamic rather than immobilist in its decision making because it will have a freer hand in making and implementing policy than an elite constantly faced by problems of 'governability'.

Leaving aside for a moment the Japanese case, a general argument in favour of the first hypothesis might contend that an elite with virtually unchallenged tenure of office is likely to run out of ideas and fail to plan for changing circumstances by adopting a dynamic and imaginative approach to policy innovation. Where a particular elite has been in power for a long time there is also the danger that new and radical departures of policy are difficult to adopt because they could be interpreted as implying a criticism of the policies pursued by the government hitherto. The problem may be particularly acute where the elite is sustained by a complex balance of forces, which may render it more comfortable to make do with old policies which were originally hammered out as a result of difficult and long-drawn-out processes of compromise between different interests represented in the elite.

In favour of the second hypothesis it might be argued that the experience of political systems in which alternation of power of

4 Dynamic and lmmobilist Aspects of Japanese Politics

competing parties or coalitions of parties is fairly frequent has not in recent years been a particularly happy one. New policies come in with each government, but the knowledge that reasonable tenure of office cannot be guaranteed inhibits a dynamic and creative approach, producing instead a tendency to concentrate on rewarding interest groups constituting the camp of supporters of the government currently in office. Adversarial politics between equally entrenched blocks of interest groups and parties in an alternating system also seems, according to this argument, to create its own systemic immobilism, with the same old arguments and disputes recurring from government to government, and a stable and essentially immobilist pattern of see-sawing policy reversals becoming the norm. In contrast, where power is securely in the hands of a given elite over a long period, there is at least a reasonable chance that that elite will be free of the time-consuming pressures of working for political survival for long enough to adopt dynamic approaches to policy making.

When we examine these hypotheses in the context of Japan, it becomes clear that there is no simple relationship between dynamism and immobilism on the one hand and alternating government versus one-party dominance on the other. In Japan, the reins of power have remained in the hands of essentially the same ruling group for longer than in almost any other advanced country with a system of free elections. Decision making is in some circumstances highly dynamic, but is often also exceedingly immobilist. It is immobilist, however, because over the long period in which one party has been in power, its freedom of action has come to be seriously checked by interest groups of various kinds, factions within the ruling party, ministries and agencies of the government bureaucracy, the business world, foreign pressures and so on.

Naturally, a political system where one party has been in power for over thirty years does not for that reason alone remain fossilised in an unchanging pattern of interactions, since the policy environment is constantly changing. The policy environment has become more complex over the years. Over certain areas of policy (for instance, defence, trade, finance and agriculture) the international environment has induced a relatively intensive learning process among the decision makers. In the case of Japan, however, we can fairly confidently advance the judgement that the structure of politics and administration of the 1980s shows more continuity with that of the late 1950s than is the case in the United States or France, to take two clear examples, and probably in the rest of the western world as well.

1. A. A. Stock win 5

From a western perspective, the political system of Japan is not entirely easy to understand. In order to come to grips with it we need to take a dispassionate look at our assumptions about the nature of politics, which include accumulated ideas about how politics ought to be arranged. Because of the widely shared understanding in modern democratic states about what is desirable in a political system, it is not always easy to perceive with clarity the actual nature of political arrangements and the 'hidden' assumptions on which they are based. The realisation that this may be the case has led in modern times to the production of a great variety of 'conspiracy theories', alleging that what on paper is a benign disposition of political institutions and practices, is in practice a cover for the domination of a particular group or coalition of forces, whose ambitions militate against the common good (or simply against the interests of those excluded from power by such arrangements).

It is no part of our intention to develop any kind of extreme conspiracy theory with regard to the politics of Japan or the way in which political decisions are made in Japan. We believe that too many such theories, or attitudes towards Japan implicitly grounded in such theories, are already part of the common currency of popular discourse. On the contrary, we are convinced that a dispassionate understanding of Japan is absolutely essential if Japan's economic competitors are to come to terms with the reality of her economic power and learn to cope with it intelligently.

Since the American Occupation of Japan there has been much discussion of the viability or otherwise of Japanese democracy. The proposition that Japan works as a functioning democracy has been widely accepted, but also vigorously contested, or at least questioned, by some observers. 1 Those who support it point to regularly held free elections, free and widely consumed mass media which often vigorously criticise government actions, freedom of political participation, the total absence of political prisoners and an apparently satisfied electorate enjoying a high standard of living, which -presumably as a consequence - regularly re-elects the conservative Liberal Democratic Party (LOP) to office. Those inclined to contest it cite above all the long and uninterrupted rule of the LOP, founded in 1955 and effectively victorious in all general elections since. They argue that an electoral system that has been heavily weighted in favour of conservative rural constituencies has gravely hindered the development of an opposition that would have been capable of replacing the LOP in government. They point to the power wielded


since the war by the ministries and agencies of the government bureaucracy, and allege that the regular and routine interaction between the LOP, the government bureaucracy and a coterie of powerful interest groups centred on big business represents government by a 'power elite'. The absence of the union movement from most central economic decision making leads to such designations of the Japanese politico-economic system as 'corporatism without labour'. 2 Moreover, whereas those who think Japan is a working democracy tend to regard 'consensus', or general agreement about national goals, as evidence of a broadly harmonious, democratically oriented electorate, the critics hint at a consensus 'created' by Establishment manipulation of consensual norms lying deep in the national consciousness, and founded in the curious if tautological proposition that the Japanese and the Japanese nation are somehow quintessentially 'unique'. 3 It should be noted that the critics, in this context, are by no means all to be found on the left, nor the believers in Japanese democracy on the right.

The focus of this book is not primarily upon democracy as such, though much of the material we have collected does bear on the question of democracy, at least tangentially. What we are concerned with is how Japan's political and economic arrangements affect policy making. To understand this, however, it is important to examine some basic assumptions which people make about politics, and this leads us back to assumptions about democracy. Essentially the question of assumptions boils down to questions about priorities.

LIBERAL DEMOCRATIC AND AUTHORITY MAINTENANCE MODELS

Most western observers are steeped in a liberal democratic mode of political discourse with strong normative elements, which predisposes towards judgements about politics of a fairly cut and dried nature. On the other hand, there is at least one alternative approach which underlies the political thinking of many regimes around the world and their supporters, which though they may or may not pay lipservice to democratic norms, in fact base their priorities on a broadly different set of assumptions. Let us therefore briefly set out these two alternatives.

Liberal democratic theory, broadly speaking, assumes that it is an essential function of government to represent the people (usually

J. A. A. Stockwin 7

defined as 'the electorate') in its area of jurisdiction and to act responsibly (not only responsively to sectional interests but bearing in mind the interests of the whole people). Government is defined as democratic if it has been elected on the basis of constitutional procedures which are fair and equitable in the sense that there is rough equality in the value of each elector's vote and no section of the electorate is in effect disenfranchised. Most debate about the merits of various electoral systems assumes these aims, but it has long been also assumed that the representatives of the electors are not mandated by them, rather they have considerable freedom to make policy with the national (or even merely party) interest in mind during the tenure of office of a government. At the next election, however, they will be tested through the ballot box. Democratic theory can accommodate a variety of arrangements for the formation and maintenance in office of governments, as well as for the relations between politicians, representative assemblies and government ministries. It also nowadays will readily assume the legitimacy of the political party as a crucial mediator between the electorate and government. Nevertheless the principal point is that a system is judged according to how well it combines efficient and fair representation with government that is so far as reasonably possible open, accountable and responsive to members of the electorate as well as responsible to the national interest. Such a simplified account of course glosses over many important controversies that are never completely resolved in what is, after all, a set of general principles to guide a hugely complex set of human interactions.

The priorities which underlie many contemporary political systems are different from those just outlined. The principal goal of a government is to stay in power, or more broadly, to ensure that a given order - often meaning a given set of sectional interests -remains in power. Heavy emphasis is placed on national goals, national integrity or the integrity of some essentially sectional ideology (such as a particular religious faith or the sanctity of an ethnic or class interest) and on the maintenance of political stability. Openness and freedoms of the citizen may be tolerated in so far as they are not regarded as dangerous, but there is no normative presumption in favour of such values except that to some extent they may be forced on the government from the outside. It may be observed that states where such principles prevail are often politically fragile, so that those in power react in an authoritarian manner as a result of political insecurity. One of the ironies of such regimes is that by their


authoritarian methods they merely succeed in exaggerating the intransigence of the opposition, so that they need to become even more authoritarian to stay secure. Their motivations may be narrowly concerned with consolidating their rule, or they may be genuinely concerned with the welfare of the state, but in either case they will be interested in consolidating stability far more than with any notions derived from liberal democracy. The most successful of such regimes may create highly dynamic 'developmental states' (the contemporary Republic of Korea is such an example), but still remain sectional, authoritarian and illiberal. Others may relegate not only liberal democracy but also development to a position subordinate to that of staying in power.

We are not seeking to argue that the second model (which for want of a better term we shall call the 'authority maintenance' model) is applicable as such to contemporary Japan. Our belief is, however, that a clearer understanding of the Japanese political system may be attained if we do not simply measure it against the yardstick of the liberal democratic model but also bring into the picture the dynamic of forces revealed in our model of authority maintenance. The application of both models in an attempt to understand the workings of the Japanese political system seems particularly apt when we consider the nation's modern political history. Japan experienced a radical (some would say revolutionary) transformation of her society following the Meiji 'Restoration' of 1868, under the guidance of a determined group of leaders who represented a certain limited segment of the previous regime's elite (largely disaffected members of the warrior class coming from particular domains in the southwest ofthe country), and who embarked upon a conscious programme of nation building. The regime was quite as insecure, and the tasks of nation building it set itself as great, as has been the case with many contemporary regimes in the Third World, but its developmental achievements were remarkable. Japan by the 1930s had developed from what in many ways was the medieval condition of the midnineteenth century to a position of major regional power with a substantial modern economic and military capacity.

The political condition of Japan, however, remained unstable, and in some ways remarkably fragile, and this fragility was an important factor leading to the Pacific war. The Constitution of 1889 left a crucial ambiguity about the actual location of power, and although the system developed impressive administrative capacities and a remarkable ability to control and motivate the population, it found

J. A. A. Stockwin 9

it difficult to incorporate new interests into political competition without destabilising the structure of political authority. Attempts to create a more responsible system of authority, through political parties actually responsible to a democratically elected parliament, were briefly successful in the 1920s, but the power of the armed forces and other groups active in politics proved too much, and what has sometimes been called the politics of 'collective irresponsibility' followed. Between 1868 and 1945 the number and range of those involved in politics and politics-related activities increased a great deal, but there was never any decisive break with a system whereby central political authority was monopolised by a coterie of cliques whose frequent inability to agree among themselves ought not to be mistaken for a willingness decisively to broaden the base of political participation.

There is general agreement that the Japanese political system that emerged from the ruins of defeat in 1945 and the efforts of the American Occupation to reform Japan marks a decisive break from what went before, even though it would also be generally acknowledged that important elements of continuity remained. Nevertheless, as we have already suggested, the system presents something of a puzzle, with controversy appearing and reappearing since the Occupation about whether Japanese politics is really democratic or whether it is (in our terms) an authority maintenance system under the guise of liberal democracy.

ELITISM VERSUS PLURALISM

One recurring mode of this controversy is the 'elitism versus pluralism' debate. 4 Abstracting from a number of studies, the 'elitist' model of the Japanese political system is not unlike C. Wright Mills's 'power elite' model applied to the United States of the 1950s. His idea was that there existed a 'power elite' of interlocking groups at the apex of three functional hierarchies (in Mills's case the government bureaucracy, the military and the business world; in the case of Japan the government bureaucracy, the LOP and the business world). For Mills, common background, upbringing and values, frequent interchange of personnel between the three hierarchies and absence of countervailing power in labour unions, other interest groups and so on, were salient features of the American system. For those emphasising this as a key feature of Japanese political decision


making, a model of mutual dependence between the three hierarchies was posited. Thus the LDP depended upon the bureaucracy for technical expertise and legislative initiative; the bureaucracy depended upon the LDP for parliamentary majorities in favour of government legislation, and for jobs on retirement; the LDP depended upon big business for electoral funding; big business depended upon the LDP for political backing, advantageous policies and political stability; big business depended upon bureaucracy for favours in the drawing up and implementing of legislation (and more broadly in the exercise of bureaucratic discretion); the bureaucracy depended upon big business for jobs on retirement. A variant on the 'power elite' model was the model of 'Japan Incorporated', which rested on the analogy between the Japanese politico-economic system and a giant conglomerate firm.

The main drawback of these approaches was their extreme crudity. They left out of account other important interest groups able to affect key areas of decision making, such as those representing agriculture. They ignored the often virulent policy disputes that frequently polarised sections of the alleged 'elite', including different sections of the bureaucracy, business and the government party, and largely forgot about the element of power competition represented by faction fights within the LDP. They failed to address systematically the question of where power actually lay within the alleged 'power elite', though different writers formulated their approaches with various suggestions about which section was ultimately the most powerful. Above all, they did not adequately cope with the problem of change over time; for instance a bureaucracy armed with the battery of controls over industry that existed in the 1950s was plainly in a different position from a bureaucracy functioning in the 'liberalised' conditions of the 1970s and 1980s, where most controls had been abolished and the corporate sector enjoyed far greater financial independence than it had twenty or thirty years earlier.

Environmental protection groups, 'progressive' local authorities and courts prepared to hand down huge compensation payments to pollution victims represented a challenge to the Establishment in the 1970s that it had not had to face in the 1950s and 1960s. Control of the National Diet by the LDP in the 1970s was less sure than it had been in the 1960s, and leadership of the LDP far more of a problem between 1972 and 1982 than between 1962 and 1972. Between 1982 and 1987, however, under the prime ministership of Nakasone Yasuhiro, the party appeared to have re-established its grip on power,

J. A. A. Stockwin 11

even though the electorate was capable of giving the LOP a shock on occasions.5

In response to the observed drawbacks of the crude 'power elite' approach, some writers attempted to counterpose a pluralist model, or at least a model with much greater elements of pluralism embedded in it than those which had prevailed hitherto. Although pluralist models of Japanese political decision making appeared well suited to the diversifying trends of the early and middle 1970s, a more up-todate perspective suggests that progress towards pluralism has been rather limited in its scope. In particular, though it is certainly the case that Japanese public servants engage in much bureaucratic infighting, the control over key decisions exercised by an entrenched bureaucracy remains impressive. As Alan Rix suggests in Chapter 3, the modern state as such may lend itself to the entrenchment of bureaucratic power, and indeed difficulties experienced in bringing about administrative reform (discussed by Daiichi Ito in Chapter 4) may simply be a demonstration of this very point. In the Japanese case this may be reinforced even further by a tradition of a centralising bureaucratic state concerned primarily with authority maintenance, as developed from the late nineteenth century, and by an absence of truly effective countervailing power, though this is now emerging within the LOP itself. As Aurelia George argues in Chapter 5, Japan is pluralist at the level of basic political representation, but elitist in the sense that there is inequality of access among interest groups associated with the institutionalisation of some groups into the centres of power, and because of the unchanging nature of the key elements at the centre.

GOVERNMENT, INDUSTRY AND ECONOMIC POLICY MAKING

Whether policy making in Japan is better described in an elitist or in a pluralist framework of analysis is a question which leads on to a further question, namely how far central economic policy making is in the hands of government and how far in the hands of private industry. Government guidance of the economy versus the freedom of private industry to make its own decisions without substantial government interference is the stuff of party political polemic in many western countries, and occasionally the Japanese experience has been used to bolster one or other side in the debate. From the perspectives


of this debate the interest lies in whether it is the government or the market that is best at making decisions relating to economic choices. Both sides have from time to time claimed that the Japanese example supports their own position: the free marketeers do so because in Japan there is little nationalised industry (and privatisation is currently in fashion), and because government-imposed restrictions on profit making are not widespread. On the other hand, those who wish to emphasise the role of government in the management of the economy can point to a battery of cases in which some section of the government (particularly the Ministry of International Trade and Industry, or MITI) has succeeded in persuading an industry or company that a government-generated vision of future strategy makes sense, so that there is acceptance and implementation at the micro-level of this larger strategy. 6

When the need to engage in partisan point-scoring on this issue is removed, an objective approach might suggest that what is singular about the Japanese system of economic management is the intensity and frequency of consultation within the government-industry complex as a whole, and the strategic goal-orientation of Japanese government and industry. Many rigidities exist, yet~ as James Horne argues in Chapter 6, information flows quickly through the system, and participants on both government and industry sides are under intense pressure to obtain results. There is, however, no monopoly of wisdom on either side, and the balance of power among all the participants is constantly shifting, even if it is shifting within relatively predictable parameters.

A FUSION OF MODELS?

This discussion leads us to the central paradox about the Japanese political system since the Occupation, namely that it was reformed and subsequently evolved in two ways which appear to point in quite different directions, or even to be mutually contradictory. Indeed we would go so far as to say that to appreciate the nature of this paradox is to travel far towards a basic understanding of how the system actually works. Moreover we believe that the paradox can be solved most effectively through a combination, or even fusion, of the liberal democratic and authority maintenance models.

The two directions of reform and evolution were as follows. First, the broadening of the participatory base of politics. By the


end of the Occupation, citizens of both sexes over the age of twenty enjoyed the vote, which a high proportion of them have gone on regularly to exercise in general and local elections; interest groups and political parties of all kinds found themselves free to operate without having to state officially that they were working in the interests of the emperor or the state (although public sector unions were forbidden to go out on strike, and had some restrictions imposed on their right to organise); an extensive list of human rights was written into the new (1947) Constitution, thus Iegitimising autonomous recourse to the courts by the citizen in defence of certain constitutionally guaranteed rights; censorship over the media was lifted and the press in particular became a vigorous participator in the political arena. Statist propaganda of the kind encapsulated in the prewar Imperial Rescript on Education was almost entirely eliminated; and so on.

Second, the centralisation of power on a particular set of elites. It seems highly significant that what is essentially a British-style set of relationships between the electorate, parliament, parties, cabinet, prime minister and the government bureaucracy should have emerged from the Occupation. The prewar system had several competing elites, not least of them the armed forces and the elites around the emperor, contesting the power of prime minister and cabinet. Cabinets were often weak and externally controlled. Perhaps more significantly, it was not always predictable what particular external groups they would be controlled by. By contrast, all cabinets without exception since 1955 have been controlled by the LOP. This single fact constitutes the linchpin of the political system as it has actually developed. On the basis of it a strongly clientelist mode of political interaction within a stable and well-defined group of actors has emerged. The actors comprise LOP politicians, officials of government ministries and agencies as well as influential leaders of major interest groups, particularly in industry, commerce, the financial world and agriculture. Increasingly, relations within the group are mediated by power brokers within the LOP.

This group is not entirely unchanging in its composition, nor is it entirely impermeable from the outside or immune to outside influence and pressure, nor (most importantly) is it devoid of internal conflict, but its central power position remains extremely strong and difficult to challenge. In terms of the combination of our two models this means that the Japanese people enjoy a political system in which they exercise their freedom to participate in a quite genuinely


democratic manner, and regularly behave through the election system in such a way that government quite strongly reminiscent of our authority maintenance model is perpetuated. Moreover the instability typical of most sectionally authoritarian political systems (including Japan's own system before the Second World War) is greatly reduced by the clear legitimacy which a set of constitutionally democratic norms has given it. The Korean case referred to above shows clearly that even spectacular success in promoting economic development may well fail to grant effective legitimacy to a political system if it is based only on authority maintenance principles and lacks a convincing liberal democratic element in its make-up.

It is interesting and important to compare the Japanese political system with a liberal democratic system where parties alternate in office with some regularity. The principal difference in effect is that in the latter, the government bureaucracy has it built into its expectations that there may at a future election be a different government in office which will mean that it will have to work on the basis of a different set of policies (though in practice much of its routine work will not change much from government to government). An even greater departure from the Japanese case is to be found in American government, where many government officials are replaced with the advent of a new administration. In Japan the 'political class' has not substantially changed since the early 1950s, and although it has no doubt evolved gradually with generational renewal and the acquisition of new experience, almost any international comparison indicates that its degree of stability is extraordinary. There are two important consequences of this.

One is that there is a general expectation that a long-term strategic view is viable. This in turn exerts a strong pressure for policy to be treated in an incrementalist fashion, with existing policy constituting a firm baseline on which new policy is devised. An incrementalist approach does not necessarily rule out a vigorous and even creative approach to policy where that is required by circumstances, but there is great antipathy to change for the sake of change, or policy shifts whose rationale is ideological rather than pragmatic. Past policy -the way things have been done in the past- assumes great significance because those institutions and even individuals who are involved in the formulation and administration of a given area of policy have been involved continuously for a long time. It is therefore difficult to criticise it in root and branch fashion, because to do so would be to cast aspersions on past competence. The widespread assumption in


British Commonwealth countries that the government bureaucracy serves with equal devotion governments with widely differing policy prescriptions is absent in practice in Japan, and thus the 'departmental view' has a fairly clear ride. This is one of the reasons why pressure from abroad can sometimes be more effective than political control in changing policy, by strengthening the hand of reform against resistance to change.

The other consequence is that for those groups excluded from effective political influence the range of choice is not particularly wide. Since the attempt to replace the LOP in power appears, on the basis of decades of experience, fruitless, the choice is essentially between general intransigence, selective or occasional intransigence and client-like compliance. General intransigence used to be a strategy widely pursued by left-wing parties and interest groups but has now greatly receded. Selective or occasional intransigence can sometimes place the LOP on the defensive, as in the revolt that occurred against Nakasone's proposal for a form of value added tax in early 1987, but an important feature of that episode was that the government's own supporters deserted it in large numbers. The Opposition parties have also sometimes succeeded in placing the LOP on the defensive in the National Diet by boycotts, threatened boycotts and tactical use of committees. Thirdly, as this writer has argued elsewhere, the frustration of the Opposition parties at being permanently excluded from office have turned some at least of them from being active opponents of the LOP, seeking to replace it, into 'supplicants', seeking to join it, or at least to receive benefits from it. 7 When Takeshita Noboru replaced Nakasone as prime minister in November 1987, it seemed that this tendency might be enhanced, since Takeshita, unlike Nakasone, maintained extensive contacts with Opposition leaders.

The problems of the Opposition parties are analytically not dissimilar from the problems of interest groups in choosing an optimum strategy with relation to government. In a political system where today's government is tomorrow's opposition, an interest group may have a real choice between an adversarial and a co-operative attitude towards the government of the day. If it regards that government as basically hostile to its interests, it can work against the government, in order to put the opposition into power, hoping that its purposes will be the better served thereby. Where, however, as in Japan, the prospects of removing a government appear bleak, the penalties of an adversarial stance can be severe. An experienced Japanese


government, confronted by an intransigent interest group, will ensure that it faces exclusion as a result of its intransigence, but will indicate to it that if it toes the line, things might improve. Local politics provides an interesting testing ground for the proposition that local authorities seeking to improve local facilities by following central guidelines tend in the long run to do better than those which seek above all to assert their policy independence. Since local authorities are themselves subject to re-election by their local electors, and since the central government controls a high proportion of local finances, an independently minded, 'progressive' local authority often has a hard time of it. Another example of the same kind of phenomenon is provided by labour unions, traditionally outside the 'system', but gradually more accommodating to the ruling Establishment as the penalties of acting otherwise have come to seem more damaging and the prospects of a more pro-labour government have receded.

In this we are suggesting that considerations of rational interest in conditions of quasi-permanent LOP government are more important than sociological factors such as habits of deference to superiors in explaining the behaviour of such groups. Indeed political pragmatism is a noteworthy feature of Japanese attitudes to their own politics. Candidates for the National Diet, as well as local politicians, find that constituency issues loom large in the thinking of their constituents, who expect their local representatives in Tokyo to bring them tangible benefits. By and large, the LOP has succeeded in capitalising on this sentiment more effectively than the Opposition parties, essentially because being the party in government gives it incomparably more effective resources both for satisfying sectional and regional demands and for bringing intransigent groups to heel.

There is, however, another side to this picture, since an interest group which proves capable of 'infiltrating' the system may well be able to establish a more effective and powerful position for itself than it would if it enjoyed only the intermittent opportunities for inside influence likely to be available in a system where parties alternate in power. One example of this (referred to in Chapter 5 by Aurelia George) is the Nokyo, or Agricultural Co-operative Association. The strategic position of the Nokyo has been built up on the basis of comprehensive organisation of farmers (and more generally rural interests), an unbalanced electoral structure giving disproportionately more votes to rural electorates than to urban ones, heavy dependence by the LOP on rural votes and the election of significant numbers of Diet members (mainly but not exclusively having LOP affiliation)


who are or have been Nokyo officials. In the case of the N6ky6, there is, to put it rather minimally, a strong presumption that policies on agricultural protection and subsidy have been strongly influenced by the entrenched position of the N6ky6 within the system. Even though international pressures have made agricultural protectionism on the previous scale much harder to maintain during the 1980s, the agricultural lobby still manages to demonstrate to government that it cannot be ignored.

The perception that a given power Establishment is permanently (or near-permanently) in office naturally creates among interest groups a different set of rational expectations than those applying when it appears that the controllers of the nation's destiny are less than securely entrenched. In the Japanese case the ideal situation is to be able to function within the system. If that is not possible, then the next best solution is to be outside, but on good terms with influential sections of the Establishment, in order to be regarded favourably when relevant decisions are made. The worst position is to be in an adversarial relationship to the Establishment, because this will be used as an excuse by those in power to treat unfavourably the group concerned. We are suggesting that it is the realisation of the logic of this that has led radical labour unions and others in recent years to tone down their radicalism (despite ideological scruples about 'supping with the Devil'), in order to position themselves more favourably in relation to government policy.

If we are correct in thinking that 'infiltration' is now seen generally as a most attractive option for interest groups, then we might expect an ever-increasing number of groups to pursue it. One further example is the Religion and Politics Research Association (Shukyo Seiji Kenkyukai), which, through its quite widespread influence among LOP Diet members, is able to exert a conservative influence on aspects of social policy. A priori, therefore, one might expect a gradual expansion of the number of interest groups which, having realised the realities of the Japanese political system, succeed in a strategy of infiltration. If this were so, the country might become increasingly more difficult to govern, and the ruling structure itself might be in danger of falling apart under the impact of insistent and contradictory interest group pressures working within it.

In practice, of course, the obstacles to developments of this kind are considerable. Up to the 1970s the most influential part of the system of government was bureaucratic, and, despite contradictory pressures operating within the bureaucracy itself, the sense of an


elite corps of 'mandarins' whose task is to provide fundamental policy direction as well as implementation remained (and remain) influential. In comparison with many other political systems, the role of the party in power by comparison with that of the government bureaucracy was rather weak, though it has notably increased during the 1980s with the emergence of political brokers among LDP members of the National Diet. Despite what we have said about bureaucratic influence, the Japanese political system does not operate according to the principles of democratic centralism, which in the Soviet Union and elsewhere ensure that only at the very apex of a highly monolithic bureaucratic structure can policy be effectively changed. A democratic centralist system tends to create hierarchical factions which culminate in one or other of a very small number of top leaders, but horizontal communication between factions or between bureaucratic structures is severely inhibited by both the theory and the practice of the system.

In Japanese politics and administration, things are far more open than this, for obvious reasons. The flow of information and influence is far freer, even though not all of it occurs in the public eye. The scope provided by the relative openness of the system for interest groups to push their particular barrows within it both adds to its dynamism in certain respects and also brings with it the possibility of instability and even disruption. Such instability is of a different kind from that created by a balance of political power producing alternating government, whereby the relative influence of different interest groups fluctuates markedly from one administration to the next. In the Japanese case, the model is rather like that of a patron-client system, where some of the clients reside within the patron's house, and others (the larger number) live outside it. Still others refuse to have much to do with the patron, but their success in exercising influence is generally slight, though they can be annoyingly disruptive and he may on occasion have to make significant concessions to them. From the patron's point of view, it makes sense to exercise power according to certain principles. First, it is essential to maintain the exclusivity of his power: other potential patrons must not be allowed to replace him in his house. Second, like any good patron, he will make sure that benefits are distributed with reasonable evenhandedness. If he favours one set of clients more than the others, this is sure to result in resentment, protests, trouble of various kinds and in extreme cases danger to his position. Third, and finally, he must try to keep the numbers of clients actually living in his house to a minimum. It is much easier to do business with clients living beyond


the gates than with those who by virtue of residing within the house have a say in the running of his household. If there are too many of the latter, they will squabble among themselves and behave in a generally disruptive manner in their scramble for influence over the patron.

In practice, of course, the 'patron' is a combination of the government party and the ministries and agencies of the government bureaucracy. Many of its actions will not clearly or demonstrably be related to overt interest group pressure, either from within or from outside the system. There are many technical, regulatory tasks to be undertaken where decisions are made according to essentially technical criteria. Few of these tasks are conducted, however, without a fine judgement being taken about their potential effects on 'clients', in both the short and the long term. One important mechanism that has been developed to deal with such matters is the 'advisory council' (shingikai), of which some hundreds now exist. These are usually set up by particular ministries or agencies of the central government in order to advise on some area of policy within the remit of the ministry or agency concerned. Interest group representatives, as well as 'persons of learning and experience' are invited to sit on advisory councils. Some of them appear to be little more than fronts for the bureaucratic body which set them up in the first place, but others have rather more autonomy, and may be regarded as a way of introducing an interest group perspective into policy making without allowing the making of policy to slip out of bureaucratic control altogether. 8 This is an imperfect and possibly undesirable mechanism from a liberal democratic perspective, but it makes much sense from the point of view of what we have called authority maintenance.

The difficulties which the United States and other foreign countries have experienced in prevailing on Japan to change economic policies in a more 'internationalist' direction owe much to this fundamental structure of decision making. The central policy making organs are responsive in a complex and stable way to interest groups which may be conceptualised as their 'clients', and in whose continued support they have invested a great deal of effort over long periods of time. Essentially, therefore, the system is much more responsive to domestic political pressure (which does not have to be expressed in a declamatory way, but is crucial nevertheless) than to foreign pressure. When foreign pressure builds up to a certain level of intensity, however, political and bureaucratic leaders become aware that some response is necessary. So far as possible the response is kept to the minimum


necessary to reduce the pressure to tolerable levels, but if this is shown to be insufficient, the scope for political leadership to come into its own is much increased. Whatever one's judgement about the effectiveness of Nakasone's prime ministership in shaping a constructive response to foreign pressures of this kind, it seems likely that his tenure in office was prolonged beyond the time limit widely forecast in part because of a common perception that strong 'westernstyle' leadership was needed in the face of intense foreign pressure for basic changes in economic policy. Even so, there were clearly rather narrow limits to what Nakasone could achieve without alienating his and his party's core constituencies.

CONCLUSION

As we have seen, the salient feature of Japanese politics since the 1950s is the dominance of a single, large, broadly conservative but not monolithic political party over the political system as a whole. By creating an environment of predictability about the political future, the unbroken success of the LD P in winning more parliamentary seats than its rivals has provided the atmosphere for the long-term view and for strategic planning conducive to dynamic policy making. This has been of particular importance in industrial management and macro-economic policy making, though it should be remembered that long-term planning is not only premised on predictability but also on a set of power relationships throughout industry favourable to larger over smaller firms, and to management over labour. In other words, we have here something approximating to our authority maintenance model, though within the context of a liberal democratic constitutional order.

On the other hand, this same political system in its more than thirty years of existence, has become remarkably responsive to a variety of interest groups, many of which have become embedded into the institutional fabric of central political power. Such groups gain influence by direct representation in Parliament and through cultivating connections with LOP Diet members and their intra-party factions. The emergence of powerful political brokers in the LOP has added to the influence of interest groups within that party. This in turn leads to policy immobilism which may be seen as the reverse side of the dynamic coin of one-party dominance.


NOTES

1. For a generally positive view, see Edwin 0. Reischauer, The Japanese (Cambridge, MA, and London: Harvard University Press, 1977) Part 4, and especially p. 297. See also T. J. Pempel, Policy and Politics in Japan: Creative Conservatism (Philadelphia, PA: Temple University Press, 1982). For a more critical approach, see Gavan McCormack and Yoshio Sugimoto (eds), Democracy in Contemporary Japan (Sydney: Hale and Iremonger, 1986) and Jon Woronoff, Politics the Japanese Way (Tokyo: Lotus Press, 1986).

2. T. J. Pempel and Keiichi Tsunekawa, 'Corporatism without Labor', in Philippe C. Schmitter and Gerhard Lehmbruch (eds), Trends Toward Corporatist Intermediation (Beverly Hills, CA: Sage, 1979).

3. See Peter N. Dale, The Myth of Japanese Uniqueness (London and Sydney: Croom Helm, 1986).

4. For an analysis of elitist and pluralist approaches, see Haruhiro Fukui, 'Studies in Policymaking: a Review of the Literature', in T. J. Pempel (ed.), Policymaking in Contemporary Japan (Ithaca, NY, and London: Cornell University Press, 1977) pp. 22-59.

5. For instance the LDP was badly beaten by a Socialist in a House of Councillors by-election for Iwate Prefecture (normally an LDP stronghold) in March 1987, and the following month performed badly in local elections. In both cases the electorate was protesting against a proposal by the Government to introduce a form of sales tax.

6. See Chalmers Johnson, MIT/ and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975 (Stanford, CA: Stanford University Press, 1982).

7. J. A. A. Stockwin, 'The Future of Japanese Party Politics', Fukuoka UNESCO: Proceedings of the Fifth Kyushu International Cultural Conference, /982 (Fukuoka: The Fukuoka UNESCO Association, no. 18, 1983) pp. 326-36.

8. See Ehud Harari, 'The Institutionalisation of Policy Consultation in Japan: Public Advisory Bodies', in Gail Lee Bernstein and Haruhiro Fukui (eds), Japan and the World: Essays in Honour of Takeshi Ishida (London: Macmillan, 1988).

2 Parties, Politicians and the Political System J. A. A. STOCKWIN

The political party in the modern world comes in many shapes and forms, but there are extraordinarily few political systems which lack parties entirely. One recent study suggests that, even in those cases when an attempt is made to outlaw them, they soon reappear 'rather like bindweed in a suburban garden' .1 Some may argue that the pervasiveness of political parties merely reflects the fact that a term which originally had a rather narrow connotation has been extended to embrace political phenomena as diverse as the British Conservative Party, the Communist Party of the Soviet Union, the Irish Sinn Fein, the Colorado Party of Paraguay and the Democratic Party of the United States. It is true that what are now called parties include some that shade into what would better be called pressure groups at the one extreme and government bureaucracies at the other. Some perhaps better deserve the appellation 'faction', while yet others might more reasonably be seen as bands of terrorists or guerrilla fighters.

Nevertheless there seems little ambiguity in what we really mean when we talk about the core concept of a political party, and parties clearly remain important because they do things which are required in virtually every country's politics. As its most basic, what a party does is to organise part of the population into a relationship with government which is more than that of simply placing pressure on government from the outside. Whether a particular government is democratic or dictatorial, in the vast majority of cases it regards a relationship with the population as necessary and the formation of a party or parties as a convenient means to this end. A party may be an instrument of oppression just as much as it may be a vehicle of representation, but what otherwise disparate parties have in common is this element of linkage between people and government. This is true of parties out of power, seeking to replace an existing government, just as it is of parties in power, since achievement of power is the ultimate aim. A party totally lacking in the aspiration to power ought strictly to be called a pressure group. 2

22


One of the most important reasons why parties are so all-pervasive in the modern world is that individuals qua individuals are too puny in their influence to have the chance of fulfilling political ambition in the absence of broader organisation. It was not always so. Where all that mattered was the politics of a narrow and self-perpetuating elite round a personal ruler, to become part of that elite was the key. The rest of the people hardly figured politically. But this is no longer the case in the modern world. Democracy is an expression of the broader political consciousness that has come from widespread education and all the heightened aspirations that have resulted from modernising change. Modern dictatorships, however, also have to reckon with general popular awareness of political matters, and have devised ways and means of adapting the political party to their own need for popular control. It is no longer sufficient for a government, whether democratic or dictatorial, to rule through a bureaucracy. It also needs the backing of an organisation or organisations linking it in a not wholly unidirectional way with the needs and aspirations of those it has to administer. What are called parties mostly perform this role, or aspire to do so.

THE PREWAR SYSTEM

We have dwelt at some length on the phenomenon of the political party in general, because we feel it essential to place Japan's experience with parties into the broader perspective of the modern world. It is scarcely necessary to make the argument that political parties are an integral part of the Japanese political system, and that this has been so for a very long time indeed. The first organisations that may reasonably be called parties emerged during the 1870s, a very few years after the Meiji Restoration of 1868, which precipitated Japan's modern revolution. Initially these operated locally, but when a national constitution was promulgated in 1889, part of the package was a western-style parliament (called in English 'Diet') with limited powers. The lower house, or House of Representatives, was elected on a highly restricted franchise, but for the first time offered the opportunity to the political parties to contest elections at national level.

Because of the restrictions placed on the House of Representatives by the Meiji Constitution of 1889 and by the realities of political power at the time, parties for several years found themselves

24 Parties, Politicians and the Political System

constituting the political opposition to a government made up of various non-elected elements which we need not describe. The Constitution, however, while it placed formidable obstacles in the path of the parties, did not leave them entirely powerless. They were able to exercise a certain amount of negative influence or veto power, making it imperative for government to enter into various forms of compromise with them. 3 These compromises, however, proved a two-edged sword since the price the parties paid for some access to power was a reduction in their ability to oppose the government in the interests of securely shifting the balance of political power in favour of parties as such. It was difficult to locate the real centre of power in prewar Japan. In formal constitutional terms power lay with the emperor, but in practice the emperor was advised to avoid compromising his neutrality by any substantive political intervention. The Constitution, however, gave insufficient guidance about where power was really supposed to lie in a de facto constitutional monarchy. Up to the early 1920s a small group of elder statesmen or genr6 acted with reasonable effectiveness as the ultimate arbiters of power, but thereafter the sole remaining genr6, Prince Saionji Kinmochi, though he lived on until1940, was unable to control the tempestuous storms of political ambition and conftict.4

Always in a central policy-making position, though conspicuously lacking a policy-making monopoly, lay the prime minister and cabinet, even though as a matter of strict constitutional interpretation there was no collective cabinet responsibility because each minister of state reported directly and separately to the emperor. The cabinet's power was further weakened by the constitutional convention that army and navy ministers should be officers of the highest rank from those respective services, and by the right of armed services' chiefs of staff to have independent access to the emperor on matters of military importance. The withdrawal of an army or navy minister in protest against unfavourable treatment by the cabinet of the service concerned, and the refusal to supply a replacement, caused the demise of several cabinets in the 1930s. Independent access to the emperor gravely weakened civilian control and gave rise to the phenomenon sometimes known as 'dual government'.

Considering the limitations to which they were subject, political parties had made significant progress towards acquiring a central role in policy making by the 1920s. Not only did universal male suffrage enter the statute books in 1925, but party cabinets became the rule, although the victory was to prove temporary. In the language of the


time, a party cabinet meant a cabinet largely composed of Diet members affiliated with the majority party or parties in the House of Representatives, and which would resign if defeated in that house. Most cabinets before the 1920s, however, were not of that kind. Rather, they were termed 'transcendental', in the sense that they were neither responsible to the Diet nor principally composed of Diet members. Transcendental cabinets, nominally chosen by the emperor, in fact chosen by complex manoeuvring among a number of politically significant elites, were the norm up to the early 1920s and again from the early 1930s to the end of the war.

The political system of Japan between 1890 and 1945 went through various stages of development. In general, however, it was characterised by a relatively high degree of fluidity and instability, underpinned by bureaucratic centralisation and control. The widespread discrediting of party politicians during the period of Taisho Democracy owed much to their perceived venality and lack of principle. Nationalist radicals associated with the armed forces during the 1930s were high on principle, but the regime to which their activities gave rise was also beset by problems of collective irresponsibility and Jack of effective central co-ordination. Various attempts were made to overcome such problems, but for the most part such attempts only amounted to the search for a better method of arriving at compromises between considerable numbers of ambitious and competing elites. The system was in some ways highly dynamic, but at the same time included significant elements of immobilism.

The designers and adapters of the Japanese political system were face to face with a complex of dilemmas which stemmed from the tasks which the state set itself after the Meiji Restoration of 1868. Even if the so-called 'Restoration' of the emperor did not constitute a revolution, the range and scope of socio-economic and political reforms which followed certainly did. The predominant revolutionary motive was to build up Japan into a formidable modern power capable of protecting itself against the outside world, which was regarded both as threatening and the source of new ideas. The Meiji leaders were extraordinarily ambitious for their nation, and this led among other things to a determined programme of administrative centralisation. To take one example among many, the introduction of conscription, where previously there had been more than two hundred elite domain armies, was a bold and ambitious step requiring impressive levels of administrative control. It was also far-ranging in its effects on the population. By contrast, Japan was less successful


in fashioning a political system capable of combining stability with the representation of an expanding range of political demands. Indeed, it is difficult to escape the conclusion that Japan between 1890 and 1945 managed to combine the worst features of political authoritarianism and political instability. Neither did authoritarian control prevent chaotic and uncoordinated politics, nor did the instability of an unresolved struggle among competing elites lead to broadly representative government, though during the 1920s it briefly seemed as though it might. Strange to say, in a state heavily influenced by authoritarian habits of mind, it was the lack of constitutional or even conventional clarity about the location of power which ultimately assisted the weakening of Japan's polity to the point where a semitotalitarian military regime became dominant in conditions of all-out war.

NEW POLITICS AFfER THE 1945 DEFEAT

Whatever else may be said about the reforms carried out by the Americans during their occupation of Japan between 1945 and 1952, one thing is clear. Political parties, set free from their prewar fetters, found themselves in a position to occupy a more salient position in the political system than ever before. Or rather, from the time of its formation in 1955, one political party, the Liberal Democratic Party (LOP), found itself in that fortunate position. The reasons for the long-term dominance of the LOP will be explored below, but what we wish to emphasise at this point is that the Occupation reforms picked out, as it were, a particular strand of prewar political development and built it up at the expense of other competing or contradicatory strands. The American purpose in doing so was, in part at least, to create a pluralistic democracy out of authoritarian Japan. This aim was not entirely unsuccessful, and, as other chapters of this book reveal, the theme of democratic pluralism has sounded quite clearly in the orchestra of Japanese politics since the Occupation. Nevertheless a distinctly more pervasive long-term effect of Occupation reforms has, in our view, been to reinforce the centralisation of the political system.

The strand from the prewar political system which the Americans built up into the corner-stone of the new system was that of cabinet government. On the face of it it may seem ironic that American reformers, who in other areas of reform introduced changes along


the lines of American institutions and practices, should in relation to central politics have introduced a system so clearly at variance with their own. The institutional relations between the electorate, parliament (the National Diet), cabinet and prime minister strike any Japanese visitor to Britain as far more similar to those existing in the British political system than to such relationships in the United States. The American-style separation of powers between the executive and legislative branches of government virtually does not exist in Japan, just as it is essentially absent in Britain. On the contrary, both in theory and largely also in practice, the Japanese electorate elects the members of the House of Representatives (the lower house of the National Diet), a majority of whom form a cabinet, headed by a prime minister, which both develops a legislative programme and administers the various ministries and agencies of the government bureaucracy. Assuming that the government (that is, the cabinet) is able to retain its majority, it retains substantial (though not absolute) control both of the legislative process and the execution of policy. It follows that the winning and subsequent retention of a majority in the House of Representatives by a party or a coalition of parties is the only way of obtaining both executive power and the power to dominate the legislative process. The almost inevitable effect of this on political parties is to enforce party discipline in parliamentary voting, since a party which cannot enforce voting discipline risks being defeated in parliament and thus losing power. In Japan, with rare exceptions,5 party discipline in voting is maintained. This is particularly interesting because, as we shall see below, most Japanese parties are famous for their internal factional wranglings. In any case, despite factionalism, the voting discipline, and indeed the central organisation, of Japanese political parties is a far cry from the lax voting discipline in Congress and decentralised organisation of American parties. 6 This is an excellent example of the vital importance of institutional constraints over the natural inclinations of political organisations.

Why General MacArthur and his staff should have preferred a British-style rather than an American-style political form1,1la for Japan is not altogether clear. Perhaps one reason is that cabinet government represented a vindication of the efforts of many Japanese liberals of the 1920s, who had sought to entrench party cabinets and outlaw the (to them) authoritarian principle of transcendentalism. With the important proviso that the chief executive of a transcendental government was appointed by the emperor, not elected by the people,


the separation of the executive from the legislature as practised in the United States bore an uncomfortable resemblance to Japanese transcendentalism. A more straightforward explanation might be that the Americans arrived at a cabinet government solution for Japan essentially by elimination. Those bodies such as the armed forces with their capacity to bypass or overthrow cabinets, the Privy Council, the House of Peers and the elites surrounding the emperor, were manifestly anti-democratic, or least non-democratic, and therefore there was every reason to be rid of them. Even though an alternative model of democracy- the one most familiar to Americans- existed, the task of transforming Japan to that model would have involved much more far-reaching institutional change, and might also have been misinterpreted.

To say that the Japanese political system as it emerged from the Occupation was close in its structure to the British system is not to imply that the practice of the two systems has been identical, or even convergent in all respects. Indeed they have come to differ from each other broadly in three ways. The first, which is discussed elsewhere in this book/ is the greater degree of influence and power, including the power of policy initiative, which has accrued to the Japanese than to the British government bureaucracy. This probably results from a combination of bureaucratic tradition and prestige, the Occupation's failure to reform the bureaucracy effectively because it needed to use its services for day-to-day implementation of reform and because of the long-term political dominance of the LOP. This last is indeed the second way in which Japanese politics and British politics have most plainly diverged. Although in Britain there have been fairly lengthy periods of rule by one party (the longest being continuous Conservative rule for thirteen years between 1951 and 1964), no party in Britain comes close to matching the election-winning ability of the LOP, which has never been out of power between 1955 when it was founded and the present (see Table 2.1). 8 The implications of this are profound. Much as in other 'one-party dominant' political systems, when one party is perceived as more or less permanently in power, the linkages which develop between that party and significant interest groups (including parts of the government bureaucracy as institutional interest groups)9 also become semi-permanent. In these circumstances the whole system tends to become bureaucratised, and, as we shall argue, this has happened to a considerable extent in the case of the LOP. The third difference lies in the structure of the LOP, which, though highly centralised in terms of its policy making,

Tabl

e 2.

1 H

ouse

of R

epre

sent

ativ

es e

lect

ion

resu

lts,

1958

-86

LD

P

JSP

JC

P

Oth

ers

Inde

pend

ents

To

tal

22/5

/58

287

(61.

5)

166

(35.

5)

I (0

.2)

I (0

.2)

12 (

2.6)

46

7 22

977

(57

.8)

1309

4 (3

2.9)

10

12

(2.6

) 28

8 (0

.7)

2381

(6.

0)

3975

2

JSP

D

SP

20/1

1160

29

6 (6

3.4)

14

5 (3

1.0)

17

(3.

7)

3 (0

.6)

I (0

.2)

5 (1

.1)

467

22 7

40 (

57 .6

) 10

887

(27.

6)

3464

(8.

8)

1157

(2

.9)

142

(0.3

) 11

19 (

2.8)

38

509

;;p 21

/11/

63

283

(60.

7)

144

(30.

8)

23 (

4.9)

5

(1.1

) 0

(0)

12 (

2.6)

46

7 ... :::t

. 22

424

(54.

7)

1190

7 (2

9.0)

30

23 (

7.4)

16

46

(4.0

) 60

(0.

1)

1956

(4.

8)

4101

7 ~

KP

29/1

/67

277

(57.

0)

140

(28.

8)

30 (

6.2)

25

(5

.1)

5 (1

.0)

0 (0

) 9

(1.9

) 48

6 ~

2244

8 (4

8.8)

12

826

(27.

9)

3404

(7.

4)

2472

(5

.4)

2191

(4

.8)

101

(0.2

) 25

54 (

5.5)

45

997

:::-:

.....

27/1

2169

28

8 (5

9.2)

90

(18

.5)

31 (

6.4)

47

(9

.7)

14

(2.9

) 0

(0)

16 (

3.3)

48

6 (=:

;•

2238

2 (4

7.6)

10

074

(21.

4)

3637

(7.

7)

5125

(10

.9)

3199

(6

.8)

81

(0.2

) 24

93 (

5.3)

46

990

j:i• a

10/1

2/72

27

1 (5

5.2)

11

8 (2

4.0)

19

(3.

9)

29

(5.9

) 38

(7

.7)

2 (0

.4)

14 (

2.9)

49

1 l::

l 24

563

(46.

8)

11 4

79 (

21. 9

) 36

61 (

7.0)

44

37

(8.5

) 54

97 (

10.5

) 14

3 (0

.3)

2646

(5.

0)

5242

5 ;:

l::l

.. N

LC

s.

5112

/76

249

(48.

7)

123

(24.

1)

29 (

5.7)

55

(10

.8)

17

(3.3

) 17

(3.

3)

0 (0

) 21

(4.

1)

511

"' 23

654

(41.

8)

II 7

13 (

20. 7

) 35

54 (

6.3)

61

77 (

10.9

) 58

78 (

10.4

) 23

64 (

4.2)

45

(0.

1)

3227

(5.

7)

5661

3 ~

SDL

:::-

: 71

1017

9 24

8 (4

8.6)

10

7 (2

0.9)

35

(6.

8)

57 (

11.2

) 39

(7

.6)

4 (0

.7)

2 (0

.4)

0 (0

) 19

(3.

7)

511

:::t.

2408

4 (4

4.6)

10

643

(19.

7)

3664

(6.

8)

5283

(9

.8)

5626

(10

.4)

1632

(3.

0)

368

(0.7

) 69

(0.

1)

2641

(4.

9)

5401

0 2 -

22/6

/80

284

(55.

6)

107

(20.

9)

32 (

6.3)

33

(6

.5)

29

(5.7

) 12

(2.

3)

3 (0

.5)

0 (0

) II

(2.

1)

511

~

2826

2 (4

7.9)

11

401

(19.

3)

3897

(6.

6)

5330

(9

.0)

5804

(9

.8)

1766

(3.

0)

402

(0.7

) 10

9 (0

.2)

2057

(3.

5)

5902

9 ..,

1811

2183

25

0 (4

8.9)

11

2 (2

1.9)

38

(7.

4)

58 (

11.8

) 26

(5

.1)

8 (1

.5)

3 (0

.5)

0 (0

) 16

(3.

1)

511

~

25 9

83 (

45.8

) II

065

(19

.5)

4130

(7.

3)

5746

(10

.1)

5302

(9

.3)

1342

(2.

4)

381

(0.7

) 62

(0.

1)

2769

(4.

9)

5678

0 ~

617/

86

300

(58.

6)

85 (

16.6

) 26

(5.

1)

56 (

10.9

) 26

(5

.1)

6 (1

. 7)

4 (0

.8)

0 (0

) 9

(1.7

) 51

2 29

875

(49.

4)

1041

2 (1

7.2)

38

96 (

6.4)

57

01

(9.4

) 53

13

(8.8

) 11

14 (

1.8)

49

9 (0

.8)

120

(0.2

) 35

15 (

5.8)

60

448

For

eac

h en

try:

num

ber

of s

eats

(%

of

tota

l sea

ts)

KP

: K

omei

to

num

ber

of

vote

s, i

n th

ousa

nds(

% o

f to

tal

vote

s).

LD

P:

Lib

eral

Dem

ocra

tic

Par

ty (

Jiyu

min

shut

o)

NL

C:

New

Lib

eral

Clu

b (S

hin

Jiyu

Clu

b)

N

Par

ty n

ame

abbr

evia

tions

SD

L:

Soci

al D

emoc

rati

c L

eagu

e (S

haka

imin

shur

engo

, S

ham

inre

n)

1.0

DSP

: D

emoc

rati

c S

ocia

list

Par

ty (

Min

shat

O)

JSP

: Ja

pan

Soc

iali

st P

arty

(N

ihon

Sha

kait

o)

SO

UR

CE

S:

Asa

hi N

enka

n (1

977,

198

0, 1

981,

198

4, 1

987)

.


is also paradoxically more localised and fragmented than that of any British party. In part the divergence here results from the different electoral systems of the two countries.

It seems not too contentious to say that the long-term dominance of the LOP, superimposed on the consolidation of a cabinet-inparliament system, is the most salient feature of Japanese politics since the 1950s. It fundamentally conditions the nature of political representation, competition, leadership and policy making. The rest of this chapter will explore the implications of this basic point.

At the time of the LOP's founding in 1955, few observers were particularly sanguine about its long-term prospects. The left and right wings of the Japan Socialist Party (JSP) had just reamalgamated into a single party, and its voters were increasing in number with rapid industrialisation. The LOP itself appeared to be a loose and fractious amalgam of personal factions which until recently had belonged to separate parties. It was only pressure from the big business lobby that had finally prevailed on the quarrelsome conservative politicians to pool their efforts into one party in order to have some chance of blocking the Socialist advance. In fact, however, the LOP proved able to maintain both its unity (admittedly a loose kind of unity) and much of its electoral strength, although its proportion of the total vote declined slowly but steadily throughout the 1960s and into the 1970s. In the late 1970s and into the 1980s it experienced a definite though unsteady recovery, but in the 1976, 1979 and 1983 elections for the House of Representatives it was close to losing its parliamentary majority (see Table 2.1).

LOP DOMINANCE

Several explanations may be advanced to account for the long tenure of office by the LOP. Some of the explanations overlap or operate on a different plane of analysis from each other.

The first explanation holds that one-party dominance essentially stems from the fact that the LOP had remained as one party since the 1950s, whereas the Opposition has progressively fragmented. This is not quite literally true, since a small splinter group broke away from the LOP in 1976 as a result of the Lockheed scandal revelations involving the former prime minister, Tanaka Kakuei, and formed a small party called the New Liberal Club (NLC). The NLC


enjoyed some initial success, but its fortunes were not maintained and after entering a coalition government with the LDP after the 1983 elections its members mostly re-entered the LDP following that party's landslide in the double elections of July 1986. A few individuals have also resigned from or been expelled from the party. In essence, however, the LDP has held its unity to a remarkable degree. By contrast the non-conservative Opposition (that is, excluding the NLC) consisted of the JSP (166 seats), Japan Communist Party (JCP) (1 seat) and 'other' (1 seat) in the 1958 lower house elections; but 28 years later, in the lower house elections of July 1986, the results were: JSP 85, Komeito 56, Democratic Socialist Party (DSP) 26, JCP 26, Social Democratic League (SDL) 4. In other words the number of Opposition parties with significant representation had risen from one to five and the JSP had seen its seat total nearly halved in a house whose full complement had increased from 467 to 512.

There is some difficulty in the explanation that the LDP has stayed in power because the Opposition has fragmented. It implies, first of all, that the splitting of the Opposition vote by the appearance of new parties has only harmed the JSP. In the case of the religious K6meit6, however, and to a lesser extent the others as well, substantial numbers of votes have undoubtedly been taken from the LDP. 10

Particularly in the big metropolitan centres such as Tokyo and Osaka, both the JSP and the LDP (though especially the former) do badly as a result of the performance of the newer Opposition parties. Probably on balance Japan's fragmented Opposition loses votes from being five parties rather than one, but the point is a fine one.U The fact that the five parties are most unlikely ever to be able to unite to form a government may actually attract more votes than are repelled by the Opposition's lack of governing credibility, since voters can cast a protest vote without serious risk of replacing the LDP in government. 12 Secondly and more importantly, however, to say that the LDP has remained in office because the LDP has remained more or less intact while the Opposition has fragmented is to explain only at a superficial level. The real question - indeed perhaps the greatest unanswered question about Japanese politics - is why the conservatives have been so much more successful in avoiding fragmentation than the centrist and left-of-centre Opposition.

This leads us to a second possible explanation, that the key factors are the constraints and opportunities provided by the electoral system. (Here we are talking largely about the electoral system for the House of Representatives.) According to this, the fact that the system is


based upon multi-member (in nearly all cases three-, four- and fivemember) constituencies while the voter has a single, non-transferable vote, means that it is conducive to the formation of small and mediumsized parties, even though it is less conducive than a proportional representation system would be. 13 This is because a party which can realistically expect to gather between, say, 15 and 20 per cent of the vote in forty or fifty constituencies can achieve modest but respectable representation in parliament. This closely fits the case ofthe K6meit6, whose votes are largely from members of the Soka Gakkai Buddhist sect, which are predictable and concentrated in city areas. This means, however, that the electoral system may be conducive to three types of small party: the party that forms as a result of a group of politicians breaking away from an existing large or medium-sized party; the party that begins from scratch on the basis of a constituency that has lacked such direct representation before; and the party that existed, but with minimal success, and finds a new constituency of voters. The first of these describes the OSP, which broke away from the JSP as a right-wing splinter in 1959-60, and the minuscule SOL (which trod the same path in 1977-8), the second describes the K6meit6 and the third the JCP. Looked at in this way, the fragmentation of the Opposition takes on an aspect less of simple fragmentation than of 'fragmentation plus proliferation'. This means that the JSP had some problems in maintaining its own party cohesion (though it was not quite so unsuccessful as has occasionally been suggested), and that it was also unable, or unwilling, to appeal to the new constituencies that were emerging in the course of rapid industrialisation from the late 1950s to the middle 1970s.

Thus the JSP, which was quite a formidable political force in the late 1950s, was damaged at least as much by its conservatism and lack of adaptability to changing circumstances of high economic growth and post-industrial society, as by its problems of internal cohesion. In this it contrasted with most of the social democratic and labour parties of western Europe and Australasia.

What then, about the other side of the coin: that of relative LOP cohesion? Here we need to take into account the impact of multimember constituencies upon a party which since its foundation has always been big enough to run more than one candidate (often three, four or even five) in the same constituency. Where several candidates from the same party are competing in the same constituency, they naturally find themselves competing with each other with at least the same intensity as their competition with candidates of other parties.


Once again we need to recall that in the Japanese system there is no vote transferability, so that candidates from the same party have absolutely no means of profiting from each other's votes. Quite obviously this situation will tend to promote internal rivalry and conflict within the same party. In the LDP, rival candidates in the same constituency normally belong to different intra-party factions, which, as it were, institutionalise at central level the personal rivalry that takes place at the level of the constituency. The electoral system (at least that for the lower house) thus appears to imperil rather than promote LDP unity and cohesion.

Despite this, and despite repeated predictions of a split, the LDP has largely remained intact. To explain this, and to explain more broadly the continued electoral success of the LDP, we need to shift our attention to several other areas of causality.

One, which is widely reported in the press, is the phenomenon of factionalism within the LDP. Factions are a common feature of Japanese political life, as of the political life of many other countries, and are based on a form of patron-client relationship which has its roots in the norms of the society as such. Since the LDP was formed in 1955, its internal factions have grown into political machines commanding impressive resources and wielding surprising power. In a sense they are parties within a party, though they do not fight elections under their own labels, and it is problematic how far they are distinguishable on the basis of policy. An LDP Diet member, generally speaking, obtains from his faction funding to fight elections with, a position on a seniority list which his faction leader presents to the prime minister in bargaining sessions before each cabinet reshuffle and other psychological and material satisfactions of belonging to a powerful political machine. Given the power of the factions within the party why does the party not split? Let us attempt a brief answer. No faction has ever embraced a majority of LDP Diet members. To elect the party president (and thus the prime minister while the party holds a majority of Diet seats), any faction must enter into a coalition with other factions. If a faction becomes too big, it is liable to split. Since they are essentially patronage groups, they find it advantageous to continue to operate within the only political party that in present circumstances is capable of granting access to central political power. Should those circumstances change, as the result of, say, the LDP losing its Diet majority and some combination of opposition parties coming to provide a credible alternative alliance, defections might conceivably occur. At present,


however, the advantages of remaining far outweigh the temptations of defecting, and since policy disputes are secondary for most LOP factions, it is most comfortable to remain.

Another LOP advantage, whose importance has been considerable in the past, but now appears to be declining somewhat, is the 'negative gerrymander' of lower house (and also upper house prefectural) electorates resulting from the failure adequately to rectify the imbalance in the numbers of electors per seat caused by shifts in population from the rural areas to the cities. At times the discrepancy at the extremes has been more than 500 per cent, though a 1986 reform made at the behest of the Supreme Court cut it back to just under 300 per cent. 14 Since LOP support has concentrated more in the countryside than in the cities, the LOP has sometimes enjoyed a seat advantage of several per cent, arguably as the result of this 'negative gerrymander'. In some elections held during the 1970s the LOP position would have been uncomfortable indeed if the imbalance had not existed.

A further reason is that elections are extremely expensive, and LOP candidates for the most part have access to much more adequate sources of funding than candidates from other parties. This is not simply a question of funding from central party coffers, since even larger sums plainly reach LOP candidates through the medium of the factions to which most of them belong, and from other sources. It is difficult to discover with any semblance of accuracy the size of these sums, because although candidates are obliged by law to report their funding, it is generally accepted that gross underreporting is general. Here we come to an aspect of Japanese political life that is worth emphasising since it touches on a salient characteristic of the society. Money is, of course, important in elections in most countries. In Japan it is important in part at least because of the weight given to mutual obligations in the course of social interaction. Thus social intercourse without exchange of gifts as a means of cementing the relationship tends to be regarded as too cold and impersonal. 15 In election campaigns this translates into the need for candidates to distribute largesse. Elections are in a sense regarded as festivals in which the candidate will provide generous amounts of entertainment, gifts, trips to Tokyo, even money. More broadly he is expected to do well by the constituency, so that a Diet member who is successful in providing his constituents with new roads, bridges and sewerage systems is most likely to be regularly re-elected. This feature of electorate expectations coincides with a low level of programmatic


or policy content in campaigning, especially on the part of Liberal Democrats. In the national constituency of the House of Councillors, which is now fought under a party list system of proportional representation with the whole country as a single constituency, the LDP does markedly less well, since a personal and local appeal is impossible.

There is strong evidence, therefore, that simply being the government favours the electoral chances of the LDP. This is so essentially for two reasons. First, a party in government (particularly if it is favourably disposed to business interests in the first place) will be in a much better position to attract funding from business than parties which are out of power and which business believes have little prospect of coming to power. This is true also for individual factions within the government party. Second, constituencies are likely to be more impressed by LDP candidates simply because they are known to have better access to resources of funding and public works initiative than candidates from parties which are out of power. With the partial exception of the largest cities, elections thus take on a localistic and somewhat mercenary flavour, which heavily favours candidates of the incumbent LDP.

Despite these in built advantages, the LDP suffered a steady decline in its electoral popularity between the late 1950s and the middle 1970s. It seems reasonably clear that the underlying reason for this was the massive movement of population out of agriculture and into industrial occupations in the cities during the period of rapid economic growth. This hurt the LOP in two distinct ways. The most obvious, perhaps, was that heavy industrialisation took place so fast and with so little attempt to control its consequences that a massive crisis of the environment ensued. 16 By the period immediately before the first oil crisis of 1973-4, the politics of the environment and quality of life had become matters of pervading concern, with beneficial results for some of the opposition parties including the Communists. Besides this, however, the shrinking of the LOP's rural base was hurting its electoral performance and prospects because, even though it was propped up by the 'negative gerrymander' mentioned above, it was doing badly in crowded urban areas, where traditional methods of campaigning made little impact by comparison with the countryside.

Nevertheless the LOP proved adaptable enough to make an electoral recovery from its dangerous years of the 1970s. Laws relating to the environment were drastically tightened. The economic crisis precipitated by the first oil crisis was temporarily severe, but the


government was able to project an image of reasonably competent economic management thereafter. Even the Lockheed corruption scandal which implicated the former prime minister, Tanaka Kakuei, from 1976, though it caused the party difficulties, failed to be the catastrophic political disaster that some rather gleefully anticipated. In the face of a more difficult international economic environment in the 1980s, the government even apparently gained electoral kudos from policies of financial stringency designed to cut deficit spending, even though these resulted in a more parsimonious government funding of welfare (see Chapter 8), subsidies to agriculture and so on. Attempts, however, to introduce forms of sales tax by the prime ministers Ohira, in 1979, and Nakasone, in 1987, resulted in quite serious electoral setbacks, since they were felt adversely to affect the economic interests of many groups which normally supported the LDP.

The final area of causality which is often advanced to explain the dominance of the LDP is that of socio-economic change. The characteristics of the electorate in the 1980s are obviously different in several ways from those of the 1950s, when Japan was a far poorer country than she is today. The sociologist Murakami Yasusuke describes contemporary Japanese society as a society in which the 'middle mass' predominates, meaning that the vast bulk of Japanese people are now reasonably affluent and regard political issues from a 'have' rather than a 'have not' perspective. 17 This implies that revolutionary, radical or class-conflict based political appeals by politicians lack persuasive power among much of today's population, which is well off and fundamentally conservative. It follows that a 'left-right' or 'conservative-progressive' conflict as the main axis of political debate should be out of date. 18

At least three qualification need, however, to be made about this approach in so far as it is used to predict electoral trends. The first is that substantial segments of the population still remain sufficiently disaffected from the ruling Establishment to vote for parties which are, or appear to be, of the left. Plainly not a few members of Murakami's 'middle mass' may be found voting for the Communist or Japan Socialist parties. Indeed, the Communists, though they account for not quite 10 per cent of the total vote, were the only major opposition party not to lose seats in the 1986 lower house elections. A rather larger proportion of voters has retained a solid allegiance to the religious Komeito, which, while it can hardly be


regarded as left wing or radical, represents many people who have been left behind in a highly competitive technological society. 19

The second qualification is that, as we have seen above, explanations based on the primacy of ideological or policy factors as motives for voting choices need to be modified in Japanese social conditions by the factor of personal connections and loyalties. There are plenty of examples of left-wing politicians who have developed long-standing local machines which rely principally on vote-gathering techniques traditionally associated with the Conservatives. This leads on to our third point, that if Japanese society has changed, it is nevertheless not inevitable that successful adaptation to such changes should be the monopoly of one party. The emergence of an Opposition party (or alliance of Opposition parties) capable of beating the LOP at its own game is theoretically not impossible. The advantages of incumbency, however, are exceptionally strong in the Japanese political system, so that the obstacles in the path of any Opposition should not be underestimated.

THE LOP AND THE EVOLUTION OF THE POLITICAL SYSTEM

Our argument so far has focused on how cabinet-in-parliament, reinforced by one-party dominance and a strong bureaucracy, has meant a stable and centralised political system. Other chapters in this book bear on this also, but what we shall explore in the remainder of this chapter is an aspect of the changing balance of forces within the political system itself. Virtually all observers of Japanese politics up to the 1970s emphasised the influence of the government bureaucracy, not only in its own natural sphere, but also by virtue of the high proportion of LOP Diet members who had retired early from senior positions in their ministries and entered the LOP, often rising to cabinet office. This phenomenon is related to amakudari (see Chapter 6), whereby senior retired bureaucrats 'come down from Heaven' to join the executive boards of companies and various kinds of institution in the public and private sectors.

The influence of former bureaucrats within the LOP is still important, but there is evidence to suggest that it is declining and that the LOP is coming into its own as a more independent source of policy initiative and implementation. We shall also explore the

Tabl

e 2.

2 Th

ird

Nak

ason

e ca

bine

t, 28

Dec

embe

r /9

85

VJ

00

Ti

mes

A

ge w

hen

Pos

ition

N

ame

elec

ted

Cat

egor

y en

tere

d D

iet

Pri

me

Min

iste

r N

akas

one

Yas

uhir

o 15

B

(?)

28

Ju

stic

e S

uzuk

i Se

igo

3 (H

C)

LP

+N

56

F

orei

gn

Abe

Shi

ntar

o 9

J+S

34

~

Fin

ance

T

akes

hita

Nob

oru

10

LP

34

E

duca

tion

K

aifu

Tos

hiki

9

s 29

:::t

Wel

fare

Im

ai I

sam

u 5

B (

Con

stru

ctio

n)

53

~·

Agr

icul

ture

R

ata

Tsu

tom

u 6

BU

S

34

~

Inte

rnat

iona

l T

rade

and

Ind

ustr

y W

atan

abe

Mic

hio

8 no

inf

o.

40

-:::;: T

rans

port

M

izuk

a H

iros

hi

5 S

,LP

45

;::;·

Po

sts

and

Tel

ecom

mun

icat

ions

S

ato

Bun

sei

7 L

P

47

E;•

;:::::

Lab

our

Hay

ashi

Yii

3 (H

C)

BU

S

50

"' C

onst

ruct

ion

Eto

Tak

ami

6 L

P+

N

46

~

;:::::

Hom

e O

zaw

a Ic

hiro

6

no i

nfo

(non

e?)

27

~

So

Chi

ef C

abin

et S

ecre

tary

G

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a M

asah

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4 B

(H

ome)

64

"'

Adm

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trat

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Man

agem

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B

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30

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and

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C)

B (

Tra

nspo

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55

0 - -· D

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i 5

B (

For

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) 33

:::-

. ()

Eco

nom

ic P

lann

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Hir

aizu

mi

Wat

aru

3 (H

C)

B (

For

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) 37

~ -

Scie

nce

and

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hnol

ogy

Kon

o Y

ohei

7

BU

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30

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Env

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men

t M

ori

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hihi

de

6 B

US

50

"' ~

Nat

iona

l L

ands

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amaz

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Hei

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6 B

(A

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58

;:

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B

form

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urea

ucra

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orm

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usin

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Die

t m

embe

r J

form

er j

ourn

alis

t H

C

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se o

f C

ounc

illo

rs

soU

RC

Es:

Asa

hi N

enka

n (1

986)

p.

87; J

inji

k6sh

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ku [

Who

's W

ho]

(Jin

jiko

shin

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198

3).


possibility that cabinet is becoming somewhat more independent of the bureaucracy in its handling of policy. Fukui has analysed evidence suggesting that the number of Diet members who were formerly government officials in the 1980s has declined slightly over figures from the 1960s.20 The extent of the decline, however, is not great and cannot alone be regarded as sufficient evidence for a decline in bureaucratic influence within the LDP. More convincing evidence emerges, however, when we analyse the composition of the cabinet. Fukui, in his 1970 book on the LDP, found that whereas about a quarter of LDP Diet members were former bureaucrats, when it came to the cabinet the proportion was about half. 21 The presumption was that with half the cabinet as former government officials, the influence of the bureaucracy over the cabinet must be overwhelming, and that this influence stemmed historically from the preference given to former government officials by the postwar prime minister Yoshida Shigeru and the 'school' of like-minded bureaucrat-politicians that he initiated. Cabinets of the 1980s plainly include a much lower proportion of former government officials, and moreover some of those so categorised may not be so close to their former ministries, or so important within the cabinet, as is sometimes assumed.

Let us examine specifically the third Nakasone cabinet, formed on 28 December 1985 (see Table 2.2). In terms ofthe career backgrounds of its members, this cabinet was quite typical of cabinets during the 1980s. Based on information in the Jinjikoshinroku we have obtained the following results about this cabinet. There were six former bureaucrats (seven if the prime minister is included: see below), five former businessmen, five former local politicians, three former secretaries to Diet members, two former officials of N6ky6 (The Agricultural Co-operative Association), one former journalist and two for whom no information was available (of whom one seems to have gone straight into politics after taking a postgraduate degree). 22

Whether to categorise Nakasone as a former bureaucrat is problematical; he was called to military service during the war immediately after having been admitted to the Ministry of Home Affairs, and after the war served for about two years in the police authority before entering the National Diet in 1947 at the age of 28. Two others, both with a background of careers in the Foreign Ministry (Kato Koichi and Hiraizumi Wataru), entered politics in their thirties, and so did not have time to rise to senior status in their ministries. Four others -Got6da Masaharu, Yamazaki Heihachiro, Kogarai Shiro and Imai Isamu - became Diet members in their fifties (in Got6da's case, in


his sixties) and so represent the classic case of those who rose to be cabinet ministers after having been very senior indeed in their own ministries.

Inoguchi has pointed out that it is now very difficult for a man to have a full career in the bureaucracy and then to aspire to cabinet rank after being elected as an LDP Diet member, because of the de facto seniority rule applying to the selection of cabinet ministers. This is demonstrated most graphically in Table 2.3, which categorises LDP Diet members according to factional allegiance, numbers of times elected to the House of Representatives (the House of Councillors, which is elected according to a different timetable, is ignored) and whether or not they have had cabinet experience. It is abundantly clear from the table that being elected for one's seventh term is the crucial turning point. Very few attain cabinet position before that, and nearly all do after that point. Assuming that the Diet member is re-elected every time after he first enters the Diet (true in the great majority of cases), then a Diet member elected for his seventh term in July 1986 would have been first elected in the general elections of December 1969. In other words something like a sixteen-year Diet apprenticeship is necessary, with very few exceptions, before entering the cabinet. On the other hand, those first elected in January 1967 (twenty years previously) had virtually all enjoyed cabinet experience by January 1987. Somebody retiring from a government ministry at, say, the age of fifty-five, would thus inevitably be into his seventies before becoming a cabinet minister under the present system.

The reason why this is so is that the prime minister in selecting his cabinet is greatly constrained by the necessity of giving 'fair shares' to each of the factions making up the LDP's Diet membership. Each faction prepares a 'seniority list' of its members to be presented to the prime minister before each cabinet reshuffle, and although the prime minister has some bargaining power he is nevertheless severely constrained by a combination of a seniority rule and a 'fair shares' rule, which means in effect that everybody has to have a turn eventually.

On the face of it, this would seem inevitably to lead to a situation of frequent cabinet turnover, where few ministers have much time to learn the business of their ministries well enough to make much impact on their policies. The arithmetic of providing turns for everybody means that nobody can be allowed to stay in one position for very long, and this must be even more of a constraint in

Tabl

e 2.

3 L

DP

low

er h

ouse

mem

bers

, fa

ctio

nal

affil

iatio

n an

d ca

bine

t exp

erie

nce

Tim

es e

lect

ed

Fac

tion

19

18

17

16

15

14

13

12

11

10

9 8

7 6

5 4

3 2

1 To

tal

Tan

aka

Cab

inet

exp

erie

nce

1 2

2 2

2 5

6 11

1

No

cabi

net e

xper

ienc

e 2

7 8

9 4

10

14

86

Nak

ason

e C

abin

et e

xper

ienc

e 2

1 1

1 1

3 1

5 5

No

cabi

net

expe

rien

ce

4 5

8 5

5 5

10

62

Miy

azaw

a ~

Cab

inet

exp

erie

nce

1 1

2 1

1 4

3 3

1 ::::.

. N

o ca

bine

t ex

peri

ence

1

4 7

12

10

4 6

61

::::..

Abe

~

Cab

inet

exp

erie

nce

1 1

1 2

1 4

5 2

1 0

No

cabi

net

expe

rien

ce

2 8

9 2

7 12

58

r'

) ;.:.. ~

Kom

oto

s· C

abin

et e

xper

ienc

e 1

2 1

1 1

3 3

3 N

o ca

bine

t exp

erie

nce

1 1

1 2

3 4

27

No

fact

ion

Cab

inet

exp

erie

nce

1 1

No

cabi

net e

xper

ienc

e 1

1 1

2 1

10

Tot

al

Cab

inet

exp

erie

nce

1 1

4 5

5 3

3 6

9 12

23

27

5

1 2

No

cabi

net

expe

rien

ce

1 7

20

32

37

23

31

47

304

souR

cE:

Asa

hi N

enka

n (1

987)

p.

110.

Fig

ures

are

for

1 J

anua

ry 1

987.

"""

.....

.

1 1


circumstances such as those following the 1980 and 1986 elections, where hardly any sitting LDP Diet members were defeated.

The rapidity in turnover of cabinet ministers can be gauged from Tables 2.4-2.8. In the period covered by these tables, the average period in office of a cabinet minister was less than a year (Tables 2.4

Table 2.4 Frequency of ministerial changes by ministry, November 1964-July 1987

Number of Number of individuals changes of holding

Ministry minister ministerial post ---------------------------------------------------

Prime Minister 7 7 ( 6 since

Finance Foreign Chief Cabinet Secretary International Trade and Industry Economic Planning (Agency) Administrative Management (Agency) Defence (Agency) Education Agriculture, Forestry and Fisheries Posts and Telecommunications Welfare Justice Home Science and Technology (Agency) Labour Construction Transport

16 16 17 20 22 22 22 23 24 24 25 25 25 25 26 26 26

July 1972) 12 15 16 19 19 22 21 22 21 24 22 24 24 24 23 24 24

Note: Agencies are agencies of the prime minister's department, but in some cases virtually equivalent to ministries in their own right. Those agencies which were not in existence or were not listed in 1964 have been omitted.

SOURCE: Asahi Nenkan (1965-87).

and 2.5). When we examine these tables in detail, however, we find that the pattern was not uniform between different ministries. Significantly fewer individuals held the portfolios of Foreign Affairs, Finance, Chief Cabinet Secretary and International Trade and Industry than of other portfolios, and the average tenure was rather longer. At the other end of the scale, Labour, Construction and Transport showed particularly rapid turnover and short tenure. While


Table 2.5 Average length of tenure of portfolio, by ministry, November 1964-July 1987

Ministry

Prime Minister Finance Foreign Chief Cabinet Secretary International Trade and Industry Economic Planning (Agency) Administrative Management (Agency) Defence (Agency) Education Agriculture, Forestry and Fisheries Posts and Telecommunications Welfare Justice Home Science and Technology (Agency) Labour Construction Transport

See note to Table 2.4


Average length of tenure (in months) (ignoring

comebacks)

37.6 16.4 15.9 15.6 13.2 11.9 11.4 11.9 11.4 10.9 10.9 10.5 10.5 10.5 10.5 10.1 10.1 10.1

this difference ought not to be exaggerated, it is obvious that it was the ministries most central to government policy making that enjoyed their ministers for longer and the less central ministries that enjoyed them for a shorter span.

Table 2.6 takes those individuals, ministry by ministry, who have held a particular portfolio for a total of twenty months or more. It also indicates the number of 'comebacks' (that is, ministers returning to a given portfolio after a period elsewhere). It can be seen that in some cases (Fukuda Takeo at Finance and Kuraishi Tadao at Agriculture being the most conspicuous) individuals have been allowed to develop a degree of functional specialisation through exceptionally long tenure. Even so, however, Table 2.6 shows that it is uncommon for anyone to remain in charge of the same ministry -even including comebacks - for much more than two years. Table 2. 7 takes the key portfolios of Finance, Foreign Affairs, Economic Planning and Chief Cabinet Secretary, and lists those individuals who


Table 2.6 Ministers holding a portfolio for a total of twenty months or more, November 1964-July 1987

Number of Ministry Name comebacks" Monthsb

Finance Fukuda Takeo 2 55 Takeshita Noboru 1 50 Mizuta Mikio 1 35 Ohira Masayoshi 28 Watanabe Michio 28

Foreign Abe Shintaro 44 Aichi Kiichi 31 Sonoda Sunao 1 29 Ohira Masayoshi 24 Shiina Etsusaburo 24 Miyazawa Kiichi 21

Chief Cabinet Secretary GotOda Masaharu 1 32 Hori Shigeru 30 Nikaido Susumu 27 Miyazawa Kiichi 27 Ide Ichitaro 24 Fujinami Takao 24 Hashimoto Tomisaburo 20

International Trade and Komoto Toshio 1 36 Industry Nakasone Yasuhiro 28

Economic Planning Miyazawa Kiichi 1 35 Agency Komoto Toshio 27

Kosaka Zentaro 1 22 Fukuda Takeo 21

Education Sakata Michita 31 Nagai Michio 24

Administrative Araki Masuo 30 Management Agency Nakasone Y asuhiro 27

GotOda Masaharu 24 Nishimura Eiichi 23 Matsuzawa Yuzo 21

Defence Agency Sakata Michita 24 Masuda Kaneshichi 23 Kurihara Yuko 1 23 Kato Koichi 20

Agriculture, Forestry and Kuraishi Tadao 2 45 Fisheries Abe Shintaro 21

Posts and Kobayashi Takeharu 23 Telecommunications

Welfare Saito Noboru 1 25 Saito Kuniyoshi 1 24 Tanaka Masami 21 Sonoda Sunao 1 20


Table 2.6- cont.

Ministry Name Number of comebacksa Months"

Justice

Home Science and Technology

Agency

Labour Construction Transport

Inaba Osamu Tanaka Isaji Fukuda Hajime Nakagawa Ichir6 Sasaki Yoshitake Kiuchi Shiro Hasegawa Shun Nishimura Eiichi Kimura Mutsuo

1 1

a Ministers returning to a given portfolio after a period elsewhere. " Periods of less than a month have been eliminated.


Table 2. 7 Ministers holding portfolios in Ministry of Finance, Ministry of Foreign Affairs, Ministry of International Trade and

Industry, Economic Planning Agency and as Chief Cabinet Secretary for a total of thirty months or more, November I964-

July 1987

Name

Miyazawa Kiichi Fukuda Takeo Abe Shintar6 Ohira Masayoshi Komoto Toshio Takeshita Noboru Aichi Kiichi Sonoda Sunao Shiina Etsusabur6 Kosaka Zentar6 Mizuta Mikio Watanabe Michio Kimura Toshio Gotooa Masaharu Hori Shigeru

souRCE: Asahi Nenkan (1965-87).

Months

112 88 67 65 63 63 46 40 36 36 35 35 32 32 30

24 22 27 27 21 20 21 23 21

1 1 1


have held one or more of those portfolios for a total of thirty months or more. Virtually all the names that appear in this category are or have been key figures within the LOP. The evidence presented here thus suggests that despite the seniority and 'fair shares' rules, it is possible for some individuals of high calibre and ambition to transcend the system, at least to some extent, and attain a position of real influence - as indicated at least by length of tenure - over policy making.

Even so, as indicated in Table 2.8, it is most unusual for any minister to retain the same portfolio when the prime minister changes.

Table 2.8 Ministers held over from administration of one prime minister to that of the next, November /964-July /987

Ministry Name Prime ministers ----------------------------------------------------

Finance Ohira Masayoshi Foreign Sonoda Sunao Home Fukuda Hajime


Tanaka-Miki Fukuda-Ohira Tanaka-Miki

Only three examples have been discovered in the period covered, although, interestingly enough, two senior ministers retained their existing portfolios in the November 1987 transition from the Nakasone to the Takeshita cabinets. A change of prime ministers, even though both the new and old prime minister lead the same party, means a change of regime. The coalition of factions on which the new man's power rests will be different from that of his predecessor, and a small number of key officials of cabinet and party will be his right-hand men, serving to bolster his regime and lend it its characteristic policy colouring.

The tenure in office of the prime minister is a matter of considerable importance as it affects continuity of policy leadership. For the same set of reasons that foster short tenure of ministerial office, there are forces at work that tend to limit the length of time that a prime minister can be in office. The fundamental point is that attainment of the LDP presidency (and thus prime ministerial office) for its leader is the jewel in the crown of any of the intra-party factions which succeeds in this. Therefore lengthy tenure by the leader of a particular faction is unpopular with other factions because it causes a log-jam in the regular process of succession and checks the claims of other factions. Indeed the party maintains an admittedly leaky


rule that no party president should be elected for more than two successive two-year terms. In 1986 this was waived in favour of an extra year for Nakasone, in circumstances where it was obvious that the party would have much difficulty in agreeing on a successor.

Stability has alternated with instability in LOP leadership succession. The early years of the party saw what at times was an unseemly struggle between factions for the leadership, but during the 1960s the situation stabilised with the successive presidencies of Ikeda Hayato (196(}-64) and Sat6 Eisaku (1964-72). The latter's long incumbency was in circumstances of temporary weakening of several rival factions. His fall from office in 1972 (in some discredit over policy towards China) ushered in a ten-year period of brief tenures, when no prime minister lasted much more than two years. These turbulent years, during which Japan was rocked by two oil crises, a series of trading difficulties with the United States, worsening relations with the Soviet Union and the ending of the high economic growth rates of the 1960s, was also a period of virulent factional rivalry in the ranks of the LD P. It is difficult to appreciate this except in terms of personal rivalries. When Fukuda Takeo failed to win the succession to Sat6, unexpectedly, in 1972, and saw Tanaka Kakuei become prime minister in his place, a bitter conflict was established which was to last a decade. Tanaka fell from office towards the end of 1974 amid allegations of corrupt dealings, and two years later was implicated in the Lockheed scandals, which led to him being brought before the courts and eventually convicted (in 1983). He was forced (nominally) out of the party, but he continued to build up his faction in the late 1970s and early 1980s until it was much the largest in the party. Fukuda belatedly reached the top of the slippery pole and became prime minister in December 1976, only to be robbed of his prize less than two years later by another faction leader, Ohira Masayoshi, who working together with Tanaka gathered enough votes in newly instituted primary elections for the party presidency (in which party members in the local constituencies were polled) to dislodge Fukuda. The latter was never reconciled to his defeat and after a poor showing for the party in general elections held in October 1979, he and his supporters refused to endorse Ohira's party presidency. After a fortyday crisis, the issue was settled, narrowly in favour of Ohira, by a vote in the Diet in which the LOP actually put up two candidatesOhira and Fukuda - for the prime ministership. The next year, members of the Fukuda and two other factions abstained in a noconfidence motion brought against the Ohira government by the


Socialists, and the Ohira government fell from office. Perhaps surprisingly, the LOP then went on to win a handsome victory, following an election campaign in which Ohira died of a heart attack.

The prime ministers mentioned so far in this period were all obvious candidates for the succession, being leaders of major factions who had clearly set their sights on the post for years beforehand. Following Tanaka's resignation in 1974 and Ohira's death in 1980, however, prime ministers emerged who were much less expected. In 1974 it was Miki Takeo, a minor faction leader with a distinctly leftof-centre approach to policy. As prime minister between 1974 and 1976 he was innovative in several policy areas but forced at times to rely on opposition party votes in the Diet in the absence of support from the LOP right wing. His factional position was always weak and he was eventually engulfed in the turmoil caused by the Lockheed revelations. Ohira's successor in 1980 was equally unexpected. Suzuki Zenko followed Ohira as leader of his faction, but previously had been generally regarded as a politician of second rank. When he was chosen as party president in a process of selection that followed the 1980 election victory, no serious observer had predicted his emergence. Indeed his grasp of certain policy areas, notably foreign policy, proved less than adequate and though certain important policy initiatives (notably that on administrative reform) were begun during his tenure, he often gave the impression of having become prime minister by accident rather than design.

After Suzuki agreed to step down two years later, Nakasone Yasuhiro was elected convincingly in primary elections, again with the crucial backing of the Tanaka faction. In image and policy terms he proved a stronger prime minister than any of his recent successors, and effectively used the rapport he was able to establish with world leaders such as President Reagan and Margaret Thatcher to good effect in domestic politics. Unusually for a Japanese prime minister, he made world headlines with a series of foreign and defence policy statements and initiatives from soon after he took office. Although the election results of December 1983, following soon after Tanaka's court conviction in October, were poor (the LOP barely scraped an absolute majority in the lower house), he retrieved the situation by entering into a coalition government with the small New Liberal Club and so ensured that the party remained in control of Diet committees. 23 Whereas most prime ministers' popularity, as measured by public opinion polls, slumped after an initial honeymoon period, Nakasone's remained consistently high until early 1987, and this,


together with the fact of no clear successor on whom the party could agree, led to his obtaining a second two-year term towards the end of 1984. In February 1985 Tanaka suffered a stroke and was forced into semi-retirement from politics. This had the effect of somewhat weakening the Tanaka faction, whose iron unity for which it had hitherto been famous began to break down, until it finally split up in July 1987. It also tended to strengthen Nakasone's position, by enabling him to become less dependent on Tanaka faction members to fill key cabinet and party positions. He was thus in a strong position to fight the elections for both lower and upper houses of the Diet held in July 1986, and led the LOP to its best victory since the 1950s. Thus fortified, he sought and obtained a further one-year extension of his tenure. Surprisingly, therefore, his attempt to capitalise on electoral strength and introduce a measure of taxation reform early in 1987 led to serious by-election and local election reverses, with the crucial small business element in the party's support rising in no doubt temporary revolt.

Both the LOP and the prime ministership based upon it have thus proved more effective and viable in the 1980s than in the 1970s, though neither viability nor stability should be regarded as absolute. The institution of a primary election system for the party presidency has been mentioned already, and has been the occasion for some limited strengthening of party organisation at local level, though much of this remains, as it always has been, more a matter of faction and candidate-centred organisation than organisation controlled and directed by the party or its local branches. 24

Another area of development which appears to have strengthened the party is the greater prominence now accorded to what are termed zoku or 'tribes' of LOP Diet members, concerned with a particular policy area such as education, telecommunications or defence. 25 The development of zoku means that substantial numbers of Diet members affiliated with the LOP have a level of policy expertise in their specialist area, and an access to up-to-date information, that rivals that of the specialist ministries. This is extremely significant, because it suggests a relative weakening of the influence of ministries in relation to the LOP, in parallel with their weakening in relation to industry caused by industry's greatly improved financial resources and freedom of action. We should not, however, jump too quickly to conclusions. To demonstrate that zoku make the LOP more able to stand up to the government ministries, we should have to show that the zoku regularly conflict with ministries and register victories.


The truth appears to be much more complicated. There are cases, for instance, where ministries recognise zoku as channels for extending their own influence rather than regarding them as a threat. 26

CONCLUSION

We have said little about the parties of Opposition in this chapter, not because they are an unimportant part of the system (in fact they are often able to exercise substantial veto power over some sorts of decision) but because of the overwhelming significance of the LDP in the Japanese political system as a whole. As we suggested at the outset, there are many types of entity described by the rubric 'political party' if we survey the politics of various countries. The LDP, however, has a distinct concatenation of features. It is an unusually uncompromising example of a dominant party (much more so than the Christian Democrats in Italy, for example). Despite, however, the changes outlined above, it is still relatively weak at the local level, leaving much initiative to local candidates, their support groups and the central factions which finance them. The determination of both the prime ministership and the various portfolios of cabinet is heavily influenced by intra-party factions which are hardly policy groups at all, but rather groups concerned with political patronage. As a result of this, promotion is closely connected with seniority, revealing a marked similarity to promotion patterns within the government bureaucracy itself. The comparative influence of the LDP and the bureaucracy is much affected by the following factors: rapid turnover of cabinet ministers plainly inhibits strong ministerial control, but this may be less important so far as the most important politicians and the key ministries are concerned; moreover, there is some evidence that the operation of the seniority system is now tending to reduce the attractiveness of a second, political, career to ambitious senior government officials following their retirement; the emergent policy groups in the party probably strengthen the LDP, but also offer opportunities for the ministries.

Thus the Japanese political system is constantly evolving and renewing itself without fundamentally, or even very perceptibly, changing its shape. Its reliance on experience and precedent is entrenched, it is both personalised and bureaucratised, political ambition is channelled through constricting processes of promotion


by seniority. But those who rise to the top in this system are no mere automata: they have proved themselves in a subtle and often unscrupulous world of political connections and policy pressures. Neither are they simply bureaucrats (though they may have been bureaucrats), but they are politicians to their fingertips and behave as such. For whatever combination of reasons, the electorate continues to vote them into office.

NOTES

1. Alan Ware (ed.), Political Parties: Electoral Change and Structural Response (Oxford: Blackwell, 1987) p. 1.

2. For pioneering work on political parties, see Maurice Duverger, Political Parties (London: Methuen, 1954) and Giovanni Sartori, Parties and Party Systems (Cambridge: Cambridge University Press, 1976).

3. Banno Junji, Meiji kempo taisei no kakuritsu [The Establishment of the Meiji Constitutional System] (Tokyo University Press, 1971).

4. Lesley Connors, The Emperor's Adviser: Saionji Kinmochi and Pre-War Japanese Politics (London and Sydney: Croom Helm, 1987).

5. In May 1980 69 members of the House of Representatives abstained in a no-confidence motion against the Ohira government, causing its resignation and new elections. See J. A. A. Stockwin, 'Japan's Political Crisis of 1980', Australian Outlook, vol. 35, no. 1 (April1981) pp. 19-32.

6. Alan Ware, 'United States: Disappearing Parties?', in Ware, op. cit., pp. 117-36.

7. See especially Chapters 3 and 4. 8. Although the LDP was returned with an absolute majority of seats in

the 1983 Lower House general elections, the prime minister (Nakasone) invited the NLC to join a coalition government alongside the LDP. The main purpose was to give the government greater room to manoeuvre, especially in Diet committees. The coalition lasted until the general elections of July 1986, after which the LDP had no further need of NLC support. Following that election the NLC was dissolved and most of its members rejoined the LDP.

9. See Takeshi Ishida, 'The Development of Interest Group Patterns and the Pattern of Modernization in Japan', in D. C. S. Sissons (ed.), Papers on Modern Japan (Canberra: Australian National University, 1965) pp. 1-17.

10. Takashi lnoguchi, 'Economic Conditions and Mass Support in Japan, 1960--1976', in Paul Whiteley (ed.), Models of Political Economy (London: Sage, 1980) pp. 121-51.

11. Electoral pacts and their effectiveness or otherwise are an important part of this equation. For data on electoral pacts between opposition


parties in the July 1986 elections, see Hans H. Baerwald, Party Politics in Japan (Winchester, MA: Allen & Unwin, 1986) table on p. 184. The larger the number of members elected per constituency, the more 'room' there is for small parties to have their members elected to Parliament.

12. The size of the LDP victory in the 1980 general elections is subject to various interpretations, including the explanation that it was caused by a sympathy vote for the prime minister (Ohira), who died during the election campaign. It can be argued, however, that in circumstances where the media were suggesting that an opposition defeat of the LDP was for once a real possibility, many voters were inhibited from voting for opposition parties because of the lack of unity (including policy unity) between them.

13. See Baerwald, op. cit., Chapter 2, pp. 35-88. 14. For details of the reform and the numbers of members elected in the

new constituencies, see Asahi Nenkan (1987) p. 108. 15. See Joy Hendry, Understanding Japanese Society (London: Croom Helm,

1987). 16. See Norie Huddle and Michael Reich with Nahum Stiskin, Island of

Dreams: Environmental Crisis in Japan (New York and Tokyo: Autumn Press, 1975), and Margaret A. McKean, Environmental Protest and Citizen Politics in Japan (Berkeley, CA: University of California Press, 1981).

17. See Murakami Yasusuke, 'The Age of New Middle Mass Politics', Journal of Japanese Studies, vol. 8, no. 1 (Winter 1982) pp. 29-72.

18. For an early exposition of this approach, see Sat6 Seisabur6, Kumon Shunpei and Murakami Yasusuke, 'Datsu "hokaku" jidai no t6rai' [Beyond Conservative-Progressive Polarisation], Chao Koron (February 1977) pp. 64-95.

19. A comparison of the total votes won by the K6meit6 and the Japan Communist Party overestimates the appeal of the latter, because, while the K6meit6 only contests winnable seats, the Communists put candidates into almost all constituencies, whether or not they have a chance of winning.

20. Haruhiro Fukui, 'The Liberal Democratic Party Revisited: Continuity and Change in the Party's Structure and Performance', Journal of Japanese Studies, vo!. 10, no. 2 (Summer 1984) pp. 385-435.

21. Haruhiro Fukui, Party in Power: The Japanese Liberal-Democrats and Policy-Making (Canberra: Australian National University Press, 1970) table on p. 273.

22. They total more than the number of cabinet ministers because some listed two former occupations.

23. Positions on Diet committees are allocated in proportion to the distribution of party support in the House concerned. This, together with the rules about appointment of party chairmen, means that if the LDP only has a narrow parliamentary majority, it may lose control of a certain number of committees.

24. See J. A. A. Stockwin, 'Japan: The Leader-Follower Relationship in Parties', in Ware, op. cit., pp. 96-116.


25. Inoguchi Takashi and Iwai Tomoaki, 'Zoku giin' no kenkyu: jiminto seiken o gyujiru shuyakutachi [A Study of 'Tribal' Parliamentarians: Those who Lead the LDP] (Nihon Keizai Shimbunsha, 1987).

26. Inoguchi and Iwai, op. cit., Chapter 1.

3 Bureaucracy and Political Change in Japan ALAN RIX

The problem of dynamic versus immobilist tendencies in the postwar Japanese polity inevitably involves the bureaucracy. Its responsiveness to the social, political and economic demands during the period of postwar high growth and the accompanying rapid systemic change is a useful measure of such dynamism. Was the bureaucracy a servant of more powerful, conservative forces? Or was it rather more an agent of change in its own right? If so, what was the relationship between the bureaucracy and the wider state structure in Japan, and how has bureaucratic dynamism become so much an accepted part of politics in Japan?

The bureaucracy has always been a central element of the Japanese political system. As such, I wish to argue, it has been a powerful force for policy change, adjustment and reform. My argument starts from the premise that 'all policy is policy change', 1 that the potential for dynamism is built into the bureaucratic policy-making system, and that the extent and direction of such policy change is the key to assessing adjustment in political systems. Likewise, I take policy change to be the basis for the broader phenomenon of political change: that is, variations in the political character and structure of systems are ultimately the result of the policy responsiveness of that system to the demands of its members and clients.

Changes in the political agenda in postwar Japan have had as their main reference point the 1947 Constitution, and the roles, standards and responsibilities of parliamentary democracy adopted therein. However, the bureaucracy was little affected by that Constitution, and the legitimate use of bureaucratic power under the postwar system of government has made for a dynamic bureaucratic contribution to political change. The bureaucracy, indeed, has been essential to the formulation and achievement of long-term state goals in postwar Japan.

54

Alan Rix

POLITICAL CHANGE IN JAPAN AND THE BUREAUCRACY

55

Historically, the Japanese bureaucracy has been central to political development in that country. As Inoki points out, 'bureaucratic leadership has played a leading part in the modernisation of Japan'. 2

In spite of a tendency to paternalism and inflexibility, the prewar bureaucracy was far more responsive to the need for political change than was the military. It was in fact a desire to protect the machinery of the state from party influences that led to imperial control of the bureaucracy and its isolation from democratic control. 3 While originally composed of 'intellectual aristocrats', the Meiji government became an appointed and dynamic 'modernising oligarchy'.

E. H. Norman presents an analysis of the political power of the Meiji bureaucracy, both civil and military. He attributed to the bureaucracy a directing role in the growth of Japanese industry in the Meiji period, and saw it as achieving, politically, 'an equal if not superior level to its partner, private monopoly capital'. 4 The civil and military bureaucracy became, he argued, 'the dominant instrument in Japanese political life'. They regarded themselves, he said, 'not as public servants but as public mentors'. 5

The extent to which these traditional bureaucratic forms (and, more importantly, norms) have carried over into the postwar political system is not precisely clear. Ide maintains that the present constitutional structure based on the 1947 Constitution retains important elements of the prewar kan (government, official power, the authorities) concept, whose authority was subordinate to and stemmed from the emperor. Indeed, the vocabulary of the prewar system (for example, kanri, official) still exists in the new Constitution (Article 73), and the administrative or executive power was explicitly defined in the new Constitution (Article 65) as existing alongside and equal to the legislative and judiciary powers. 6 The concept of 'public service' was written into the Constitution (Article 15) for the first time in Japanese tradition, and in practice the political status of the postwar civil service has been raised above its prewar counterpart in terms of its formal possession of constitutional (as contrasted with derived) authority.

The initial political change in postwar Japan was sudden and swift. The new Constitution radically altered the formal locus of sovereignty in the state from the emperor to the people, but Occupation reforms hardly touched the bureaucracy, because of the American desire to

56 Bureaucracy and Political Change in Japan

maintain the Japanese government structure as a legitimating buffer between the occupying forces and the Japanese people. Apart from the purges of officials and some administrative changes, the core of the bureaucratic system remained the same.7 Indeed, in many cases, one author suggests, the bureaucracy continued to operate under the 'traditional spirit'. 8 Craig is adamant that elitism is still applicable to higher career bureaucrats and that elite consciousness is strong; there is other evidence to suggest that this is indeed so.9

However, it is risky to assess Japanese political change solely in terms of the original aim of the Allied Occupation political reforms: that is, democratisation. Several authors have done this, 10 but it wrongly implies a unidimensional process of change. Tsurutani, for example, looks at Japan's political change and sees it mainly as a tension between politics in industrial society and new issues and problems emerging as a result of post-industrial society. He presents no formal theory of political change: political alignment occurred as new issues arose that cut across the socio-economic and ideological cleavages of the industrial period. He concentrates on styles of politics rather than any fundamental change in political structures. 11

Political change in the postwar Japanese context must obviously be measured not against prewar institutions and standards, but against the roles, standards and practices established by the 1947 Constitution and, more importantly, the 'rules of the game' flowing from it. Essentially we are looking at changes in the political agenda - the objectives of governments, the methods used to attain them and the criteria adopted to judge the results. It is reasonable to conclude that a strong degree of pluralism has been a feature of the system as it has evolved since 1947, and that bureaucracy has been an active element, both supporting and directing the pluralistic process. At the same time, however, that pluralism has been substantially modified by the entrenchment of Liberal Democratic Party (LDP) power over thirty years. 12

BUREAUCRACY IN JAPAN

In considering change within political systems, bureaucracy has tended to be classified in one of two ways: as an agent of reaction or of reform. Blau and Meyer point out that in modern industrial society the deliberate introduction of social innovation on a wide scale requires that bureaucratic methods of implementation be effective,

Alan Rix 57

but they also warn that the conditions of bureaucracy can themselves inhibit social change. 13 Morstein Marx contrasts the proximity of bureaucracy to 'the signal masts of change', with its strong conservative streak deriving from a need for a firm structure of political power. 14 On the one hand the bureaucrat is supposed to look forward, to think and to plan, to be a technician and a practical manager. But he is also meant to be a neutral and a political unknown. The bureaucracy's ultimate effects flow from its 'skill and resource for bolstering the long-run performance of government'. 15 But the ultimate dilemma is the conflict between the inertia of large organisations and the demands often made of bureaucracy to act as the spearhead of social change and adjustment.

There is no doubting the applicability to Japan of Weber's description of the trend to bureaucratisation in modern states. 16 The term 'administrative state' is readily applied to Japan by Japanese authors, 17

for example, and it is clear that national policy making has become increasingly bureaucratised over the postwar period. 18 At the same time, however, Weber was also concerned with the problem of whether the power of bureaucracy within the polity was universally increasing. 19 He saw that a ruler's influence required underwriting by the bureaucracy, and that 'constitutionalism binds the bureaucracy and the ruler' against the parliament and the party. But he did not claim that this process was necessarily irresistible: private economic interest groups, he said, were a foil to bureaucracy. I shall examine below the important concept of bureaucratic power in Japan; at this stage it is necessary to look more closely at the nature and functions of bureaucracy in Japan.

The term 'bureaucracy' is extremely elastic, and its usage is often unclear in studies of Japan. Many analyses have limited their attention to certain upper strata, the 'higher civil servants'. Given the welldocumented contribution of the bureaucracy to Japan's successful modernisation and growth in the Meiji and Taisho periods, close observation of the upper reaches of the bureaucracy is perhaps to be expected. But there is often an assumption that administrative circumstances today are sufficiently similar to those of one hundred years ago to warrant undivided attention to elites in the policy process.

The 'bureaucracy' in Japan today is far-reaching. It operates at both national and local levels, spanning central ministries and agencies, 114 public corporations, defence forces and national education staff, and (at least before privatisation of the Japan National


Railways in 1987) totalling 3--4 per cent of the labour force. Indeed, in a 'proximate policy makers' sense, bureaucracy extends into a complex array of government commissions and advisory bodies embracing non-officials from all walks of Japanese life.

Descriptively, therefore, the Japanese bureaucracy is a vast and impressively 'legal-rational' (in Weber's terms) structure. There are, however, some key issues in assessing the functions of bureaucracy as an institution in Japan. Can distinctions be made about the importance of different tasks, and their proximity to the 'centre' of decision making? Is dynamism or immobilism a result of a bureaucrat's location or function within the bureaucratic system, or the wider political system?

(i) Policy Function

'Policy function' refers to the role of different units in the policy process. A central consideration here must be the purpose of bureaucracy, be it the supply of services which the market will not provide, or in a more political sense, a role in societal 'governance', as Peters calls the effective fulfilling of the needs and wants of society and the economy.20 Not all bureaucratic behaviour is designed to achieve policy objectives, at least not directly. Nor are policies necessarily the preserve of single parts of the bureaucracy. It is therefore difficult to apportion fixed responsibility among the parts of the bureaucracy where particular .policies are concerned. It cannot be said, for example, that 'foreign policy' is the sole preserve of the Ministry of Foreign Affairs, or 'trade policy' the responsibility only of the Ministry of International Trade and Industry (MITI). Nevertheless there are important distinctions to be drawn between setting policy agendas and implementing those same programmes. As Peters points out, 'implementation' (as opposed to decision making) is 'a crucial part of the policy process'21 and is essential to effective governance. In Japan, the distinction within the national civil service between the policy makers and the policy implementers has often been drawn (for example the ministries versus the autonomous agencies or corporations). But this separation has never been complete (for example within the MITI itself) and, in any case, as Heclo has demonstrated,22 policy is a self-enriching cycle embracing both the making and the 'implementing' of policy. In Japanese policy areas (such as foreign aid) the implementers were inseparable from

Alan Rix 59

future policy options: the administrative process, in fact, affected outcomes and therefore future policy options.

There is, of course, ample evidence of the notional separation of the key policy makers from the rest: for example between the architects of the 'developmental state' described by Chalmers Johnson in his book about the MITI, and the economic planners described by Fukui, 23 and those officials dealing with some of the more mundane aspects of Japan's foreign aid. 24 Johnson's description of Sahashi Shigeru, one of these 'architects', is instructive:

Through his actions and his strongly enunciated opinions he set off a series of explosions that sent shock waves not only through the worlds of bureaucracy, industry, and finance, but also through the world of politics. His career offers what is probably the best Japanese example of the inseparability of bureaucratic interests and substantive issues of policy when the state dominates administration of the economy.25

A more personal touch is given by Okita Saburo, in speaking of his role in the Economic Planning Agency in 1962:

Two years later I was made director of the Development Bureau and participated in the final stages of the first Comprehensive National Development Plan. As head of the Development Bureau, I was also involved in deciding which towns or villages would be designated as new industrial cities. It seemed as though every town in the country wanted to become a new industrial city and fierce lobbying began. For example, a dozen or so lobbyists from Hachinohe city, Tohoku, including two housewives, turned up one day. 'Director', they said, 'please make Hachinohe a new industrial city. If you don't our children will have to leave home. Couldn't you find a way so that our children can stay?'26

Officials with these functions (often considered to be the 'elite') are few, but power over momentous decisions such as these is not the sum total of policy influence. Indeed, as Hogwood and Peters make quite clear, 'all policy is policy change', be it 'innovation, succession, maintenance or termination' _27 Japanese policy is no different, as Rix's aid study has shown: policy change was a universal objective and dynamism was built into the system at the micro-level:


Completing an aid project meant disbursing funds, 'moving money', fulfilling aid targets .... Seeing aid decisions through was part of the politics of foreign aid, and here officials became important in determining future options .... The end of a project was only a beginning. Bilateral relationships were ongoing and cumulative, a mass of criss-crossing requests, commitments and agreements about what could and could not be part of an aid program .... Decisions were made through action at the frontier of the aid relationship as much as at the centre, for approving aid was not enough; how projects and programs were ultimately set up and made to work was the real test of the aid relationship and of the relevance of prior decisions. It was ultimately the way external-internal linkages interacted with domestic structures and procedures which shaped decisions, and influenced the effectiveness of the implementing machinery. 28

(ii) Social Function

In assessing the social functions of bureaucracy, we are asking about the service role of public organisations: are there 'public service' fundamentals to the Japanese state bureaucracy? Muramatsu demonstrates a clear gap between citizens and politicians (and between different sides of politics) over the appropriate activities of the state. Only 0.9 per cent of politicians saw 'public service and facilities' as most important, as opposed to 12 per cent of citizens, but far more politicians (28.7 per cent) than citizens (17.4 per cent) saw welfare as most pressing.29 Japan is certainly no western-style welfare state, although welfare services are by no means poor (see Chapter 8). 'Welfare' has in Japan been defined in terms of economic principles and achievements; as Pempel explains, the development of a welfare programme was done 'in a manner that, at least in the early stages, did not fundamentally undercut its principles of minimal involvement by the national government in such areas and of reliance where possible on the private sector'. 3° Campbell nevertheless regards policy towards the aged as 'an impressive example of a government's ability to redirect its attention and resources to new social needs'. 31

On the other hand, as Johnson implies, widespread 'marketconforming state intervention in the economy' can be a social cushion in the long term. Public service, as a form of welfare, is an outcome of the type of state control Japan has experienced in the postwar period; they are opposite sides of the same coin. Clearly both 'control'

Alan Rix 61

and 'service' aspects of the bureaucracy's role exist here and both were integral to the activist response of the bureaucracy for social need. Social welfare did become an articulated official target in economic plans in the late 1960s and 1970s, and was made consistent with other national plan objectives. But policies were not simply a bureaucratic response to official plans: Campbell feels that 'when Japan's elderly did need assistance which only government could provide, by the late 1970s a set of policies had emerged which was an appropriate response to many of these needs'. 32

(iii) Bureaucrats as Elites

Another of the major issues in relation to bureaucratic functions concerns 'elites': that is, are administrators members of the 'elite', and are the 'elite' the key decision makers in modern society? Much, if not most, of the writing on the role of elites in society since Pareto and Mosca has subsumed administrators within the elite, and there has also been a tendency to deem elites to be the important decision makers. 33

The Japanese political process has often been described in terms of the elite model, but several recent studies have indicated that just as the policy implementers are inseparable from the policy makers, so these categories involve the 'other ranks' of the bureaucratic structure.34 Theories of elites in policy making tend to start from the assumption, rather than the hypothesis, that elites are the policy makers. This has been particularly so in studies of Japan, and it has obscured arguments about levels of decision making, structures of power, indeed the administrative process as a whole. The elite argument does not, by itself, take us very far in answering questions about patterns of bureaucratic power.

Nevertheless recent research, both on the West and on Japan, has been devoted to studies of 'contending elites'' top bureaucrats and politicians. 35 This stems from a concern with the fundamental principles of the democratic process based on the primacy of the legislature, and the threat (first predicted by Weber) of growing ~ontrol of the political system by bureaucrats. These studies have tended to conclude that the 'bureaucratization of politics and politicization of bureaucracy'36 are unavoidable, and the roles of both bureaucrats and politicians become confused and ultimately inseparable. For example, Heclo's study of the Washington bureaucracy found that political leadership was 'extraordinarily difficult' in


Washington because of the conflict between the need to keep open the democratic channels of policy input (the pressure group process) and the need to make decisions increasingly more wide-ranging in their effects.37 It is a problem of the effectiveness of the civil service in adopting a broad view of the 'service' function of government.

Putnam and his associates have suggested that bureaucrats and politicians in European countries have different functions in the political system: bureaucrats act as 'equilibrators' and politicians as 'energisers' .38 One of the most interesting conclusions of their study is that each is likely to foster a different kind of change (incremental versus sudden) and approach public issues in different ways (caution versus risk taking). 39 This does not, however, fit the Japanese case very well. It has been shown that there are other energisers (external groups and certainly bureaucrats themselves), 40 while bureaucrats are not the only avoiders of risk or seekers after compromise and consensus. 41 However, Muramatsu and Krauss have demonstrated that Japan shares 'in the trend toward partial convergence of politicians and bureaucrats in policymaking among the advanced industrialized countries'; but they also saw differences in attitudes, roles and styles between bureaucrats and politicians. If anything, they found that politicians were increasing their relative inftuence.42 In this context, the power of bureaucracy becomes relevant when we try to assess the extent of the bureaucratic impact, and the relevance of the bureaucratic function.

BUREAUCRACY AND POLITICAL POWER IN JAPAN

Trying to locate parts of the bureaucracy in relation to the centres of power is based on something of a false premise: that there are distinct 'loci' of greater power. Some have claimed this distinction for the Ministry of Finance or the MITI,43 while others have looked to the career bureaucrats - the 'elite' of the popular literature - as the epitome of the powerful civil servant. Notably, power has rarely been accorded to particular positions (such as vice-ministers) in order of authority; rather, more functional criteria come into play, and even the leadership and authority role of ministers in Japan is said to be increasingly circumscribed. 44

To the man in the street, however, the counter official at the local ward or town office is the most direct semblance of bureaucratic power; thus the recent government concern in the context of the

Alan Rix 63

administrative reform movement, to improve the image of the madoguchi or 'shopfront': a 1982 poll by the Administrative Management Agency found that the registration office had the worst image of any civil service shopfront.45 One objective of administrative reform has been to correct these images, and improve the delivery of administrative services.

Bureaucratic power, in this sense, is pervasive and entirely relative to that bureaucracy's customers. If power is seen as the ability to direct the course of the nation, however, we can be more specific about power resources. Until recent years, the economic bureaucracies -Ministry of Finance, MITI, Ministry of Agriculture, Forestry and Fisheries, Economic Planning Agency and the major government corporations- have developed complex and far-reaching mechanisms for translating policy into achievement, and have built a bureaucratic citadel within the state founded on a set of premises about national directions. 46

Fukui argues that bureaucrats are powerful in Japanese policy making because of the limitations of other formal participants (the cabinet, the Diet, the LDP), and the reliance by the LDP on the expertise and information of the bureaucracy. 47

Tsuji put it strongly when he claimed that 'the postwar Diet and parties have fine trappings but in fact dance on the brightly lit stage erected by the bureaucratic structure' .48 The reasons Tsuji puts forward for the maintenance and growth in bureaucratic power relate to the Occupation's reliance on the Japanese government to carry out its policies, a lingering popular belief in the neutrality of the bureaucracy, and the lack of a mature alternative power structure in Japan. Bureaucratic power lies in its 'neutrality' (kokkateki churitsusei) and its specialist competence (tekkakusei). This reflects, he says, Weber's explanation of bureaucratic power as lying in bureaucracy's monopoly of specialist and administrative knowledge. 49

So, in addition to the standard explanations in the literature of the sources of bureaucratic power (skills - including expertise - outside support and aggressive intra-bureaucratic competition for power), there exists an historical reason in Japan for explaining the strength of bureaucratic influence over public policy: the Occupation and its policies. But there are nevertheless strong limits to the power of bureaucrats, largely associated with their interaction with the cabinet and LDP. Power is not untrammelled, and Pempel has demonstrated that the patterns of powerplay in policy making are extremely varied and variable. 50 Muramatsu and Krauss argue, as related above, that


the influence of politicians in the political process is increasing. Thus there is considerable scope yet for examining Japanese bureaucratic power in greater detail. The following aspects are important.

1. The structural aspects of bureaucracy (for example the effects of the existence of independent centres within bureaucracy, proliferation of specialised agencies).

2. Public attitudes to bureaucracy: what are the prevailing societal notions of the social effects of bureaucracy, and therefore the role and relative utility and acceptable behaviour of bureaucrats? (This is linked to the type or types of bureaucracy existing and their relationship to their clients.)

3. Bureaucratic attitudes (for example to the task, to notions of 'service', to the norms of bureaucratic life).

4. Behavioural aspects (for example the relationship with political executives and external groups, the 'service' functions of bureaucracy).

(i) The Structure of Bureaucracy

Japan is blessed (if that is the word) with a bureaucracy structured, as Pempel puts it, 'for clarity of organisation and responsibility' ,51

but one not far removed from the bureaucratic structure of the late nineteenth century. A system of reasonably clear responsibility for government functions from cabinet level to the lowest main organisational unit is an important feature of the bureaucratic system. There is a fixed core of central ministries (twelve in all, plus the prime minister's office); the phenomenon seen often in the West of regularly changing the number and nature of ministries depending on the policy of the government of the day is not seen in Japan. This is due in part to the monopoly on government held by the LDP since 1955. There are a number of important policy agencies under the charge of various ministers. Within each ministry or agency, functional bureaux do not change often, although their own divisions do. There is scope for administrative diversification and the enlargement of responsibility through the large number of government and semigovernment authorities and public companies, 52 all of which require ministerial oversight to one degree or another.

Pempel points out that the basic principles of Japanese administrative reform became, in the postwar period, 'increased efficiency and constraint on the size of government'. 53 In 1955, there were a total

Alan Rix 65

of 40 ministries, agencies and major commissions; this had risen to only 45 in 1982. The number of bureaux had risen from 80 to 114 over the same period, but the number of tokushi h6jin or public authorities had nearly tripled from 33 to 94, although it has fallen from a high point of 113 in 1967.

Numbers of government employees have been held down through a series of planned reductions in staff levels across the board. The total establishment is just over five million including educational and military personnel. This is a level of 45 per thousand of population as compared with 109 in the UK, 83 in France, 82 in the USA and 76 in the FRG54 - Japan's lower figure is not due only to a low level of military employment but to continued attempts to hold back on public sector employment. The national civil service establishment has been held stable since 1967 over six successive reduction plans. Over that period growth has occurred, however, in the establishment for the national universities, medical and hospital, policy and foreign affairs, social welfare, taxation and science/environment/energy, and patents sectors, while large reductions have taken place in agriculture, government monopolies (minting, alcohol, posts) and general administrative staff in the central ministries and agencies. 55

The size and structure of the bureaucracy, therefore, has kept pace to some extent with areas of growing policy demand. At the same time as the central ministries have been held in check, however, some of the main growth has occurred in the key economy and regulatory ministries and agencies - Finance, International Trade and Industry, Welfare, Education, Public Safety and Fair Trade. Likewise, the public corporations have extended significantly the specialised reach of particular ministries.

(ii) Attitudes Of and Towards Bureaucracy

It is difficult to generalise about Japanese bureaucrats. There are, within the Japanese civil service, a myriad of personnel types and classifications. The best known of these are the career 'elite' groups that form the core of the policy process within the bureaucracy, and which have been discussed above. It seems a reasonable conclusion from the literature that the national-mindedness of this relatively small group of officials is strong. 56 It may also be the case that bureaucrats in Japan perceive themselves to be more influential in determining the directions of the nation than do bureaucrats in other western countries. One cross-national survey reported that 96 per


cent of bureaucrats felt they were 'very' or 'rather' influential in the policy process; the percentage was 85 per cent in the UK and 75 per cent in the USA. Furthermore 80 per cent felt that the civil service tended to provide public policy rather than parties or the parliament, whereas only 21 per cent did so in the UK and 16 per cent in the FRG.57 Muramatsu's study of Japanese bureaucrats suggests two types of officials: the politically minded and the classical types. This distinction mirrors the diversity of the political world itself, claims Muramatsu, and is related to bureaucrats' views about their own role in particular policy areas. 58 Muramatsu and Krauss's study of higher and middle bureaucrats, and LDP politicians, shows that bureaucrats have a fairly high opinion of their influence in the policy process, while government politicians see their role as more important than do the bureaucrats. Indeed, the authors conclude that the influence of politicians has been increasing and that 'influential bureaucracy does not particularly like this new tendency in postwar politics'. 59

Public attitudes to bureaucracy are rather more difficult to judge. It is relatively easy to document dissatisfaction with government services, and views that bureaucrats are well off,60 but we have tended to rely for general views of the administrative system on qualitative assessments about the 'elite' nature of the national bureaucracy. Descriptive studies have put forward the view of members of the bureaucracy as active and even dominant participants in the setting and implementation of public priorities and policies. 61 The validity of these attitudes, however, depends on the environment in which the bureaucracy operates and the accepted social norms under which bureaucratic controls over individuals can be condoned. Japanese commentators have suggested a move away from the values of earlier years (modernisation, the free market and a positive state function), towards a search for a new 'public philosophy' in response to reactions against big government and values of the 'welfare state' or the 'positive state'. 62 The administrative reform efforts of the 1980s have failed to grapple with the most difficult barrier to reform - the budget system- and a process of 'decrementalism' puts financial authorities in a firmer control position within the political system as the arbiter of who gets what in a period of declining growth in resourcesY It is also recognised that public demands on bureaucracy are increasing and diversifying, but that the consciousness of the citizenry is moving to greater antagonism towards a system which is seen to be exploiting, rather than benefiting, them. This may lead, in itself, to increasing public dissatisfaction with the performance of bureaucracy.64

Alan Rix 67

(iii) Behaviour

This subject takes us into the realm of policy making in the Japanese government system and questions the ability of the bureaucracy both to satisfy the demands made upon it and service the perceived needs of society. Studies of Japanese policy making show that patterns are extremely diverse. It seems clear, however, that 'the bureaucratization of politics and politicization of bureaucracy' in Japan are facts of life. This is not due simply to the long reign of the LDP in Japan (since 1955), but to the stability of the bureaucratic structure over the period, the conscious efforts to restrain its growth and the concomitant preservation of an upper-level minority within the civil service having- as Muramatsu shows- a fairly restricted background. Also, in the sense that new policy usually involves fiddling around with old or existing policies, the LDP and the bureaucracy have for over thirty years provided a reservoir for policy from both political and administrative directions. This has produced not only reasonably predictable policy dynamics (not the least because of long-range thinking at the bureaucratic level) but also stability in the delivery and distribution of those policies, and a certain degree of popular expectation about benefits. That is one reason why 'decrementalism' will be carefully managed.

The ultimate sources of the power attaching to participants in the Japanese administrative process are not easily isolated. The relationship between bureaucracy and the political world is not altogether clear, nor is the place of bureaucracy in the wider state power structure. It may be, in the end, that the dictum put forward by Miliband applies: 'everywhere and inevitably the administrative process is also part of the political process'. 65 To deal adequately with the contribution of the bureaucracy to political change in Japan, we need to discuss the concept of the state as it applies to Japan.

BUREAUCRACY AND THE STATE IN JAPAN

To what extent are bureaucratic outputs in Japan determined by the bureaucracy's wider state function, and are state power structures in Japan affected by bureaucratic processes? That is, do policies serve state interests first and foremost, and is the policy-making process itself a mechanism for changing the power structure?

The modern state is not simply an 'administrative state' in the


sense of a set of national political arrangements based purely on administrative organisation. However, it can be considered to be such to the extent that there is a dominant tendency to 'administrative regulation'. Weber foresaw the trend to 'administrative bureaucratisation': 'technically, the great modern state is absolutely dependent upon a bureaucratic basis. The larger the state, and the more it is or the more it becomes a great power state, the more unconditionally this is true. '66 Heclo has spoken of 'the large scale bureaucracies that constitute the modern state' _67 Some Japanese writers have written of their own country as an 'administrative state', describing its strong connections to the prewar absolutist state structure, but reflecting also the Weberian qualitative and quantitative development of administrative functions under a constitutional division of power system.68

But the state is not administration only. Indeed, according to Poggi, the constitutional division-of-power structure has increased state powers (and not just bureaucratic powers) overall through the competition engendered by its units and subunits over their respective prerogatives. He adds that this competition and its resulting impact on society is 'particularly intense within the state's administrative apparatus'. 69 But there are other important centres of state power; in Japan's case, it is commonly argued that the government party and big business are the other two.

Theories about the power structure in postwar Japan are numerous. Most have converged toward a position of what Fukui calls 'limited pluralism' or what Vogel calls 'guided free enterprise'. 70 The emphasis is usually placed on co-operation between bureaucracy, big business and the governing conservative party. A more recent approach has been the application of the corporatist model to Japan/1 while Inoguchi suggests a 'bureaucratic-inclusionary pluralism' model where bureaucracy is a central part of the pluralistic power structure, and has a decisive influence over its directions. 72

In considering the place of bureaucracy in the state we assume that the state is something more than the bureaucracy, despite the trend towards bureaucratisation of state functions. The important factor is, however, the extent to which bureaucracy is able to contribute to the legitimacy of the state: firstly, to determine the directions of state policy, the 'agenda setting'; secondly, to adapt to political demands by policy innovation. These, plus the performance of bureaucracy in making policies work (implementation) are essential to the creating and strengthening of political values supportive of the state. At the

Alan Rix 69

same time, the ability ofthe bureaucracy to make government operate effectively on a routine basis - via its communication function and central co-ordinating role- assists the maintenance of state legitimacy.

Yet, as Poggi states, parliament remains the main institutional link between state and society73and, in democratic societies at least, it is ultimately to society that the state is answerable. Nevertheless the continuing trend is for the state to extend and deepen the facilities of institutional rule, despite the argument that this is making the state increasingly unable to rule effectively, and despite the development of greater distance between the reality of popular sovereignty as the basis for state power.

The ultimate purpose of the state in Peters's view is societal 'governance'. In capitalist, industrial societies, this involves the contradictory role of maintaining capital accumulation and simultaneously retaining legitimacy.74 Poggi has described how this contradictory role is, in the modern state, proving difficult to reconcile: the more the modern state gathers unto itself the means of rule, the less capable it is of rationally controlling the social process. Heclo's study revealed an uncertain - but not directionless - satisfaction of policy demands over time. Resistance to change, or concern for the 'status quo' by bureaucracies was not dominant, according to Heclo, except in the sense of trying to get policies right the second time around.75

Likewise Heclo observes that 'the possession and relationships of power have not necessarily decided the substance of policy . . . a great deal of policy development has been settled prior to or outside of substantial exercises of power'. 76 There is, according to Heclo, no fixed power structure or technique in the area which he studied (social policy), different elements of power having been influential at different times.

The question is: how does Japan fit this model? Is the power of the Japanese bureaucracy universally increasing, and how has the Japanese state structure in the postwar period been affected by bureaucratic administrative power? Has change been a product of bureaucratic behaviour across the spectrum of government and through the ranks as well? To answer these questions, we return to ideas about the relevance of the concept of bureaucracy to the Japanese state. This again raises the question of bureaucratic power in Japan, particularly the role of the bureaucracy as an institution in the direction and achievement of state purposes and, ultimately, in political change.


BUREAUCRACY AND THE POSTWAR POLITICAL AGENDA IN JAPAN

In a 1982 article, Bernard Silberman wrote of the development of the Japanese bureaucratic state during the Meiji period. It was a state where the 'public good' required intense state bureaucratisation, for this was 'the only organizational solution to the myriad problems created by the revolutionary act'. Silberman also claims that it was the bureaucracy itself which sought to determine the public interest and so establish its own claims for rights over decision making. 77 The identity between state objectives and bureaucratic interests in this system was more than coincidental. Chalmers Johnson documents the same identity in his analysis of the Japanese 'developmental state' from the 1920s to the 1970s: 'Japan's is', he writes, 'a system of bureaucratic rule' / 8 with the MITI as the 'pilot agency'.

Yet, it is difficult exactly to pinpoint where the sources of the postwar bureaucracy's power lie, or what the role of the bureaucracy in the postwar state has been. Johnson's conclusions about the activist role of the MITI are clear enough, but the MITI is not the Japanese state and industrial policy is not the state's sole purpose. Nor does bureaucratic power have a single causal factor. Bureaucracy is none the less a pervasive presence in the state and the political system. Even given that policy is constantly changing, the perennial bureaucratic function in the policy process has been crucial to policy performance, in policing and servicing different client groups within society. Bureaucratic structure, behaviour and image, with their foundations in the historical functions of the bureaucracy in the Japanese state back to the Meiji period, have helped to bolster and maintain bureaucratic power. The Japanese 'administrative state' today is the culmination of a century of involvement in the Japanese state structure. 79

Assessing the role of the bureaucracy in postwar political change involves considering how the bureaucracy has contributed to the postwar policy agenda, in terms of the objectives set, the methods used to achieve them and the criteria used to judge the effects. From what we have discussed already, it is clear that bureaucracy has been important in Japan in legitimising state functions through policies and performance. But are social and political change in Japan consciously and purposefully directed by bureaucracy towards state ends, or do bureaucratic actions have functional limits?

Bureaucracy is not a passive servant of politics, and the institutional

Alan Rix 71

process of bureaucratic activity has a life of its own. There are numerous studies of Japanese policy which bear this out - in budgeting, industry, foreign aid, education, to name a few. 80 Bureaucracy can 'energise' like any politician and, at this stage of our empirical knowledge, it is difficult to consider the bureaucratic process (as contrasted with bureaucracy as a formal component of the state structure) as directed necessarily - or at all - to state ends, except as bureaucracy has defined those ends.

Let us concentrate, however, on the bureaucracy as an institution rather than on its internal processes. The postwar bureaucracy has not had the self-legitimating task that the Meiji bureaucracy had; its legitimising activities have involved reinforcing the relation between the state and the people, emphasising the 'public service' aspects of its functions. The role of the Japanese bureaucracy in 'making policies work' has been vital to the success of the Japanese state in several areas - economic planning is an excellent example. 81 The methods of the postwar political agenda have largely been the responsibility of the bureaucracy, as Chalmers Johnson has so carefully pointed out.82 This implementing function (in its broadest, most creative sense) has important political ramifications in that the delivery of policies affects popular values as they relate to the state. This is not to say that the bureaucracy has permanently affected popular political values, but the bureaucracy has held a powerful political weapon in the effective way it has been able to carry out policies and, therefore, to create new policies, new demands, new clients and new power structures.

The methods of bureaucratic policy management have been described and analysed in many books on Japan. There are several aspects, however, which represent important and pervasive processes - the methodology, in a sense, of the Japanese bureaucracy. There is, in the first place, an extremely strong emphasis (as one would expect) on administrative and organisational procedures within the governmental system. This is important because of its effect in maintaining bureaucratic control over the pace and direction of policy development. Secondly, this factor is linked to the firm reliance on the annual budgetary process to filter policy, as has been described by Campbell and Rix.

Thirdly, there is a relative openness of policy debate within society, fostered by indicative long-range thinking about policy directions. This has permitted tolerance within bureaucracy of political intervention in the administrative process as a result of the long rule of the


LDP. But political intervention and long-term thinking have enabled there to be a reasonable degree of policy 'co-ordination', in the sense of awareness and acceptance of an unevenness in policy boundaries. It has also strengthened the administrative practice of 'guidance' to the private sector - the practical enforcement of administrative decision through various forms of persuasion, for the legal basis of such action was often doubtful except in a vague and diffuse way. 83

The bureaucracy's methods of implementing its policies have therefore magnified many of its traditionally accepted characteristicscomplexity, authority, and pervasiveness. However, implementation is more than just enacting the policies of the day. It is, as explained above, part of an ongoing policy cycle, through which Japanese bureaucracy has come to be not only seeing policy enacted, but setting new agenda objectives- in much the same way that Silberman observed Meiji bureaucrats setting the parameters for deciding the 'public interest' so as to legitimise their own policies. This assumes agreement about what constitutes that public or national interest. Such agreement cannot be assured in Japan, despite popular myths about consensual elites. 84 The ultimate contribution of the bureaucracy to the state, however, comes in its impact on policy objectives, in defining new agendas, problems and challenges. T. J. Pempel argues that 'the agenda of economic policy in Japan was the conservative agenda of big business and the central economic ministries'. 85 The focus on indicative long-term perspectives has been instrumental in the bureaucracy's defining of objectives - although it has been more conspicuous in some policies (industry, the economy, welfare and education spring to mind) and less noticeable in others (foreign aid and trade liberalisation are examples). It will depend very much on the policy area in question, and the period.

In general terms, it is true to say that the national bureaucracy plays a pivotal (but by no means monopoly) role in the Japanese state structure, and therefore in setting the objectives for Japanese society, designing and carrying out the policy to give effect to them, and assessing the results. It is at this last point that the long-term significance of the bureaucratic function is very real: the maintenance and consistency of objectives and methods over time is a task for the implementers and the managers of the policy process, not the political leaders, despite the longevity of LDP rule. In that sense, the constancy and predictability of political change in Japan owes most to the bureaucracy.

Alan Rix 73

NOTES

1. Brian Hogwood and B. Guy Peters, Policy Dynamics (Brighton: Wheatsheaf Books, 1983) Chapter 3.

2. Masamichi lnoki, 'The Civil Bureaucracy: Japan', in Robert E. Ward and Dankwart Rustow (eds), Political Modernization in Japan and Turkey (Princeton, NJ: Princeton University Press, 1964) p. 293.

3. Ibid., p. 291. 4. John W. Dower (ed.), Origins of the Modern Japanese State: Selected

Writings of E. H. Norman (New York: Pantheon, 1975) p. 240. 5. Ibid., p. 457. 6. Ide Yoshinori, 'Gyosei kokka ni okeru "kan" no shihai' [The Control of

'Official Power' over Administration] in Taniuchi Makoto et al. (eds), Gendai gyosei to kanryosei [Contemporary Administration and Bureaucracy) (Tokyo Daigaku Shuppankai, 1974) pp. 47-102.

7. Gary D. Allinson, 'Japan's Second Bureaucracy: Civil Service Reforms and the Allied Occupation', in Thomas W. Burkman (ed.), The Occupation of Japan: Educational and Social Reforms (Norfolk, VA: Macarthur Memorial, 1980) pp. 471-97.

8. Okochi Shigeo, 'Nihon no gyosei soshiki' [Japan's Administrative Organisation], in Tsuji Kiyoaki (ed.), Gyoseigaku koza 2: gyosei no rekishi [Lectures on Administration 2: The History of Administration] (Tokyo Daigaku Shuppankai, 1976) p. 95.

9. Michio Muramatsu and Ellis S. Krauss, 'Bureaucrats and Politicians in Policymaking: the Case of Japan', American Political Science Review, vol. 78, no. 1 (March 1984) pp. 130-3.

10. For example, Robert Ward, Japan's Political System, 2nd edn (Englewood Cliffs, NJ: Prentice Hall, 1978) Chapter 13.

11. Taketsugu Tsurutani, Political Change in Japan (New York: David McKay, 1977).

12. An important work based on the pluralist notion is J. A. A. Stockwin, Japan: Divided Politics in a Growth Economy, 2nd edn (London: Weidenfeld and Nicolson, 1982). T. J. Pempel has described a notion of 'creative conservatism' in Policy and Politics in Japan (Philadelphia, PA: Temple University Press, 1982). lnoguchi Takashi has developed a model of 'bureaucratic inclusionary pluralism': see his Gendai Nihon seiji keizai no kozu: seifu to shijo [The Composition of Contemporary Japanese Politics and Economy: Government and Market) (Toyo Keizai Shimp6sha, 1983).

13. Peter Blau and Marshall Meyer, Bureaucracy and Modern Society, 2nd edn (New York: Random House, 1971) Chapter 6.

14. Fritz Morstein Marx, 'The Higher Civil Service as an Action Group in Western Political Development', in Joseph La Palombara (ed.), Bureaucracy and Political Development (Princeton, NJ: Princeton University Press, 1967) p. 87.

15. Ibid., p. 94. 16. H. H. Gerth and C. Wright Mills (eds), From Max Weber: Essays in

Sociology (London: Routledge and Kegan Paul, 1970) pp. 196-244. 17. Ari Bakuji, 'Gendai gyosei no tenkai to gyosei kokka no keisei' [The


Development of Contemporary Administration and the Formation of the Administrative State], in Tsuji Kiyoaki (ed.), gyoseigaku k6za 2: gy6sei no rekishi, pp. 1-50.

18. T. J. Pempel, 'The Bureaucratization of Policy Making in Postwar Japan', American Journal of Political Science (November 1974) pp. 647-64.

19. Gerth and Mills, From Max Weber, pp. 232ft. 20. B. Guy Peters, 'Bureaucracy, Politics and Public Policy', Comparative

Politics (April 1979) pp. 339-58. 21. Ibid., p. 354. 22. Hugh Heclo, Modern Social Politics in Britain and Sweden (New Haven,

Cf: Yale University Press, 1974) Chapter 6. 23. Chalmers Johnson, MIT/ and the Japanese Miracle (Stanford, CA:

Stanford University Press, 1982); Haruhiro Fukui, 'Economic Planning in Postwar Japan: a Case Study in Policymaking', Asian Survey (April 1972) pp. 327-48.

24. Alan Rix, Japan's Economic Aid: Policy-making and Politics (London: Croom Helm, 1980) Chapter 3.

25. Johnson, MIT/ and the Japanese Miracle, p. 243. 26. Saburo Okita, Japan's Challenging Years: Reflections on my Lifetime

(Canberra: Australian National University Press, 1983) p. 79. 27. Hagwood and Peters, Policy Dynamics, Chapter 3. 28. Rix, Japan's Economic Aid, pp. 250-1. 29. Muramatsu Michio, Sengo Nihon no kanryosei [Postwar Japanese

Bureaucracy] (Toyo Keizai Shimposha, 1981) p. 300. 30. T. J. Pempel, Policy and Politics in Japan (Philadelphia, PA: Temple

University Press, 1972) p. 149. 31. John Creighton Campbell, 'The Old People Boom and Japanese Policy

Making', Journal of Japanese Studies, vol. 5, no. 2 (Summer 1979) p. 355.

32. Ibid., p. 354. 33. For a survey, see T. B. Bottomore, Elites and Society (Harmondsworth,

Middx.: Penguin, 1964). Also F. G. Castles et al., Decisions, Organizations and Society, 2nd edn (Harmondsworth, Middx.: Penguin, 1976) Part 3.

34. For example, Rix, Japan's Economic Aid. 35. Joel D. Aberbach, Robert D. Putman and Bert A. Rockman (eds),

Bureaucrats and Politicians in Western Democracies (Cambridge, MA: Harvard University Press, 1981). See also Robert D. Putman, 'Bureaucrats and Politicians: Contending Elites in the Policy Process', in William C. Gwyn and George C. Edwards (eds), Perspectives on Public Policymaking (New Orleans, LA: Tulane University Press, 1975) pp. 179-202.

36. The term is taken from Aberbach et al. , Bureaucrats and Politicians, p. 19.

37. Hugh Heclo, A Government of Strangers: Executive Politics in Washington (Washington, DC: Brookings, 1977). Chapter 1 of the book sets out the problem.

38. Aberbach et al. , Bureaucrats and Politicians, Chapter 8. 39. Ibid.

Alan Rix 75

40. Rix, Japan's Economic Aid, Chapters 6 and 8. Also Campbell, 'The Old People Boom and Japanese Policy Making'.

41. John Creighton Campbell, Contemporary Japanese Budget Politics (Berkeley, CA: University of California Press, 1977) and his 'The Old People Boom'.

42. Muramatsu and Krauss, 'Bureaucrats and Politicians in Policymaking'. 43. Such as Kanryo kiko kenkyukai-hen, Okurash6 zankoku monogatari

(Cruel Stories of the MOF) (Yell Books, 1976). 44. Muramatsu, Sengo Nihon no kanry6sei, pp. 193-203. 45. Gyosei kanricho, Gyosei kanri no genkyo [The Current State of Ad

ministrative Control] (Gyosei Kanricho, 1983) p. 74. 46. Yamamoto Masao, Keizai kanry6 no jittai (The Real State of Economic

Bureaucracy] (Mainichi Shinbunsha, 1972). 47. Haruhiro Fukui, 'Bureaucratic Power in Japan', in Peter Drysdale and

Hironobu Kitaoji (eds), Australia and Japan: Two Societies and their Interaction (Canberra: Australian National University Press, 1981).

48. Tsuji Kiyoaki, Shin Nihon kanryosei no kenkya (Studies of the New Japanese Bureaucratic System] (Tokyo Daigaku Shuppankai, 1969) p. 281.

49. Ibid., pp. 271-8. 50. T. J. Pempel (ed.), Policymaking in Contemporary Japan (Ithaca, NY:

Cornell University Press, 1977). 51. Pempel, Policy and Politics in Japan, p. 258. 52. Chalmers Johnson, Japan's Public Policy Companies (Washington, DC:

American Enterprise Institute for Public Policy Research, 1978). 53. Pempel, Policy and Politics in Japan, p. 260. 54. Fukui Ryoji, 'Komuinsu no kokusai hikaku' [International Comparison

on Numbers of Officials), Jurisuto, Special Issue no. 29 (January 1983) pp. 79-80; Gyosei kanrichO, Gyosei kanri no genkyo, Chapter 2.

55. Gyosei kanricho, Gyosei kanri no genkyo, p. 94. 56. This is demonstrated in, for example, Muramatsu and Krauss, 'Bureau

crats and Politicians in Policymaking'. 57. Akira Kubota, 'Political Influence of Japanese Higher Civil Service',

Look Japan, 10 December 1980, pp. 25-7. 58. Muramatsu, Sengo Nihon no kanryosei, Chapter 3. 59. Muramatsu and Krauss, 'Bureaucrats and Politicians in Policymaking',

p. 137. 60. Yoron ch6sa nenpo [Public Opinion Poll Yearbook] (1980) p. 532. 61. Albert M. Craig, 'Functional and Dysfunctional Aspects of Government

Bureaucracy', in Ezra Vogel (ed.), Modern Japanese Organization and Decision-making (Berkeley, CA: University of California Press, 1975).

62. Muramatsu Michio, 'Gyosei no gaien', (The Outer Garden of Administration], Jurisuto, Special Issue no. 29 (January 1983) pp. 36-42.

63. Kojima Akira, 'Seisaku kettei hoshiki no tenkan' (Transforming the System of Policy Decision Making), Jurisuto, Special Issue no. 29 (January 1983) pp. 43-8.

64. Tanaka Mamoru, 'Gyosei juyo no henka to sono taio' (Changes in Administrative Demand and Responses to it), in Nihon keiei kyokaihen, 80 nendai Nihon no gyosei - sono kadai to teigen (Japanese


Administration in the 1980s: Issues and Proposals] (Nih on Keiei Shuppankai, 1981) pp. 67-9.

65. Ralph Miliband, The State in Capitalist Society (London: Open University Press, 1973) p. 47.

66. Gerth and Mills, From Max Weber, p. 211. 67. Heclo, A Government of Strangers, p. 4. 68. Ari, 'Gendai gyosei no tenkai'. 69. Gianfranco Poggi, The Development of the Modern State: A Sociological

Introduction (London: Hutchinson, 1978) Chapter 6. 70. Haruhiro Fukui, 'Economic Planning in Postwar Japan: a Case Study in

Policy Making', Asian Survey (April1972) pp. 327-48; and Ezra Vogel, 'Guided Free Enterprise in Japan', Harvard Business Review (May-June 1978) pp. 161-70.

71. T. J. Pempel and Keiichi Tsunekawa, 'Corporatism without Labor? The Japanese Anomaly', in Phillipe C. Schmitter and Gerhard Lehmbruch (eds), Trends Towards Corporatist Intermediation (Beverley Hills, CA: Sage, 1979).

72. Inoguchi, Gendai Nihon seiji keizai no kozu. 73. Poggi, The Development of the Modern State, p. 144. 74. Stewart Clegg and David Dunkerley, Organizations, Class and Control

(London: Routledge and Kegan Paul, 1980) p. 550. 75. Heclo, Modern Social Politics, p. 303. 76. Ibid., p. 306. 77. Bernard S. Silberman, 'The Bureaucratic State in Japan: the Problem

of Authority and Legitimacy', in Tetsuo Najita and J. Victor Koschmann (eds), Conflict in Modern Japanese History: The Neglected Tradition (Princeton, NJ: Princeton University Press, 1982).

78. Johnson, MIT/ and the Japanese Miracle, p. 320. 79. Jurisuto, Special Issue no. 29 (January 1983): round table discussion

'Gyosei kokka no is6' [The Phase of the Administrative State] pp. (r.. 30.

80. See Campbell, Contemporary Japanese Budget Politics; Johnson, MIT/ and the Japanese Miracle; Rix, Japan's Economic Aid; T. J. Pempel, Policy and Politics in Japan, Chapter 5.

81. Fukui, 'Economic Planning in Postwar Japan'. 82. Johnson, MIT/ and the Japanese Miracle. 83. Ibid., Chapter 7. 84. It was never clear, for example, in the foreign aid area. See Rix, Japan's

Economic Aid, Chapter 1. 85. Pempel, Policy and Politics in Japan, p. 58.

4 Policy Implications of Administrative Reform DAIICHI ITO

In March 1981, an advisory body, the Provisional Commission on Administrative Reform (Rinji Gyosei ChOsakai abbreviated as Rincho) was set up in the Prime Minister's Office. According to its Establishment Law, the Commission was to consist of nine members who were appointed by the prime minister with the consent of the Diet from among 'persons having knowledge and sound judgement concerning the problem of administrative reform' .1 In practice, the membership consisted of three members from the business world (including the chairman, Doko Toshio), two from labour unions, two from the Civil Service (former administrative vice-ministers of the Ministries of Finance and Home Affairs), one from journalism and one from the academic world. In carrying out their duties, the abovementioned members were assisted by expert members, twenty-one in all, many of whom came from the business world. As the word 'Provisional' suggests, the duration of the Commission was limited, in fact, to two years. The Commission presented five reports to the prime minister in the two years of its existence, and was dissolved in May 1983.

In the words of the Establishment Law, the Commission was supposed to 'examine and deliberate basic matters concerning a reform of the administrative system and its functioning', with a view to 'facilitating the realisation of fair and reasonable public administration enabling the Government to cope with changes in society and the economy'. 2 The words 'basic matters' were, however, rather indeterminate. Much room was left to construe these words either broadly or narrowly. As a matter of fact, the Commission decided to take them as broadly as possible, as will be seen in its official view of the terms of reference, which says:

The Commission will study the reorganisation and rationalisation of public administration in those areas in which there exist various basic problems resulting from changes in society and the economy, such as the shift from a pattern of high economic growth to that of

77

78 Policy Implications of Administrative Reform

moderate and stable growth, Japan's increased international role and the growing tendency towards an aged society, and regarding which an overall review of administrative structures and measures from a comprehensive standpoint is necessary for finding solutions to the problems.3

To be faithful to this statement, the Commission stepped out of the conventional sphere of administrative reform, where organisational management and the method of work were held to constitute the main issues, to take up policy measures as a subject of its investigation and deliberation. This may clearly be seen in, for instance, the lengthy list of topics taken up in the Third (Fundamental) Report of July 1982 which included such a wide range of subject matters as policy proposals on diplomacy and defence and those concerning privatisation of public corporations. 4

Looking at the variety of topics, many of which are directly concerned with policy matters, one could be pardoned for asking whether these were appropriate issues to be dealt with by an advisory body on administrative reform. Some critics argued that this course of action deviated radically from the example set by the Commission's predecessor, the (First) Provisional Commission on Administrative Reform (established in 1961 after the model of the US Hoover Committee), and that it was not justifiable. There may be some truth in this argument, since policy matters are conventionally thought of as being what the prime minister and his cabinet should deal with on their own responsibility, although there is no problem in legal principle of delegating their authority to other bodies. 5

But these criticisms were helpless against the Commission's invasion into various fields of policy. For example, a senior official of the Ministry of Education remarked deploringly that

the proposals incorporated in the Third Report will exert a farreaching influence on administrative measures taken by various government departments as they materialise one after another. ... As for education, the Report proposes (1) to control the fixed number of teachers engaged in compulsory education, (2) to review the free distribution of school-books, (3) to cut substantially the amount of construction work for state schools, (4) to reduce the total amount of grants for private schools and (5) not to establish new departments in state universities. It is true that not all of these proposals have been realised. All of them, however, impinge upon

Daiichi Ito 79

the principles of educational policy which, as such, have long been considered to be within the competence of the Minister of Education. Therefore, it will be a new development that an advisory body, over the selection of whose members and over the arrangement of whose agenda the minister concerned does not have any control, is to give detailed instructions on the affairs under his jurisdiction. 6

In contrast, an official of the Administrative Management Agency, who was responsible for the management of affairs concerning administrative reform, did not conceal his satisfaction at this development.7 Thus, the Commission came to stand out in sharp contrast to its predecessor in that it interfered openly in the domain of ministerial responsibility.

How was it, then, that the Commission, in spite of criticism, was successful in breaking a conventional rule? A clue to the answer may be found in the abnormal state of financial affairs at the time. During the period of recession following the oil crisis in 1974, tax revenue fell off sharply, while public expenditure went on increasing as before on an incremental basis. 8 Naturally, the fiscal balance fell into the red, with an ever-growing deficit. In an effort to overcome these difficulties, the Government had recourse to issuing deficit bonds for the first time since the end of the Second World War. What was particularly annoying to the people concerned was the fact that the ratio of money raised by deficit bonds to total revenue increased rapidly to 27 per cent in the fiscal year 1979.9 These were the very circumstances which called for the establishment of the Commission and, at the same time, induced Suzuki Zenko, the prime minister, to make an unusual address at the opening session of the Commission. After having submitted the problem of administrative reform to the Rinch6, in virtually the same words as the Establishment Law, he added: 'as it is most urgent to undertake the rebuilding of the administrative and financial systems from the standpoint of reconstructing public finance', he would like the Commission 'to produce reform measures to meet this pressing need by the summer, so that they might be put to practical use in drawing up the budget for the 1982 fiscal year' .10 This was an unexpected development, and was received with surprise by many of those in attendance. In fact, it is reported that doubts were entertained by the Commission members themselves about whether it was appropriate for an advisory body on administrative reform to step into the domain of budget formation. 11


However, it was decided by the Commission as a whole to comply with the prime minister's request, and an additional statement was issued which said that:

From the standpoint of contributing to the rehabilitation and reconstruction of public finance through the far-reaching rationalisation of administrative functions and systems, the Commission, with a view to submitting to the prime minister the first report on administrative reform by July of this year, will commence studies with regard to the following matters: (1) Ideals of the immediate administrative reform and issues to be tackled. (2) Retrenchment in public expenditure and measures for revenue increase by both the central government and local authorities on the basis of a review of public administration. (3) Rationalisation of national and local administration and promotion of efficiency on the basis of a review of the proper orientation of public administration. 12

It is a commonplace that effective 'reconstruction of public finance' may not be accomplished without changing a variety of policies since many, if not all, of these policies necessarily involve spending public money. Japan was no exception to this rule. Moreover great efforts had already been made to rationalise organisation and the methods of work inside government departments since the days of the First Provisional Commission on Administrative Reform in the early 1960s. For example, in spite of an increase in the amount of work, the total number of officials employed by the central government had decreased by more than 2 per cent during the previous fifteen years, along the lines of manpower control policy worked out jointly by the Administrative Management Agency and the Ministry of Finance (MOF). This meant that a substantial improvement had taken place in the productivity of administration. 13 As a result of this and other measures, little room was left for cutting public expenditure by means of administrative reform in the conventional sense of the words. Taking these considerations into account, it is understandable that the Commission, to be of any service to financial reconstruction, could not do other than step into various substantive policy fields. As the official of the Ministry of Education quoted above put it, 'the fact that the proposals of the Commission have been accepted by government departments may only be understandable in the context of a peremptory situation which necessitates economic reduction and financial retrenchment'. 14

Daiichi Ito 81

Thus, the Commission drew up its First (Urgent) Report with all possible despatch, and this was presented to the prime minister in July 1981, just in time for the compilation of the budget for the 1982 fiscal year. In effect, this report stressed thoroughgoing retrenchment in government spending so that the total amount of public expenditure for 1982 might be kept within the limit of that for the preceding year. The underlying assumption was that the increases in public expenditure in the past which had brought about financial difficulties were caused by the fact that the incremental patterns of spending coined at the time of economic growth had, simply by force of habit, been adhered to long after the economy had ceased to grow. And, in order to bring its proposals into force, the Report enumerated at length various fields of policy measures where substantive retrenchment of expenditure might be expected and, therefore, effective measures should be duly worked out. These included a wide range of government activities, such as:

1. medical care and health insurance schemes, in particular those for the aged;

2. pensions and superannuation schemes; 3. measures for social welfare, in particular those for children; 4. educational policy (see above); 5. public construction works including housing and projects for

improving farmland; 6. measures concerning energy resources; 7. protection measures for small-scale industry; 8. privatisation of the Japan National Railways and other public

corporations; 9. reduction of the levels of services carried out by local authorities. 15

Many of these proposals were, in the end, brought to at least partial fulfilment, and with this a revised rule of budget compilation was introduced, according to which a non-incremental ceiling ('zeroceiling' as it is called) was set on claims for money by spending departments. 16 As a result, the total amount of expenditure for 1982 was in fact kept within the limit indicated by the Report, even though defence expenditure, accorded preferential treatment by the government, showed a marked increase. 17 Furthermore, the Report came to be seen as having established a precedent for the later reports. For instance, the Third Report, which meddles in a multiplicity of government activities under the pretext of financial reconstruction as


referred to above, simply followed its example. As one commentator put it, the dispute on how to interpret the Commission's terms of reference was finally settled at the time when the First Report was accepted by the prime minister. 18 But, if so, 'administrative reform', notwithstanding a counter-argument by the Commission, might be said to have degenerated into 'financial reform', that is a mere means for attaining fiscal balance, as many people have derisively suggested from both inside and outside government circles. 19 Is there any truth in this argument? This is precisely what we shall need to examine, but, before doing so, we shall take a brief look at some features peculiar to the Commission and its activities.

Three features stand out especially. First, the Commission enjoyed real authority over officialdom and the population at large, which no other advisory body could ever have aspired to, and there can be no doubt that much of this authority stemmed from the power of personality of its chairman, Doko Toshio. In fact, the Commission has often been called the 'Doko Rinch6', an extraordinary phenomenon in Japan where organisation normally transcends person. Assuredly, Doko is a man of great character. He is a most successful entrepreneur, led the business world as president of Keidanren (Federation of Economic Organisations) for many years and has a civil engineering background. At the same time he loves Chinese classics, which makes him a personification of oriental spirit and occidental technology. Unlike other successful leaders, he lives a very simple life. In fact, he has the reputation for being a man of honest poverty, which is an immeasurable asset in Japan. Presumably, if the prime minister, Suzuki, earnestly wished to carry out reform, there was no better way than to put this eighty-five-year-old personage into the position of chairman. Ironically, it is reported that one commentator who was critical of Rinch6 operations remarked deploringly that it was a great misfortune for Japan ever to have had a charismatic figure like Doko. 20

Secondly, in the Procedural Rules of the Commission, it was laid down that decisions should be reached by a majority of two-thirds or more. This way of coming to decisions is extraordinary in the world of administration in Japan, where, as a rule, agenda items are carried without division. As a matter of practice, an agreement was made in the Commission to the effect that, as far as possible, decisions should be reached unanimously, apparently as a way of calming objections raised by some members. 21 A majority rule of some sort, however, may well be indispensable if an advisory body is determined to

Daiichi Ito 83

accomplish anything substantial. In this sense, the Procedural Rules of the Commission can be seen to have expressed its determination to discharge the duties placed upon it.

Thirdly, supporting systems, both inside and outside the Commission, proved effective in disposing of practical affairs. On the outside, a liaison committee, called the 'Joint Administrative Reform Promotion Headquarters', was set up between the cabinet and the Liberal Democratic Party (LOP) at the highest level under the chairmanship of the prime minister, with a view to backing up the Commission's activities. According to a report made by an official concerned, this arrangement was very useful as it provided the Commission with opportunities for ascertaining the views of the cabinet and LOP leaders on prospective reform measures in advanceagain, an unusual practice for an advisory body. 22 As for inside arrangements, an Executive Office was organised under the chairman of the Commission, which was supposed to 'deal with affairs relating to the work of investigation'. The Office itself was headed by an executive director who was the same person as the administrative vice-minister of the Administrative Management Agency, and its staff (research assistants as they were called), about seventy in all, consisted of officials who were seconded provisionally from various government departments. The distribution of those research assistants among government departments is shown in Table 4.1. At first glance, every government department seems to have been represented evenly, with the exception of the Administrative Management Agency, the very government department whose raison d'etre lay in handling administrative reform. If, however, we take into account the fact that this Agency was thought to have been making common cause with- and, to some extent, to be under the influence of- the MOF, it can be concluded that some departments, the MOF in particular, were better represented than others. Incidentally, inside the Office, powers and responsibilities were said to have been concentrated at the level of senior research assistant, which might be taken as indicating a further predominance of the MOF. 23

One of the peculiar features about the Rinch6 was the fact that much of its time was spent in holding meetings individually with spending departments ('hearings' as they were called in Japan) where consultations and practical negotiations were conducted over reform measures. 24 Again, this was quite unusual for an advisory body, and caused criticism from some quarters. However, these 'hearings' were thought of as indispensable if realistic measures were to be worked


Table 4.1 Distribution of researchers among departments

Department and Chief Senior other bodies researcher researcher Researcher Total

Ministry of Finance 3 4 Ministry of Home Affairs 2 3 Economic Planning Agency I 2 Ministry of International Trade and

Industry 4 4 Prime minister's office 2 2 Ministry of Education 2 2 Ministry of Welfare 2 2 Ministry of Agriculture 2 2 Ministry of Transport 2 2 Ministry of Posts and

Telecommunications 2 2 Ministry of Labour 2 2 Ministry of Construction 2 2 Eleven other ministries and agencies II 11 Administrative Management Agency 8 22 31 Local authorities, public

corporations, etc. 17 17 Total 11 76 88

souRcE: Data provided by Administrative Management Agency.

out in line with the prime minister's expectations. In connection with this problem of feasibility, reference should be made to another peculiar feature of the Rinch6, that is its policy of presenting separate reports consecutively, instead of a single report at the close of its service. According to a comment by an official concerned, this policy was taken deliberately with a view to facilitating implementation of reform plans. The Commission drew up five reports one after another, each time relevant investigations and deliberations were finished, so that they could be carried into effect without delay. 25

It is worth mentioning here that not only in 'the work of investigation', but in 'the preparation of drafts, questions, agendas, timetables, consultation, formulation of questions and report writing', the research assistants demonstrated their resourcefulness. Indeed, but for their service, reports would not have been produced satisfactorily. But, at the same time, their resourcefulness reflected 'the possible danger of the bureaucracy'. And in fact Elliott has found 'a tendency to avoid controversial arenas and disturbing powerful groups' reflected in 'the selection of zero growth as the main criterion, the exclusion of defence, the delicate handling of the rice subsidy question, and the use of ambiguous language in some parts of the reports' .26

8

8

8 8 8

Daiichi Ito 85

FINANCIAL RECONSTRUCTION

Is there any truth in the argument that 'administrative reform' carried out by the Rincho was no more than a means for restoring financial balance? In order to answer this question, we must examine just how serious financial difficulties actually were at the time when 'administrative reform' was begun. We also need to see whether there were any alternatives to expenditure cuts, and, in particular, whether tax increases were a practical possibility, assuming that financial difficulties were really serious.

The First Report opens with the sentence that 'over the past several years, public finance has fallen into a state which can only be regarded as a crisis. As is shown in the rallying cry "administrative reform cannot wait", reform has come to be a popular demand, touched off by the financial crisis'. This was virtually a reiteration of what the government, in particular the MOF, had been arguing for some time. For instance, a handbook called Saishutsu Hyakka (Encyclopaedia of Public Expenditure), which was published by the MOF in the previous year, gave a warning that 'public finance in Japan has entered an emergency situation, where one-third of the total revenue is met with money raised by national bonds. In order to avoid inflation and maintain both stability of livelihood and economic development, it has become absolutely necessary to overcome the habit of depending upon bonds'. 27 This coincidence of emphasis on financial crisis, together with the fact that many of the measures for expenditure cuts enumerated in the First Report were the refashioning of reform plans in the Saishutsu Hyakka, strengthened the persuasive power of the argument that 'administrative reform' was merely a means for financial reconstruction.

How then, is the actual state of affairs to be evaluated? Certainly it was not normal that one-third of total revenue should have to be met from money raised by national bonds. Furthermore, if we consider that spending on pensions and medical insurance was anticipated to increase substantially owing to the rapid ageing of society, the situation could be regarded as serious. This was the very picture that the MOF handbook tried to draw as a warning to the people at large, and obviously something had to be done about it.

It was, however, in the fiscal year 1979 that the rate of dependency on bonds reached its peak of 'one-third of the total revenue'. After that, it began to decline gradually, as can be seen in Table 4.2. This apparently resulted, to no small extent, from the MOP's efforts to

Tabl

e 4.

2 R

atio

of d

epen

denc

y on

bon

ds

Rat

io o

f dep

ende

ncy

Fin

anci

al

on b

onds

incl

usiv

ea (

%)

year

1974

19

75

1976

19

77

1978

19

79

1980

19

81

1982

19

83

b

Initi

al

Settl

ed

12.6

11

.3

9.4

26.3

29

.9

29.9

29

.7

34.0

32

.0

32.8

39

.6

35.4

33

.5

32.7

26

.2

27.4

21

.0

30.2

26

.5

27.1

Am

ount

of

issu

e of

bon

ds in

clus

ive

Am

ount

of

expe

ndit

ure

of

gene

ral

acco

unts

Am

ount

of

issu

e of

def

icit

bond

s

Am

ount

of

wor

king

exp

ense

s in

gen

eral

acc

ount

s

souR

cE:

Dat

a pr

ovid

ed b

y M

inis

try

of F

inan

ce.

Rat

io o

f dep

ende

ncy

on d

efic

it bo

ndsb

(%

)

Initi

al

Settl

ed

13.9

19

.3

18.7

17

.8

21.6

18

.4

18.6

27

.1

22.4

22

.0

20.9

14

.4

15.3

9.

5 18

.9

16.6

16

.6

Rat

io o

f bon

d re

mai

nder

to G

NP

(%

)

7.0

9.9

13.0

16

.9

20.6

25

.3

29.3

32

.3

36.1

39

.2

00

0

\ ~ ~· ~ ~ I:

) - s· ;::: "" ~

~ ~ s· c:;· ~ -~· ~ ::0 ~

0 3

b

Daiichi Ito 87

restrict the growth of public spending. In other words, the financial situation could be improved, up to a point, by conventional methods of expenditure control. Moreover figures like 'one-third of the total revenue' indicated not just deficit bonds, but the total of national bonds including those for construction work, which were considered a normal means of financial management. Taking this into account, some were opposed to the way in which the situation was defined and to the pessimistic presentation of the problem by the MOF and the Commission. 28 In retrospect, their argument seems well grounded, though it may have been too optimistic to argue in favour of issuing more deficit bonds,29 as some economists did.

It seems reasonable to doubt, therefore, whether the financial situation on the eve of 'administrative reform' was so critical as to justify the establishment of an 'extraconstitutional organ' such as the Rinch6.30 Incidentally, the MOF did not seem to be much embarrassed, despite the fact that the net result of 'administrative reform' fell short of what had been expected. For instance, the MOF initially insisted that the issue of deficit bonds should be reduced according to a schedule by which it would be terminated by 1985. This aim was, however, abandoned promptly without regret when, after the Third Report, the prospective amount of retrenchment entailed by reform measures turned out to be insufficient for realising the scheduled reduction. 31 This may possibly reinforce the doubt stated above.

Another possibility was that of coping with the financial deficit by means of tax increases. If this had genuinely been feasible, however, an 'extraconstitutional organ' such as the Rincho would hardly have been necessary, since the problem could have been dealt with by conventional methods of tax legislation. The Commission, indeed, eliminated the possibility decisively. The Third Report, confirming the principle of 'financial reconstruction without tax increases' which had been proclaimed in the First Report, explains this as follows:

It is necessary to keep the amount of tax incidence below a proper level in the future by reviewing policy and administrative activities .... In particular, it is of great importance to cope properly with increases of expenditure on social security. Provided that the existing system remains unreformed, the ratio of transfer payments to GNP, which is estimated as being at the level of a little more than 10 per cent in 1980, is expected to reach the level of around 20 per cent at the beginning of the next century. Even if


the social security system is reformed substantially, it seems almost unavoidable that the ratio of the total amount of government expenditure to GNP will grow due to the increase in various transfer payments in a rapidly ageing society. Thus, it would be necessary to settle in advance on the maximum limit of cost to the people. In our view, the prospective ratio of incidence as a whole, including both tax and social insurance instalments, to GNP, though bound to be larger than the existing level (around 35 per cent), should be kept far below the level in European countries at present (around 50 per cent) through a thoroughgoing reform of systems.32

It is reported that between 40 and 45 per cent was considered reasonable inside the Commission as a figure for the maximum limit of this ratio, although official reports do not give any indication of this. 33 Underlying these arguments was, of course, a common-sense notion that Japan should be careful not to contract the 'disease' peculiar to advanced countries.

This explanation, however, appears unconvincing. For one thing, it would have been possible to increase taxation for a limited period only, pending termination of the issue of deficit bonds, as some people actually suggested. 34 For another, it does not take into account the political context in which 'administrative reform' was located. As was widely known, the government, with the advice of the MOF, had intended to introduce VAT in order to make up for the financial deficit. Unfortunately, however, their intention miscarried since the LDP under the leadership of Prime Minister Ohira Masayoshi did badly in the general election of 1979, finding itself without a stable majority in the Diet. As a result, the words 'tax increase' come to be something of a political taboo, as the election result was taken as somehow authoritatively indicating that the electorate was opposed decisively to tax increases. If so, the explanation that a tax increase, though technically possible, was impossible politically would be more convincing. The statement in the Third Report that 'financial reconstruction must be achieved, not by tax increases, but by expenditure cuts since this is what public opinion dictates' reflects this line of reasoning.

But here, again, doubt emerges. Was this what public opinion really dictated? Two lines of reasoning give birth to this doubt. First, it is open to question whether, and to what extent, the VAT proposal constituted an effective issue in the election. As is the case with elections in general, many other issues were involved, and we cannot

Daiichi Ito 89

tell which of these was decisive in determining the outcome. Secondly, in the general election which was held unexpectedly in the following year, the LDP was returned with a larger majority than it had before 1979. Considering the fact that the election was again fought under the leadership of Ohira (though he died in the middle of the campaign), and also that the MOF was known to have still favoured the idea of introducing VAT, the interpretation of the result of the 1979 election mentioned above then becomes difficult to sustain. In fact, Doko himself made the confession that 'the alternative way of reconstructing finance by means of a tax increase is plainly feasible ... if we are aiming only at the improvement of the fiscal balance'. 35

The result of the 1979 election was undoubtedly exploited for political reasons. If so, the truth may be that the tax increase path was not chosen, not because it was impracticable, but because it was thought wise not to do so.

Having taken these considerations into account, it becomes clear that the 'financial crisis' claimed to exist by the Commission was artificial, and produced deliberately by the Commission itself. As evidence supporting this conjecture, the commentary by Kumon Shunpei, an expert member of the Commission, may be cited here. Kumon admitted that during investigation and deliberation no thorough analysis had been conducted of the nature of 'financial crisis' and of what the concept of financial reconstruction exactly meant:

Rather we have found a profound significance in not having discussed directly the problem of what financial reconstruction really was. If we had done so, it seems probable that the MOF's arguments might have been rejected as poorly grounded, which would have been embarrassing. Therefore, we decided instead, to start with the assumption that the formation of a budget with a reduced amount of bond issue ... was imperative. 36

A senior official of the Administrative Management Agency, who was deeply involved in the Rinch6 operation, affirmed this, saying that 'the strategy of concentrating popular attention on the issue of financial reconstruction was deliberately taken' Y But, for what? Another official who was also involved in the operation gives an answer to this question:

Coping successfully with changes in the environment presupposes


an innovation, not only of administrative systems, but of politics and society as a whole, including a reformation of people's way of thinking. However, there is difficulty in radically changing conventional notions, administrative systems and policy objectives. In order to effect this, there must be a breakthrough. That is why the Commission hit upon the idea of utilising a pressing need for financial reconstruction as a strategy to attain radical reforms. From this standpoint, it would be almost out of the question to try to fill the financial gap by means of a tax increase. If a measure such as this were taken, existing systems standing in need of reform would be left unreformed. 38

Thus, it turns out that the 'financial crisis' was something produced deliberately, with a view to engendering a sense of crisis among the people at large, so that a radical innovation might be effectively achieved. Apparently, the situation had something of the character of a political play. An artifice might be created as the result of acting by various actors. In Japan, this type of breakthrough has commonly been known as resulting from 'foreign pressures', meaning that radical measures for change are taken effectively under the justification that they are necessary to cope with an assumed crisis stemming from outside. A deputy director of the Executive Office of the Commission was conforming to this pattern when he triumphantly declared that 'we have capitalised on foreign pressures, and made a great success'. 39

If so, the answer to the question posed in the previous section would be definitely 'no'. Administrative reform by the Rincho was by no means an expedient for attaining financial reconstruction. On the contrary, financial reconstruction has to be seen as an expedient for attaining a radical innovation. But innovation of what? What was it that the Rinch6 was attempting to reform by capitalising on the 'financial crisis'? In order to understand this, it is necessary to examine in some depth the actions of various actors who took part in the Rinch6 operation - who were they and what did they intend to achieve?

THE ACTORS

Broadly speaking, three main groups of actors were involved in the Rincho: business leaders, senior bureaucrats and LDP politicians. Unfortunately, the proceedings inside the Commission have been

Daiichi Ito 91

kept strictly secret. In fact it is reported that reference materials distributed at the expert members' meetings (the centre for drafting reports) were all withdrawn each time the meeting came to a close. 40

Therefore we cannot know exactly what happened, how each of the main groups acted and reacted in and around the Commission. What follows is nothing more than a sketchy description of their actions and reactions gathered from sporadic accounts provided by reporters.

First, there can be no doubt that leaders of the business world, the so-called zaikai, played a dominant part in launching the Rinch6. It was reported that the secretariat of the Federation of Economic Organisations, the core of the zaikai, had confidentially worked out, well in advance of the establishment of the Commission, a draft plan for administrative reform to which, later on, other actors, especially senior officials, made great efforts to gain access.41 In fact, if there had not been a positive, almost enthusiastic, attitude on the part of the zaikai, the Rinch6 operation would not have materialised at all. As it stands, it was the zaikai that forcibly put three of their own members, including the chairman, into the Commission.42 Moreover, seven out of twenty-one expert members, who took charge of conducting investigations and drafting reports, were recruited from the zaikai. It should also be noted that the expert members with business backgrounds exerted a disproportionately great influence inside the Commission, three out of four of its subcommittees having been presided over by them. 43

What, then, was it that urged business leaders to take such a positive attitude towards administrative reform? An explanation may be that they were strongly opposed to the idea of tax increases. In their view, the current financial difficulties should be solved, not by means of tax increases, but by expenditure cuts. In fact, they were bitterly disappointed when the Ohira cabinet attempted to cover the financial deficit by introducing VAT, and it is conceivable that this led them to hit on the idea of intervening actively in the problem of administrative reform. This, however, does not necessarily mean that, for business leaders, avoiding tax increases was an end in itself. We shall be able to confirm this by looking at their response to the issue of increasing taxation. Towards the end of the 1981 fiscal year, when it turned out that the budget for 1981 would fall into the red due to the prolonged recession, the Suzuki cabinet decided to cover this by raising corporation tax, against the view of the chairman Dok6 and business leaders. It is reported that Dok6, who had been thinking seriously of resigning the chairmanship as a protest against


the decision of the cabinet, was narrowly dissuaded from doing so by business leaders.44 As the continuation of the cabinet was dependent upon the success of the Doko RinchO, his resignation might have brought concessions from the government on tax measures, which of course meant a gain for business leaders. But, at the same time, they were extremely worried that the business world might lose more than it gained if Doko actually resigned. In this sense, their objection to tax increases may be seen as a strategy which could be traded off when expedient. What, then, was it that the business world might lose? According to a reporter, it was political influence (to be precise, the prospect of regaining political influence) strong enough to remould the way in which policies were reformed:

Up to the middle of the 1960s, business leaders had been guiding Japan. The so-called big four business leaders were a prop of the conservative government, providing it with both money and advice. Since then, however, the business world has become the target of public censure. As trading companies were attacked for hoarding vital goods and chemical industries were tried for polluting the environment, people began to see the business world as a source of all evils. This climate might be exemplified by the incident where Sejima Ryuzo of the lto-Chu Trading Company, who now runs virtually the whole Rincho as its most influential member, was summoned to a Diet committee and persecuted relentlessly under the suspicion of unfair transactions in 1974. Under these circumstances, the business world was in the humiliating position of being unable to provide political circles with any advice, while being obliged to give them financial support. ... Now, the time has come for the business world to make conditions for both political circles and the bureaucracy. Business leaders must have their lost privileges reinstated. From the viewpoint of the business world, the task of retrieving its lost prestige by means of the Rincho is far more important than that of repudiating tax increases. 45

In particular they were resentful of an 'excessive' egalitarianism in policy formation. 46 This egalitarianism was based, to a great extent, on a system of policy making called 'budget primacy', where 'a high proportion of governmental decisions are channelled through the budgetary system', which, in turn, by its nature was run incrementally.47 What business leaders were attempting to do, therefore, was to remould the way in which policies were made so as to produce

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non-egalitarian, differential ones. In a sense, their attempt was not without good reason, since 'budget primacy', which had supported non-differential policy making, had ceased to work effectively and needed to be replaced by some other system. What business leaders failed to see was that the business world itself was not fully prepared to provide an alternative system of policy making by, for instance, imposing self-restraints on their activities so that they might be able to fulfil the 'social responsibility of business enterprises'. 48 This may be part of the reason why they finally failed to win out over the bureaucracy, their current opponents.

What, then, about the bureaucracy? At the time when the setting up of the Commission began to be discussed, no bureaucrat could imagine that it would become so powerful. Rather, they took the matter as another impromptu idea of politicians, and were indifferent to it. Bureaucrats, however, have an extremely keen nose for power, its trends and its movements. By the time the name of Doko began to be mentioned as the chairman of the coming Commission, they sensed the formidable force it might have, and realised that they had better get inside it. Hence came a sudden rush of bureaucrats into the Commission. They sent in their representatives one after another, both at the level of expert members (to be filled by exbureaucrats) and at the level of research assistants in the Executive Office (to be filled by bureaucrats on the active list). As a result, the number of candidates for expert members, for instance, is said to have swollen to nearly one hundred, whereas the fixed number as provided by law was twenty-one. Among them were many former administrative vice-ministers of various government departments, the topmost career officials. In order to cope with these demands, additional councillor posts, forty-nine in all, had to be set up. Though it caused extra troubie in managing the Commission, there can be no doubt that this massive inclusion of bureaucratic elements, resulting from the expectation that the Commission would become powerful, had the effect of enhancing its power further.

What were these bureaucrats aiming at? From sporadic accounts, there seems to have been a divergence on this point between the MOF and the spending departments. In the context of gauging 'the influence and success of each participant', James Elliott puts this divergence as follows:

the Finance Ministry achieved most of its aims (i.e. cutting of, or at least stopping the increase in, expenditures) because of its


leading role in the decision-making process at the earliest possible stage, close cooperation with the Administrative Management Agency, exploitation of the tight time limits, and its proposals for each department to present its own assessment. This influence was possible because the Commission and its advisers felt that these proposals were probably the easiest that these proposals were probably the easiest and quickest way to reach implementable recommendations. The AMA achieved some of its aims .... Both the AMA and the Finance Ministry, however, were limited partly by the presence of so many former senior bureaucrats from other departments among the committee members, each with his own particular aim, and also other experts. It was clear throughout the hearings that the principal aim of current and former bureaucrats was to maintain the status quo. 49

Does this mean that there was nothing in common between the MOF and the spending departments? It is true that, as administrative reform converged on financial reconstruction, spending departments, in conjunction with corresponding policy groups of LOP politicians and outside interest groups concerned, came more and more into confrontation with the MOF. And in this confrontation senior officials of the spending departments had a rough time in the face of the MOF examiners who laid the axe to their budget requests under the shelter of the Rincho. Papers daily reported their reproachful remarks against the MOF.

Strangely enough, however, they do not seem to have been entirely discontented at heart. Rather, they showed signs of relief from time to time. For instance, among spending departments the Ministry of Health and Welfare, said to have been hit hardest by administrative reform, was actually most co-operative with the Commission, and willingly presented its own draft plan on expenditure cuts. In part, this was due to the fact that the Ministry of Health and Welfare adopted the strategy of utilising the authority of the RinchO in working out its own retrenchment plan. As was well known, expenditure on welfare services was expected to increase enormously thanks to the rapid ageing of society. Under the conditions of a low-growth economy, this meant that the introduction of a differential approach to resource allocation came to be indispensable, and the Rincho seemed to have been vested with power effective enough to authorise such an approach. This, however, was not the whole story, since a variety of differential measures incorporated in the First Report (for

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instance the introduction of a benefit principle and strengthening the means test) were not entirely novel. Rather, many of these were in fact long-cherished ideas which the Ministry of Health and Welfare had been trying in vain to realise, impeded by the egalitarian principle of policy making based on incremental budgeting. In other words, they felt that the system of 'budget primacy' itself had become an impediment to welfare administration. If so, it may be inferred that, in taking part in the RinchO operation, the Ministry of Health and Welfare availed itself of a good opportunity to part with the system of 'budget primacy', and to realise their cherished ideas. As a senior official of the ministry put it, 'it would be embarrassing if anything impracticable were included in the Report. Therefore, we decided, instead, to try to get our line of policy incorporated in it. '50

A similar inference may be drawn from the information available on the Ministry of Agriculture, Forestry and Fisheries (MAFF). Here again, the officials were having a tough time with the MOF in the lion's den of the RinchO. Indeed, it was commonly held that the MAFF was another example of the spending departments that suffered most from administrative reform, particularly since the notorious system of price support for rice, which constituted one of the principal targets of administrative reform, came under the jurisdiction of this ministry. Curiously enough, however, the officials of the ministry do not seem to have been as depressed as might have been expected from their external appearance of indignation at the MOF. It was, indeed, reported that, in the face of political pressure for a rise in the price of rice, 'officials of the Ministry of Agriculture held fast to the plan of pegging the producer price . . . with the desperate hope that the embryonic sympathy with agriculture which grew up in the process of the dialogue with the Commission might be kept uninjured'. 51 Presumably they found possibilities of renovating the farming industry through a joint effort with the Commission towards administrative reform. Behind these agonies on the part of officials of the MAFF was a growing criticism, not only by business leaders, but by consumers in general, of 'the overprotection of agriculture by administration'. If the farmers and their representatives within the Diet, without making efforts to accommodate themselves to the changing needs of society, went on demanding overprotection in the form of an incremental rise in the price of rice, they would forfeit all claims to the confidence of the people, thus delivering a disastrous blow to the farming industry itself: this was what the MAFF found most disturbing. To the officials of the Ministry who


were watching for a chance to switch from protective policies to constructive ones, 'a honeymoon with the Rinch6' might be seen as providing them with a rare opportunity to realise their aims. 52

Let us tum, then, to the MOF. Did it really achieve 'most of its aims' as Elliott claims? It is reported that just after the First Report was presented to the prime minister, budget examiners of the MOF drank a toast. In fact, as many observers remarked, various proposals incorporated in the Report were virtually adopted from the handbook 'Encyclopaedia of Expenditure' mentioned previously. Nakasone Yasuhiro himself, who was directly responsible for carrying out administrative reform as the minister in charge of the Administrative Management Agency, is said to have made a cynical comment to the administrative vice-minister of the MOF that 'they have admirably copied the model you worked out'. 53 But does this really mean victory for the MOF?

Contrary to external appearances of satisfaction, senior officials of the MOF were ill at ease. A reporter has described their equivocal attitudes as follows:

There have been waverings in the way in which the MOF has coped with administrative reform by the Rinch6. In January 1981, the MOF issued a 'Middle-Term View of Public Finance', with a warning that, if the issue of deficit bonds was to be cut by 8.1 billion yen to set financial reconstruction on its way, the fiscal balance for 1982 would fall into the red by 2.7 billion yen. In this case, they intended to increase taxation by the introduction of VAT, without paying attention to the possibility of financial reconstruction by administrative reform. Disappointingly, their intention miscarried completely since Prime Minister Suzuki set out on 'financial reconstruction without tax increase'. What is worse, he entrusted the Rinch6 with the task of working out measures for expenditure cuts. Quite understandably, the MOF, as the authorities responsible for public finance, felt bitterly embarrassed. In fact, a senior official of the Ministry went so far as to show hostile feeling against the Rinch6, saying that 'I am doubtful if a group of laymen can do anything useful'. Abruptly, however, they changed their attitude toward the Rinch6 around the end of May when its subcommittees set about the work of drafting reports. Senior officials of the MOF, especially those of the Budget Bureau, started visiting the Executive Office of the

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Commission frequently, giving wholehearted help in drafting committee reports. 54

As experts in governmental tactics, officials of the Budget Bureau had much to contribute to the drafting work. Indeed, their aid was highly appreciated by the staff of the Executive Office who were having a hard time with tough negotiators from the spending departments. It would be natural for officials of the MOF to give aid to the Commission, but why was the change in their attitude so drastic? According to the reporter quoted above, it was because they hit upon the idea that, under the shelter of the Rinch6, they might be able to realise their plan for expenditure cuts which had been stifled in the previous year because spending departments were opposed. 55 This, however, is not very persuasive since they, knowing that the financial problem had passed its critical point, seemed less concerned with an expenditure cut in itself. It appears more likely that they were afraid the Rincho might impinge upon the competence of the MOF. In fact, as an astute observer revealed, LOP politicians and business leaders, under the mask of the Rincho, were pressing the financial bureaucracy for a transfer of its power on budgeting. In his words, 'although a plan to transfer the power of budget compilation from the MOF to the cabinet proved abortive, vestiges of it are preserved in the present state of affairs where administrative reform has been transformed into financial reform and budgetary decision making falls virtu;:tlly into the hands of the Commission'. 56 In other words, their drastic change in attitude may well have resulted from their desperate but tactful efforts to avoid being excluded from budgetary decision making.

The reason why LOP politicians and business leaders so much wanted to take the power of budget compilation from the MOF is obvious. In Japan, as we have seen, budget compilation, while left to bureaucrats as a matter of technical expertise, was a highly political process through which 'much of the policy-making flow is directed'. No doubt it was this policy-making function rather than the power of budget compilation as such which politicians and business leaders, in the semblance of an advisory body, were trying to take away from the bureaucracy with the MOF at its apex. Indeed, politicians had already begun to sever part of this function from budget compilation and transfer it to ad hoc policy co-ordinating committees which had been set up inside the LOP. 57 Against this, bureaucrats in the MOF


tried to retain as far as possible the system of 'budget primacy', that is the policy-making function inherent in, or derived from, the budget compilation process, although they had become aware that this cherished system was malfunctioning. In order to keep hold of it, however, it was absolutely necessary for them to make common cause with bureaucrats of the spending departments, since bureaucratic autonomy in policy matters depended on the assumption that effective co-ordination in policy making could be attained among bureaucrats themselves. The MOF therefore attempted to reshape the coordinating mechanism among government departments through what was called 'unprecedented budget formation', in other words, by allowing spending departments to present their own assessments. As the head of the Budget Bureau expressed it, in order to work out 'a system approaching joint responsibility between all the government departments', each spending department would be asked to 'come out of itself, each taking the part of an assessing department'. 58

Eventually the spending departments came to appreciate these efforts, and, as a result, 'something in common' developed between them and the MOF, notwithstanding Elliott's arguments to the contrary. Incidentally, this 'something in common' seems to be a prerequisite for the successful presentation of the political play called 'foreign pressures'. 59

Finally, how about politicians? What were they aiming at in the operation of Rinch6? There seems to be a consensus of opinion that the issue of administrative reform was exploited fully by LDP politicians in their power struggles. To take one example, Elliott gives the following account:

An election had just been fought which required considerable funds, and the new Prime Minister, Zenko Suzuki, was eager to win the support of business for himself. He believed he would consolidate his position by tackling the 'difficult task' of administrative reform. Yasuhiro Nakasone, Director General of AMA and cabinet minister responsible for reform, also needed to improve his position. Although able and one of the most senior LDP politicians, he had failed to become Prime Minister. He thought the reform efforts would prove he was not just a 'political weathervane' and would give him the necessary 'thick pipeline' to the business leadership. 60

Of course, these elements of artifice are not novel. In politics,

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every issue can be exploited by politicians in their own self-interest, and can thus be subject to all sorts of exaggeration and distortion. If there is anything novel in what these particular politicians did, it lay in the decisiveness with which a commitment was given by each of them. As Elliott puts it: 'in March 1981, the Prime Minister took the unusual step of staking his political career on the achievement of reforms, and to reassure public opinion, Ooko, and business, he had to renew his pledge in 1982. Nakasone made the same pledge.'61

Interestingly enough, this produced the unexpected effect of pressuring the Commission to concentrate on 'the easiest reforms or on those considered to be the most realistic to implement'. 62 And this, in turn, was to strengthen the hold of bureaucrats over the setting of agendas, since they had exclusive possession of knowledge of what was feasible and what was not. In fact, it came to be seen as an established rule that senior officials should be consulted fully in the process of drafting reports. 63

One thing which should be noticed here is the contribution made by the Investigating Committee on Administration and Finance (ICAF) of the LOP. As bureaucratic budgeting deteriorated in its capacity to adjust government decisions, ad hoc committees for policy orientation were set up one after another within the LOP through the 1970s, possibly in an effort to replace this former system. The ICAF was one of these committees, entrusted with the power to adjust plans, not only within the LOP but among government departments, concerning administrative and financial reform. It played an important part, for example, in working out a proposal for privatising public corporations, in the course of which it strove to reconcile opposing views held by various interests both inside and outside the LOP.64 In this process each member of the committee was pulled in two directions, one part of him representing particular interests as a private member of the LOP and the other responsible for integrating courses of action as a selected member of a coordinating body. It seems that the Rincho exercise further accumulated experiences of this type, which in turn tended to differentiate the interest-representing function and the policy-making function within the LOP. What is important here is that the establishment of the ICAF (1977) preceded that of the Provisional Commission on Administrative Reform. 65 The trend was reinforced in 1980 as an immediate response to the LOP victory in the general election which drove the LOP 'to the position where it must show leadership with an unpleasant choice which requires political opportunity cost as the


leading player of the zero-sum game'. 66 Presumably the scenario which led to the formation of the Rinch6 was drawn up by certain LOP politicians. At any rate, it did create change in the preceding state of affairs, described by Campbell as one where 'the net effect of LOP participation has actually been to increase inertia, by inhibiting attacks on backward-looking expenditures'. 67

CONCLUSIONS

What was the Rinch6 and what did it achieve? At the time when the Commission was struggling hard for success, the following account of its historical background was given by a well-informed observer:

The government party does not have to show its leadership actively in the adjustment of public policies, except by arbitrary interference in the problem, because the budget compilation process will assume this function, and this incurs less political cost. The MOF bureaucrats necessarily become influential in the policy formulation process. According to J. C. Campbell, however, budget primacy in the public policy formulation process was forced to change during the two crises which struck Japan in the latter half of the 1970's, i.e. the international currency crisis and the oil shock. In other words, conflicts between social groups demanding their shares had been mitigated through the budget compilation process by an ever-increasing pie as a result of high economic growth, but the two crises put a stop to this. Certainly, the era of rapid economic growth in Japan has come to an end, and there are few conditions where conflicts between social groups can be mitigated through the budget compilation process by a constantly growing pie. As a result, Japan has come increasingly near to the so-called 'zero-sum society' .... [The] policy innovation in a zero-sum society requires re-formation of vested interests and a vast opportunity cost, providing that large scale tax increases or flotation of deficitcovering bonds should be avoided. Any one of them is a burden too heavy for the former budget compilation process. For this and other reasons, the MOF bureaucrats have come to look more and more towards LOP leadership, and budget primacy in policy formation shows signs of retreating as this trend comes to be reinforced. 68

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Viewed in this broader historical context, the task given to the Commission may be said to have been twofold: vicariously to execute adjustment of government decisions in order to cope with present needs in the short term, and in the long term to help bring forth a new system of 'public policy formulation' to supersede budget primacy.

How, or to what extent, was the Commission successful in performing these duties? In its short-term task, the Commission seems to have been reasonably successful. It is recorded in the minutes that Ushio Jiro, an expert member with a business background, said with disappointment: 'originally I intended to undertake the ambitious job of reforming the administration, but soon I have found myself simply assisting officials in making a budget programme'. 69 This, however, was probably unavoidable if the Commission was to accomplish its short-term task. In practice, the Commission carried out a 'fair allocation of dissatisfaction' among various programmes, except for defence which was allowed a marked expansion so that the government could meet pressing demands coming both from within Japan and from abroad. 70 If there were any parties concerned who suffered an 'unfair' cutback, it would be local authorities. In fact, it would not be too much to say that the success of the Rincho was achieved at the expense of local authorities. 71 Interestingly enough, some local authorities, in particular the Hokkaido prefectural government, followed the model of the Commission, setting up its own advisory bodies called 'local Rincho', in order to cope with the difficulties caused by the Rincho exercise at the centre. This may be seen as further evidence of the success of the Commission as a vicarious co-ordinator.

How about the Commission's long-term task? It is true that, as a result of the Rincho operation, disengagement of government organs from the grip of the MOF was furthered. For example, control by the secretariat of each spending department over budgetary assessment was strengthened. Privatisation of public corporations, though this may have been the product of a political need for visible fruits of the reform, can be seen as an extreme case of disintegration. No doubt all this was a necessary condition for giving birth to a new system of policy adjustment, but surely not a sufficient condition. Indeed, the Commission has done very little to construct a system of co-ordination. Reorganisation of government departments was postponed, and a plan for strengthening cabinet functions was shelved. 72 In other words, the Commission, while being expected to


be a catalyst for a new system, failed to live up to this expectation. In April 1983, just after the Commission came to its close, a new advisory body called the Provisional Commission for Promotion of Administrative Reform was set up. According to its Establishment Law, it was charged with the task of promoting the implementation of reform measures worked out by the Commission. Essentially, however, it was nothing other than a continuation of the Commission, its later self as it were, and this can be seen in its activities, which were almost identical with those of its predecessor. 73 Many of the members of the renewed Commission, including the chairman, Doko Toshio, were the same as those of the original Commission. Thus the existence of the renewed Commission may indicate that policy could not be adjusted yet without the help of the Rinch6 or its substitute. In this sense, the fact that the Commission was given a new lease of life can be seen as incontestable proof that it was not successful in giving birth to a new system of 'policy formulation'.

NOTES

1. The Provisional Commission on Administrative Reform Establishment Law (law no. 103 promulgated on 5 December 1980; came into effect on 16 March 1981) Article 5.

2. Ibid., Articles 2 and 1. 3. 'Basic Matters Requiring Investigation and Deliberation and Pressing

Issues for Administrative Reform', Provisional Commission on Administrative Reform (1 April1981) Section 1( 4).

4. 'Third (Fundamental) Report of the Provisional Commission on Administrative Reform' (1982). See also commentaries which appeared in Jurisuto, no. 777 (1 November 1982).

5. Maki Taro, 'Rincho gohyakunichi no kiseki' (The Five Hundred Day Course of the Rincho], Sekai (September 1982) p. 63.

6. Saito Taijun, Seisaku keisei katei no kenkyu (Studies of the Policy Formation Process] (Gyosei, 1984) p. 55.

7. Furuhashi Genrokuro, Nihon ni okeru sengo gyosei kaikaku no keii (The Process of Postwar Administrative Reform in Japan], paper to Tokyo Round Table, International Institute of Administrative Sciences (14 September 1982).

8. See John C. Campbell, Contemporary Japanese Budget Politics (Berkeley, CA: University of California Press, 1977).

9. The figure is based on the General Account at Initial. It grows to 39 per cent if Construction Bonds are included. See Annexe of Third Report.

10. Gyosei kanrich6 shi (History ofthe Administrative Management Agency] (Administrative Management Agency, June 1984) p. 887.

Daiichi Ito 103

11. Rinch6 News (Maruyama Yasuo Office), no. 1 (25 March 1981). 12. 'Basic Matters', op. cit., Section 2. 13. Matsuda Takatoshi, 'Gyosei kaikaku no totatsuten' [Achievements of

Administrative Reform], H6ritsu Jih6, vol. 53, no. 4 (March 1981) pp. 32-7.

14. Saito, op. cit., p. 55. 15. 'First (Urgent) Report of the Provisional Commission on Administrative

Reform' (1981). 16. The practice of setting ceilings itself was first introduced in 1974.

However, ceilings were incremental until the rule was revised in 1981. See Saito, op. cit., pp. 21-2. See also Kato Yoshitaro, Nihon no Yosan Kaikaku (Tokyo Daigaku Shuppankai, 1981).

17. Mainichi Shinbun, 18 July 1981. 18. Nishio Masaru, Rinch6 to gy6sei kaikaku [The Rinch6 and Administrative

Reform], paper to the Annual Conference of the Japanese Society for Public Administration, Sapporo (10 June 1983).

19. See, for example, Jurisuto, no. 750 (1 October 1981); no. 777 (1 November 1982); no. 791 (1 June 1983).

20. 'Zoku rincho jimukyoku koborebanashi' [A Sequel to an Anecdote about the Executive Office of the Rinch6], ESP, Economic Planning Agency (October 1982) pp. 76-8.

21. Rinch6 News, op. cit. 22. Furuhashi, op. cit. 23. 'Zoku rincho jimukyoku koborebanashi', op. cit., p. 78. 24. Gy6sei kanrich6 shi, op. cit., pp. 889, 892, 894 and 900-1. 25. Furuhashi, op. cit. 26. James Elliott, 'The 1981 Administrative Reform in Japan', Asian Survey,

vol. xxm, no. 6 (June 1983) p. 775. 27. Saishutsu hyakka [Encyclopaedia of Public Expenditure], Budget

Bureau, Ministry of Finance (July 1980), Foreword. 28. See, for example, Fujioka Bunshichi and Nishikawa Masao, 'Naze isogu

zaisei saiken' [Why Do They Rush Financial Reconstruction?], ESP, Economic Planning Agency (April1982) pp. 24-9.

29. Uchida Tadao, 'Gyozaisei kaikaku no hihan to hyoka' [A Critical Assessment of Administrative and Financial Reform], Gendai Keizai, vol. 44 (Autumn 1981) pp. 15-16.

30. Maki, op. cit., p. 74. 31. Gy6sei kanri [Administrative Management], Gendai Gy6sei Zenshu,

vol. 3 (Gyosei, 1984) p. 76. 32. 'Third Report', op. cit., Part 1(3). 33. Gy6sei kanri, op. cit., p. 78. 34. See, for example, Yoshida Kazuo, 'Zaisei saiken no hoto' [A Measure

for Financial Reconstruction], ESP, Economic Planning Agency (July 1980) pp. 66-71.

35. Asahi Shinbun, 11 July 1981. 36. Jurisuto, no. 750 (1 October 1981) p. 30. 37. Ibid., p. 29. 38. Gy6sei kanri, op. cit., p. 77. 39. Sasaki Haruo, 'Rinch6 to gy6sei kaikaku' [The Rinch6 and Administrative


Reform], paper to the Annual Conference of the Japanese Society for Public Administration, Sapporo (10 June 1983). Incidentally, devices similar to 'foreign pressures' are utilised frequently in Japan. For example, in the case of the Ministry of International Trade and Industry, see Kodama Fumio, 'Policy Innovation at MITI', Japan Echo, vol. XI,

no. 2 (1984) pp. 66-7. 40. See, for example, 'Zoku rinch6 jimukyoku koborebanashi' [A Sequel to

an Anecdote about the Executive Office of the Rinch6], ESP, Economic Planning Agency (June 1982) pp. 64-5.

41. Yomiuri Shinbun, 21 June 1981. 42. Originally it was scheduled that two places would be allotted to the

business world. See Maki, op. cit., p. 64. 43. See Annexe of Third Report. 44. Maki, op. cit., p. 68. 45. Ibid., p. 69. 46. See, for example, Saishutsu hyakka, op. cit., B-1 (Social Security

Measures). 47. Campbell, op. cit., p. 282. 48. Yomiuri Shinbun, 21 June 1981. 49. Elliott, op. cit., p. 770. 50. Yomiuri Shinbun, 14 July 1981. See also 'Zoku rinch6 jimukyoku

koborebanashi', op. cit., p. 63. 51. Yomiuri Shinbun, 13 July 1981. 52. Ibid. As for the Ministry of Construction, see Yomiuri Shinbun, 17 July

1981. 53. Yomiuri Shinbun, 12 July 1981. 54. Ibid. 55. This does not mean that Japan did not have a financial problem. It came,

however, from a source different from that of the issue of deficit bonds, namely a deterioration of annuity finance. Strangely enough, it was not before the Commission came to its close that people- including officials of the MOF- became aware of this. See Noguchi Yukio, 'K6seish6 no daigosan' [Great Miscalculation of the Ministry of Welfare], Keizai Seminar, no. 340 (May 1983) pp. 4-5.

56. Jin Ikk6, Okura kanry6 (Treasury Bureaucrats) (Kodansha, 1982) p. 10.

57. See, for example, D6moto Seiji, 'Seisaku keisei katei no shisutemu' [System of Policy Formation], Jurisuto, Special Issue no. 29 (January 1983) pp. 56-63.

58. Mainichi Shinbun, 29 December 1981. 59. Elliott, op. cit., p. 774. 60. Ibid., p. 766. 61. Ibid., p. 773. 62. Ibid., p. 769. 63. Mainichi Shinbun, 25 June 1981. 64. Yomiuri Shinbun, 26 September 1982. 65. See Sat6 Seizabur6 and Matsuzaki Tetsuhisa, 'Jimint6 ch6-ch6ki seiken

no kaibo' [Anatomy of the Ultra-long-term Regime of the LDP], Chilo Koron (November 1984) p. 93.

Daiichi Ito 105

66. Kojima Akira, 'Budgetary System and Politics', in Administrative Management in Japan, Institute of Administrative Management (March 1982} p.61.

67. Campbell, op. cit., p. 275. 68. Kojima, op. cit., pp. 60-1. 69. Quoted in Maki, op. cit., p. 67. 70. On the political background to an increase in defence expenditure see

J. A. A. Stockwin, Japan: Divided Politics in a Growth Economy, 2nd edn (London: Weidenfeld and Nicolson, 1982}, pp. 253-4.

71. This point was suggested by Professor Tsuji Kiyoaki, a member of the Commission, in a private talk with the author. Undoubtedly the central government held the view that local authorities had come to enjoy excessive autonomy. See Nishio Masaru, 'Shin shinchiio shiiken to jichitai no sentaku' [Neo Neo-centralism and the Choice of Local Authorities], Sekai (June 1983} pp. 100-11.

72. Yomiuri Shinbun, 25 June 1981. 73. See, for example, 'On Promotion of the Proposals of the Provisional

Commission on Administrative Reform', Provisional Commission for Promotion of Administrative Reform (23 October 1984}.

5 Japanese Interest Group Behaviour: An Institutional Approach* AURELIA GEORGE

INTRODUCTION

The crucial question of the distribution of power in the Japanese political system has hitherto involved a major scholarly controversy between political scientists who have presented an elitist view of the system and those who have advanced a more pluralist conception of the political process.

The basic premise of the power elite model is that the Japanese ruling power structure is made up of a tripartite alliance of Liberal Democratic Party (LDP) politicians, bureaucrats in the national ministries and big business leaders. 1 The pluralists, on the other hand, argue that public policy in Japan is the product of a much more open process, accessible to a range of participants who make inputs into the political system and exercise leverage in different policy areas.2

The power elite interpretation has been challenged on a number of grounds: for reducing the highly complex processes of governmental decision making to an oversimplified stereotype in which the existence of conflict within the ruling power is discounted; and for ignoring the presence of other power centres in the Japanese polity and therefore the possibility that groups outside the so-called elite might exercise a demonstrable measure of influence over policy outcomes.3

The pluralist approach is less a systematically developed model than a perspective which emerges from a number of empirical studies. Chiefly in case study form, these have documented the activities of organisations representing Japan's farmers,4 doctors,5 teachers,6

repatriates7 and anti-pollution campaigners,8 and have discussed policy making in the national budget,9 labour, 10 education 11 and

• This chapter is based on a more extensive paper published as no. 95 in the Pacific Economic Papers series (Canberra: Australia-Japan Research Centre, December 1982).

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foreign policy areas. 12 The contribution of the pluralists to the debate with the elitists was to substantiate the fact of power sharing by elite groups with non-elite groups, thus negating the most basic assumption of the elite theorists.

In spite of the valuable corrective which the pluralist approach provided to the power elite model, the latter has proved to be remarkably enduring, albeit in modified form. The pluralists successfully challenged the notion of a rigid and exclusive three-sided power structure in ·;:hich a hierarchy of 'interests' dictated that the claims of big business groups automatically prevailed over those of other voluntary organisations. The continuing hegemony of the LDP, however, and the central role which Japanese public officials in the national bureaucracy continued to play in setting and implementing policy goals, left the core party and bureaucratic elements in the elite alliance intact. The outcome was a new variant of the old elite model in which the dividing line between the political 'ins' and the political 'outs' was redrawn. The former comprise the government party, the bureaucracy and a number of interest groups (including those representing big business, finance, agriculture and a range of other professional and occupational interests), which, according to the theory, enjoy continuous and direct access to authoritative decision makers and considerable influence over government policies. Excluded from the politico-bureaucratic Establishment are the Opposition parties and interest groups such as the trade unions, consumer organisations and other groups with generally 'progressive' orientations.13 In other words, the Japanese political system is still seen as elitist, but elite circles have been expanded to include a range of interest groups. 14 Membership of the elite is inclusive of groups which give their majority support to the LOP but excludes those with close links to the parliamentary Opposition parties.

This chapter does not start from the assumptions of either the elitist or pluralist conception of Japanese politics, nor will it seek to demonstrate systematically the validity or otherwise of these two opposing paradigms in the political science literature on Japan. In outlining the basic precepts of these models, attention has been drawn to the fundamental question they raise about the nature of the Japanese political system and the role of interest groups in it. Is the Japanese political system open or closed? The pluralists would argue that it is highly participatory; but to the elitists it presents an exclusive and rigid three-sided power structure.

This chapter will take up the basic question of interest group access

108 Japanese Interest Group Behaviour

to political decision making by examining the institutional contexts in which interest groups participate in the policy process. The first part of the chapter will focus on interest group-political party relations. As a medium for representation of group interests, political parties represent a vital channel of access to legislators and policy makers. The second part of the chapter will examine interest groupbureaucracy relations and the mechanisms through which interest groups become incorporated into the processes of policy formulation and administration.

INTEREST GROUPS AND POLITICAL PARTIES: THE INTERPENETRATION OF POLITICAL INSTITUTIONS

An extremely close nexus exists between interest groups and political parties in Japan. The nexus is such that the customary division of roles between political parties as organisations which seek and hold political office and interest groups which attempt to influence them is blurred. In the Japanese system, the functions which normally differentiate the two types of political institution are common to both. Interest groups not only exert pressure on decision makers from outside the policy process, they also operate from within the parliamentary and party systems. Interest group officials secure seats in the Diet (and in local political assemblies) as direct representatives of their own organisations. Dual office holding is common: politicians occupy leadership positions in interest groups concurrently with Diet (or local political office) either as long-serving officials of these organisations or as co-opted, high-ranking executives. In other cases, interest group leaders retire from group office prior to the assumption of a political career. 15

The duality of function between interest groups and political parties also extends to the electoral sphere. Interest groups engage in political support activities as surrogate party organisations, a role which is not restricted to generating electoral backing for their own leadership but which encompasses an extremely diverse range of activity in the electoral arena. In consequence of this involvement and of the system of direct representation, politicians act as lobbyists on behalf of interest groups in legislative activities and in the process leading to the determination of government policy. In the following section, each aspect of party-interest group overlap will be examined. Although the analysis can be applied to local politics, it will be restricted to the

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interrelationships between political parties and interest groups at the national level.

Diet Representation of Interest Groups

According to data on Diet membership for the 1980-3 period, 16 there were 144 politicians in the Lower House (or 28.2 per cent of the total of 511 members) who had either held or were holding official leadership positions in interest groups. 17 In the Upper House there were 102 interest group officials18 or 40.5 per cent of the total membership of 252. Details of group affiliation of these Diet members indicate representation from a wide cross-section of Japanese interest groups, ranging from the customary sectional and occupational groupings, to the promotional and single-cause types (see Appendix). Table 5.1 subtotals the number of Diet representatives for each of a series of interest group categories. As the data indicate, trade union representatives comprised the largest bloc of interest group leaders on the Diet, with those from agricultural organisations also significant in number. According to the Diet Handbook only three interest group officials espoused no party affiliation; the remainder spanned the entire spectrum of political parties.

Electoral support is the principal bonding element which links politicians to interest groups. The presence of large numbers of interest group officials in the Diet is only the most obvious manifestation of a very broadly based electoral support role on the part of Japanese voluntary organisations, whether they function primarily for political purposes or not. Interest groups are actively involved in getting their own leaders elected to political office. Their support, however, is not restricted to those who represent them directly. The Diet (and political assembly) connections of interest groups extend to a whole range of political 'sympathisers' with whom they maintain various forms of official and informal contact. At this level, almost every member of the Japanese Diet can be identified as a 'sympathiser' of one or more interest groups. Politicians who espouse no interest group connections are the exception in Japanese politics.

The pattern of parliamentary representation of interest groups varies. Some organisations combine direct representation by their own officials, either current or former, with supplementary support from the ranks of Diet 'sympathisers'; others rely solely or principally on political 'sympathisers'. The number and range of interest groups


Table 5.1 Number of interest group officials in the Diet by type of group, a

1980-3

No. in House of No. in House of Category of interest group Representatives Councillors Total

Trade unions S6hy6,b S6hy6-affiliated unions,

prefectural labour councils and joint struggle organisations 45 27 72

D6mei'. and D6mei-affiliated unions 8 6 14 Churitsu R6ren"-affiliated unions 1 I 2 Other independent unions 3 I 4 Total 57 35 92

Agricultural/farmers groups N6ky6r and N6ky6-affiliated groups 9 12 21 Farmers' unions 8 1 9 Other agricultural groups 4 5 9 Total 2of 18 31V

Commerce/industry groups Small and medium enterprise groups 8 6 14 Local commerce groups 2 2 Total 10 6 16

Health/welfare groups Health organisations 4 2 6 Welfare groups 4 6 10 Total 8 8 16

Cultural/religious/ideological/political groups Cultural 1 1 Religious/political I 3 4 Ideological/political 4 5 9 Total 5 9 14

Sports groups Physical education groups 6 1 7 Other sports groups 5 2 7 Total II 3 14

Professional/educational groups Lawyers' associations 6 6 Medical associations 1 3 4 Fire service associations 1 2 3 Total 8 5 13

Youth groups Youth councils 4 1 5 Other youth groups 3 I 4 Total 7 2 9

Forestry/fishery groups Forestry groups 2 2 4 Fishery groups 4 1 5 Total 6 3 9

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Table 5.1- cont.

No. in House of No. in House of Category of interest group Representatives Councillors Total

Transport groups Roads associations 1 4 5 Other transport groups 2 1 3 Total 3 5 8

Local government groups Total 3 4 7

Insurance/pensions groups Insurance groups 2 2 4 Pensions groups 2 1 3 Total 4 3 7

Consumer/women's groups Consumer groups 1 1 2 Women's groups 2 2 4 Total 3 3 6

Postal groups Total 0 2 2

Banking/credit groups Total 1 0

a For a comprehensive listing of the actual organisations, their Diet representatives and information regarding the party affiliations and constituencies of these representatives, see Appendices A and B in Aurelia George, The Comparative Study of Interest Groups in Japan: An Institutional Framework, Pacific Economic Papers no. 95 (Canberra: Australia-Japan Research Centre, December 1982) pp. 92-122. h S6hy6 is the acronym for Nihon R6d6 Kumiai Sohyogikai, or General Council of Japanese Trade Unions. c D6mei is the acronym for Zennihon R6d6 S6d6mei, or Japan Confederation of Labour. d Churitsu Roren is the acronym for Churitsu Rodo Kumiai Renraku Kaigi, or Federation of Independent Unions. 'N6ky6 is the acronym for n6gy6ky6d6kumiai, or agricultural co-operative union, a generic term which denotes the basic type of unit (or agricultural co-operative) within the nationwide organisation of agricultural co-operatives. Together these groups are referred to as N6ky6. As a title it has no exact equivalent in English. It merely denotes in toto the organisation of agricultural co-operatives in Japan. I This discrepancy between the totals in these columns and the sum of the subcategory totals is due to the fact that a Diet member represented more than one type of interest group as listed in the subcategories.

SOURCE: Data on organisational positions of Diet members in Nihon Seikei Shinbunsha, Kokkai benran (Diet Handbook), 62nd edn (Nihon Seikei Shinbunsha, 1981) pp. 85--157.

0


engaging in electoral support activities is, therefore, greater than the number which actually place their leaders in Diet office, and the actual number of official Diet representatives of a group is not necessarily an accurate indicator of the extent and range of its electoral support activity.

Certain aspects of Japan's party and electoral systems help account for the extent of interest group involvement in the electoral process. A historically significant feature common to the development of almost all of Japan's national political parties is their failure to establish strong local organisations of party activists which provide both a sound financial basis for the party and a well-mobilised electoral machine. The LOP, the Japan Socialist Party (JSP), the Democratic Socialist Party (DSP) and, similarly, the New Liberal Club (which broke away from the LOP in 1976 and was dissolved in 1986) and the Social Democratic League (ex-JSP) 19 are all essentially political groupings with a top-heavy membership of Diet politicians and prefectural and municipal assemblymen. The weakness of party organisation is compounded by strong factional divisions which are a constant source of internal disunity. The effect of these organisational shortcomings is that, at election time, parties have to utilise a variety of channels in addition to party organisation to provide electoral resources such as political funding, campaign assistance and mobilisation of voting support. 20 One such external source of support is 'Japan's rich organisational infrastructure'. 21 If interest groups need political parties to provide them with an institutionalised channel into the Diet, then parties need interest groups to act as surrogate party organisations at the ekctoral level.

At the same time, certain aspects of Japan's electoral system have helped to perpetuate the relatively undeveloped state of party organisation and the entrenched factionalism of political parties, and thus have compounded candidate dependence on extra-party sources of organised voting support. The particular combination of a singlechoice voting system with multi-member constituencies (which applies in elections to all Lower House seats and almost one half of Upper House prefectural constituencies ?2 forces candidates from the same party to compete against each other for votes. Until the introduction of the proportional representation system in the Upper House national constituency in the June 1983 elections, this was also true of the Upper House national constituency. Voters chose individual candidates from the entire range of political parties to fill fifty seats with the whole nation voting as one electorate. Under the new

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system, however, voters select parties not candidates, and seats are allotted on the basis of the party share of the national vote.

In practice, the LDP and JSP have been the only parties with wide enough support to field a number of rival candidates in the Lower House constituencies and Upper House prefectural constituencies, although prior to the 1983 electoral system change, almost all parties presented more than one candidate in the national constituency of the House of Councillors. In those electorates where there is scope for multiple candidacy from the same party, candidates with the same party affiliation will inevitably have to compete against each other for votes. The existence of factional divisions within parties reinforces this rivalry and indeed makes it likely that internal party divisions will be expressed in terms of electoral competition between candidates. At the same time, the system elevates the importance of non-party determinants of electoral choice because support for party alone cannot be the deciding factor on which electoral choice is based: it merely narrows the field. Candidate appeal must extend beyond purely partisan identification to other factors centring on the candidate as an individuat.23 These other factors can reinforce voters' party preferences, or reduce their importance or even neutralise them altogether.

Unable to rely on a party as the principal grassroots electoral organisation, or on voter support for parties or party policy platforms as the trigger mechanism to bring in the vote, individual candidates are forced to bear the main burden of mobilising voting support themselves. Campaigning thus becomes very much 'a personalised, candidate-specific activity'24 with candidates organising their own electoral support groups (the koenkai) and utilising the widest possible range of connections to produce votes, including their ties, leadership or otherwise, to particular interest groups. The loyalties of individual members to organisations are manipulated for political purposes, the rationale being that having a representative in parliament who is an official of the group and/or who has an electoral debt to the group will bring its rewards in terms of policy benefits.

Group membership connections have been identified as among the most important motivating factors of electoral choice in Japan. 25 In some cases, interest groups provide aspiring politicians with their primary launching pad into politics, with the core of a support base built around organisational membership. The prospect of an organised bloc of voting support also makes interest group leaders a viable electoral proposition for political parties in the process of candidate


selection. It is not unusual for political parties to approach interest groups to supply them with a candidate or candidates whose electoral prospects are enhanced by the guarantee of organised group support. The trade unions, for example, are generally considered to represent the single most important source of candidates for the JSP, DSP and to some extent the J CP. Similarly, provision of interest group backing is the usual quid pro quo for politicians or aspiring candidates who accept offers of executive office in interest groups.

The range of interest group participation in electoral activity is, therefore, very wide, and the connections between organisations and candidates highly variable. Electoral support functions are executed at both the formal, organisational levels and at the more informal, personal levels, and they are both overt and covert. For purposes of mobilising voting support and expanding the electoral resources of candidates and political parties, interest groups may also formally recommend candidates and provide electoral funding and campaign assistance, with different groups specialising in some forms of electoral support rather than others. In some instances there is integration of interest group personnel into koenkai organisation, and in the extreme case the virtual conversion of an interest group into a candidate's political support organisation at election time. Local politicians who combine political assembly membership with organisational office, or who maintain more informal interest group connections may also form part of the substratum of support for Diet candidates with ties to the same or affiliated interest group(s).

Interest group participation in electoral activity also extends to the organisation of specialist groups to conduct political support operations. Where electoral funding is involved, the formation of specifically designated 'political groups' is legally required by the Political Funds Regulation Law, which prevents organisations other than those registered as 'political groups' from making direct contributions to political parties. Professional, occupational and economic interest groups whose legal status does not place them in the 'political group' category thus have a need for separate organisations to serve their specific political and electoral objectives in a more formal and overt context, in addition to the de facto involvement of their own officials and members through other means.

Political organisations attached to the better-known Japanese interest groups include the Japan Doctors' League (JDL) which operates as the political arm ofthe Japan Medical Association (JMA), the Japan Dentists' Political League which performs similar functions

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for the Japan Dentists' Association, the Political Action Committee which spearheads the electoral activities of the General Council of Japanese Trade Unions (Sohyo), the Japan Political League for Democratic Education which serves as the electoral support organisation for the Japan Teachers' Union (JTU) and the National Commerce and Industry Political League which acts as a political organisation on behalf of the National Federation of Commerce and Industry Associations. The Japan Medium and Small Enterprise Political League functions in a more specialised electoral and political capacity alongside a number of economic interest groups in the small- and medium-enterprise sphere, including the National Central Association of Medium and Small Enterprise Organisations and the Japan League of Medium and Small Enterprise Organisations. In the agricultural sector, the national agricultural co-operative organisation (Nokyo) sponsors a number of political groups including the National Agricultural Co-operative Council, the Agricultural Policy Research Association, the Japan Dairy Farmers' Political League and a host of prefectural farmers' political leagues, which form a loose-knit federation in the National Farmers' General Federation. The bestknown electoral funding organisation is the People's Political Association (Kokumin Seiji Kyokai), formed in 1975 as the successor to the People's Association (Kokumin Kyokai) which was set up as the political party fund of big business. The People's Political Association is the largest organised source of official finance for the LDP. It is the central collection point for contributions from individual business corporations, from the associations representing the different sections of Japanese industry, from the peak associations of industry such as the Federation of Economic Organisations (Keidanren), and from the financial world through organisations such as the Federation of Bankers' Associations of Japan and the banks themselves. Contrary to the popular view, however, Japanese big business is not the sole source of financial support for the government party. It is assisted in this role by organisations representing agriculture, the professions, small and medium enterprise and other interests.

The Party Alignment of Interest Groups

Japanese interest groups have been broadly characterised as 'party attached'26 in the sense of displaying singular and continuous affiliations with particular political parties. In actual fact, however, the enormous variation in the nature of the affiliations of interest groups


to political parties makes it difficult to generalise about them as a whole.

It could be said that the traditional division between conservative business and agricultural interests on the one hand and progressively aligned labour interests on the other holds true for Japan. The party connections of interest groups towards the conservative end of the political spectrum, however, are less homogeneous and rigid than those towards the progressive end, where group-party connections are often cemented by strong ideological links and where the phenomenon of party-sponsored interest groups is more common.

Where interest groups are sponsored by political parties (or vice versa), the identification between parties and interest groups is absolute. This is true of the Soka Gakkai and the Komeito, for instance, for such groups as the Japan Communist Party (JCP)sponsored small- and medium-enterprise, welfare and women's associations,27 and for the JSP-sponsored small- and medium-enterprise group, the Federation of Medium and Small Commerce and Industry Organisations. These voluntary associations are created not only for the purpose of advancing party-inspired policy interests but for the narrower electoral purpose of mobilising voting support for party candidates around these interests. They form part of the party substructure at the electoral level, organised around an 'interest rationale'.

In other cases, although organised spontaneously by individuals who seek to advance their collective interests by organisational means, interest groups may in practice become mere tools of political parties. The farmers' unions are examples of this type. They played an important role during land reform in representing the interests of tenant farmers to government but they declined subsequently into little more than electoral support organisations for socialist candidates in the countryside: the All-Japan Federation of Farmers' Unions (Zennichino) for the JSP, and the National Farmers' League (Zenno) for the DSP. These groups have become 'party-attached' in the true sense of the word: those amongst their current or former leadership who are Diet politicians display uniform political affiliations with one or other of the socialist parties, union policies are tied to party policies and the unions operate as subsidiary organisations of parties in the elections. Membership of the group automatically carries with it a vote for a specific party.

The relationship between the Japan Confederation of Labour ( Domei) and the DSP, and between Soh yo and the JSP, approximates

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the same degree of attachment. In many respects the JSP and OSP represent the Sohyo and Domei organisations in parliament. Both parties rely substantially on their associated union organisations for support and for party funds, with the power base of a majority of socialist candidates established through the union movement. The ties between Sohyo and Domei and their respective parties are not, however, absolutely uniform. Some officials of Sohyo-affiliated trade unions stand as JCP candidates, occasionally leaders of trade unions affiliated to Sohy6 choose to align themselves with the OSP in parliament, and furthermore, individual members of the unions affiliated with the peak associations of labour do not necessarily vote for the party to which their union is attached.

Those sectors traditionally identified with the conservatives, such as those of business, agriculture and the professions, display an even more complex political configuration.

In the business sector, there is a contrast between large enterprise and small and medium enterprise. Big business unquestionably forms the largest and most reliable bloc of political support for the LOP, with large Japanese firms and the People's Political Association making only token financial contributions to the Opposition socialist parties.

The political affiliations of the small- and medium-enterprise community are, on the other hand, quite heterogeneous. The Opposition (JCP and JSP)-sponsored small- and medium-enterprise groups were established largely to offset the dominance of conservative interests in the Japan Chamber of Commerce and Industry. In between these political extremes are a number of groups, such as the Japan League of Medium and Small Enterprise Organisations, the Japan Medium and Small Enterprise Political League, the National Federation of Commerce and Industry Associations, the National Commerce and Industry Political League and the National Central Association of Medium and Small Enterprise Organisations, all of which are more inclined towards the LOP than any other party.

Bipolarity is also evident in the political representation of the legal profession. On the one hand there are groups with strong attachments to the Opposition parties, such as the JCP-affiliated Free Lawyers' Groups and the JSP-aligned Second Tokyo Lawyers' Association. On the other hand, the Japan Lawyers' Federation (including its prefectural associations) is a conservative body with conservative political affiliations. In the area of local government, generally proLOP local government organisations - the National Governors'


Association, the National Association of Prefectural Assembly Chairmen and the National Association of City Mayors and so on- operate alongside progressive local government interest groups.

Agriculture also presents a more complex picture than is often assumed. Rural electorates in general and the agricultural cooperative organisation (N6ky6) in particular have been portrayed as bastions of conservatism, but one should not overlook the presence of socialist rural representatives in the Diet who have served at one time as farmers' union officials, the fact that the JSP has been the major political alternative to the LOP amongst agrarian voters or the fact that just under one quarter of N6ky6 officials with Diet membership in the period 1949-80 belonged to the JSP or the DSP.2R

The various medical associations in Japan, such as the Japan Medical Association, the Japan Dentists' Association (and their political offshoots the Japan Doctors' League and Japan Dentists' Political League, respectively) and the Japan Nurses' Association, claim no specific attachment to any particular party, but in practice their affiliations have centred largely on the LOP.

Interest groups such as N6ky6, the JMA, the Japan Lawyers' Federation and the majority of small- and medium-industry and localgovernment organisations are, in terms of their legal establishment, non-political and therefore non-ideological groups. In contrast with most Opposition-aligned groups, there is no overriding ideological dictate which tends to restrict choice of party support, and therefore they can, in theory, accommodate the entire range of political affiliations amongst their leaders, members and Diet supporters. In practice, however, while these groups may officially profess to be politically neutral, political expediency has dictated proximity to the LOP rather than to the Opposition parties. Japan does not have a political system where there is periodic turnover of parties in government; therefore a policy of strict neutrality or 'equidistance' from all political parties - which allows for changes in party support as a lever to gain optimal policy benefits- is not a feasible manoeuvre. The political environment provides limited potential for playing off one political party against another. Given the long period of conservative party dominance, the generally pro-LOP stance of even the 'non-partisan' interest groups has remained stable over the years. Secondly, almost three decades in government has fixed the rewardsallocation mechanism firmly in the hands of the LOP. Over this period the LOP has established and retained a monopoly over the

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power to dispense patronage and thus provide a concrete return on the electoral support of interest groups. Representation within the ranks of the LDP has far greater potential for being policy- and subsidy-productive than support for Opposition party candidates.

The overall picture of the party attachments of Japanese interest groups is, therefore, a complex one. The relationships between particular interest groups and particular political parties vary, as do the types of electoral function they perform and the political support strategies they follow. At one extreme are the party-sponsored interest groups where there is a very high degree of interpenetration between interest group and party, characterised by integrated leadership structures and the use of interest groups by political parties as subsidiary organisations at the electoral level. In such cases the interests of political parties and supporting groups tend to become fused: there is uniformity of political allegiance, mutual endorsement of ideological and policy goals and the pursuit of common electoral goals.

Towards the other extreme are groups such as those representing big business and financial circles, which retain a high degree of organisational independence from political parties and display minimal overlap in leadership structure. This reflects in part their concentration on electoral funding rather than on vote mobilisation as a political support activity. As organisations representing in almost all cases corporate rather than individual members and with highly centralised locations in the major industrial centres, big business groups are not optimally placed either geographically or organisationally to make effective contact with individual voters at constituency level. Financial contributions, directed on the whole but not exclusively to the LDP, represent their most easily mobilised electoral resource. 29

Most Japanese interest groups fall in between these two types. One can safely generalise by saying that the relationships between interest groups and political parties are characterised by a high degree of interdependence. Support for individual candidates in the elections is given in anticipation of policy benefits. In many cases the involvement of interest groups in the elections extends beyond mere support for candidates. Political parties become the instruments through which interest groups achieve direct representation in the Diet, and where this penetration is mutual, interest groups provide the organisational infrastructure for party-electoral and interestpromotion functions.


POLICY IMPLICATIONS

The practice of holding office in both Diet and interest group and the strong traditions of interest group involvement in electoral activity as surrogate party organisations in Japan create a degree of party electoral debt to outside interests. This debt is much greater than in political systems where parties and interest groups have a high level of organisational autonomy and where responsibility for vote mobilisation, campaigning and fund raising lies primarily or solely with party organisations. Each Diet member has a constituency of supporting groups to which he or she is obliged to respond for electoral reasons, and as a result it is more difficult for parties to formulate independent party policies. Penetration of party structures by interest groups makes possible the direct exercise of influence by interest groups over party policy, with politicians acting as internal Diet and party lobbyists on behalf of their allied interest groups. Many carry the labels of the interest groups they represent as members of intra-Diet groupings of representatives sympathetic to particular organisations. Examples of such interest group-connected bodies are the Diet Members' Group for the Promotion of Commerce and Industry, the Agricultural Problems Conference, the Diet Members' League for Environmental Hygiene and the Diet Members' League Associated with the Medical Association.

'Connection' and 'interest', therefore, often carry a greater explanatory force in elucidating the motivating factors behind Diet members' positions on issues and policies- particularly those of LD P politiciansthan philosophical conviction or considerations of equity, rationality or efficiency. The Diet process as dominated by the LDP could justifiably be characterised as expressing far more the 'politics of interest' than the 'politics of ideology' and the majority of political parties are just as much 'conglomerates of interest groups' as 'federations of factions'.

Decisive in determining an interest group's access to the policy process is the nature of its political allegiance. For interest group representatives and sympathisers aligned with the Opposition parties, internal lobbying activities are confined principally to the Diet forum and its standing committees. Influence over policy making is indirect. Representation within the ranks of the LDP, on the other hand, opens up all party-related avenues in the policy process (the LDP's policy-making apparatus, its party executive and the government executive in cabinet).

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The primary point of access for interest groups with supporters in the LOP is the government party policy-making machinery. The LOP's formal policy organisation, which includes all members of the parliamentary party, is the Policy Affairs Research Council (or PARC), and it is principally through the PARC that the party rank and file can exert influence over policy formation. The PARC determines the political acceptability of all major policy decisions and legislative proposals, and these must receive party approval before they are passed on to cabinet and become government policy. Decisions of major import generally go through two critical stages: negotiations between rank-and-file LOP members (who form the bulk of the PARC committees) and the party executive, and final negotiations between the party executive and the government leadership represented by the relevant ministers. Only then do policies go to cabinet for approval. The powers of LOP l<:laders in determining government policy stem from their role as spokesmen for the party in negotiations with the government. They are often crucial intermediaries affecting the margin of adjustment between rank-andfile party demands and the government position.

One of the most important functions of the party as a whole in the policy-making process is to act as an electoral watchdog on the government. Rank-and-file members are particularly mindful of the special interests of their supporting groups. Government ministers, on the other hand, by virtue of their office are more inclined to put their allegiance to interest groups aside and argue from a national interest or ministry perspective.

The importance of the interest intermediary role of Japanese politicians both within the Diet and in their own parties is borne out in the concentration of political activity that can be observed in certain policy areas that directly impinge on the interests of particular interest groups. Conversely there is a low level of activity in areas where there is either no group constituency or a weak one. Policy making relating to support prices for farm products, for example, has become intensely politicised with direct intervention by LOP 'farm politicians' in the decision-making process leading up to the final determination of support prices.

Diet members also intercede directly with ministry officials on behalf of their supporting groups. This is particularly evident in the budget process which represents the clearest demonstration of LOP patronage politics. Individual Diet members lobby intensively in the LOP's budget committees and also exert pressure directly on


bureaucrats in order to extract special subsidies for the interest groups they represent. The extent of government party involvement in the budget formulation process had led one observer to conclude: 'Japan is probably unique, at least amongst capitalist nations, in the degree to which a political party organisation directly penetrates the budget process. '30 Some interest groups are 'budget-parasitic' in the extent of their dependence on financial assistance from government. For such groups the budget process is the focus of their activities.

Interest groups do not rely solely on their political intermediaries in the Diet, however, in their efforts to extract policy and other concessions from government. Achievement of their political objectives also requires the development and maintenance of direct contacts with ministry officials. The second part of this chapter takes up the question of interest grou}rbureaucracy relations and the ways in which the bureaucracy provides the institutional medium through which interest groups become integrated into the policy process.

INTEREST GROUPS AND THE BUREAUCRACY: THE CORPORATIST CONNECTION

The Japanese bureaucracy enlists the active co-operation of interest groups in the pursuit of government policy objectives by formally incorporating them into the processes of policy formulation, decision making and administration. In this case the facilitating agent in interest group penetration of official policy-making mechanisms is the bureaucracy itself.

The formal role of interest groups as peripheral agencies in the execution of government policies has recently come under close scrutiny in the literature on corporatism, which has sought to find an appropriate ideal type model to describe the growing phenomenon of institutionalised co-operation between the state and organised groups in the business of government. 31

The essence of corporatism as a pattern of interest grou}rstate bureaucracy relations is interdependence: formal inclusion of interest groups in government administration for purposes of assistance in policy implementation, in exchange for guaranteed access to government officials, legitimation of interest groups in ministerial advisory and consultation processes and, in some cases, a direct role in the authoritative allocation of values. 32 These policy-related functions are supplemented by more concrete benefits in the form

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of bureaucratic protection and patronage. The end product of corporatised relations between the state and interest groups is cooperation between the various parts of the public and private sectors in the pursuit of commonly agreed policy goals. Corporatism can also result in diminished levels of organisational autonomy, leading in some cases to subordination of interest groups to the bureaucracy.

The following sections of the chapter examine in turn the various legal, institutional and procedural mechanisms which facilitate direct participation by Japanese interest groups in the formation and execution of public policies in a bureaucratic-administrative context. The analysis then proceeds to an evaluation of those factors which have contributed to variations in levels of corporatisation between particular interest groups and government in the Japanese case.

Legal Mechanisms

In the most formal sense, the means by which corporatisation is effected is through legal statute assigning administrative and policy roles to interest groups. In the first instance this involves organising legislation which defines and regulates the activities of interest groups. Organisations such as Nokyo, the National Fisheries Co-operative Federation, the National Chamber of Commerce and Industry, the National Federation of Commerce and Industry Associations and the National Central Association of Medium and Small Enterprise Organisations, all operate under their own laws and perform staterecognised roles as part of their day-to-day functioning. In most cases legal provisions also allow for an officially sanctioned interest articulation function, which permits organisations to make proposals to administrative authorities.

Operation under terms which are legally defined facilitates government-initiated extension of interest group activity into other areas also governed by legislation. Noky6, for example, performs a range of administrative tasks under a host of agricultural laws, 33 as does the National Chamber of Agriculture in addition to its prefectural and local-level organisations. In this they are similar to the various commerce and industry unions and business co-operatives which form the unit organisations of the National Central Association of Medium and Small Enterprise Organisations and which are the main operative agencies under the Law to Promote the Modernisation of Medium and Small Enterprise.

Interest groups which function under legislative provisions as agents


for the government in administration are accorded a legitimate role in processes of policy formulation affecting their respective areas of administrative involvement. They are automatically consulted about proposed changes to relevant legislation or the passage of new laws with which they might be associated. Financial assistance from government to perform their legally designated tasks is another byproduct of the corporatisation process. As a result, requests for subsidies often become the main objective of group interest articulation activities.

The distinctive feature of the organisations being discussed here is that they are legally authorised interest groups with a foot squarely in both the public and private sectors. Legislation provides for their establishment, so, in a sense, the primary organisational initiative comes from the state. At the same time, these are private groups of individuals who agree to associate voluntarily. Funding is a mixture of public and private financing: membership fees/shares are privately sourced, while expenses for activities are generated by the organisation and also provided by the government. Group activities serve both private organisational and public policy objectives.

Institutional Mechanisms

Apart from legal statute, other formal mechanisms by which interest groups are drawn into the fabric of administration include the establishment and funding (either partially or wholly) of bodies such as public corporations and extra-departmental groups (gaikaku dantai) in which interest groups form part of the executive, advisory or membership structure.34

The gaikaku dantai represent a specialised form of administrative or institutional interest group which function as auxiliary organs of government. They are formally private groups organised as incorporated associations, foundations or unions under the Civil Code,35 but their founding impetus is bureaucratic and their functions are public. Each is affiliated with a particular ministry or section of it, and each has an intimate clientele relationship with the part of the bureaucracy to which it is attached. This relationship is built around financial, functional and personnel links. The gaikaku dantai rely on government funding in varying degrees for their activities and they are staffed predominantly by retired government officials. There are around 5000 such groups in Japan. 36

Although the gaikaku dantai are uniformly non-profit or non-

Aurelia George 125

commercial bodies, they undertake an extremely diverse range of semi-official activities in technical, planning, informational, research, inspection, promotional and public relations areas and assume duties in connection with the administration of government subsidies and government-assisted insurance and development schemes. They represent the institutionalised expression of the protectionist, regulatory and promotional goals of the Japanese bureaucracy.

Membership of the gaikaku dantai is group or corporate, not individual. Categories of membership are set originally by the groups' bureaucratic sponsors; actual membership is, however, voluntary in principle. Membership often includes an interest group clientele made up of those who are the recipients of the administrative services provided by the gaikaku dantai and who may also participate in their execution. In addition to providing an institutionalised context in which interest groups can engage in policy administration, the gaikaku dantai share and complement the interest articulation functions of the more 'orthodox' interest groups. 37 A natural by-product of their administrative activity is involvement in policy representation to government relating to their respective spheres of activity. Their political concerns focus on the acquisition of patronage for the special interests they represent in the form of either specific policies or administrative measures, or maintained or increased subsidy levels.

Some gaikaku dantai seek to expand their political influence through direct representation in the Diet. Influential politicians are invited to serve in executive positions in the group, which allows full use to be made of their political office and influence to augment the group's leverage with the administration. For a Diet member, the rationale of the connection is usually an electoral one. It demonstrates to those of his constituents who are the ultimate beneficiaries of gaikaku dantai services that he is active politically on their behalf.

Procedural Mechanisms

The basis on which interest groups are integrated into the functioning of the administration also extends to less formalised and more ad hoc mechanisms. Interest groups may be commissioned by public officials to perform a specific set of tasks or projects for which special funding is allocated to the group. Consumer organisations, for example, are sometimes approached by MITI or by local government officials to conduct consumer surveys. The provision of information


to government may also be undertaken on a more routine basis, as the various industry associations and Keidanren do for the Ministry of International Trade and Industry (MITI). These activities serve to provide government with access to the attitudes and expertise embodied in groups.

Bureaucrats may also request policy advice from interest groups in the formal context of government advisory councils. The councils provide a regular forum both for policy submissions and recommendations from interest group spokesmen and for submissions on policy from 'interests' which are not necessarily mediated through interest organisations but are put forward by spokesmen representing other types of institutions (such as public corporations, the Diet and sections of the bureaucracy) and by individual specialists. Although the advisory councils are essentially organs for servicing the bureaucracy and legitimising its policy recommendations with formal powers that are limited to advice and recommendation, council reports may in practice carry a great deal of policy weight. The largest and most prestigious of the advisory councils set basic goals for different sectors of the economy, such as industry, agriculture and the financial system, in the light of which more detailed matters of policy are decided. Advisory councils may also play a role in regularised decision-making procedures leading to major pronouncements on government policy.

Corporatist Qualifications

It is possible to distinguish significant variations in levels of corporatisation from sector to sector in Japan, and also from group to group. Similarly, there are also differences in the mechanisms of corporatisation between different groups and sectors. These differences are due to historical, economic, political and organisational factors.

In Japan there is a strong historical tradition of state-sponsored interest groups. In one form or another all prewar interest groups existed with the consent of government. They were either approved by government or established by law. Those not approved were outlawed. Development of state-sponsored, statutory-based interest groups advanced most rapidly in the agricultural sector and in the small- and medium-enterprise sector. The prewar antecedents of N6ky6 were the producer co-operatives (sangyo kumiai) and the agricultural associations (nokai), both established and regulated by successive laws from 1899 onwards. The Japan Chamber of Commerce

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and Industry, on the other hand, began as a government-approved organisation in 1878 and there were successive Chambers of Commerce Acts until 1923. In the early 1930s a series of commercial and industrial laws established 'control co-operatives' for the small- and medium-business sector.

For such groups, legal regulation was often accompanied by an officially recognised government advisory role, the imposition of semi-administrative duties, receipt of government subsidies and other forms of organisational control. Subsidies were important as an indirect means of control. The producer co-operatives, agricultural associations, chambers of commerce and the commercial and industrial co-operatives were thus variously charged with advising government on relevant policies, disseminating government policies to members, collection and sale of commodities, distributing government subsidies and generally promoting the productive and economic contribution of members to the community. They were quintessentially organs of government persuasion and mobilisation.

The organisations of large capitalists, on the other hand, while they received government approval, were far more independent. They centred on the industrial clubs which were non-statutory, nonsubsidised groups organised partly as a reaction against government supervision of the chambers of commerce. They were dominated by the economically powerful, big business corporations (the zaibatsu) and this gave them greater autonomy vis-ii-vis government than the agricultural and small- and medium-enterprise groups which relied in varying degrees on government financial assistance.

Organisational development in the labour sector was also nonstatutory. It took two forms: business-supported enterprise unions and voluntary but weak industrial unions with restrictions on their activities. In neither form was the organisation of unions legally sanctioned.

In the extreme circumstances of the wartime effort, statutory forms of organisation were imposed in all sectors and incorporation into the functioning of government enforced. Interest groups were reorganised as monolithic, compulsory, government-controlled, representative organisations united under a single organisational umbrella in the Imperial Rule Assistance Association (IRAA}. This period in Japanese history most clearly exemplifies corporatism in its purest form as a system of state-controlled interest groups. 38 The producer co-operatives and agricultural associations came together in a new type of agricultural association (nogyokai) to which all farmers were


required to belong and which were charged with various semiadministrative duties including the vital task of collecting the nation's rice crop and transferring it to government for controlled distribution. Labour organisation was brought under state control with the formation of an Industrial Patriotic Association. In the business sectors, the commercial and industrial 'control co-operatives' for small and medium industry were incorporated into 'control associations' to which the zaibatsu were also required to belong and which they later came to dominate. The 'control associations' were integrated into the Council of Key Industry Control Associations, thus bringing all business activity into the framework of the wartime controlled economy. Even during this period, however, big business retained a measure of independence from state domination.

Postwar organisational development in each of the major sectors has not diverged markedly from the pattern laid down in the prewar and wartime periods. For agricultural and small- and medium-industry groups, the strongly corporatist tradition continued in the form of statutory organisation, legally designated, semi-administrative tasks and subsidised government assistance. Big business groups, on the other hand, retained their position of greater independence from government and for labour organisation, the dual structure of enterprise unions and loose federations of industrial unions persisted. The right of trade unions to organise was sanctioned by the passage of the Labour Union Law in 1945, but this law sought to guarantee workers' freedoms rather than to allocate any duties in a formal administrative sense to the trade unions.

Levels of corporatisation have also been influenced by the perceived need for government intervention in the economy. Although the socio-political control objective of government appears to have been a dominant motive in the corporatisation process during the prewar and wartime periods, economic development objectives also played a role. The government sought to use interest groups as the organisational medium for administrative supervision and promotion of economic and productive activities. In the postwar period this goal has become paramount and is particularly evident in the higher levels of corporatisation observable in the agricultural and small- and medium-industry sectors.

Nokyo, for example, was designed as the prime instrument of government intervention in the agricultural sector, and it has, since the time of the postwar re-establishment of the agricultural cooperative system, provided a nationwide channel for government

Aurelia George 129

assistance and direction to the farmer. As government intervention in the agricultural sector has become more pervasive because of declines in agricultural productivity relative to the secondary and tertiary sectors, Nokyo's administrative roles have expanded and a host of other statutory and institutional interest groups related to farming have emerged to assist and complement the work of the agricultural co-operatives.

Similar factors have operated in the small- and medium-enterprise sector which has remained one of the weaker and more dependent sectors of the Japanese economy. Co-operative unions were established in 1949 along much the same lines as the prewar and wartime groups to act as 'co-ordinating' and 'regulating' bodies for small- and medium-enterprise firms. These were absorbed into the business cooperative unions, credit co-operative unions and commerce and industry unions set up under the Small and Medium Enterprise Organisation Law passed in 1957. The various unions were designed to act as government-supervised, economic stabilisation, regulation and promotion agencies for small and medium industry,39 and they have remained the main channel for government policy direction and assistance to this sector, particularly to small-scale industry. Their activities are supplemented by the national, prefectural and city branches of the Japan Chamber of Commerce and Industry, which have statutory entitlement to perform various functions for commerce and manufacturing industry on behalf of government.

Similarly, in the health and welfare sector where direct government subsidies and handouts have grown along with the development of welfare policies, a cluster of corporatised interest groups predominantly of the gaikaku dantai type have grown up as disbursement agencies of government benefits.

Where there has been reduced need for direct government subvention to support economic activity as in the large enterprise and financial sectors, levels of corporatisation are lower, with the looser, procedural forms of corporatisation predominating. The close working relations between the various specialist bureaux of the MITI and their corresponding industry associations involving regularised consultation and exchange of information constitutes procedural incorporation, as does the participation of large-enterprise and financial-group spokesmen on prestigious advisory councils. Industry associations also provide a forum in which government representatives and corporate executives can meet to co-ordinate investment planning and achieve a government-business consensus on specific policies


for industry and on particular actions to be taken by individual corporations.

Mechanisms of control and assistance by government with respect to large industrial and financial enterprise do operate, but they relate less to corporatist forms of interest intermediation than to the use of bureaucratic instruments which impinge directly on industry40 such as 'administrative guidance', the authority to grant licences, approvals and deregulation, provision of assistance in cartel formation, investment guidance, tax concessions, protection against foreign competition and control over allocation of imports or overseas funds. These are usually all covered by laws to establish, promote or stabilise certain industries or types of enterprise. Co-operation and coordination between government and business is also engendered by other mechanisms such as amakudari.

Corporatisation of trade unions into processes of national policy formulation, decision making and administration is also limited, even in the procedural form. Representation from labour on government advisory councils tends to be on a token basis41 and there is a conspicuous lack of formal bodies comprising government, labour and business 'to deal with problems of economic management and/or to co-opt labor and legitimate wages and incomes policies'. 42 There is some degree of corporatisation of labour at the individual enterprise level, involving negotiating procedures between management and enterprise unions, and at the national level, involving the institutionalisation of wage fixation processes in the 'spring offensive', but this exemplifies most clearly the notion of corporatism as a system of labour participation in management rather than as a system of interest group participation in government. 43

Political and organisational factors also contribute to levels of corporatisation. The overall political alignment of interest groups indirectly affects the extent of their integration into the structure of the administration because of the close links that have been established between the LOP and the ministries as a result of the LOP's long period in government. Conservative political affiliations are a distinct advantage. Labour organisation has suffered in the corporatisation process from its exclusive political alliance with the Opposition. The labour movement as a whole is also politically disadvantaged and administratively suspect as a result of internal ideological and organisational divisions. Each of the two major trade union federations is allied to a separate political party and neither commands the membership of even half the unionised workforce.

Aurelia George 131

Corporatisation: The Rewards and Risks

The integration of interest groups into the policy-formation and administrative functions of the bureaucracy has both positive and negative implications for organisational integrity. Interest groups benefit from government patronage in the form of subsidies and other policy rewards which simultaneously serve the protectionist, assistance or developmental goals of government. Corporatisation also legitimises the presence of interest groups in the policy process, institutionalises access to the bureaucracy and provides additional opportunities for the exercise of group influence at the implementation stage of administration.

The advantages of operating 'from within the system', however, may be counterbalanced by the loss of varying degrees of organisational autonomy. Almost by definition, there is an inverse correlation between degrees of corporatisation and degrees of organisational independence. Corporatist processes subject interest groups to a mixture of legal controls, institutional constraints, procedural norms and financial inducements which ultimately have the effect of restricting the methods and content of interest representation. Procedural corporatism is compatible with higher levels of organisational independence than legal and institutional corporatism.

The political rationale of interest incorporation in advanced capitalist democracies is the means it provides to mobilise the consent of the government. Interest groups become the instrument of mobilisation where the state, in determining economic and social priorities, sees a need to intervene in the operations of the free market and countenance various forms of assistance and control over particular sectors of the economy. In the Japanese case the state has been able to draw on the historical relationship between government and governed in some sectors and on organisational precedent to institute corporatist forms of linkages with particular interest groups in the postwar period. Interest groups drawn into a policy-assistance role by the state thus function within a broadly based policy consensus in which the 'specific purposes of interest groups become fused with governmental purposes'. 44

CONCLUSION

At the most abstract level this paper has been concerned with identifying the institutional channels through which interest groups


participate in the governing process. The relationship between interest groups and political parties is characterised by a high degree of interdependence, extending in some cases to duality of function. Electoral support is the essential bonding element between interest groups and political parties and it is also the means through which interest groups are able to penetrate directly the Diet, party and government policy-making processes. In some cases penetration becomes mutual with interest groups functioning primarily as appendages of political parties and existing almost entirely for party-political purposes. In interest group-bureaucracy relations, interdependence operates through corporatist forms of interaction. Interest groups are integrated into the systems of bureaucratic policy formulation, administration and control. In sharing the burden of policy administration with the bureaucracy, interest groups also share in an institutionalised system of rewards and participate directly in policy formation, consultation and decision-making processes within the bureaucracy.

The institutional approach adopted in this chapter implicitly rejects all a priori assumptions about the distribution of power in Japanese politics, whether it be the 'hierarchical' notions of the elite theorists or the power-sharing approach of the pluralists. The analysis has reexamined the empirical basis on which these models were built and provided a new perspective on the institutional linkages through which interest groups interact with those they seek to influence. It supports the pluralist contention that the Japanese political system is an open one and the strength and variety of direct interest group representation in the Diet attests to this fact. It thus exposes the bias in the elitists' emphasis on personal, private and thus 'noninstitutional' links between LOP leaders and the world of big business and the 'exclusive' policy influence generated through this route.

On the other hand, the analysis does not endorse the notion implicit in the pluralist thesis that because there are various institutional channels of access to policy makers which a range of interest groups utilise in observable ways, then all groups necessarily enjoy equal access. Interest groups affiliated with the Opposition clearly enjoy more limited access to the policy-making process involving the government party, the government executive and the national bureaucracy than those with closer ties to the government party.

The most important political fact of life in Japan is the long and continuous period of one-party rule by the LOP which has elevated the political support patterns of interest groups to a critical determi-

Aurelia George 133

nance of policy access. For groups aligned with the Opposition this has meant limited direct access to authoritative decision makers and limited direct participation in policy making. Conservative interest groups or those with ideological flexibility have been better placed to adapt to the fact of semi-permanent LDP government and have developed strategies which are most appropriate to the political reality which they face. For groups desiring budgetary subsidies, logic has dictated close ties to the LDP as the party of patronage. Similar inducements have operated in the corporatisation process. Although corporatist trends have been influenced by many factors - including historical tradition, organisational factors, party alignments and government economic priorities - interest groups which actively cooperate in the execution of government policies seek both the opportunity to influence policy decisions and the advantages of protection and assistance from government. In becoming agents of administrative intervention and control, however, interest groups sacrifice a certain measure of organisational autonomy. This ultimately restricts their strategic options and policy choices and binds them to support of the established system.

NOTES

1. For a comprehensive listing of works presenting a power elite perspective of Japanese politics, see Haruhiro Fukui, 'Studies in Policymaking: A Review of the Literature', in T. J. Pempel (ed.), Policymaking in Contemporary Japan (Ithaca, NY, and London: Cornell University Press, 1977) pp. 23-35nn. A representative sample would include the majority of contributions to the volume Nihon Seiji Gakkai (ed.), Nihon no atsuryoku dantai [Pressure Groups in Japan] (Iwanami Shoten, 1960); Ishida Takeshi, Gendai soshiki ron [A Treatise on Modern Organisation] (Iwanami Shoten, 1961); Suzuki Yukio, Keizai kanry6: shin sangyo kokka no purojllsti [The Economic Bureaucrats: Producers of a New Industrial State] (Nihon Keizai Shinbunsha, 1969); Robert A. Scalapino and Junnosuke Masumi, Parties and Politics in Contemporary Japan (Berkeley, CA: University of California Press, 1962); Chitoshi Yanaga, Big Business in Japanese Politics (New Haven, CT: Yale University Press, 1968); Fukuji Taguchi, 'Pressure Groups in Japanese Politics', The Developing Economies, vol. 6 (1968); Haruhiro Fukui, Party in Power: The Japanese Liberal-Democrats and Policymaking (Berkeley and Los Angeles, CA: University of California Press, 1970); and Takeshi Ishida, 'Interest Groups Under a Semipermanent Government Party: The Case of Japan', Annals of the American Academy of Political and Social Science, vol. 413 (May 1974).


2. Those who have argued the pluralist case in more general terms include Robert E. Ward, Japan's Political System (Englewood Cliffs, NJ: Prentice-Hall, 1967) and Gerald L. Curtis, 'Big Business and Political Influence', in Ezra F. Vogel (ed.), Modern Japanese Organization and Decision-making (Berkeley and Los Angeles, CA: University of California Press, 1975).

3. Criticisms of the power elite view are contained in Chalmers A. Johnson, 'Japan: Who Governs? An Essay on Official Bureaucracy', Journal of Japanese Studies, vol. 2, no. 1 (August 1975); Fukui, 'Studies in Policymaking: A Review of the Literature', pp. 22-59; T. J. Pempel, Patterns of Japanese Policymaking: Experiences from Higher Education (Boulder, CO: Westview Press, 1978); and J. A. A. Stockwin, 'Understanding Japanese Politics', Social Analysis (Adelaide) Special Issue: Japanese Society: Reappraisals and New Directions; no. 5/6 (December 1980), pp. 144-53, at pp. 147-8.

4. Aurelia George, The Strategies of Influence: Japan's Agricultural Cooperatives (Nakya) as a Pressure Group, Ph.D. thesis (Canberra: Australian National University, 1980); Aurelia George, 'The Japanese Farm Lobby and Agricultural Policy-making', Pacific Affairs, vol. 54, no. 3 (Autumn 1981); and MichaelS. Donnelly, 'Setting the Price of Rice: A Study in Political Decisionmaking', in Pempel (ed.), op. cit.

5. William T. Steslicke, Doctors in Politics: The Political Life of the Japan Medical Association (New York, Washington and London: Praeger, 1973).

6. Donald Thurston, Teachers and Politics in Japan (Princeton, NJ: Princeton University Press, 1973).

7. John Creighton Campbell, 'Compensation for Repatriates: A Case Study of Interest Group Politics and Party Government Negotiations in Japan', in Pempel (ed.), op. cit.

8. Margaret A. McKean, 'Pollution and Policymaking', in Pempel (ed.), op. cit.; Savitri Vishwanathan, 'Citizens Movements Against Industrial Pollution: A Case Study of Fuji City, Japan', Annals of the Institute of Social Science, no. 18 (April1977); and Kawanaka Niko, 'Chiiki seisaku to chiho gyosei' [Regional Policy and Local Administration], in Nihon Seiji Gakkai (ed.), Gendai Nihon no seita to kanrya: hoshu gada igo [Parties and the Bureaucracy in Contemporary Japan: Since the Conservative Merger] (Iwanami Shoten, 1967).

9. John Creighton Campbell, Contemporary Japanese Budget Politics (Berkeley and Los Angeles: University of California Press, 1977).

10. Ehud Harari, The Politics of Labor Legislation: National-International Interaction (Berkeley and Los Angeles: University of California Press, 1973).

11. Pempel, Patterns of Japanese Policymaking. 12. George R. Packard, III, Protest in Tokyo: The Security Treaty Crisis of

1960 (Princeton, NJ: Princeton University Press, 1966); Donald C. Hellmann, Japanese Domestic Politics and Foreign Policy: The Peace Agreement with the Soviet Union (Berkeley, CA: University of California Press, 1969); and Akio Watanabe, 'Policy-making Japanese Style: An

Aurelia George 135

Appraisal', Study Group on Japanese Foreign Policy Choices to 1980, 8th Meeting, 16 June 1977, The Royal Institute of International Affairs, London.

13. See, for example, T. J. Pempel, 'The Bureaucratization of Policymaking in Postwar Japan', American Journal of Political Science, vol. 18 (November 1974); T. J. Pempel, 'The Dilemma of Parliamentary Opposition in Japan', Polity, vol. 8 (Autumn 1975); T. J. Pempel and Keiichi Tsunekawa, 'Corporatism without Labor', in Philippe C. Schmitter and Gerhard Lehmbruch (eds), Trends Towards Corporatist Intermediation (London and Beverly Hills, CA: Sage, 1979); and J. A. A. Stockwin, Japan: Divided Politics in a Growth Economy, 2nd edn (London: Weidenfeld and Nicolson) p. 161.

14. Stockwin, Japan: Divided Politics in a Growth Economy, p. 161, and Stockwin, 'Understanding Japanese Politics', p. 147.

15. In some cases resignation from group office is mandatory before assumption of political life or parliamentary office (the trade unions for example).

16. Nihon Seikei Shinbunsha, Kokkai benran [Diet Handbook], 62nd edn (Nihon Seikei Shinbunsha, 1981) pp. 85-131.

17. The Kokkai benran does not differentiate between current or former organisational office.

18. Kokkai benran, pp. 132-57. 19. In the 1983 House of Councillors' elections, the New Liberal Club (NLC)

and Social Democratic League (SDL) combined in an electoral alliance to form the New Liberal Club-Democratic League (NLC-DL).

20. The Japan Communist Party (JCP) and the K6meit6 both have large grassroots organisations of party activists and are, therefore, exceptions to the rule. It is noteworthy, however, that data in the Diet Handbook for 1981 reveal that 58 per cent of all JCP members in the Upper House were current or previous interest group officials, as were 52 per cent of JCP members in the Lower House (42 per cent and 20 per cent, respectively, were trade union officials). The group representation rate amongst JCP Diet members is thus higher than the overall rate for all parties in both Houses of the Diet. It is, however, extremely low for K6meit6 Diet members. The K6meit6 has a highly mobilised local party network. Overall it may be considered a religious interest group in parliament, representing the neo-Buddhist Soka Gakkai organisation.

21. Bradley M. Richardson, 'Party Loyalties and Party Saliency in Japan', Comparative Political Studies, vol. 8, no. 1 (May 1975) p. 48.

22. These are Hokkaid6, Fukushima, Ibaraki, Tochigi, Gumma, Saitama, Chiba, Tokyo, Kanagawa, Niigata, Nagano, Shizuoka, Aichi, Kyoto, Osaka, Hy6go, Okayama, Hiroshima, Fukuoka, Kumamoto and Kagoshima (that is, 21 out of a total of 47 prefectural constituencies). The remainder are two-seat constituencies, but only one seat is contested in each election.

23. For an extended discussion of why the party orientation of Japanese voters is weak and individual candidate orientation strong, see Thomas R. Rochon, 'Electoral Systems and the Basis of the Vote: The Case of


Japan', in John Creighton Campbell (ed.), Parties, Candidates and Voters in Japan: Six Quantitative Studies (Ann Arbor: Center for Japanese Studies, University of Michigan, 1981) pp. 1-28.

24. George, 'The Japanese Farm Lobby and Agricultural Policy-making', p. 417.

25. See Scott Flanagan, 'The Japanese Party System in Transition', Comparative Politics, vol. 3, no. 2 (January 1971) pp. 231-53. Flanagan subsumes the multiplicity of non-party determinants of electoral choice under the heading of 'connections', of which organisational connections are some of the most important.

26. Thurston, op. cit., p. 221. 27. The National Federation of Commerce and Industry Organisations, the

People's Medical League and the New Japan Women's Association, respectively, are examples of these.

28. Based on data in George, The Strategies of Influence, pp. 194-5. 29. Active vote gathering on behalf of election candidates by large corpor

ations and by banking groups does occur, but only on a limited basis. Company and banking executives may publicise amongst their staff the names of candidates whom they support, and they may also exert pressure through suppliers, retail outlets and subsidiaries. This kind of activity is most common in Upper House elections for the national constituency where electoral boundaries are not a factor in voting choice. In some cases, corporations also mobilise managerial and labour votes for company union candidates.

30. Campbell, 'Japanese Budget Baransu', in Vogel (ed.), op. cit., p. 81. 31. See, for example, the contributions to Schmitter and Lehmbruch (eds),

op. cit. 32. This concept of corporatism is closest to that expounded by Gerhard

Lehmbruch in ibid., p. 150. He defines corporatism as 'an institutionalized pattern of policy-formation in which large interest organizations cooperate with each other and with public authorities not only in the articulation of . . . interests, but - in its developed forms - in the "authoritative allocation of values" and in the implementation of such policies'.

33. These include the Agricultural Basic Law, The Central Bank for Agriculture and Forestry Law, the Livestock Price Stabilisation Law, the Stockfeed Demand and Supply Stabilisation Law and the Dairy Farming Promotion Law.

34. Public corporations or special legal entities (tokushu h6jin) with which No kyo, for example, is formally connected are the Central (Co-operative) Bank for Agriculture and Forestry (since 1981 a private organisation), the Agriculture, Forestry and Fisheries Finance Corporation, the Japan Horse-racing Association, the Forest Development Corporation, the Agriculture, Forestry and Fisheries Organisations Employees' Mutual Aid Association, the Livestock Industry Promotion Corporation, the Japan Local Racing Association, the Japan Sugar Price Stabilisation Agency, the Japan Raw Silk Corporation, the Institute of Agricultural Machinery, the Farmers' Pension Fund and the Agricultural Land Development Corporation.

Aurelia George 137

35. Chalmers A. Johnson, Japan's Public Policy Companies (Washington, DC: American Enterprise Institute for Public Policy Research, 1978) p. 49.-

36. According to data reported in Johnson (ibid., p. 49, n. 58), there were 4396 gaikaku dantai in 1971. The MITI alone had 560 and the Ministry of Education, 1377.

37. For this reason gaikaku dantai have been included amongst the interest groups listed in Appendix A.

38. It also exemplifies corporatism as defined by Schmitter in Schmitter and Lehmbruch (eds), op. cit., p. 13. According to this definition, corporatism is 'a system of interest representation in which the constituent units are organized into a limited number of singular, compulsory, noncompetitive, hierarchically ordered and functionally differentiated categories, recognized or licensed (if not created) by the state and granted a deliberate representational monopoly within their respective categories in exchange for observing certain controls on their selection of leaders and articulation of demands and supports'.

39. See Naoki Kobayashi, 'The Small and Medium-sized Enterprises Organization Law', in Hiroshi Itoh (ed.), Japanese Politics: An Inside View (Ithaca, NY, and London: Cornell University Press, 1973) pp. 49-67.

40. Relevant in this context is the notion of corporatism as a model of capitalist political economy in which government in consultation with industry actively intervenes in economic affairs, with enterprise accepting a certain degree of priority ordering and policy direction from government, combined with some injection of centralised government co-ordination and planning. 'Corporatism' as defined here has existed most clearly in postwar Japan as an 'ideal' expounded at different times and in different forms by the MITI, the Economic Planning Agency and by the Japan Committee for Economic Development. See the discussion in Pempel and Tsunekawa, op. cit., pp. 231-70 and also Hideo Otake, 'Two Competing Business Ideologies in Postwar Japan', unpublished manuscript (March 1982).

41. Pempel and Tsunekawa have noted, for instance, that 'the nearly 300 government advisory committees are devoid of labor representation', op. cit., p. 262.

42. Ibid., p. 233. 43. See the discussion in ibid., pp. 231-70, and also in Otake, op. cit. 44. Takeshi Ishida, 'The Development of Interest Groups and the Pattern

of Political Modernization in Japan', in Robert E. Ward (ed.), Political Development in Modern Japan (Princeton, NJ: Princeton University Press, 1968) p. 297.


APPENDIX

Table 5.2 Interest group representatives in the Diet by type of group•

House of House of Category of interest group Representatives Councillors

AgriculturaVfarmers' groups Nokyo groups 6 10 Farmers' federations and political leagues 1 1 Livestock and beef associations 2 1 Land improvement federations 2 3 Agricultural councils 1 1 Tobacco cultivators' unions 1 1 Tea industry groups 1 2 Fruit associations 1 Farmers' unions 8 1 Other agricultural groups 1 Total 22 22

Banking/credit groups Credit union associations

Commerce/industry groups Chambers of commerce and industry 2 Federations of medium and small commerce and

industry organisations 2 Federations of commerce and industry

associations 2 National Central Association of Medium and

Small Enterprise Organisations National Commerce and Industry Political

League 1 Other commerce and industry groups 3 3 Total 11 8

Consumer/women's groups National Consumer Groups' Liaison Association Livelihood co-operatives 1 New Japan Women's Association 1 1 Other women's groups 1 1 Total 3 3

CulturaVreligiouslideologicaVpolitical groups Cultural associations Religion and Politics Research Association House of Growth Political Federation 2 New Japan Federation of Religious Groups 1 Japan-China friendship groups 2 Constitutional groups 1 1 Buraku emancipation leagues 1 1 Other ideologicaVpolitical groups 2 1 Total 5 9

22

22

22

22

22

22

22

22

22

Table 5.2- cont.

Category of interest group

Forestry/fisheries groups Forestry federations Other forestry groups Fishing port associations Fisheries federations Fisheries co-operatives Total

Health/welfare groups

Aurelia George

National Health Association federations Other-health groups War Bereaved Associations Military pensioners' federations Other welfare groups Total

Insurance/pensions Agricultural Mutual Aid groups Other mutual aid groups Pensions Associations Total

Local government groups Prefectural and municipal government

associations Prefectural assembly associations Mayors' associations Town and village associations Other local government groups Total

Postal groups National Special Post Office Postmasters'

Association

ProfessionaVeducational groups Lawyers groups Medical, dental and nurses' associations Fire service associations High school PTA federations Private high school associations Total

Sports groups Physical education associations Other sports associations Total

House of Representatives

2

2 1 1 6

1 3 2

2 8

2

2 4

1 2

3

6 1 1

8

6 6

12

139

House of Councillors

1 3

1 2 2 2 2 9

2 1 3

1 2 4

2

3 2 1 1 7

1 2 3

2 2

2


Table 5.2- cont.

House of House of Category of interest group Representatives Councillors

Trade unions Sohyo and Sohyo-affiliated trade unions 56 41 Domei and Domei-affiliated trade unions 10 9 ChUritsu Roren-affiliated trade unions 2 1 Independent unions 3 2 Total 71 53

Transport groups Roads associations 1 4 Other transport associations 2 1 Total 3 5

Youth groups Youth councils 4 1 Other youth groups 3 1 Total 7 2

• This appendix is an expanded version of Table 5.1. Because of the more detailed breakdown of categories and because some Diet members represent more than one type of group, subcategory and category totals vary slightly from those in Table 5.1. For a comprehensive listing of organisations, together with their Diet representatives and details of the latter's party affiliations and constituencies, see Appendices A and B, in Aurelia George, 'The Comparative Study of Interest Groups in Japan: An Institutional Framework', Pacific Economic Papers, no. 95 (Canberra: AustraliaJapan Research Centre, December 1982) pp. 92-122.

souRcE: Basic data was obtained from Nihon Seikei Shinbunsha, Kokkai benran [Diet Handbook], 62nd edn (Nihon Seikei Shinbunsha, 1981) pp. 85--157.

6 The Economy and the Political System JAMES HORNE

Interaction between the economy and the political system in a modern industrial society cannot be assumed to be stable. Many factors make it desirable to re-examine the methods, institutions and structure of existing relationships. Since the early 1970s Japan's role in the world economy has altered so dramatically as to affect several basic perceptions of the role of government. The shifting age structure and the progressive urbanisation of Japan have also had major political and economic ramifications. With changes in the international and domestic environment facing the nation and its government, it is inevitable that the character of interaction between the economy and the political system will evolve.

In the case of Japan, the legal framework, various forms of administrative guidance, the management of the budget and the associated Fiscal Investment Loan Programme (FILP), and the existence of a range of government-owned corporations, all give the government and hence the Liberal Democratic Party (LOP) considerable oversight of the economy. Patterns of intervention relate to historical practice, the interest group support base and ideological bias of the ruling LOP, the role of the bureaucracy in the management of the economy and the division of responsibilities between the LOP and the bureaucracy.

Relationships, moreover, have altered over time. Political stability and established institutional methods were two factors which helped maintain the status quo. But working against this were changes in the position of Japan in the international environment and in the demands of Japanese business, changes in demands of the population expressed through the ballot box or interest groups and the responses of politicians to changes in the set of relationships which governed the performance of the domestic economy and the operation of Japanese business in the international economy. An analysis of these factors and how they relate to forms of intervention is the central objective of this chapter, which will concentrate on the period up to the early 1980s.

141

142 The Economy and the Political System

CAUSES OF CHANGE

Historical Background

During the 1930s and 1940s the state played a dominant role in allocation decisions in the Japanese economy. Following a period of self-control by industry and only moderate interference in the economy, the military influence from the mid-1930s succeeded in reorientating the economy to respond to the wishes of the state. 1

Much of the apparatus for state control was dismantled during the years of the Occupation but none the less the role of government remained considerable. For one thing the Occupation forces required an agent to implement their goals, and this was undertaken by the government bureaucracy. Another problem was the parlous state of the economy, which required a central role for government in the allocation of capital and the available foreign exchange.

The role of government financial institutions, of the regulatory framework which controlled access to foreign exchange and technology, and of the entire interest rate framework were important mechanisms which helped determine the shape of economic development. Although conservative politics dominated after the formation of the Yoshida government in 1949, the early postwar period belonged to the public servants. The Ministry of Finance (MOF) and the Ministry of International Trade and Industry (MITI), through their control over interest rates, access to loans, technology and imports and through the direction of budget expenditure, were two powerful bureaucratic influences. 2

Economic Factors

Japan's commercial policy altered in the 1960s and 1970s to reflect its changing national interests. 3 Its entry into the General Agreement on Tariffs and Trade (GATT), the Organisation for Economic Cooperation and Development and the International Monetary Fund all reflected these changes. The developments in the 1960s exemplified two emerging trends. The first was that the state recognised the need to relax restrictions which were inhibiting corporate expansion in international markets. Regulations covering investment flows and

James Horne 143

banking services were eased and Japanese corporations began the process of building international profiles. 4 The second was that although Japanese corporations were becoming more internationalist in outlook, the authorities did little to assist greater foreign involvement in the economy. Differences in social organisation, barriers imposed by the legal framework and a range of indirect protective methods were sufficient to prevent any major breach of government policy.

The high growth rate of the 1960s clearly facilitated many adjustments within the economic system. It also led, however, to the institutionalisation of policy-making routines. The management of fiscal policy illustrated some of the dilemmas that arose. Up to 1974 approximate balance was maintained between revenue and expenditure in the national budget. Economic growth was given the highest priority but always in the context of a relatively strict public sector fiscal programme, following the balanced budget approach established by Joseph Dodge in the early 1950s.5 Instead of using the rapid increase in tax revenues to expand the public sector, tax cuts became a feature of fiscal policy.

What high growth had permitted, in addition to avoiding zero sum infighting so common in budget discussions around the world, was the entrenchment of large subsidies, especially to the agricultural sector, including rice price-support schemes and subsidies to rural railway lines. The pruning back of these expenditures was to prove very difficult when the rate of increase of revenue declined sharply after 1974. In the economic climate after 1974 the political taboo on increasing taxes remained. The narrowness of the LOP majority was one factor among several which made this problematic. The point which needs stressing is that while the Japanese economy moved from a high to a lower growth path in the mid-1970s, fiscal policy, in the face of established patterns and distorting political imperatives, failed completely to respond.

In turn, slow growth of revenue, tax cuts and an inability to control satisfactorily the growth in government expenditure led to massive government bond issues. This then led to pressure on the structure of the financial markets and the relationship between the finance community and the MOF, forcing the government to consider deregulation of interest rates. Thus the management of policy had in turn a significant impact on the range of policies in which change had to be contemplated.


At the same time several other developments were taking place. The gradual deregulation of capital flows into and out of Japan in the late 1970s was a policy response to Japan's changing national interests. The yen was slowly becoming more important as a trading currency and as a reserve currency. There was also a massive increase in the demand for Japanese securities by foreign investors as confidence in the performance of the Japanese economy continued to grow internationally. This large capital inflow helped to support the even larger capital outflow related to direct investment by Japanese corporations abroad, loans raised by foreigners in Japan and investment in foreign currency assets. Government policy changed to accommodate the shift in Japan's interests as perceived by the government bureaucracy.

As the economy grew and shortages became less important, the role of the bureaucracy also changed. In the 1950s control over foreign exchange, the shortage of capital and controls over technology flows provided effective means of enforcing the will of the bureaucracy. Later, as these constraints were relaxed, control became more difficult. Effective control also rested on a unanimity of opinion or general agreement that the existing framework represented the best possible package. By the end of the 1960s this was beginning to disappear.

In the automobile sector, for example, the MITI attempted to influence the structure of industry, seeking to reduce the number of producers from several to two, Toyota and Nissan. It was successful in promoting a merger between the fledgling Prince Motor Company and Nissan, and rewarded this link-up with an offer of subsidised finance from the Japan Development Bank (JDB). But its overall plan was a complete failure. Apart from Nissan, other car makers were looking to joint ventures with overseas makers to boost their competitive position, an approach which flew in the face of the MITI's efforts to keep foreign investment capital out of Japanese industry. The announcement by the car division of Mitsubishi Heavy Industries in October 1969 of a link-up with Chrysler of the United States stunned MITI officials.

Similarly, in the steel industry, the MITI's administrative guidance was not always accepted. By the end of the 1960s, the MITI's strong control over manufacturing was being challenged increasingly throughout the manufacturing sector. The MITI had a vision for the course of Japanese industrial development, but over time this had to be modified in the context of political and bureaucratic opposition.

James Horne 145

Political Factors

Politics in Japan as it related to economic actlVlty was oriented towards the winning of elections and the maintenance of interest group support. Ideology, which played a major part in early postwar foreign policy, had become relatively unimportant. Political sensitivities, however, were important in many areas. Although growth was the central objective of the LOP, this did not mean that the MITIor business interests had a carte blanche to formulate industrial policy.

In 1962 discussions began on a Special Measures Law for the Promotion of Designated Industries, the brainchild of one of the giants of postwar industrial policy making in the MITI, Sahashi Shigeru. The MITI's aim was to formalise a system of controls stronger than self-regulation which, according to the MITI, had resulted in excessive competition and overcapacity. Although the Federation of Economic Organisations ( Keidanren) opposed the original bill because of the power it vested in the bureaucracy, the Policy Affairs Research Council (PARC) gave its approval. As in 1958, however, opposition from some sections of the LOP and a virulent media campaign left the bill sponsorless. It was defeated because many saw it as a step back to the days of the prewar industrial conglomerates (zaibatsu) and because the LOP was sensitive to this type of opposition. Electoral implications were a key constraint on the power of the bureaucracy.

Business and the LDP had good relations in the 1960s but this did not prevent the emergence of major disputes. By the early 1970s, for example, the LOP was no longer prepared to accept a 'growth at any cost' philosophy. Little attention was focused on the costs of economic growth in the first half of the 1960s, but the 'Pollution Diet' of 1970 showed that the LOP had begun to realise the major electoral ramifications of the pollution issue. Pollution had reached unacceptable levels, so much so that the views of the MITI were largely ignored. On this occasion it was pressure from local government and the media which precipitated the tough amendments to the Pollution Countermeasures Basic Law of 1967. The LOP did not take the lead in the debate against industry, but nevertheless electoral concerns in the form of a continually declining LOP majority moved it to amend legislation and subject growth to the constraint of strengthened antipollution guidelines. This action was an effort to restore the harmony which had existed in Japanese society during the early high-growth years so as to protect its electoral prospects in the 1970s.6


Agriculture was one area of economic policy on which the LDP exerted notable influence in the 1960s and 1970s, reflecting more than anything the strategic importance of its rural political support base. Even the importance of this 'sacred cow' began to change. In the severe budgetary climate of the late 1970s and 1980s, and amidst trade friction problems with the industrialised world, the willingness and ability of the government to support its rural-based parliamentarians was tested severely.

The treatment of the rice price-support scheme maintained under the Food Control Law showed the difficulty the LDP had in maintaining its high subsidy profile in agriculture. Between 1970 and 1980 the budget allocation to rice price support fell from 5.6 per cent to 2.2 per cent, with an average nominal increase of only 1 per cent between 1976 and 1981. Strident criticism from domestic groups, including Keidanren and even parts of the LDP, and a changing attitude towards public sector subsidies, were evidence of the decline in support for agricultural protection. Japan had to consider the problem of escalating trade conflict in its entirety. It required a continuation of the relatively free access which much of its manufacturing industries had in industrial markets. Two-hundred mile economic zones also placed some of its traditional fishing grounds at risk.

As with the pollution debate a decade and a half before, in this case too the LDP was reluctant to alienate an important interest group base, but again this was tempered by competing political and economic necessities. Agriculture remained one of the most complex issues involving international trade friction, food security, fiscal stability and the political base of the LDP. Government intervention had been based on its political weight, but by the mid-1980s that was changing along with consumer interests and political and bureaucratic interests within the LDP, while the MOF and the MITI, respectively, were adopting positions which were forcing a reassessment of the hitherto accepted status quo.

THE CHARACTER OF GOVERNMENT INTERVENTION

In all industrialised countries politics is closely involved in the formation of economic policy and in the flow and management of economic resources. Most countries have their state-controlled airlines, while telecommunications and the railways are often run by a state monopoly, although the fashion for privatisation which has

James Horne 147

emerged in the 1980s now puts this in question. Every country has detailed laws regulating the operations of financial institutions and the interaction between domestic and international financial markets. All countries operate a national budget through which taxes are collected and revenue distributed according to the ideological persuasion of the governing political party (although the range of programmes that governments are involved in include a common core). To understand the role of the political system in the Japanese economy requires an outline of the basic forms of government intervention and how they have changed.

The Legislative Framework

Laws relating to economic activity exist to control the methods and scope of business operations and to influence business decision making, to control prices, to control the flow of goods and services and to establish government enterprises. There is little dispute that laws such as the Anti-monopoly Law, the Bank Law, the Securities and Exchange Law, the Foreign Exchange and Foreign Trade Control Law (FEFTCL) and the Commercial Law all have had a significant impact on the development path of the Japanese economy.

The impact of the American Occupation on the Japanese legislative framework had a clear and immediate impact on some areas of economic and social activity. 7 Its Anti-monopoly Law led to some disaggregation of the prewar zaibatsu. The influence of US legislation was also apparent in the Securities and Exchange Law which ensured that banks were excluded from the activities of securities companies; it was not until the early 1980s that this influence began to wane. Over the 1960s and 1970s most legislation was rewritten at least partially to reflect the contemporary economic and social environment, but more often than not changes in law followed changes to practice, reflecting the important discretionary elements permitted in the administration of policy.

In some cases where jurisdictional responsibility was assigned to several ministries, the pace of change was delayed by inter-ministry conflict. For example, attempts to reform the FEFTCL in the late 1950s and early 1970s ended in stalemate following bitter disputation between the MOF and the MITI. In 1978-80 an attempt to overhaul the legislation completely was unsuccessful for similar reasons. Attempts to strengthen the Anti-monopoly Law have been resisted strongly by the MITI and business interests. But these influences


have given way over time to broader social and ultimately political pressures. Although the MITI was successful in its endeavour to weaken the impact of the legislation on business in the 1950s and 1960s, the 1970s saw the trend reversed with the arguments of the Fair Trade Commission (FTC) being endorsed through amendments to legislation.

The Basic Pollution Control Law (1967) also reflected the major social changes that began in the late 1960s. Debate up to the time that pollution legislation was approved showed a marked division within the community, particularly between business and a range of consumer groups. Eventually the legislative framework came close to reflecting the prevailing social norm. 8

The use of cabinet orders and ministerial ordinances enables the supervising ministry to exercise considerable latitude in implementation, thus creating flexibility which allows adjustments to the operating framework without going through the tedious and often difficult process of securing legislative approval. A classic case was the management of the sale of government bonds by banks. Under the Bank Law and the Securities and Exchange Law, banks technically were able to sell government bonds to the general public. This legal right was not translated into operational permission until April1983. Banks were prevented for nearly twenty years from so operating by guidance from the Banking Bureau of the MOF. In this case administrative guidance was used to control the range of activities undertaken by the banks. Similarly, in 1973, although new legislation to control prices was passed, which complemented an existing comprehensive range of legislation, the ministry which supervised implementation chose not to rely on the legislation itself but on an agreement between itself and the parties involved. In this case the law provided a fall-back position, but the ministry chose to handle the issue less directly in the form of a gentlemen's agreement. 9

The legislative framework evolved continually during the postwar years. The addition of legislation covering pollution and social services, for example, reflected the growing sensitivity of politicians and the increased ability of Japan to afford the cost involved in tackling these issues. Political control of the legislative decisionmaking process was for the most part in the hands of the LOP, although loss of control of many committees between 1976 and 1980 gave the opposition parties a modicum of parliamentary power to amend legislation. The media and public opinion were two other forces which also had an impact on government action. Earlier we

James Horne 149

mentioned their role in shaping the stand of the LOP on controversial legislation. Concern with pollution and anti-monopoly legislation, or with proposals to reform legislation which had split control over the postal savings deposit interest rate, stemmed either from the sensitivity of the electorate as a whole or of a particular pressure group. Much economic legislation fell into this category as it had an impact on the distribution of income and modes of operation of groups within the economy. Law was the most clear-cut method of ensuring control. Implementation of the legislative framework, and the arrangement of broad economic policy throughout the postwar period, was left to the government bureaucracy.

Administrative Guidance

We need to recognise the breadth of the term 'administrative guidance'. Administrative guidance can reflect the attitudes of the government bureaucracy towards a law; it can be used as a means of avoiding political interference in determining the approach to the problem; it can be used as a means of exercising bureaucratic control over the economy; it can be used to implement decisions already agreed upon by participants within a particular industrial sector; and finally it can be used to implement the spirit of the legislative framework. 10 Broadly, however, it refers to the range of approaches and rationales which constitute the relationship of the government bureaucracy with economic actors.

There has been much discussion about the role of administrative guidance as a part of industrial policy. In any case, its character depends upon factors such as prevailing economic conditions, the pressures of the international environment and the current range of political sensitivities. It has been implemented in several ways. 11

Sometimes it was based upon the force of law, but might involve a 'stick and carrot' or counterbalancing approach, or it could involve the threat of public exposure of the strategy of the corporation in question. In some cases there was a consensus of need, where all corporations supported a particular proposal and the administrative authority was prepared to countenance intervention.

Administrative guidance sometimes embodied an attempt by the supervising agency to impose plans on particular industries. The MITI was best known for this. Its leadership in the steel industry was disputed in the mid-1960s by Sumitomo in one incident relating to production levels. In the 1970s the MITI had plans for the car industry


which failed as a result of that industry's recalcitrance. In both cases the ministry lacked a clear legal role and met resistance from elements of each industry. In the former case the MITI was successful in imposing its will because of the importance of implied threats to Sumitomo's future. In the latter case, some years later, it had little impact because of the independent strength of individual corporations and the lack of effective legislative authority.

A feeling of obligation was one aspect of administrative guidance but more important was the threat of retaliation. The strength of the MITI, for instance, appears to have been at its height when there were foreign exchange shortages, problems of competitiveness and a need for priority access to funds. By the end of the 1960s it was floundering slightly in search of a role. In the mid-1970s the MITI repositioned itself, assisting the reorganisation of sunset industries, and being actively involved in the development of new technologies. By the 1980s it was again actively concerned with a range of new industries including computers, new materials and industries related to biotechnology. In industries which had lost their competitiveness the MITI was at the forefront of reorganising agreements to restrict output and to mothball plant, offering with the other hand incentives to restructure. Its efforts in sugar refining, chemicals, textiles, cement and plywood, for instance, illustrate this active role in industrial restructuring. The MITI's involvement was accepted since it facilitated agreement.

Among the cases in which corporations rejected the guidance of the bureaucracy in the late 1970s, two are of interest. One involved the independently minded car producers who rejected the MITI's calls for export restraint, while another involved the governmentowned Nippon Telephone and Telegraph (NTT) which rejected the demands of the Ministry of Foreign Affairs (MFA) to be more responsive to international demands regarding its tendering system. 12

These cases illustrate how far Japan was from being a 'control' economy. In the latter case NTT simply refused to recognise the jurisdiction of the MFA. Had the demand come from the Ministry of Posts and Telecommunications (MPT) the result might well have been different, in keeping with the long-term give and take exhibited in relations between government corporations and the relevant supervisory bureau. The car producers rejected advice on the same basis. In both cases it was the view of a section of the bureaucracy that was rejected. Political involvement at senior level was required before the respective groups in the private sector were brought to

James Horne 151

heel, but such participation was forthcoming in neither case until the issue had become prominent as a foreign trade policy issue.

A few cases of administrative guidance have been in breach of the law. The most publicised case was the authorisation by the MITI of a cartel to control the price of petroleum goods, which was later shown to run counter to the provisions of the Anti-monopoly Law. 13

It is this type of case which raises important questions about the relationship between the National Diet and the government bureaucracy. If the bureaucracy could be shown to ignore repeatedly the will of the Diet, then a fundamental reconsideration of the significance of the bureaucracy would be necessary. There is no evidence to suggest that private agreements flourish, although probably they are more common than is widely recognised and could, indeed, form part of mechanism which helps make administrative guidance effective on a wide front. Public protection against these agreements lies in the explicit guidelines being issued by the LOP concerning the authority of government departments to engage in such activity. The indication that this type of activity is likely to be in decline rests on the argument that Japan has become less closed to outside trade and investment flows. But while little foreign investment enters Japan, and there is little real evidence of a breakdown of the information flows between industry and government, these forms of agreement will continue.

Another aspect of administrative guidance is the role of the public service in determining the rate of structural change. In retailing, for example, laws such as the Large Scale Retail Shops Law, the Promotion of Small Business Law and the Retail Trade Special Measures Adjustment Law all protected the interests of small business and provided 'a mechanism for resolution of conflicts between large and small enterprises which might arise when small enterprises felt threatened by the new entry or expansion of the activities of large enterprises'. In doing so they served as a political mechanism for protecting the position of an interest group which supported the LOP. Mediation was handled in this case by the MITI, but the politics were such that only the lowest common denominator of change could occur. Mediation or administrative guidance meant preventing change that would incur political displeasure. 14 This type of intervention took place in other sectors such as finance services and transport.

Every country has its own forms of administrative guidance. In Japan this plays a prominent and varied role in the implementation of government policy and the management of relationships within


the corporate sector and between corporations and the government bureaucracy. Administrative guidance continued to be important in settling disputes and implementing solutions because the role of litigation through the courts remained relatively unimportant in determining the character of economic interaction. The role of the bureaucracy was more widely encompassing (coercing, suggesting, enticing and sometimes remaining aloof) with a much greater emphasis being placed on regular discussions with both individual corporations and industry groupings, as well as through government councils and personal contacts, including former public servants who had retired to senior positions in industry. Industry was subject to the influence of political interests which might be given priority in implementation and reflect the strength of particular interest groups, and the public service which had its own jurisdictional interests to protect, not to mention its own conception of the national interest forming its guidelines for action.

Over the past two decades the effectiveness of administrative guidance has been called into question by the increasing diversity of interest in the Japanese economy. Economic activity in the 1980s was much less regulated and much more varied than in the 1960s. The emphasis of administrative guidance had indeed changed, shifting to the extremes - the declining and frontier sectors of industry. The growing level of international interchange and foreign participation in Japanese production and distribution sectors in the late 1980s and 1990s is likely to produce further changes in the methods and effectiveness of this set of administratively backed policy measures.

The Budget

A third area of government involvement in the economy is through the government's budget. In Japan the Fiscal Investment Loan Programme (FILP), sometimes known as the 'second budget', is also of considerable importance, supplying loan funds for distribution through government financial institutions and a range of other government bodies. The budget directly affects the operation of the economy by its impact on public work projects, subsidies to a variety of interest groups, the provision of welfare and through the purchase of equipment for programmes such as defence. Changes to the budget and the budgetary process are important repositories of information on the interaction between the economy and the political system.

The growth of the budget relative to gross national product (GNP)

James Horne 153

is an initial crude approximation of the changing impact of statecontrolled operations on the economy as a whole. Japan's national budget was around 20 per cent of GNP in 1970, but grew substantially during the 1970s. Even so, the government's share remained small in international terms with the USA, the UK, the FRG, France and Sweden allocating 38.5 per cent, 49.0 per cent, 52.2 per cent, 54.0 per cent and 64.1 per cent of GNP, respectively, through the budget. 15

The increase in relative weight of government expenditure was located in two broad areas: social security and national bond expenses. During the 1970s the LDP, for electoral and other reasons, began to promote a wider range of welfare programmes designed to assist the increasing proportion of aged people in Japan and, in spite of opposition from the MOF and private business circles, the increase in budgeting share manifests the success of their efforts and the extent that conservative politicians have come to accept the need for basic state-run welfare programmes (see Chapter 8). The growing ability of the economy to support these programmes, the increasing percentage of elderly people living separately from their families and a vigorous Ministry of Health and Welfare (MHW) provided the ingredients for change. 16 If we add to this the effect of publicity and what was in the 1970s a declining electoral base for the LDP, we can easily see that the stage was set for change.

The objections of the MOF to the new expenditure programme were, significantly, overruled, as was its demand for the introduction of new taxes. Although Campbell 17 emphasised the importance of incrementalism and maintenance of budgetary shares in the budgeting process between 1954 and 1974, an examination of the raw budget data between fiscal 1970 and fiscal 1980 shows that significant changes did in fact occur, including the two discussed above. The changes are not altogether unexpected but at least one of them runs counter to accepted wisdom. Whereas the share of budget used by the MHW grew from 13.6 per cent to 18.5 per cent between fiscal 1970 and fiscal 1981, the share of the Ministry of Agriculture, Forestry and Fisheries (MAFF) declined. In the context of the continuing decline of agriculture's share in GNP this was not surprising, but it does cast a shadow over the assertion that the importance of agriculture in the political context remained unchanged. The Foodstuff Control vote was most affected, falling from 5.6 per cent of budgetary outlays in fiscal 1970 to 2.2 per cent of budgetary outlays in fiscal 1980. This illustrates not only a change in emphasis in agricultural policy away from producer price-support schemes for rice to alternative crops,


but also the declining ability of rice farmers to maintain in real terms the high producer prices they achieved in the early 1970s. Between 1976 and 1981 the gap between the government's buying price and selling price (the former always exceeded the latter) shrank from 35.8 per cent to 7.8 per cent.

The implications of the Provisional Commission on Administrative Reform (Rinch6: see Chapter 4) are that the position of agriculture is likely to decline further. 18 It cannot, of course, be argued on the basis of its budgetary allocation that the agricultural lobby is losing its political clout. Nevertheless changes in recent years of quotas for many agricultural goods, as well as tariff protection, suggest that in the hostile international environment of the 1980s the agricultural lobby is weakening. There is little doubt that it continues to have an impact on agricultural policy, but what happens to policy in future depends on factors such as the continuing importance of the agricultural vote, the problems Japan encounters in other trade forums and the ability of consumer and business groups opposed to agricultural protection to have their positions accepted. The trend of electoral reform, slow and inadequate though it may be, is gradually to weaken the political impact of agriculture.

The decline in the proportion of the budget going to agriculture has reflected the inexorable reduction in the number of households engaged full time and part time in agriculture, as well as the continuing decline in agriculture's contribution to GNP. Rural and semi-rural parliamentary seats are changing their socio-economic complexion, and the LOP is paying greater attention to the broader population through increased emphasis on social welfare, public works, regional finance, technology, small and medium businesses and energy-related programmes. Looking at individual programmes alone is misleading since the emphasis of agricultural support schemes shifted greatly from price support to reuse of paddy fields for crops other than rice. Nevertheless the low level of increase in the producer rice price in the late 1970s and the 1980s is indicative of a new fiscal resolve to cut back passive agricultural subsidies and to use the agricultural budget to benefit consumer groups more broadly. The fiscal crisis of the early 1980s produced the first absolute decline in the agricultural budget in fiscal 1982.

The budgetary process is complex and has been discussed by Campbell, Ito and others at length. 19 Although it is sometimes divided into two parts (the interministry negotiations and the political input into the process after the structure as a whole has been decided), we

James Horne 155

need to be careful not to overemphasise the role of the bureaucracy relative to the LOP in budget formation. 20 The character and range of programmes which formed the core of the budget and the increase or reduction in weight accorded to each was as much a reflection of LOP policy priorities as of inter-ministry bargaining. The latter certainly slowed down the rate of adjustment, but ultimately changes in policy priorities became evident. For example, most of the national roads programmes saw a decline in expenditure in that area, and the concern over energy after the first oil crisis resulted in a rapid increase in expenditure on energy-related schemes. In the self-imposed tight fiscal position of the late 1970s and 1980s it was difficult to establish new programmes, but in some circumstances if they were regarded as important they were indeed established. The continuity of LOP rule gave much greater stability to such schemes in Japan than was apparent in the USA, the UK or France, where a change in government meant substantial shifts in budgetary allocations. Nevertheless the changes that did occur were substantial and support the view that incrementalism was not necessarily a prescription for immobilism. 21

The Fiscal Investment Loan Programme

If the budget was the clearest expression of the government's role in allocating resources, the FILP was also important. In essence the FILP was a loan fund programme providing working capital to fourteen governmental financial institutions, including public bodies (kodan), public corporations (kosha), special companies and special budget accounts (tokubetsu kaikei). Bearing in mind that these were loan funds, the FILP was involved in funding the equivalent of 41.6 per cent of general account expenditure in fiscal 1980. Throughout the period 196{}-80 the welfare component grew rapidly, and housing, which accounted in fiscal1960 for 12.8 per cent of the funds allocated, had risen to 26.6 per cent by 1980, and this was in a cake that grew thirtyfold. The continued importance of the FILP can be attributed to the institutional structure which supports it, most notably the postal savings system which has been strongly supported by the LOP.

Trends in FILP loans broadly paralleled those in the main budget. The allocation of loan funds for housing, public recreation facilities and small and medium business grew substantially at the expense of roads, transport, telecommunications and basic industries. The increased availability of subsidised housing funds reflected the in-


creased political sensitivity to the housing issue, the concern over the inadequate quality of housing and the inadequate private sector attempts to satisfy demand. Small- and medium-sized firms continued to be a key sector in the economy and in the political support base of the LDP. They were also subject to strong pressures for rationalisation. Given these points, the continued flow of public funds comes as no surprise. The decline in funds to roads, transport and basic industries reflected the winding down of programmes in those areas and the dominant role of private sector finance. Like the national budget, the FILP adapted to changing national needs subject to institutional constraints which prevented the rationalisation of many 'unwanted bodies' and maintained, if at a reduced level, the access of a wide variety of pressure groups to subsidised funds. 22

The importance of the FILP thus also attests to the difficulty of dismantling a government financial institution. Politically sensitive financial corporations such as the People's Finance Corporation, the Housing Loan Corporation, the Agriculture, Forestry and Fisheries Finance Corporation, the Medical Care Facilities Finance Corporation all had the continuing support of sectional interest groups. At the time of its establishment each financial institution had some plausible raison d' etre, but over the years the original purpose was fulfilled and in most cases, with the notable exception of housing, the gap in the financial system was filled by existing private sector institutions, with the main difference being that public sector financial institutions provided subsidised fundsY Institutional rigidity was attributable to several factors. Supervising ministries would not permit any change in the status quo. Government financial institutions formed a part of the institutional framework which assisted ministries to service client groups through provision of access to funds and subsidising the cost of funds. If the institution were to close it would reduce the ministry's sphere of influence, its power within the bureaucracy as a whole.

In circumstances when the opposite might have been expected, the importance of finance grew. Government financial institutions increased their share of the financial assets of individuals between 1973 and 1979 from 13.4 per cent to 19.4 per cent after the share had been declining in the 1960s.24 After reaching a peak in 1972, the role of private financial institutions in gathering financial resources declined slightly. This paradox of a declining share relative to public financial bodies, as the capital market and saving public grew more sophisticated, could be attributed to the competitive character of the

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postal savings system which supplied about two-fifths of the funds of the FILP. The high growth of public sector loan funds resulted in government decisions on capital allocation becoming more important rather than less, and gave rise to potential misuse of funds. The case of the Japan Development Bank (JDB) illustrates the problem.

During the 1950s most ofthe JDB's loans went into the development of power plant and shipbuilding. By the 1960s the needs of the power industry had fallen but shipbuilding remained a key industry. Its loans to regional development increased dramatically. During the 1970s loans for pollution control, energy saving and technological development all increased greatly, and could readily be justified. But loans to hotel and recreation financing could only be justified by the fact that such loans helped to use up the JDB's loan allocation, and secondly, that the construction industry had important political backing within the LDP. The availability of surplus funds led to financing of projects which should more appropriately have been handled by private financial institutions at market interest rates. 25

The fact that the JDB had survived was a reflection of the range of connections of its senior management and its use to certain interest groups.

Together, the size of the budget and the size of the FILP suggest that government had a major impact on the allocation of resources and that its role grew in a similar way to that in other industrialised countries. Nevertheless when we make comparison with such countries, we find that government spending in Japan was relatively low.

Other Means of Intervention

In comparison with France and the UK, Japan has few public corporations (kosha), although it does have a wide variety of public companies, ranging from public corporations through special legal entities and auxiliary organs.26 The Japan National Railways (JNR) and National Telephone and Telegraph (NTT) were both large and controversial public corporations. Both, under the Nakasone government, became subject to its privatisation policy. The JNR was caught up in the political arena which prevented it from performing as an efficient economic unit. The NTT operated much more independently and was probably little different from what it would have been had it been a private monopoly. At times it exercised considerable independence, illustrating that public companies were


not necessarily responsive immediately to suggestions from the government bureaucracy.

One important group of state-controlled bodies were the government financial institutions. In the early postwar years the government-run JOB was an important arm of government policy in indicating through small loans the areas of industry favoured by the government. Although this indicative function declined as the supply of capital was more able to meet demand, government financial enterprises continued to make their presence felt, particularly in the area of social policy, offering subsidised finance and financial services to groups which it felt required additional support. As we detalied above, this function remains important.

Even more difficult to place in proper perspective are companies in which the government had no direct ownership but which the government bureaucracy played an important role in creating. In this category we could include the Kyodo Oil Company, the largest Japanese private company to break the grip of the international oil majors in Japan; Nippon Steel, the world's largest steel company formed in 1970 by merging Yawata and Fuji Steel; and the Daiichi Kangyo Bank, formed by merger in 1971. The first two mergers were organised by MITI and the third by the MOF. Even today, retired government officials play an important role in managing the affairs of these corporations, mainly by filling senior executive jobs such as the positions of vice-president and president. Unlike the JNR (up to its privatisation in 1987) and Japan Airlines (JAL), these companies are not linked financially to the government, so that whatever influence is exerted must be transmitted through indirect old-boy channels, through administrative guidance or legal measures which apply equally to other companies. The objectives of the management might be broadly in line with national interests but it is easy to overemphasise their importance, particularly when the corporations are so large. The limitations of MITI and MOF power have been detailed earlier and they need to be borne in mind. 27

Rather than being limited to direct intervention, government can also intervene in the economy through its support of technological research and development. In the early postwar years the emphasis of government was on importation of appropriate technology, but by the late 1960s both government and industry were involved in basic and applied research on a joint and independent basis. Japan's expenditure on technology, about 2 per cent of GNP, is equivalent to that of other major industrial powers. The government contribution

James Horne 159

was about 16 per cent and concentrated in the area of VLSI circuits, robots, fibre communications, laser and computer software. The Japanese government recognised, as did many others, the importance of being at the frontier of technology. After a slow start, state participation in research and development is now important. The suggestion that 'in the metamorphosis from military to merchant state Japan [managed to] hold over some of the key mechanisms of centralised coordination and control'28 is close to the mark in that it implies a conscious effort by the state to direct the broad character of the economic development. It can be argued that technological development and subsidisation was one element of a framework involving controls over foreign investment, import duties, demand side guarantees such as the NTT system of procurement, special tax provisions and the use of subsidised finance. 29 By providing a favourable climate Japan permitted its companies to get on with the business of technological development and application.

We should not ignore the role of the market in our discussion of government involvement. Wage setting illustrates the point. The Japanese institutional framework did not have the rigidities in setting wage rates seen in many other industrialised countries. Over time, relative wage levels changed significantly and this enabled shifts in comparative advantage to be handled less painfully than elsewhere. As a whole, ability to pay was a key consideration in establishing wage rates. The key role played by labour-business negotiations, and the relative absence of political input was an important mechanism in the smooth adjustment of the industrial structure. In some areas of industry, restructuring was facilitated by special tax and subsidy arrangements. But in industries such as steel and shipbuilding the adjustments began much earlier by relative falls in wage rates. Over time, market forces began to play an increasingly large role in the economy, as Japan became more completely integrated into the international economic system.

POLITICS AND THE ECONOMY

Economic activity is the outcome of a set of decisions by actors in the market place. Businessmen, public servants, the general public and the political parties are all participants. Since its formation the LDP has played a central role in defining the relationship between the political system and the economy.


The Complexity of the LDP's interests

The LOP represents in essence a collectivity of conservative interest groups. First and foremost the LOP was and remains a party whose strength is concentrated in what can be called rural and semi-rural electorates.30 This base was eroded drastically during the 1960s and 1970s as Japan became more urbanised, and as the proportion of the population that was engaged in rural activities fell. In Tokyo and Osaka it consistently won less than a majority of seats for the House of Representatives. Even with the swing in the 1980 general election towards the LOP it could only manage 22 out of 69 seats (33 per cent) compared with a national total of 286 out of 511 (57 per cent). [This was still true later in the decade. With the even greater swing in favour of the party in the elections of 1986, the LOP won 26 out of 71 seats in Tokyo and Osaka (37 per cent). Its national total was 300 out of 512 seats (59 per cent), to which several seats were added when the disbanded New Liberal Club rejoined the LOP.]

The structure of the LOP's electoral support means that longstanding bread-and-butter issues, such as the maintenance of rural railway networks, public works and agricultural support schemes, are of continuing interest to the rank and file. Despite the significant decline in the budgetary allocation to these interests, import protection through distribution authorities (such as the Livestock Industry Promotion Corporation in the meat industry) and the maintenance of tariffs and quotas, have been at a higher level than they might have been had the LOP been a city-based political party.

LOP politicians are strong supporters of low tax rates and high personal savings and their actions have followed their beliefs. Being able to promise and deliver tax reductions on a consistent basis was one of the features of the LOP's economic management in the period up to the late 1970s, made possible by a high rate of economic growth and an effective system of channelling loan funds outside the budgetary framework for use on national, regional and individual projects through the FILP. The LOP's support for the governmentrun postal savings system illustrated its pragmatism. The system enabled it to respond to the needs of interest groups which provided strong electoral support. This was sufficient to outweigh whatever ideological preferences it might have had for private enterprise and give its complete backing to the public sector alternative. The LOP's position on the postal savings system which favoured the Post Office over the private banks, did not mean that it was against big business,

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but rather that its interests were multiple and on some occasions that its non-business interests were more important. Earlier we detailed how the LDP's policy on pollution changed with the development of public awareness and political relevance of the problem. Similarly it did not accept the arguments of Keidanren on the liberalisation of the agricultural sector or on education policy.

The party was as a whole unashamedly pro-growth in the 1960s, but its position became more constrained in the 1970s when concern about pollution, the level of social services and international tensions created by rapid growth became issues with electoral implications. In the 1960s high growth was achieved by a range of factors present simultaneously including the technological advances and ambitious marketing and planning of big business. Big business became important to the LDP as it assisted in fulfilling a range of value goals. Furthermore big business (the banks, the steel industry, power generation, metals processing, securities and construction industries and so on) provided a large proportion of the funds necessary for the LDP's political survival. In contrast to the Japan Communist Party (JCP), which accumulated funds through its own business activities, the LDP received most of its declared funds from business. 31

The massive and biased flow of funds to the LDP enabled it to 'buy' its support base, and its supporters in return found a receptive ear on many issues. Notwithstanding this relationship, the business community had little in the way of an alternative: the threat of withdrawal of support would have been a cost to it as much as to the LDP.

Business and Politics

Business certainly maintained close links with the LDP. It was in the first instance its major provider of funds. Secondly, from the late 1950s successive prime ministers scheduled regular discussions with business representatives. But over time the position of business declined for several reasons, of which the following are the most important: the replacement of a conservative pro-growth consensus with a less certain, more socially aware plurality; the development of an increasing plurality of views with the business community itself; the decline in the LDP vote during the 1970s, which required specific political action to stem; and the fact that senior political leaders had more diverse claims on their time.

Although business representation in the Diet was considerable in


the early 1950s, by the late 1970s it was less important than career politicians (many from local and prefectural level) and former government servants. Most businessmen came from the small- and medium-enterprise sector. With the exception of men such as Kosaka Tokusabur6 and Komoto Toshio, few senior executives of major enterprises held cabinet rank in the LDP during the 1970s. In short, other competing interests often enjoyed political access at least equivalent to that of big business.

Business interests appear to have had good informal access to the prime minister up to the retirement of Ikeda Hayato in 1964. According to Curtis: 'Whether it made any difference in policy or not is an open question, but businessmen at least felt with Ikeda they had an opportunity to fully discuss and bring him round to their view. With Sat6 they could never be sure their view was understood or what Sat6's position was.' Under subsequent prime ministers formal access was still good with frequent meetings with Keidanren leaders to discuss matters relating to economic conditions, regulatory policy and the courses for future action.32 The relationship, however, did change significantly. Prime ministers in the 1980s had to contend with an increased load of international obligations, including meetings with foreign dignitaries, and had to preside over an extensive range of cabinet discussions as well as manage the affairs of their own electorate and faction.

The 1970s did not produce a climate conducive to effective business lobbying. The decade offered little opportunity for untrammelled economic expansion. After the inflationary spasms of 1972-4 the Bank of Japan (BOJ) assumed much greater control over monetary policy, concerning itself more than in the previous decade with reducing inflation. The unity of views which had existed in business and political circles in the 1960s disappeared to form a less manageable plurality in the 1970s. In forming policy positions, business provided one set of inputs which had to compete with the views of the government bureaucracy, the views of the LDP's PARC with its increasingly able support staff, the opinions of the media, opposition political parties and international opinion. The quality and strength of these alternative sources of information and opinion improved greatly during the period. The role of the bureaucracy increased in many areas because of the technical nature of the policy issues, the complexities involved and the lack of immediate political interest in the outcome. Within the LDP, the PARC also grew in stature. 33

A final avenue for business access to policy makers was that

James Horne 163

available through official government committees. These committees, such as the Industrial Structure Council, the Securities Exchange Council and the Committee on Financial System Research, all played a part in overseeing the development of the postwar economy. The government bureaucracy, through its provision of secretarial and research assistance, control of the agenda and report writing, was able to exert extensive influence on these bodies' final reports, which were a useful indicator of the extent of change in the character of decision making. Business views received a generous hearing at their meetings and strong concerted opposition on particular issues placed the bureaucracy under pressure to modify its opinion. The inputs from business depended \lpon the jurisdiction of each committee, and it was not unusual to find competing committees producing markedly different reports. This ultimately meant that adjustment to policy depended upon how well or poorly defined was jurisdictional control over the issue at hand.

The Government Bureaucracy and Politics

The retirement system in the government bureaucracy whereby many career bureaucrats retired between the ages of 50 and 55 to LOP Diet membership or to senior executive positions in companies for which their ministry had responsibility, was a mechanism which assisted the bureaucracy to monitor important developments in the economy and changes in political sensitivities. When bureaucrats took retirement jobs in industry or public companies, this was known as amakudari or 'descent from Heaven'. Officers of the Ministry of Construction were to be found in construction companies, officers of the Ministry of Transport in the transport industry, officers of the MITI in steel and power, and to a lesser extent in car companies and trading companies, and officers of the MOF in small and mediumsized financial institutions (though not in great numbers in city banks). 34

Business was linked to the bureaucracy through important old-boy ties, providing a mechanism for information exchange over and above the usual university and club links. Beyond this the significance of the interaction between senior levels of the public service, business and the LOP was not clear. Several observations, however, can be offered about the broad significance of government servants entering politics. Firstly, the number of officers of the MOF who 'retired' to become LOP Diet members was disproportionately large, and was


concentrated among officers with backgrounds in the Budget and Taxation Bureaux. A second category of MOF officers entered the LDP by marrying into families with safe, political jiban or support organisations. The large MOF representation illustrated the need for particular expertise within the LDP and confidence in the MOF as an appropriate source of future LDP politicians. No other ministry had anything like an equivalent representation in the House of Representatives. In the House of Councillors representation of bureaucrats showed a rather different pattern, with strong agricultural pressure groups mobilising effectively behind former officers of the MAFF. Again, it is not clear how far this representation affected the rate of industrial adjustment, but it obviously contributed to a sympathetic hearing in the bureaucracy for the views of agriculture. In contrast to the strong representation of the MOF and the MAFF in the LDP, the MITI's representation was relatively low, with most senior MITI officers retiring to positions in industry.

The movement of personnel from the government bureaucracy to the LDP and private business was one method of ensuring that LDP views became securely incorporated into policy. Government servants thereby became aware of the imperatives of politics and were able to exert some influence on general policy development. Politically sensitive areas, such as small and medium-sized financial institutions and agriculture, stood out. In both cases efficiency arguments dictated that more ruthless policies should be adopted, but the importance of each area to the LDP and the awareness of political problems by former bureaucrats provided a more direct, alternative means for the bureaucracy to give effect to the attitudes of the ruling party.

The bureaucracy played an important role in the emergence of a revitalised Japanese economy, and in the continuing process of restructuring. It did not control the process but rather performed as a central actor in administering established regulatory programmes, responding to political, industrial and other public service demands, and in developing and implementing new regulations and policies to respond to the changing character of the economy. The relationship between the bureaucracy and the LDP in a long-term framework was not static. Not only were there major shifts in the structure of economic activity which had an impact on LDP involvement but there was also significant change in the character of the economy itself. The economy became less subject to regulations in its interaction with the international economy, and between sectors of the economy where regulatory controls already existed. The changes in the way in

James Horne 165

which Japan interacted with the world economy resulted in regulations being adapted to suit better Japan's national interests. Other changes were the result of acquiescence to foreign pressure in trade disputes, such as in the case of opening up the NIT's tendering system to international electronics groups and broadening access to Japan's agricultural markets. Political considerations in these cases took dispute settlement out of the realm of the government bureaucracy, but for the most part disputes were handled at a bureaucratic level.

Japan was little different from other industrialised countries as far as changing the legal framework within which economic activity was conducted. This was subject to a number of barriers, including the extent of consensus or conflict within the business community, the approach taken by other ministries upon whose jurisdiction the proposal might infringe, and the extent of political backing for the proposal in question. Consensus was not an end in itself, for individual interests normally attempted first to have their ideas fully adopted. Solutions were often imposed on the weaker members of the industrial or commerical sector. In some instances inter-ministry rivalry led to the maintenance of the status quo. Where individual ministries enjoyed complete authority, they still needed to consider the stance of the LOP, particularly in matters that were politically sensitive both within the LOP and in an international context. The former element was a constant which applied throughout the 1970s as the LOP's popularity was generally in decline at that period. Rather than operating independently, ministries had to contend with a defined politico-administrative framework which, while it offered on occasions considerable flexibility, also often imposed severe limits on available policy options.

Interaction with the international arena became more important from the late 1970s onwards. The MITI became a much stronger supporter of less intervention and greater international competition. lts image changed to meet the new needs of the Japanese economy. The MITI took the unusual step of supporting further deregulation in agriculture; it knew that without these adjustments Japan would face criticism and regulatory controls on its export products. From the early 1980s the MOF was also in the process of rearranging the level of interaction appropriate between Japan's financial markets and international markets. A similar reassessment was under way in most economic ministries and was not without political ramifications.

The growing international profile of Japan meant that the interest of senior politicians in their national as against their local roles began


to differ. In exchange for a US withdrawal from demands for complete liberalisation, for example, cabinet approved some partial reductions in tariff measures and increased quota allocations on agricultural products thought necessary by the prime minister and other senior ministers, but opposed by many rural-based LOP Diet members.

The higher international profile also meant greater cabinet intervention in the economy, paradoxically at a time when there were increasing pressures to reduce the level of regulation from both domestic and international sources. General political interest was still concentrated on matters having electoral implications, but as trade issues and issues relating to technology and investment flows became international problems, senior politicians could not ignore the technical issues as they embodied important political components. The public service presented the options and did most of the bidding but in the final analysis it was the prime minister and his cabinet which had to balance national objectives and interests. Trade disputes were not completely within the control of government. Trade liberalisation over the twenty years to the end of the 1970s meant that government withdrew to a large extent from controlling trade and investment flows. As with the government bureaucracy, the political elite was not insensitive to the demands placed on it by domestic and international forces. The internationalisation of Japan meant that gradually Japan surrendered some of its independence. Where it had control, however, it put national interests ahead of the satisfaction of foreign criticism. If the two could be coincidentally satisfied, this was well and good, but if not, then international criticism was largely ignored.

CONCLUSION

The most significant influences on the development of the Japanese economy since the war have been, in addition to competition in the market place, the values of the LOP and the orientation of the government bureaucracy. Into the 1980s the character of government involvement and support was changing to meet the new economic environment. Throughout the period, however, continuous LOP rule provided an economic environment in which the basic values favourable to business remained unchanged, even though substantial concessions were made in some areas to mollify wider social pressure groups.

James Horne 167

The continuity of LDP rule has led to widespread interaction between the public service and the LDP in the selection of senior personnel. Numbers of government bureaucrats become LDP parliamentarians, and government politicians are afforded regular detailed briefings by the bureaucracy. This produced an environment where the views of the LDP were not only understood but formed the broad base for bureaucratic action. Even so, conflict arose frequently. Within the LDP there were often several stances on any particular problem and these in turn provided the basis for different bureaucratic positions. Compromise was sometimes reached, but at other times conflict produced a stalemate. Sound long-term decision making was hampered by jurisdictional disputation in much the same way as seen in other industrialised countries. If Japan was different, however, this was a function of the depth of discussion and debate between business and the government bureaucracy, and this in turn helped to identify problem areas or areas of promise with considerable speed.

Many of the changes which occurred in the operation of the government bureaucracy were the result of the evolving relationship between Japan and the international economy. The more Japan borrowed and invested abroad, the more it was subject to calls for reciprocal access. Exposure to international methods also moved business groups to press for alterations to the regulatory framework supporting Japan's economy. But even though gradual and significant change did indeed occur, the political strength of various interest groups reduced the scale and speed at which adjustment occurred. Attention to the demands of these groups to minimise political intervention has kept the position of the bureaucracy at the forefront of policy making and also given it increased opportunity to implement its preferred policy. Administrative guidance was used extensively to adjust the framework around economic activity with a minimum of disruption. The ability to enforce changes often meant that companies would follow advice, but there is little doubt that the character of guidance changed over the years: enforceability became more difficult.

It is difficult to argue that intervention did any long-term harm. Certainly in the past quarter-century no other economy has outperformed Japan. Neither was the impact of LDP and public service intervention obviously bad. When we look more closely, however, it is clear that approaches did indeed change, in the following ways. Firstly, in the rebuilding and high-growth stages Japan was relatively closed, many of its key industries being relatively highly protected.


New industries enjoyed an environment which assisted their emergence. Secondly, the 1970s and 1980s required a different, more international, approach. Although some control was lost, control became less important. Intervention shifted from mainstream to sunrise and sunset industries. Thirdly, although some sectors (particularly agriculture and small business) have succeeded in retaining protection, reflecting the politics of the LOP and the interest group character of Japanese politics, change has taken place in the more internationally competitive, dynamic sectors coming to the fore, while international pressure is a significant factor promoting change. Meanwhile, segments of small and medium-sized industry have become some of the most dynamic sectors in the economy.

The picture, then, is not one of a control economy, but of an economy attuned to market forces in many areas, although subject to intervention at different times for different reasons. State intervention in Japan was important as a means of facilitating change in some areas and for protecting politically sensitive areas elsewhere. The view that the bureaucracy knew best continued to persist but its ability to implement its own views was constrained by existing market pressures and demands. Participation in international investment, trade and finance on the one hand, and Japan's role as a 'locomotive economy' on the other, all limited the scope of bureaucratic action. In this it was little different from other major industrialised countries except that Japanese policy makers probably felt more keenly than others pressure from its new high-profile position. It is difficult to make useful international comparisons. In Japan, state intervention emphasised indirect means rather than direct legislative controls or massive central government expenditure. The increasing significance of state finance and the maintenance of significant research facilities was offset partially by deregulation of capital flows and greater flexibility in business management. More than anything, the importance attached to information exchanges was the characteristic which distinguished state intervention in Japan from elsewhere. The implications of this have been considerable.

NOTES

1. Chalmers Johnson, MIT/ and the Japanese Miracle: The Growth of Industrial Policy, /925-1975 (Stanford, CA: Stanford University Press, 1982).

James Horne 169

2. Chitoshi Yanaga, Big Business in Japanese Politics (New Haven, Cf: Yale University Press, 1968) pp. 95-119.

3. For an interesting treatment of this transition see W. W. Goldsborough, 'Environments of Economic Development, the Open Economy and Public Policy: The Case of Japan since 1945', Ph.D. dissertation, University of Nebraska, 1974 (Ann Arbor, MI: University Microfilms 74-23, 902).

4. Robert Ozaki, The Control of Imports and Foreign Capital in Japan (New York: Praeger, 1972).

5. For an outline of financial thinking at the time see Martin Bronfenbrenner, 'Four Positions on Japanese Finance', Journal of Political Economy (August 1950) pp. 281-8.

6. Margaret A. McKean, 'Pollution and Policymaking', in T. J. Pempel (ed.), Policymaking in Contemporary Japan (Ithaca, NY, and London: Cornell University Press, 1977) pp. 201-38. For a much broader study by the same author, see Margaret A. McKean, Environmental Protest and Citizen Politics in Japan (Berkeley: University of California Press, 1981).

7. See Eleanor M. Hadley, Antitrust in Japan (Princeton, NJ: Princeton University Press, 1970); Herbert Passin, 'The Legacy of the OccupationJapan', Occasional Paper (New York: East Asian Institute, Columbia University, 1968). See also Tokyo Daigaku Shakai Kagaku Kenkyiijo, Kaikakugo no Nihon keizai [The Japanese Economy after the Reform] (Tokyo Daigaku Shuppankai, 1975).

8. See OECD, Environmental Policies in Japan (Paris: OECD, 1977) pp. 16--23.

9. Malcolm D. H. Smith, 'Prices and Petroleum in Japan: 1973-74 - A Study of Administrative Guidance', Law in Japan, vol. 10 (1977) pp. 81-100.

10. For a different but interesting treatment of administrative guidance see Mitsuo Matsushita, 'Administrative Guidance and Economic Regulation in Japan', paper given at the Third National Conference of the Asian Studies Association of Australia, Brisbane, 1980.

11. See chapters by Curran, and by Winham and Kabashima, in I. M. Destler and Hideo Sato (eds), Coping with US-Japanese Economic Conflicts (Lexington, KY: Lexington Books, 1982).

12. Gary Saxonhouse, 'Industrial Restructuring in Japan', Journal of Japanese Studies, vol. 5, no. 2 (Summer 1980) pp. 273-320.

13. Mitsuo Matsushita, 'The Anti-Monopoly Law of Japan', Law in Japan, vol. 11 (1978) pp. 57-75.

14. Hosokawa, op. cit., p. 59. 15. Ishi Hiromitsu, 'Nihon keizai to seiji no yakuwari', Keizai Semina, vol. 9

(1982) p. 39. 16. T. J. Pempel, Policy and Politics in Japan (Philadelphia, PA: Temple

University Press, 1982) chapter 4. 17. John C. Campbell, Contemporary Japanese Budget Politics (Berkeley:

University of California Press, 1977). 18. Hosokawa, op. cit. See also chapter 4. 19. Campbell, op. cit., and Ito Daiichi, Gendai Nihon Kanry6sei no bunseki

(Tokyo Daigaku Shuppankai, 1980).


20. We are not here arguing that the role of the bureaucracy does not dominate over wide areas, but rather that in areas important to the LOP, that party's input is crucial in shaping long term changes.

21. Charles A. Lindblom, 'The Science of Muddling Through', Public Administration Review, vol. 19 (Spring 1959) pp. 49-88.

22. See Noguchi Yukio, Zaisei kiki no kozo (Toyo Keizai Shinposha, 1980).

23. Matsumoto Masao, Seifu kin'yu kikan (Kyoikusha, 1979). 24. Kaizuka Keimei, 'Seifu kin'yii ni tsuite', Kin'yu (August 1981). 25. For example see, the series 'Zaito - chohiman no taishitsu' [Capital

Investment: The Nature of the Splurge), in Asahi Shinbun, 30 September and 1, 2, 3, 4 October 1980. The efforts to increase the level of foreign investment in Japan may also have given the JDB a chance to redirect itself. See the brief remark in Journal of Japanese Trade and Industry, no. 1 (1983) p. 14.

26. See Chalmers Johnson, Japan's Public Policy Companies (Washington, DC: American Enterprise Institute for Public Policy Research, 1978).

27. Contrast this with Johnson, op. cit. 28. Daniel I. Okimoto, 'Political Context', in Daniel I. Okimoto, Takuo

Sugano and Franklin B. Weinstein (eds), Competitive Edge: The Semiconductor Industry in the US and Japan (Stanford, CA: Stanford University Press, 1984) p. 98.

29. Ibid., pp. 99-100. 30. Terms used by Nishihira Shigeki, quoted in J. A. A. Stockwin, Japan:

Divided Politics in a Growth Economy, 2nd edn (London: Weidenfeld and Nicolson, 1982) pp. 109-11.

31. For an interesting perspective on business-government relations, see Gerald L. Curtis, 'Big Business and Political Influence', in Ezra F. Vogel (ed.), Modern Japanese Organization and Decision-Making (Berkeley: University of California Press, 1975).

32. Ibid., p. 48. 33. Nihon Keizai Shinbun, 14 July 1982. 34. James Horne, Japan's Financial Markets (Sydney and London: Allen

and Unwin, 1985).

7 Politics and the Japanese Financial System JAMES HORNE

What we shall try to do in this chapter is to explore the patterns of behaviour and interaction between civil servants, politicians and participants in the financial markets in Japan up to 1983 in order to show what kind of relationships determine the character of the financial environment, and how stable these relationships are. This will enable us to throw light on the stability of the policy-making process, the degree to which there is agreement amongst participants on the development of new policy initiatives and the level of control that different groups are able to exercise over policy making in the financial system.

The major economic function of financial markets and financial institutions is to match the availability of funds with the demand for funds. In all modern, industrialised economies, however, comprehensive regulatory frameworks developed around the operations of financial markets and financial institutions. The net effect of these regulations was to constrain the allocative function of the financial system. In Japan, as elsewhere, the functioning of the market was subject to constraints imposed by government. The rationale for imposing constraints on the operation of the market went beyond the promotion of efficiency, the maintenance of diversity and basic prudential requirements. Electoral politics, jurisdictional interests of government ministries and the influence of established policy-making methods and patterns also help to explain the character of the existing regulatory framework. They are also relevant to developing new regulatory policy and determining the ability of the financial system to adapt to new economic and political initiatives. The idea of a stark dichotomy between free markets and state control gives way to subtle lines of interaction between participants in the market and the regulators of it, as well as the not-so-subtle conflicts which emerge when regulations or the lack of regulations interfere with the potential livelihood of groups within the existing set of arrangements.

Behind the legislation and administrative behaviour of the early postwar period were clear statements about the respective roles of

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172 Politics and the Japanese Financial System

government and participants in the market. Since the end of the American Occupation in 1952 the structure of the financial markets has changed considerably. An outline of the formal relationships of a regulatory framework put in place in the 1940s and 1950s are the basis for understanding how it coped with the needs of business and financial institutions in the 1960s and 1970s and the emerging pressures and demands for change from various quarters in the early 1980s.

Whereas the government bureaucracy has often been regarded as the centre of decision making in Japan, as in other areas of policy discussed in this book, the political demands and activities of the Liberal Democratic Party (LDP) also exercised an important broad impact on the development of the financial system. The establishment of a range of government financial institutions, the maintenance of low interest rates and the continuation of a separate postal savings system were all at least partially the result of strong LDP lobbying. Moreover, small financial institutions were to some extent protected by LDP support of the principle that a network of regional financial institutions serving small local areas should be maintained. In turn, this support had a major impact on the evolution of a broad spectrum of financial relations. Yet in other areas, such as in the interface between the Japanese financial market and international financial markets, and in a whole range of domestic financial issues, political interest was peripheral and unimportant. Political interest in the financial sector was uneven and in many areas non-existent, but in several important areas it was crucial.

THE REGULATORY FRAMEWORK

From the early 1920s, when the minister of finance, Takahashi Korekiyo, recommended the amalgamation of small regional banks to strengthen the foundations of banking, the key feature of the management of the financial system was the prevention of excess competition, and the promotion of sound management. 1

The institutional character of the Japanese financial system derives much of its present form from the rationalisation process that occurred during the 1930s and early 1940s, and the administrative guidance of the Ministry of Finance (MOF) during that period.2 The Bank Law (1927) provided the legislative framework for the banking system during this period, and it remained largely intact until its revision in 1981. The policies of the American Occupation Forces also left

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their mark. 3 For example, the Securities and Exchange Law (1947) incorporated a rigid division of specialisation into the financial markets. Banks were prohibited from operating in most of the securities sector. This artificial division was gradually being eroded in the late 1970s and early 1980s as a result of an increased demand for a more varied range of financial instruments, innovative packaging by both the securities companies and banks and the use of electronics in finance. Nevertheless the division set out in law, ordinances and other forms of guidance, and institutionalised through management by separate bureaux within the MOF, was an important legacy of the Occupation. By the early 1950s the legislative framework was firmly in place, and in general the specialised functions of different financial institutions were more pronounced than they had been in prewar Japan. 4

Whereas the Bank Law and the Securities and Exchange Law provided the legislative framework, the dynamic character of the MOF's regulatory policy came from its use of ministerial ordinances and notifications. Ministerial ordinances (sh6rei) were regulations developed within the MOF and did not require the approval of the National Diet. Notifications (tsutatsu) were regulations prepared at bureau level within the MOF, and were less rigid than ministerial ordinances. Both ministerial ordinances and notifications were used extensively. 5

Most aspects of the activities of banks and the securities companies were controlled directly by the MOF. In the banking sector, through the Banking Bureau, it controlled the rate of expansion of branch banking, the types of financial products which could be offered by the banks to their clients and almost all interest rates. In the securities sector, through the Securities Bureau, it also controlled the rate of expansion of branch networks, the rules for entry by corporations into the bond issue market, the character of the secondary bond market in some areas and the interest rate on bonds in the issue market. 6 The government through the MOF had firm control over the shape of financial development. 7 As we show later, however, the roles of the LDP, the MOF and market forces changed over time, and more in some areas than others.

In the late 1940s and early 1950s the Japanese government opted for a major role in the allocation of available investible resources. The establishment of the Japan Development Bank (1951) and the Export Import Bank of Japan (1950) played an important role in channelling funds into development projects favoured by the


government. Even after the volume of funds provided by these institutions had declined sharply, they continued to play an important indicative function until the early 1960s. Approval of a loan from a government bank was often used as a signal to private sector banks. The government also established a large number of financial corporations, as a means for channelling funds into areas which were not served adequately by existing financial institutions, or which were deemed to justify privileged treatment from a political point of view. R

Examples of this included the People's Finance Corporation (1949), the Housing Loan Corporation (1950), the Medical Care Facilities Finance Corporation (1960) and the Environmental Sanitation Business Finance Corporation (1967). These institutions continue to be a means of servicing interest group demands. Although no new government financial institutions were established since 1967, neither were any disbanded.

The role of the government was also reflected in the phenomena of 'overloan' and 'overborrowing'. In the latter half of the 1950s the city banks were unable to satisfy all demands for industrial funds. The shortage of funds was alleviated to some extent by direct loans from the Bank of Japan (BOJ). This 'overloan' position of the city banks was one of the unusual features of the Japanese financial system during the late 1950s and 1960s.9 It was not until the 1970s that the relationship began to change appreciably and the reliance on loans from the BOJ fell significantly. 10

'Overborrowing' described a relationship which developed between city banks and large corporations. It referred to the corporate reliance on borrowings from city banks for the major part of external financing, and was a phenomenon which resulted directly from government regulations. The failure of government to encourage the development of the corporate bond market, and indeed the deliberate restriction of its growth, was quite fundamental to the strength of the banking sector within the financial system. 11

Funnelling the demand for funds through the banking system was not only a means by which the government could in some ways control the direction of funds, but also a means by which it could control the cost of funds. The Temporary Interest Rate Law (1947) regulated the level of interest rates attached to bank deposits and short-term bank loans. 12 These were linked to the official discount rate over which the MOF had considerable control. 13 The long-term bank loan rate was linked unofficially to the short-term rate, and the MOF exercised great influence over all the bond market rates.

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Interest rates were set at levels which did not permit the clearing of demand and hence the major problem facing borrowers was not the cost of funds but their availability. 14

The phenomena of overloan and overborrowing reflected the political and social environment of the late 1950s and early 1960s. Prime Minister Ikeda's Income Doubling Plan (1961) illustrated the bullish economic environment, and the political importance attached to economic growth. 15 By the late 1960s the appropriateness of the existing regulatory framework began to be questioned by both government and non-government authorities. In February 1967 the director-general of the Banking Bureau, Sumita Shigeru, made what was perhaps the first important move in this direction when he called for greater attention to be focused upon improving efficiency. 16 The Committee on Financial System Research (CFSR) emphasised, in a report released in 1970, the requirement for government to pay greater attention to the needs of Japanese corporations in their overseas operations and to their changing domestic needs. 17 This committee was an official government body made up primarily of members of the business and finance communities, but its comments reflected faithfully the views of the Banking Bureau of the MOF, which was responsible for secretarial support to the committee.

The committee's 1970 report produced little immediate regulatory change. The report touched on several issues under the jurisdiction of other ministries and bureaux within the MOF and over which the Banking Bureau had little effective control. Similarly it faced differences of opinion within the areas of the industry under its immediate control. The debates in the CFSR between 1975 and 1979, which examined the need to reform the Banking Act, and the subsequent debate in 1980--1 over proposed legislation, the debate over the formation of the Certificate of Deposits (CDs) market in 1978-9 and the process which led to the partial revision of the Foreign Exchange and Foreign Trade Control Law (1980) were all examples of policy making in which serious conflict was involved within the government bureaucracy and within the financial sectors. Clear differences of opinion were expressed on a wide range of issues fundamental to the future development of the finance industry. All of this was healthy and would be considered normal in other industrialised countries, but it represented a departure from the way in which Japanese politics and policy making is often perceived. Much of the broad agreement that was more typical of the 1960s


dissipated in the 1970s as the domestic economy developed, as Japan's international position changed and as the position and interests of the participants within that process adjusted to meet the demands of the 1980s and beyond.

INSTITUTIONS

Extensive rationalisations of the 1930s and 1940s produced a relatively stable institutional structure at the core of the financial system, although there was considerable merger activity amongst the smaller institutions at the fringe. There was little change in the institutional structure of the Japanese financial system between the mid-1950s and 1980. Regulations barred new entrants and maintained the status quo between existing participants. Incremental but none the less significant changes occurred in the regulatory framework, mainly in the form of small adjustments to existing practices. There was both diversity and potential conflict of interests within the banking community on the one hand, and between banks and securities companies on the other. Rapid economic growth during the 1960s allowed all institutions to participate in a phase of rapid expansion. But as the domestic economy faltered in the 1970s and domestic expansion became more 'zero sum' in character, conflicts became increasingly visible.

Difference in size was one factor involved. Larger institutions (with the exception of the highly specialised, long-term credit banks) favoured a more deregulated market environment whilst the smaller ones tended to endorse the maintenance of the status quo. Conflict between the 'big four' securities companies was at least as intense as each attempted to expand its activities into new financial instruments, the jurisdiction over which was not entirely clear. In turn this led to disagreements within the MOF, which at times operated more as individual bureaux than as a single unified and coherent policymaking body.

To some extent the larger banks, which were constrained the most by existing regulations, were able to expand through their international operations. Rather than seriously threaten their existing domestic relationships with the major regulatory authorities, the banks (and to a lesser extent the large securities companies) partially opted out. 18 Competition between the major securities companies (Nomura, Yamaichi, Daiwa and Nikko) and the city banks, which was legendary and persistent within Japan, expanded into the

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international arena, and both groups sought to engage in areas of finance from which they were excluded within Japan. By the early 1980s both parties were preparing for a showdown within the domestic markets, living with the expectation that domestic corporate needs and international pressures would force consideration of further substantial regulatory change within Japan.

Table 7.1 The regulators

Institution General remarks

MOF Banking Bureau

Securities Bureau

International Finance Bureau

Financial Bureau

801

MPT

Controlled most interest rates including the savings interest rate and the long-term lending rate, and played a major part in determining the official discount rate. Was responsible for implementation of the Banking Law and associated laws relating to particular groups of financial institutions.

Was responsible for implementing the Securities Exchange Law. which governed the activities of the securities companies. Its guidance was prominent in the bonds and equities market.

Was responsible for the international conduct of Japanese financial institutions. the conduct of international financial policy and in general terms the design and implementation of rules and regulations affecting the interaction of Japanese financial markets with international financial markets. Its increasing status reflected the growing importance of this area.

Was responsible for the management and issue of government bonds, the control of the Fiscal Investments Loan Programme and the Trust Fund Bureau.

Had brief responsibility for the management of monetary policy. After 1975 focused on the maintenance of price stability. In the late 1970s, began pursuing a policy of deregulation of the short money markets which was designed to give it more control over the money supply. Set the official discount rate.

Through the Postal Savings Bureau, controlled the interest rate on savings held in the postal savings system, which in 1980 amounted to over 21 per cent of the financial assets of individuals.


On the other side of the regulatory system were the regulators. The MOF and the BOJ were the most important, but other agencies such as the Ministry of International Trade and Industry (MITI) and the Ministry of Posts and Telecommunications (MPT) played significant roles in specialised areas. Table 7.1 sets out their main obligations. Government ministries were frequently in conflict over policy, as were bureaux within the MOF which played an important role in most financial decision making. As economic conditions changed, the jurisdictional 'spoils' of managing new activities also changed and were bound to affect the influence of some parts of the government bureaucracy more than others. Within the MOF, for example, this was the case in setting interest rates, where the attitude towards regulated interest rates became less cohesive, and resulted in some reduction in the authority of the Banking Bureau. This did not prevent the Banking Bureau from attempting to act as if nothing had changed and as a result create a deal of conflict within the MOF over the management of the issue.

FEATURES OF THE FINANCIAL SYSTEM

Institutional issues aside, the financial system in 1970 can be described simply by focusing on four major characteristics of the system, and the salient features of the flow of funds. Before examining these we should make a brief comment on the selection of 1970 as the base year. The regulatory framework changed little in the 1960s, making 1970 still quite typical of the high-growth period which came to an end with the oil crisis in 1973. In 1970 securities companies and banks were in the initial phase of their overseas expansion and foreign banks and investors had established a small presence in Japan, but for most purposes Japanese financial markets and institutions were limited to domestic participants and a restricted world view. This was to change greatly over the following decade.

The Japanese financial system exhibited the following characteristics: firstly, it relied upon indirect financing (the use of financial institutions as intermediaries) rather than direct financing (the use of the capital and money markets, and the equities market), and as a result the banking system played a dominant role in financial transactions. The short-term capital and money markets remained largely underdeveloped in terms of servicing corporate needs directly. Secondly, interest rates in the banking sector and the bonds sector

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were quite inflexible. 19 Interest rates were set at below market levels and regulated by administrative fiat. This did not mean that competition within the banking sector was restricted, but simply that non-price competition and the use of compensatory deposits were widespread. Thirdly, the city banks were chronically indebted to the BOJ. This allowed the BOJ to use quite effective window guidance as a major tool in the implementation of restrictive monetary policy. Fourthly, the Japanese financial system was relatively isolated. There were few ties between the international and domestic financial markets. 20

In 1970 the flow of funds showed the same relatively stable pattern that it had had over the previous decade. Only the personal sector was in surplus. Most of its financial surplus was held in the form of deposits within the banking and postal savings systems, and only a small portion of funds was held in bonds, equities and insurance. Funds were transferred to the government, the corporate and the overseas sectors. The corporate sector was the major user of funds; it borrowed heavily from the banking sector. The government sector was also slightly in deficit, although the central government was in surplus. Until 1965 the central government maintained a strict policy of balancing the budget and was frequently in a position where it could both increase public expenditure and offer tax cuts. In 1970 it placed few demands on the financial system. Finally, the foreign sector was relatively unimportant. The flow of capital into Japan was still severely restricted by regulations and the Tokyo capital market was still closed to foreign borrowers. The outflow of Japanese investment funds was also relatively small.

During the 1970s some of these relationships and characteristics changed. We examine these changes in the context of what they tell us about the interaction between the financial and the political system, and the dynamism and immobilism of the policy-making arena.

SHIFTING DEPOSIT SHARES

Whereas the role of banks continued to dominate the external financing of corporations, the roles of financial institutions within this sector did not remain unchanged. The share of private financial institutions in overall provision of funds fell considerably from 72.8 per cent (1970-4 average) to 63.6 per cent (1975-9 average), whilst


the share of government-related financial institutions rose from 17.9 per cent (1970-4 average) to 26.1 per cent (1975-9 average). 21

Underlying the increased presence of the government-related financial institutions was the strong performance of the postal savings system. The share of deposits held by the banks as a group (excluding trusts and insurance, which has remained almost static) fell from 68.8 per cent in 1970 to 54.5 per cent in 1979. The share of city banks fell the most precipitously. On the other hand, the share of deposits held by the postal savings system rose from 19.0 per cent in 1970 to 32.6 per cent in 1979_22

There were several explanations for the shift in savings habits of individuals. The Post Office system had, for example, become more convenient with a relative increase in the number of branches operated in comparison to banks. Further, after the refusal of the MPT to lower the term deposit interest rates in line with MOF demands in 1971-2, the postal savings system began to live up to its image as a 'people's institution, in contrast to the city banks which were servicing the interests of large corporations. 23 At best, however, these two factors were partial explanations.

A more convincing explanation was that individuals not only became more sensitive to interest rate differentials but also that 'products' offered by the Post Office suited more closely the needs of individuals. Fixed period and quantity type deposits were held for approximately four times longer in the postal savings system than in the banking system.24 In addition, although both systems had similar levels of tax exemptions, the red tape involved in obtaining the benefits through the banking sector was more involved, and subject to considerable oversight by taxation authorities.

Under the Postal Savings Law, an individual was permitted to hold a given amount of savings deposits in the postal savings system. The quantity allowed by law had increased gradually over the past one hundred years, and in 1980 stood at three million yen. All deposits within the postal savings system attracted tax-free interest payments. The 'advantage' of the Post Office over the banks was that the limit on deposits was not effectively policed in the postal savings sector. In the banking sector, the MOF audited bank accounts and kept strict account of holdings of individuals. When individuals wanted to hold savings in tax-free bank accounts (which could be up to the same level as in the postal savings systems) they had to apply specifically to the Tax Office. Auditing controls in the banks were far stricter than in the Post Office. The reason why auditing procedures

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in both systems were not equally rigorous had its basis in jurisdictional issues, but it was also widely recognised by politicians and civil servants in interviews that it helped accommodate caches of funds of dubious origin. 25 Political interest combined with a co-operative MPT was therefore an important factor underlying the fast growth of Post Office savings.

It was not that no attempt was made to tighten tax regulations. In March 1980 the Diet passed MOF-sponsored legislation designed to tackle the problems of tax avoidance on savings deposits. 26

Amendments to the Income Tax Law and Special Taxation Measures Law were designed to provide the legal basis for a checking system, called the 'Green Card' system, which would facilitate monitoring the level of deposits held by individuals in tax-free savings accounts. 27

A particularly interesting feature of the Green Card debate was that the political opposition to the proposal came not before but after the legislation had become law. By early 1981 the LDP had had sufficient time to assess the public's reaction to the proposed system which it had supported less than a year earlier. The chairman of the LDP Policy Affairs Research Council (PARC), Abe Shintaro, expressed doubts about the system. His comments reflected a political concern: 'All those I have talked to since the passage of the legislation have been opposed. If it encourages the flight of financial assets overseas, what will become of the Japanese economy?'28 The opposition of all those he had spoken to was the driving force behind Abe's public position. After much bickering within the LDP and between the MOF and the LOP, the original decision was reversed by the Suzuki cabinet, which decided to defer the introduction of the system. The principal reason for the volte-face in the LOP stance over the Green Card issue was political.

Abe's comment that the Green Card System would encourage a shift from saving to speculation and the flight of financial assets abroad, was explicit recognition that the new system would uncover tax avoidance. The fear within the LDP that eliminating this avenue o:' tax avoidance would affect its political support base was perhaps one reason for the lengthy debate within the LOP on the issue of privacy. But reading between the lines suggests that the public backlash against the legislation was of more importance than the 'privacy' elements that suddenly became important after the legislation introducing the new system had been enacted. That is, the public was concerned about the privacy issue, but the LDP more about its political support. Some have extended the argument of tax


evasion further, suggesting that it was tax-free caches held by politicians which were being hidden by the existing system. 29

In summary, while the LOP was sufficiently concerned about the shift in deposit shares to contemplate the Green Card legislation in the first place when it was proposed by the MOF, it was not ready for potential adverse impact on supporters closely allied with it. In this case, as in another one where the LOP supported the introduction of the pension scheme run within the jurisdiction of the MPT,30 the LOP and the MOF were in sharp disagreement. In both cases, political decisions were made which overrode the civil service and each decision reflected a different political interest of the LOP. In the former it was the plight of its financial backers, the wealthy elements of the LOP, whereas in the latter it was the interests of the low- and middle-income earner which were receiving attention. Thus although there were many areas in finance in which the LOP expressed virtually no interest, those areas which impinged on electoral support were monitored closely through subcommittees within the LOP's research wing, the P ARC.

As the above issues show, the LOP's position was not so secure that it could afford to alienate its electoral base, despite the fact that it has governed in Japan since its formation. The gradual decline in the LOP's political support base through the 1960s and into the 1970s make it necessary to question the proposition that long service made it less sensitive to interest group pressure and more able to adopt long-term perspectives. The above discussion of the Post Office issue shows that even in matters of finance, interest groups could play an important part in immobilising policy development.

The LOP's support for the postal savings system also reflected the importance of public sector loan finance which is made available through government financial institutions to special interest groups. In the economic climate of the late 1970s, when tax receipts were growing slowly, the rapid increase in the size of postal savings allowed a rapid expansion in loans to be made by the government financial institutions. In the early 1980s support for the postal savings system did not seem likely to be affected by 'fads' for small government, despite the relatively high profile of administrative reform in both the Suzuki and Nakasone governments. 31

Although the Japanese government instituted committees to look at the shape and size of the civil service and government programmes in much the same way as governments elsewhere the results in Japan appear to have been fairly limited. The ideological commitment to

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smaller government existed in principle, but it had not by the early 1980s been matched by administrative reforms. In an environment where general revenue from tax sources was substantially less than general expenditure, the postal savings framework provided one source of loans funds which made it possible to avoid tax increases. The whole central-government loans framework was of great political significance, and for this reason the continued support of the LDP was assured.

DEREGULATION OF INTEREST RATES

At the beginning of the 1970s there were few deregulated interest rates in Japan, and most political and economic interest groups supported the maintenance of low and regulated interest rates. There was, however, a quite significant move towards deregulation in the short-term money markets. This policy shift was in response to a number of factors including changes in needs of business, in attitudes towards the free market in parts of the government sector and in the character of Japan's interaction in the international economy.

During the deliberations of the CFSR in 1968-70 there was some pressure from the larger city banks to have CDs, a short-term method of gathering funds used by banks to absorb surplus finance from the business sector. The LDP had little interest in the demands of the city banks and the MOF, given widespread opposition from within the rest of the banking industry and the threat that deregulated interest rates might pose to its control, expressed no interest in the proposal. In the face of this opposition the issue faded away quietly.

The CDs debate was reactivated in the late 1970s when, although the LDP remained disinterested, the position of the MOF had changed. The shift in deposit shares and the significant expansion in government demand for funds in the bond market after 1975 led the MOF to support the introduction of CDs. The BOJ also supported this, but for different reasons. It saw the establishment of a CDs market as a means of promoting a market-oriented, short-term money market, which in turn would give it improved control over the money supply.32 Opposition from most of the financial sector, notably the long-term credit banks, the regional banks and the securities companies, was insufficient to stop the formation of a CDs market, but again rather than efficiency considerations, the outcome reflected more the character of the policy-making process. The MOF as a


whole failed to support the proposal but the bureau in charge of the issue, the Banking Bureau, was able to limit the input from other competing bureaux by careful shaping of the policy proposal. The lack of any interest within the LOP on account of the technical character of the issue meant that the discussions and decisions were taken within the MOF after consultation with the finance sector and representatives of industry.

The policy-making process leading to the introduction of COs showed that one of the basic functions of the MOF in finance was to administer the markets and make sure they operated smoothly. In the case of COs, the Banking Bureau made some concessions on certain characteristics in order to keep control of the policy-making process and restore what it saw to be balance between the participants in the industry.

Interest rates in other sectors of the financial system were not all subject to the same winds of deregulation. The savings deposit interest rate issue was, for example, highly complex and really quite outside the parameters of deregulation debate, being a political issue. Furthermore, on occasions there were conflicts in setting deposit interest rates between providing low-interest-rate loans to business and maintaining the real value of savings of depositors. In the 1960s deep conflict rarely emerged as real incomes were rising at a rapid rate. In the 1970s conditions changed. Real incomes rose quite slowly and the interest rate sensitivity of the general public increased. With the existence of the public and private savings systems (the postal savings system and the private banks) choice and hence competition existed. In addition, the two systems were managed by different parts of the civil service. Where opinions on policy differed between the MOF and the MPT, cabinet and the prime minister were drawn into the policy-making process. It would be glib and misleading to say that the MOF dominated the policy-making forum on setting savings interest rates, although it obviously did play an important role. It was clear that in certain cases its view was subordinated to a broader political view, sometimes influenced by the proximity of national elections. The history of the 1970s shows that the savings sector was subject to a variety of influences, both political and economic in character, and sometimes requiring prime ministerial intervention to resolve a deadlock in the government bureaucracy. As conflict emerged, the implications of the Jack of full jurisdictional control became increasingly apparentY

The deposits sector formed the core of Japan's system of low,

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regulated interest rates: loan rates of banks, hence most of the funds within the financial system, were related closely to the savings deposit rates. In turn, most bond rates were closely related to loan rates. Despite the increase in flexibility that resulted from developments in the short-term financial markets, the extent that regulations could be relaxed elsewhere depended to a large degree on savings interest rates. There remained at the end of the 1970s a widely held view within the LOP that deregulation would lead to substantial increases in loan rates which would, amongst other things, adversely affect groups such as small- and medium-sized businesses and banks, not to mention the adverse impact on capital-intensive operations such as steel. There is little doubt that during the 1960s there was close to unanimous support for low, regulated interest rates. It was not clear how far politics set the framework for policy. The MOF firmly implemented a low-interest-rate policy through its Banking Bureau which was responsible for the regulatory framework. In turn, the Banking Bureau's interests were best served by maintenance of the regulated interest rate framework. Interest rates set by administrative fiat remained dominant and the MOF maintained its position as the major decision maker in the financial system. But changes began to occur. Corporations widened their horizons and became skilled in international financial transactions; a larger number of corporations had cash surpluses and wanted to maximise their returns; individuals began to become more sensitive to interest rate differentials; the government found it had to offer higher returns in order to secure the finance it required; and certain financial institutions- some large city banks and the big securities companies -were pushing proposals for innovative financial reform. Each of these changes reduced the viability of the system of regulated interest rates.

In the short-term financial markets the introduction of a COs market in 1979 widened the options available to institutions with surplus funds. Interest rates in the long-term government bond sector also became more amenable to market forces as the volume of bonds the government chose to issue reached enormous proportions. This latter development was facilitated by the MOF amending regulations to permit the sale of government bonds soon after purchase, thus allowing the development of a secondary bond market. 34 In 1983 the turnover in that market was the second largest in the world. Moreover, individuals were offered high-interest-rate packages in the form of funds utilising the secondary market for government bonds. The report of the CFSR of May 1983 which recommended liberalising


interest rates in the 'large unit' areas indicates the magnitude of the change over the previous five years.

The move towards deregulation is of interest as it highlights several important points. Firstly, although the view of the LOP has changed little on the question of interest rates- that is, it prefers low, regulated rates - the force of the market began to produce important changes. Secondly, although the Banking Bureau still supports the idea of regulated interest rates, other bureaux, such as the International Finance Bureau which was responsible for the linkages between Japan and the international financial market, and the Financial Bureau, which was responsible for collecting enough revenue to finance the budget, became more vocal supporters of interest rate deregulation. Policies began to change because the weight of vested interests also changed. It is also crucial not to forget the small banks sector in which intervention by politicians was clearly important and slowed down the general process of deregulation.

FINANCIAL EFFICIENCY, MERGERS AND POLITICS

In 1966--7 the CFSR examined the operations of small and mediumsized financial institutions. While it concluded that the overall structure was appropriate, it also drew attention to the need for amalgamation amongst the least efficient organisations. 35 The passage of the 'Law Concerning Amalgamation and Conversion of Financial Institutions' opened the way for greater amalgamation activity, not only between financial institutions of the same type, but also between financial institutions of different types. During the six-year period from fiscal 1969 to fiscal 1974, 95 mergers occurred, a majority of which were between two or more credit associations on the one hand, or two or more credit co-operatives on the other.

The mergers which did occur were concentrated on the very small financial institutions and when mergers declined sharply after 1974 there was still an enormous difference between the size of the small financial institutions. For example, the average size of the ten largest mutual banks (themselves relatively small financial institutions) in 1981 was approximately nine times larger than the average size of the ten smallest. Merger activity between the city and regional banks was minimal, although the formation of Daiichi Kangyo Bank and Taiyo Kobe Bank were two notable exceptions.36 The slowing down of mergers in the period 1975-80 reflected the problems these posed

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within the bounds of existing regulations and traditions. For example, credit associations were permitted only to operate within a defined geographical area and were unable to extend their activities into other discrete areas without changing into financial institutions of a different type. 37

The MOF supported mergers of banks in the early 1970s but gradually came to adopt a low-key position: mergers between banks could proceed only where all the parties were agreed. It changed to this rather passive stance in recognition of the limitations of its power. There was little explicit political support for mergers, since politicians were not greatly concerned with questions relating to financial efficiency. They cared about the continued existence of small financial institutions because they were important to the continued viability of many small- and medium-sized firms, and hence important ultimately to the LOP's political base. If an aggressive policy of mergers was adopted and supported by the government, the LOP would be alienating part of its local support base, and therefore, unless there were good reasons, such a policy was unlikely to be realised. 38

With mergers being unpopular politically and within many of the small- and medium-sized financial institutions themselves, the way was set by default for greater MOF intervention. In the late 1970s many mutual banks, such as the Taiko Mutual Bank, made the financial news because of revelations of bad management. The Taiko Mutual case illustrated how the MOF reacted to the problem of bad management. Instead of forcing the closure of the bank or arranging some form of takeover of assets, it organised a financial support plan for the troubled institution, based on subsidised loan funds from other large, private financial institutions.39 The MOF stood by its policy of not allowing any financial institution to go into liquidation. It argued that the collapse of any financial institution would upset the confidence of the public and hence the financial order of the economic system.40

The policy adopted by the MOF was one of injecting skilled management into weak financial institutions instead of encouraging or forcing market rationalisation. According to Yomiuri Shinbun research, 53 out of 71 mutual banks employed a total of 63 former career and non-career MOF officers. Of eighteen institutions with dubious financial standing, thirteen had MOF men, twelve in the position of president. 41 It is hard to see how financial stability or financial order benefited from this policy. The MOF 'encouraged' loans by a group of financial institutions which owned shares in the


bank. There was no guarantee that the firm would be able to trade its way out of trouble and even then the cost was likely to be substantial. Banks engaging in activities they had no business engaging in were in effect given guarantees that the institutions would not be permitted to collapse. There are two possible explanations.

The first is that the MOF retreated from its stance of favouring amalgamations in the early 1970s because of political pressure. Somewhat unusually, and in strong contrast to the ideologically market-oriented Thatcher government in the UK, the LOP in this period tended to prefer orderly markets to deregulated ones. Its policy stance appears to have been dictated by the demands of interest groups and a perception of the political rather than ideological ramifications of the policy programme. The LOP's sensitivity on the amalgamation issue was based on links between small financial institutions and individual conservative politicians. The empirical evidence is scant as much of this grey area of financial politics remains underresearched, but most informed observers agree that it was at the centre of the problem. The argument was that amalgamation of small- and medium-sized financial institutions would centralise finance so that the needs of smaller business institutions (and politicians) would not be met adequately. There is a general consensus that the larger banks had little to do with shady financial transactions and were less amenable to local political influence. 42 The existence of political pressure would be sufficient to cause the division responsible for implementing policy, the Banking Bureau's Small and Medium Sized Financial Institutions Division, to adopt a policy of emphasising improved management techniques rather than force institutions to amalgamate or let market forces operate without interference.

A second, consistent, explanation was that the MOF had much to gain from bowing to the hesitancy of political, local business and labour groups towards amalgamation, in that its policy to send MOFled management teams into troubled banks assisted the MOF in placing retiring employees. Most of the MOF's career officers- that is, the elite - retired between the ages of 50 and 55, mainly finding employment in semi-government bodies, private financial institutions and as politicians in the LOP.

The practice of the MOF retiring its senior personnel into troubled financial institutions had the advantage of improving the quality of financial management within the existing financial system. On the other hand, it increased the immobilist character of the financial system by assisting these banks in becoming increasingly skilled at

James Horne 189

protecting their own positions within the MOF and the LOP. In the absence of the retirement system there would have been greater incentive for the MOF to explore alternative ways to overcome the political resistance towards reducing the number of small and mediumsized financial institutions.

The retirement system of the MOF meant that at any one time a large number of former MOF officers were located in the financial sector. In 1980, for every five career officers in the MOF, there was one retired officer in a financial institution. A large proportion was employed in small financial institutions, which were sensitive towards any movement towards financial deregulation.

Although there was a large 'MOF clique' which entered the Diet on retirement, there is no evidence that this group was more concerned with financial deregulation than the average LOP politician. There was a general view encountered in interviews that this group had more sympathy with the view of the MOF and with a second group of ex-MOF officers who used the MOF as a launching pad for a political career. From an early age politics was the livelihood of this group, which meant that political survival came before more deregulation if and when the two conflicted. There were notable exceptions to this general view: Miyazawa Kiichi, who retired at the age of thirty-two to enter the House of Councillors, was the leader of a small study group within the MOF which met regularly to discuss questions concerning the financial system. Kaneko Ippei, on the other hand, retired at forty-seven, later held the position of minister of finance before becoming in 1981 one of the leading supporters of the retention of the existing savings interest rate decision-making mechanism. In all, the level of interest of Diet members as a whole in financial matters was low, although there was interest when important parts of their constituency were affected by government policy. Hence on postal savings, the deregulation of deposits and the small-scale finance sector, the LOP supported the interests of the status quo. To do otherwise would have jeopardised areas of political support.

The retirement system directed officials towards what were essentially the inward-looking sectors of the financial industry, namely the government financial sector and the small- and medium-sized banking institutions. The flow of personnel from the MOF to these areas was unlikely to promote financial deregulation for the reason that it served neither the interest of the retiring officers nor the LD P, although in the long term it could be expected to improve the administration of the individual financial units. The three types of


personnel movements, to the private financial institutions, public financial institutions and the LOP, all strengthened the information channels between the MOF, the finance industry and the LOP, but did so in a way which entrenched existing interests. The MOF attempted to improve and ensure the financial stability of the banking system but every effort was subject to a range of constraints: practical financial policy meant that the improvements that did occur were incremental rather than major in character. Although incremental change may in the long term be more effective and more persevering than short, sharp changes in policy, 'incremental' in the context used here is taken to mean slowing down the rate of policy change rather than the steady, progressive connotations which might also be attached.

Retirement processes linked the MOF with the political and financial world in Japan in a unique way. More so than any other ministry, the MOF had strong links with the LOP, illustrated most vividly by the large number of former officers of the MOF that became politicians. By our calculations after the 1980 general elections, 24 former officers of the MOF were members of the House of Representatives and six were members of the House of Councillors. This process expressed the confidence of the LOP in the MOF personnel, and contributed to a significant information flow between the two bodies. In particular, it made the MOF very aware of the political constraints on policy making.

RIVALRIES AMONGST THE REGULATED

Despite the strong regulatory control exercised by the MOF over the financial system, there was none the less quite intense competition in different areas of business. Competition did not take the form of interest rate bargaining as much as attempting to encroach on established market shares by offering new financial products. In this context the big four securities companies and city banks were natural competitors.

When the city banks sought to have COs approved in the late 1970s, the securities companies were amongst the most vocal opponents. The central fear of the securities companies was that a COs market would challenge the monopoly of the securities companies in the gensaki market, which was the only short-term, negotiable instrument available to corporations with surplus funds.

James Horne 191

Similarly the securities companies were opposed to banks being permitted to trade in or sell government bonds. Under Article 65(2) of the Securities and Exchange Law, banks were authorised to underwrite and to sell government bonds, but from the inauguration of the government bond market in 1965, banks followed the administrative guidance of the MOF precluding them from exercising this legal right. After 1976 there were several attempts to remove the administrative barriers which prevented banks from being involved in this market. With the help of the Securities Bureau of the MOF, which was responsible for the supervision of the securities industry, the banks were successfully kept out of selling government bonds until April 1983.

In debate on the issue between 1979 and 1982 the question was discussed at length in complicated and acrimonious negotiations in which securities companies attempted to involve politicians to maintain the status quo. They were successful in the sense that change was delayed temporarily, but it also was very apparent that politicians within the LDP (and in a similar way opposition parliamentarians) did not relish being involved in matters concerning two support groups. Taking sides in matters which had few political implications could result only in the alienation of part of the LDP's political support base. In this case, as in the case of CDs, the ultimate decision to alter the regulatory framework reflected the continuing high level of government bond flotation and the concomitant pressure on the banking system in light of other changes such as the shift in deposit shares.

The two policy-making processes highlighted one important difference. In the case of CDs, the Banking Bureau was able to confine the decision-making authority within its jurisdiction, whereas in the case of sale of government bonds the decision-making process involved two bureaux within the MOF with very different ideas on policy. As we argued earlier, the MOF was in a sense more like a collection of independent bureaux than a single ministry. Its domination of the policy-making process, as in the two instances above, did not mean that each issue was necessarily treated on its merits in terms of its contribution to financial efficiency or other criteria. Instead, the outcome was substantially predicated on the shape of the policy-making process. Competition within the industry between the banks and securities companies was monitored by each interested bureau with any industry demands for change being not only scrutinised on the basis of their contribution to the financial system but also on their political sensitivity and administrative acceptability.


The different interests within the banking community were also clearly visible. The city banks were in the process of transforming themselves from financial institutions fulfilling the needs of Japanese big business to international financial institutions with a greater range of domestic financial interests. In particular they were more interested in the fund requirements of small- and medium-sized businesses and individuals than they had been in the 1950s and 1960s. They were the most aggressive of the banks and the biggest of them were much more prepared to take on the MOF in disputes. For example, in the period 1978-82 a substantial rift emerged between the banks which belonged to the Government Bond Underwriting Syndicate and the MOF as a result of the persistence of the MOF in pursuing a policy of keeping the yield on government bonds in the issue market below market levels. Had the city banks alone been dealing with the MOF the pressure for change to the existing system would have been greater. The presence of the smaller financial institutions, which were much more concerned about their overall relationship with the MOF, prevented a strong industry front from being constructed. The smaller institutions had the most to lose since the regulatory framework, through measures such as branching policy and policy on the introduction of new instruments, protected the interests of the regional and mutual banks. The increased competition of the 1980s reflects the changed financial needs of Japanese corporations, individuals and government, all of which were striving for access to a broader set of financial products to satisfy their more diverse demands. New demands and new business horizons led to the breakdown of shared values within the finance industry and produced a much more aggressive and dynamic financial environment.

RIVALRIES AMONGST THE REGULATORS

Without wanting to understate the role of consensus within the Japanese government bureaucracy, there is little doubt that conflict also played an important role in intra- and interministry negotiations in the 1970s and early 1980s.43 Furthermore, we can tentatively suggest reasons why, within the financial sector, distinct trends emerged in handling issues involving multiple interests. The emergence of Japan as a major economic power in the late 1960s, and as a world power in a more general sense in the late 1970s was not without impact.

James Horne 193

Up to the late 1960s the Japanese financial system was quite isolated from international influences. The leading banks were essentially domestic institutions with little international representation. The BOJ and the MOF were in general agreement on macroeconomic policy management, with the former managing monetary policy broadly along the lines desired by the MOF. Comments that the BOJ was merely an appendage of the MOF were not without substance.

The regulatory changes in the short-term money market between 1977 and 1982 culminated in a period of more independent monetary policy management and concern for inflation control which began with the installation of Morinaga Teiichiro as governor of the BOJ in 1975.

One of the key differences between the BOJ and the MOF was over interest rates. The MOF had traditionally been a strong supporter of regulated interest rates. During the 1970s attitudes began to change with growing support for deregulated markets in the Financial Bureau and the International Finance Bureau. But within the Banking Bureau, which was responsible for most interest rate controls, a change in attitude was almost imperceptible. Thus it was only after some pressure that the Bureau accepted deregulated interest rates on COs and a small amount of responsiveness to the market in government bonds. In a sense the Banking Bureau found itself building a house of cards, where if one card is removed the house collapses.44

It was administering a banking system which was built around controlled interest rates, a system in which the various participants traded off a range of costs and benefits. Clearly, with the passage of time, it would be unreasonable to expect the cost-benefit ratio for each participant to remain the same. The task the Banking Bureau appeared to have set itself was one of keeping approximate balance within the banking system, making changes to prevent any particular group from being badly disadvantaged by changes in the marketplace, all the time recognising the political constraints which also operated. This dual function (apart from its own self-interest), left the Banking Bureau in a difficult position, particularly in the light of factors we have mentioned above but which warrant restating:

1. The government's own revenue needs, which were forcing the Financial Bureau to consider market-oriented, medium-term government bonds.

2. The shift in deposit shares, which led to the approval of COs, and the support given by the BOJ to deregulation of the short-term money markets.


3. The rapid growth of the secondary market for government bonds, and the increasing overseas interest in portfolio investment in Japan.

4. The increased support from business for deregulated interest rates.

By and large, when it comes to matters of regulation the BOJ keeps fairly closely to matters within its own jurisdiction. In matters which it judges to have an impact on monetary management- such as the rate of issue of government bonds and their cost- it has been, through its governor, quite outspoken on what should be done. With different yet interdependent areas of responsibility there was bound to be conflict. The BOJ sought to achieve the narrow aim of monetary responsibility, whereas the MOF was burdened with fiscal, political and administrative management issues. The BOJ gained much in the way of cementing its role as Japan's key monetary authority in the late 1970s and early 1980s, but even then there were occasions when political considerations forced it to relax its monetary stance earlier than planned. The influence of traditionally strong groups - such as the MOF, the capital-intensive business community and its vocal supporters within the LOP, such as the influential Komoto Toshio -received a set-back after the disastrous policy mismanagement of 1972-3 when the economy overheated and inflation ran temporarily out of control. Part of the strengthening of the position of the BOJ was attributable to Morinaga Teiichiro who was governor from 1975 to 1980, and who had a very close relationship with Prime Minister Ohira Masayoshi (1978-80). Personal prestige aside, the role of the BOJ did grow in the latter half of the 1970s, and with it the view that the highly regulated framework of interest rates might have outlived its usefulness. For reasons outlined earlier, however, the essence of the system seemed likely to continue for some considerable period.

IMPACT OF INTERN A TIONALISA TION

At the beginning of the 1970s the Japanese financial system was relatively isolated from international markets. By the early 1980s the story was notably different. The introduction of flexible exchange rates in 1972 was the first of a series of significant changes which affected the interaction between Japan and the rest of the world. The period 197(}..-83 saw a remarkable change in the quantity and

James Horne 195

diversity of both inward and outward financial transactions. In addition, the regulatory framework changed appreciably, including the partial revision of the Foreign Exchange and Foreign Trade Control Law in 1980.45

During the 1970s Japan's approach to foreign participation in its own financial markets changed dramatically, as did its attitude to Japanese capital moving abroad. A stronger economy and balance of payments and an acceptance of the international position given to the yen and Japanese securities and equities permitted a very different regulatory standpoint where the level of direct intervention by government authorities declined noticeably, to be replaced by a system of reporting transactions in some cases and of complete deregulation in others. The development of the yen bond market typified these developments. 46 In the 1960s Japan prohibited foreign institutions from raising funds in Tokyo. The opening of the yen bond market in 1970 reflected a relaxation of the attitude of Japanese authorities but not a fundamental change, as was clearly seen by the closure of the market during 1973-5. By the early 1980s the MOF's International Financial Bureau had clearly decided that there was a need to keep the market functioning in all except the most exceptional circumstances. In this area domestic politics played only a minor role but the government bureaucracy still had a major input into the timing of issues, the distribution of issues between countries and the extent that the market reflected market or non-market forces.

Increasing the level of interaction did not necessarily mean that foreign financial institutions played a more important role in the Japanese financial system. Unlike the inroads that Japanese banks made into the United States (and California in particular) no foreign bank purchased any domestic financial institution, nor did any have what could be called a network of branches. The number of foreign banks represented in Tokyo rose dramatically during the 1970s, but in spite of this their share of outstanding loans actually fell to approximately 3 per cent in September 1980. The increasing sophistication of Japanese corporations meant that they could go independently to the international financial markets and not rely so much on foreign banks as intermediaries. While foreign banks had virtually no cause to claim discrimination in conducting their business, should they desire or attempt to take over any existing Japanese financial institutions they would meet with a cool response. In this sense the domestic industry remained virtually free from foreign influence.

Nevertheless the growth of activities of Japanese banks and


corporations abroad and the significant inflow of foreign indirect investments into Japan (in investments in bonds and certain stocks) produced a much more market-oriented mentality in a growing segment of institutions involved in financial matters. In the 1960s and early 1970s it was interesting to observe the different ways in which policy makers reacted to domestic and international markets. In the latter, the requests by domestic financial institutions to operate in particular product markets were treated liberally, with the major concern being the impact of the entrance of Japanese banks on the stability of the market. In the former, domestic political considerations, jurisdictional relationships and balance within the financial system were all basic considerations. Policy makers worked in the domestic market under a completely different set of constraints from those operating internationally. Politics in the latter was international politics at a government-to-government level. In the former it involved the question of electoral survival. In the 1950s and 1960s Japan was able largely to ignore international methods, and the intrusion of its financial institutions into the international financial markets had little impact at home.

The 1970s can be best seen as a learning phase and a period of international expansion by Japanese groups seeking to make themselves better known on international financial m~rkets. It was the outlet for tensions which were building up in the domestic markets. At the same time, however, it was also a breeding ground for new expertise, and by the early 1980s was used as evidence by both securities companies and banks that previously relevant divisions of responsibility within the Japanese financial markets had outlived their usefulness. A combination of the changing national interests of Japan as perceived by policy makers and the diffusion of international financial expertise along with the development of international investor interest in Japan combined to become an important influence on the development of new policy initiatives.

THE NATURE OF FINANCIAL DEVELOPMENT

In this chapter we examined two contrasting situations, sometimes implicitly but as an important recurring theme. These are 'consensus versus conflict' and 'dynamic versus immobilisation' themes.

We have argued that the conflict within the finance industry and between regulators has been on the rise in Japan. Furthermore, we

James Horne 197

have explained how in some cases, the LOP will act as the final arbiter in matters where: (i) dissatisfied participants in the normal pattern of negotiations are not satisfied with the outcome; (ii) where a decision is required and the parties involved cannot reach a compromise solution; and (iii) where the LOP has an explicit political interest in the problem and takes authoritative action.

The third category is where the government fulfils normal executive functions, whereas the first is more a political response to sectional interest group pressures and tends to be of less importance. The second area involves small sections of the financial markets but nevertheless has exerted a strong influence over the nature of financial development in that area.

The LOP's continued involvement in the first and second areas provides evidence that the power of the central government bureaucracy is far from omnipotent. The fact that in conflicts between the LOP and the MOF, the former normally gets its way should not be ignored. Nor should the impact of changing demands of borrowers and lenders. Indeed in the long term what we might call the forces of the market may increase in influence. Political influence stems from electoral interests and extends over a relatively small though important sector of the financial market. Its crucial importance in influencing the shape of the deposits market still remains most significant, but in the long term it is difficult to see it being maintained. Political influence will certainly have an impact on the speed and breadth of change, but that is all.

Jurisdiction, political influence, administrative methods and selfinterest also influenced in the short term the way in which public servants executed policy. Circumstances in the early 1980s, however, already suggested change. The MOF worked in a constrained environment in which immobilism prevailed, but Japan itself was operating in a very dynamic world economy. Financial services were late in developing in Japan, as Tokyo itself was slow to emerge as an international financial market.

The civil service was not by its nature intrinsically dynamic. Its methods and retirement patterns were indeed the opposite. In seeking a stable environment, however, it needed to balance the needs of participants and where these were changing rapidly it could not delay too long the reform of its policies. In everyday financial activities the government bureaucracy - the MOF in many areas, the BOJ in some - negotiated and managed policies. It was the key force group in determining policy. In the long run, however, it seemed that the


needs of the market and the international interests of Japan would also act as an important source of dynamism.

CONCLUSION

The interaction between politics and finance reveals nothing that should surprise us, but it does emphasise once again the need to adopt a dynamic framework for analysis.

We noted that the LOP was actively involved in consideration of problems relating to the savings system and savings interest rates.

The fact that the LOP held political power uninterruptedly from 1955 established a far more pervasive influence over the system than is initially apparent. The role of senior LOP ministers in selecting directors-general of Bureaux and the administrative vice-minister provided an unbroken support system within the MOF with compatible conservative values. The LOP itself could not be cast into any iron-clad conservative ideological paradigm. Its views on the interaction of the market and government were built up on traditions of the prewar period and carried over into postwar politics. Government was seen as having a positive contribution to make in ordering economic and in particular financial activity. The framework for the banking system established with the Bank Law of 1927 remained largely unchanged to the early 1980s. It recognised both explicitly through laws and implicitly through guidance the attitudes of the ruling LOP and the government bureaucracy to regulation. Their respective attitudes were not always compatible, underlining the independent streak within the elitist MOF, but whenever conflict arose it was the LOP's view which generally won the day. Despite the importance of the civil service in management of regulatory matters and the rate at which financial institutions adjusted to the changing domestic and international environment, political constraints were always of importance, like a perpetual shadow.

The changing needs of suppliers and users of funds was the major factor behind the introduction of new techniques and financial products, but the rate of introduction was not necessarily synchronised to meet immediately the needs of the market. In the more political areas change was often delayed by the fear that adjustment to the status quo could have a negative effect on the LOP's electoral backing.

James Horne 199

Notwithstanding this political intervention, significant changes did occur, and these must be attributed to the impact that market forces had on the structure of the regulatory framework in important areas. The formation of the secondary market for government bonds was attributable to the enormous demands that the government placed on the bond markets. Changes in the foreign exchange regulations similarly reflected the strengthening of the Japanese economy and the need for a more liberal approach to capital flows. Japan moved much closer to its industrialised counterparts in the way in which it administered the financial system in the 1980s. Political continuity meant that less change was countenanced than might otherwise have occurred. The small and medium-sized bank sector was more a part of the support system of the LOP than was the case in other Opposition parties, although the general lack of interest shown by the political opposition in financial matters makes it difficult to detail fully the importance of this point.

At the beginning of the 1960s the financial system was operated largely for the benefit of large corporations, a position which could be rationalised as socially beneficial in light of the significant annual increases in per capita income and real wages. By the end of the 1970s the cost of funds and the availability of funds to individuals had improved markedly, although it was still poor when compared with the EC or the US. Foreign influence was one factor, but more important was the shift of domestic economic objectives, horizons of domestic corporations and the surpluses and expectations of individuals. The growth of the Post Office savings system and of mutual banks in the 1960s illustrated how attention to this sector could bring dividends. By the early 1980s even the city banks were vigorously promoting this market.

The growth of Japan as an international financial centre was expected to continue. The national interests of Japan were not static and the benefits to be had from internationalising the financial market were being increasingly appreciated. Tokyo was becoming, alongside New York and London, one of the pillars of the international system. This development would be another expression of Japan's development and acceptance as a major world power.


NOTES

1. Got6 Shin'ichi, 'Gink6h6 kaisei zenya- gy6sei shid6 no kenkyii', Kin'ya to Gink6 (1 June 1978) pp. 62-7; Hugh Patrick, 'The Evolution of Japan's Financial System in the Interwar Period', seminar paper given at the Australian National University (27 November 1979) mimeo. For perhaps the best annotated bibliography on Japanese financial history see Nihon Ginko Ch6sakyoku, 'Kin'yiishi kenkyii no d6k6' [Trends in the Study of Financial History] (July 1976) mimeo.

2. For an interesting perspective see Hugh Patrick, 'Japanese Development in Historical Perspective; 1868-1980', unpublished paper (updated, c.1981).

3. The financial sector was not affected as much as other parts of the economy in terms of the direct impact of policies on private or public institutions. The formation of the Policy Board in the BOJ was one move designed to increase the independence of the BOJ from the MOF. The insertion of a clause in the Securities and Exchange Law which prohibits the direct underwriting of government bonds by the BOJ had a similar purpose. See Eleanor M. Hadley, Anti-Trust in Japan (Princeton, NJ: Princeton University Press, 1970) pp. 157-65.

4. See Okurasho hyakunenshi henshiishitsu, Okurasho hyakunenshi [Hundred Year History of the Ministry of Finance] vol. 2 (Okura zaimukyokai, 1969).

5. See Ginkokyoku kin'yii nenp6 bessatsu, Ginkokyoku genk6 tsutatsusha -sh6wa 54 nenban [Collection of Draft Notifications - 1979 Edition] (1980). We are not suggesting that these are unique to the Japanese MOF. They are also a familiar feature of many other financial systems.

6. See Okurash6 sh6kenkyoku hen, Okurash6 shokenkyoku nenp6 [Ministry of Finance Securities Bureau Annual].

7. This is not to say that the impact of each regulation was maintained throughout the period. Whereas the regulation controlling the growth of branching networks was important during the 1960s, by the end of the 1970s most banks had completed their branch networks. The emphasis then shifted to the control over the rate at which mechanised branches and subbranches could be opened and the swapping and relocation of branches.

8. Hadley, op. cit., pp. 403-7; Chalmers Johnson, Japan's Public Policy Companies (Washington, DC: AEI Hoover Policy Studies, 1978) pp. 87-99; Kozo Yamamura, Economic Policy in Post War Japan (Berkeley: University of California Press, 1967) pp. 27-8.

9. See Yoshio Suzuki, Money and Banking in Contemporary Japan (New Haven, CT: Yale University Press, 1980) pp. 3-13, 62-3; Kure Bunji, Kin'ya seisaku- Nihon ginko no seisaku un'ei [Financial Policy: Policy Management of the Bank of Japan] (T6y6 Keizai Shinp6sha, 1973) pp. 58-62.

10. In 1961 a government body of enquiry, the Committee on Financial Systems Research, held a series of hearings to examine the overloan phenomenon. In its report of 1963 it concluded that while there were clearly some very positive side-effects of the development in the short

James Horne 201

term, it was something that ought not to be institutionalised. The report recommended the normalisation of the relationship between the BOJ and the city banks as soon as was practicable. See Kin'yii seido kenkyiikai hen, Futsa gink6 no arikata to gink6 seido no kaisei [The Activities of the City Banks and Reform of the Banking System] (Kin'yii zaisei jijo kenkyiikai, 1979) pp. 428-52.

11. Suzuki, op~ cit., pp. 13-14, 64; Kure, op. cit., pp. 3{}-1. 12. Saito Kazusane and Tamura Tetsuo (eds), Nihon gink6 [The Bank of

Japan] (Zaikei shohosha, 1981) pp. 152-67. 13. The accepted wisdom is that BOJ policy was largely controlled by the

MOF, and this appears to hold for the 1960s and early 1970s. Since the rapid inflation of 1973-4 the BOJ exercised considerably more control over monetary policy, and on occasions this led to substantial differences of opinion with the MOF. For an example of the earlier view see Gardner Ackerly and Hiromitsu Ishi, 'Fiscal, Monetary and Related Policies', in Hugh Patrick and Henry Rosovsky (eds), Asia's New Giant (Washington, DC: The Brookings Institution, 1976).

14. See Hugh Patrick, 'Finance, Capital Markets and Economic Growth in Japan', in Arnold W. Sametz (ed.), Financial Development and Economic Growth (New York: New York University Press, 1972) pp. 114-16, 121; Suzuki, op. cit., pp. 2fr.9, 64.

15. An English version of the plan was published by the Economic Planning Agency, New Economic Plan of Japan (1961-70) - Double National Income Plan, Japan Times (1961).

16. Nihon Keizai Shinbun, 6 February 1967. 17. Kin'yii seido kenkyiikai hen, op. cit., pp. 472-87; Tokuda Hiromi,

'Kin'yii seido chosakai toshin o megutte' [The Report of the CFSR] Fainansu, vo!. 6, no. 5 (1970) pp. 3-9; also see the interview between Tokuda and Nakamura of the Federation of Bankers Associations in Kin'ya (August 1970) pp. 8-18.

18. A. 0. Hirschman, Exit, Voice and Loyalty (Cambridge, MA: Harvard University Press, 1970).

19. The same type of market arrangements existed a decade earlier. See Hugh T. Patrick, 'Japan's Interest Rates and the "Grey" Financial Market', Pacific Affairs, vo!. 38, no. 3-4 (1965-6) pp. 32Cr-44.

20. There have been several studies outlining the characteristics of the Japanese financial system. These include in English: Suzuki, Money and Banking in Contemporary Japan, op. cit; OECD, Monetary Policy in Japan (Paris, December 1972); Ackerly and Ishi, op. cit.; The Special Issue on the Japanese Financial System in Japanese Economic Studies (Winter 1977--8). Recent works in Japanese include Nihon Keizai Shinbunsha (ed.), Kin'ya shisutemu [The Financial System] (Nihon Keizai Shinbunsha, 1980); Horiuchi Akiyoshi, Nihon no kin'yu seisaku [Japan's Financial Policy] (T6y6 Keizai Shinposha, 1980); and Okumura Hirohiko et a/., 50 nendai ni okeru waga kuni kin'yil shisutemu no tenb6 [The Outlook for the Japanese Financial Systems 1975--84] (Nomura sago kenkyiijo, September 1980); Yokoyama Akio, Gendai no kin'ya k6z6-atarashii kin'yil riron o motomete [The Modern Financial Structure: In Search of a New Theory of Finance] (Nihon Keizai Shinbunsha, 1977).


The term 'compensatory deposit' refers to the practice where banks required a percentage of a loan to be redeposited with the bank, hence resulting in a higher effective interest rate. The practice was frowned on by the MOF.

21. Saito and Tamura (eds), op. cit., p. 127. 22. Yubin chokin ni kansuru chosa kenkyukai, Yubin chokin ni kansuru

ch6sa kenkyukai hokokusho [Report of the Research Committee into Postal Savings] (1980) pp. 135-41.

23. See Takiya Yuki ( ed.), Rekidai yasei daijin kairoku [Record of Successive Postal Ministers] (Kyodo Tsiishinsha, 1974) vol. 5, pp. 140--3.

24. The details are presented in the table below:

Investment character of postal savings: average length of deposit in savings institutions (fiscal/979)

Type of deposit

Demand deposit Fixed period and quantity

character deposits

Note: Units are months. Method of calculation:

Postal savings Banks

6.1 0.2

39.8 9.9

Average outstanding balance Length of deposit = -------"='---------"'-----

Monthly average payment level

souRcEs: Yuseisho, Kin'yu no bunya ni okeru kangy6 no arikata nado ni tsuite [The Activities of Government Institutions, etc. in the Sphere of Finance] (February, 1981) p. 47; Nihon Ginko, Keizai tokei gepp6 [Economic Statistics Monthly].

25. Whilst there were no denials of this reason, few actually stated it positively but rather put the 'Abe line' (see below). Also see Asahi Shinbun, 17 February, 14 March 1981, and Nihon Keizai Shinbun, 17 April 1981.

26. The proceedings of the Diet debates were reproduced by the Federation of Bankers associations in Zenkoku ginko kyokai rengokai, 'Guriin kado seido ni kansuru kokkai rongi' [Diet Debates about the Green Card System] (September 1980) mimeo. This booklet contains debates that appeared in Kin'yu between May and September 1980.

27. See editorial commentary on the series 'Yubin chokin no kenkyii' [Research into Postal Savings], in Kin'yu zaisei jij6, 8 September 1980, pp. 20--6.

28. Asahi Shinbun, 14 March 1981. 29. The debate in the Diet included the dual savings interest rate system,

the green card system, the impact of the shift of funds to the Post Office and the impact on monetary policy. See Kin'yu (January, February, May, June and July 1981) nos 406, 407, 410--12. See also Kin'yu zaisei jij6.

James Horne 203

30. Details on the pension scheme issue can be found in James Home, Japan's Financial Markets (Sydney and London: Allen & Unwin, 1985) Chapter 5.

31. In essence the issue was whether the taxation office should have access to details of the quantity of funds held by individuals in tax free accounts. No one could object to adequate checking arrangements designed to ensure that individuals were unable to abuse the existing system. But there was legitimate concern over the desirability of government having access to detailed accounts of individuals. The government had an obligation to minimise the level of tax evasion, but it had little right to other details of the financial status of individuals that it would gain from an on-line computer system holding lists of financial assets within the non-tax framework of each individual. A noteworthy aspect of the renewed debate in the Diet was that the Japan Communist Party was the only political party to object to the original legislation on these grounds. In fact the size of the national public service fell fractionally in absolute terms between 1968 (899 333) and 1982 (890295) which ran counter to trends in other industrial countries. See Administrative Management Agency, 'Staff Number Control in Japan', International Review of Administrative Services, vol. XLVIII, no. 2 (1982) pp. 154-65.

32. Interview with a senior official of the BOJ, June 1980. Although various studies on interest rate deregulation had been made by the Research Department and put to the Executive Board of the BOJ during the governorship of Sasaki Tadashi (1970--5), they had all been rejected. The dominance of the regulated interest rate philosophy was shaken during the great inflation of 1972-3, and gradually the view of the economists who supported deregulation came to prevail over the administrators, who preferred regulatory guidance. At the same time the objective of monetary policy switched from concentrating on external balance (the problem of the balance of payments) to internal balance (control of the level of inflation). The dominant view in the BOJ favoured the introduction of COs providing interest rates were completely deregulated.

33. For details see James Horne, Japan's Financial Markets, op. cit., Chapter 5.

34. Ibid., Chapter 2. 35. See Kin'yii seido kenkyiikai hen (1979) op. cit., pp. 462-71. 36. See 'Kobe, taiyo ginko no gappei' [The Merger of the Kobe and Taiyo

Banks], Kin'ya zaiseijijo, 19 February 1973. 37. Mutual banks faced a number of problems which were beyond the control

of individual managers. The attempted merger between Sumitomo Bank and Kansai Mutual Bank illustrated some of the problems involved with mergers. The Kansai Mutual Bank was an average-sized mutual bank, but was tiny when compared with Sumitomo Bank, one of the largest city banks in Japan. Although there was some support within Kansai Mutual Bank for the merger, strong opposition came from two sources. One was the bank's branch managers, who saw their future careers being adversely affected if Kansai Mutual were absorbed into Sumitomo. The other source of opposition was the clients of Kansai Mutual who argued


that the merger would reduce their access to funds and financial services. Whether the criticisms were valid or not the merger was successfully thwarted. If employees objected to a proposed merger there was little chance that it would go ahead, and further, the Kansai Mutual-Sumitomo case suggested that mergers between units of greatly contrasting size were unlikely to succeed because this agreement would not be forthcoming. Merger could be induced if the small bank were on the verge of financial collapse, but then the incentive for the large bank would be far less. Mergers between medium-sized mutual banks, or even between the small and medium-sized mutual banks seemed to offer the prospect of cost reduction, and the possibility of more adequate competition with the larger regional banks and city banks, but for the reasons cited above even these mergers were unlikely. This is one area which requires much more research. The comments are based on discussions with politicians, public servants and research staff of politicians.

38. There is also the question of contribution to finances of the LOP by small- and medium-sized financial institutions. We are unable to throw any empirical light onto this issue.

39. Memo from officer of the Banking Bureau, received June 1981. For comments on the Taiko Mutual Bank see Kin'ya zaisei jij6, 28 May-4 June 1979; Asahi Shinbun, 20 May 1979 (editorial). For comments on another troubled mutual bank, Tokuyo Mutual Bank, see Kin'ya zaisei jij6, 17 September 1979; Nihon Keizai Shinbun, 9 February 1981; Asahi Shinbun, 10 February 1979.

40. Interviews with two senior BOJ officers, April and May 1981. The BOJ clearly did not agree, as it refused to supply funds to Taiko Mutual or the other troubled banks. Privately, senior BOJ officers expressed puzzlement at the MOF's position, although they were willing to concede that the explanation was probably political. Interviewees throughout the financial sector backed up this opinion. The logic of the economic argument was almost non-existent. The Taiko Mutual Bank's assets amounted to barely 1 per cent of the assets of the Mutual Banks. In terms of the banking sector the proportion was 0.001 per cent. A government guarantee on the existing bad debts of the institution or use of the Savings Deposit Insurance scheme could have permitted the institution to close without any long-term effect on financial order. The existing branch activities and clients could have been sold by tender to another financial institution.

41. Yomiuri Shinbun, 18 June 1979. 42. This was the view encountered in discussions with bankers and politicians. 43. Horne, op. cit., Conclusion. 44. This metaphor was used in a discussion with Robert Kerr at the Australian

Embassy in Tokyo, May 1980. 45. See Horne, op. cit., Chapter 6. 46. See James Horne, 'National, International and Sectional Interests in

Policymaking: The Evolution of the Yen Bond Market 197G-82', Pacific Economic Papers, no. 98 (December 1982).

8 Social Policy: Pressures and Responses MARTIN COLLICK

INTRODUCTION

The aims of this chapter are twofold. It will first outline developments in the social policy field in Japan up to the early 1970s. It will then look in some detail at the arguments after that time on two issues: medical care for the aged and the reform of the pensions system, finally reviewing briefly the situation as it existed in those areas in 1985. 1

SOCIAL POLICY TO 1973

The Prewar Background

The main features of social policy up to 1945 can be summarised fairly briefly. 2

Two main factors served to inhibit government initiatives to legislate for the welfare of the nation as a whole. First and most significant was a long-standing conviction, based on traditional Confucian moral teachings, that the family and the local community were the proper organs for the relief of distress. In the Tokugawa period the feudal han and bakufu governments had intervened only when famine or other disasters threatened the regime itself; this att1tude was inherited by the rulers of Japan after the Meiji Restoration of 1868. The second factor was the dominance in postRestoration Japan of the doctrines of laissez-faire economics, which reinforced traditional attitudes by insisting that intervention was not only unnecessary, but positively harmful. The result was that much of the responsibility for the relief of the poor was left in the hands of private charitable institutions. At the same time, employers - both public and private - increasingly provided for the needs of their own workers, either directly, or by encouraging them in self-help through mutual aid associations. Such positive steps as the government did

205

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take were motivated by an almost obsessive fear of social unrest, or were a response to the needs of specific groups - veterans and war widows, for example- directly affected by government policy.

Despite the partial nature of government provision, a large body of welfare specialists did grow up, many of them armed with a high degree of commitment and expertise. One particularly important group were the Welfare Commissioners (Homen Iin, 3 the precursors of the postwar Minsei lin). They were first established after the Rice Riots of 1918 as an attempt to suppress social unrest by identifying its causes. By 1940 there were over 100 000 commissioners, the great majority of whom saw themselves as voluntary welfare workers rather than as instruments of social control. (A whole body of other organisations had been created by this time to perform this latter function.) With workers in private charitable bodies, and supported on the whole by the officials of the Social Bureau of the Home Ministry, the Homen lin formed a committed and vocal pressure group, which consistently advocated improvements in social policy legislation. However, it was not until the defeat of Japan in 1945 that an atmosphere existed where their efforts could be really effective.

The Postwar Occupation, 1945-52

Background4

After the surrender in 1945, the Supreme Commander, Allied Powers (SCAP) exercised complete control over all activities of the Japanese government. Jurisdiction over welfare matters was in the hands of the Public Health and Welfare Section (PH&W) of the Supreme Command, which was staffed, on the whole, with liberal and often idealistic officers. It is clear, moreover, that after an initial period of uncertainty and tension a close rapport was established between PH&W and the Ministry of Health and Welfare. Only in the very early stages of the Occupation was SCAP policy enforced predominantly by directives from PH&W to the Japanese side. There was a rapid transition to a system of continuing consultation; a PH& W directive would often be a mere formality, initiating a policy worked out in advance by both sides. It is not always easy, therefore, to determine whether a particular policy originated on the American or Japanese 'side'. By the same token, the formal end of the Occupation did not signal any dramatic changes of policy direction; by this time PH& W appears to have been holding little than a watching brief.

Martin Collick 207

An important influence on policy in this period was the publication, in July 1948, of the so-called 'Wandel Report'5 produced by a team of American specialists who had visited Japan in the previous year. One of their recommendations was for the unification and simplification of the whole social security system - a theme which was to recur frequently over the ensuing four decades.

A distinctive feature of postwar Japanese government has been the proliferation of consultative bodies, either set up privately by a minister to give him advice on a particular topic (usually entitled Ch6sakai or Kondankai), or established by legislation (Shingikai), with the right to give their opinion to the minister concerned on any matter within their field of competence, and to be consulted by him when new legislation is contemplated. The first of these statutory commissions in the social policy field after the surrender was the Social Insurance Commission (Shakai Hoken Shingikai). This was established in December 1945, with its first task being to consider what measures were needed to compensate for the disappearance of military pensions, abolished shortly after the surrender on the orders of SCAP. A non-statutory Social Insurance Survey Group had also been set up to consider wider issues, but following the publication of the Wandel Report, the Social Security System Commission (Shakai Hosh6 Seido Shingikai) was created, with the specific remit of discussing the whole area of social security policy. 6 This latter commission, which started operation in May 1949, has refused to content itself with merely 'rubber-stamping' the proposals for legislative change put before it by the Minister of Health and Welfare. Under the leadership of a succession of forceful chairmen, and backed up by its own research office, it has consistently recommended a unified approach to the whole social security system. It has also argued integration of social security and social welfare policy with other related- but administratively separate- fields, such as industrial and employment policy. 7

The Development of the Public Assistance System By August 1945 Japan had been virtually devastated. Some two million houses had been destroyed by Allied bombing; industry, transport and communications were in a state of chaos; unemployment was rife, and a considerable proportion of the urban population was on the verge of starvation. Official American policy was that SCAP should accept no responsibility for the maintenance of living standards, and should intervene only 'to prevent such starvation ...

208 Social Policy

disease and unrest as would ... permanently obstruct the objectives of the occupation'. 8 It was immediately obvious, however, that precisely such a situation did exist, and much of the energy of PH&W officials in the early months of the Occupation was devoted to the provision of emergency relief. But this relief was not to be distributed indiscriminately; in December 1945 SCAP set out, and the Japanese Government formally accepted, certain principles which were to underlie the administration of relief. 9

The most significant of these principles was an insistence that the need of the recipient should be the only factor determining whether, and how much, relief should be granted. This amounted to a rejection of the principle of 'less eligibility' which had been a major feature of the public assistance system in Japan in the prewar period. Nor was there to be discrimination in favour of certain groups, such as demobilised ex-servicemen, or repatriates from the former Japanese empire. This represented a complete reversal of previously existing Japanese policy.

By the spring of 1946 the immediate crisis appeared to have been overcome. This allowed SCAP and the Japanese officials responsible for the formation of welfare policy to shift their attention to longerterm objectives. The result was the enactment, in September of that year, of the so-called 'old' Livelihood Protection Law (Seikatsu Hogo Ho). 10

This new law explicitly accepted - for the first time in Japan's history- the duty of the state to care for those in need. At the same time it clearly enshrined the principle of 'blanket' non-discriminatory provision, and also signalled the withdrawal of the state from involvement with private charitable institutions. SCAP had insisted on these features, in order to prevent the Japanese government from showing special favour to those whose needs were a result of their involvement in the recent war - veterans, the war wounded, war widows and the like. The existence of these features also meant, however, that special treatment could not be accorded to any group, no matter how special its circumstances. As a result, it was impossible to make special provision for the needs of particular groups, such as the disabled, for example, or single-parent families. The law also retained the principle of 'less eligibility'; relief was denied to those 'who have no will to work . . . or make no effort to support themselves', and to those judged by the authorities 'to be of unsatisfactory behaviour'. This last provision was clearly particularly open to abuse.

Martin Collick 209

As a result of these and other defects, the law was replaced in 1950 by the 'new' Livelihood Protection Law. 11 In the interim the 1947 Constitution had been enacted, enshrining (in Clause 25) the right of the Japanese people to 'a minimum standard of healthy civilised life'. The new law echoed this constitutional provision, expressly guaranteeing the right of the citizen to demand relief from the state. A grievance and appeals procedure was established, andat least in theory - the principle of 'less eligibility' was finally renounced. Henceforward relief was to be determined on the basis of need alone, with no reference to the moral worthiness or otherwise of the claimant.

Health Insurance 12

The basis of the modern health insurance system had already been created by the end of the Second World War, as the product of a national policy which had emphasised the importance of a healthy population as a necessary condition for military strength. At the end of the war about one-third of the population of the Japanese empire was covered by some type of health insurance scheme. The core of the prewar system was the National Health Insurance Scheme (kokumin kenko hoken), which offered basic cover for the self-employed and others not in regular employment. In 1945 it comprised over 10000 Insurance Associations, with about 40 million members. There were also a large number of mutual aid associations (kyosai kumiai), operated by public enterprises and private companies on behalf of their employees, and usually providing pensions and other benefits as well as health insurance. Despite the very low level of cover provided by these schemes - the national scheme in particular - the rampant inflation of the immediate postwar years dealt an almost fatal blow to the system; two years after the surrender, only some 40 per cent of the Health Insurance Associations were still functioning, and by the end of 1947 the great majority of patients supposedly covered by insurance were receiving treatment entirely outside the system. Even for those still covered, rapidly rising premiums and the introduction of supplementary charges - borne by the patient -deprived the system of much of its usefulness. The government was able to save the system from complete disintegration only by lending funds to the insurers to enable them to fulfil their minimum contractual obligations. By staving off disaster in this way, however, the government also effectively deprived itself of the opportunity for a radical reform of the system as a whole.

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The first real step in the reconstruction of the system came in 1948, when responsibility for the operation of the National Health Insurance scheme was transferred from private Insurance Associations to local governments. The 1951 Local Tax Act contained provisions for a National Health Insurance Tax, to enable local authorities to carry out this responsibility.

Nevertheless the reconstruction process still required considerable support from central government, at first in the form of loans and later by massive direct subsidies. In this way, almost by default, the system ceased to be fully funded, and a 'mixed' system - funded partly by insurance and partly by subsidy - was established, which was to set the pattern for the future shape of health insurance in Japan.

The Pension System In 1945 there already existed schemes providing non-contributory pensions for some higher-ranking national and local government employees, for servicemen, for merchant seamen and for teachers in private educational institutions. There was also an embryonic Employees' Pension scheme for workers in private industry, which has been established in 1942. Its level of contributions had been set extremely high, however, and the first benefits were not to be paid until twenty years in the future. It is probably best regarded, therefore, as a type of disguised war loan, rather than a major step forward in the creation of a universal pension system.

Government employees' pensions were paid out of the national budget, but all the other schemes had been established on a fully funded insurance basis. In the galloping inflation of the postwar period they saw their accumulated funds virtually wiped out. Only the state-operated Employees' Pension scheme was able to continue paying benefits, and only then by diverting its resources almost entirely into disability and dependants' pensions, at the expense of those who had contributed in the hope of eventually receiving a retirement pension. It was clear, therefore, that the system would have to be reconstructed almost in its entirety, once economic conditions had returned to something like normality. This task was not to be undertaken, however, until 1954, after the end of the Occupation.

Martin Collick 211

Independence and Consolidation, 1952--73

Public Assistance Until the end of the 1950s the Livelihood Protection Law was virtually the only source of financial assistance available to all Japanese. It carried the whole burden, as it were, in a period when the rest of the system was not ready to do so. Between 1947 and 1950 the provision of public assistance under this law took up some 50 per cent of the Government's social security budget, and was still accounting for over 40 per cent in 1952, the last year of the Occupation. This proportion fell as economic conditions improved, so that by 1960 public assistance accounted for only about 25 per cent of the total cost of social security 13 This relative decline, however, was due to improvements in the rest of the system. The absolute level of expenditure on public assistance actually increased throughout this period, as benefit levels were raised, and the conditions of eligibility progressively relaxed. This trend was particularly marked after 1960, when high rates of economic growth made improvements in the level of relief relatively less and less expensive. By the early 1970s the general level of prosperity was such that the relatively small proportion of the population receiving public assistance could be treated as generously as in any country in western Europe, without their being regarded as an unacceptable burden on the exchequer. In 1974, the average expenditure per capita of families receiving relief was over 50 per cent of that in an employed person's household. 14 It was not the law itself that had changed, however, but the strictness with which it was applied. The law's provisions remained restrictive, and the way was left open for their strict enforcement should either economic conditions or the climate of opinion change.

Health Insurance By the late 1950s some economic stability had been restored to the health insurance system - though it remained complex and riddled with inequalities. There were wide differences in the levels of both contributions and cover between the different parts of the system, with the wealthy mutual aid associations being the most generous, and the government-run national scheme the least. Membership was not compulsory, with the result that a large proportion of the population had no cover whatsoever. This situation persisted until 1959.

In 1959 it became compulsory for all Japanese to have health

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insurance cover. 15 Employees in private industry would be insured through their place of work, and all others were to join a greatly extended National Health Insurance scheme, administered through local government bodies according to the place of residence of the insured.

For the next two decades the system operated satisfactorily, at least as far as the great majority of its members are concerned. Even the national scheme, which paid only 70 per cent of medical fees (50% for the dependants of the insured person) imposed no great burdens on patients in a period of prosperity and full employment. Only occasionally did the public at large feel the impact of the conflicts over financing and administration which were in fact endemic in the system. The insuring organisations, on the one hand, tried to hold down costs by restricting the fees paid to doctors, and by clamping down on overcharging and fraudulent claims, both of which were rife. The medical profession, for its part, has resisted what it regards as interference in the professional judgement of its members, and has claimed that rising costs are the result of bureaucracy and financial incompetence on the part of the insurers. This running battle has occasionally come into the open, as in 1960-1 when the Japan Medical Association held two one-day 'holidays', and threatened to withdraw en masse from the health insurance system. 16 The government was trapped between the two sides throughout this conflict. The Ministry of Health and Welfare, representing the interests of patients, was inclined to side with the insurers, while politicians in the ruling Liberal Democratic Party (LOP) tended to support the doctors, who form an important source of electoral support. The result was a succession of compromises, most of which have persisted until the present day; medical costs continue to rise, and rather than weaken the financial condition of the insurers, the government passed much of the additional burden onto the public. Not only did premiums rise, but an increasing number of 'special payments' (normally not covered by insurance) were also progressively introduced, eroding the principle whereby - except in the case of the national scheme - all the medical costs of the insured person were supposed to be covered.

Pensions The development of the pensions system in many ways parallels that of medical insurance. 17 Although the complicating factor of the involvement of the medical profession is absent, the inequalities

Martin Collick 213

between different parts of the system have been, if anything, more glaring than in the case of health insurance. The financial crisis too has been both deeper and less amenable to stopgap solutions.

In the closing years of the Occupation there had been virtually unanimous advice, from PH&W's welfare advisors, the Welfare Ministry, and the majority of academic commentators and statutory advisory councils, that the various pensions schemes should be unified into a single, integrated system. A number offactors, however, militated against this sort of radical change. First, by the time the Japanese economy had begun to recover from the war, the government was already committed to the comprehensive system of public assistance referred to above. This both reduced the immediate need and to some extent pre-empted the resources for a major reconstruction of the pensions system. Secondly, the early 1950s was the period of the 'reverse course' - of reaction against and partial retreat from 'imposed' Occupation reforms- which strengthened the government's ideological predisposition to rely on family solidarity and mutual assistance, rather than on protection from above. This went hand-in-hand with another deeply entrenched conviction: that the free working of the economic system was more effective than large-scale state intervention. The government had therefore encouraged the formation and re-formation of large numbers of mutual aid associations, both by providing funds, and by creating the legal framework for their operations. Finally, and probably most important, was the long-standing practice whereby large firms made extensive provision - including lump sum retirement benefits - for their employees. All these factors enabled the government to claim that a welfare state on the western model was unnecessary. In this they were supported not only by employers - who saw no advantage for themselves in being forced to contribute to the support of a state system - but also by the major trade unions, the great majority of whose members were precisely those who benefited most from the traditional system, heavily subsidised as it was by their employers. 18

The 1950s therefore saw the consolidation of existing pensions schemes, and the extension of government provision to specific groups in obvious need, such as children, widows and the disabled. By the end of the decade, however, there was a growing awareness among the general public of widespread and often severe poverty. 19 One result was the extension of pensions coverage to all Japanese, by the introduction of a new National Pension Insurance Scheme (kokumin

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nenkin hoken), membership of which was to be compulsory for all those not otherwise covered. 20

The new scheme, however, attracted little praise and widespread criticism. Some of this was due to the fact that it imposed additional burdens immediately, in return for benefits to be received in the rather distant future. More to the point, however, was the criticism that, like the health insurance scheme before it, it did little more than paper over the cracks in the existing structure, rather than rebuilding it altogether. The most vociferous critic was the Shakai Hosho Seido Shingikai which since its formation had consistently argued for the creation of a genuinely comprehensive and integrated social insurance system. 21 Luckily for the government- in the short term at least - the introduction of global compulsory pensions coverage coincided with the beginning of the Japanese 'economic miracle'. It was therefore relatively easy for the nation to bear the increased costs of a greatly enhanced system. Rapid economic growth brought a rapidly growing tax income for both national and local governments, and such contribution increases as were imposed on individuals were hardly a crippling burden in a period of rising prosperity. In fact, however, the government to some extent 'bought off its critics by raising contributions only slowly. As a result, what had been conceived as a fully funded system gradually ceased to be so, as the fund created by accumulated contributions fell further and further behind the level required to pay for future benefits. These chickens were to come home to roost after 1974.

SLOW GROWTH AND RETRENCHMENT, 1973-84

Background

When drawing up the budget for fiscal 1973 the government had announced that the year would be 'Year One of the Welfare Era' (fukushi gannen), when Japan would finally achieve levels of welfare provision at least equal to those in the industrialised West. 22 And indeed, the years 1973 and 1974 saw such an improvement in the system that this appeared to be no idle boast. There were those who claimed later in the 1970s that Japan was now a 'welfare superpower', which had not only equalled but outstripped her rivals. 23

In the field of pensions, there were massive increases in benefit levels in both the main schemes. The employees pension benefit was

Martin Collick 215

almost doubled, to a level equivalent to about 45 per cent of the average employee's income, while the national pension was raised proportionately. 24

Even more significant - both in terms of the security it provided for beneficiaries and of its implications for the stability of the systemwas the introduction of indexation. From 1974 all pensions were to be raised annually to keep pace with inflation, except in years where the Consumer Price Index had risen by less than 5 per cent over the past twelve months. In practice it has nearly always proved politically impossible not to raise benefits annually, even when the rate of inflation has been lower than 5 per cent. The overall effect of these changes was to produce a level of pension that the recipient could live on - or at least the prospect of such a pension at some time in the future.

Equally important changes were introduced in the area of medical care. In 1973 the proportion of a dependant's medical expenses defrayed by insurance under the National Health Insurance scheme was increased from 50 per cent to 70 per cent. An annual ceiling was also placed on the sum that a patient could be made to pay out of his own pocket.

A further innovation at this time was the introduction of free medical care for the aged. 25 This measure was an outstanding example of so-called 'pre-emptive welfare' (sakidori fukushi), whereby a local government initiative proved so popular that the central government had no choice but to bring in a similar scheme at the local level. Free medical care for the aged was first introduced by the Minobe administration in metropolitan Tokyo in 1969. By 1972 it had spread to nearly all of Japan's prefectures, and went into effect nationally in 1973. Its introduction was a step which successive governments were to regret over the next ten years.

By the end of 1973, just when the government had committed itself to these extensive - and expensive - changes, the economic situation changed dramatically. The 'oil shock' had occurred, and Japan's era of rapid economic growth had come to an end. In real terms Japan's gross national product experienced a negative growth in fiscal 1974. In a sense it is ironic that, just when Japan's welfare state was on the point of achieving levels of provision at least equal to most of the industrialised West, the ground should have been cut away from beneath her feet. On the other hand, it is precisely in times of economic crisis that adequate social provision is most needed. There is certainly no doubt that the indexation of pension benefits that

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had just been written into the law did much to soften the impact of the double-figure inflation of the next two years.

This inflation, however, coupled with the dramatic fall in the rate of economic growth, brought into the open the problems that had been masked or ignored in the preceding decade of (apparently permanently) increasing prosperity. By the beginning of 1975, Prime Minister Miki, who had come to power a little over a year earlier promising 'to rectify the inequities in Japanese society', was harping on a very different theme. 'The government', he warned, 'is neither a magician nor a Santa Claus; benefits have got to be paid for. 26

For the prime minister to make this sort of statement was easy; it was to prove far less easy to convince the public - or even the members of his own party- of the severity of the problems. The next five years saw the unfolding of a political and publicity battle whose results are only just becoming clear.

The problem was complicated, and the search for solutions made even more difficult, by a combination of factors. First was the overall deterioration in the government's finances. The government had relied increasingly on bonds to finance its budget deficit, but these were becoming progressively more difficult for the financial markets to digest without increases in interest rates. These, it was feared, would put in jeopardy the government's overall economic policy. It would also have been unacceptable to the government's backers in the business world. The obvious alternative - a rise in Japan's relatively low level of corporate and personal taxation - was also regarded as politically impossible. The course chosen has been to reduce public expenditure. The campaign for 'administrative reform', which has received so much attention in recent years, is in reality little more than a cost-cutting exercise, however much it may be heralded as the instrument of revolutionary change in Japanese politics and society (see Chapter 4).

Secondly, the fall in the rate of economic growth put increasing burdens on those parts of the social security system which had hitherto been relatively inexpensive. The period of rapid growth had brought levels of unemployment down to something near an irreducible minimum, and the number of people receiving public assistance under the Livelihood Protection Law had also fallen to very low levels. It had therefore been easy for successive governments to raise the levels of benefits for such people quite dramatically. In 1975, however, the number of registered unemployed, which had stood at less than 500000 in the early 1960s, rose to 1.1 million, and showed every sign

Martin Collick 217

of continuing to riseY There was a similar, if less dramatic, increase in the number of people receiving public assistance. 28 The problems of the social security system, therefore, were by no means confined to the areas of pensions and medical care.

Finally, there is the issue which to the outside observer seems to have taken over from the economic growth rate as a topic of almost obsessive interest for many Japanese: the rapid ageing of the country's population. This is the result not only of changes in the birth rate, but also of the fact that the life expectancy of the Japanese is now the highest in the world. The result will be that a relatively smaller population of productive age (between the ages of 15 and 65) will have to support an increasing number of dependent people aged 65 or over. It is estimated that whereas this dependent age group accounted for only 5 per cent of the population in 1960, and 9 per cent in 1980, it will have reached just over 14 per cent by the year 2000, and nearly 19 per cent by 2020. Whereas in the middle of the 1970s there were over seven people of productive age to support every dependent old person, by the year 2000 this ratio will have fallen to just over 4:1, and by 2015 to less than 3:1, where it is expected to remain until well after the middle of the twenty-first century.29

Although the problems facing the social security system are often exaggerated, or presented as if they were somehow unique to Japan, and incapable of political solution, they are nevertheless very real. It is an inescapable fact that the burdens on the system are going to grow quite rapidly, whereas under present arrangements the resources available are not. From 1975 onwards here have been insistent demands from business circles and from the political Right for an end to 'indiscriminate expenditure on welfare', and calls for 'a proper balance between benefits and contributions'. 30

The following sections of this chapter will trace the course of the political arguments concerning the future of the system, in two areas to which reference has already been made: medical care for the aged and public pensions. At its simplest this 'search for a proper balance' could be depicted as a straightforward struggle between the political Right (the LOP) and business interests on the one hand, and the labour unions and Opposition parties on the other, the latter also being supported by the so-called 'welfare lobby'. Even in the UK this would be an oversimplification; in Japan it would be grossly so. Given the balance of political power in postwar Japan, there has not been a time in the last two decades when the government could not

218 Social Policy

have forced through the Diet any changes which the LOP as a whole genuinely desired. If the picture had been as simple as that outlined above, therefore, the social security system could not have developed as it has. It would also have been trimmed back for more drastically once the period of rapid economic growth had clearly come to an end. One of the most interesting aspects of the whole 'administrative reform' exercise is that despite the virtually unanimous support of the business community- to which the LOP is popularly regarded as being entirely subservient- the party has signally failed to put through reforms with anything like the speed that the committees proposing them have demanded. The diversity of interests within the LOP, the Opposition within the Diet and the involvement of a variety of other participants have combined to produce a very complex scenario.

Medical Care for the Aged

The issue of free medical care for the aged illustrates very clearly the complexity of the process of change in the system. Free medical care for patients aged 70 and over had been introduced nationally in 1973. Treatment was to be covered entirely by insurance, with no contribution from the patients themselves. The government had been pushed into introducing the scheme against its better judgement, and in the face of fierce opposition from· the Ministry of Finance in particular. Even the Ministry of Health and Welfare was on the whole opposed to the measure, seeing it as a bottomless pit, quite capable of swallowing virtually the whole welfare budget. 31

The worst fears of the scheme's opponents were realised; it was so popular that- in the words of the 1974 Welfare White Paper- 'many hospitals were turned into old people's homes'. 32 By the following year, the White Paper was referring to the need to reintroduce charges for old people,33 while the Finance Ministry, with the vociferous support of its statutory Advisory Commissions, was demanding the effective abolition of the scheme. Nevertheless with a general election due in November 1976, and well aware of the scheme's popularity with a section of the electorate on whose support it relied, the government announced that it would remain in effect at least until the spring of 1978.34 By that time, however, the costs of this treatment were taking up approximately 30 per cent of the total expenditure of the National Health Insurance scheme, which had a disproportionately high number of old people amongst its members. Many local authorities too were complaining of great difficulty in

Martin Collick 219

bearing their share of the costs. This was a completely new factor; even some left-wing authorities, who had been the first to introduce this type of scheme, were now joining the chorus of demands for its revision. 35 It was clear that changes were bound to come; it was equally clear, however, that the scheme was too popular for it to be abolished altogether without major political repercussions. In the preliminary discussions on the national budget for fiscal 1980, the Finance Ministry proposed a drastic revision. This included the introduction of a rigorous means test, which would have taken about three million old people - about half the total eligible at the time -out of the scheme altogether. The Ministry of Finance was clearly staking out a negotiating position; the proposals were greeted with horror, not only by the 'welfare lobby' and the Ministry of Health and Welfare, but also by many LOP Diet members. Yet another election - this time for the House of Councillors - was in the offing, and the plan as put forward was seen as likely to be electorally disastrous. It was promptly withdrawn in return for a promise of definite action in the following year. But when the next year's budget discussions came around, the matter was again postponed- this time in return for actual legislation in 1982. On each occasion the Ministry of Finance had obtained substantial reductions in other parts of the Welfare Ministry budget in return for its acquiescence. These reductions had, in turn, strengthened the voices within that ministry in favour of major revision of the free medical care programme. 36 It was also becoming clear that no overhaul of the health insurance system as a whole - for which there was increasing pressure from virtually every quarter- would be possible while the National Health Insurance scheme was devoting such a high proportion of its resources to the provision of free medical care for the aged.

The Old People's Health Bill was first presented to the Diet in 1981. Having been withdrawn and then watered down considerably before re-presentation, in order to secure the support of LOP Diet members, it finally passed into law in August 1982 and came into effect in February of the following year. The presentation of the new law to the public was quite masterly in its attempt to mask the fact that the law's main purpose and effect was to reduce the availability of medical treatment to the aged. It purported to have as its main component a comprehensive plan for preventive health care for middle-aged and old people, to be administered by local authorities. Both in the law itself, and in the 1982 Welfare White Paper which summarised its contents, the financial provisions are treated as if they

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had been almost an afterthought. 37 Despite the disingenuous claims in the White Paper, however, the real aims of the Law were obvious. According to the Asahi Nenkan, 'Publicly the Ministry said that their aim was "for old people to awaken to the need for health care", but in fact its purpose was to prevent needless visits to the doctor - to stop the hospitals from turning into "old people's salons" '. 38 In fact the financial burdens imposed were not high: 400 yen per month for outpatients, and 300 yen per day for inpatients, which are token sums compared with the estimated actual cost of 3000 yen per visit, and 10 000 yen per day, respectively. The aim was clearly not to collect fees from old people, but to deter them from visiting the doctor, and thus to reduce the pressure on the health insurance system.

A further provision of the new law redistributed the cost of old people's medical care, so that more of the burden was borne by the relatively affluent occupational schemes, and less by the National Health Insurance scheme, with its disproportionately high number of older members. The Ministry of Health and Welfare estimated that the annual saving on the national health insurance budget would be approximately 157 billion yen, of which the occupational schemes would have to shoulder about half. The revised bill had in fact been opposed by both the management and labour union side of private industry who regarded its provisions as an entirely unjustified expropriation of their contributions to the occupational sector of the health insurance system.

Together with the introduction of the revised law, the Ministry of Health and Welfare had been putting pressure on local authorities to adjust their own overgenerous schemes to fit in with the law provisions. By the end of 1984 most of them had done so, often with only thinly disguised relief at being forced by central government to take a step which though financially desirable was likely to be electorally unpopular.

Compared with the long-running battle over the reforms of the pensions system - a discussion of which follows - the debate over medical care for the aged had been little more than a skirmish, lasting barely ten years from beginning to end. Nevertheless even the much simplified account given here casts an interesting light on the process of political decision making in Japan, at least in so far as it concerns social policy decisions. The first point of interest is the almost completely ineffectual nature of the opposition put up by the leftwing political parties in the Diet, all supposedly dedicated to the preservation and improvement of the social security system. Through-

Martin Collick 221

out the ten-year period, the most vocal and persistent parliamentary opposition came from within the LDP itself. This was extremely effective, especially when an election was on the horizon. Secondly, the statutory Advisory Commissions on the Welfare Ministry side played a relatively minor role. The Finance Ministry not only mobilised its Advisory Commissions, but felt it necessary to make use of the recommendation of the Provisional Commission on Administrative Reform (Rinch6) with its hand-picked membership of businessmen and generally conservative academics. The whole course of the debate suggests a far greater degree of diversity in the decision-making process than might be expected from a government with a massive parliamentary majority, which is often accused of riding roughshod over all opposition.

The Reform of the Pensions System

The financial crisis in the pensions system was in great part a result of decisions consciously taken at the time the Employees' Pension scheme was reconstructed in 1954. It was felt necessary at that time to keep the burden on the relatively small number of participants below the level strict adherence to actuarial principles dictated. Premiums were set artifically low, with the intention that they should be progressively raised in later years, as membership grew. In fact, however, the political decision to raise contributions has - quite naturally - always proved harder to take than one to raise the level of benefits. As a result, the situation of the Employees' Pension fund, far from improving, progressively deteriorated with the passage of time. Secondly, the government was faced by the fact that the longer it took to rectify the situation by increasing the level of contributionseither directly, in the form of higher premiums, or by a subvention from general taxation - the greater the burden would have to be on those contributing at the time the decision was taken. Finally, there was the problem of the relationship between the various parts of the system. Not only did the levels of benefit vary widely between the different schemes, but the benefits were paid at three different ages: 65 in the National Pension scheme, 60 in the Employees' Pension and 55 in the semi-independent schemes run by mutual aid associations for public employees and other special groups. There was already considerable public sensitivity to these inequalities - particularly about the apparently favourable treatment accorded to civil

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servants - and any change in part of the system was likely to exacerbate these problems. 39

A variety of solutions was possible. The most radical would be to recast the whole system, abandoning the existing diversity in favour of a single national scheme with equal coverage for all citizens. It would also of course have been possible to solve the immediate financial problems by raising premiums to a level that would make the system actuarially sound, or by providing an equivalent subsidy from public funds. In terms of practical politics, however, the first of these solutions was out of the question- at least in the mid-1970sand the second extremely difficult. From the government's point of view, by far the simplest solution was merely to raise the age of entitlement to the Employees' Pension by five years, to 65 for men, and 60 for women. This would have the great attraction of imposing no immediate burden on the present generation, whilst its disadvantages would not be felt until some time in the future, when the change eventually came into effect.

By the beginning of 1975 it was clear that this was the government's preferred solution. Its execution, however, was not going to be as straightforward as they had hoped.

There were a number of participants in the drama that unfolded over the next five years. First the government, whose objective was to re-establish the financial soundness of the pensions system with as little political upheaval as possible. Its interests were not necessarily identical with those of the governing LOP. Factional interests, and considerations of electoral advantage by individual members, meant that the LD P could not be relied on for unquestioning support of government initiatives. The Ministry of Health and Welfare was also concerned for the system's financial soundness, though its support for the government was modified by a desire for bureaucratic tidiness and efficiency, which would be best served by a complete reform of the whole system. It also felt a genuine reluctance to see a reduction in the quality of provision in a scheme which it had the responsibility of administering.

On the other side of the stage were ranged the representatives of both the employers (as contributors) and of employees (as both contributors and beneficiaries of the scheme). As far as this issue was concerned they spoke with a single voice, opposing any increase in contributions, reduction in benefits or raising of the age of entitlement. They were supported in this stand by all the opposition political parties.

Martin Collick 223

The final major participant was the Social Security System Commission, which had the duty of advising the prime minister on all aspects of the social security system. Its recommendations, while not binding, have consistently been so closely argued and so well supported by research that it has been difficult for governments to ignore them entirely. This independence of mind and thoroughness of approach have been evident since its formation; it has consistently argued for a unified approach to the whole social security system, and opposed short-term partial solutions to its problems.40 It was to continue to pursue this line in its deliberations on the question of the pensions system.

In July 1975 the Financial System Commission, a statutory body reporting to the minister of finance, advised him that in order to prevent an unacceptable drain on public funds in the future, the pension system should be rationalised 'by ceasing to raise benefits, and instead by raising contributions to an appropriate level'. 41 This advice gave further ammunition to the government in its campaign for a more realistic relationship between contributions and benefits. In December of the same year, however, the Social Security System Commission presented to the prime minister its own recommendations, in a document entitled 'The Pattern of Social Security in an Ageing Society'. In this it insisted that the quality of the social security system should be maintained, despite- or, rather, precisely because of- the deterioration in the country's economic circumstances. It urged the government to make the necessary resources available out of taxation, and ignored completely the idea that the load on the pensions system could be lightened by raising the age of eligibility. It demanded instead that pensions should be regarded as only one part of a comprehensive policy for the aged, another part of which should be the provision of opportunities for employment. 42 This was a reference to the problems caused by the common practice - particularly in large companies - of enforcing a compulsory retirement age of 55. Should the age of entitlement to the Employees' Pension be raised to 65, there would be a ten-year blank when no support was available. Under conditions of rapid economic growth it had been relatively easy to find new employment even at 55, but it was precisely this age group which had suffered most in the changed employment conditions since the 1973 'oil shock'.

The 1975 Welfare White Paper, published in February 1976, had as its theme 'The Future Shape of Social Security'. It dwelt at length on the need for a burden - through taxes and contributions -commensurate with the level of benefits, pointing out that the

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Japanese paid a far lower proportion of their income in taxes and social insurance contributions than any of the advanced nations of the West. 43 It also called for a change in the age of entitlement to the Employees' Pension to 65, though it did pay lip-service to the need for a simultaneous discussion of the problems posed by Japan's generally low retirement age. 44

Running through all these opinions, and through speeches made during 1975 by members of the government, was support for the idea of a 'national minimum' to be achieved through a rationalisation of the benefits currently provided by eight separate pensions schemes. In fact, however, the term 'national minimum' itself was virtually the only common factor in the various proposals. The government's position was outlined by the welfare minister in November 1975. He proposed a basic pension, payable from the age of 65, and financed out of taxation. All the existing pensions schemes would continue, but would provide an earnings-related benefit additional to the basic pension. This basic pension would be set initially at a level of 20000 yen per month - some 33 per cent higher than the non-contributory Welfare Pension, but only about 35 per cent of the benefits paid by the employees' scheme.45 He made no reference to the retirement age, or to the problem of employment opportunities for older workers.46 His proposal had the great advantage, from the government's point of view, that it would replace the state's support for the existing system by a single, comprehensive - but low-cost -scheme. It would be funded out of taxation, and pay low levels of benefit, with only a vague financial commitment for the future. The minister provided no details of the way the scheme would operate, and the whole proposal was quickly dismissed as a piece of illconsidered political kite-flying.

The Social Security System Commission's approach is well illustrated by a detailed recommendation which it presented to the prime minister in December 1977.47 It too proposed a basic pension- at a level sufficient to support the recipient - payable as of right to all citizens from the age of 65. The government should withdraw its support from all existing pensions schemes, which would be converted to a 'pure' insurance basis, providing a supplement to the government's basic pension. This, the commission proposed, should be financed by a new 2 per cent 'pensions tax' levied on incomes. It placed great emphasis, moreover, on the need to improve the employment opportunities of older workers and to raise the retiring age, before any change was made in the age of entitlement to a

Martin Collick 225

pension. In that it accepted the principle of entitlement at the age of 65, this report could perhaps be seen as a move in the government's direction. Its proposal for a new pensions tax, however, and its continued insistence on a linkage between employment policy on the one hand and the age of entitlement on the other, meant that the gap between the commission and the government was as wide as ever.

The parties to the discussion were to a great extent talking in a vacuum. The whole topic appeared to arouse little public interest -certainly not to the extent that one could begin to talk about the emergence of any sort of consensus among the people as a whole. In fact, perhaps the most significant development over the next year was what was clearly an organised campaign on the part of the Welfare Ministry to educate the population by making them aware of the magnitude of the problem, and softening them up, as it were, in preparation for the unpleasant decisions that lay ahead. 1978 saw the publication of a flood of books, pamphlets and survey reports, all hammering home the message that the public must accept the necessity for higher premiums and a rise in the age of entitlement to the Employees' Pension. 48 Nor is there any doubt that the campaign was effective, at least in making the public aware that a major problem existed. By the end of 1978 the phrase 'the ageing society'49

had become a part of the ordinary vocabulary of the man in the street.

In April 1979, the Discussion Group on the Basic Structure of the Pensions System50 presented a report containing the results of three years' deliberations. They were highly critical of the government's continued failure to undertake a thoroughgoing overhaul of the system. In particular they criticised the practice of raising benefits while holding down contribution levels, a practice that they identified as the main cause of the financial problems faced by the system. At the same time, however, they rejected the 'total restructuring' approach of the Social Security System Commission. They recommended instead that the government should immediately start raising the level of contributions. Simultaneously they should gradually raise the age of entitlement for the whole pensions system to 65 - including the mutual aid associations, currently paying benefit from the age of 55 - over a period of twenty years. 51 It seemed at last that the government had received outside advice that was likely to be politically advisable. Indeed, a revision of the Mutual Aid Association Law, raising the age of entitlement to 60, was to pass through the Diet with little difficulty at the end of December.

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In September, however, yet another statutory advisory body, the Employees' Pension Subcommittee of the Social Insurance Commission, presented two separate replies to the welfare minister's request for advice on the matter. The majority report, signed by the eight members representing employers and employees, advised that 'it would be inappropriate to raise the age of entitlement in view of the present economic and employment conditions'. The minority report of four 'public interest' representatives recommended that the 1980 revision of the Employees' Pension Insurance Law52 should include a clause raising the age of entitlement 'in order to avoid a financial crisis in the system' _53 In December 1979 the minister announced his intention of raising the age of entitlement to 65 over a period of twenty years. 54

By this time, however, the Social Security System Commission had intervened, repeating its demand that any change in the age of entitlement should only be enacted as part of a totally new taxfinanced system. In particular it again insisted that it should be accompanied by measures which acknowledged the status of the 60-65 age-group as part of the labour force, and offered them realistic guarantees of employment. 55 These proposals had no real chance of being adopted. The government had just come through an election in which it had fared less well than expected, largely due to tentative proposals by the prime minister to raise taxes. Proposals for new taxation was therefore out of the question, especially when the government faced yet another election in about six months' time. Nevertheless the fact that both the Social Security System Commission and a majority of the Employees' Pension Subcommittee were firmly opposed to the government's proposals, considerably reduced their chances of becoming law.

The details of the Government's proposed revision were announced in January 1980. The current ages of entitlement to the Employees' Pension (60 for men, 55 for women) were to be raised in one-year steps at intervals of three years. The first group that would have to wait until the age of 65 before receiving a pension would thus be men born in 1935.

As required by the Employees' Pension Insurance Law, the Bill for its revision was submitted to the Social Insurance Commission (and to the Social Security System Commission) for their comments and advice. Perhaps predictably the reaction of both commisions was unanimously hostile. The Social Insurance Commission resented the fact that the majority report of its Employees' Pension Subcommit-

Martin Collick 227

tee had been ignored, while the chairman of the Social Security System Commission went so far as to say that he could not place on the table before the commission 'a proposal which runs entirely counter to its recommendations'. 56

Signs of disunity were also appearing within the government. First, the Ministry of Labour was worried about the problems likely to be caused by a widening of the gap between the retirement age and the age of entitlement to a pension. At the same time it was unwilling to admit that the question of the retirement age was any concern of the Welfare Ministry. Secondly, in an attempt to answer the criticism that his proposals would again put the Employees' Pension recipients in an unfavourable position compared with those insured by the mutual aid associations, the welfare minister proposed in cabinet that the age of entitlement for these too should be raised to 65. This suggestion was received with something less than enthusiasm by the ministers of education, agriculture and home affairs, who had only just finished guiding through the Diet a Bill raising from 55 to 60 the age of entitlement for the mutual aid associations under their jurisdiction. 57

During January 1980 the secretary-general of Soh yo, Japan's largest trade union confederation, announced that blocking the proposals would be one of the main aims of that year's 'spring struggle', while all the opposition parties declared their determination to prevent the Bill's passage through the Diet. The final blow to the Bill's chances of success came at the end of January 1980, when the leaders of the LOP asked for a meeting with the welfare minister, and formally registered their opposition to the proposal to raise the age of entitlement. 58 Their objections are reported to have been directed towards the failure to link the proposals with any measures to raise the compulsory retirement age, but there is little doubt that their main concern was with the likely effect of the proposals on the party's electoral prospects in the forthcoming House of Councillors election.

After this meeting, the withdrawal of the proposals was a foregone conclusion, but the minister insisted on waiting for the formal response of the two commissions to which it had been submitted. These were announce(,i in mid-February; both commissions condemned the proposals as premature and ill-considered, and on the same day the government announced that it was withdrawing them from the Bill.59

Although this particular battle had clearly been lost, the government was not willing to admit complete defeat. It included in

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the Bill- now stripped of any proposal to raise the age of entitlementa regulation to the effect that the matter was to be reconsidered at the next regular revision of the Law in 1985. However, in spite of government assurances that this was in no way prejudging the issue, the Opposition insisted that the Bill contain no reference to the subject. Eventually a compromise was reached; the proposed regulation was excised, and the Opposition parties agreed to accept the contribution increases that they had hitherto opposed. Employees' Pension benefits were raised by 26 per cent and contributions by 16.5 per cent.

Although, as we shall see, the government's retreat by no means settled the issue of the pensions system once and for all, it does mark the end of a chapter. Hereafter the government was to abandon its piecemeal approach to the problems of the system and accept - in principle at least - the position taken by the Social Security System Commission, that a total reshaping of the system was necessary. It also exerted pressure on private industry to move gradually towards a higher compulsory retirement age, which went some way towards satisfying the commission's longstanding insistence on a linkage between the ages of retirement and of entitlement to the Employees' Pension.

One thing that the five-year campaign had achieved was a very real change in public awareness concerning the issue. In one sense this was likely to make change more acceptable: the public were now in no doubt that there was a very real financial crisis in the system. On the other hand, the continual coverage of the issue appears to have raised public expectations. While the government's propagandists still pointed to the serious implications of the rapid ageing of the population, its exhortations now took on a more positive note, emphasising the 'traditionally Japanese' virtues of self-reliance and mutual assistance. This appeal to national pride also had explicit overtones of contempt for the western experience. There was no need, it was claimed, for Japan to copy the western model of the welfare state; her postwar economic success had been achieved by her own efforts and in her own way. The economic malaise of western Europe was attributed explicitly to the demoralising effects of dependence on state support. 60

A further significant contribution to the campaign was the pressure from the Rinch6, and in particular the public pronouncements of its chairman, Doko Toshio. The Rinch6's initial Report, issued in July 1981,61 took an entirely negative attitude to social security. Its tone

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was typified by such phrases as 'the encouragement of self-reliance and self-help' and 'respect for the habit of individual responsibility'. Welfare provision was to be restricted to 'those genuinely in need of relief'. The report was condemned- quite accurately- by the 'welfare lobby' and the political Left as 'a return to nineteenth-century views of social security'. 62 It also aroused something akin to panic within the Ministry of Health and Welfare, which had apparently not anticipated quite such a thoroughgoing denunciation of virtually all that it stood for. 63

By the time of the 1982 preliminary discussions on the national budget a general mood of financial crisis had been effectively creatednot only in political and business circles, but among the public at large. There was talk of a 'zero ceiling' on budget growth, and when the final figures were announced in December of that year, the Welfare Ministry had been held down to a growth of 2.9 per cent, almost all accounted for by automatic increases in pensions and health benefits. 64

Regardless of the precise figures, the point had been made that the welfare budget was no longer inviolable. In the autumn of 1981 the welfare minister yet again asked his advisory commissions to consider measures for a radical revision of the pensions system. The next actuarial recalculation of pension benefits was due in mid-1985, and the ministry was now resigned to the necessity for considerable reductions in benefit levels in the long term -however well disguisedif the system itself was to survive.

Before either of the main advisory bodies had formulated their proposals, Doko's Rincho produced its main report. 65 In presenting it, Doko made no secret of his irritation at the government's reluctance to take vital decisions. The report called for the unification of the various pensions schemes into a single system, and virtually demanded concrete, long-term proposals from the government by the end of 1983. The report was immediately accepted, and the LOP agreed in principle to a complete reorganisation, to be completed by 1995.66

The LOP had in fact been far less obstructive of proposals on pensions than it had in the case of free medical care for the aged, which clearly affected the immediate interests of an easily identifiable and important constituency. The issues of pensions was far less likely to be electorally damaging, particularly after the barrage of propaganda which at one level had depicted the issue as a clear choice between lower pensions and higher taxes, and at another as virtually affecting Japan's national survival.

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POSTSCRIPT, 1984-5: COLLAPSE OR CONSOLIDATION?

The next two years saw changes in both the medical care and pensions systems which, in both their practical effects and their long-term implications for the future of the Japanese welfare state, are probably more significant than any since the introduction of compulsory coverage at the end of the 1950s. The two areas which chiefly concern us here, however, were treated in very different ways.

Health Care

Compulsory health insurance cover for all, instituted at the end of the 1950s, can be seen as the basis for over two decades of steady progress, which was reversed in 1982, with the abolition of free medical care for the aged. This was regarded, even at the time, as a turning-point; it is now clear that it marked the beginning of a period of serious decline in the provision of publicly insured health care.

At a press conference in August 1983 the health and welfare minister described his long-term vision of the health insurance system. 67 He announced his intention of lowering the percentage of the medical costs paid for by the employees' health insurance schemes from 100 per cent to 80 per cent. He also proposed a move towards 'basic medical care'- in other words, 'special' treatment and medication would be paid for by the patient. The reduction in cover was presented as 'a rectification of inequities in the system', since the National Health scheme pays only 70 per cent of the insured's costs. 68 In effect, however, it clearly represented a 'levelling downwards'. Despite considerable opposition from both the LOP and the Opposition parties, a revision of the Health Insurance Act passed through the Diet, and came into effect in October 1984. The original proposal had had to be modified, so that the reduction in the proportion of costs covered was 10 per cent rather than 20 per cent, with a further 10 per cent cut to be imposed at a later date. Patients would hereafter be asked to pay out of their own pockets for certain medicines, as well as for the cost of meals provided by the hospital. There were minor concessions to assist patients on low incomes, but the overall aim of the revision was clearly to cut costs, and thus to create 'an unshakeable basis for health care in the age when lifeexpectancy is 80 years'. 69 The financial problems are undeniable, but the chosen solution for them has clearly been to move away from

Martin Collick 231

global coverage to a means-tested system, providing even those clearly in financial need with a reduced level of provision.

Pensions

Despite claims that the changes in the health insurance system are the first steps towards a soundly based uniform system, the reality is still a series of cost-cutting measures, without any clearly discernible overall vision for the future. The reform of the pensions system, by contrast - partly at least because of the relentless pressure in that direction from the Social Security System Commission - is clearly moving very rapidly towards the creation of a single, comprehensive system. The reason for the relative ease with which this has been achieved is threefold: the effective creation of public awareness of the problems of 'the ageing society', and something approaching a consensus as to the most acceptable solution;70 a 'levelling down' process which means in this case that a majority of the population stands to gain rather than lose; and, finally, the fact that the heaviest burdens and the reductions in benefit will come into effect at a point some time in the future.

In February 1984, a cabinet meeting decided on a 'Programme for the Reform of the Public Pensions System'. 71 This would create, a single 'basic pension' system, membership of which would be compulsory for all adults, regardless of sex or employment status. This would replace the existing National Pension, and would be introduced into all the other schemes, which would eventually turn into 'supplementary' pensions, providing an earnings-related benefitfor an additional premium - on top of the basic pension. The first stage of this process was to be the unification of the National and Employees' Pension schemes. The Bill putting this into effect was presented to the Diet in March the same year, and after considerable discussion, but only marginal revisions, was passed into law in January 1985, to take effect in April the following year. Bills followed to bring the other employees' schemes into the system, and by 1995 there will exist one national scheme, demanding greatly increased contributions from its members, but designed to provide an income for all its members sufficient to guarantee them a standard of living 'commensurate with that which they enjoyed when working'. 72

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CONCLUSIONS

Two major conclusions can be drawn from this brief survey of two issues in the postwar controversy over the shape of the Japanese welfare state. The first is that, despite the continuing dominance of the LOP in Japanese politics, the diversity of influences on the decision-making process is hardly less than in countries where an alternation of parties in power is the norm. The instability of the coalition of factions that make up the LOP renders governments highly sensitive to pressure from Diet members, who in their turn are well aware of shifts in opinion within their constituencies. The frequency of parliamentary elections makes this pressure extremely effective, more than compensating, it would appear, for the lack of a powerful Opposition party within the Diet. The social policy area differs from many others in that the interests of the responsible ministry - in gaining a larger share of the budget and thus increasing its influence- often coincide with policies more often associated with the political Left, and thus serve as a powerful force working against the generally hostile pressures from the government. The ministry has had a powerful ally in the Social Security System Commission, which - unlike its counterparts in the fields of economic and financial policy - has consistently exerted its independence from the government to which it reports.

The second conclusion to be drawn concerns the persistence or otherwise of 'traditional' values and attitudes, and to some extent contradicts the implications of the previous paragraph. It appears quite possible that in retrospect the struggles over social policy between 1973 and 1985 will be seen as part of a somewhat longdrawn-out 'reverse course', away from the welfare ideology of the postwar years and towards a re-establishment of the values which held sway until the end of the Second World War. There is no doubt that the rhetoric of the early 1980s bears a strong resemblance to that of nearly a century earlier.73 On the other hand, there is no doubt that social security is now generally accepted as an integral part of contemporary Japanese life. While economic prosperity and a relatively free and democratic political system continue, it is unlikely that the gains of the last forty years will be altogether lost, though the events of the last decade provide disturbing evidence of their fragility.

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NOTES

1. Despite the importance of other areas, such as unemployment insurance and the whole range of personal social services, restrictions of space mean that it will be possible to make only passing reference to them here.

2. In Japanese the standard source for the prewar period is Yoshida Kyiiichi, Nihon shakai jigy6 [A History of Social Enterprise in Japan] (Keiso Shobo, 1966) pp. 18-288. The fullest source in English (which draws heavily on Yoshida) is Toyori Tatara, 1400 Years of Japanese Social Work from its Origins through the Allied Occupation, 552-1952, 2 vols, Doctoral Dissertation, Bryn Mawr College (1975) [hereafter referred to as Tatara (1)] pp. 11-194.

3. Tatara (1), vol. 1, pp. 145-67 is a useful description of the origins and role of the Homen lin, which shows clearly that they were first conceived of as agents of social control. See also Zenkoku Shakai Fukushi Kyogikai (ed.), Minsei iin seido 50-nenshi [50-Year History of the Public Welfare Commissioners] (Zenkoku Shakai Fukushi Kyogikai, 1969).

4. This period is treated in considerable detail in Tatara (1), vol. 1, pp. 279-end, vol. 2. Toyori Tatara, 'The Allied Occupation and Japanese Public Welfare: An Overview of SCAP Activities during the Early Phase', in T. W. Burkman (ed.), The Occupation of Japan: Educational and Social Reform (Norfolk, VA: MacArthur Memorial, 1982) [hereafter referred to as Tatara (2)] is an analysis of SCAP activities in the welfare field up to mid-May 1946.

5. Social Security Mission to Japan, Report of the Social Security Mission to Japan (Washington, DC: Department of the Army, July 1948).

6. Shakai Hosho Kenkyiijo (ed.), Sengo no shakai hosh6 [Postwar Social Security] (Shiseido, 1968) (hereafter referred to as SSH) vol. 1, p. 5.

7. SSH, vol. 1, pp. 5-7. 8. SWNCC 107/1, 'Policy with respect to Relief in Japan', 1 October 1945,

in Okurasho Zaiseishishitsu (ed.), Sh6wa zaiseishi [A Financial History of the Showa Period] (Toyo Keizai Shinposha, 1982) vol. 20, pp. 582-3.

9. SSH, vol. 2, pp. 5-7; Tatara (2), pp. 319-20. The crucial SCAP directive was SCAPIN 404 of 8 December 1945.

10. Law no. 17, 9 September 1946. 11. Law no. 144, May 1950. 12. Sugaya Akira, Nihon shakai seisaku shiron [A History of Japanese

Social Policy] (Nihon Hyoronsha, 1978) pp. 197-331, gives a concise account of the major developments in social policy up to the early 1970s, which forms the basis for this and the following section. There is no general study in English.

13. Koseisho Daijin Kanbo, Kikakushitsu (ed.), Kosei hakusho (Showa 35 nendo ban) [1960 Welfare White Paper] (KoseishO, 1960). These annual publications [hereafter referred to as (Year) Welfare White Paper/, as well as providing a wealth of factual information, also contain editorial material giving a fairly reliable indication of thinking within the Ministry

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of Health and Welfare, or at least of the direction in which the ministry wishes to guide public opinion.

14. S6rifu Shakai Hosh6 Seido Shingikai Jimukyoku (ed.), Showa 50 nenban shakai hosh6 tokei nenpo [Social Security Statistical Yearbook for 1975] (Shakai Hosh6 H6ki Kenkyujo, 1976) p. 92.

15. The National Health Insurance Law (Kokumin Kenko Hoken Ho) [Law no. 192, December 1958 (taking effect the following year)] was a complete revision of the wartime law of the same name.

16. W. E. Steslicke, Doctors in Politics (New York: Praeger, 1973) contains a detailed account of the events of this period, and a study of the role of the Japan Medical Association as a political pressure group.

17. Several organisations - notably the Mutual Aid Associations - in fact provide both pensions and health insurance cover for their members.

18. See, for example, the arguments summarised in SSH, vol. 1, pp. 30-1. 19. The 1957 Welfare White Paper had attracted considerable comment with

its revelation that 10 million Japanese lived below the level which would entitle them to public assistance.

20. The National Pensions Law (Kokumin Nenkin Ho) (Law no. 141, May 1959) was passed in 1959, and came into effect in 1961.

21. SSH, vol. 1, p. 43. 22. Asahi Shinbunsha (ed.), Asahi Nenkan (Asahi Shinbunsha, 1974)

pp. 283, 533. 23. See, for example, Nakagawa Yatsuhiro, 'Nihon koso sekaiichi no

fukushi ch6taikoku da' [The World's Top Welfare Superpower is Japan], Chilo Koron, vol. 93, no. 8 (August 1978) pp. 86-103. A condensed translation appears as 'Japan, The Welfare Superpower', Journal of Japanese Studies, vol. 5, no. 1 (Winter 1979), pp. 5-51.

24. It is worth noting, however, that the figures for benefit levels referred to the hypothetical case of someone who had been in the scheme long enough to receive a full pension. In 1974 such people formed only a tiny proportion of all pensioners. The number was of course to increase as the system 'matured'.

25. This issue is treated in some detail in John C. Campbell, 'The Old People Boom and Japanese Policy Making', Journal of Japanese Studies, vol. 5, no. 2 (Summer 1979), pp. 321-35.

26. Asahi Shinbun, 25 January 1975. 27. In 1985, unemployment stood at about 1.5 million, which, though low

by any international yardstick is three times the level of the boom years. 28. The number of households receiving assistance under the Livelihood

Protection Law rose from 689000 in 1974 to 724000 in 1977. In 1983 it stood at over 780 000.

29. 1980 Welfare White Paper, pp. 155-7. 30. See, for example, Asahi Nenkan (1977) pp. 533.-4. 31. Campbell, op. cit., pp. 330-5. 32. 1974 Welfare White Paper, p. 91. 33. 1975 Welfare White Paper, pp. 127-8. 34. Asahi Nenkan (1977) p. 533. 35. Asahi Nenkan (1978) p. 469. 36. Asahi Nenkan (1981) pp. 440-1.

Martin Collick 235

37. 1982 Welfare White Paper, pp. U-19. 38. Asahi Nenkan (1983) p. 440. 39. Japanese Government, Social Insurance Agency, Outline of Social

Insurance in Japan (Japan International Social Security Association, 1982) pp. 61-93, and chart following p. 130. This pamphlet illustrates very clearly the complexity of the whole social insurance system as it existed up to 1985.

40. SSH, pp. 6-61. 41. Asahi Nenkan (1976) p. 495. 42. Ibid. 43. 1975 Welfare White Paper, pp. 64-131. 44. Rivalry between ministries served to complicate the problem even

further. The Ministry of Labour considered that the question of the age of retirement was an employment matter, and therefore its concern, and did not take kindly to uncalled-for pronouncements on the matter by the Ministry of Health and Welfare.

45. Sorifu Shakai Hosh6 Seido Shingikai Jimukyoku (ed.), Showa 50 nenban Shakai Hosh6 T6kei Nenp6 [Social Security Statistical Yearbook for 1975] (Shakai Hosho Hoki Kenkyujo, 1976) p. 156. The National Public Employees' Mutual Aid Association paid on average 87 578 yen per month, whereas the average monthly payment under the Livelihood Protection Law (for a single person, outside Tokyo) was 38572 yen (ibid., pp. 171; 1976 Welfare White Paper, p. 377).

46. Asahi Nenkan (1976) p. 497. 47. Asahi Nenkan (1978) p. 469. 48. Typical examples are: Konomura Tomokazu, K6reisha Shakai no K6zu

[The Structure of an Ageing Society] (Kyosei Shuppan, 1978); Nihon Keizai Shinbunsha (ed.), Nenkin Kiki [The Pensions Crisis] (Nihon Keizai Shinbunsha, 1978); Maruo Naomi, Nenkin Kakumei [The Pensions Revolution] (Nihon Keizai Shinbunsha, 1978).

49. Koreisha shakai or k6reika shakai. 50. This proliferation of advisory groups, often reporting to the same minister

on the same topic, is ostensibly a product of a desire to consult the widest possible cross-section of opinion before making a policy decision. Since the composition of such statutory bodies as the Social Security System Commission is fixed by law, it is often useful for a minister to have 'private' advisory bodies on hand. Their membership is often obviously chosen so as to make it likely that they will tell him what he wants to hear, or at least that their recommendations will be politically acceptable.

51. Asahi Nenkan (1980) p. 467. 52. Revisions of the Law are necessary in order to adjust benefit levels, after

a formal actuarial review of the system's finances. 53. Asahi Nenkan (1980) p. 467. 54. Asahi Shinbun, 19 December 1979. 55. Asahi Nenkan (1980) p. 467. 56. Asahi Nenkan (1981) p. 435. 57. Ibid.

236 Social Policy

58. Ibid. 59. Ibid. 60. See, for example, Jiyii Minshut6 (ed.), Nihon-gata fukushi shakai

[A Japan-Style Welfare Society] (Jiyii Minshut6 K6h6 linkai Shuppankyoku, 1979) especially pp. 1-70 and 190-210. This book, published by the LDP for the 'training' of its members, gives very revealing evidence of the persistence of traditional attitudes to welfare. Its first two chapters are entitled 'What is the British Disease?' and 'Sweden, the Collapsing Welfare State'. Another, rather more sophisticated, example, by an academic member of Dok6 Toshio's Administrative Research Council, is Kat6 Kan, Gyokaku wa Nihon o Kaeru [Administrative Reform will Change Japan] (Shunjiisha, 1982).

61. Dainiji Rinji Gyosei Chosakai, Dai lchiji Toshin [First Report] (July 1981). The text can be found in Asahi Shinbun, 11 July 1981. Chairman Doko's views on the 'Administrative Reform' issue appear in Dok6 Toshio, 'Kono mama ittara Nihon wa hasan da' [If We Go on Like This Japan will be Bankrupt], Gendai (July 1981) pp. 88-94, abridged and translated as 'My Views on Reform', Japan Echo, vol. 8, no. 3 (1981) pp. 29-34. This issue of Japan Echo contains translations of several Japanese journal articles on the topic.

62. Kokumin Seiji Nenkan Henshii linkai (ed.), Kokumin Seiji Nenkan 82 nenban [People's Political Yearbook 1982] (Nihon Shakait6 Chii6 Honbu Kikanshikyoku, 1982) pp. 681-3; Asahi Nenkan (1982) pp. 205--11.

63. Ibid., p. 434. 64. Asahi Nenkan (1982) p. 434. This figure had in fact been achieved by

dint of some shuffling of funds between accounts and between years; actual growth was about 7.1 per cent- almost exactly the rate of inflation.

65. Dainiji Rinji Gyosei Chosakai, Kihon Toshin [Basic Report] (July 1982) The text appears in Asahi Shinbun, 31 July 1982.

66. Asahi Nenkan (1983) p. 436. 67. Asahi Shinbun, 19 August 1983. 68. The employees' schemes also require considerably higher contributions

from their members than does the national scheme. 69. Asahi Nenkan (1985) pp. 232-3. 70. Asahi Nenkan (1984) p. 269. 71. Asahi Shinbun, 25 February 1984. 72. It is estimated that the scheme will provide an income equivalent to 70

per cent of average salary, in return for contribution - shared equally between employer and employee - of just under 30 per cent of the employee's salary. Asahi Nenkan (1984) pp. 269-70; Asahi Nenkan (1985) p. 231; Kawamura Masayoshi, Shin Nenkin Pasup6to [New Pension Passport] (Mineruba Shob6, 1985) pp. 241-53.

73. Yoshida, op. cit., pp. 141, 152-3. See also the arguments over factory legislation cited in Byron K. Marshall, Capitalism and Nationalism in Prewar Japan: The Ideology of a Business Elite (Stanford, CA: Stanford University Press, 1967) pp. 51-93.

9 Japan and the United States: Dependent Ally or Equal Partner?* AURELIA GEORGE

INTRODUCriON

Recent developments in Japan's foreign and defence policies portray a nation shedding its postwar pacifist stance and moving from a state of military quiescence and international political passivity to a position of greater international prominence and responsibility. These developments encompass not only economic, trade and aid initiatives, where Japan's international efforts have been concentrated in the past, but also moves to raise Japan's foreign and defence policy profile. Japan is demonstrating a new willingness to share more of the burden of western defence, particularly in the north-west Pacific, and an unprecedented era of Japan-US security co-operation has been launched. From a weak and dependent American ally in the early postwar period, Japan has evolved into a powerful regional lieutenant with a military role that is edging beyond the boundaries of self-defence. Although it remains dependent on the US defence umbrella, Japan has begun the transition to a collective security state with some degree of regional force projection.

Many of the recent changes in Japan's foreign and defence posture received conspicuous impetus from the Nakasone administration. Prime minister from 1982 to 1987, Nakasone introduced an element of dynamism into the defence policy making process, challenging many of Japan's postwar defence orthodoxies and altering the substance as well as the public perceptions of defence policy. Immobilist forces remain strong, however, and the constitutional, legal, political and pyschological constraints on Japan's defence options continue to present a formidable barrier to Japan entering into a defence partnership of full equality with the United States.

* An earlier version of this chapter was published as 'The Nakasone Challenge', Discussion Paper no. 2 (Canberra: Legislative Research Service, Department of the Parliamentary Library, 1986-7).

237

238 Japan and the United States

This chapter discusses the recent changes in Japan's foreign and defence policies from the perspective of the preceding three decades. It examines the major components of Japanese defence policy and attempts to evaluate whether the Nakasone government has instituted fundamental structural change in Japan's defence posture in line with Japan's attainment of world power status. The chapter identifies the major domestic and external constraints on Japan's defence posture and catalogues the sequence of opposing pressures from the United States. It indicates the consequences of this basic clash of political forces on the defence policy-making process. The chapter notes how the balance in the US-Japan security relationship has changed as a result of Japanese efforts to raise their direct and indirect contributions to defence and the maintenance of the western alliance. The analysis measures the implications of Japan's increasing integration into the US strategic system in north-east Asia for the most fundamental premises of Japanese defence policy. It points out the growing disparity between Japan's official posture and the reality of its position as a regional military power with a growing regional security role. The chapter concludes that Japan's rising international profile and greater independence of foreign policy choice are concomitant with continuing dependence on the US defence umbrella and a security orientation firmly integrated into the framework of American global strategy.

THE FUNDAMENTAL PARAMETERS OF JAPAN'S DEFENCE POLICY-MAKING SYSTEM

On matters relating to defence, Japan's position in the world is unique. No other nation in the world is so powerful and yet 'so dependent on another nation for defence'. 1 No other nation confronts such limits to its military power.

The singular characteristics of Japan's defence posture derive, in the first instance, from the Japanese Constitution, which, in its strict and literal interpretation, imposes military emasculation on Japan. This constitutional restriction is not replicated anywhere else in the world. Secondly, Japan bears the burden of history, which has embedded 'anti-war and anti-militarist sentiments'2 in the Japanese psyche. Compared with other peoples, the Japanese have, since the Second World War, acquired a reputation of being pacifist to an abnormal degree. This stems not only from the circumstances of

Aurelia George 239

their defeat, but also from the people's acceptance of the Peace Constitution, which has incorporated the pacifist impulse into the very ideology of the state. Thirdly, the wartime experience of peoples of the Asian-Pacific region has left a legacy of complex and ambivalent feelings towards the Japanese and a long-term sensitivity about the possible resurgence of Japanese military power. Fourthly, Japan's defence policies are, inevitably, a reflection of its security relationship with the United States, a link that was established at the end of the Occupation when Japan rejected the alternative of autonomous defence in favour of military protection from a stronger ally.

Formulating defence policy within parameters drawn from both inside and outside Japan has been an extraordinarily delicate process for postwar Japanese governments. On the one hand, they have been acutely sensitive to the perceptions and reactions of neighbouring powers to their defence policies; on the other, they have faced strong pressures from the United States to rearm. Opposing any remilitarising trends have been the forces of domestic pacifism. These conflicting pressures have presented Japan with a fundamental 'defence dilemma': 3 the government has remained 'caught between the ideal expressed in Article 9 and the reality and pressure to maintain a fairly strong military capability'. 4 The result has been a government response marked by passivity, political inaction and immobilism.

The Domestic Constraints

The domestic framework that regulates defence policy choice represents a compound of constitutional, legal, policy, fiscal and political influences. Article 9 of the US-drafted Constitution renounces the right of war and the use of armed force in international disputes, stipulates that land, sea and air forces, as well as other war potential, will never be maintained and rejects the right of belligerency of the state.

Japan's defence policies and capabilities are grounded in the Japanese government's official interpretation of this Article, which holds that Japan may exercise a right of self-defence as a sovereign nation and permits a minimum level of armed strength necessary to exercise its right of self-defence. This right received international recognition and legitimacy in the San Francisco Peace Treaty signed by Japan and the Allies in 1951.5 It was further confirmed by a series


of court rulings in Japan in the 1970s, which held 'that the Japanese Constitution does not deny the right of self-defense to Japan'. 6

Accordingly, Japan declares that the existence of its Self Defence Forces (SDF) does not violate Article 9 and operates them 'under the basic principle of being exclusively defence-oriented'. 7 This exclusively defensive posture permits Japan to engage in military action only after it has been attacked, holds that Japan's defence actions must be confined to the minimum necessary for self-defence and limits the size of the defence capability to the minimum necessary for defence. The SDF are thus prohibited from going on the offensive and from possessing offensive or strategic weapons, which are understood to be long-range weapons capable of projecting Japanese force beyond its own territory and attacking enemy bases.

Although acts of self-defence justifiable in the eyes of international law include both individual and collective self-defence, Article 9 of the Constitution has been interpreted to exclude the right of selfdefence being exercised by Japan collectively, in the sense of participation in mutual defence arrangements which allocate a collective division of defence roles. In Japan's case the right of self-defence is understood to be exercisable only individually. This view was expressed by the government when the US-Japan Security Treaty was revised in 1960. It was, however, considered questionable by military experts at the time in connection with the implementation of the treaty.

The legal and policy constraints on Japan's defence role flow from, exemplify and reinforce this basic interpretation of Article 9, which provides the core around which the associated legal and policy constraints are built.

As a legal constraint, the Self Defence Forces Law of 1954 fleshes out the principle of exclu'iively defensive defence in its designation of all aspects of the organisation, functioning, recruitment and command of Japan's military forces. It incorporates the principle of 'civilian control' under which the prime minister is designated commander-in-chief of the armed forces and the director-general of the Defence Agency is given immediate authority over the three services through their respective chiefs of staff. This principle was in the first instance expounded by Article 66 of the Constitution which states that the prime minister and cabinet ministers must be civilians. It is further exemplified in the stipulation that the SDF are subject to the democratic management of the Diet through the Self Defence Law and cannot be despatched without Diet approval. An important

Aurelia George 241

role in civilian control is also played by a committee located within the cabinet, the National Defence Council, which makes decisions on basic defence policy.

Japan's fundamentally defensive disposition is honoured in the two major statements on defence policy made by the Japanese government: the Basic Policy for National Defence enunciated in 1957 and the National Defence Programme Outline (NDPO) of 1976. Both contain essentially the same mix of ingredients: they establish the guiding principles of Japan's exclusively defence posture, incorporate the notion of a gradual and moderate improvement in Japan's defence capability and advocate reliance on the security arrangements with the United States based on the Japan-US Treaty of Mutual Cooperation and Security. The NDPO, however, goes further than the mere enunciation of principles in the 1957 Basic Policy in establishing the 'Standard Defence Force Concept', the label given to a highquality core defence force charged with two primary tasks: maintaining a full surveillance posture in peacetime and dealing with military emergencies up to the point of limited and small-scale aggression. The NDPO lays down the specific force levels to enable Japan to discharge these basic defence objectives and looks to overall improvement of Japan's defence capabilities with these specified but limited military objectives in mind.

The 1 per cent of gross national product (GNP) ceiling on annual defence appropriations was adopted in 1976 by the National Defence Council and Cabinet as a spending ceiling guide for the attainment of the force level objectives contained in the 1976 Outline.8 Because the NDPO specified no target date for completion and no total sum for the defence expenditure involved, it was felt that some accompanying limit on defence spending was required. The government wanted to reassure the Japanese public that future increases in defence spending as called for by the NDPO would not escalate limitlessly.

Other basic policy constraints include the ban on conscription and the prohibition on overseas despatch of the SDF, which was a resolution of the Upper House in June 1954. The ban on weapons exports was enunciated as the Three Principles on Arms Export adopted by the Sat6 cabinet in April 1967. It declared that arms export to Communist bloc countries, countries subject to embargoes on the export of arms under UN resolutions and countries which are involved in or likely to be involved in international conflicts would not be approved by the government. The Miki Cabinet Policy


Guideline on Arms Export announced in February 1976 went even further and provided that in addition to the restrictions in the Three Principles, arms export to other areas would be restrained and that exports of equipment related to arms production (such as military technology) would be treated in the same manner as weapons and therefore prohibited. 9 The Three Non-Nuclear Principles of not possessing, not manufacturing and not permitting the introduction into Japan of nuclear weapons were adopted as a resolution by the Lower House in November 1971. The first two of these principles relating to the non-possession and manufacture of nuclear weapons were reaffirmed by Japan in 1976 when it became a signatory to the Nuclear Non-Proliferation Treaty.

The limitations of Japan's exclusively defensive posture and the associated policy constraints that give concrete form to this official interpretation of Article 9 were 'imposed either as governmental decisions or decrees, or as parliamentary resolutions based on constitutional interpretations'. 10 In themselves they are not immutable; nor do they carry the force of law. 'None of them represent an unalterable legal restraint, i.e., the permanent will of the state, and successor governments or Diets can repeal them either by policy change or by new parliamentary resolutions.' 11 This discounts, however, the requirement that the government policies must observe the Constitution and the limits to which the meaning of Article 9 can be stretched.

Politics thus far has made it impossible to amend the Constitution and the attendant framework of defence policies derivative of Article 9. In the first instance the governing Liberal Democratic Party (LOP) has never had the numbers to obtain the mandatory two-thirds majority in both Houses of the Diet, and the possibility of an amendment to Article 9 being approved by more than 50 per cent of the Japanese people in a referendum has seemed an equally distant prospect. As a result, the government has not been able to adjust the Constitution to the reality of the existence of Japan's armed forces.

But if it can be said that the government has come up with an interpretation of Article 9 that has allowed de facto the creation and growth of an army, navy and airforce, then it can equally be said that the pacifist opposition has used this same Article for their own political purposes 'in thwarting the ambitions of those who would like to revive the political power of the military to its pre-war heights' .12 Vocal support for Article 9 (particularly its literal interpret-

Aurelia George 243

ation) and the Constitution as a whole has been the main battle cry of the Opposition parties - particularly the Japan Socialist Party (JSP), the Japan Communist Party (JCP), and the Buddhist-inspired Clean Government Party, or Komeito. They have acted as selfappointed guardians of the Constitution and have been eternally vigilant against any hint of a revival of prewar militarism. They have relentlessly articulated the pacifist position on defence and have variously called for a reduction in the SDF, their abolition or the scrapping of the US-Japan security arrangements. And while these views have been judged by the electorate as too impracticable to command majority support, the minority position of the Opposition parties in the Diet has been considerably strengthened by the fact that on many aspects of defence policy, particularly Article 9 and its renunciation of war, they have represented the majority view amongst the public at large.

Pacifist sentiments on defence issues are also echoed in much of the commentary in the mass media (like the Opposition parties, some sections of it more than others). Representing the 'pacifist coalition', the Japanese media and Opposition parties have held the LOP to account not only on minute details of the interpretation of Article 9, defence laws and policies, but for every evolutionary twist and turn in defence policy. It has been the Opposition's standard parliamentary tactic to create hypothetical defence scenarios and then ask what action the SDF would take in such a situation. As a result, a considerable number of defence policy measures incorporating the major policy restrictions on Japan's defence expansion in general, and SDF actions in particular, originated as government responses to Opposition interpellations in the Diet. 13

The constant accountability of the government to the Opposition, mass media and Japanese public has imposed specific requirements on the defence policy-making process and has had an impact not only on the content of defence policy, but also on the rate of expansion in Japan's defence capability and defence budget. On any issue relating to defence, it has been impossible for the government to use its majority to force its view on the Diet in disregard of the Opposition and public sentiment. The political consequences of this approach were only too apparent in the 1960 Security Treaty revision struggle, which divided the nation and brought forth an unprecedented level of public protest against the security relationship with the United States. As a result, defence policy has been formulated with as much a view to maintaining internal security and political stability as


preserving external security and the defence relationship with the United States.

Given the nature of the political forces at work, particularly the equation in the public mind of rearmament with militarism, and the watchdog role of the Opposition parties and mass media in keeping public sensitivities alive, defence policy has been 'a matter of national decision' .14 Achievement of a national consensus has been a prerequisite for major shifts in defence policy, with the Opposition exercising a virtual veto power over proposals emanating from the LDP. This has restricted the speed of change to the point where defence decision making has been characterised as a prime example of governmental impotence and policy immobilism. 15 Change has taken the form of almost imperceptible shifts in policy, with the government striving to keep its real defence policy as vague as possible in order to present a diffuse target for Opposition attack. The same strategy has informed the government's response to US pressure. It has sought to avoid clear and concrete defence commitments to the United States so as to prevent defence issues from becoming a matter of major public controversy. Vagueness of terminology is thus characteristic of official statements and documents on defence. The LDP has learned to its political cost that in matters involving security, the fictions maintained through semantic usage must be upheld. 16 Ambiguity of expression also gives the government leeway to interpret defence policy to suit its particular purposes of the moment. For example, not only is there 'considerable latitude in what can be justified as serving the principle of self-defence', 17 there is similar latitude in interpreting basic statements of defence policy such as 'a minimum necessary defence capability'. The NDPO, for example, is so ambiguously written that the meaning of many of its phrases can be stretched to justify a wide range of military action. It refers to the 'assorted functions required for national defence' but nowhere states clearly what these are. Nor does it offer any definition of 'limited and small-scale aggression'. Similarly, one of the biggest question marks about Japanese defence policy has been that 'the area to be defended is not clearly delimited'. 18

In those areas where Japan's defence expansion has been measurable in concrete terms, the constraints arising from the domestic political process have put a clear brake on the pace of Japan's arms build up and the increase in defence spending required to support such a build up. Change has been restricted to a gradual, incremental pace. This has been reinforced by the incrementalism inherent in the

Aurelia George 245

budgetary process which tends to restrict rises and falls in the allocations for different ministries to marginal gains and Iosses19

and by the fiscal limits on Japan's defence expansion imposed by restrictions on government spending from the late 1970s onwards. Japan's fiscal deficit problem has required that a special case be made for exempting any sectors from the government's 'zero growth' budget strategy. These fiscal conditions have presented the LOP with some particularly hard choices about budgetary priorities, and the reality that increases in government spending to fund any significant expansion in the SDF would have to come from cuts in other areas or from increases in taxes, options with potentially negative electoral costs.

Incrementalism has also marked the pace of expansion in domestic defence production, which is mostly a side-line business for predominantly large corporations supplying a monopoly buyer- the Defence Agency. Japan's defence industry is predominantly geared to a steady output of defence equipment and would have difficulty in dealing with fluctuating demand, including a sudden and large increase in orders.

In the context of defence policy decision making, however, the government has not only had to respond to domestic pressures but also to powerful external influences.

The Impact of the Japan-US Security Relationship

Because it has not been possible under existing defence policies for Japan to establish a military capability enabling it to deal with the whole range of potential military threats, it has had to enlist the security protection of the United States to fill the gaps in its own defence. The security of Japan has, therefore, rested jointly on the SDF and the US-Japan Treaty of Security and Co-operation. Japan relies on US deterrent power against nuclear threat as well as counterattack capability against large-scale aggression with conventional weapons. To this extent, Japan's defence relationship with the US is one of dependence. Japan relinquished defence autonomy in exchange for the US guarantee of its security.

The history of the Japan-US security relationship in the postwar period has been a story of continual and increasing American pressure for Japan to expand its own defence responsibilities, capabilities and outlays. Japan has never been able to ignore this pressure because of its dependency relationship.

American pressure began as early as 1950 under the Occupation


when MacArthur instructed Prime Minister Yoshida to establish a 75 000-man Police Reserve Force to fill the gap left by the US troops departing for Korea. What 'began as an American desire to suppress Japanese militarism once and for all was soon modified, when the Korean War of 1950 created a new American need for Japanese military support against Communist aggression'. 20 John Foster Dulles was successful in incorporating this pressure into the preamble to the 1951 US-Japan Security Treaty, in which the US expressed its willingness to maintain armed forces in Japan 'in the expectation, however, that Japan will itself increasingly assume responsibility for its own defense against direct and indirect aggression'. 21 Under the treaty, any armed attack against Japan from outside faced the possibility of direct confrontation with US military forces which the US stationed in Japan in accordance with Article 1 of the Treaty.

Pressure for the initial rearmament of Japan culminated in 1954 in the passage of the Self Defence Forces Law. Very much behind Japan's compliance with the United States in establishing an integrated defence force at this time was its 'relative strength within that relationship and the reality that much of the equipment for the defense capability was provided by the US'. 22 In 1954 Japan also signed a Mutual Security Assistance Agreement with the US, in which it undertook to upgrade its defence efforts in exchange for military aid. The effect of this agreement was that between 1954 and 1958, the size of the Ground Self Defence Forces, increased by increments of lOOOG-20000 almost annually. And in spite of Japan's economic difficulties at the time, 'the ratio of defense expenditures to GNP was over 1.45% up until 1959'. 23

Another turning point came in 1957 with the enunciation of Japan's Basic Policy for National Defence, which was designed to represent the first concrete step towards an indigenous defence policy. Accompanying the Basic Policy was Japan's first Defence Build up Programme (fiscal 1958--DO), which set manpower and equipment targets for each service.

In 1960 the 1951 Security Pact with the United States was revised to become the Treaty of Mutual Co-operation and Security, and Japan obtained a de jure guarantee of its security from the United States. Henceforth Japan was under the umbrella of the US deterrent, not only because of the stationing of US forces in Japan, but also because of an American guarantee which provided that both Japan and the United States would deal with any armed aggression directed at Japan, considering such aggression as a common threat to both

Aurelia George 247

nations. Under the treaty, Japan continued to grant the US facilities and areas within the country to maintain its own security as well as peace in the Far East.

The key element in this Us-Japan strategic alliance was lack of reciprocity in defence obligations, something that directly reflected Japan's ban on participation in collective security arrangements. While the US bore the burden of defending Japan, Japan was under no obligation to support the US if it were attacked. This asymmetry of defence responsibilities enshrined Japan's defence dependence on the United States.

The next stage in the Us-Japan security relationship began with the enunication of the Nixon Doctrine in 1969. Under this, the US requested its allies in Asia to accept greater responsibility for their own defence because of growing American unwillingness to maintain its own military presence in the region. Accordingly, it increased the pressure on Japan to expand the capabilities of its own forces to the point where the US could shift some of the burden for Japan's defence off its own shoulders and on to the SDF.

At the same time as the Nixon Doctrine provided the foreign policy justification for a reduced American commitment to its Asian allies, it was supplemented by an economic argument accusing Japan of getting a 'free ride' on the US for its defence. US pressure on Japan began to focus on the desired level of Japanese contribution to the joint Japan-US defence of Japan. Ultimately this came down to the level of defence spending needed to upgrade the capabilities of the Japanese defence forces. The addition of an economic dimension to US pressure was in no small part due to the spectacular advances being made by the Japanese economy. In comparison with the early years of the Us-Japan security relationship, Japan was now in a much better position to pay a 'fair share' of the costs of its own defence. In the view of the US administration, Japan had for too long benefited from a 'cheap defence policy', which obligated 'the United States to defend Japan merely in return for free fixed assets (military bases and establishments) for US forces'Y Accordingly, the US sought to share more equitably the burden of Japan's defence, and to make what had begun as a very unequal partnership more equal.

The next stage in the Us-Japan defence relationship was marked by a changing American perception of the desired Japanese defence contribution. The US began to see Japan's role not only in terms of it assuming a bigger share of the burden of its own defence, but also


in terms of it 'contributing a fair share to the burden of defending western interests' ,25 It wanted Japan to increase its defence capability to the point where it could 'take on some of America's military responsibilities'26 and act 'as a partner in the context of a global confrontation with the Soviet Union' .27 In particular it wanted a Japanese contribution to the American strategic framework in the north-west Pacific. This stage began in earnest in the late 1970s, and has continued into the 1980s.

The expanded focus of US pressure can be linked directly to strategic developments in the Far East in the late 1970s. This period was marked by a concerted Soviet build up of its strategic weapons, maritime forces and air power in north-east Asia and the north-west Pacific. The growth in Soviet defence power 'created a new strategic reality in the Far East'28 - a challenge that the United States could not ignore, and a reality that Japan could not deny.

Pressure from the United States also arose from the development of its swing strategy, which postulated a shift in American naval power from the Pacific to the Indian Ocean and Persian Gulf in cons~quence of the Iranian revolution, the subsequent US-Iranian crisis and the Soviet military intervention in Afghanistan. This left 'the waters around Japan, the Western Pacific and large parts of the critical sealanes to the Middle East dangerously exposed to a ... Soviet Pacific Fleet'. 29

US pressure on Japan began to focus on the need for Japan to upgrade her maritime and air forces as a counter to growing Soviet air and sea power in the north-west Pacific and to fill partially the gap left by the extension of Indian Ocean and Persian Gulf operations to US Pacific fleet responsibilities. Specifically, the United States mapped out three strategic missions for Japan: sea control in a zone extending 1000 nautical miles out from Japan and encompassing the sea lines of communication to the south and south-east, mining and blockading the Tsushima, Tsugaru and Soya straits leading out of the Sea of Japan into the Pacific, and the establishment of an effective air defence screen for Japan and its surrounding sea and airspace. 30

Japan also came under tremendous pressure at this time to deepen military co-operation with Washington as a result of the linking of the defence issue - and the notion of Japan getting a 'free ride' -with the trade deficit issue, which hardened the Americans' attitude towards Japan. According to one Japanese assessment, the United States 'frustrated by growing trade deficits . . . and resentful of Japan's perceived "free riding" ... once again adopted the practice

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of Japan-bashing, this time euphemistically calling it pressure tactics, in order to try to correct the glaring imbalance of the relationship?' US pressure on Japan to redress the balance focused directly on the size of Japan's defence contribution in terms of the amount allocated to defence in the national budget relative to GNP. The US wanted Japan to raise its contribution from less than 1 per cent of GNP to 2-3 per cent. There were resolutions to this effect in the US Congress in 1978 and the Carter administration began officially to seek a steady and significant increase in Japan's defence efforts in 1979, pressure continued by the Reagan administration. In 1980 there were three ministerial-level meetings between Japan and the United States, and at each the US asked Japan to raise its defence spending. In 1981 there were moves in the US Congress to revise the terms of the USJapan Security Treaty as well as demands that Japan pay directly to the United States 2 per cent of its GNP as a 'security tax'. 32

JAPAN'S RESPONSE TO US PRESSURE

After the enunciation of the Nixon Doctrine and American pressure for Japan to assume a fairer share of the burden of its own defence, the Japanese response was still minimalist in the sense that it aimed at keeping the United States minimally satisfied by limiting 'its defence effort to the minimum necessary to respond to Washington's criticism that Japan has a "free ride"'. 33 Japan continued its incremental arms build up implemented through a series of Defence Build up Programmes (fiscal 1962-6, 1967-71 and 1972-6) culminating in the National Defence Programme Outline of 1976. For Japan, incremental change represented a form of 'crisis avoidance in her relations with the US and with others'. 34 The government was caught in the familiar complex of domestic and external pressures: pacifist sentiment at home and the two major conditions governing Japan's external military relations - the desire to get along with the US and sensitivity to the perceptions of neighbouring countries.

Nevertheless, in spite of the difficulties posed by the traditional defence dilemma, there was something of a turning point in the late 1970s. This was prompted by an appreciation not only by the government but also by the Japanese public that for the first time in a long time, Japan really did have a security problem. This in turn prompted a re-evaluation of Japan's need for the nuclear and conventional deterrence provided by the US-Japan Security Treaty.

The expansion of the Soviet military system in the Far East was of


direct concern to Japan because it initially coincided with what the Japanese perceived as the end of 'Pax Americana' in the Pacific, 'the relative decline in American supremacy in the political, military, and economic spheres' ,35 and growing doubts about American willingness to defend Japan in the event of an emergency, particularly in the light of the planned withdrawal at the time of US troops from South Korea.

There was also concern about the specific threat the Soviet forces posed to Japan quite independently of their implicit threat to United States strategic interests in the region. Soviet consolidation of bases in Cam Ranh Bay and Da Nang were seen as a threat to Japan's economic lifeline: the importation of Middle Eastern oil passing through the sea lanes linking the Persian Gulf to north-east Asia. During 1978-9 the Soviet Union militarised three Northern Islands claimed by Japan- Etorofu, Kunashiri and Shikotan. These developments also coincided with the deployment of the Soviet SS-20 missiles with a range of 3500-4500 km in Soviet Siberia and the Soviet Backfire bomber with an action radius of 5700 km, both of which posed a new kind of nuclear threat to Japan.

Soviet military expansion in northeast Asia was accompanied by what the Japanese perceived as specifically anti-Japanese acts on the part of the USSR, such as Soviet action in the MiG-25 incident in 1976, the treatment of Japanese fishermen following the USSR's declaration of a 200-nautical-mile fishing zone in 1977, the conspicious frequency of Soviet military ship and aircraft encroachments on Japan's sea and airspace, and the Soviet threat of 'countermeasures' to the peace treaty signed with the People's Republic of China in 1978. The invasion of Afghanistan also had a strong impact in Japan and lent credence to Chinese perceptions of the USSR's hegemonic intent. In response, the Japanese government began to make more specifically anti-Soviet noises. In 1980, the USSR was officially identified as a 'threat to the security of Japan'36 for the first time.

The impact of these developments registered directly on the defence consensus in Japan and on the main themes of the defence debate. There was a reawakening of the defence debate after an interval of more than twenty-five years, with very public arguments being traded about the desirable defence options for Japan. For decades, serious discussion on these matters had scarcely been considered legitimate. The defence debate had largely centred on the ambiguity surrounding the meaning of Article 9 and the legal and constitutional foundation ofthe Japanese armed forces. The existence ofthe SDF now appeared

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to have become a fact that registered in the public opinion polls, which showed that the majority of Japanese now supported the need for an indigenous Japanese defence force and the Security Treaty with the United States.37

Rising national support for these two pillars of Japan's defence, however, could not necessarily be translated into a consensus in favour of a rapid and significant defence build up. A majority of those polled favoured 'the status quo rather than either an increase in or reduction of defence capability. And those in favor of the status quo believe that any buildup should be undertaken slowly, as in the past. '38 Clearly there were 'limits to how quickly the ruling Liberal Democratic Party ... [could] alter the status quo'. 39 The government could not 'openly move faster than public opinion'. 40

A shift in attitude of Japan's neighbours was, however, detectable. Following resumption of diplomatic relations with China in 1972, China's previous criticism of Japan as a lackey of American imperialism fell silent, and there were signs of growing Chinese support for the US-Japan Security Treaty as well as an increase in SDF strength. South-east Asian nations also backed the idea of moderate increases in Japan's defence capabilities as a counterweight to the rise in Chinese and Soviet military power.

Growth in US-Japan Defence Co-operation

The biggest change in Japanese policy came in the area of increased US-Japan defence co-operation rather than in the form of a Japanese defence build up on a scale that would have satisfied the United States. Japan started to display new and 'deeper understanding of the need for complementary and cooperative efforts in the JapaneseAmerican joint defense structure'. 41 Upgrading this qualitative aspect of Japan's defence effort represented a policy choice fraught with less political risk than the highly visible quantitative changes involved in increasing the defence budget. In one semi-official view: 'Improved coordination with US forces is an important qualitative aspect [of the US-Japan security relationship] that demands little extra expenditure. '42

The turning point in the US-Japan defence relationship came in 1978 with agreement on a set of 'Guidelines for Japan-US Defence Co-operation'. Hitherto there had not been any studies or consultations between Japan and the US on military co-operation and for this reason 'it was unclear what specific actions the two nations would


take or to what extent they would cooperate in the event of an armed attack on Japan'.43 The guidelines envisaged heightened US-Japan defence co-operation in all areas of military activities including joint defence planning, intelligence, logistics, combined manoeuvres and training. They provided the policy framework around which USJapan defence co-operation was substantially increased and consolidated in the 1980s. Within this framework procedures were established for enhanced US-Japan co-operation with respect to the three fundamental defence situations: deterring aggression against Japan, joint action in the event of armed attack against Japan and the facilitative assistance to be offered to the US by Japan in the case of situations in the Far East that might have an important influence on Japanese security. 44

In addition to the guidelines, new emphasis was placed on cooperation between Japan and the US in military equipment and defence technology. In 1980, a Japan-US Systems and Technology Forum was set up in order to encourage co-operation in these fields, and under a newly expounded principle of 'interoperability' the SDF's equipment and operational manuals were increasingly 'incorporated into the US military forces deployed in the Asia-Pacific region'. 45 At the practical level, there was considerable expansion of joint exercises involving the SDF and US forces aimed at promoting the efficiency, effectiveness, 'credibility and deterrent power of the Japan-US security arrangements' .46 In consequence, Japan-US joint exercises expanded steadily.

Another conspicuous development was Japanese Maritime Self Defence Force (MSDF) participation in the Rim of the Pacific Exercise (RIMPAC) in 1980, a multinational naval exercise involving the member countries of ANZUS and Canada, which has continued on a biennial basis. Participation in RIMPAC brought the question of Japan's participation in collective security arrangements out into the open. Held to account by the Opposition on this issue, the government declared that RIMPAC did not represent a collective exercise of the right of self-defence, but was an attempt to provide all participants with the opportunity to improve their tactical capabilities.

In order to underline its greater willingness to bear a 'fair share' of the defence burden, the Japanese government increased its own financial contributions to the total expenditure required to support US forces in Japan. Much was made of the fact that by the early 1980s, the ratio of Japan's contributions to the US forces in Japan exceeded those of all other countries hosting American servicemen.

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Division of Labour in Defence Functions

The first real evidence of an emerging division of roles for the defence of Japan and indirectly for the defence of American strategic interests in the north-west Pacific came in 1981 with Prime Minister Suzuki's statement that Japan would 'try to assume responsibility for the defense of sea lanes up to 1000 nautical miles from Japanese shores'. 47

The pledge was accepted as official by the US administration which later stated that 'if Japan undertook the defence of the sea lanes, the US would be able to throw more forces into the Southeast Asia and Indian Ocean theatres'. This established that US global strategy would be complemented by Japanese defence of the sea Ianes. 48

The Suzuki statement in 1981 was followed up in 1982 with a Japanese and US agreement that 'they would conduct studies on sealane defense as part of the studies on joint-defense planning based on the [1978] Guidelines'. 49

There remained, however, some key differences in Japanese and American perceptions of Japan's role with respect to the sea lanes. The Japanese government claimed that Prime Minister Suzuki's reference to defence of the sea lanes had merely been to give an example of the undertaking Suzuki had made to improve Japan's 'defense capabilities in Japanese territories and in its surrounding area and air space'. 50 It was also argued that 'Suzuki was describing a defense role that was no different from the goals of the antisubmarine forces of the MSDF since the beginning of the 1970s'Y These were to ensure 'the security of maritime transportation within surrounding waters extending out hundreds of miles or within 1000 miles in the case of establishing a sea lane'. 52 This 'was in line with Japan's defense philosophy of remaining strictly on the defensive'. 53

In the Japanese view, Suzuki's purpose had been to illustrate this philosophy when he referred to the defence role of Japan's sea lanes, 'without any intention of giving any firm commitment to the United States'. 54 The US, on the other hand, chose to interpret Suzuki's statement as an official commitment and tried to hold the Japanese firmly to this position. US defence spokesmen reiterated 'that Japan should undertake the defence of seas west of Guam and north of the Philippines, based on the American expectation that Japan would act as an alliance partner'. 55

The difference in Japanese and American perceptions on this issue also extended to the ultimate objective of sea lane defence. On the grounds that it was prohibited from involvement in collective security


arrangements, Japan took the position that sea lane defence as part of a sharing of military duties between allies could not be considered, and that the SDF could 'defend US forces only if the need arises while the two forces are engaging in joint operations for the defense of Japan'. 56 In other words, sea lane defence was an extension of the defence of the mainland, and Japan was willing to co-operate with the US to the extent that their basic strategic objective coincided. For the US, defence of the sea lanes was part of a global military strategy in which it sought to allocate regional defence functions to Japan.

This same perception gap was evident with respect to Japan's role in blockading the three straits leading out of the Sea of Japan. The US wanted Japan to be responsible for this task. The Japanese expressed unwillingness to blockade the three straits if they had not already been attacked, and stated that it would be difficult for Japan to meet a US requirement for blockading the three straits 'if this was for the defence of sea lanes as part of a conflict on a global scale'. 57

In attempting to pin the Japanese down to specified defence tasks, the US administration sought to find ways in which Japan could contribute to US global strategy which it could be argued lay squarely in line with the defence of Japanese national interests, particularly its lifeblood of trade. But there remained a perception gap about what was involved and in what circumstances Japan would undertake these tasks.

US pressure for Japan to spend more on defence and to shoulder more of the burden of the defence of American and western strategic interests in the Asian-Pacific region forced Japan to identify and underline every non-military contribution it made to regional and global security. In the late 1970s Japan developed this response into a diplomatic art form and formally and officially articulated it as a concrete foreign policy doctrine known as 'Comprehensive Security', launched by the Ohira government in 1979-80.

THE FUNDAMENTAL DETERMINANTS OF JAPAN'S FOREIGN POLICY

Generally speaking Japan's foreign policies have been influenced by three major factors: its defence posture, its high growth economic policies and its security relationship with the United States.

Japan's defence posture has had an inevitable impact on its foreign

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policy style given that military capability is a major factor governing the foreign policy of each country. The Japanese government has committed itself to a 'peace diplomacy' by explicitly rejecting a military dimension to its foreign policy. Its 'peace diplomacy' has matched its 'peace constitution'. In positively de-emphasising defence and military issues, Japan has sought to maximise its friends and minimise its enemies, and also to allay the fears and anxieties of its near neighbours about a possible resurgence of Japanese military power. This approach has assisted its foreign relations in that it has enabled neighbouring countries to 'relax their guard against the threat of resumed Japanese expansionism'.58 In this sense Japan's defence policy has been a positive instrument of foreign policy.

Because of its passive, exclusively defence posture, Japan has looked on involvement in foreign political and military disputes as taboo. It has assiduously avoided aggravating any international disputes or taking public sides in political or military conflict, particularly those in the region, such as the North-South Korea or China-Taiwan issues, and on a larger scale, East-West conflict. Japan has avoided any sort of confrontation with other nations because of the possibility that such action might provoke military consequences and because of the fundamentally 'no-war' premise on which it operated. This general attitude has frequently prevented it from taking a stand on any issue that was in any way controversial. Its low-posture defence policy has produced a low-profile diplomacy.

All these factors have resulted in a deliberately apolitical approach to foreign relations, a strategy of non-involvement and conflict avoidance, which has led people to ask whether Japan has a foreign policy at all. Others have labelled it 'passive' rather than 'creative' diplomacy, or 'follower' rather than 'leader' diplomacy.

Historically the priorities in Japan's foreign policy were set at the same time as they were for domestic and defence policy, when Prime Minister Yoshida rejected Dulles's plan for the rearmament of Japan, declaring instead that priority should be given to economic rehabilitation. This was the essence of Yoshida's 'conservative pacifism', and it was strongly endorsed by the Ikeda and SatO governments during the period of rapid economic growth. On the international political scene, Japan merely substituted economics for politics as the determining element of its foreign relations and instituted what has been labelled as an 'economistic' foreign policy.59 Although it began as an extension to the foreign relations sphere of Japan's high-growth domestic policies, the primacy of economism was reinforced by the

256 Japan and thP United States

belief that economic involvement was much less likely to involve Japan in political or military disputes than taking the political high ground, and in fact exerted a positive and constructive effect on foreign relationships at the same time as it maximised trade opportunities and market access. It was a style that developed its own set of imperatives. Political relations with other countries came to be measured in terms of their potential economic costs and benefits. On the positive side, Japan refined and specialised in all the economic instruments of diplomacy. Economic strength was seen as the source of international status.

The various foreign policy doctrines expounded by the Japanese government from the early 1950s onwards reflected this particular set of priorities: the seikei bunri (separation of politics and economics) concept of the Yoshida, Ikeda and Sat6 years, which was originally conceived 'as a device to get round political and ideological difficulties over Japan's trade with China'60 and thus emphasised economics to the exclusion of politics, but which also reflected 'widespread scepticism in Japan about the ultimate efficacy of cold-war premises' ;61

the equidistance diplomacy of the Tanaka and Miki adminstrations which sought to capitalise on Japan's growing economic links with China while limiting the costs in Japan's relations with the USSR; the Fukuda Doctrine of 1976-8 which attempted to consolidate Japan's economic relations with south-east Asia through the application of economic diplomacy, and ease the political tensions arising from Japan's economic penetration of these countries; and the 1978--80 omnidirectional diplomacy of Ohira, which tried to preserve the fiction of even-handedness in Japan's relations with all powers including China and the Soviet Union, in the wake of Japan's clear 'leaning to one side' with its signature to the Peace and Friendship Treaty with the People's Republic.

Another factor reinforcing the primacy of economism was the greater degree of independence Japan could exercise in its foreign economic relations compared to its foreign political relations, which existed in the shadow of its security dependence on the United States. Japan's security ties with the United States were a constraining element in its foreign policy options, particularly in relation to the major communist powers - the USSR and China - where Japan started out as a mere pawn of US foreign policy. Nowhere was Japan's lack of independence more clearly exemplified that in its recognition of the Republic of China on Taiwan in 1952 instead of the Communist government on the mainland, essentially under

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pressure from the United States' containment of China policy. Two decades later, when Japan reversed its policy and recognised the Communist government in Beijing in 1972, this was also in tandem with the earlier reversal of US policy, and Prime Minister Tanaka sought prior approval of Japan's planned move from the United States.

Japan's fundamental security alignment with the United States, combined with its foreign policy strategy of non-involvement in international disputes, produced a passive rather than active adherence to the American foreign policy line. In this context it pursued a 'follower' diplomacy in line with its own wider principles of foreign and defence relations. At no time has Japan assumed the role of 'cold war warrior' and its passivity on this issue has frequently elicited the criticism of more partisan nations such as the United States and South Korea. At the same time, more faithfully than any western country, Japan 'has adopted sanctions toward the Soviet Union initiated by the American administration despite the political and economic sacrifices they required'. 62

The early 1970s marked the beginning of a significant rise in Japan's profile as an international actor in its own right compared with the barely perceptible role it played in the 1950s and 1960s. During the recession years of the 1970s, Japan began to realise that even usJapan relations required active diplomacy in the light of increasing trade friction; that economic considerations also made adjustments with EC countries a necessity; that economic relations were not above creating political repercussions in south-east Asia; that its burgeoning economic relationship with China was creating difficulties requiring diplomatic action; that security considerations arising from Soviet military expansion in north-east Asia made it impossible to keep politics out of its relationship with the USSR; that Japan's economic survival depended on its undertaking more independent initiatives vis-a-vis Middle Eastern oil suppliers; and that Japan generally needed to refine its political and diplomatic skills in order to overcome the supply security issues of the 1970s. Moreover, the deepening international interdependence between the Japanese economy and the world economy meant that Japan had to become 'more and more internationally oriented'. 63

All these trends culminated in Japan's concept of 'Comprehensive Security', launched by Prime Minister Ohira, but pursued by the subsequent Suzuki administration.

The 'Comprehensive Security' concept integrated the dominant


strands in the foreign policy doctrines that preceded it: the apolitical and economistic emphasis of seikei bunri, the Fukuda Doctrine's emphasis on foreign aid to nations of the Asian-Pacific region and the omnidirectional diplomacy of the Ohira government which aimed to maximise the political, security and economic benefits to Japan of international friendship. But it was also more than the sum of its predecessors.

'Comprehensive Security', as the name implied, incorporated a 'comprehensive' interpretation of the term security, and not simply a narrow military interpretation in the sense of defence capability, although there was an explicitly defence component to the doctrine. It broadened the concept of national security to take account of other aspects of Japan's security such as dealing with natural disasters, energy and resource security, foreign aid (particularly as a means of ensuring resource security and markets), the preservation of the free and open international trading system and positive diplomacy in order to consolidate a stable international environment. It underlined the important economic security element in Japan's national security, particularly for energy supplies, raw materials and food. This represented one of the longer-term after-effects of the pivotal events of the decade, the 1973 oil crisis and associated 'shocks', such as the American embargo on the export of soybeans. These events raised the resource security-consciousness of both the Japanese public and policy makers, with the result that there was a strong emphasis in the 'Comprehensive Security' doctrine on obtaining 'security of supply' based on the wider perception of Japan's strategic vulnerability as incorporating not only military security but also resource security.

Integral to 'Comprehensive Security' was the notion that Japan should use all the international relations instruments at its disposal -political, economic, trade, aid, diplomatic- as instruments of its own security and as a means of contributing indirectly to regional and even global peace, economic growth and political stability, factors to which its own security was linked. This rationale linked Japanese security directly to regional and global political and economic stability, and, therefore, it reasoned that Japan should contribute through all the non-military means at its disposal to help consolidate this stable environment.

'Comprehensive Security' thus deliberately highlighted the nonmilitary contribution Japan made to the collective economic and political interests of other nations, contributing through aid, investment, technology transfer, trade and other economic and

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diplomatic means to regional and global peace and security. This was a political move designed to counter American arguments and pressures on Japan to increase defence spending and to expand its military capabilities in order to assume greater defence responsibilities in the region. 'Comprehensive Security' advocated a moderate upgrading of Japan's defence capabilities within the traditional constraints, combined with a good measure of non-defence contributions. The Japanese thus sought to widen their concept of security beyond the narrow confines of defence policy in order to highlight the non-military burden they were bearing in the interests of peace, security, international co-operation and support for western interests in the Asian-Pacific region and beyond. It was an attempt to show the US that Japan was not shirking its responsibility as a member of the 'free world', but was discharging this responsibility in ways conforming to the no-war premise of Japan. As Ohira explained: 'Under the constitution, which recognizes only our own self-defense, what Japan can do is limited. We want to contribute to world peace within the [constitutionally] permitted area. '64 'Comprehensive Security' drew attention to the potential international relations costs and inherent destabilisation risks of Japan acquiring a powerful military capability, particularly in the Asian-Pacific region. In particular Japan wanted to be able to incorporate aid expenditure as part of its comprehensive security costs and thereby dissipate some of the American pressure for an increase in defence spending. The US response was to dismiss the whole concept as a rationalisation of Japan's 'free-riding'.

In reality the 'Comprehensive Security' doctrine represented a compromise between Japan's earlier position of total subordination to the US and that of a completely independent power in foreign affairs. It redefined the concept of security in a way most relevant to Japanese needs, and it also envisaged an increased, but distinctively Japanese (that is non-military) contribution to global peace and security. At the same time, the impact of US pressure on these positive Japanese diplomatic and foreign initiatives can be seen in their increasing use as instruments of western security policy in the service of US strategic interests.

The broad concept of security that was incorporated under the 'Comprehensive Security' umbrella has remained an important theme in Japanese defence thinking. On the defence build up and defencespending issue, it represents the moderate arms build up option, and has retained supporters amongst bureaucrats, business and opinion


leaders as a policy guideline or 'software' option on security. It has been used by sections of the bureaucracy arguing against increases in defence spending in opposition to the more hawkish lobby in favour of acquiring more military hardware.

CHANGES UNDER NAKASONE AS PRIME MINISTER

Defence Co-operation and the Division of Defence Roles with the US

Under Prime Minister Nakasone Japan gave a much more unequivocal and active commitment to the US-Japan alliance. Nakasone made explicit what his predecessors left shrouded in ambiguity and ambivalence. On becoming prime minister he expressed his determination to comply with US defence requests wherever possible. Diplomatically he pursued a policy geared to full co-operation with the United States and 'described Japan's relations with the United States as an "unmei kyodotai" [community bound together with a common destiny]'. 65 It was on his first visit to the United States in 1983 that Nakasone made his much-quoted remark about Japan contributing to the western alliance in east Asia by acting as a 'giant aircraft carrier against Soviet Backfire bombers'. 66 In particular, Nakasone appears to have changed the ratio of responsiveness of the government to domestic as opposed to international public opinion, especially that originating in the US. Under previous governments, internal considerations had consistently received priority with domestic public opinion exercising its traditional constraint on defence options. Where the shift occurred was in Nakasone's willingness to risk increased political opposition at home in order to push through his own policy initiatives and please the United States.

The most significant developments were seen in the increasing integration of US and Japanese defence strategies through Japan's acceptance, in a qualified way, of the strategic missions spelled out by the United States, the increasing integration of US and Japanese defence forces through expanded interoperability and joint military exercises and a new level of reciprocity in the US-Japan security relationship through military technology exchanges.

(i) Japan's Strategic Missions Under Prime Minister Nakasone, Japan moved closer than ever before to assuming the clearly defined regional role spelled out by

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the United States. Under pressure to behave more like a normal alliance partner, Japan began to take responsibility for discharging certain military duties within an overall set of agreed strategic objectives, and to share some of the military responsibilities for defending given areas, in what amounted to a division of defence roles. Evidence that Japan accepted this challenge first emerged in Nakasone's early statements on the defence missions for Japanese forces, which were 'specific in regard to surveillance and control of sea lanes and the vital straits in a way which departed from previous practice'. 67 During his first trip to Washington in 1983, Nakasone declared that his government would 'establish complete and full control over the "four straits" around Japan, including the defense of the vital sea-lanes around the country'. 68

The exact nature of the expanded Japanese defence commitment was later spelled out in official documents on defence. In the Defence Agency's view, sea lane defence 'refers to the maintenance of the safety of maritime transportation through wide-ranging surveillance, escorts of vessels, defense of ports, harbors and straits .... Specifically, the Maritime Self-Defense Force will primarily conduct operations for the protection of major ports, harbors and straits in Japan; anti-submarine operations, operations for the protection of ships and other operations in surrounding waters. '69 As for the geographic scope of sea lane defence, the Defence Agency defined this as 'protection of sea lines of communication in sea waters extending to about 1000 nautical miles or so from its [Japan's] shores'. 70

In the process of transition from the ambivalent and equivocating stance of Suzuki to the firm and explicit commitment of Nakasone, it is thus indisputable that Japan accepted an enlarged geographic sphere of responsibility for the SDF. The defence perimeter of Japan, for so long limited to the Japanese archipelago, was expanded to include sea waters 1000 nautical miles from its shores. This is reinforced by a Defence Agency statement to the effect that 'constitutionally, the geographical scope where Japan can execute force for the self-defense is not necessarily limited to Japanese territory, territorial waters and territorial airspace, but could be extended to open sea and airspace'. 71

Under Nakasone the Japanese government also officially accepted the task of mining and blockading the straits leading out of the Sea of Japan. According to the Defence Agency: 'It is considered feasible that in the event of an armed attack against this country, the SDF will take steps to impede the passage of the straits by the ships


belonging to the nation which is attacking Japan. . .. It is possible that depending on the situation, mines may be laid. m

As for air defence, this has been officially described in terms of 'the ability to cope with attacks on Japanese territory and its peripheral sea and air areas by aircraft and others .... It [the ASDF] must also be armed with an air warning and control capability . and it must have an early warning and surveillance capability to complement the air warning and control capability.m

These defence roles for Japan, as spelled out in official defence documents, were accompanied by the traditional provisos and qualifications that they would be performed only after an armed attack had taken place on Japan, and that would be within the scope of the necessary minimum requirement for the defence of the country. Nevertheless it is also evident that these 'exclusively defensive' roles were integrated into a joint US-Japan strategy for the defence of the north-west Pacific region and took on a wider strategic purpose in the context of a joint Japanese-US confrontation with the USSR. For example, in the US view, the purpose of Japan's sea control out to 1000 nautical miles was to mount 'offensive and defensive actions against Soviet submarines, surface ships, and aircraft over a wide ocean area' / 4 particularly against Soviet submarines and Backfire bombers. This description corresponded almost exactly to the official Japanese view of what was involved in protecting the sea lines of communication (apart from the fact that the enemy was unidentified): 'the Maritime Self-Defense Force must maintain the anti-submarine warfare capability to search and destroy submarines, anti-surface vessel striking capability to defeat surface vessels and air defense warfare capability to cope with assaults by aircraft and missiles'. 75

Japanese and US views of straits defence also coincided. In the US conception, mining and blockading the straits was for the purpose of 'preventing access by Soviet naval vessels from bases in eastern Siberia into the Pacific'. 76 This accords with the Defence Agency description: 'the Maritime Self-Defense Force is to execute antisubmarine warfare, anti-surface vessel striking operations and such, on enemy submarines and surface vessels which may try to pass through main Japanese straits, and if necessary, by laying mines to prevent them from going through Japanese straits'. 77 Likewise there was a shared perception of the purpose of an air defence screen over Japan and part of the Sea of Japan. In the US view, this was to

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inflict heavy losses on Soviet tactical fighters and long-range bombers. An effective air defense screen would facilitate the task of sea control by weakening Soviet air strike capabilities against US and Japanese bases and against naval vessels and merchant ships south and southeast of Japan. 78

And in the Japanese view:

The nucleus of an [enemy] air assault includes fighters, fighter bombers and bombers which are equipped with missiles and others, and high performance equipment like electronic warfare devices, and capable of intruding into the country at a low altitude as well as an ultra-high altitude. Against an air invasion, Japan is to implement systematic air defense operations by mobilizing interceptors and surface-to-air missiles ... which will be used by organically linking them with the aircraft control and warning system .... In addition to the maintenance of these capabilities, it is necessary for the SDF to uphold the air defense capability against air assaults on bases and facilities which are the foundation for the implementation of various operations. Also, they must be prepared to cope with air attacks on units operating on the ground and Japanese surface ships at Japanese peripheral seas. 79

While it may be true, therefore, that the purpose of Japan's defence roles remained strictly defensive, they gained an expanded geographic scope and added strategic purpose through their incorporation into a joint Japan-US security strategy against the Soviet Union in the north-west Pacific.

This was reinforced by Japan's apparent acceptance of the primary responsibility to discharge these military missions, presumably to enable the US to concentrate its strategic effort in other areas. For example, with respect to sea lane defence the Japanese government stated that: 'US naval forces will extend support to the Japanese SelfDefense Forces in their operations' ,80 implying that in this context Japan is the principal actor, with the US playing a support role.

The increasingly collective security orientation of Japan's defence contribution was also strengthened by Nakasone's extension of permissible 'individual security actions' to include SDF assistance to US naval forces operating in waters around Japan if, in the cause of Japan's defence, they come under enemy attack. Until 1983 the


official view had been that SDF action to help protect American ships, either military or merchant, in waters around Japan would constitute collective security action. 81

(ii) Interoperability and Japan-US Joint Exercises Interoperability has become a star item on the US-Japan defence co-operation agenda. In a 1984 agreement, Japan and the US undertook to initiate joint studies on how interoperability could be increased between their forces across the entire range of military action, including tactics, information and communications, logistical support and equipment. 82 This arrangement has been pursued in subsequent security discussions, and in early 1987, it was decided that Japan-US manoeuvres and training should actively test ways in which interoperability could be increased.

Japan-US joint exercises or 'combined training' activities have also reached new heights, with increasing emphasis being placed on training Japan to play a supporting role in larger American exercises, pointing 'to a much more positive Japanese role in the defence of Northeast Asia'. 83 Another first was recorded in October 1986, when the Japanese government agreed to allow American military aircraft stationed in South Korea to participate in exercises in Japan with the Air SDF for the first time. This was part of an exercise involving the three services of both countries.

The regularisation and expansion of joint US-Japan exercises and the enhancement of Japan-US interoperability are both indicative of the increasing integration of American and Japanese forces for regional defence operations in the north-west Pacific.

(iii) Reciprocity in Military Technology Flows In the light of Japan's advances in the so-called frontier technologies, a specific US request for defence technology exchange with Japan was lodged in 1981. The Japanese government considered the request for one and a half years, mindful of the restrictions imposed on such technology transfer under the Government Policy Guideline on Arms Export of February 1976. The final decision was deferred by the Suzuki government and left to the Nakasone government to resolve. A positive response from the latter came quickly in January 1983. It announced that it would allow the transfer of military technology to the US as part of a mutual exchange of defence-related technology.

Japan thus endeavoured to introduce more reciprocity into its defence relationship with the United States by making the trade in

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military technology two-way instead of the one-way flow that had operated for so many years. This policy change represented an extremely important turning point in Japan's defence relationship with the United States. Japan could claim to be making a contribution to the US strategic alliance, which could go a long way towards balancing the books in the US-Japan relationship, but which did not involve specifically military undertakings.

The official wording justifying the change in Japanese policies read as follows:

Under the Japan-US security arrangements, the US and Japan, in cooperation with each other, are to maintain and develop their respective defense capabilities to resist armed attack. In improving its defense capabilities, Japan has been benefiting from various kinds of cooperation extended by the US, including the transfer of the US technologies to Japan such as in the form of licensed production. In view of the new situation which has been brought about, by among other things, the recent advance of technology in Japan, it has become extremely important for Japan to reciprocate in the exchange of defense-related technologies in order to ensure the effective operation of the Japan-US security arrangements. Such exchange is in line with the spirit of the Japan-US Security Treaty and its related arrangements, which provide for and envisage mutual cooperation between Japan and the US in the field of defense, and contributes to the peace and security of Japan and the Far East. 84

On these grounds the Japanese government justified its decision to make the transfer of arms technology to the US an exception to the Three Principles. The ban on technology transfer would still apply to other countries. 'The decision was made on the basis of Article 1 of the US-Japan Mutual Security Assistance Agreement, which states that the two countries should make available to each other equipment, supplies, services, and other forms of assistance in accordance with specific arrangements to be made between them.'85

Based on this agreement, in November 1983, the Exchange of Notes that stipulated the basic framework for implementing the programme to transfer military technology was concluded. It provided that the specific technologies to be transferred would be determined independently by Japan, and that such transfer of arms technology would not be subject to the Three Principles on Arms Export. The


transfer also included the exports of arms necessary to make transfer of arms technology effective, such as prototypes. The Three Principles on Arms Export still applied to the export of other arms as in the past.

The November 1983 Weapons Technology Exchange of Notes on the Provision of Weapons Technology to the US was followed up in December 1985 by the Exchange of Notes on Details of Implementation of the November 1983 Exchange of Notes. Thus the 'Japanese government has evaded criticism by using the existing agreement with the US [namely the Japan-US Mutual Defense Assistance Agreement of 1954] and the two Exchanges-of-Notes have been concluded to make it adapt to this particular case. Furthermore, the 1954 Agreement makes it easy to handle the implementation of the US government demand for secrecy on certain matters, since the agreement has such clauses. '86 These agreements 'freed Japanese industry to export technologies to the US without undergoing complicated procedures and checks by the government to gain approval'. 87

There had been only two cases of military technologies being exported by the end of 1986: the sensor for a guided missile, developed by the research and development section of the Defence Agency, and the design of a warship. The government decision facilitated the export of dual-use technology as well, however. Clearance to export military technology had the effect of giving symbolic release to the transfer of dual-use technology. Japanese companies had long feared the bad image they would create in exporting commercial technologies that might have a military application and had exhibited a general reluctance 'to be dragged into becoming a part of the US military machine'. 88 With official blessing given to the export of explicitly military technology, the final impediment to the transfer of dual technology for use in weapons systems had been removed. This type of technology had been the real focus of the US request from the beginning, but releasing specifically military technology from export restriction was a prerequisite to freeing up the flow of dual-use technology. Technology of particular interest to the US included very high-speed and large-scale integrated circuits, semi-conductors, night-time imaging, fibre optics, lasers, heat-resistant ceramics, robotics, targeting devices, computer 'artificial intelligence', that is fifth-generation computers of particular use in avionics, quality-control methods, stealth technologies and gallium arsenide, the computer-chip material of the future. Most of these have both civilian and military applications, with gallium

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arsenide and fifth-generation computers being of critical importance to the US Strategic Defence Initiative (SDI). Although it was not spelled out in any agreement, the change in Japanese government policy was designed to 'clear the way for future Japanese participation in the US Strategic Defense Initiative program through participation by Japanese companies'. 89 The US also wanted from Japan a strong symbolic gesture and demonstration of its loyalty and solidarity as an ally.

Defence Spending and the Defence Build Up Programme

In 1984 and 1985 Prime Minister Nakasone made two concerted attempts to break through the 1 per cent of GNP limit on defence spending. His objective was to remove the principal obstacle to achieving the force level targets set by the NDPO.

His handling of the issue on both occasions is illustrative of his political methodology in general. He tackled head-on some of the more intractable policy problems faced by successive Japanese governments, manoeuvring through such political minefields as privatisation and administrative reform and achieving policy change at an unprecedented rate for the Japanese political process. On defence, he attempted to accelerate the process of change by replacing political inaction with dynamic initiative, by substituting a clear exposition of opinion and policy for the government's customary passivity and vagueness and by confronting the entrenched immobilism of defence decision making with a brand of direct democracy that forced the pace of intra-government, intra-LOP and inter-party consensus formation. He used his own policy experts to legitimise his initiatives and then by a method known as the 'top-down formula', disclosed the policy outline to the nation through the mass media in a bid to win public endorsement and a national consensus in favour of his recommendations, thus outflanking any opposition from the government bureaucracy, LOP factions and the Opposition itself.

Using this method, however, Nakasone did not achieve a clear victory on the 1 per cent ceiling issue. At the last minute he was blocked by other influential leaders of his own party, not because they intrinsically opposed the idea of abolishing the 1 per cent limit, but because they feared the electoral implications for the party of this move (the negative impact was already showing up in public opinion polls90), because they did not want any credit to go to Nakasone for pulling off such a political coup and because they


disliked 'Nakasone's forceful way of doing things, his ignoring the LDP's- and the traditional Japanese way- of obtaining a consensus before making decisions'. 91 The Opposition parties also objected on the latter grounds, raising the possibility of an alliance with the antimainstream factions within the LDP and threatening obstructionist behaviour in the Diet towards a number of important government bills including the defence budget. Nakasone's failure exemplified the traditional forces of immobilism at work. He found it impossible to ignore the requirements of consensus decision making involving not only formal policy-making bodies within the party and government, but also groupings formally outside this process such as party factions and the Opposition. He was undermined from within his party by perennial intra-LDP factional rivalries and by government party numerical weakness in the Diet, which allowed the Opposition parties to harness factional rivalries within the LDP for their own political purposes, which raised the possibility of breakaway LDP factions using an Opposition-sponsored crisis in the Diet to undermine his power base within the party, and which forced on the LDP a consensual style of Diet management generally.

The outcome of this political dispute was nevertheless highly ambiguous. The govenment released a statement by the chief cabinet secretary, which stated: 'The Government will make efforts to respect the intent of the decision at the Cabinet meeting held on November 5, 1976 ("Concerning the Defense Buildup for the Time Being"), that it should keep its national defense expenditure within 1% of the gross national product'. 92 This is notwithstanding the permission Prime Minister Nakasone received from the LDP in September 1985 to exceed the 1 per cent ceiling 'by a slight amount' because, at the time, government approval was simultaneously obtained for the government's defence build up programme, the Mid-Term Defence Programme Estimate (MTDPE) for 1986--90. This estimate was one of a series which originated as intra-departmental Defence Agency weapons procurement programmes designed to enable the SDF gradually to achieve the force levels and defence objectives set by the 1976 NDPO. As a step closer to abolishing the 1 per cent limit, the 1986-90 MTDPE was upgraded to a formal government plan in order to give official cabinet and National Defence Council approval to the total level of expenditure envisaged under the programme, amounting to 18.4 trillion yen over the five years. Calculated in terms of the ratio to estimated GNP over the 1986--90 period, this sum came to 1.038 per cent. It looked, therefore, as if the 1 per cent

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ceiling would be breached in the normal course of implementation of the 1986-90 MTDPE.

The government's official word on the issue was presented in the 1986 Defence White Paper. It stated:

With respect to the ratio of¥ 18.4 trillion to the GNP, the definite ratio cannot be specified due to fluctuations of the future GNP. If the ratio is simply calculated on the basis of the governmental estimates it would slightly exceed the 1% of GNP. However, the defense-related expenditures for each fiscal year are to be appropriated in each year's budget with due consideration to economic, fiscal and other conditions in each year. ... Therefore, the definite ratio of the defense-related expenditure to GNP cannot be specified at present. The Government intends to respect and abide by the decision of the Cabinet meeting on November 5, 1976'.93

According to calculations made in late 1986, the 1986-7 defence allocation of 3.3 trillion yen amounted to 0.9937 per cent of GNP as estimated by the government, assuming a projected 5.1 per cent growth in GNP for fiscal 1986. In making these calculations the government took advantage of exchange rate changes which reduced the cost of some military items to the Defence Agency. Because the 1 per cent of GNP issue involves multi-stage, time-lagged calculations of projected expenditure, actual expenditure, projected GNP, then actual GNP, with the last figure also coming in last, there is room for the government to adjust the orders and payment for defence equipment, to utilise changing exchange rates to advantage and to manipulate GNP figures (made easier by the fact that Japan is presently changing its base year for GNP computations from fiscal 1975 to the 1980 calendar year to bring it in line with the UN system) and possibily even to enlist the backing of the Opposition parties for a breakthrough of the 1 per cent limit in consequence of a wage rise for government workers (including military personnel), which the Sohyo-based JSP consistently supports.

The significance of the 1986-90 MTD PE lay not only in its upgraded status to a formal government plan but also in the target date (1990) it set for attaining the force levels of the 1976 NDPO. For the first time the Japanese government had actually put a time limit on reaching the goals of the NDPO. This was revolutionary enough in itself in so far as the Outline set no target date for completion. It


signals 'a shift in policy by insisting simply that existing policy is to be fully carried out'. 94 It also goes some way towards meeting the repeated US request for Japan to meet its 1976 defence goals in the minimum possible time rather than treating them as open-ended objectives. By 1990 Japan should therefore, in theory, be able to mount a full surveillance posture in peacetime and to counter, unaided by the United States, 'limited and small-scale aggression' in the event of conflict.

According to one assessment, however, Japan's basic defence goals as postulated by the 1986-90 MTDPE have undergone a distinct change from those in the NDPO. While

claiming to follow the National Defense Program Outline the new plan actually revises it. The plan represents the first official document sanctioning a shift from a policy oriented to defense of the Japanese archipelago to an outward-looking policy oriented to deterrence of the Soviet threat. 95

This is argued in the 1986-90 MTDPE in terms of a 'response-tothreat' approach:

In consideration of changes in the international military situation and in the level of technology in other countries, and in order to develop an effective defense capability in response to these changes, efforts will be made to carry out a thorough review of the functions of the Ground, Maritime, and Air Self-Defense Forces and to deploy resources in line with priorities. 96

In other words, a redirection in Japanese defence policy appeared to have taken place, away from the basic defence power or 'standard defence force' concept postulated by the NDPO (that is adequate peacetime surveillance and a capacity to deal with limited and smallscale aggression), and towards a 'necessary defence power' concept that linked Japan's defence capabilities to the scale of the threat facing it. In other words, the Japanese arms build up now seemed to be linked directly to the Soviet arms build up in the region. And the fact that the NDPO defence objectives were cast in such broad and abstract terms allowed Japan's real defence policy to change considerably in emphasis and direction and yet remain within the overall guidelines of the 1976 policy.

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The 1986-90 MTDPE also went beyond the NDPO in another sense. The NDPO provided only general force level targets, listing main units, basic categories of defence equipment and numbers of personnel. It did not specify actual types of equipment. The 1986-90 MTDPE, on the other hand, envisaged a marked qualitative upgrading of the SDF, in so far as the new additions to military hardware it specified for procurement were advanced, sophisticated weaponry with capacities no one conceived of ten years previously when the NDPO was originally formulated. 97 Not only will it achieve the general force level targets in the NDPO in quantitative terms, it will far surpass them in a qualitative sense. Therefore, it may be the case that when the NDPO targets are met by 1990, the SDF will have capabilities that exceed the defence objectives of the NDPO, without any official change having taken place in the government's defence philosophy.

A closer examination of the defence capability targets in the 1986-90 MTDPE confirms this trend. The build up programme will give Japan fighting capacities that are additional to and only tangentially related to the objectives of the NDPO, which are limited to peacetime surveillance and an ability to counter limited and small-scale aggression in time of conflict. The 1986-90 MTDPE focused Japan's military build up in two main areas: a more efficient defence of Japan, which accorded with the NDPO goals, and a more effective regional security role for Japan, which was not foreshadowed by the NDPO at all. The former concentrated on building up Japan's defence against seaborne and/or airborne landing invasion, improving C31 (command, control, communications and information) functions, and enhancing the ability to engage in sustained conflict. The latter concentrated on enhancing Japan's sea control capabilities and the establishment of an air defence screen. The MTDPE states: 'Efforts shall be made to improve the air defense capability of the main islands and the ability to protect sea lanes of communication in the waters surrounding Japan by improving and modernizing equipment such as aircraft, vessels and surface-to-air missiles'. 98 Accordingly, the substance of the weapons procurement programme in the MTDPE placed emphasis on modernising Japan's air defence capability with F-15 interceptor fighters, E-2C early warning aircraft, Patriot surfaceto-air guided missiles and over-the-horizon radar, and on upgrading Japan's sea-based anti-submarine, anti-ship and anti-air capability with P-3C anti-submarine patrol aircraft, anti-submarine helicopters, submarines and missile-carrying escort ships. The nature of this


military build up undeniably adds credibility to Japan's acceptance of a sea control and air defence role in the north-west Pacific.

During the formulation of the 1986-90 MTDPE, US pressure remained on Japan to upgrade its defence responsibilities and capabilities. In July 1985, the US Congress again passed a resolution calling on Japan to accelerate its military build up to enable it to carry out fully its role of defending air and sea space out to 1000 nautical miles from its coast, with the possibility of trade retaliation if Japan did not come up to expectations.

On Japan's Attainment of Major Power Status

Nakasone managed successfully Japan's elevation to a major summit power alongside the other advanced industrialised nations, and he was prime minister during the period of Japan's attainment of economic superpower status. With this came a full realisation of Japan's role as an economic superpower to assume greater global responsibilities and contribute more international public goods. In a comparison with other advanced western industrialised nations (the UK, France, the USA and the FRG) in terms of its contributions to international public goods, Japan still ranked lowest on defence, third on ODA, second on the share of the UN budget, second on research and development expenditures, fourth on trade and fourth on imports. 99 Relative to her economic size, Japan still had some way to go in terms of contributing her fair share to the maintenance of the international economic order through the supply of public goods.

In absolute terms, however, Japan was now the second largest foreign aid donor after the United States and under Prime Minister Nakasone aid increases under the national budget were continuing to receive priority. This was seen as one of Japan's largest and most valuable, but non-military, contributions to regional and global peace and stability. The rationale behind the economic assistance provided was to promote the economic growth and political stability of recipient countries. It also gained in more recent times a much more explicitly political and strategic purpose, in so far as it aimed through economic means to shore up and stabilise pro-western regimes in the AsianPacific area and beyond, as Japan attempted to show its solidarity with western interests in general and American interests in particular. Nowhere was this strategy more in evidence than in Japan's revamped economic development initiatives in the south Pacific. As part of a

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'counter-offensive' to the Soviet diplomatic, commercial and political offensive in the Pacific resulting from Gorbachov's Vladivostok speech in July 1986, and with strong encouragement from the United States, Japan expressed its determination to display a higher profile in the region. In early 1987 it outlined plans to dispense increased amounts of economic aid to the more vulnerable island economies of the south Pacific, have upgraded them into the category of 'strategic aid' recipients. Japan's increasing use of aid as a strategic, but nonmilitary weapon has continued to be an important dimension of the Japanese response to American calls for a larger Japanese financial contribution to the maintenance of the western security system. In its aid allocation decisions, Japan has been strongly influenced by US strategic assessments, and in its reappraisal of the strategic importance of the south Pacific, Japan has incorporated into its own response the US reaction to Soviet advancement into the region.

Japan has unashamedly acknowledged the underlying political and strategic purposes of its diplomatic and economic initiatives towards the south Pacific. It has emphasised its 'important responsibilities in contributing to solving of problems which require global remedies. In the area of security . . . an approach based on global vision is essential. It is clear that it will become increasingly necessary, not only for Japan, but for the Western nations as a whole, to look at the importance of the peace of the Pacific in a world-wide context. ' 100

On the domestic side, Nakasone showed a willingness to attempt major economic adjustments, which were conceptualised in terms of harmonising Japan's economy with the global economy. Nakasone moved harder and faster on the internationalisation of Japan's economy than any of his predecessors. This was facilitated by a series of market opening measures designed to increase trade and investment opportunities for other countries in Japan, and by attempting to build a public and intra-bureaucratic consensus in favour of these initiatives by setting up the Maekawa Committee with a brief to investigate 'what Japan should do to win true acceptance in the international community of nations'. 101 The Maekawa Report included recommendations for adjusting domestic economic conditions to the demands and pressures from Japan's major trading partners, including the transformation of Japan's economic structure from an export-led economy to a domestic demand-led economy, and an increase in Japan's international contributions. In the wake of the Tokyo summit in July 1986, the major summit powers gave their endorsement to the Nakasone government's continued efforts


to engineer further adjustment in Japan's domestic economy to offset international trade and currency difficulties.

Acknowledgement of Japan's new major power status was accompanied by a new realisation that Japan's political profile on the international stage also needed to be raised. The Nakasone administration sought to cast aside Japan's traditionally apolitical approach to international affairs and supplement its economic power with a more influential political role. This role Prime Minister Nakasone very firmly defined as being part of the western camp. Japan joined the league of advanced industrialised nations as an equal partner, and under Nakasone's leadership unequivocally identified its interests not only in economic terms, but also in political and security terms, with western interests. On matters of nuclear arms control, for instance, Nakasone very clearly associated Japan with the United States and the nations of the North Atlantic Treaty Organisation, and signed the joint communique issued by the Williamsburg summit, which declared: 'The security of our countries is indivisible and must be approached on a global basis. ' 102

On the Belief System of Nakasone

Prime Minister Nakasone was the most 'visibly patriotic' of Japan's recent prime ministers. His policies were less patterned on the 'conservative pacifism' of Yoshida, Ikeda and Sato than the political agenda of the Hatoyama period in the mid-1950s. The similarities can be found not only in the generally conservative, nationalistic thrust of his policies but in their detail, explained in terms of his overall objective of 'settling the postwar accounts', a clear euphemism 'for reform of Japan's postwar pacifist and dependent foreign policy'. 103 Nakasone was quoted as saying: 'True independence is impossible ... as long as a nation chooses to depend in large measure on the military power of another country for its own territorial security. I have long contended that a Constitution that leaves room for doubt of one's own self-defence capability must be revised. ' 104 Nakasone was known to support constitutional revision in order to legitimise the SOF. In 1983 the LOP adopted a resolution in favour of revising the constitution.

Hatoyama Ichiro who became prime minister in 1954, also advocated constitutional amendments, including revision of Article 9, and when the LOP was established in 1955, its initial policies included revision of the constitution together with the 'establishment

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of self-defense power appropriate to the national power and national conditions'. 105

The conservatives under Hatoyama also tried to wind up the legacy of the Occupation in the areas of education, police and labour legislation and generally reform the political system in line with traditional values. They were largely unsuccessful in instituting this latter agenda of reactionary measures, mainly because the progressive forces in Japan staunchly defended any encroachment on their newly granted freedom and defended the constitution and Article 9 through their more than one-third of Diet seats. Nakasone made it equally known was the was 'unhappy with the ... education system largely imposed on Japan by the victorious Americans after 1945'. 106 He was particularly interested in education, was very critical of the American legacy in that area and supported moral education.

In foreign policy Nakasone's policies were also less patterned on the Yoshida/Ikeda precedents than on the Hatoyama approach. Under the 'conservative pacifism' of Yoshida, Japan sought to raise its international status through economic means alone, depoliticise foreign policy by shelving sensitive political and defence issues at home and abroad, reorient national objectives more fully to economic growth policies and relinquish, for the time being, any plans for constitutional revision. Nakasone, on the other hand, showed no reluctance to tackle politically sensitive issues (like the 1 per cent ceiling on defence spending) and challenge defence taboos (witness his visit to the Yasukuni shrine in 1985 in his official capacity as prime minister). Like Hatoyama (and also Prime Minister Tanaka in 1973), he also sought to achieve a breakthrough in the relationship with the Soviet Union with a view to settling one of the most outstanding postwar accounts, namely, signing a peace treaty with the Soviet Union, something Prime Minister Hatoyama tried and conspicuously failed to do.

Nakasone attempted to secure a much more internationally assertive role for Japan. He made the attainment of Japan's new international status integrally bound up with the notion of Japan being 'reborn', wiping the slate clean and discarding the postwar legacy of guilt and shame. In his view the time for atonement was over; Japan could now hold its head high and take its legitimate place amongst the family of nations as well as discharge its responsibilities as a fully fledged member of the western alliance. In his view, Japan no longer deserved the label of economic giant and political pygmy. At the same time, Nakasone continued personally to repeat the pledge to


Asian-Pacific countries that Japan would never become a military power that might threaten its neighbours, and he declined to make a second official visit to the Y asukuni Shrine in 1986 in deference to Chinese sensitivities.

In spite of Nakasone's assurances about Japan's long-term intentions, the question has already been raised whether Japan's new international responsibilities should extend to contributing military manpower to UN peace-keeping operations. Such a move would require a revision of the Diet resolution that currently forbids the despatch of SDF personnel overseas, although if their purpose is not explicitly military, such deployment is not specifically prohibited by the current interpretation of the constitution. The glaring lack of public support, however, for Japan assuming a higher military profile on the international stage has thus far prevented the government from taking any official steps in this direction.

On defence matters in general the Japanese public seemed to lag considerably behind the prime minister's will. What Nakasone did not achieve was not because of a Jack of will or intention, but because his options were still limited and his hands tied by the lack of a supporting defence consensus. This obstacle was clearly recognised by the prime minister, who took clear steps to push the defence consensus in the desired direction. Undoubtedly there was a change in public attitudes towards defence and security issues in recent years, not only because of the deliberate defence consciousness-raising by the government but also because of external factors relating to the activities of the Soviet Union in the vicinity of Japan. The threat perceptions of the Japanese people sharpened, and although the public did not fear an imminent invasion by the USSR, there was general agreement that the Soviet military build up in the north-east Asian region posed an increasing latent threat to Japan. But increased public security awareness and majority support for the existence of the SDF and the Security Treaty did not necessarily translate into public backing for a more prominent defence role for Japan and a rapid and significant defence build up.

Nakasone received powerful endorsement in the July 1986 election for his achievements in raising Japan's international status and a continuing mandate to settle the postwar accounts. In the election the LOP managed to escape some of its traditional electoral dependencies and move into the vast middle ground of the Japanese electorate, drawing increased support from the middle-class, urban, salary earners. The party was consequently in a much stronger position in

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the Diet than it was in the hakuchu107 period of 1983--6 when it was in too weak a position politically to change the fundamentals of defence policy. This often required the government party to compromise with the Opposition and concede on its defence and other policy initiatives in order to ensure smooth Diet deliberations. 108

With its large majority from 1986, the LDP was in a much more favourable position in the Diet. This could result in a rewriting of the rules that had governed LDP and Opposition behaviour over the previous decade. The strength of the government party's majority was such that it would grant increased immunity to defence policy makers from the views of the minority Opposition whose political weakness placed them further out on the political periphery, and possibly outside the consensus formation process itself. This permitted the government to take a much more dynamic approach to defence policy making, introducing several significant changes that had been delayed by the customary forces of immobilism. The Takeshita cabinet, however, which came to office in November 1987, appeared likely to seek to incorporate sections of the Opposition into a broad consensus.

Changes Since the July 1986 Election

In July 1986 Prime Minister Nakasone initiated a major restructuring of Japan's highest-level defence policy-making system. The National Defence Council within the Japanese Cabinet was abolished and replaced by the Security Council of Japan (SCJ). The SCJ not only took over the conventional tasks of the National Defence Council (decision on important matters relating to national defence), but also deliberation of measures to be taken in case of major defence emergencies. Its establishment represented an effort by the Japanese government to streamline its rapid response capabilities in time of attack. Previous inadequacies in this area have been pinpointed by both high-level Japanese military personnel and the United States.

In September 1986 the Nakasone government also took up the challenge and officially accepted the official US invitation for Japan to participate in 'Star Wars' research, an invitation that had lain on the table since early 1985. The initial Japanese response had been to express understanding of the American request but to reserve its official decision. Because dual-use technology was involved, no formal approval for private firms to participate was required and they already had the technology. But because of the political ramifications of such


de facto participation, Japanese private firms had been unwilling to participate unless given the nod by the government. The Japanese decision in favour of 'Star Wars' was designed as a gesture of solidarity with American strategic interests, a non-military, yet highly useful, contribution to the US military effort against the Soviet Union.

On 30 December 1986 it was announced as part of the budget formulation process that the 1 per cent limit on annual defence appropriations would be broken by a defence budget totalling 3.5 trillion yen for fiscal 1987, a 5.2 per cent increase over the previous year and amounting to 1.004 per cent of estimated GNP. This move was presented by the director-general of the Defence Agency in terms of the necessity to accomplish the equipment procurement and expenditure targets envisaged under the 1986--90 MTDPE109

regardless of the slower than projected growth in GNP, which, in figures for fiscal1987 released by the government, amounted to a 4.6 per cent increase over fiscal 1986 in nominal terms and 3.5 per cent in real terms. In justifying the government's decision, Prime Minister Nakasone explained: 'I was afflicted with the question of adhering to the 1% rule or fulfilling the five-year program. I decided that the buildup program is a minimum required for security of the country. ' 110

In setting the policy limit more than a decade before, the government had combined a number of political, fiscal and intra-bureaucratic objectives: firstly, the 1 per cent ceiling was designed as a political device to pacify the Opposition and allay the fears of those concerned about a rapid growth in Japan's defence spending; secondly, it presented a policy barrier behind which the Japanese government could hide in dealing with US pressure for larger defence budget contributions to security; and thirdly, it handed to the Ministry of Finance a fiscal weapon for keeping a tight rein on Defence Agency ambitions for increased defence spending. The fact that Nakasone presided over the demise of this policy limit at that time was further evidence of the change in the basic political and policy climate in Japan: Nakasone's need to pay heed to Opposition and pacifist sentiment was reduced by his electoral victory; for the same reason his eagerness to make strong symbolic gestures to the United States as an ally could now be given freer rein; and the Defence Agency won the battle several years earlier with the Ministry of Finance with respect to its exemption from the government's 'zero growth' budget policy.

The decision on SDI participation and the scrapping of the 1 per cent of GNP ceiling on annual defence expenditure may be indicative

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of future developments. They represented the new freedom of defence policy choice provided by the massive electoral endorsement of Japan's LDP government under Nakasone's leadership. If unchecked, this trend could result in the eradication of the immobilism that characterised the defence policy process over the previous thirtyfive years and ultimately produce a fundamental revision of Japan's postwar policy of pacifism and dependence. It remains to be seen, however, whether the LOP's stunning victory in July 1986 will have given the government a mandate for radically altering the defence status quo.

WHAT NAKASONE DID NOT DO

Thus far, however, the fundamentals of Japan's defence policies were still in place. Nakasone did not yet attempt a qualitative change in the sense of introducing a new constitutional interpretation that would allow the necessary changes in associated policy. In spite of his own views and that of his party, this option appeared to be unrealistic because the necessary consensus amongst the nation at large was missing.

The defence administration of Japan was not reorganised to elevate the Defence Agency to the status of a Ministry.

Japan had not revised the terms of its security treaty with the US to make it truly reciprocal. It remained a one-sided arrangement, formally and officially, in spite of the fact that Japan was contributing more, both officially and unofficially, to the defence relationship. Japan was still under no obligation to assist the United States if it was attacked, and under no obligation to assist even if US forces were attacked in Japan's region but not in the cause of Japan's defence.

With respect to defence spending and the defence build up, there was no sudden and massive increase in Japan's budget to underwrite a corresponding jump in Japan's defence capabilities. Incrementalism was still the order of the day in defence spending and weapons' acquisition. In structuring the SDF, even the defence lobby was opposed to fast rearmament since it could damage the fragile consensus that existed in favour of the gradual allocation of more money and attention to defence. On defence spending the Nakasone administration was not able to disregard entrenched budgetary procedures and the limitations on defence spending imposed by the


fiscal requirement for stringent budgets. During his period of office, trends in defence spending followed the incrementalist pattern of previous administrations: a steady year-by-year increase designed to achieve the qualitative upgrading of defence equipment, better logistical support for the armed forces and a small percentage increase in research and development expenditure. The absolute amount allocated to defence was rising steadily from 1982 at a rate of about 200 billion yen annually, while expenditure on defence equipment was rising at an equally steady rate of 100 billion yen. The increase in projected expenditure on equipment for fiscal 1987, however, was a 100 per cent jump on previous years and reflected equipment purchases planned under the 1986-90 MTDPE as well as retroactive payment for past orders. The priority allocated to defence under the Nakasone government also became more apparent when the annual percentage increases allocated to defence under the budget (averaging 6.5 per cent since 1982) were compared with the zero or very marginal percentage increases granted to all other areas of budget spending except foreign aid. And it was apparent when note was taken of the fact that defence spending as a percentage of the total budget was rising each year from 1982 (it was 6.5 per cent of the total General Account budget in 1987, compared with 5.2 per cent in 1982).

From an American perspective, these defence spending increases were consistently judged as inadequate and unsatisfactory, particularly in view of the fact that they represented such a modest percentage of Japan's GNP. The Japanese Opposition and much of the mass media, on the other hand, saw them as a portent for a greater and more rapid Japanese rearmament effort. Those arguing from a more hawkish standpoint stressed that even with the increases in defence spending that Japan had sustained over the past decade, the allocations were insufficient to satisfy the demands of the US Congress and pay for Japan's main- and modest- defence commitments. In justification for the government's intention to step up the defence build up, the 1986 Defence White Paper underlined the point that 'Japan's defense capability has yet to reach the force level of the defense capability laid down by the Outline as the necessary minimum peacetime level.' 111 According to one recent western assessment, Japan's SDF 'would be incapable of repulsing even a "limited and small-scale" invasion'. 112 At worst 'Japan would be able to hold up an invader for only two days.' 113 Even by 1990 when the current MTDPE expires, 'Japan will still be unable ... to fulfil the strategic

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goals . . . [it] has set: it would not be able to defend the sea-lanes, or even to provide air defence of its own territory.' 114

It was also officially acknowledged that the military environment surrounding Japan changed markedly in the ten years since the 1976 NDPO was compiled. Government defence documents pointed out that 'Soviet military forces in the Far East including Japan's Northern Territories have been conspicuously increased both in quantity and quality in comparison with the time when the Outline was adopted ten years ago.' 115 They did not go as far as to state, however, that the NDPO should be revised to take account of Soviet militarisation of Japan's regional environment since 1976. According to the latest Defence White Paper, the Japanese government intended neither to revise the Outline nor amend its accompanying force level targets. 116

While there was no official change in policy, however, the 1986-90 MTDPE explicitly acknowledged the changes in Japan's military environment, and also implicitly took them into account in its weapons' acquisition targets.

In absolute terms, Japan's 1985-6 rate of defence spending put it tenth in the world, 117 down from eighth, the position it held in the early 1980s. It was only in relative terms- that is the ratio of defence spending to GNP, per-capita expenditure and the total government budget- that Japan appeared to lag markedly behind other western countries. Nevertheless, by the standards of its neighbours and other advanced, industrialised countries, Japan could be considered to have substantial armed forces. 'Ranked with America's NATO allies, Japan was fourth in naval tonnage, fifth in submarines, and sixth in combat aircraft. Japan's ground forces were about the size of the United Kingdom's.' 118 Measured in these terms, Japan had attained the status of a regional military power, with the largest military budget in east Asia outside China.

Japan could hold this relatively elevated world ranking and yet still claim a minimalist defence posture because the essence of Japan's minimalism was that its intentions and objectives within the military sphere officially remained defensive ones, its forces were not yet equipped to conduct offensive operations, its capabilities remained targeted on repelling an enemy only after it had attacked Japan and the current constitutional interpretation barring the SDF's participation in collective security arrangements was still held up as a barrier to an explicit and official Japanese military contribution to western security in the Asian-Pacific region outside its own defence.

It was further argued that this minimalist defence posture still


allowed room for considerable increases in defence spending and a significant upgrading of Japan's defence capabilities before Japan could be accused of changing its basic defensive stance. According to one analyst, 'The inventory of equipment it is currently acquiring is far from the sort of shopping list that would give Japan an offensive capability. The size and equipment of the SDF are still limited to the minimum necessary for self defence, and in fact Japan could build up its forces considerably more than it already has done and remain within the boundaries of an exclusively defence posture. ' 119

Not even Japan's defence hawks advocated a change in Japan's basically defensive stance. They might be in favour of building up Japan's military capability to the point where it could contribute to an effective deterrence of the Soviet Union in the north-west Pacific, of legitimising the SDF by revising Article 9, of showing more solidarity with the United States, of assuming more and explicit responsibilities under the US-Japan Mutual Security Treaty and for sending SDF troops overseas on international peace missions, but they were not in favour of Japan assuming an offensive capability and posture, which could have such destabilising consequences for Japan both at home and abroad. The Yoshida/Ikeda 'conservative pacifism' was still alive in the sense that a majority of Japanese still 'believe their national welfare has profited by placing priority on economic affairs, and that a greatly expanded military would detract from the willingness of trading partners to welcome their businessmen and their products'. 120 The incremental approach to Japanese rearmament, to the extension to Japan's military activities and to defence spending increases also had the added political advantage of keeping the pacifist opposition 'within manageable limits' .121 As long as a majority of the Japanese people support the constitution and its renunciation of war, the Japanese government would find it extremely difficult to abandon its policy of 'defensive defense'. 122

THE IMPLICATIONS OF JAPAN'S INTEGRATION INTO THE US STRATEGIC SYSTEM

Nevertheless, while it is true to say that Japan's exclusively defensive posture had not been changed officially, it is equally true to add that this official policy was gradually being qualified as a result of the new era in US-Japan security co-operation launched in 1978 and Japan's

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increasing integration into US force structure and strategies in the north-east Asian region.

In the passive sense Japan had long been part of the US strategic system as 'a springboard from which the United States can launch attacks against the Soviet homeland [and] . . . a shield behind which the US Navy can fight Pacific battles'. 123 This passive role was enhanced in recent years with the increasing importance of Japan to the US nuclear and command structure in the north-west Pacific and US-Japan co-operation in the modernisation of the C3I facilities based in Japan. The American bases, command centres and other strategic facilities that Japan hosted were integral to both the US global strategic system and its regional defence operations in the north-west Pacific. In this regard, the Japanese government appeared to have breached its own non-nuclear principles by unofficially allowing the introduction of nuclear weapons into Japan on board US warships permitted to enter Japanese ports and presumed to be carrying such weapons. The government took refuge in arrangements associated with the Security Treaty which require the US to undertake 'prior consultation' with the Japanese before introducing nuclear weapons into Japan. Because no such prior consultation had taken place, the Japanese government could officially claim that 'introduction' had not occurred. For its part, the US government appeared to take refuge in its own interpretation of the meaning of the word 'introduction' to permit port calls and transit by its nuclear-armed ships in Japanese waters. 124 More recently, the Japanese government has agreed to allow 40-50 American F-16 fighter-bombers capable of carrying nuclear weapons to be stationed at the US Air Force base at Misawa in northern Japan. Given Japan's overall level of integration into the US nuclear infrastructure, it has been argued that Japan would find it difficult to avoid being involved in a conflict between the US and the USSR. 125 'Regardless of its own official defence policy ... [and] with or without the consent of Japanese governments the US has incorporated Japan into its war fighting plans. ' 126 Presumably this is the price of a continuing American security guarantee.

To the passive role that Japan had been playing since 1945 was added a more active role within the American strategic system. Japan was slowly being incorporated into US war-fighting strategies in the sense that its military forces had been allocated specific regional security functions in the north-west Pacific and were being developed to this end. In this sense, Japan's 'military capability has begun to function in the East Asian regional system as a US military ally' 127


and not solely for its own defence. Japan's contribution was largely unofficial, but the expanding Japanese capabilities and defence functions to which they were targeted 'contribute a valuable bonus to the US units deployed in this critical area of the [north-east Asian] region'. 128 Japan had worked out co-ordinated defence policies with the United States so that if not legally, then at least in effect, the defence role of Japan could contribute to US strategic capability and planning. US strategy, according to one assessment, was 'to mount a highly concentrated anti-SSBN effort in the Seas of Japan and Okhotsk ... [and] neutralise the highly capable Soviet Naval Aviation in order to ensure that a concentrated array of US air, sea and undersea ASW forces can infiltrate the SSBN bastions' .129 Japan's military capabilities dovetailed very neatly into this strategy in several main areas:

Japan reinforces US sea-air dominance. The JSDF contributes substantially to surveillance and ASW capabilities. The Japanese also have a respectable air force including 6 squadrons of F15 and 7 squadrons of FSJ [sic.] aircraft, all of which form part of the theatre air dominance equation as the US strive to maintain air superiority over the East Asian Soviet air formations. . .. Japanese ASW and Mine Countermeasures . . . capabilities have been expanded with the purchase of an additional 103 Lockheed/Kawasaki P-3C ASW aircraft and Sikorsky MH-53 Minesweeper helicopters. Surveillance and EW capabilities constitute another significant Japanese contribution, with the Grumman E-2C airborne early-warning aircraft playing an important role. . .. With this concentration of highly capable ASW technology, allied forces would have a reasonable chance of systematically eradicating the relatively noisy Soviet SSBN. 130

Under Nakasone, Japan found the political and financial will to build up capabilities to discharge these responsibilities in the name of usJapan defence co-operation.

Much of the build up of Japan's air and naval capabilities was justified in the name of sea-lane defence which, in the official view, was seen as essentially an anti-submarine and air defence operation. 131

The build up in Japan's air and naval capabilities, however, should also be interpreted in the light of the broader Japanese support role to the US against the Soviet Union's strategic air and naval

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forces in the seas around Japan. Sea-lane defence, in other words, was the rationale and only part of the real purpose of the emphasis on upgrading Japan's anti-submarine warfare and air defence capabilities in the 1986-90 MTDPE [namely the additional purchases of antisubmarine surface vessels, anti-submarine aircraft and submarines, (with the latter two also contributing to Japan's mine-laying capability), as well as surface-to-air missiles, advanced fighter interceptors and improvement in early warning and surveillance systems).

According to some strategic analysts, the whole notion of having to defend the sea lanes around Japan was questionable. The USSR did not have the capacity for an interdiction campaign, 132 it did not enjoy naval or air dominance in the region and the costs in attempting to threaten sea lanes in the region were high, and also its forces in the area were not targeted at that function. 133 This view was endorsed by a US intelligence assessment which stated that the 'primary missions of the [Soviet] Pacific Ocean fleet are to protect the Pacific flank of the Soviet Union, to help secure the Delta SSBN [nuclearpowered ballistic missile submarine] launch areas, and to provide limited interdiction'. 134 Moreover:

SOVPACFLT [Soviet Pacific Fleet] force structure imbalances indicate that it is not capable of seriously challenging US naval forces outside the effective air cover of land based Soviet Naval Aviation (1500 nm) and a sustained interdiction of shipping campaign is not presently viable .... Consequently, it would appear that SOVPACFL T has no real option in a theatre war but to fight a defensive campaign within the seas of Japan and Okhotsk. 135

Furthermore, according to the secretary for the US Navy in the Reagan administration, Admiral Lehman:

the traditional method of protecting sea lanes - assigning convoys to escort ships through hostile waters - is an old, 'passive' mode of warfare, both ineffective and costly. They have replaced it with an aggressive naval strategy that pinpoints ... the Soviet Union as the proper target to focus on when attempting to safeguard shipping ... the U.S. Pacific Fleet could, in the event of a crisis, trap the Soviet Pacific Fleet behind the choke points that close off the Soviets' Far East bases. Unable to disperse, the Soviet fleet would not be able to threaten shipping on the high seas. 136


According to the same analysis:

A strategy that depends on 'bottling up' the Soviet Pacific fleet cannot help but rely heavily on Japan, whose central location and proximity to the Soviet Union make it more valuable to US maritime strategy than any other piece of real estate. Japan straddles the only three straits through which the Soviet Pacific Fleet could gain access to the open ocean. 137

Japan's military objectives were thus no longer targeted solely at defending Japanese territory and territorial air and sea space, but to role sharing with the United States targeted at fighting the Soviet Union in the north-west Pacific. This amounted to a significant but unannounced shift in Japan's fundamental defence orientation. The situation had been reached where the principal defence doctrine governing Japan's defence build up, namely the 1976 National Defence Programme Outline, which was pitched to the strictly defence-only ideology of the Japanese state, remained in place as the overarching defence philosophy of Japan, but the defence objectives implicit in the latest defence build up plan (its hidden agenda) were clearly targeted at discharging certain specified military functions in the context of a joint Us-Japanese strategic effort against the Soviet Union. This amounted to a substantial, unofficial, de facto shift in Japan's primary defence goals. Meanwhile, the old defence documents were retained because an attempt to bring formal policy into line with reality might result in unacceptably high political costs for the government.

Even if Japan remained reluctant to undertake on American terms the strategic missions that the US had spelled out (that is, act outside the limits of self-defence), the United States wanted a Japanese capability to discharge these functions to act as a deterrent to the USSR, something that was likely to bring forth Soviet countermeasures. 138

What is also clear is that the 'more Japanese forces are tied to the missions of US forces the more the distinction between defensive and offensive forces breaks down .... Many weapons now used by Japanese forces can be easily modified from defensive to offensive systems and used in conjunction with US forces. ' 139 Japan was moving into a subsidiary support role in a strategic system which was both defensive and offensive and was thus acquiring an offensive posture by association.

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Undertaking these regional military tasks was presented by the Japanese government as the means of achieving a more efficient defence of Japan rather than as a Japanese contribution to the American strategic effort in the north-west Pacific. American policy, on the other hand, stressed the coincidence of Japanese defence and US strategic interests in this region. Neither the US nor Japan openly questioned whether the strategic requirements for the defence of Japan necessarily coincided with US objectives for Japan. Discussion of the issue was made difficult by the fact that the strategic purpose of the three missions the US had pinpointed for Japan and Japan's precise role in US strategy had not been made explicit. 140 The basic question remained unanswered: was it burden sharing for the defence of Japan, or was it a collective security arrangement for the defence of the north-west Pacific? The Soviet Union had rather acidly described the process as the 'Natoisation' of Japan. The trend had also been acknowledged in discussions of a JANZUS, 141 a Western Pacific Treaty Organisation (WEPT0) 142 and a US/Japan/ROK alliance. 143

In the perceptions of the USSR, the stronger defence co-operation between Japan and the United States was clearly directed against its own strategic interests, and this made it unlikely that in the northwestern Pacific area the Soviets would be so kind as to make a distinction between US forces and Japanese forces, and would therefore consider them a joint and inseparable enemy.

JAPAN AND THE US: DEPENDENT ALLY OR EQUAL PARTNER?

Japan in the late 1980s was still a dependent ally of the US in terms of its own security. The full extent of this dependence would be revealed if one were to 'subtract' the US defence umbrella. In such an event, 'the concept of "autonomous defense" of Japan becomes a fantasy' .144 Japan could not stand alone against the security threats in her region, particularly from a USSR within waving distance from her shores. Nevertheless Japan in the last nine years or so had sought to contribute more to a balancing of the books in the Us-Japan security equation. Japan was no longer an overly dependent and rather complacent ally of the United States. It had now graduated to the status of contributing partner to the us-Japan defence relationship which had blossomed into more fully fledged strategic co-


operation. The Ohira, Suzuki and Nakasone administrations had openly and officially accepted the need to ease the US burden of defending the 'free world'. This was supported by an increasing recognition of the fact that Japan's own economic, political and strategic interests were inseparable from the rest of the western world, a development that was encouraged and reinforced by the Soviet military build up in the vicinity of Japan. Japan saw its present position as the product of a much more realistic assessment of its own defence needs and a recognition that it must 'pay substantially higher rents for US protection, be they in the form of direct military expenditure, technology cooperation, or economic subsidies to third parties of military interest to the US' .145 This coincided with a subtle change in the balance of the US-Japan security relationship. Under US tutelage, the SDF was evolving from a purely self-defence instrument into a regional security force with functions designed to assist US strategic capabilities. Under the Security Treaty, US forces were charged with aiding the SDF to defend Japan; in the name of US-Japan defence co-operation, the SDF was increasingly directed towards assisting the US in regional defence.

At the same time, however, this policy of stronger identification and alignment with western interests in general and American strategic interests in particular combined with greater independence and stature for Japan in world affairs. Although much of the Japanese foreign policy conception was still seen through the prism of US interests and Japan still deferred to the US lead on major issues, Japan was increasingly displaying more independence in its diplomatic actions, and was working hard in practical terms to increase this independence. While not pressing the point explicitly, there were many issues where the Japanese government enjoyed a fairly large degree of freedom of action. In this sense Japan was no longer an appendage of the United States, but had become 'an important, independent source of political and economic power in the world, particularly in the Asia-Pacific region'. 146 There was a growth in Japan's international stature in its own right based primarily on its economic power, and it was this stature and economic power that was now available for productive use as an instrument of foreign policy influence, primarily in partnership with the United States, and perhaps in some areas, acting as a surrogate for the United States, as for example, in the south Pacific.

As for the question whether the changes in defence policy under the Nakasone government amounted to fundamental structural change in

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Japan's defence posture or a mere hastening and consolidation of past trends, the foregoing analysis offers evidence of both quantitative and qualitative changes of significance. Quantitatively, there was steady expansion of Japan's defence capability and a continued growth curve in defence spending in order to achieve these improvements in defence capabilities. Within the national budget, relatively more emphasis was given to defence than in the past and in comparision with almost any other area of government spending. A target date (1990) for the fulfilment of objectives laid down in the 1976 NDPO was set and the latest defence equipment procurement plan was upgraded to a formal government programme. The 1 per cent limit was bowled over in the process.

Qualitatively speaking, defence co-operation with the United States reached new heights and there was a new level of reciprocity in the Japan-US defence relationship. This could be seen in the area of interoperability, joint exercises, technology exchange and Japanese participation in SDI. Moreover the security responsibilities Japan now shared with the United States had grown dramatically, with a much more clearly defined regional defence role for Japan involving some degree of regional force projection. The nature of Japan's current defence build up lent support to the view that Japan now accepted responsibility for discharging specific defence functions that were integral to the US strategic effort in the north-west Pacific.

Some of the groundwork for the rise in Japan's defence profile, particularly with respect to US-Japan defence co-operation, was laid prior to Nakasone's accession to the prime ministership by his predecessors, Ohira and Suzuki. Nevertheless Nakasone consolidated these developments and also broke new ground. He violated some domestic defence taboos symbolic of Japan's disassociation with militarism and attempted to breach others. He raised Japan's international political profile and combined this with a higher degree of national self-respect and assertiveness.

Within the domestic policy process, Nakasone showed an equal willingness to violate procedural norms in order to accelerate change and break through the immobilistic tendencies of the system. Until July 1986, he had mixed success: his attempts to overcome bureaucratic dominance of policy initiative were more effective than his political methodology of factional and Diet management. His own factional power-base and the parliamentary power-base of the LDP, respectively, were such that compromises had to be made with both the Opposition and opposing factions within his party on defence


policy. After July 1986, however, the political calculus changed. Given the Opposition parties' weak position in the Diet, the need to incorporate them into the process of consensus formation was reduced, Nakasone's direct appeal to the electorate for approval of his policies received massive endorsement, and his own factional base within the party increased in strength. The consequences of these changes quickly registered in his approach to defence policy after July 1986: a willingness to tackle and overcome politically sensitive defence issues on the assumption of a favourable national consensus, and to upgrade in qualitative leaps Japan's commitment to the JapanUS security partnership. The area of defence spending remained the chief exception to this trend: the fiscal imperative to reduce the overall budgetary deficit and incrementalist principles continued to limit increases. Given the fiscal environment of the 1980s, however, any increase could be considered a policy victory and the defence budget remained, relatively speaking, the most unscathed area of government spending.

The changes in defence policy under Nakasone amounted to the early stages of fundamental structural change in Japan's defence posture, with the most significant developments in the future likely to be seen in the area of increased Japanese defence co-operation with the United States, further Japanese integration into the American strategic system in north-east Asia, a growing force projection in the region and perhaps an explicitly military contribution to international peace efforts. Politically and diplomatically Japan would continue to raise its profile with a reach extending into the broader Asian-Pacific region.

NOTES

1. Geoffrey Blainey, 'Japan: in Defence of Growing Patriotism', The Sydney Morning Herald (24 July 1986).

2. Paul Keal, 'Japanese Defence and Australian Interests', paper presented to a seminar at the Australian National University (September 1985) p. 39.

3. For a further discussion of this issue, see Chalmers Johnson, 'Reflections on the Dilemma of Japanese Defense', Asian Survey, vol. 26, no. 5 (May 1986).

4. Chuma Kiyofuku, 'The 1986-90 Defense Plan: Does It Go Too Far?', Japan Quarterly, vol. xxxm, no. 1 (January-April1986) p. 14.

Aurelia George 291

5. 'The Allied Powers recognized that "Japan as a sovereign nation possesses the inherent right of individual or collective self-defense referred to in Article 51 of the Charter of the United Nations and that Japan may voluntarily enter into collective security arrangements'", see Theodore McNelly, Politics and Government in Japan, 3rd edition (New York: University Press of America, 1984) pp. 217-18.

6. Hisahiko Okazaki, 'Japanese Security Policy', International Security, vol. 7, no. 2 (Fall1982) p. 192.

7. Defense Agency, 'Summary of Defense of Japan' (Foreign Press Center, August 1986) p. 31.

8. In November 1976, the National Defence Council and the cabinet decided that 'in implementing the defense capability buildup, this is to be done for the time being in an outlook with defense-related expenses not to exceed the sum corresponding to 1/lOOth of the gross national product (GNP) of each year', Ibid., p. 36.

9. For the exact wording of the government announcements, see Research Institute For Peace and Security, Asian Security 1983 (Research Institute for Peace and Security, 1983) pp. 234-5.

10. Osamu Miyoshi, 'Toward a New US-Japan Alliance: The Crucial Choices of the Eighties', Comparative Strategy, vol. 3, no. 4 (1981) p. 295.

11. Ibid. 12. Dick Wilson, The Sun at Noon: An Anatomy of Modern Japan (London:

Hamish Hamilton, 1986) p. 128. 13. This includes 'for example, the limits of war potential and self-defense

strength in relation to Article 9 of the Constitution, prohibition of conscription and dispatch of forces overseas, the three non-nuclear principles, whether or not possession of nuclear submarines is possible, the scope of the "Far East" referred to in Article 6 of the US-Japan Security Treaty, the substance of "prior consultation" in relation to that same treaty, the three principles on the export weaponry, removal of the bombing equipment and mid-air refuelling capability of the F-4 fighter aircraft, etc.', Takuya Kubo, 'Japanese Defense Policy: DecisionMaking Process and Background', unpublished manuscript (June 1978) p. 6.

14. Miyoshi, op. cit., p. 293. 15. Kataoka Tetsuya, 'The Concept of the Japanese Second Republic' ,Japan

Echo, vol. VII, no. 1 (1980) pp. 91-2. 16. Witness the political fall-out when Foreign Minister Ito described the

US-Japan relationship in concrete terms as an 'alliance' with its collective security connotations.

17. Keal, op. cit., p. 22. 18. Chiima, op. cit., p. 18. 19. See Aurelia George, 'Japanese Defence Spending', Current Affairs

Bulletin, vol. 62, no. 12 (May 1986) p. 8. 20. Wilson, op. cit., p. 128. 21. McNelly, op. cit., p. 218. 22. Kubo, op. cit., p. 11. 23. Ibid., p. 12. 24. Miyoshi, op. cit., p. 294.


25. Keal, op. cit., p. 20. 26. Chuma, op. cit., p. 15. 27. Seiichiro Onishi, 'Background and Development of Japan's Defense

Reorganization', unpublished manuscript (n.d.) p. 14. 28. Miyoshi, op. cit., p. 279. 29. Ibid., p. 280. 30. Larry A. Niksch, 'Japanese Defense Policy: Suzuki's Shrinking Options',

Journal of Northeast Asian Studies, vol. 1, no. 2 (June 1982) p. 84. 31. Shibusawa Masahide, Japan and the Asian Pacific Region (London:

Croom Helm for the Royal Institute of International Affairs, 1984) p. 163.

32. Research Institute for Peace and Security, Asian Security 1982 (Research Institute for Peace and Security, 1982) p. 25.

33. Miyoshi, op. cit., p. 294. 34. Davis B. Bobrow, review ofT. W. M. Chapman, R. Drifte and I. T. M.

Gow, Japan's Quest for Comprehensive Security, in Pacific Affairs, vol. 58, no. 1 (Spring 1985) p. 140.

35. Hiroshi Kimura, 'Moscow and Tokyo: An Uneasy Peace', Annals of the American Academy of Political and Social Science, vol. 481 (September 1985) p. 65.

36. Defense Agency, Defense of Japan 1980, p. 49. 37. Takahashi Susumu, 'Japanese Security and Public Opinion', Japan

Quarterly, vol. 8, no. 1 (January-March 1981) p. 58. 38. Ibid., p. 61. 39. Keal, op. cit., p. 39. 40. Ibid. 41. Kubo, op. cit., p. 13. 42. Research Institute for Peace and Security, Asian Security 1984 (Research

Institute for Peace and Security, 1984) p. 209. 43. Defense of Japan 1980, p. 171. 44. Ibid., pp. 172-5. 45. Toshiyuki Toyoda, 'Japan's Policies Since 1945', Bulletin of Atomic

Scientists, vol. 41, no. 7 (August 1985) p. 58. 46. 'Summary of Defense of Japan', p. 86. 47. Comment of Prime Minister Suzuki Zenko to the National Press Club,

Washington, DC, 8 May 1981; see also Japan Times (10 May 1981) and Asian Security 1982, p. 154.

48. Asian Security 1983, p. 237. 49. 'Summary of Defense of Japan', p. 85. 50. Onishi, op. cit., p. 14. 51. Ibid. 52. Ibid., pp. 14-15. 53. Asian Security 1983, p. 237. 54. Ibid. 55. Ibid., pp. 237-8. 56. Ibid., p. 238. 57. Ibid. 58. Wilson, op. cit., pp. 1.28-9. 59. Shibusawa, op. cit., pp. 22-5.

Aurelia George 293

60. Ibid., p. 25. 61. Ibid. 62. Kimura, op. cit., p. 65. 63. Kubo, op. cit., p. 33. 64. Sankei Shinbun, 2 February 1980. 65. Kimura, op. cit., p. 67. 66. This was misquoted in the press as 'unsinkable aircraft carrier'. 67. Keal, op. cit., p. 34. 68. Haruhiro Fukui, 'Japan's Nakasone Government', Current History

(November 1983) p. 383. 69. Defense Agency, Defense of Japan 1983, p. 75. 70. Ibid. 71. Ibid. 72. Ibid., p. 77. 73. Ibid., pp. 70-1. 74. Niksch, op. cit., p. 84. 75. Defense of Japan 1983, p. 73. 76. Niksch, op. cit., p. 84. 77. Defense of Japan 1983, p. 74. 78. Niksch, op. cit., p. 84. 79. Defense of Japan 1983, pp. 70-1. 80. Ibid., p. 75. 81. Fukui, op. cit., pp. 383--4. 82. Tokyo Report, vol. 7, no. 2 (14 January 1987) p. 6. 83. Alan Hinge and Lee Ngok, 'Naval Developments in the Asia-Pacific

Region', paper presented to the Asian Studies Association of Australia Conference, University of Sydney (May 1986) pp. 11-12. According to Hinge and Lee, 'elements of the Japanese Navy played a supporting role in Fleetex 85 which tested US ability in both the Pacific and the Indian Ocean, including its mission to protect the Japanese sea lines of communication. In addition, Japanese sensors and electronic systems contributed to supporting 20 US ships in a major exercise in December 1984 which tested Soviet defences and Standard Operating Procedures (SOPs) in an activated situation.'

84. Defense of Japan 1983, pp. 211-212. 85. Asian Security 1983, p. 44. 86. Takashi Inoguchi, 'Technology, Security and Trade: An Emerging Nexus

in East Asia', paper presented to a seminar at the Australian National University, (September 1986) p. 17.

87. Aviation Week and Space Technology, 14 February 1983, p. 118. 88. Robert Manning, 'Comrades in arms', Far Eastern Economic Review, 1

August 1985. 89. 'Japan, US Develop Technology Transfer Plans', Aviation Week and

Space Technology, 3 March 1986, p. 27. 90. Opinion polls taken at the height of the 1 per cent of GNP debate in

1985 showed that a majority of Japanese were happy with existing levels of expenditure and thought that some institutionalised limit on defence spending should be retained. According to a poll taken in 1985 by the Prime Minister's Office, 54.1 per cent of the public 'did not see any


reason to change defense spending, while only 14.2% wanted to increase it and 17.7% wanted to cut it'. See Johnson, op. cit., p. 567. Furthermore, the popularity ofthe Nakasone cabinet fell 11 percentage points between April and September 1985 when the debate on the 1 per cent ceiling was at its height. See George, op. cit., p. 7.

91. Chiima, op. cit., p. 14. 92. 'Summary of Defense of Japan', p. 72. 93. Ibid., p. 79. 94. 'The Cautious Sharpening of the Samurai's Sword', The Economist, 16

August 1986. 95. Quoted from the MTDPE in Maeda Tetsuo, 'A Dangerous Shift in

Defense Policy', Japan Echo, vol. xm, no. 1 (1986) p. 77. 96. Quoted from the MTDPE in ibid., p. 78. 97. Chiima, op. cit., p. 13. 98. Quoted from the MTDE in Defense Agency, Defense of Japan 1986,

p. 305. 99. These rankings were obtained from an index of contributions of inter

national public goods developed by Kazuhiko Otsuka in 'Charting a New Policy Course', Economic Eye, vol. 7, no. 2 (June 1986) pp. 4-7. Japan's defence contribution, for example, was calculated by taking Japanese defence spending as a proportion of Japanese GNP, then weighting it for world defence spending as a proportion of world GNP and expressing it as follows: Japan's defence contribution = (Japanese defence spending/world defence spending) divided by (Japanese GNP/world GNP).

100. Part of the address 'Working Towards "The Pacific Future Community"', delivered by Japanese Foreign Minister Kuranari in Suva, Fiji (14 January 1987). Press Release, Embassy of Japan, Canberra, p. 3.

101. Yoshio Okawara, 'Responsibilities of 304 Lower House Seats', Tokyo Business Today (October 1986) p. 7.

102. Kimura, op. cit., p. 67. 103. Johnson, op. cit., p. 558. 104. Quoted in Wilson, op. cit., p. 129. 105. Kubo, op. cit., p. 19. 106. Blainey, op. cit. 107. This refers to the period when there was a rough balance between

government and Opposition party numbers in the Diet. 108. Ironically this balance of forces in the Diet also produced a softening

of Opposition party attitudes towards the SDF and Mutual Security Treaty and even a revision in their official policies on the constitutionality of the SDF and the need for the American security guarantee, 'in the belief that they might actually be close to taking over the reins of government administration' (Kubo, op. cit., p. 29).

109. According to one source, equipment to be purchased by the SDF in fiscal1987 under the MTDPE 'include 12 F-15 interceptor planes, nine P-3C anti-submarine patrol planes, and two destroyers. The defense forces also plan to increase the training flights for combat planes pilots to 150 hours a year (from 146.5 hours at present), raise the frequency

Aurelia George 295

of maneuvers of ground combat troops to three times a year (from twice at present), and increase the training navigation of destroyers to 1600 hours a year (from 1400 hours at present)' Tokyo Report, vol. 6, no. 52 (31 December 1986) p. 2.

110. Ibid., p. 5. 111. 'Summary of Defense of Japan', p. 37. 112. The Economist, 16 August 1986, p. 15. 113. Ibid. 114. Ibid., p. 16. 115. 'Summary of Defense of Japan', p. 37. 116. Ibid., p. 36. 117. Ibid., p. 84. 118. Shinichiro Asao, consul-general of Japan in New York, 'Japan's Defence

Policy', The New York Times, 29 February 1984. 119. Keal, op. cit., p. 52. 120. Ezra Vogel, 'Pax Nipponica?', Foreign Affairs, vol. 64, no. 4 (Spring

1986), pp. 752--67. 121. Tetsuya Kataoka, 'Japan's Northern Threat', Problems of Communism,

(March/April1984) p. 4. 122. In a 1985 public opinion survey, for example, 90 per cent of those

polled were against amending the peace constitution. This poll was reported in Robert Y. Horiguchi, 'Vigorous Soviet Buildup', Pacific Defence Reporter 1985 Annual Reference Edition (December 1984/January 1985) p. 33.

123. W. M. Arkin and D. Chappell, 'Forward Offensive Strategy: Raising the Stakes in the Pacific', World Policy Journal, vol. n, no. 3 (Summer 1985) p. 487.

124. According to Edwin Reischauer in 1981, the American government interprets the word 'introduction' in Japan's Three Non-Nuclear Principles to mean 'bring in and establish', as opposed to merely bringing in and taking out again, i.e. through port calls. For a discussion of this issue, see George, op. cit., p. 6.

125. Kimura, op. cit., p. 68. 126. Paul Keal, 'Japan's Strategic Role in the Pacific', paper presented to

the Asian Studies Association of Australia Conference, University of Sydney (May 1986) p. 9.

127. Takahashi, op. cit., p. 57. 128. Hinge and Lee, op. cit., p. 12. 129. Ibid., pp. 4, 5. 130. Ibid., pp. 5, 11-12. 131. Takakazu Kuriyama, 'Japan's Security Policy: Present and Future',

paper presented to the International Institute for Strategic Studies Annual Conference, Kyoto (September 1986) p. 22.

132. Hinge and Lee write: 'Soviet Naval warfighting plans and objectives within the Asia-Pacific and Indian Ocean regions must necessarily be quite limited. The main reasons for this are the constraints placed on SOVPACFLT [the Soviet Pacific Fleet] by unfavourable geography, lack of balance in force structure and a clear US naval superiority throughout the region' (op. cit., p. 2).


133. Ibid., pp. 6-9. 134. Quoted from a 1982 US Defense Intelligence Agency report in Arkin

and Chappell, op. cit., p. 485. 135. Hinge and Lee, op. cit., p. 22. 136. Arkin and Chappell, op. cit., p. 485. 137. Ibid., p. 486. 138. Keal, 'Japan's Strategic Role in the Pacific', p. 6. 139. Keal, 'Japanese Defence and Australian Interests', p. 54. 140. For a discussion of this issue, see Keal, 'Japan's Strategic Role in the

Pacific', pp. 4-14. 141. William T. Tow, 'Australian and Japanese Security Cooperation:

Present Barriers and Future Prospects', Australian Outlook, vol. 38, no. 3 (December 1984), pp. 200--6.

142. See Yatsuhiro Nakagawa, 'The WEPTO Option: Japan's New Role in East Asia/Pacific Collective Security', Asian Survey, vol. XXIV, no. 8 (August 1984) pp. 828-39.

143. The first visit Nakasone made as prime minister was to South Korea, where it was reported in the Korean press that the two sides had agreed in principle on the importance of trilateral security co-operation, involving the United States, Japan and South Korea. [See Tanaka Akira, 'Japanese-South Korean Relations in the 1980s', Japan Quarterly, vol. xxx, no. 2 (April-June 1983) pp. 127-8.] This built on an earlier visit by the director-general of the Defence Agency in 1979, when it was decided 'to promote interchanges between the defense authorities of Japan and South Korea' (ibid., p. 61). The director-general 'officially made clear a policy of promoting military co-operation with South Korea' (ibid., p. 62).

144. Okazaki, op. cit., 194. 145. Bobrow, op. cit., p. 141. 146. Kimura, op. cit., p. 63.

10 Dynamism, Foreign Policy and Trade Policy ALAN RIX

Foreign trade is an area of government activity where domestic, political and bureaucratic structures have an impact upon those of other countries, often with loud and acrimonious results. In recent years Japan's trade policies have come under strong foreign criticism for their inflexibility, unfairness and insensitivity to the needs of trading partners. Foreign trade has remained a central concern of Japanese diplomacy and of the pursuit of national interests at the highest level, while Japan has been subject to the strongest international political pressure to change its policies to suit external interests. It has, to some extent, accommodated this pressure, but in other instances (notably in the agricultural trade area) has failed in this respect.

This chapter seeks to explain some of the important processes that have contributed to Japan's policies on trade in recent years. It starts, however, from the premise discussed more fully in Chapter 3, that bureaucracy is an inherently dynamic institution, where 'all policy is policy change', and where bureaucrats have a pivotal role in designing, implementing and, therefore, redefining policy. Japan's is a dynamic and aggressive bureaucracy, in maintaining policies or in policy innovation; trade policy is an area where powerful Japanese bureaucratic institutions have been involved and where change and adjustment in policy reveal a careful interplay of political, bureaucratic and private sector interests. This is not to argue that all policy change necessarily assists in resolving problems or in effectively managing crises; the point is simply that policy change is constant, but that this is very different from issue resolution. The objective in this chapter, however, is not to prove this point; it is rather to consider some of the motivating factors in dynamic policy change within the area of foreign trade.

It is an inescapable fact of Japanese government life that trade should represent so significant a feature of foreign policy. There are several important developments which have brought this about. One has been the pivotal role of trade in Japan's postwar economic growth

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and the Japanese economic structure, in particular as it has affected some of Japan's major foreign relationships. Japan's diplomatic priorities have, to a great extent, been determined by trade questions. Another factor is the direct relationship between domestic political tensions and trade policy, and the interplay between domestic issues and international pressure on Japan. At the same time, private sector involvement in trade policy decisions has also represented a major foreign policy input, primarily because of cross-national industrial and commodity trade issues that have had to be resolved. Finally the processes of foreign policy decision making have encouraged diverse and multiple sources of advice and pressure, within a general framework of accepted long-term parameters of policy. It is the argument of this chapter that, taken together, these factors have produced a dynamic mix of foreign and trade policies, in the sense that Japan has been able actively to shape its policies to meet external constraints and its own objectives. Dynamism has, at the same time, not necessarily or always meant outward-looking or positive approaches; Japanese national interests have often required unadventurous and reactionary responses to international economic pressures.

THE ROLE OF TRADE

Japan trades to survive. Its economic system is based on what has been called a 'processing' economy, where raw materials are imported, processed into manufactured items and exported to the world market. Japan is desperately short of natural supplies of raw materials and relies on strategies of spreading risk across its external suppliers while seeking to influence the world supply and world market prices of some commodities. This has been successful in, for example, the case of coking coal, of which Japan is the world's largest single importing country. Such dependence on other countries for the essentials of industry and economic survival has injected a strong sense of insecurity into Japanese foreign policy and trade policy, and the objective of overcoming or alleviating this dependence is a prime force in Japanese policy. Economic security has become the aim of Japanese policy alongside military security, and the greater the advance of the Japanese economy the more difficult and complex have these objectives become.

The nature and extent of 'dependence' will, however, vary according to resource endowment, level and structure of demand for goods

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and services, and commercial policy. 1 Dependence in Japan's case has not always proved a weakness, since in many cases dependence has been mutual between Japan and its trading partners. Dependence had likewise changed over time, 2 and the imbalances in interdependent relationships which Japan has have tended to confer upon Japan a strong influence in bilateral relations. Interdependence is no more than 'mutual dependence' and it is the costs or threat of costs which give the concept practical meaning. Interdependence also implies more than that costs are present; the imbalance of these costs against benefits imposes a power element in the relationship. This is notably present in Japan's relations with some of its key raw material suppliers like Australia, with which a once evenly balanced relationship (balanced, that is, in terms of reciprocal costs and vulnerabilities) is now swinging out of kilter, as the relative dependence of Japan on Australia's main raw material exports declines.

Power in trade relationships has been a source for active Japanese trade diplomacy. One of the foremost objectives of Japan's postwar diplomacy has been an economic diplomacy effective and responsible in Japanese terms. To develop diplomatic priorities to revive the economy, restore national power and achieve Japan's reacceptance to the international system, required an active and flexible response to the barriers facing Japan after the Second World War. 3 Both bilateral and multilateral paths had to be taken, not without some difficulty at both levels. 4 Japan was able to overcome many of these barriers by persistent and careful diplomacy,5 and a willingness to co-operate with the rules laid down by the victorious powers. Japan's entry to the General Agreement on Tariffs and Trade (GATT) in 1955 symbolised its acceptance into the new international trading regime, but it was an achievement brought about by strong US pressure as much as by responsible Japanese actions. 6 An active diplomacy by Prime Minister Yoshida also impressed upon the West that Japan was willing to adapt to changed circumstances, but Japan's efforts to assist regional economic development were not overlooked either. 7

An important facet of Japan's activist economic diplomacy in the 1950s and 1960s was her economic co-operation programme. The first steps by Japan were tentative, through technical co-operation and later reparations and eventually loans for major projects.8

Japan's objectives in these endeavours were somewhat muddled, but economic diplomacy and trade promotion were central goals in the first postwar economic plan of 1955, and this spilled over to include


economic co-operation. The Ministry of International Trade and Industry (MITI) linked economic assistance quite blatantly to trade promotion. The first edition in 1958 of the MITI's annual report on economic co-operation

presented the view, expressed early in the 1950s by those in business and government anxious to press ahead with external economic relations, that Japan's main economic task was the promotion of trade to secure the resources necessary for Japan's industrial growth, and to develop markets for the products of Japan's industry. Economic cooperation became, in the words of the MITI paper, 'the new axis of postwar trade policy', for the developing nations were valued as markets or as potential markets in which demand could easily be stimulated.9

This was an area where Japan's policy was constantly being developed and refined, and a particular, rather aggressive, role for Japan carved out in south and south-east Asia. Alongside a desire to achieve recognition for her contribution - which Japan did by being accepted into the Organisation of Economic Co-operation and Development (OECD)'s Development Assistance Committee in 1960, four years before joining OECD itself- Japan's main purpose was to further her own economic interests in trade, a goal which was achieved.

In the 1970s, Japan's economic diplomacy was put to a rather more severe test. The oil crisis of 1973-4 required rapid responses to drastically changed economic circumstances. Japan's Middle East policy was turned around to follow a line required by the Arab oil exporters, and to follow Japan's immediate economic interests. 10

Japan's successful economic performance in the 1970s in the face of oil crises, rapid inflation and low growth was a result of what Abegglen calls 'narrow self-interest', that is a maintenance of an internal focus to policy, defining national self-interest in the most restricted terms, and refusing to undertake initiatives in the international arena. 11

Japan's policies of recovery after negative growth in 1974 centred on external demand, not the development of domestic investment. Domestic demand remained stagnant, but an export-led recovery pushed up growth rates, and was accompanied by continued restrictions in import markets and an exchange rate policy which maintained a low value for the yen. While it has been shown that Japan's import policy reveals discriminations which are little different from those of

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other industrialised nations, 12 a strong image nevertheless developed of a Japan determined to maintain export growth but reluctant to countenance rapid import liberalisation.

In macro-economic terms, however, Japan's policy of 'narrow selfinterest' was designed to achieve the specific objectives of strong external performance, stabilised domestic economic management and an assurance of economic security. However, while Japan's policy as defined by these objectives has been active, aggressive and responsive to short-term demands, from a standpoint outside Japan its policies have often been seen as limited, inflexible and even immobilist. It is a matter of reference points: Japan's policies have coped with the immediate pressures, and may have done so because of its 'relative immunity' from American demands. 13 Over the longer term, however, this immunity has become clouded by strong reaction from Japan's trading partners - notably the US and western Europe - which claim to have borne the cost of Japan's export-led economic recovery. 14

Japan has already faced, and partly dealt with, some of these pressures, such as in the areas of steel, automobiles, agricultural goods and technology trade. The rest of this chapter will be devoted to the policy processes which have brought about Japan's activist policies in economic diplomacy since the oil crisis.

DOMESTIC PRESSURES: ECONOMIC SECURITY

The effective voice of domestic interests in national policy making has kept Japanese policies closely attuned to the dynamics of political power in Japan. It is well known that there are strong domestic bases for Japan's foreign economic policy behaviour; 15 it is also important to recognise that the protection of Japanese domestic interests and the satisfaction of domestic pressures has been an objective of policy, usually the primary objective. Such pressures are of two major types: immediate, short-term, even decision-specific interests; and more generalised, national interests that require a series of decisions across issue areas. A good example of the former is the contrived protection of Japan's farmers couched in the interests of 'food self-sufficiency'; an example of the latter is Japan's quest for economic security. Both types of pressure are intertwined and have brought forth policy approaches constantly adapting, searching for the best channel amid the shoals of competing international interests.

Agricultural protection in Japan is as famous as it is criticised; it


cannot be denied, however, that it has worked to the benefit of the Japanese farmer. This has resulted from the political effectiveness of the Japanese farm lobby and its ability to influence trade policy via the Liberal Democratic Party (LOP) and the Ministry of Agriculture, Forestry and Fisheries (MAFF). A major policy objective is selfsufficiency, 'a dominant political and social theme that simply cannot be denied in Japan's trade policy' .16 While complete autarky is not possible, a policy of maximum self-sufficiency in many staple foods has been sought, resulting in serious trade problems with traditional suppliers such as the United States, Australia and the countries of ASEAN.

The political process surrounding Japanese agricultural politics has been described in detail elsewhere: 17 suffice it to say here that Japan's protectionist policies are based on strongly held national sentiments about the need to ensure adequate food supplies, protectionist platforms in all political parties and a political and bureaucratic system geared to cater for rural protectionist pressure. This pressure is successful because of the 'negative gerrymander' and the control of major policy-making machinery (party committees, government advisory bodies and parliamentary committees) by conservative rural politicians. 18 The combined effect of the rural lobby has been to create severe strains in Japan's agricultural trade relations, most notably in the beef trade.

Japan's interests clearly lie in preserving an effective policy aiming at self-sufficiency - but to what degree? The conflict between this goal and the need to maintain close trading relations with its suppliers in non-agricultural areas has not been resolved. The domestic policy interest is one which can hardly be ignored by Japanese policy makers, and for that reason there has been developed a set of priorities which serve the political ends of the agricultural lobby most effectively. Many would argue that those ends are themselYes the inappropriate ones for Japan's long-term well-being, 19 and that minority political pressure produces a policy unable to adapt to other pressures on Japan, such as those from her trading partners. Domestic pressure, in the sense of the limited and effectively channelled rural political lobby in Japan, has had important results in maintaining policy, extending its edges and adjusting slowly to continuous pressures from other sources inside and outside Japan. 20

In defending policy, the system has proved so far successful. The search for economic security has guided much of Japanese

diplomacy in the postwar period, mainly because of Japan's resource-

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poor status and what was seen to be a weak and vulnerable position at the end of the Second World War. 21 One element of her approach to securing her economic future was reacceptance into the forums of the world's nations, as described above. Japan's general strategy, however, as defined more carefully in the 1950s, was not simply to procure resources; given the devastating outcome of a push for resources supplies in the 1930s and 1940s, an economic security policy which had resources as its ultimate aim had to be couched in terms appealing to the co-operative spirit of the postwar international regime. Thus Japan's policy emphasised a commitment to the pursuit of multilateral and bilateral co-operation. Relations with the United States became the corner-stone of Japan's bilateral policies, but as Japan's economy settled into a heavy-industry-based growth structure, links with other major suppliers became important. India became the first recipient of Japan's economic co-operation loans (India supplied cotton, jute and iron ore), the countries of south-east Asia (oil, iron ore, rubber, tin) and Australia (wool, coal, minerals) became directly relevant to Japanese strategies. The term 'economic co-operation' took on very special significance.

Japan's interests lay in preservation of free trade, a growing world economy and world trade and effective bilateral relationships. Japan's entry to the GAIT, and the abolition of residual restrictions under Article XXXV, were therefore important in laying the basis for negotiations of longer-term bilateral trade with resource-supplying countries of the British Commonwealth in particular. 22 The Japanese steel industry, for example, developed an intensive and extensive strategy for securing long-term supplies of adequate coking coal and iron ore. 23 This included a direct role in developing new Australian open-cut coal mines, and pressure on the same country to revoke its ban on the export of iron ore, which was done in 1960. A set of bilateral treaties which Japan had drawn up with most of its major trading partners by 1963 gave a solid institutional footing to Japanese trade relationships.

The concept of economic security came closer to the forefront of Japan's national concerns after the experience of the 1973 oil shock. There was again a heavy emphasis on external economic policy as a means of confronting the difficulties of Japan's resource position. The MITI developed lines of policy on economic security which, while maintaining past commitments to international co-operation in trade and economic policy, focused specifically on means to achieve resource security. This approach was part of a wider notion of


'comprehensive security', that had become popular in describing Japanese approaches to a security policy devoid of aggressive military potential.

One of the costs of a passive Japanese diplomacy of 'defencelesson-all-sides' or 'ornnidirectionalism' was strong criticism from other countries for Japan's lack of responsiveness to the problems faced by its partners. Comprehensive security reflected an active attention to national policy interests, and was based on an assumption that the operation of the free market might not provide sufficient guarantees of security in resources and raw materials. Comprehensive security involved an integrated security strategy covering military, diplomatic and economic aspectsY Security was seen to comprise two major elements- a narrow, military security concept, and a wider area of economic security. In each category there were seen to be three levels of policy- broad international efforts, middle-level policy of a bilateral nature and a third level of domestic policy. This matrix of policy approaches involved an explicit defence effort that included regional co-operation, such as accepted by Japan in relation to its sea lanes of communication up to 1000 nautical miles. It also incorporated stronger ties with Japan's allies and 'friendly' nations (the 'western alliance', ASEAN, Australia and Canada), and a purposeful attempt to make Japanese trade, aid and investment serve national interests.

Comprehensive security was criticised as a vague and therefore meaningless set of policies, but the care with which some ministries were addressing various aspects of it (such as the MITI's economic security report) suggests that a positive, even an aggressive, strategy was being developed. One particular element, Japan's economic security, was being discussed in terms of the three-tier policy structure mentioned above. The MITI report placed strong emphasis on maintenance of international co-operative mechanisms and the free trade system. 'Economic co-operation', which included Japan's aid programme, was also regarded as contributing to Japan's economic security. The main area of the MITI's concern, however, was the development of policy for energy and resource security, and technological independence. Its key mechanisms included strategies already practised in its energy and resource policies: diversifying its sources of resource supply; increasing world supplies of usable minerals, while strengthening 'friendly interdependence' with mineral-supplying nations; and stockpiling rare metals- from 1982 creating tenday stockpiles of five key metals. 25

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Japan's policies for alleviating its critical dependence on imported energy supplies provide an excellent example of a rapid, positive and diverse response to a potentially serious threat. Energy was basic to Japan's policies of comprehensive and economic security; the strategy developed specifically for energy security was consistent with the general thrust of Japan's comprehensive approach. Japan's policy broadly consisted of seven elements: energy conservation; greater use of domestic resources; alternative energy developments; better siting; energy research and development; stockpiling; and closer relations with energy-exporting nations. These were not an easy set of aims to achieve, and revealed some raw nerves in the domestic politics of economic security. 26 Energy policy sits awkwardly in the Japanese bureaucratic context and straddles the responsibilities of several ministries: effective policy co-ordination has been hard to achieve.

Domestic pressures for an activist and appropriate energy policy after the oil crisis brought a willing response from government and industry, although elements of that policy have threatened some interests and livelihoods. The most notable opposition, for example, was towards expansion of Japan's nuclear energy programme, for reasons of threats to the quality of local life and more basic opposition on ideological grounds from the strong Japanese antinuclear movement. 27

But other aspects of the energy programme were not easily forged. The conflict between government and private interests (at what cost should companies bend to serve state interests?) was evident in important areas of policy. 28 The institutional arrangements themselves have been different- the MITI's relationship with its own sub-agencies, the Agency of Natural Resources and Energy and the New Energy Development Organisation, have been sensitive; the MITI's rivalry with the power utilities has continued since they were first spawned by the Electric Power Control Law of 1938.29 The creation of an alternative energy strategy has been conflictual (if eventually largely successful), while Japan's oil diplomacy has proved painfully expensive for the Mitsui group and the Japanese government because of the failure of the petrochemical project in Japan, originally built to strengthen relations with one of Japan's main oil suppliers.30

Domestic pressures on Japanese policy have shown that 'resource security has a price'. 31 Likewise, overall economic security is by no means assured. However, that Japan has attempted to find workable solutions to these questions bespeaks a constructive approach to


secure national interests. Domestic pressures in the very broad sense as presented here- food self-sufficiency and economic security- are indicative of firmly held Japanese views about their nation's future. These can reveal - as Samuels points out - that 'we have scratched consensus and found conflict, and we have scratched conflict and found consensus'. 32 This tension has helped produce a dynamic response to Japan's needs.

INTERNATIONAL PRESSURES: TRADE FRICTION

An important variable in Japanese policy is the interaction at a policy level with Japan of Japan's trading partners. Japan has proven easily susceptible to some international pressures, mainly because of the difficulties which trade interdependence has thrown up at Japanese policy makers. Since the Allied Occupation of Japan, the scope for independent action in foreign trade policy (a measure of room to minimise or ignore pressures from trading partners) has been limited. It is never possible to avoid such pressures, but Japan's reliance on trade for its economic well-being make external pressures an essential ingredient in Japanese policy. One popular explanation of Japan's policy as 'low-profile' was that Japan needed to retain friendly relations with all countries to preserve stability in its trading patterns. This was certainly an argument put forward as a basis for Japan's foreign economic policies in the 1950s.33

In more recent years, much has been made of 'trade friction' as an element in the Japanese approach to trade policy. Japan has indeed come under criticism for its protective import policies and aggressive export activity. However, foreign pressure on Japan has helped it develop a set of policies more suited to its long-term interests; this has brought with it a recognition that a 'low-profile' policy is less able to exploit the power element in bilateral relationships. Japan's recent relations with the United States amply demonstrate the ability of Japan to maintain a strong and purposeful trade policy primarily serving Japanese objectives and interests. These interests, it should be noted, required that American pressure be eased, but not necessarily that it be stopped.

The US trade deficit with Japan widened to massive proportions towards the end of the 1970s. After being US$11.6 billion in 1978 it fell to US$8.7 billion in 1979 but widened again to US$9.9 billion in 1980, US$15.8 billion in 1981 and US$16.8 billion in 1982. In 1983 it

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rose to US$18.1 billion. Deficits of this magnitude encouraged criticism of Japan in the US from business, political and trade union sources. A continuing fall in the value of the yen from 1980 to 1982 encouraged American demand for Japanese exports and made American goods less competitive in Japan.

Important areas of pressure on Japan were in the automobile trade, government procurement and steel, among other things. At the same time, there was strong insistence from the United States and Europe34

that Japan liberalise its regime. But the focus of major political pressure remained Japan's relations with the US. The procurement policies of the Japanese government-owned Nippon Telephone and Telegraph Company (NTT) proved to be one area in which a lengthy period of negotiations resulted from American desires to compete with Japanese suppliers for major Japanese contracts. It was typical of a pattern of pressure on Japanese policy in which prolonged negotiations initially brought tension, stand-off and high-level political intervention leading to a series of compromise resolutions. It also reflected a common thread of conflict within the Japanese bureaucratic process and between Japanese government and industry (in this case NTT), where definitions of national interests differed, often quite fundamentally.

The NTT issue demonstrates that the Japanese had to bend to pressure to some extent, but that it was reluctant and that Japan was for some time able to resist American demands from several sourcesnegotiators, the White House and Congress. Japan was by no means in a position of weakness, and was willing to exploit its position of strength in bilateral economic relations. The NTT dispute was eventually resolved, an agreement coming into effect on 1 January 1981 allowing American companies to bid for NTT contracts. The agreement was renewed in January 1984 through to December 1986.35

The steel issue raised wider questions of relative industrial performance, which became highly politicised questions in the period 1975-80. The primary issue, as Patrick and Sato explain, is 'how the American steel industry has responded to substantially enhanced competition in the American market and how Japanese producers have entered that market'. 36 The pressure on Japan in this instance was to accept protection for the American steel industry rather than to reduce protection for a Japanese industry, as was the case with NTT. For that reason, direct domestic political interests in Japan were seen as less threatened, and certainly less so than in the separate case of agricultural trade. Japan has a need to avoid the tag of


promoting 'unfair competition', so its reasons for agreeing to limited compromise on steel were based on linkages across trade policy areas and a desire to prevent the impact of tension in one area from spreading to other sensitive trade problems. The steel issue, therefore, did reflect a willingness by Japan (notably the MITI) to compromise; Patrick and Sato compare this with Japan's intransigence in the USJapan textile dispute of 1969-71.37 In the trade issues of the late 1970s and 1980s Japan certainly had an inherently stronger bargaining position, but this was coupled with a perspective on the need to achieve its objectives through flexible response. Such flexibility was consistent with Japan's long-term interest in maintaining basically cooperative relations with its largest trading partner, the United States, since there were, concurrent with the steel trade problem, other major policy questions affecting the relationship, notably matters of defence.

The steel trade difficulties brought about the adoption by the United States in December 1977 of a trigger price mechanism (TPM), which set a floor to steel prices based on calculations of Japanese production costs. Goods landed at below the trigger price automatically led to investigation of dumping. The TPM was suspended in March 1980 but reinstated in September. It was again suspended in January 1982. But the US restricted entry of Japanese special steels in July 1983, which led to a four-year orderly marketing arrangement (OMA) in October, which was a way for Japan to retain market access without drawing fire from protectionists.

The OMA mechanism was one which has proved a useful policy device for Japan. It had the advantage of giving the Japanese government - mainly the MITI - effective oversight over exporters' activities, in order that the OMA could be managed successfully. At the same time, it placed ultimate responsibility for success with actors formally external to the government. The same procedure was eventually adopted in the dispute over exports of Japanese automobiles to the US. Japanese car manufacturers took 21.3 per cent of the American car market in 1980, compared with only 12 per cent in 1978. This represented 1.9 million cars sold in 1980, which was for US auto manufacturers their worst sales year since 1961. In 1981 this share rose to 21.8 per cent while in 1982 Japanese imports took a greater share of sales at 22.6 per cent. Total volume of sales fell, however, because of decline in domestic American demand. Japan's huge share of the market led to moves to restrict Japanese imports while deepening Japanese participation in the American industry.

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Criticism in Congress and by the United Auto Workers, and a ruling in November 1980 by the International Trade Commission (lTC) about potential serious injury to the American industry, added weight to calls for a political arrangement to curb Japan's penetration of the US market.38

By the middle of 1980 the MITI was already thinking of the need for orderly marketing, and the industry was of the same mind. Japanese officials wanted to resolve the issue with the minimum of tension; this was aided by the American decision not to impose import controls on Japanese products. The lTC ruling pushed further the need for an orderly marketing arrangement but Japanese officials were anxious to finalise the issue before the Japanese prime minister, Suzuki Zenko, visited the United States in May. It was feared that there could be an explicit trade-off made by the US on trade and defence matters, for the Americans were pushing Japan hard to expand its self-defence responsibilities. However, a consolidated Japanese approach was threatened by intense rivalry between the MITI and the Ministry of Foreign Affairs over where responsibility for the issue should lie.

The MITI wanted its deputy vice-minister, Amaya Naohiro, as chief negotiator, whereas the Ministry of Foreign Affairs was already using Okita Saburo, the government's representative on overseas economic relations. Since the ultimate solution to the problem looked as if it would involve voluntary restraints on the part of the Japanese car industry, the MITI was worried that Foreign Affairs would be too conciliatory and not be able to take industry along with it. 39 For its part, the Ministry of Foreign Affairs was concerned that the MITI would not be able to manage political trade-offs if they were raised, particularly in relation to defence. Intra-factional rivalry between the MITI minister, Tanaka Rokusuke, and the chief cabinet secretary, Miyazawa Kiichi (both important figures in the Suzuki faction) was also part of the problem. Miyazawa was in favour of an active Foreign Ministry role.

A decision by the prime minister and the chief cabinet secretary, however, nominated Okita as the negotiator, Amaya as his assistant, and the MITI as the locus of final decision, although the MITI continued its opposition to Foreign Affairs' involvement and spoke of their own man Amaya as a full negotiator. 40 It was the MITI minister, Tanaka Rokusuke, who was responsible for negotiating with the car industry, and it took some hard bargaining over February, March and April of 1981 to achieve a compromise. The Federation


of Economic Organisations came out early in March in favour of voluntary restraints, but only a week later the director-general of the Economic Planning Agency, Komoto Toshio, opposed such restraints. 41 The foreign minister, Ito Masayoshi, however, appeared to grab the initiative again, when, on a visit to the United States in late March, he and President Reagan agreed that their countries should enter negotiations towards Japanese voluntary restraints. 42

By mid-April an arrangement had been largely worked out, with the MITI proposing to administer it by merely strengthening certain aspects of existing 'administrative guidance' and by introducing export licensing on cars. The final agreement reached on 1 May allowed for entry of 1680000 vehicles to the US in fiscal1981, with slightly higher limits in 1982 depending on the American market, and a reassessment at the end of the second year. Controls would be maintained through a careful watch on each company's monthly export figures in an attempt to maintain shares based on 1979-80 market performance.

Although the MITI's position was always that restraints were emergency and temporary measures only,43 they were a political necessity. But they were also a political liability, for they immediately encouraged demands from Canada and European countries for Japanese restraints of a similar nature on exports to those countries. Japan had by 1980 taken 25 per cent of the car market in the Benelux countries, 10.3 per cent in the FRG and 12 per cent in the UK. Denmark and the FRG, in particular, switched from a position previously opposing restraints on the Japanese because the Japanese share of their domestic car markets had risen sharply between 1979 and 1980.44 The MITI was responsive to these requests, although not so far as to agree to restraints of a similar magnitude. Voluntary restraints were already in force with the UK, France and Italy, and a further 'orderly export' agreement was negotiated in July with the UK to keep Japanese cars below 11 per cent of the passenger car market in that country. 45 The Benelux and West German arrangement that was worked out in June, however, was not as specific, Japan only agreeing to keep exports to 'moderate levels', promising to talk again in 1982 and to appeal to Japanese companies to import more from Europe.46 Restraints were also arranged on exports to Canada, whereby the goal was to limit exports to 10 per cent above the 1980 levels. 47

The MITI demonstrated, as Winham and Kabashima point out, that it had become more internationalist and able 'to accommodate the interests of Japan's major trading partners instead of trying to

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defend the narrow and immediate interests of the industries under its jurisdiction'. 48 Greater flexibility on the part of the MITI was due to its recognition that the national interest lay in policies able to achieve effective compromise with the trade partner's position. This is indicated by the extension of the voluntary restraints on auto exports to the US into a third year at the fiscal 1981 level of 1.68 million units, and a fourth year in 1984 at a slightly higher quota. 49

International pressure has also led to a series of decisions to ease import restrictions in Japan to allow in more foreign goods. This has been a move to ameliorate foreign complaints about the intransigence and unfairness of Japan's import barriers - barriers which have, indeed, been shown not to be as difficult and discriminatory as is often said, and 'not very different to those of the USA and the EEC'. 50 These market access packages took place in January and May 1982, January 1983, October 1983 and April 1984. They were put together in the context of requests from the US, EC and other exporters for better access; but they were generally accompanied by explanations from Japan that 'it is all we can manage at present', and a foreign response of 'too little too late'. Japan's timing of the packages was an integral factor in its. economic diplomacy. The May 1982 announcement came one week before the Versailles Summit and had the effect of quietening criticism of Japan at that forum. The January 1983 package was timed to accompany Nakasone's visit to Washington, while that of April1984 preceded Vice-President Bush's plain-speaking visit to Japan early in the 1984 presidential election campaign year.

The major feature of all the packages was gradual deregulation of imports including tariff reductions, dismantling of non-tariff barriers, expansion of access for American and other foreign trade services such as investment, lawyers, distribution channels, consultants and so on. A second major feature of the packages was what they did not contain: the issue of agricultural trade was skirted and, as the Japan Economic Institute of America put it, agriculture was 'on a separate track' Y Despite intense pressure from the US for Japan to open up the market for beef and citrus fruit, Japan resisted. Nakasone specifically excluded those items from the agenda for his talks with President Reagan before he left for Washington in January 1983. He was able to divert pressure on these issues, which were extremely difficult for him politically. He had little room to manoeuvre, for beef and oranges as trade problems have both their origins and solutions in the domestic political support given by the rural sector


to the LD P, of which Nakasone was president. Nakasone was prepared to deal with Reagan on defence matters, but their meeting did not provide an acceptable solution to the agricultural trade problem. Japan has favoured US exporters over those of other countries in its beef quota allocations in recent years,52 but a long-term solution to demands by foreign exporters of overprotectionism of Japan's domestic agricultural sector remained a long way off. It was in this area that Japanese policies remained wedded to a narrow view of Japan's national interests.

THE PRIVATE SECTOR

A third influential factor in the way Japanese trade policy was able to match national interests with external constraints was the private sector. In the type of 'developmental state' described by Chalmers Johnson53 the relationship between the MITI and Japanese business was inevitably symbiotic. Even though the bureaucracy may well have led on policy 'from the front', the role of the business sector was essential to the legitimacy, practicability and implementation of policy. Solutions in the recent major trade disputes with the United States depended for their success on the Japanese business community's willingness to accept and fulfil the conditions of political decisions: the orderly marketing arrangements for motor vehicles are a case in point.

The role of business has been a favourite subject for writers on Japan. William Bryant found private economic diplomacy to be an important 'seeding process' for traditional diplomacy in the 1950s and 1960s, serving Japan's purposes well.54 Nishihara has documented the seminal role of business in developing Japan-Indonesia relations after the Second World War,55 while Tsurumi argues that the multinational spread of Japanese business activity is a dynamic (if dangerous) force for reorienting the Japanese approach to the world. 56

Curtis found· that businessmen were highly successful in Japan's dealing with the Soviet Union, taking the lead on negotiations for the Tyumen oil development project on behalf of the Japanese government. 57 Chalmers Johnson put forward three different types of business-government interaction operating in the Japanese experience- state control, self-control and co-operation- all of which have played a part in the creation of the Japanese economy of today. The co-operative model is, he says, 'by far the most important' .58

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Recent experience of Japanese trade policy confirms Johnson's conclusion about the relevance of public-private co-operation as a means for advancing state goals in policy. It also confirms his point that such co-operation is extremely difficult to maintain. Both the steel and car trades with the United States involved the creation of a common approach by government and business to the way in which Japan's exports to the US were to be curtailed in the face of strong criticism from American producers and workers. But it was possible to create an acceptable approach, and Japan's response to these policy issues was effective and appropriate.

The mechanisms for this success are varied. Some of them have been well documented in the past: the plethora of institutions for interaction of business and government at a policy level (deliberation councils, trade associations, exchange of employees, various forms of official guidance), the 'interpenetration of elites', and what Johnson calls 'social supports for co-operation' - the old-boy network and much more. 59 There are other processes, however, which have to do with the dynamics of the interaction between business and the bureaucratic and political worlds. One is the tolerance on both sides of an ill-definition of the boundaries between government and private sector responsibilities. There has been a mutual acceptance that both have a contribution to make to the objectives of the state in advancing national interests, although agreement on details is never assumed to be automatic. The performance by the private sector of government tasks (such as missions undertaken by Keidanren in negotiating with the Soviet Union, for example) is well known, but there is often difficulty in determining where responsibility for action lies in the trade policy area. One result of this is the preference for some companies to define a policy area on their own behalf, often out ahead of the MITI. The case of the Tokyo Electric Power Company, a privately owned utility, in establishing the trade in liquid natural gas for power generation is a good example. 60

Similarly, a feature of private initiatives in trade policy has been the role of individuals in shaping approaches and implementing the role of industry and government. The interaction between individuals is likewise important. Both the steel and car trade issues exemplify the constructive and important role of individual business and government leaders in forging solutions to these trade problems. The role of ministers is expected to be an individual one, but it is highly relevant to these trade policy questions that officials were important too. Amaya Naohiro, the MITI's former vice-minister for inter-


national trade, was one such person, while Inayama Yoshihiro chairman of Nippon Steel, was a key figure in the steel issue. He was not nicknamed 'Mr Cartel' without a strong record of achievement in effecting his view on the importance of market controls and export restraints. 61

The presence of important individuals in Japanese decision-making processes figures strongly in case studies and analyses of Japanese policy. What is interesting is the general lack of acceptance that individual processes are relevant to Japanese decision making, or that individuals can operate reasonably freely of their institutional environment. The evidence of several trade cases suggests that, although institutional constraints are difficult to avoid in the era of high-speed communication and the vague boundaries of the state in the 1980s, the scope for the individual negotiator and decision maker is still broad enough to make a difference to policy outcomes.

A related matter is that of the privacy of issues. In the USJapan context, for example, trade problems are rarely confined to boardrooms and ministerial suites. The media have made international trade negotiating a public event, and the openness of both the US and Japanese political systems has allowed negotiation via the media to become a useful channel for communication and negotiating signals. Trade disputes have been, by nature, political and therefore public. This has forced Japanese participants to respond to public debate as well as to the private bilateral dealings. This was a powerful pressure on Japanese decisions in the trade cases discussed above.

DECISION-MAKING PROCESSES

The administrative environment of Japanese trade policy has produced a competitive atmosphere responsive to the needs of the national interest. This does not mean that trade policy necessarily accedes to the demands or wishes of Japan's trading partners; rather, it suggests that international pressures are one (albeit highly significant) input to the domestic Japanese policy process. The more important parameters of decision making are domestic: the long-term indicative objectives of government; the diversity of internal processes and the influence of the bureaucratic process itself on policy; and definitions of the national interest.

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Indicative Planning

Trade policy exists within a web of assumptions and expectations about Japan's future. A determining feature of postwar Japanese economic experience has been indicative planning in economic and industrial areas. Those plans have provided a publicly accepted basis for governmental action and have been the broad guidelines to the future of the economy which have so much shaped the decisions of the present.

In the 1980s there are four areas of indicative planning of relevance to trade decision makers: economic plans, the industrial structure 'vision', energy demand forecasts and food self-sufficiency blueprints. All are to some extent interlocked (energy projections have been based on optimistic economic growth forecasts in the national economic plan), and derive from a process of public-private cooperative assessment through highly structured 'advisory councils'. These become, in the case of these types of plan, a background for competing interests, and ultimately a source of commonly accepted wisdom about appropriate directions and objectives.

In terms of commodity trades, the policy of food self-sufficiency and the industrial structure vision are most directly relevant. The difficulties for Japanese agricultural trade policy are raised by the fact that, although food self-sufficiency is a constantly sought goal, self-sufficiency becomes an ever-receding prospect because of Japan's low level of sufficiency in important feedstuffs and food items - soy beans, wheat, feed-grains and sugar. Thus in the areas of key trade friction (notably in beef and citrus fruit) Japan is attempting to raise beef self-sufficiency but cannot do so with feed-grain dependence. Conversely, citrus is already a saturated industry in Japan which imports can only harm. The parameters of policy therefore provide a flawed set of long-term targets which provide more of an escape or refuge for negotiators than a rational design for agricultural efficiency. 62

The industrial structure vision, by contrast, serves a different purpose. From the late 1960s, when the MITI produced guidelines for new direction in trade and industry policies, the 'vision' served as a focal point for thinking about Japan's industrial future. It provided the basic intellectual framework for discussion of policy change in industry and trade,63 and guided the shift from an advanced industrial to a post-industrial society; that is, away from an emphasis on heavy industry to an industrial structure that would be knowledge


intensive, technology intensive and service-sector oriented. This involved specific encouragement of new industries, such as electronics and robotics, and the winding down of old industries like shipbuilding, textiles, steel and non-ferrous metals. 64

It was envisaged in the early 1970s, for example, that growth in the steel industry would be among the lowest of all Japanese industries and that its share of output would fall, particularly in the 1980-5 period (although not by as much as it actually did). Coal and iron ore imports were likewise predicted to suffer continually reducing growth from 1970 through to 1985, and Japanese exports of steel were foreseen as declining between 5 and 9 per cent between 1980 and 1985. Industry projections by Japan's Industrial Structure Council in the middle 1980s stated that the steel industry would be the central focus of the upgrading of the basic Japanese industrial structure. This meant that domestic demand for steel would fall with lower unit consumption of steel, overall quantitative expansion in the industry was unlikely and there would be an emphasis on specialisation in basic industries such as steel. 65

Future rapid expansion of demand by the Japanese steel industry in terms of volume could not be expected. Aluminium smelting was officially designated a structurally depressed industry, as was spinning and pulp and paper. In textiles, the key to revitalisation was said to be in upstream large synthetic fibre production. The new industrial developments were likely to concentrate on energy efficiency, technological and knowledge intensification in all sectors and a shift in the economy towards the service sector.

These policy parameters have had profound effects on Japan's trading policy. Traditional raw material suppliers such as Australia, Canada, Brazil and ASEAN suffered recessional effects through reduced Japanese demand for their goods at the same time as the growth in demand from Japanese basic industries was levelling. Likewise, Japanese policy on trade in bauxite and alumina was directly affected by the need to 'destructure' the aluminium smelting industry. 66 Problems in Japan's trade with the US over steel related to the place of steel in the economies of both countries and the fact that excess capacity had coincided with a shift in comparative advantage in making steel not in Europe and the United States but in Japan and latterly in some developing countries. Japan's steel exports were part of the overall objective of building markets in advanced industrial countries to exploit Japan's comparative

Alan Rix 317

advantage and to build demand in specialised products where the Japanese industry would be tending to concentrate in future.

Thus the long-term structural parameters of the Japanese economy, as prepared and developed over many years, were a crucial underpinning to the process of determining and carrying out trade policy. They provided both a guiding set of principles - an 'ideology' of trade policy- and a basis for trade negotiation.

The Trade Bureaucracy

Japan's trade bureaucracy is centred on the MITI but, in common with other policy areas, trade cannot be 'roped off' from other elements of the bureaucracy with a legitimate standing in trade decision making. As Chalmers Johnson has pointed out on several occasions, the reach of the MITI is enormous - from the central ministry out to its attached agencies (such as the Natural Resources and Energy Agency) and advisory councils, and to clusters of government corporations created primarily for policy implementation. Of more direct relevance to the policy development process is the interaction within the MITI and between the MITI and other government ministries. The need for this policy system to interact with the private sector also led to the development of formal processes of consultation and advice.

There are several important distinctions that need to be made between types of issue in the trade policy area. For in this area it is very largely the issue which can decide the forms of decision processes. In the first instance, there is a distinction between short-term critical issues and longer-term and persistent problems. Trade problems have tended to be drawn-out, with political, high-level crises arising from time to time (the steel example is a good one). Characteristically, in an extended issue, patterns of bureaucratic influence become settled, although in the automobile case there was persistent rivalry between the MITI and the Foreign Ministry. In Japan, as in other countries, the practice has developed of appointing ministers or senior officials as trade negotiators - the best known in recent years being Ushiba Nobuhiko, Amaya Naohiro and Okita Saburo. This has generally meant a focus of decision making on that ministry from which the official derives or with which he has had closest links. Thus the role of the Foreign Ministry - a role traditionally strong in prewar and postwar years - as negotiator has been enhanced on the one hand,


but undermined on the other as other ministries have taken a frontline role in overseas trade issues.

Sectoral aspects of policy making are also relevant. An important area of trade dispute has been agricultural trade. Here the MAFF was the dominant ministerial presence, and the substantial and continuous pressure from the agricultural sector is a well-known curb on the MAFF's ability to negotiate compromises amenable to the interests of exporting nations. Nevertheless Japan did make large concessions to the US in December 1978 to allow increases in imports of citrus and high-quality beef through to 1983.67 The agricultural protection lobby was not impregnable and the eventual flexibility of the Japanese position resulted from adroit negotiating by the MAFF minister, Nakagawa, as well as Ushiba Nobuhiko, who could persuade Japanese interests that it was essential for the MAFF to give some ground in the face of criticism of Japanese protectionism from overseas, other Japanese ministries and from Japanese business. On the other hand, Japan has also been oversusceptible to pressure from the United States in the beef trade area- for largely political reasons - over less important trade partners like Australia. 68

An extremely difficult area of trade policy - in terms of Japan's capacity to act 'dynamically' - is that of import barriers and nontariff barriers. Japanese decision making for the GATT Tokyo Round is a good example of the complexities when foreign pressure is imposed on sensitive domestic industrial interests. Fukui observes the 'internationalist thrust' of domestic ministries (for example the MITI and the MAFF), and the special role often thrown on to the Foreign Ministry in multilateral diplomatic issues. Similarly weak political leadership on such issues has given the bureaucrats the task of producing effective compromises. For the GATT negotiations, interministry bargaining was intense, and difficult for the Foreign Ministry to control - in particular the MITI pushed strongly for agricultural concessions for Japanese industrial exports to other countries.69 Because of domestic political pressure, the rounds of import liberalisation between 1982 and 1984 have made few inroads into the major areas of agricultural protection.

A similar example of the bureaucratic tensions occasioned by protectionist elements in Japan was the NTT case. There a closely knit family of suppliers surrounded NTT, and foreign suppliers were excluded. The matter was originally raised in the state procurement framework of the GATT negotiations, but it gained bilateral momentum after the US Congress took it up, and the Japanese government

Alan Rix 319

had then to negotiate a solution. The bureaucratic problem was that NTT was a government corporation under the formal control of the Ministry of Posts and Telecommunications. NTT was perhaps the superior partner in this relationship, having strong relations with its major supplying firms, and regular 'descent from Heaven' movement of retiring NTT officials to these firms. The ministry was itself still unable to move NTT on matters of procurement. It was a domestic ministry, little concerned with trade policies, and both the Ministry of Finance (because NTT was a profitable corporation) and the MITI (because NTT had not relied on its developmental support) were unable to have much influence over NTT. It was left to the Foreign Ministry to deal with NTT, in the Foreign Ministry's co-ordinating role in the Tokyo Round GATT negotiations. 70 It took very strong US pressure to force NTT to budge, and only then did the resolution come via political, rather than bureaucratic, persistence. It was at the high political level that NTT was finally forced to accept the need to open up its procurement policies. The role of the trade negotiatorfirst Ushiba and later Okita - was crucial in giving Japan some flexibility at the negotiating end of the issue. The negotiator naturally was beholden to domestic decisions, but he was the focal point of communication between US pressure and the domestic protectionist interests.

The National Interest

What is seen to constitute the national interest is largely the basis on which the dynamism of the Japanese bureaucracy turns. We have noted already that within government itself there were widely differing attitudes to what the national interest was. No ministry can claim a monopoly on wisdom in this respect. The difficulty of developing common approaches to the national interest has been shown in the area of foreign aid, for example, to have contributed to a diffused administrative system and poorly co-ordinated and unpopular policies. 71 In the trade policy area also, there have been differing priorities given to what is the most appropriate course for Japan in dealing with consistently strong pressure for it to alter its policies. The Ministry of Foreign Affairs has been more prepared than the MITI to include in 'national interest' an element of accommodation to pressure.

But foreign pressure on Japan has been of such intensity that


compromise has been fairly readily adopted to meet national objectives. It is the ability that Japan has shown to meet the pressures that require reaction, and to come up with temporary solutions, that has produced what could be called a 'dynamic' response to trade policy problems. Japan has actively developed policies - usually within a context of sustained bilateral negotiation and political tension - to achieve an easing of pressure. Japan's position has not been easy, as it is highly vulnerable to pressure on trade policy questions because of its reliance on the United States for defence support, and because of its large bilateral trade surpluses with the United States and European nations.

Japan's primary national interest was to reduce foreign leverage; it could do that by entering into commodity-specific agreements for limited periods. This perhaps revealed, on the part of the MITI, a less narrow interpretation of national interest than has been held in the past. The term has come to include a reasonable level of adjustment to external interests. This is certainly more in line with a Foreign Ministry approach to defining an appropriate foreign economic policy for Japan. This does not mean that acceptance of external pressure is automatic; the national interest has not been defined as going to that extent, but selective policy adjustments to suit specific MITI concerns appears to be the approach adopted. This is dynamic in that the government has sought to match its policies with perceived national needs.

Those needs have not, for example, included acceptance of demands from minor powers like Australia, particularly when related to fundamental political sensitivities such as agricultural protection and the beef trade. Japanese interests are sufficiently attuned to American requests on beef import liberalisation because of the intensity of cross-issue linkages, whereas there is a low level of linkage on policies related to Australia.

Dynamism should not, therefore, be interpreted as responsiveness to all trade pressures; it refers rather to the process of designing and implementing policies to adjust Japanese interests to the pressures and demands which foreign trade brings. A dynamic Japanese trade policy is not one geared necessarily to advancing the interests of its trade partners.

Alan Rix 321

NOTES

1. Klauss Knorr, Power and Wealth: The Political Economy of International Power (London: Macmillan, 1973) p. 96.

2. For a recent treatment of dependence, see Bruce Russet, 'Dimensions of Resource Dependence: Some Elements of Rigor in Concept and Policy Analysis', International Organization, vol. 38, no. 3 (Summer 1983) pp. 481-99.

3. Gaimusho sengo gaikoshi kenkyiikai-hen, Nihon gaiko sanjilnen, 1952-1982 [Thirty Years of Japanese Diplomacy, 1952-1982) (Sekai no Ugokisha, 1982) pp. 121ff.

4. Gardner Patterson, Discrimination in International Trade: The Policy Issues 1945-1965 (Princeton, NJ: Princeton University Press, 1966).

5. See Ushiba Nobuhiko, 'Watakushi no rirekisho' [My Curriculum Vitae], Nihon Keizai Shinbun (November 1983).

6. Nihon gaik6 sanjilnen, pp. 152-5. 7. Lawrence Olsen, Japan in Postwar Asia (London: Pall Mall Press, 1970). 8. Alan Rix, Japan's Economic Aid: Policy-making and Politics (London:

Croom Helm, 1980). 9. Ibid., pp. 24-5.

10. Kenneth I. Juster, 'Foreign Policy-making During the Oil Crisis', The Japan Interpreter, vol. XI, no. 3 (Winter 1977) pp. 293-312.

11. James C. Abegglen, 'Narrow Self-Interest: Japan's Ultimate Vulnerability?', in Diane Tasca (ed.), US-Japanese Economic Relations: Cooperation, Competition and Confrontation (New York: Pergamon Press, 1980). p. 21.

12. Gary Saxonhouse, 'Evolving Comparative Advantage and Japan's Imports of Manufactures', in Kozo Yamamura (ed.), Policy and Trade Issues of the Japanese Economy: American and Japanese Perspectives (Seattle, WA, and London: University of Washington Press, 1982) pp. 239-69. Also see Radha Sinha, Japan's Options for the 1980s (London: Croom Helm, 1982) Chapters 2-4.

13. Stephen Du Brul, 'Japan's Autonomy and American Vulnerability: Another View of US-Japanese Relations', in Tasca, US-Japanese Economic Relations, pp. 32-8.

14. I. M. Destler and Hisao Mitsuyu, 'Locomotives on Different Tracks: Macroeconomic Diplomacy 1977-1979', in I. M. Destler and Hid eo Sa to (eds), Coping with the US-Japanese Economic Conflicts (Lexington, KY: Lexington Books, 1982) pp. 243-69. Also Gary R. Saxonhouse, 'Cyclical and Macrostructural Issues in US-Japan Economic Relations', in Daniel I. Okimoto (ed.), Japan's Economy: Coping with Change in the International Environment (Boulder, CO: Westview Press, 1982) pp. 123-48.

15. T. J. Pempel, 'Japanese Foreign Economic Policy: The Domestic Bases for International Behavior', International Organization, vol. 31, no. 3 (1977), pp. 723-74.

16. James P. Houck, 'Agreements and Policy in US-Japanese Agricultural Trade', in Emery N. Castle and Kenzo Hemmi (eds), US-Japanese Agricultural Trade Relations (Baltimore, MD, and London: Johns Hopkins University Press for Resources for the Future Inc., 1982) p. 62.


17. See, for example, Kenzo Hemmi, 'Agriculture and Politics in Japan', in Castle and Hemmi, US-Japanese Agricultural Trade Relations, pp. 219-74.

18. Aurelia George, 'The Japanese Farm Lobby and Agricultural Policymaking', Pacific Affairs, vol. 54, no. 3 (Fall1981) pp. 409-30.

19. Yujiro Hayami, 'Adjustment Policies for Japanese Agriculture in a Changing World', in Castle and Hemmi, US-Japanese Agricultural Trade Relations, pp. 368-92.

20. Hideo Sato and Timothy J. Curran, 'Agricultural Trade: The Case of Beef and Citrus', in Destler and Sato, Coping with US-Japanese Economic Conflicts, pp. 121-83.

21. Nihon gaiko no sanjunenshi, pp. 119ff. 22. Ibid., pp. 128-30. 23. Tanabe Saburo, Nihon tekko genryoshi [A History of Raw Materials for

Iron and Steel] 2 vols (Sangyo Shinbunsha, 1983). 24. For a full account, see J. W. M. Chapman, R. Drifte and I. T. M. Gow,

Japan's Quest for Comprehensive Security: Defence, Diplomacy and Dependence (London: Frances Pinter, 1983).

25. Nickel, chromium, tungsten, cobalt, molybdenum. See Busho Sangyosho Sangyo Kozo Shingikai-hen, Keizai anzen hosh6 no kakuritsu o mezashite [Aiming at the Establishment of Economic Security] (Tsusho Sangyo Chosakai, 1982), p. 152.

26. RonaldA. Morse (ed.), The Politics of Japan's Energy Strategy (Berkeley, CA: Institute of East Asian Studies, 1981) Chapter 2.

27. See Richard P. Suttmeier, 'The Japanese Nuclear Power Option: Technological Promise and Social Limitations', in Morse, The Politics of Japan's Energy Strategy, pp. 106-33.

28. Tawara Soichiro, 'Seizon no sentaku' [A Life or Death Choice], Bungei Shunju (July-September 1980); Inose Taoki, 'Shizen enerugiicho no kuno [The Anguish of the Natural Energy Agency], Chao Koran Keiei Mandai (Summer 1979) pp. 198-208.

29. Tawara, 'Seizon no sentaku 3: tsusho sangyosho no imbo' [A Life or Death Choice 3: The MITI Plot], Bungei shunju (September 1980); Roger W. Gale, 'Tokyo Electric Power Company: Its Role in Shaping Japan's Coal and LNG Policy', in Morse, The Politics of Japan's Energy Strategy, pp. 85-105.

30. Martha Caldwell, 'The Dilemmas of Japan's Oil Dependency', in Morse, The Politics of Japan's Energy Strategy, pp. 65-84.

31. Ian Smart, 'Nuclear Resources: The Dilemma of Interdependence', in Nobutoshi Akao, Japan's Economic Security: Resources as a Factor in Foreign Policy (London: Gower, 1983) p. 142.

32. Richard J. Samuels, 'The Politics of Alternative Energy Research and Development in Japan', in Morse, The Politics of Japan's Energy Strategy, p. 163.

33. Nihon gaiko sanjunenshi, pp. 128ff. 34. On Japan-EC relations, see Loukas Tsoukalis and Maureen White

(eds), Japan and Western Europe: Conflict and Cooperation (London: Frances Pinter, 1982).

35. Timothy J. Curran, 'Politics and High Technology: The NTT Case', in

Alan Rix 323

Destler and Sa to, Coping with US-Japanese Economic Conflicts, pp. 185-241.

36. Hugh Patrick and Hideo Sato, 'The Political Economy of United StatesJapan Trade in Steel', in Yamamura, Policy and Trade Issues of the Japanese Economy, p. 198.

37. Patrick and Sato, 'United States-Japan Trade in Steel', p. 235. 38. Gilbert R. Winham and Ikuo Kabashima, 'The Politics of US-Japanese

Auto Trade', in Destler and Sato, Coping with US-Japanese Economic Conflicts, pp. 73-119. See also Alan Rix, 'Trade and Politics: Recent Trends in Japan's Relations with the United States and Europe', World Review, vol. 21, no. 2 (June 1982) pp. 32-46.

39. Asahi Shinbun, 28 February 1981. 40. Ibid., 5 March 1981. 41. Ibid., 13 March 1981. 42. Ibid., 25 March 1981. 43. For example, ibid., 29 March 1981. 44. In the FRG from 5.6 to 10.3 per cent, in Denmark from 21.3 to 31.3

per cent. 45. Asahi Shinbun, 10 July 1981. 46. Ibid., 18 June 1981. 47. Ibid., 5 June 1981. 48. Winham and Kabashima, 'The Politics of US-Japanese Auto Trade',

pp. 111-12. 49. Yearbook of US-Japan Economic Relations in 1982 (Washington, DC:

Japan Economic Institute of America, 1983) pp. 62-4; Japan Economic Survey (January 1984).

50. Sinha, Japan's Options for the 1980s, p. 87. 51. Yearbook of US-Japan Economic Relations in 1982, p. 53. 52. Aurelia George, The Changing Patterns of Japan's Agricultural Import

Trade: Implications for Australia, Pacific Economic Papers no. 100 (Canberra: Australia-Japan Research Centre, 1983).

53. Chalmers Johnson, MIT/ and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975 (Stanford, CA: Stanford University Press, 1982) Chapter 9.

54. William E. Bryant, Japanese Private Economic Diplomacy: An Analysis of Business-Government Linkages (New York: Praeger, 1975).

55. Masashi Nishihara, The Japanese and Sukarno's Indonesia: TokyoJakarta Relations, 1951-1966 (Honolulu: Hawaii University Press, 1976).

56. Yoshi Tsurumi, The Japanese are Coming: A Multinational Interaction of Firms and Politics (Cambridge, MA: Ballinger, 1976).

57. Gerald L. Curtis, 'The Tyumen Oil Development Project and Japanese Foreign Policy Decision-making', in Robert A. Scalapino (ed.), The Foreign Policy of Modern Japan (Berkeley: University of California Press, 1977) pp. 147-73.

58. Johnson, MIT/ and the Japanese Miracle, p. 311. 59. Ibid., pp. 312-13. 60. Gale, 'Tokyo Electric Power Company'. 61. Patrick and Sa to, 'United States-Japan Trade in Steel', p. 208. 62. Houck, 'Agreements and Policy in US-Japanese Agricultural Trade'.


63. Johnson, MIT/ and the Japanese Miracle, p. 289-303. 64. Tsiish6 Sangy6sh6 Sangy6 K6z6 Shingikai-hen, 80 nendai no sangyo kozo

no temb6 to kadai l Outlook and Problems of Industrial Structure in the 1980s] (Tsiish6 Sangy6 Ch6sakai, 1981).

65. 80 nendai no sangyo k6z6 no temb6 to kadai, pp. 104-7. 66. Richard J. Samuels, 'The Industrial Destructuring of the Japanese

Aluminum Industry', Pacific Affairs, vol. 56, no. 3 (Fall 1983) pp. 495-509.

67. Sato and Curran, 'Agricultural Trade: The Case of Beef and Citrus'. 68. George, The Changing Patterns of Japan's Agricultural Import Trade. 69. Haruhiro Fukui, 'The GATT Tokyo Round: The Bureaucratic Politics

of Multilateral Diplomacy', in Michael Blaker (ed.), The Politics of Trade: US and Japanese Policy-making for the GATT Negotiations (New York: East Asian Institute, Columbia University, 1978) pp. 75-169.

70. Ushiba Nobuhiko and Hara Yasushi, Nihon keizai gaiko no keifu [The Lineage of Japanese Economic Diplomacy] (Asahi Evening News, 1979) pp. 102-5 and Curran, 'Politics and High Technology: The NTT Case'.

71. Rix, Japan's Economic Aid.

11 Conclusions J. A. A. STOCKWIN

If there is one thing of which we hope to have convinced the reader in this book so far, it is surely that politics and political decision making in Japan is complex and sophisticated. No quick and easy theory can hope to do justice to the tangled web of interactions and developments which we have sought to analyse. At the same time we are not simply dealing with chaos. Clear patterns are in evidence and politics for the most part does not stray outside reasonably defined parameters. The politics of Japan in these senses is not utterly unlike the politics of most other advanced industrialised states in the world of the late twentieth century.

Our underlying theme has been inspired by what at first sight appears like a paradox to the outside observer of contemporary Japan. Whereas Japan has become famous throughout the world for the dynamism of its industries and the rapidity with which they seem able to react to changing conditions and emerging opportunities, many areas of policy appear extraordinarily unresponsive to the need for change, or pressures for change. In other words, Japanese decision making often gives the impression of stultifying immobilism. There are those who have been known to argue that the immobilism is some kind of a ploy or conspiracy to harm foreign interests for the sake of a concerted nationalist game plan.

We have turned up little in our research for this book that would give credence to such theories. What we have discovered, on the other hand, may readily be arranged under three headings: political system, political dynamics and political change.

THE POLITICAL SYSTEM

The first thing to be said about the Japanese political system is that it is open. Information flows extremely freely. The importance of free interchange of information between government and industry was emphasised by Horne in Chapter 6. In general it is not at all difficult to discover what is going on in Japanese politics, indeed the danger is of being swamped by information rather than of lacking information. Rix, in Chapter 10, stressed the public nature of trade

325

326 Conclusions

disputes in which Japan has been involved, with the ever-present Japanese mass media ensuring that much of the detail of disputes is in the public domain. The mass media are free (though the extent to which they are accurate and balanced is a separate issue, not discussed in this book), elections are free (which is not the same thing as saying that the electoral system accurately reflects popular preferences) and most non-violent forms of political expression are free (though, as elsewhere, there is conspicuous political apathy among the general population).

To say that politics is open and political expression is free does not necessarily imply the same about political access. As George argued in Chapter 5, open access to politics does not imply equal access. This, of course, is also true of other political systems, but it is true in a particular sense of Japan because of what George also called 'the most important political fact of life in Japan', namely that the Liberal Democratic Party (LOP) has never been out of power since it was formed in 1955. Japanese politics is based - apparently quite securely - upon the dominance of one party over political life. This does not mean that Opposition parties are totally meaningless or bereft of all possibility of influencing political outcomes, indeed in the field of defence policy (see George, Chapter 9) they have exercised a crucial power of veto, though its effectiveness is diminishing. They are, however, chronically out of office, and being out of office means that interest groups - notably labour unions - which have hung onto their coat-tails are relatively without power. Indeed it is arguable that the current parties of Opposition are out of office because they limit their appeal to narrow interest groups. This in turn has led historically, despite the important labour legislation brought down during the American Occupation period, to a conspicuously unequal balance of power in industry between capital and labour, in favour of the former. The extent to which socially and politically conservative assumptions underpin the political system was graphically shown by Collick in Chapter 8, where he demonstrated how in circumstances of financial stringency which emerged in the late 1970s it proved quite possible to trim back the state provision of social welfare from the improved, but still modest, levels attained under the prime ministership of Tanaka Kakuei (1972-4).

One-party dominance, as argued by Stockwin in Chapter 2, rests on a cabinet-in-parliament system essentially of British type, and as such is markedly un-American in form and style. The dominance of a single party, however, has meant a stability of the system and a


stability of the actors at the centre of politics, which is certainly not matched in Britain and is hard to match in any other comparable system. Stockwin maintained that a de facto seniority system operates in the distribution of cabinet and party office among LOP Diet members. This is not unlike that operating within the government bureaucracy. According to Rix in Chapter 3, in conditions of oneparty dominance the structure of the government bureaucracy has been extremely stable, but at the same time its size has been carefully held in check, which can be seen as consistent with a view of the bureaucracy as an elite administrative corps in a rather Weberian sense. It is characterised by 'complexity, authority and pervasiveness'.

If one-party dominance means absence of really effective political opposition, that is true only outside the ranks of the LOP. The ministerial party itself may be conceptualised as containing its own opposition within itself. Again, this is not unknown in other systems, but in Japan it seems to be institutionalised to an extent scarcely known elsewhere. The best-known divisions within the LOP are the factions (discussed by several contributors to this book), which to an extent at least are parties within a party. The way Japanese politicians climb to the top of Disraeli's 'slippery pole' is by way of factional activity, and factional activity also has a way of dislodging them rather easily. Several contributors have also addressed themselves to the subject of interministerial rivalries, which can be intense and long lasting, and the relatively recent phenomenon of zoku, or powerful policy groups within the LOP, often with a power-broking role, testifies to a pluralistic element within the ruling elite.

Finally, certain interest groups play a central role in the political system, having a variety of methods whereby they make their views felt (see Chapter 5). George describes the relationship between interest groups and political parties as highly interdependent, extending at times to duality of function. That the LOP is closely linked to interest groups associated with big business is well known, but its connections in fact range much more widely than this suggests. Indeed Horne in Chapter 6 describes the LOP as representing a 'collectivity of conservative interest groups'.

POLITICAL DYNAMICS

The model of corporatism is clearly a powerful one in the analysis of Japan's political system, although it is unusual that labour is largely

328 Conclusions

excluded from the corporatist process of decision making. In Chapter 5 George discusses the varieties of form which corporatist interaction takes. In general there is a high level of 'interpenetration' of the system, and what Rix in Chapter 10 calls 'tolerance on both sides of an ill-definition of boundaries between government and private sector responsibilities'. Corporatism, however, does not of itself tell us whether a political system will tend towards immobilism or dynamism in its policy making.

Much evidence of the existence of immobilist elements in the system has been presented in the course of this book, and it would be tedious to go over this ground again in detail here. Two aspects, however, will be briefly explored, one being checks and balances, and the other incrementalism.

An example of checks and balances was given by George, in her discussion in Chapter 9 of how the 1947 Constitution was used to check increases in defence expenditure. Another is implicit in Ito's analysis in Chapter 4 of attempts by the zaikai to regain some of their influence and prestige vis-a-vis the bureaucracy by using the Rincho for this purpose. The immobilising impact of interest groups over the postal savings issue was discussed by Horne in Chapter 7. Factional conflict within the LOP has served (though not always to equal effect) to limit the tenure, and thus the power, of the prime minister, while the limited tenure of cabinet office for the same reason plainly limits the capacity of a cabinet minister to control his ministry. Within the bureaucracy, interministerial clashes between the Ministry of International Trade and Industry (MITI) and the Ministry of Foreign Affairs (MFA) over GATT negotiations and over the Nippon Telephone and Telegraph (NTT) issue were discussed by Rix in Chapter 10. All these cases are of situations where one powerful political actor finds its influence limited by having to fight off or having to negotiate with other powerful actors.

It needs to be noted, however, that the operation of checks and balances does not always result in an immobilist outcome, or if they do, the outcome may not last for ever: the Constitution is less of a check on defence development than it once was; the Rincho was also a means of breaking out of a policy impasse; sometimes a prime minister will survive long enough in office to place his indelible imprint on events and may indeed have to resolve conflicts; some individual cabinet ministers (and some key cabinet offices) manage to overcome the limitation of tenure; amakudari can be ambiguous in its impact; while some interministerial clashes result in significant


changes in policy rather than the inhibition of such changes. So far as we are talking about institutional checks and balances, we may perhaps describe the Japanese system as inherently conservative in relation to change without being reactionary. This, however, is a broad and necessarily incomplete generalisation.

The second aspect of immobilism to be discussed is that thought to inhere in incrementalist decision making. Incrementalism means building small increments onto an existing baseline, and is most clearly seen in the making of Japan's annual budget. Rix, in Chapter 3, described the budgetary process as functioning to 'filter policy', as part of a procedural emphasis aimed at perpetuating 'bureaucratic control over the pace and direction of policy development'. Horne, on the other hand, argued that budget making was not wholly incremental, and cites as evidence that over the decade of the 1970s budgetary allocations to agriculture declined, while allocations to welfare significantly rose. Annual rises during the 1980s above the budgetary 'norm' for defence and foreign aid would be further examples, though while these were initially the result of policy decisions to break away from incrementalism, the rate of increase since then suggests that a predictable incrementalist pattern of decision making may have once again asserted itself. Here again, the underlying pattern appears to be conservative, though there was sufficient flexibility in the system to permit exceptional treatment in matters of exceptional political urgency and importance.

Even though immobilism rather than dynamism may appear to be the dominant theme in the discussions in this book, examples of dynamic decision making are by no means absent. Rix's argument about the 'energising' function of the Japanese bureaucracy (exceptional in the literature on bureaucracy in general) relates to its prewar history of elite status, its effective reinforcement by the American Occupation, and the exigencies of economic development. But a strong elite bureaucracy does not necessarily add up to an 'energising' bureaucracy. Whatever the precise set of reasons for the capacity for an 'energising' role in political decision making developed by a ministry such as the MITI (but not confined to the MITI), one important factor in the past has plainly been the relative abstention from influence by other parts of the political system.

330 Conclusions

POLITICAL CHANGE

Although in the course ofthis book we have emphasised the essential, and remarkable, stability of the Japanese political system since the 1950s, it would be foolish to ignore the possibility of systemic change.

Many writers thought they saw systemic change approaching during the 1970s in the shape of a declining LDP and a resurgent Opposition capable eventually of taking power. This possibility was aborted by the conservative electoral trend that became apparent in the late 1970s and the chronic inability of the Opposition parties to combine into any kind of credible alternative force. A different kind of change, however, has gradually been manifesting itself, though its progress is somewhat erratic and its implications uncertain. With the consolidation in power of the LD P, national politicians of that party have been exercising their political muscles in ways that have arguably been eroding the formerly dominant position of the bureaucracy. Evidence to this effect has been presented at various places in this book. The emergence of zoku is one example. Another is the decline of that instrument of bureaucratic power known as 'administrative guidance'. It should be noted, however, that Rix enters a caveat here when he argues in Chapter 3 that a situation of decrementalist budgeting which began to appear in the 1980s was likely to strengthen rather than weaken the government bureaucracy. There was also evidence that the business world was prepared to flex its muscles in relation to the bureaucracy, as we saw from the Rinch6 experiment, described by Ito in Chapter 4.

A further possible indicator of change was the unexpected degree of personal leadership apparently exercised by Nakasone by comparison with most of his predecessors. Although it is notoriously difficult in the case of Japan to disentangle the effect of personal leadership from the influence of subordinates, there is a good case (made by George in Chapter 9) that Nakasone, with his relatively long tenure of office, exercised exceptional leadership influence in the field of defence. Even his position, however, was far from invulnerable, as the tax debate of 1987 graphically revealed, and he yielded the prime ministership to Takeshita in November 1987.

Finally, foreign pressures provided a potent influence for change, of policy most obviously, but also possibly of system. Foreign, and especially American, pressures have been intense and virtually unremitting in defence and trade, as well as for the liberalisation of financial markets discussed by Horne in Chapter 7. Clearly Nakasone


as prime minister was inclined to play the political game according to somewhat different rules from his predecessors because he understood the political gains domestically that could be made from being seen to stand tall on the international stage. In circumstances of intense international pressure too, a leader prepared to play the card of personal charisma could expect to win support. As George argued in Chapter 9, Nakasone was willing both to break through immobilist barriers to change, and also to reverse the normal practice whereby Japanese governments respond primarily to domestic pressure and only secondarily to foreign pressure, to a practice which had the ratio the other way round. Even so, we should not lose sight of Ito's remark that various participants in the Rincho were engaged collusively in the 'successful presentation of the political play called "foreign pressures"'.

IMMOBILISM, DYNAMISM AND THE POLITICAL SYSTEM

In Chapter 1 we suggested that although it was perfectly legitimate to apply a western-style, liberal-democratic model of politics to Japan, it was inadequate in some respects because it tended to lead to the wrong questions being asked. As an alternative we proposed an authority maintenance model as a standard by which to measure aspects of the Japanese system. (Not dissimilarly, Rix in Chapter 3 argued that there were risks in measuring political change in Japan solely according to the yardstick of democratisation.) An authority maintenance model is one in which a regime has the goal above all of consolidating its power. We suggested that the model was quite compatible with a dynamic developmental approach, and that it may well have a long-term perspective. It may also accommodate within it a relatively diverse set of political forces, though it will not manage to accommodate all political forces that exist. There will be an opposition, but it will be largely impotent, as the regime itself becomes the pole around which significant political forces revolve.

Japan, as we suggested, is a more open political system than this model would imply. There are free elections, a free press, free political participation. The regime, however, demonstrates a systemic conservatism (not only a policy conservatism) somewhat reminiscent of an authority maintenance type system. This is what gives it so much of the immobilism for which Japan has in recent years become

332 Conclusions

well known. That it is also dynamic is not entirely surprising, since for instance the Republic of Korea is also highly dynamic in a policy sense. Japan, however, possesses elements in her political system which take it well beyond the theme of authority maintenance.

Does the replacement of Nakasone by Takeshita, then, herald a change from dynamic to immobilist politics? It is early to say, but two points should be made. First, broad-based consensus leadership should not entail immobilism, and may even do better than so-called 'dynamic' policy making by a leader whose power base is weak. Secondly, however, a consensus of diverse interests may be hard to maintain through traditional Japanese methods in conditions of intense foreign pressure or severe social or economic disruption. Here a more forceful approach may be required as in tackling the trade surplus or subduing an upward spiral in land prices.

Finally, therefore, structural change ought not to be a taboo subject if the full potential of Japan's capacity for political action is to be realised. Some change is, as we have seen, already taking place. Though from the present perspective it may seem impracticably ambitious to suggest it, an arrangement whereby the electorate were presented with a genuine political choice, and where therefore one party need not indefinitely remain in office, might with advantage be a priority item on the political agenda.

Index

Japanese names are given with the surname first and the personal name second.

Abe Shintaro, 181 Abegglen, James, 300 administrative guidance, 130, 144, 149,

150-2, 167, 330 Administrative Management Agency,

63, 79, 80, 83,89, 96,98 administrative reform, 1, 48, 66, 77-

107' 182, 216 Joint Administrative Reform

Promotion Headquarters, 83 see also Rincho

'administrative state', 57,67-8,70 advisory councils see Shingikai ageing society, 78, 85, 88, 94, 153, 217,

223,228 see also medical care for the aged,

Old People's Health Bill, pensions

agricultural associations (prewar), see nokai

agricultural associations (wartime), see nogyokai

Agricultural Co-operative Association (postwar) see Nokyo

Agricultural Problems Conference, 120 agriculture, 1, 4, 13, 35, 36, 107, 108,

ll(rl8, 128, 143, 146, 164, 165, 301-2,311,318,328

and food self-sufficiency, 315 beef,302,311,320 citrus, 311 protection, 301-2, 311-12, 320 rice price support system, 315 see also Food Control Law

Agriculture, Forestry and Fisheries Finance Corporation, 156

All-Japan Federation of Farmers' Unions, 116

alternation in office, 3-4, 14, 232, 332 amakudari, 37, 130, 163-4, 189-90, 319,

328 Amaya Naohiro, 309, 313--14, 317 American Occupation, 5, 9, 12-13, 26-

8, 55-6,63,142,147,172-3,206-10,213,239,275,306,326,329

Anti-Monopoly Law, 147, 151

arms export, 264, 265 Three Principles concerning (1967),

241, 265 Guidelines (1976), 242, 264 see also military technology transfer

ASEAN, 304, 316 Australia, 299, 302, 303, 304, 316, 318,

320 authority maintenance model, 6-9, 12-

20, 331

Bank Law (1927, revised 1982), 147-8, 172-3, 198

Bank of Japan (BOJ), 162, 174, 177-9, 183, 193, 194, 197

Basic Policy for National Defence (1957), 246

Basic Pollution Control Law (1967), 148 Benelux, 310 Brazil, 316 Bryant, William, 312 budget, 121-2,147,152-5,219,229,

245, 278, 280, 329 balanced, 143 budgetary crisis, 154-5 special budget accounts, 155 zero growth, 245-78

bureaucracy, 6, 9-11, 14, 17-18, 19, 23, 28, 37, 49-51, 54-72, 106-8, 141, 144, 149, 152, 163--8, 195, 197, 267, 297, 318, 329, 330

and interest groups, 122-31 and the National Diet, 151 and the State, 67-9 as 'energiser', 54, 62, 71, 329 'bureaucratic inclusionary pluralism',

68 former bureaucrats within LDP, 37,

39-40, 163-4, 167 of Meiji period, 55, 71, 72 public attitudes towards, 66 stability of, 64, 327

Bush, George, 311 business, 9-11,30,91, 106-7, 117, 128,

148, 152, 161-3, 193, 199, 312-14, 330

333

334 Index

cabinet, 13,24,26, 27, 37, 63,166,268 ministerial ordinances, 148, 173 orders, 148 seniority system for appointment to,

40, 50, 327 'transcendental,' 25, 27-8 turnover of ministers in, 40-6, 50--1,

328 Campbell, John C., 60--1, 71, 100, 153,154 Canada,304, 310,316 capitalliberalisation, 144, 168, 179 Carter, James, 249 censorship, 13 centralisation of power, 13, 26 Certificates of Deposit (CDs), 175, 183-

5, 190--1, 193 Chief Cabinet Secretary, 42, 43, 45, 268 China, People's Republic of, 47, 250--1,

255, 256, 276 Treaty of Peace and Friendship with

Japan (1978), 256 China, Republic of (Taiwan), 255, 256 city banks, 176,179,180 clientelism, see patron-client relations Commercial Law, 147 Committee on Financial System

Research (CFSR), 163, 175, 183, 185-6

'Comprehensive Security', 254, 257-60, 304

see also defence conflict, 196, 306 conscription, 25, 241 consensus, 6, 165,192,196,225,244,

267,268,273,276,277,279,306,332 conservatism, 329, 331 Constitution of 1889, 8, 23-4, 26 Constitution of 1947, 13, 54, 55, 209,

238-9,243 article 9 (peace clause), 240, 242, 255,

275, 282, 328 article 66, 240

consumer organisations, 125, 148 corporatism, 6, 68, 122-31, 127, 128,

130--3, 327-8 Council of Key Industry Control

Organisations, 128 see also Supreme Court

courts, 13, 47 Craig, Albert, 56 Curtis, Gerald, 312

Daiichi Kangyo Bank, 158, 186 'decrementalism', 66-7, 330

defence and security, 1, 4, 84, 101, 237-90, 329, 330

and economic security, 258 and public opinion, 251, 276 blockading of inter-island straits, 248,

254,261 C3I functions, 271, 283 defence production, 245 Mid-Term Defence Programme

Estimate (MTDPE), 268-72, 278, 280, 285

1 per cent of GNP issue, 249, 267-71, 278-9

ofsealanes,248,250,253-4,261-2, 271,281,284,285,304

see also 'Comprehensive Security' Defence Agency, 240, 245, 261-2, 266,

269, 278, 279 deficit financing, see Rinch6 democracy, 5-9, 14, 23, 26, 28, 54, 56,

232, 331 see also Taisho Democracy

democratic centralism, 18 Democratic Socialist Party (DSP), 31,

32, 112, 114, 116-18 see also Opposition parties

Denmark, 310 'descent from Heaven', see amakudari 'developmental state', 59, 70, 312, 331 Diet

Imperial, 23, 25 National, 10, 15, 16, 18, 27, 39-40,

63,108,218,227,232,242,277, 327: and bureaucracy, 151, 189; and defence, 240, 243; and interest groups, 109-15, 126; committees of, 120; 'Pollution Diet' (1970), 145

see also House of Councillors, House of Peers, House of Representatives

Diet Members' Group for the Promotion of Commerce and Industry, 120

Diet Members' League Associated with the Medical Association, 120

Diet Members' League for Environmental Hygiene, 120

Dodge, Joseph, 143 Doko Toshio, 77, 82, 89, 91-3,99, 102,

228-9 see also Rinch6

Domei, 116-17 'dual government', 24

Index 335

Dulles, John Foster, 246, 255 dynamism, 1-20, 25, 54, 58, 179, 196,

197,237,297-320,325,328,331-2 definition, 2

economic co-operation, 299-300, 304 and India, 303 see also foreign aid

economic dependence, 298-9 economic diplomacy, 299, 300

towards Middle East, 300 Economic Planning Agency, 42, 43, 45,

63,310 economic policy, 11-12, 20, 72, 141-68

industrial structure 'vision', 315-16 towards exchange rate, 300

economic security, 299, 301-6 'economism', 255-7 education, 1, 72, 106, 275 elections, 5, 13, 29, 30-1, 35-6, 48, 232,

326, 331 and candidate appeal, 113, 119 and interest groups, 109, 132 as festivals, 34 expense of, 34-5 see also House of Representatives,

House of Councillors electoral support groups, see koenkai electoral system, 5, 7, 14, 30-3, 112, 326

see also 'negative gerrymander' Electric Power Control Law (1938), 305 elites and elitism, 9-11, 13, 25, 29, 56,

59, 61-2, 65-6, 72, 106-8, 132, 327, 329

see also power elite Elliott, James, 84, 93, 96, 98, 99 emperor, 24, 25, 27, 28 energy policy, 305, 315 environment, 10, 35, 145 European Community (EC), 310-11, 316 Export Import Bank of Japan, 173

factionalism, 27, 30, 33, 40-1, 46-50, 112-13,162,222,232,267,268, 289, 327, 328

see also Liberal Democratic Party Fair Trade Commission (FfC), 148 Federation of Bankers' Associations of

Japan, 115 Federation of Economic Organisations,

see Keidanren Federation of Medium and Small

Commerce and Industry Organisations, 116

financial institutions, 107, 147, 171-2 foreign, 195

financial markets, 171-2, 330 financial mergers, 186-90 financial policy, 4, 36

see also Rinch6 financial system, 126, 171-99 Financial System Commission, 225 First Provisional Commission on

Administrative Reform, 78, 80 Fiscal Investment Loan Programme

(FILP), 141, 152, 155-7, 160 fiscal policy, 143-4 fishing zones, 146 flexible exchange rates, 194 Food Control Law, 146 foreign aid, 58, 59-60, 72, 258, 272-3,

319,329 and south Pacific, 272-3

Foreign Exchange and Foreign Trade Control Law (FEFfCL), 147, 175, 195

foreign pressure, 15, 19, 90, 98, 165, 239,278,297-8,306,318,319,320, 330-1,332

France, 4, 65 and government share of budget, 153 and international public goods, 272 and Japanese car exports, 310

Free Lawyers' Groups, 117 Fukuda Takeo, 43, 47

Fukuda Doctrine, 256, 258 Fukui Haruhiro, 39, 59, 63, 68, 318

gaikaku dantai, 124-5, 129 General Agreement on Tariffs and

Trade (GATT), 142,299, 303, 328 Tokyo Round,318,319

General Council of Japanese Trade Unions, see S6hy6

genr6, 24 gensaki market, 190 Germany, Federal Republic of (FRG),

65 and government share of budget, 153 and international public goods, 272 and Japanese car exports, 310 attitudes to bureaucracy in, 66

Gorbachov, Mikhail, Vladivostok speech, 273

Government Bond Underwriting Syndicate, 192

Green Card System, 181-2

336 Index

Hatoyama lchiro, 274-5 health insurance, 209--10, 211-12, 23~1

see also National Health Insurance Scheme

Health Insurance Act, 230 Heclo, Hugh, 58, 61-2, 68, 69 Hogwood, Brian, 59 Hokkaido prefectural government, 101 Homen lin, see Welfare Commissioners House of Councillors, 34, 35, 109, 164,

189 and Ministry of Finance, 190 national constituency, 112-13 1980 general election, 219, 227 1986 general election, 49 prefectural constituencies, 112-13

House of Peers, 28 House of Representatives, 23, 25, 27,

29, 30, 31, 34, 40, 109, 112-13, 164 and Ministry of Finance, 190 1979 general election, 88-9 1980 general election, 99, 160 1983 general election, 48 1986 general election, 49, 160, 276--9,

289-90 housing, 155-6

see also land price spiral Housing Loan Corporation (1950), 156,

174

Ide Yoshinori, 55 Ikeda Hayato, 47, 162, 175, 255, 256,

274, 275, 282 immobilism, 1-20, 25, 54, 58, 155, 179,

188,196,197,239,244,267,268, 277,279,301,325,328,331-2

checks and balances, 328-9 definition, 2

Imperial Rescript on Education, 13 Imperial Rule Assistance Association

(IRAA), 127 Inayama Yoshihiro, 314 Income Doubling Plan (1961), 175 Income Tax Law, 181 incrementalism, 14, 92, 153, 155, 244-5,

279-80,282,290,328-9 Indonesia, 312 Industrial Patriotic Association

(wartime), 128 industrial policy, 149 Industrial Structure Council, 163, 316 industry, 20, 35, 72, 126 'infiltration', 17 information flow, 12, 18, 325

Inoguchi Takashi, 40, 68 Inoki Masamichi, 55 interest groups, 13, 15--18, 20, 22, 28,

106--33, 327 and bureaucracy, 122-31 and Diet representation, 109--15, 132 and dual office holding, 108 and interpenetration, 108-22, 328 and political parties, 108-19, 327

interest rates, 142, 143, 172, 175, 178-9, 189

deregulation, 183--6, 189, 194-5 International Monetary Fund (IMF),

142 internationalisation, 167-8, 194-6, 273 issue linkages, 320 Italy, 310 Ito Masayoshi, 310

Japan Airlines, 158 Japan Chamber of Commerce and

Industry, 117, 126--7, 129 Japan Communist Party (JCP), 31, 32,

35, 36, 114, 116--17, 161, 243 see also Opposition parties

Japan Confederation of Labour, see Domei

Japan Dentists' Association, 115 Japan Dentists' Political League, 114,

118 Japan Development Bank (JDB), 144,

157, 158, 173 Japan Doctors' League (JDL), 114, 118 'Japan Incorporated', 10 Japan Lawyers' Federation, 117, 118 Japan League of Medium and Small

Enterprise Associations, 115, 117 Japan Medical Association (JMA), 114,

118, 212 Japan Medium and Small Enterprise

Political League, 115,117 Japan National Railways, 57, 81, 157-8 Japan Nurses Association, 118 Japan Political League for Democratic

Education, 115 Japan Socialist Party (JSP), 3~2, 36,

48, 112, 114, 116--18, 243, 264, 269 see also Opposition parties

Japan Teachers' Union (JTU), 115 Johnson, Chalmers, 59, 60, 70, 71, 312-

13, 317

Kabashima Ikuo, 31~11 kan, 55

Index 337

Kaneko Ippei, 189 kanri, 55 Keidanren, 82, 91, 115, 126, 145, 146,

161-2, 310, 313 k6dan, see public bodies k6enkai, 113-14 Kokumin kenk6 hoken, see National

Health Insurance Scheme Kokumin Kyokai, see People's

Association Kokumin nenkin hoken, see pensions:

National Pension Insurance Scheme

Kokumin Seiji Ky6kai, see People's Political Association

K6meit6, 31, 32,36-7, 116,243 see also Opposition parties, S6ka

Gakkai Komoto Toshio, 162, 194, 310 Korea, Republic of, 8, 14, 255, 264, 332 Korean War, 246 Kosaka Tokusaburo, 162 k6sha, see public corporations Krauss, Ellis S., 62, 63, 66 Kumon Shunpei, 89 Kuraishi Tadao, 43 Kyodo Oil Company, 158 ky6sai kumiai, see Mutual Aid

Associations

Labour Union Law (1945), 128, 326 labour unions, 6, 9, 13, 16, 17, 107, 110,

127,128,130,213,217,220,326, 327

land price spiral, 332 Large Scale Retail Shops Law, 151 Law to Promote the Modernisation of

Medium and Small Enterprise, 123 Lehman, Admiral, 285 liberal democratic model, 6-9, 12-20,

331 Liberal Democratic Party (LOP), 1, 5-

6, 9--11, 13, 15, 16-20, 26, 28, 30-51, 56,63, 83,88-9,94, 97,99--100, 106-7, 112, 117, 118, 120, 130, 132, 141, 143, 145, 148, 149, 153, 155-6, 159, 160-8, 172-3, 181-3, 185, 189, 190, 197, 198-9, 212, 217-19, 221, 222,230,232,242,244,251,274, 302,312,326-8,330

and People's Political Association, 115

and political funds, 161 forty-day crisis of 1979, 47

Investigating Committee on Administration and Finance (ICAF), 99

leadership succession, 46-9 Policy Affairs Research Council

(PARC), 120, 145, 162, 181-2 presidency, 46-7: primary elections

for, 47 zoku, 49--50, 327, 330 Fukuda (later Abe) faction, 47 Miki (later Komoto) faction, 48 Nakasone faction, 289 Ohira (later Suzuki, later Miyazawa)

faction, 47, 309 Tanaka (later Takeshita) faction, 47-8 see also factionalism

Livelihood Protection Law, 208-9, 211, 216

Livestock Industry Promotion Corporation, 160

local politics and government, 10, 16, 108, 117-18, 125, 218-19, 220

Lockheed scandals, 30, 36, 47-8

MacArthur, Douglas, 27, 246 see also Supreme Commander of the

Allied Powers (SCAP) Maekawa Report, 273 Marx, Morstein, 57 mass media, 5, 148, 243-4, 280, 314,

326,331 Medical Care Facilities Finance

Corporation, 156, 174 medical care for the aged, 215, 218-21

see also ageing society, Old People's Health Bill, pensions

Meiji Restoration, 8, 23, 25, 205 'middle mass', 36 Miki Takeo, 48, 216, 241-2, 256 Miliband, Ralph, 67 military technology transfer, 264, 265-6

see also arms export Mills, C. Wright, 9 ministerial responsibility, 79 Ministry of Agriculture, Forestry and

Fisheries (MAFF), 63, 95, 153, 164, 302, 318

Ministry of Construction, 163 Ministry of Education, 65, 78-9, 80 Ministry of Finance (MOF), 42, 43, 45,

62, 63, 65, 77,80, 83,85,87,88-9, 93-8, 101, 142, 143, 146-8, 153, 158, 163-4, 173, 174, 176, 178, 180-5, 187, 189--94, 197, 198-9, 218-20,278,319

338 Index

Ministry of Finance - continued Banking Bureau, 148, 173, 175, 177-

8, 184-6, 188, 191, 193 Budget Bureau, 96-7, 164 Financial Bureau, 177, 186, 193 International Finance Bureau, 177,

186, 193, 195 Securities Bureau, 173, 177, 191 Taxation Bureau, 164

Ministry of Foreign Affairs (MFA), 42, 43, 45,58, 150,309,317,319,320, 328

Ministry of Health and Welfare (MHW), 94-5, 153, 207, 212, 213, 218,219-22,225,227,229,230

Ministry of Home Affairs, 39, 77, 206 Ministry of International Trade and

Industry (MITI), 12, 42, 45, 58, 59, 62,63,65, 70,125-6,129,142,144-6, 147, 149-51, 158, 163-5, 178, 308-15,317-20,328,329

Agency of Natural Resources and Energy, 305, 317

and aluminium smelting, 316 and economic co-operation, 300 and economic security, 303-4 and industrial structure 'vision', 315--

16 and new technology, 150 and pulp and paper industry, 316 and steel industry, 316 and textiles, 316 and sunset industries, 150 New Energy Development

Organisation, 305, 317 Ministry of Labour, 227 Ministry of Posts and

Telecommunications (MPT), 150, 177-8, 180-2, 184, 319

Ministry of Transport, 163 Minobe Ryokichi, 215 Mitsubishi Heavy Industries, link with

Chrysler, 144 Miyazawa Kiichi, 189, 309 Morinaga Teiichiro, 193, 194 Murakami Yasusuke, 36 Muramatsu Michio, 60, 62, 63, 66, 67 Mutual Aid Associations, 209, 211, 221,

225,227 Mutual Aid Association Law (1979),

225 Mutual Security Assistance

Agreement (Japan-US) of 1954, 246, 265-6

Nakagawa Ichiro, 318 Nakasone Yasuhiro, 1, 10, 15, 20, 36, 39,

46,47,48-9,96,98,99, 157,182, 311-21, 332

and defence policy, 237-8, 260-82, 288, 330

and settling postwar accounts, 275-6 and unmei kyodotai, 260 and Yasukuni Shrine, 275, 276 belief system of, 274-7 third cabinet of, 38 what he did not do, 279-82

National Association of City Mayors, 118 National Association of Prefectural

Assembly Chairmen, 118 National Central Association of Medium

and Small Enterprise Organisations, 115, 123

National Chamber of Agriculture, 123 National Chamber of Commerce and

Industry, 123 National Commerce and Industry

Political League, 115, 117 National Defence Council, 241, 268, 277 National Defence Programme Outline

(NDPO) of 1976, 241, 244,249, 268-71,281,286,289

'Standard Defence Force Concept', 241

National Farmers' General Federation, 115

National Farmers' League, 116 National Federation of Commerce and

Industry Associations, 115, 117, 123 National Fisheries Co-operative

Federation, 123 National Governors' Association, 118 National Health Insurance Scheme, 209-

10,212,215,218-20,230 National Health Insurance Tax, 210 national interest, 320-1 'national minimum', 224 National Telephone and Telegraph

(NTT), 150, 157, 159, 165 'negative gerrymander', 34-5, 302 New Liberal Club (NLC), 30-1, 48, 112,

160 see also Opposition parties

Nippon Steel, 158, 314 Nippon Telephone and Telegraph

(NTT), 150, 307, 318-19, 328 Nishihara Masashi, 312 Nissan, merger with Prince, 144 Nixon Doctrine, 247

Index 339

nogyokai, 127-8 n6kai, 126-7 N6ky6, 16--17,39, 111, 115, 118, 123,

126, 128--9 Norman, E. H., 55 notifications, 173 Nuclear Non-Proliferation Treaty, 242 nuclear policy, 249, 305

'introduction' issue, 283 Three Non-Nuclear Principles (1971),

242,283

Ohira Masayoshi, 36, 47-8, 88--9,91, 194, 288, 289

and 'Comprehensive Security', 254, 257,259

and omnidirectional diplomacy, 256, 258,304

death, 48, 89 fall of government, 48

oil crises 1973-4, 35, 47, 79, 155, 215, 223, 258,

300-1, 303 1979-80,47,100

Okita Saburo, 59, 309, 317, 319 Old People's Health Bill, 219

see also ageing society, medical care for the aged, pensions

one-party dominance, 3, 16, 17, 20, 26, 28,30-7, 50,67, 71-2,107,118, 132-3,167,232,326,327

Opposition parties, 15, 30-2, 34, 37, 50, 107, 117-18, 130, 133, 148, 191, 199, 217,218,220,222,228,230,232, 243,244,267,268,269,275,277-8, 280,289-90,326,327,330,331-2

see also Democratic Socialist Party, Japan Communist Party, Japan Socialist Party, K6meit6, New Liberal Club, Social Democratic League

Organisation for Economic Co-operation and Development (OECD), 142

Development Assistance Committee 300 ,

pacifism, 237-9, 243, 278--9, 282 'conservative', 275, 282 'peace diplomacy', 255

parliament, see Diet Patrick, Hugh, 307-8 patron-client relations, 13, 18--19, 33, 50 Pempel, T. J., 60, 63, 64, 72

pensions, 60-1, 81, 85, 210, 212-14,220, 221-9, 231

Discussion Group on the Basic Structure of the Pension System, 225

Employees' Pension Insurance Law, 226

Employees' Pension scheme (1942), 210,221-8,231

National Pension Insurance Scheme 213-14,221,231 ,

Programme for the Reform of the Public Pensions System, 231

see also ageing society, medical care for the aged, Old People's Health Bill

People's Association, 115 People's Finance Corporation (1949),

156, 174 People's Political Association, 115, 117 Peters, B. Guy, 58, 59, 69 pluralism, 9-11, 26, 56, 68, 106--8, 132,

327 Poggi, Gianfranco, 68, 69 Police Reserve Force (1950), 246 policy change, 54, 297 policy cycle, 72 'policy function', 58-60 political access, 326 political change, 54-72, 330-2 political choice, 332 political dynamics, 327-9 Political Funds Regulation Law, 114 political participation, 12-13, 331 political parties, 22-51

and interest groups, 108--19 party organisation, 112

political power, 62-7 political system, 1-2, 7-8, 22-51, 132,

141-68,179,232,325-7,329,330-2 and interpenetration, 328 and traditional values, 275 prewar, 23-6

Pollution Countermeasures Basic Law 145 ,

Postal Savings Law, 180 postal savings system, 149, 155, 160, 172,

179-80,182-3,199,328 poverty, 213 power elite, 9-11, 106--7 pressure groups, see interest groups prime minister, 24, 27, 46--51, 162, 166,

328 Prime Minister's Office, 64, 77

340 Index

privatisation, 12, 57, 157 Privy Council, 28 producer co-operatives (prewar), 126 Promotion of Small Business Law, 151 Provisional Commission on

Administrative Reform, see Rinch6 Provisional Commission for Promotion

of Administrative Reform, 102 public assistance, 211, 213, 217 public bodies, 155 public companies, 157-9 public corporations, 65, 81, 101, 124, 126,

150, 155, 157-9, 317

Reagan, Ronald, 48, 249, 310, 311-12 Religion and Politics Research

Association, see Shukyo Seiji Kenkyukai

research and development, 158-9, 272 Retail Trade Special Measures

Adjustment Law, 151 'reverse course', 213 Rice Riots (1918), 206 RIMPAC, 252 Rinch6, 77-102, 328, 330-1

and agriculture, 154 and bureaucracy, 93-8, 330 and defence, 84 and deficit financing, 79, 85-8, 100 and politicians, 98-100 and social welfare, 221, 228-9 and zaikai, 91-2, 328 Executive Office, 90, 93, 96-7 financial reconstruction, 80-2, 85 'hearings', 83-4 researchers, 83-4 rules, 82-3 zero ceiling, 81, 84 First Report, 81, 85, 94-5, 228 Third Report, 78, 81-2, 87-8 see also Doko Toshio

Rinji Gyosei Ch6sakai, see Rinch6

Sahashi Shigeru, 59, 145 Saionji Kinmochi, 24 sakidori fukushi, see social welfare, 'pre-

emptive' Samuels, Richard, 306 San Francisco Peace Treaty (1951), 239 sangy6 kumiai, 126-7 'satisficing', 2 Sato Eisaku, 47, 162, 241, 255, 256, 274 Sato Hideo, 307-8 Second Tokyo Lawyers' Association, 117

Securities and Exchange Law (1947), 147-8, 173, 191

securities companies, 173, 176, 191 Securities Exchange Council, 163 security, see defence and security Security Council of Japan (SCJ), 277 Seikatsu Hogo Ho, see Livelihood

Protection Law seikei bunri, 256, 258 Sejima Ryiizo, 92 Self Defence Forces (SDF), 240, 243,

245,250-2,263,268,271,276,279, 282,288

Air (ASDF), 262, 264, 270 and UN peace-keeping, 276, 290 assistance to US naval forces, 263 ban on overseas despatch, 241,282 C31 functions, 271 Ground (GSDF), 270 Maritime (MSDF), 252-3, 261-2, 270

Self Defence Forces Law (1954), 240, 246 separation of politics and economics, see

seikei bunri Shakai Hoken Shingikai, see Social

Insurance Commission Shakai Hosh6 Seido Shingikai, see Social

Security System Commission shingikai, 19, 126, 207, 213, 214, 218,

221,225-6,315,317 Shukyo Seiji Kenkyukai, 17 Silberman, Bernard, 70, 72 small and medium enterprises, 116-17,

127-9, 155-6, 185, 187 Small and Medium Enterprise

Organisation Law (1957), 129 Social Democratic League, 31, 32, 112

see also Opposition parties 'social function', 60-1 Social Insurance Commission, 207, 226-7 Social Insurance Survey Group, 207 Social Security System Commission, 207,

214,223,224-8,231,232 social welfare, 60-1,66, 72, 81, 153,205-

32,326,328 and traditional values, 232 Japan as 'welfare superpower', 214 'pre-emptive', 215

Sohy6, 115-17,227,269 'spring struggle', 227

Soka Gakkai, 32, 116 see also K6meit6

Soviet Union, 18, 248 Afghanistan invasion, 250 and Keidanren, 313

Index 341

Soviet Union- continued and Tyumen oil development, 312 Backfire bombers, 250, 260, 262 deterrence of, 282, 284, 286 identified as threat, 250, 276 military build up in western Pacific,

250, 270, 281, 288 MiG-25 incident (1976), 250 Northern Islands issue, 250, 262 relations with Japan in general, 47,

256,262,275,278,287 Soviet Pacific Fleet, 248, 285--6 SS 20 missiles, 250

Special Measures Law for the Promotion of Designated Industries, 145

Special Taxation Measures Law, 181 Strategic Defence Initiative (SDI), 267,

277-8 Sumita Shigeru, 175 Sumitomo, 149-50 summits

Tokyo, 273 Versailles, 311 Williamsburg, 274

Supreme Commander, Allied Powers (SCAP), 208

Public Health and Welfare Section (PH&W), 206, 208, 213

see also MacArthur, Douglas Supreme Court, 34

see also courts SuzukiZenk6,48, 79,82,91,96,98, 182,

253,257,261,264,288,289,309 Sweden, and government share of

budget, 153 swing strategy, 248

Taiko Mutual Bank, 187 Taisho Democracy, 25 Taiyo Kobe Bank, 186 Takahashi Korekiyo, 172 Takeshita Noboru, 1, 15, 46,277, 330,

332 and Opposition, 277

Tanaka Kakuei, 30, 36, 47-9, 256, 275, 326

Tanaka Rokusuke, 309 tax reform, 15, 36, 45, 49, 87, 88-9, 91,

96,330 Temporary Interest Rate Law (1947), 174 Thatcher, Margaret, 48, 188 Tokugawa period, 205 tokushu h6jin, 65 Tokyo Electric Power Company, 313

Tokyo metropolitan government, 215 Toyota, 144 trade, 4, 146, 165--6, 254, 258, 272, 297-

320, 330, 332 and decision making, 314--20 and indicative planning, 315--17 and the private sector, 317-19 friction, 306-12: beef, 302, 311, 315,

318; cars, 308--11, 312-13; citrus, 311, 315, 318; steel, 307-8, 313, 316; textiles, 307-8

International Trade Commission (lTC), 304

Japanese import restrictions, 311, 318 liberalisation of, 72, 166, 318 orderly marketing arrangements

(OMA), 308, 312 trade bureaucracy, 317-19

trade unions, see labour unions Tsuji Kiyoaki, 63 Tsurumi Yoshi, 312 Tsurutani Taketsugu, 56

unemployment, 211, 216 United Kingdom, 65, 155

and government share of budget, 153 and international public goods, 272 and Japanese car exports, 310 attitudes to bureaucracy in, 66 system of government, 27-30, 326

United States, 4, 19, 155 and government share of budget, 153 and international public goods, 272 attitudes to bureaucracy in, 66 economic relations with Japan, 47, 302,

303,306-12: beef,302,311, 315, 318, 320; cars, 308--11; citrus, 311, 315, 318; steel, 307-8, 313, 316; textiles, 308

security relations with Japan, 237-90, 320

system of government, 14, 27-8, 326 see also US-Japan Security Treaty

US-Japan Security Treaty, 240--1, 243, 245,246,276,282

and China, 251 and military technology transfer, 264,

265 asymmetry of obligations, 247, 279 free ride argument, 247-8, 249, 259 Guidelines for Japan-US Defence Co-

operation (1978), 251-3 increasing Japanese independence

within, 288

342 Index

US-Japan Security Treaty- continued interoperability, 260, 264, 286 Japan-US Systems and Technology

Forum, 252 Japanese strategic contribution within,

284,287 Japanese strategic dependence on US,

237-90 1960 Treaty revision crisis, 243 'prior consultation', 283 revision moves, 249

Ushiba Nobuhiko, 317-19 Ushio Jiro, 101

Vogel, Ezra, 68 vote transferability, 32, 33 voting discipline, 27

Wandel Report, 207 Weber, ~ax, 57,61,63,68, 327 Welfare Commissioners (prewar), 206 Winham, Gilbert, R., 310-11

yen bond market, 195 Yoshida Shigeru, 39, 246, 255, 256, 274,

275, 282, 299

zaibatsu (prewar), 127, 128, 145, 147 zaikai, 91, 328 Zennichin6, see All-Japan Federation of

Farmers' Unions Zenna, see National Farmers' League zero-sum society, 100 zoku, see Liberal Democratic Party

dynamic and immobilist politics in japan

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