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May 1, 2007

Abe's Reform Drive a Battle with Deeply Rooted Bureaucracy

Stamping out common practice of assigning lucrative private-sector jobs to retiring government officials a key step toward truly free, efficient society

Masahiko ISHIZUKA (Councilor for the Foreign Press Center Japan and also teaches at Waseda University)

The term amakudari, which translates as "descent from heaven," says it all. In this time-honored, routine practice, prematurely retiring bureaucrats land handsomely compensated posts as private firms or organizations, though some are semi-governmental. Although their time in government - "heaven" - has come to an end, they are able to land gracefully thanks to the practice. In most cases, enterprises are effectively forced to accept those descending from a government agency because they themselves are under the agency's jurisdiction. Above all, this illustrates the hierarchical relationship that exists between the government and industry, one in which bureaucratic authorities exercise such complete control over the private sector that they even dictate extraordinarily small matters.

One example is how the Ministry of Health, Labor and Welfare sets detailed guidelines that hospitals must follow in advertising themselves. The meticulous regulations bureaucrats enforce on businesses and individuals are often astonishing.

The problem is more than a simple matter of control. Under the amakudari system, bureaucrats land cushy jobs, or at least are assured job security. In return, they provide influence with their former ministry colleagues so their new employers can navigate the regulation-ridden bureaucracy.

The practice was once tolerated and in some cases welcomed by industry and the public, but that is no longer the case. Amakudari and the problems it causes have blown into a major political issue.

One of the main problems is widespread bid-rigging on public projects. It is so common that some business leaders are call it a die-hard culture, and it has recently given birth to some major scandals. Amakudari is blamed for this corrupt practice because it creates murky ties between bureaucracy and industy.

It has reached the point where Prime Minister Shinzo Abe has made amakudari into a reform issue he can wield to score political points. Under a pending bill, government ministries would be prohibited from placing early retiring bureaucrats at private companies under their jurisdiction. A unified job-placement agency would be created to help bureaucrats being pushed out the door land new jobs, but at the same time it would shield the process from the influence of individual ministries.

Bureaucrats' careers are shaped by a series of promotions. But once they reach a certain level, there are fewer positions into which they can rise. Those that miss the cut are theoretically expected to retire, but in reality, they move into the private sector and join companies they once regulated.

Skeptics question whether the proposed system will bring about real change, pointing out that bureaucrats are very good at devising ways around laws they do not want to follow. Any solution to the problem will have to either curtail bureaucratic power or reform the personnel system so bureaucrats can keep their jobs until they reach true retirement age.

The bureaucracy has been credited with designing and fueling Japan's modernization and economic development over the past century, especially during postwar decades and in conjunction with industrial leaders. That Abe has now made the abolition of amakudari into a political goal is symbolically significant: What was once an asset is now a liability.

When former U.S. President Ronald Regan famously said the government was not a solution but a problem itself, Japanese probably failed to grasp his meaning. For all the defects in Japan's bureaucracy and the burdens it placed on society, the people believed in it and relied on its work.

At the crest of the country's economic success in the late 1980s, Americans perceived a threat coming from Japan. Suddenly, a strong bureaucratic system appeared to be trumping small government, free-market economics. And the perceived threat was coming just as communism was being defeated in Eastern Europe.

Perceptions and realities drastically changed in the 1990s, but Japan's bureaucracy nevertheless has survived intact. Perhaps now many Japanese can more fully understand what Regan was talking about two decades ago.

Private Plans

Privatization and deregulation have been much talked about in recent years, with former Prime Minister Junichiro Koizumi's targeting of the postal services for privatization intended to be a symbolic culmination.

Despite that, the bureaucracy has seemingly remained a steadfast monster - if no longer a juggernaut - resisting calls to give up control over every nook and cranny of the nation's life and business. That said, businesses, and perhaps consumers as well, are not entirely free of blame.

In the past several months, Japan has been plagued by a string of high-profile corporate scandals. The long list includes a leading brokerage doctoring its books, major insurance companies sabotaging policy payouts, a well-known confectionary maker breaching hygienic regulations for years, and major construction companies engaged in bid-rigging.

Scenes of company executives bowing to television cameras in apology are commonplace these days. Their scandals have prompted many to ponder whether the private sector might inherently be crooked and go away unless checked and policed by a governmental watchdog. Meanwhile, they have also given bureaucrats a perfect excuse to tighten regulations or interfere in private business - even the media.

Consumers also encourage the bureaucracy to clench its grip as more often than not they hold the government responsible for letting these wrongdoings occur.

The government-initiated debates on education reform offer another prime example. An alarming development at the advisory council, where the debates are taking place, is the Education, Culture, Sports, Science and Technology Ministry's unabashed attempt to strengthen the state's control over education.

For Japan to achieve a truly free, efficient and independent-minded society, it is crucial to abolish the self-righteous bureaucracy. Stuck to the myth of its own infallibility, it is condescending toward the private sector and citizens, possesses an insatiable desire for control and regulation based on bureaucrats' own selfishness and greed.

(Originally appeared in the April 23, 2007 issue of The Nikkei Weekly, reproduced here with permission.)

Copyright © Japanese Institute of Global Communications