PROBLEMS WITH THE JAPANESE BUREAUCRACY AND EFFORTS TO REFORM IT

PROBLEMS WITH THE JAPANESE BUREAUCRACY

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Ministry of Health, Labor...
The Ministry of Finance secretariat has helps employees to improve their status by helping them find brides in powerful families. The Japanese foreign ministry has a wine cellar with 8,000 bottles, 90 percent of it from France, including bottles of Lafite Rothschild, Mouton Rothschild and Margaux.

The “pub taxi” scandal in 2008---involving 1,402 bureaucrats in 17 ministries, with 612 from the Finance ministry---was a reference to gifts and cash given to bureaucrats who took taxis home, at government expense, after the last trains stopped running. The practice was profitable to taxi drivers and expensive for the government. The value of taxi coupon used by officials at the Construction and Transport Ministry alone totaled ¥1.2 billion in fiscal 2006.

Taxi drivers offered beer, sushi, octopus dumplings, gift vouchers and cash to officials that road with them. One bureaucrat from the Budget Bureau of the Finance Ministry received over ¥2 million in cash and gift vouchers over a five year period. Another received an energy drink every time he took a taxi and racked a total of over 1,000 drinks.

A “ghost employee” in the Social Insurance Agency that never showed for work and engaged full time in labor activities was given the next-to-highest work performance rating. In November 2006, it was revealed that a 42-year-old sanitation worker in the Nara municipal government was paid a full salary for five years even though he worked only eight days during that time, claiming sick leave for the rest of the time and using that time to attempt to rig bds to win contracts for a construction company under his wife’s name. The worker also took off 11 months 15 years earlier and five months off between 1993 and 1994

Bureaucrats, Relations with Big Business and Corruption in Japan

Top bureaucrats regularly retire when they are in their 50s and enter politics or big business. In some cases they get lucrative jobs after they retire in industries they formally oversaw. This creates an environment rich influence peddling, deal making and corruption especially with the government routinely withholding information on how much public money is collected and spent.

The term amakudari is used to describe the practice in which bureaucrats in government ministries and agencies end up in cushy well-paying jobs after they retire in companies or organizations in the pubic or private sector which were overseen by the government body the bureaucrats used to work for.

Watari, an element of this, is when ministries and agencies arrange for retired government officials to assume posts in entities related to the sectors they formally supervised. Watari is being phased at with a complete ban in 2011. Prime Minister Aso has said he wanted tat to happen earlier. Some want to see amakudari banned

Japan has a supplementary budget called the Fiscal Investment and Loan Program, of FLIP, which dwarfs the official budget and traditionally has been like a cookie jar for pork barrel politician and the source of money for wasteful public works projects and roads to nowhere. Much of the money has traditionally come for Japan’s postal savings and insurance.

A freedom of information law passed in 2001 helped improve things a little bit. After the law was passed dozens lined up outside th Information Disclosure Room at the Foreign Ministry to find out how much of the agency’s budget went to entertainment expenses and “gift money” paid to guest speakers.

Cliques of Japanese Bureaucrats and Corporate Officials

Ian Buruma wrote in Project Syndicate: “But it was this system that produced the problems now associated with TEPCO,” the owners of the Fukushima nuclear power plant, whose reactors melted down after the earthquake and tsunami in March 2011. “Tight-knit cliques of bureaucrats and corporate officials made sure that a utility company vital for economic growth would never be hindered by strict regulation or political oversight. The cozy relationships between government officials and the corporate world and not just in the case of TEPCO was reflected in the large number of retired bureaucrats who took jobs on the boards of companies that they had supposedly regulated. [Source: Ian Buruma, Project Syndicate , April 2011]

Many Japanese are aware of these problems, which is why they voted for Kan's Democratic Party of Japan (DPJ) in 2009, breaking the virtual political monopoly exercised for a half-century by the conservative Liberal Democrats. One of the DPJ government's stated goals was to increase the political system's transparency: less hidden authority for bureaucrats, more responsibility for elected politicians.

The aftermath of the earthquake is thus a potential watershed. If Japan's relatively inexperienced government is blamed for everything that goes wrong, people might wish to retreat to the old ways of murky paternalism. If, on the other hand, enough people realize that the old ways are the problem, rather than the solution, democratic reforms will still have a fighting chance. That would cast at least one ray of light on the gloom that envelops Japan today.

Amakudari

Hannah Beech wrote in Time magazine: “In a phenomenon known as amakudari , which literally means "descent from the heavens," retiring government officials often take on top jobs at companies, some of which they were once charged with regulating. The cozy ties between government and Big Business are exemplified by TEPCO [the owners of the Fukushima nuclear power plant whose reactors melted down after the earthquake and tsunami in March 2011] whose executives are beneficiaries of amakudari. The power company has been criticized not only for being less than forthcoming with information about the ongoing nuclear crisis but also for securing a license for an aging reactor earlier this year without making adequate safety checks of equipment that ended up failing during the March 11 disasters.” [Hannah Beech, Time, April 4, 2011]

Hiroko Tabuchi wrote in the New York Times, “The network of government-linked organizations at the heart of the amakudari problem is complex, including 104 large organizations supervised directly by the government and 6,625 smaller public corporations. Critics say that many of the former bureaucrats use their connections in government to win public money for dubious construction and research projects, then delegate the work while their organizations pocket much of the budget as administrative fees.” [Source: Hiroko Tabuchi, New York Times, April 28, 2010]

Aki Wakabayashi, an author and former worker at a government-supported labor think tank, has been one of the most fervent critics of government spending on these organizations. In 2001, she blew the whistle on her institute, describing lavish foreign “research” trips for the former bureaucrats leading the institute---complete with first-class air travel and stays in five-star hotels---and clerks who drew researcher salaries while spending their days chatting and reading magazines. “The Japanese public is angry and demoralized,” said Ms. Wakabayashi, who has been advising the Democrats on the cost-cutting panels. “And Japan’s finances are in tatters. We either fix this, or Japan goes bankrupt.” [Ibid]

In 2009, al least 11 Diet members received executive salaries from companies or organizations, while also receiving political donations from them.

After the August 2009 elections threw out the old the party, the new leaders vowed to take power out of the hands of the bureaucrats and put it the hands of the politicians. One of the first things Hatoyama did was set up the Government Revitalization Unit that was in charge of identifying and cutting wasteful spending in the government. Resembling a cross between a Congressional budget hearing and a Spanish Inquisition interrogation, the hearings were conducted by the units panels and were often short and harsh. Bureaucrats and supporters of projects deemed wasteful by the panel were given about 30 minutes to an hour to justify their programs and asked questions by a panel that often had little knowledge of the programs.

Reforms Taken Up by the Democratic Party of Japan in 2009

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visiting a drug factory
To achieve his goal of setting up a government in which politicians ran things rather than the bureaucrats, Hatoyama established a national strategy bureau, whose first order of business was suspending the implementation of the fiscal budget of the LDP and freezing or canceling many LDP programs.

Among the DPJ’s biggest problems was dealing with costly promises made during the election such as getting rid of expressway tolls which would derive the government of desperately needed funds, encourage people to drive more and cause traffic jams on the expressways. On the issue of health care the DPJ vowed to end a new scheme for “late-stage elderly people” that required them to pay more but was put in place to trim health care debt and reduce the burden paid by future generations.

The DPJ ultimately had difficulty coming up with funding and had to renege on some of it promises. Taxes were down as a result of the economic crisis in 2008 and 2009. Some reforms were delayed. Plans to reduce the gasoline tax---a campaign pledge--- were scrapped and the gasoline tax was kept at the same rate.

Efforts to Cut Public Works Programs Such a Yamba Dam

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Cutting expensive public works projects that were deemed a waste of money was high priority of the new Democratic Party of Japan government that came to power in 2009.

The project that got the most attention form cost cutters was the $4.6 billion Yamba dam in Gunma Prefecture, an expensive project that was launched in 1952 and had few benefits other than flood control and providing water and irrigation to an area near Tokyo that didn’t really need it. The only problem was that $3.2 billion had already been spent on it, hundreds of people had already been relocated and the project was 80 percent done. Eighty-seven local dam projects were examined with the government freezing 48 out if 56 projects currently being carried out. In December 2009, 30 dam projects were singled out for close scrutiny with the aim of closing down ones deemed unnecessary.

In December 2011, the Yomiuri Shimbun reported: “After more than two years of turmoil, the government has finally settled the issue of whether to cancel or resume construction of the Yamba Dam in Gunma Prefecture. Land, Infrastructure, Transport and Tourism Minister Takeshi Maeda has at last decided to resume construction of the dam in Naganoharamachi. The government will earmark costs for building the main structure, funds for which had been frozen, in the fiscal 2012 budget. The decision was based on a reexamination of the project by the ministry, in which it judged "construction of the dam is most desirable" in terms of flood control and water utilization effects as well as project costs. [Source: Yomiuri Shimbun, Dec. 23, 2011]

“Under the slogan "from concrete to people," the Democratic Party of Japan included cancellation of the Yamba Dam project in its manifesto for the 2009 House of Representatives election, which brought about the DPJ-led administration. Seiji Maehara, now the DPJ's Policy Research Committee chair, became infrastructure minister after the 2009 election. Based on the manifesto's promise, he forcibly terminated the dam's construction without any consultation with local governments involved. [Ibid]

“In the face of strong opposition by residents and local governments, then Land, Infrastructure, Transport and Tourism Minister Sumio Mabuchi in autumn 2010 effectively nullified Maehara's decision on the project. Subsequently, the ministry had been reexamining the project to decide whether the dam should be constructed. [Ibid]

“Already 80 percent of the total project costs have been spent on related works, such as construction of roads to replace ones that will become unusable. If the project had been axed, the government would have had to return funds to Tokyo and five other prefectures of the Tonegawa basin, which had paid out more than half of these costs. [Ibid]

“Since the Democratic Party of Japan came to power in 2009, infrastructure ministers have decided to continue 14 and suspend six of the 83 dam projects reviewed by their ministry and related municipalities. The ministers' decisions on the 20 projects have matched the conclusions of the reviews. The Land, Infrastructure, Transport and Tourism Ministry is still reviewing 63 dam projects. The Yamba Dam case was the only one in which the ministry and the DPJ had disagreed. [Source: Yomiuri Shimbun, December 24, 2011]

Japanese Inquisition

Hatoyama set up the Government Revitalization Unit that was in charge of identifying and cutting wasteful spending in the government. Resembling a cross between a Congressional budget hearing and a Spanish Inquisition interrogation, the hearings werw conducted by the units panels and were often short and harsh. Bureaucrats and supporters of projects deemed wasteful by the panel were given about 30 minutes to an hour to justify their programs and asked questions by a panel that often had little knowledge of the programs.

The hearings were conducted by 13-member panels and were shown on television. One of the reasons for having them was to make government more transparent. In one widely shown exchange the head of a project to build an advanced supercomputer was asked to offer some good reason why the government should fund the project. The project head said to advance science and compete with the United States. The head of the panel responded by saying, “Does it matter if the United States is No.1" and refused a request to increase funding. Scientists, including some Nobel laureates condemned the cuts, arguing the money was vital for Japan to remain competitive in technology fields.

The panels racked up about $8 billion in budget cuts, about half of what they had hoped to achieve. Among the program that were cut back were subsidies for herbal medicines, grants to science programs to make carbon nanotubes and jet-engine rockets, funding to help new businesses, requests for more military personnel, and requests by local government for help paying for higher teacher salaries and children reading programs. Among the projects that were drastically cut were “landscape creation costs” and a planed anime hall of fame.

Second Inquisition

A second more mild round government of hearing was held in April 2010. Among the main targets in addition to wasteful spending was cushy jobs for retired bureaucrats. After four days of questions and testimonies, the government panels decided to ax 34 projects and scaled down dozens of others. Hiroko Tabuchi wrote in the New York Times: “Seeking to bring its spiraling debt under control, Japan has undertaken an unlikely exercise: lawmakers are forcing bureaucrats to defend their budgets at public hearings and are slashing wanton spending. The hearings, streamed live on the Internet, are part of an effort to tackle the country’s public debt, which has mushroomed to twice the size of Japan’s $5 trillion economy after years of profligate spending.”[Source: Hiroko Tabuchi, New York Times, April 28, 2010]

Hatoyama and the DPJ said their intent was to wrest control of Japan’s economy from the country’s powerful bureaucracy. “We want the public to see how their tax money is really being spent,” said Yukio Edano, the state minister in charge of administrative reform, who is heading the effort. “Then we will bring about big changes.” “Budgets have always been drafted behind closed doors, with nothing to underpin how much should be spent or why,” said Hideo Fukui, a professor of law and economics at the National Graduate Institute for Policy Studies in Tokyo. “Until now, nobody knew how unscrupulous the spending was.” [Ibid]

“Many analysts say that Japan must slash wasteful spending and start cutting its public debt to avert the interest rate and refinancing risks that have wreaked havoc in Greece,” Tabuchi wrote. “Addressing Japan’s debt crisis was among the many promises made by Mr. Hatoyama, Mr. Hatoyama’s Democratic Party has also been keen to find extra money to pay for an ambitious social agenda, including cash payments to families with small children and free public high school education.: [Ibid]

The public interest in the budget hearings has been among the few bright spots for Mr. Hatoyama... At the central Tokyo site for the hearings, people lined up to watch the bureaucrats being pressed before panels of lawmakers and appointed experts. “The bureaucrats looked scared,” said one attendee, Kenji Nakao, a 67-year-old Tokyo retiree. “It was very satisfying to see.” [Ibid]

Second Inquisition Targets the Bureaucracy

Hiroko Tabuchi wrote in the New York Times: “The target of the most recent hearings...is Japan’s web of quasi-government agencies and public corporations---nonprofits that draw some 3.4 trillion yen ($36 billion) in annual public funds, but operate with little public scrutiny. Critics have long argued that these organizations, many of which offer cushy executive jobs to retired public officials, epitomize the wasteful spending that has driven Japan’s public debt to dangerous levels. The daily testimony by cowering bureaucrats, covered extensively in local media, has given the Japanese their first-ever detailed look at state spending. So far, viewers have looked on in disbelief over the apparent absurdity of some of the government spending.” [Source: Hiroko Tabuchi, New York Times, April 28, 2010]

“In one example scrutinized on Tuesday, the National Agriculture and Food Research Organization, which is government financed, spent 130 million yen ($1.4 million) last year on a 3-D movie theater used to show footage of scenery from the countryside. The movie dome, which also plays recordings of chirping insects and babbling streams, is closed to the public and is used to study how the human brain reacts to different types of scenery, said Takami Komae, head of the organization’s rural engineering department. The findings will be used to help rural areas think of ways to attract more tourists, he testified.” [Ibid]

Politicians ridiculed the project. “The dome is located in the countryside anyway, isn’t it?” said Manabu Terada, a Democratic Party lawmaker, at a public hearing in Tokyo. “Can’t we just step outside and see the real thing?’ At the end of the hourlong hearing, all financing for the dome’s upkeep was canceled and the organization was urged to sell the facility off to salvage some of the construction cost. [Ibid]

Amakudari Scrutinized

Under particular scrutiny at the hearings have been the retired ministry officials who take comfortable positions at the government-linked organizations in a practice known as “amakudari,” or “descent from heaven.” The network of government-linked organizations is complex, including 104 large organizations supervised directly by the government and 6,625 smaller public corporations. Critics say that many of the former bureaucrats use their connections in government to win public money for dubious construction and research projects, then delegate the work while their organizations pocket much of the budget as administrative fees. [Source: Hiroko Tabuchi, New York Times, April 28, 2010]

Aki Wakabayashi, an author and former worker at a government-supported labor think tank, has been one of the most fervent critics of government spending on these organizations. In 2001, she blew the whistle on her institute, describing lavish foreign “research” trips for the former bureaucrats leading the institute---complete with first-class air travel and stays in five-star hotels---and clerks who drew researcher salaries while spending their days chatting and reading magazines. “The Japanese public is angry and demoralized,” said Ms. Wakabayashi, who has been advising the Democrats on the cost-cutting panels. “And Japan’s finances are in tatters. We either fix this, or Japan goes bankrupt.” [Ibid]

Criticism of the Hearings

The hearings have drawn criticism from some circles. During the recent ones, members of Japan’s scientific community warned that steep cuts in research financing would damage Japan’s global competitiveness. Their fears were exacerbated when a Democratic lawmaker, known only as Renho, called for reduced spending for a government-financed project to build the world’s fastest computer, asking, “What’s wrong with No. 2?”

Meanwhile, the scale of the cuts---which will amount to a few trillion yen at best against Japan’s budget of 207 trillion yen this year---is too small to make much of a difference, some experts say. Even supporters like Ms. Wakabayashi doubt that the Democrats, with strong links to labor unions, will cut too deeply into the estimated tens of thousands of workers at the government-associated entities. [Source: by Hiroko Tabuchi, New York Times, April 28, 2010]

Some organizations, meanwhile, are making last-ditch efforts to drive home their relevancy. In a hastily called press conference this month, the government-financed Fisheries Research Agency announced that it had succeeded for the first time in fully cultivating Japanese eels, a fish whose breeding habits had long baffled scientists. Kiyoshi Inoue, executive director at the agency, stressed the importance of the achievement. “These findings are at the cutting edge of global research,” he told reporters. [Ibid]

Image Sources: 1) Ray Kinnane 2) Visualizing Culture, MIT Education 3) Goods from Japan 4), 5) Shugin, House of representatives website, buildings, Japan Photo japan-photo.de ;

Text Sources: New York Times, Washington Post, Los Angeles Times, Daily Yomiuri, Times of London, Japan National Tourist Organization (JNTO), National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

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© 2009 Jeffrey Hays

Last updated August 2012

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