Yamasaki Hajime on the Koizumi reforms and Your Party

A RECENT ARTICLE in the English-language press claimed that Japan is about to enter its “third decade of stagnation”. How quickly they’ve forgotten the events of the five years and five months of the Koizumi Jun’ichiro administration. Mr. Koizumi also confronted a severe economic crisis, as major Japanese banks and security companies were either going bankrupt or merging to avoid bankruptcy, and there was an enormous overhang of non-performing private sector debt.

Under the watch of Mr. Koizumi and his financial guru Takenaka Heizo, most of that debt was safely unwound, government debt was reduced, and the latent popular desire for political and governmental reform was made manifest. His reform program was so popular he won the second-largest majority in Japanese postwar history in the 2005 lower house election and left office with a 70% approval rating.

It was no surprise that the old guard in the Liberal Democratic Party would try to roll back those reforms, but few foresaw that the putative reformers of the Democratic Party would be even more reactionary by halting the privatization of Japan Post for little more reason than to gain power through a coalition with the New People’s Party, an LDP splinter group opposed to privatization.

Since Mr. Koizumi left office, many in the mass media and in politics have succeeded in spinning the Koizumi reforms as having been detrimental to the country.

An advocate of those reforms, economic analyst and university professor Yamasaki Hajime, draws some parallels between Mr. Koizumi and Your Party and makes some pointed observations about the Koizumi reforms in Diamond Online. Here it is in English.

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Isn’t the obvious lesson to be learned about the people’s will from the upper house election the reaffirmation of the Koizumi course?

The Democratic Party’s losses were too great to allow Your Party to hold the critical votes in the upper house, but they did win 10 seats. In addition, the former so-called Koizumi Children of the Liberal Democratic Party, including Katayama Satsuki, Sato Yukari, and Inoguchi Kuniko easily won seats. Combining those results with the popularity of Mr. Koizumi’s son, Koizumi Shinjiro, suggests there is a certain amount of sympathy for the Koizumi program.

Kaneko Masaru of Keio University has a different different opinion and is critical of Your Party. As an illustration, here is one of his tweets on Twitter.

Your Party’s positions are just a complete rehash of Koizumi’s structural reforms. Their content calls for a reduction in the number of legislators and public employees, deregulation, and cutting the corporate tax. That will lead to growth? They favor devolution and small government. What’s new about that? They’ll look for hidden financial reserves and set an inflation target. Give me a break. If they think it’s so easy, why don’t they try it and see?

Elsewhere, he said, “The media is unable to sum up the failures of structural reform based on the facts.”

Judging from these statements, Prof. Kaneko’s premise is a factual awareness that Japanese social and economic conditions worsened because of the implementation of the Koizumi structural reforms.

To be sure, it is important to sum up the structural reforms. Well then, let’s view this as a problem of factual awareness and ask to what extent the Koizumi structural reforms were implemented.

In brief, I would suggest that the structural reforms were declared, but not put into practice.

This is easy to understand by looking at the subjects Prof. Kaneko raises. Certainly all of these cases were cited long ago, so they are not fresh. But were they actually implemented and their results confirmed?

The number of legislators in the Diet has not been reduced since the days of the Koizumi administration. There has been a slight decline in the number of public employees, but the pace of that decline is slow. Indeed, this has been replaced by an acceptance of amakudari (retired bureaucrats being employed by quangoes). The administrative corporations should have been eliminated or privatized, but almost all of them survive under a different name. There has been no major reduction in the number of public employees, who in a broad sense earn their livelihoods from the state budget.

There has been absolutely no large-scale deregulation that would allow efficient use of the airwaves or the corporatization of medical institutions. Japan is also far behind other countries in lowering its corporate tax rate.

To be fair, let’s cite those areas in which progress has been made. Public works projects have been substantially reduced. This is directly connected to the decline of local economies. Despite the reduction in public works projects, it is not possible to improve conditions in regional areas because there has been no progress in devolution for budgets or political authority.

The privatization of Japan Post was the issue on which Koizumi Jun’ichiro staked the most political capital and on which he won a landslide victory in the general election of 2005. The pace of privatization was so slow, however, that it is now being rolled back.

The people involved with each of these reforms must have had an extraordinarily difficult time of it, so I don’t mean this as a blanket criticism of all of them, but while Prime Minister Koizumi brought forward these objectives, his execution left something to be desired. One criticism frequently used during his term of office was that he left everything up to others. Mr. Koizumi’s words were inspirational, but by leaving the actual work to the bureaucratic organizations, all his reforms were deboned due to the skillful sabotage of the bureaucracy and their stalling tactics.

To borrow the explanation of Your Party President Watanabe Yoshimi, the three weapons of the bureaucracy are leaks, pejorative, and sabotage. The effect of skillfully controlled sabotage has been stunning. This effect has continued into the Democratic Party administration, as seen with the emasculation of the proposed National Strategy Bureau.

The biggest reason for the lack of progress of the Koizumi structural reforms was that Mr. Koizumi put off the reform of the civil service personnel system. In brief, Mr. Koizumi did not pick fights that he thought he might lose. Some might think that wise, but others might think that pathetic.

Ultimately, would not the proper recognition of reality be that few of the reforms were carried out?

When marshalling opposition to policies in the future, it will be important to have an understanding whether the structural reforms were implemented and failed, or whether they were not implemented.

I maintain that they were not implemented.

Assuming that to be true, wouldn’t the deregulation and reduced public sector (public employee) involvement in the economy propounded for structural reform be part of significant policy measures? There are more than a few supporters of structural reform in the Democratic Party. From their perspective, the LDP talked structural reform, but did not deliver. In the LDP itself, there are likely to be people who believe that now more than ever is the time for structural reform. While both of those groups probably have different opinions on the ideal level of income redistribution, they should be in accord in regard to the conduct of government and the economy in the immediate future.

If they could form a consensus on how to reform the civil service system, how to slash corporate taxes, and how to liberalize labor regulations, it would enable the citizens to have a clear political choice.

Watanabe Yoshimi would probably agree with all of these reforms, and Kamei Shizuka of the People’s New Party would probably oppose them. Who would the members of the two major parties follow? If this is not clearly identified, and the distortion both inside and outside the parties continues, the current stagnation will become locked into place and the flow of economic vitality overseas will not end.

Afterwords:

* Japanese language sources refer to Kaneko Masaru as a Marxian economist.

* Social Democratic Party head Fukushima Mizuho, representative of the Japanese scorpion left, also drew parallels between Your Party and Mr. Koizumi.

* Nonaka Hiromu, chief cabinet secretary in the Obuchi administration, thinks he sees Takenaka Heizo lurking behind the scenes in Your Party.

* In Yoron no Kyokkai (The Distortion of Public Opinion), Sugawara Taku writes:

All the data indicate that the post-Koizumi course of the LDP was a mistake. Public opinion rejected the readmission of the postal privatization rebels to the party, and urged the Abe administration to correct their course. It was clear that the 2007 LDP defeat in the upper house election was not due to the Koizumi structural reforms. The data show that the idea that Aso Taro was a popular figure among the people was laughable. The party pursued a course in opposition to that indicated by the data, so their defeat in the general election (of 2009) was completely in accord with predictions.

* The word that Mr. Sugawara used that I translated as “laughable” was funpan (suru). The closest literal translation would be “spewing rice”. It’s a shame there isn’t a good English equivalent.

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