Japan - Change and Continuity

Jeff Graham, Javed Maswood, Hideaki Miyajima

• Publisher: Routledge
• Year: 2003
• eBook ISBN: 9781135789053
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

Japan is currently undergoing many interesting changes, which the Japanese government trumpets as fundamental reform, but which some observers suspect will turn out to be superficial, part of a long sequence of changes which have been much less far-reaching than at first anticipated. This book provides a survey of the many changes currently in progress in Japan, including political reform, economic deregulation and liberalisation, and reforms to environmental policy, science and technology, education, and immigration policy. The essays in this volume explore the reform process in Japan overall, and provides a thorough overview of major current developments in Japan.

1Introduction

Javed Maswood

Until the 1990s, speculation of a coming Pacific Century, dominated by Japan, did not seem altogether unreasonable. The Japanese and many East Asian economies were experiencing rapid economic growth and there was nothing uncommon about the coming shift in the center of economic gravity. Hegemonic transitions are a historically recurrent pattern. If, however, the idea of a Pacific Century was at all unpalatable it was because Japan and East Asian economies represented a significantly different model of domestic and international political economy, with an extensive role for governments in industrial policy and trade development. The role of governments in East Asia extended well beyond simple counter-cyclical economic interventions. Japan’s postwar economic success is often attributed to successful state intervention in industrial development and this was a model that was emulated by many East Asian countries in replicating the Japanese growth experience. The developmental state model was a contrast to the largely market dominant Anglo-American model. The West seemed unable to keep up with competition from Japan and East Asia. Yet, just as the long run of economic growth and prosperity was remarkable, so too was the quick descent into economic stagnation. Few had anticipated that the trend lines would fall away so suddenly.

In the 1990s, as Japan and East Asian countries were beset by economic and financial crises, the Pacific Century was no longer a credible reality. For Japan, the final decade of the twentieth century was one of lost opportunities, as the economy remained mired in a Great Stagnation. Successive governments poured enormous amounts of monies into large infrastructure projects in an attempt to generate growth but these efforts produced few positive results and only worsened the fiscal crisis of the state. As the financial and economic crisis lingered, Japan was no longer seen as a model to be emulated, but rather as a model that had run its course and was now unable to provide answers to new challenges on the horizon. The developmental states are now expected to converge on the western model of market discipline and incentives. Yet, convergence may be as much of a wishful thinking as was the notion of a Pacific Century.

The decade of the 1990s was also a period of political instability in Japan. The 1955 system of conservative governments and a socialist opposition fell apart in the mid-1990s and this was followed by a period of enormous fluidity, as political parties formed, merged and disappeared in a manner that was in sharp contrast to the stability of the 1955 system. Political instability perhaps delayed effective responses to the lingering economic crisis, which many argued could only be resolved through an extensive overhaul of economic and corporate structures.

We cannot deny, however, that the winds of change are blowing across Japan and implicate not just political and economic structures, but many facets of Japanese society. Economic and political crises are not the only sources of change in Japan but demographic shifts, globalisation and demands of an information technology (IT) based economy are also fomenting change in human resource management strategies, education and immigration policies. Growing domestic and international environmental sensitivities have also strained existing parameters of environmental policy making in Japan. The record of environmental management in Japan is both exemplary and disappointing. Following a spate of environmental disasters in the early postwar period, the Japanese government introduced new environmental legislations and these contributed to environmental outcomes that exceeded international standards. Yet, Japan’s voracious appetite for natural resources to power its industrial economy casts a large ecological and environmental shadow over its region, and there is increased pressure to contribute more to protect regional and global ecology and toward nature conservation in Japan and elsewhere. In the West, the environmental movement has been supported by well-organised non-governmental organisations (NGOs) and green political parties, but these have not played a prominent role in Japanese politics. There have been some significant changes however, and it is important to consider and review Japanese efforts at environmental management.

Although interest in reform and change has been stimulated by persisting economic crises in the 1990s, the agenda of reforms in Japan, particularly political and administrative reform, emerged in the 1980s. Japan began to debate reforms at around the same time as other western countries were implementing reforms, typical of the slow pace of the policy machinery in Japan. Interest in political reform was a result of the spread of money politics and gerrymander and it was high on the domestic political agenda, if not for the ruling Liberal Democratic Party at least opposition parties. Reform became inevitable in the mid-1990s as the ruling political party became embroiled in a succession of financial scandals that heightened public disenchantment with the way political processes had become distant from shifting electoral dynamics and become a captive of money politics. The scandals implicated politicians and senior bureaucrats, the latter groups suffering further loss of prestige as a result of continuing economic malaise and policy failures.

In this volume, we survey the process of reform to highlight the elements of continuity and change in Japanese political economy. To say that the process of change has been slow and cautious is both true for specific cases and misleading as a broad generalisation. The pace of reform and the mix of continuity and change varies considerably across issue areas. The papers that have been collected here do not necessarily provide a consistent view of reforms, or of change and continuity and that is a simple reflection of diversity in the field of Japan studies.

All but one of the papers collected in the volume were first presented at a workshop in Brisbane in January 2001. The papers have been revised to incorporate discussion and comments at the workshop. The papers cover a range of issue areas and if there is a central message it is that the record of achievements is varied and has to be carefully assessed for individual areas. Japan is slow to change but change does occur. The focus has been on analysing the process of change in the 1990s, over a range of themes, including politics, economics and society. Reform of course is socially and economically painful to the disaffected, a message that was highlighted by Prime Minister Koizumi in his first major policy speech in early May 2001. He asserted, nonetheless, that reforms were essential even if it meant some pain and suffering in the short term.

The chapter on political and electoral reforms by Purnendra Jain provides a background to the reforms that were implemented in the mid-1990s. Pressure for reform had been building for a long time but came to a head in early 1990s as a result of a succession of political crises and corruption scandals. Japan’s politics had become dominated by money politics and elections had degenerated to crass money politics rather than policy contests. Jain outlines the nature of reforms and probable future developments. He also looks at other issues of political reform, including administrative reform and reforms to the centre—periphery balance. In Japan, political power is concentrated in the capital of Tokyo and there is a continuing movement to devolve some of the power and authority to local governments as a way of ensuring better representation of community interests in policies.

The chapter by Maswood on regulatory reforms begins with the assumption that regulatory reforms are essential not only because of the demands of economic globalisation and international competitiveness, but also as a strategy for sustainable growth and development. The Japanese economy is highly regulated relative to other western countries and while the reformist debate has waxed and waned since the early 1980s, progress has been slow and measured. The main obstacle to reform is not simply an entrenched bureaucracy but also the nature of party politics, which have failed to provide voters with alternative policy choices or even to fully reflect constituency interests.

It is inevitable that vested interests will obstruct reform and change and, not surprisingly, bureaucratic obstructionism was one factor in delaying regulatory reform in Japan. Similarly, Chris Pokarier argues that reform in the corporate sector has been obstructed by senior management. Pokarier emphatically argues that corporate reform and restructuring is essential to future competitiveness of Japanese industry. Instead, management has continued to emphasise long-term employment contracts and remuneration based on seniority, rather than merit and competence. He cogently argues that this has important consequences. First, it is a practice that will leave Japanese firms vulnerable and exposed by being unable to respond to pressures of IT, since corporate staffing has a commitment to long term employment. This has prevented the entry of new blood and led to a retention of older employees who may be inadequate in responding to future needs of global competition and IT. Second, he also argues that while the persistence of earlier patterns of human resource management have prevented a blowout in the overall levels of unemployment, this has come at the expense of high unemployment among the young Japanese, who are unable to find employment opportunities because of corporate commitment to current employees. Retention of high-cost older employees, despite worsening business conditions, may have mitigated some of the potential social dislocations of planned lay-offs and redundancies, this same practice has exacerbated the ‘freeter’ phenomenon, of young Japanese in casual or part-time employment. In Japan, social commentators have focused on the alleged lack of discipline among the freeters, implying that faults lie within them as individuals instead of the fact that the freeter phenomenon may largely be a creation of inappropriate human resource strategies of Japanese companies. Thus, Pokarier asserts that aversion to reforms not only has had considerable socio-economic costs so far but will also have negative consequences in future, by making it harder for Japanese companies to compete in a global economy.

Nonetheless, we cannot be dismissive about Japan’s capacity to rebound from present difficulties. The Japanese economy has demonstrated its capacity to overcome crises in the past and the Japanese people and government have shown similar determination to overcome obstacles. It is true that the present economic crises has extended to more than a decade but it would be premature to write off Japan as having lost the competition between the old economy and the new economy. Morris Low, for example, points out that while Japan may be lagging in the development of e-commerce, it is competitive in a number of other technology indicators. The takeup of new technology is very high in Japan, especially cell phone and mobile communications, and research and development expenditure has been maintained at a high level, despite prolonged economic stagnation. To survive in the frontiers of modern technology, many scholars have emphasised the importance of education reform to encourage innovation and creativity rather than discipline and uniformity. The issue of educational reform is one of the most important challenges confronting the Japanese political economy and it is explored at length by Yoneyama Shoko. She looks at recent proposals for reform and is disturbed by the emphasis on morals and nationalism, as well as the likely stratification of education into an elite stream, with its focus on creativity and excellence and a mass stream focused on discipline and uniformity. One of the key features of the Japanese political economy is the practice of amakudari (descent from heaven), whereby senior bureaucrats parachute into plum private sector positions following retirement. Yoneyama finds that a similar practice might be emerging in the education sector to allow redundant and retrenched corporate executives find suitable positions within the schools system as, for example, principals. Yoneyama argues that this pattern is part of the corporatisation of education and designed to create an industrial workforce that is imbued with an appropriate corporate culture and work ethics. Her analysis suggests that the proposed reforms are designed more to reflect the conservative and nationalistic values of the Liberal Democratic Party than the requirements of a global economy. According to her, the reform proposals do not even address some of the critical problems in the education sector, such as bullying.

Reform and change is an uncertain process, at least to the extent that there is no certainty about the final configuration. This uncertainty has generated debate and disagreement as to whether the process of change in Japan will result in a convergence on the Anglo-American models of corporate and economic governance. This is an issue taken up by Miyajima and Aoki, who argue that the emerging corporate governance structure in Japan is a combination of internal governance mechanism (indigenous Japanese) and market based (Anglo-American). The governance issues are important considering that sustained economic failure can be partly attributed to poor governance and regulatory controls. Miyajima and Aoki test a number of hypotheses and demonstrate that internal governance structures are strong, such that presidential turnover and appointment is not unrelated to corporate performance and profitability.

Jennifer Amyx looks at the banking crisis in Japan and the unresolved problem of non-performing loans. The financial crisis is at the heart of Japan’s contemporary economic malaise and Amyx suggests that information asymmetry was an important factor in the failure to deal effectively with the crisis. The Ministry of Finance (MOF) had ultimate regulatory authority over banks and financial institutions in Japan and the basic regulatory principle was the convoy approach, which carried implicit guarantees that no bank would be allowed to fail. The convoy approach offered banks the security of knowing that the MOF would engineer a ‘rescue merger’ under dire circumstances. This approach broke down in the late 1990s and in the ensuring reforms, the MOF was stripped of its regulatory authority, which was now vested in an independent Financial Supervisory Agency. New regulatory controls have been put in place to ensure transparency and consistency with international practices, such as in the definition of non-performing loans. As a result of regulatory and structural changes, information dynamics have been significantly improved and this has made financial policy making more transparent and enhanced the role of markets in exercising discipline and due diligence. There remains the problem of non-performing loans and Jennifer looks at three solutions to deal with this remaining problem: debt discounting, debt forgiveness and strict market discipline. In the end, it appears likely that the government will opt for a solution that shares the responsibility and burden between banks and the borrowing institutions.

Global environmental issues continue to attract considerable interest and there are expectations that Japan will play a constructive role in global environmental management. Japan’s own experience with environmental management is mixed. It has been particularly successful in resolving issues of environmental pollution and damage, to the extent that it moved from being one of the most polluted countries to a relative clean environment. However, its record on nature conservation is less exemplary and Mike Danaher probes this interesting paradox. He looks in particular at the role of NGOs in Japan and traces their evolution from being marginal players in policy processes to being more involved within a corporatist structure, with relatively close links between some of the larger environmental NGOs and government agencies. Nonetheless, the conclusion is that the influence of NGOs is very limited and this can be attributed partly to their incapacity to raise their domestic profile because of organisational and financial obstacles. Jeff Graham looks at the evolution of Japan’s environmental policies and says that while the challenge of policy reform had become evident at least three decades earlier, it has only been in recent years that we can see genuine policy movement. For example, it was in 1997 that Japan legislated the Environmental Impact Assessment Law and was one of the last OECD countries to do so. Japan’s environmental aid to other countries also, until recently, included no requirement for environmental impact assessment whereas countries like the US had introduced such requirements in the late 1970s. Graham observes that many of the reforms can be classified as superficial, involving no more than a simple rebadging of existing programmes as ‘Green Aid’ or ‘Initiatives for Sustainable Development’ to give a impression of environmental sensitivity and concern. Yet, at the same time, we can also notice policy innovation and leadership in initiatives to promote regional environmental protection. These initiatives include mechanisms for acid deposition monitoring. While these are worthy developments, there remains some uncertainty about ultimate objectives of these monitoring mechanism, whether these are envisaged are preliminary to legally binding agreements at a later date. Graham suggests that likely outcome will be a continuation of ‘old diplomacy’ and emphasis on consensus building rather than preparedness to assume a leadership role in multilateral agreements.

Most of the chapters deal with reform and changes in postwar structures that have underpinned Japanese political economy. Morris-Suzuki’s Chapter 9 on nationality and immigration, however, is an analysis of the ‘1899 system’ regulating immigration and citizenship policies. The first Nationality Law was passed in 1899 and the principles established therein have continued to find expression in the revisions since then. She argues that the 1899 system is being challenged from a number of sources, including an international human rights regime which questions, for instance, the patriarchal assumption behind existing nationality legislation, from domestic indigenous rights advocates and from demographic shifts. While there has been little evidence of policy shifts, the reality on the ground is changing rapidly as a result of inflow of foreign labour. Rather than real policy responses to reflect these changes, what has emerged, according to Morris-Suzuki is ‘cosmetic multiculturalism’. This may yet be a significant move from ‘ethnic homogeneity’ and Morris-Suzuki also suggests that the government, apart from being cautious in its own rights is also constrained by broad societal forces, which reflect a complex and intricate mixture of xenophobia and xenophilia.

Acknowledgements

Finally, we should acknowledge our thanks to a number of individuals who contributed to the workshop, in particular Hayden Lesbirel, Peter Ross and Donna Weeks. We would also like to thank all the individual authors who were prompt in delivering their revised manuscript, which has allowed us to put this volume together without undue delay. Our thanks also to the Japanese Consul General in Brisbane, Mr Kai Korenari, who attended all the proceedings and participated actively in the debate and discussion. Robyn White cheerfully prepared the manuscript for publication and we owe her a big vote of thanks. The workshop was sponsored by the Griffith Asia Pacific Council, with additional funding provided by School of International Business and Asian Studies, Griffith University.

2 Much ado about nothing? The limited scope of political reform in Japan

Purnendra Jain

Seiji kaikaku (political reform) has appeared in patches on Japan’s political landscape for decades, largely as rhetoric. In the 1990s, political reform took on ever more life — in the machinations of political parties, in parliamentary debate and eventually as legislated change to the political system. Reform implies a problem (e.g. corruption) to be corrected or improved. Throughout postwar, those with political and moral authority to cast the national debate on political reform have set its margins narrowly around the electoral system. Their claim has been to clean up money politics that has seen the nation’s political life run less on ideology or policy pursuing the national interest than on brokered deals driven by vast amounts of money, favour and obligation — a well-fed political pork barrel. Since the Japanese political system is fuelled by money, the economic recession of the 1990s added a new imperative to the political reform agenda. The need for financial prudence sparked calls for greater political efficiency and effectiveness, and strengthened the position of those pushing for substantive political reform rather than superficial fiddling on the margins.

It may be inevitable that po...

Table of contents

• Cover
• Half Title
• Full Title
• Copyright
• Contents
• List of figures
• List of tables
• List of contributors
• 1 Introduction
• 2 Much ado about nothing? The limited scope of political reform in Japan
• 3 Regulatory reforms in Japan: issues and prospects
• 4 Reforming Japanese banks and the financial system
• 5 Changes in the J-type firm: from bank-centred governance to internal governance
• 6 Continuity and change in Japanese human capital formation
• 7 Changing environmental policy agendas: Japan's approach to international environmental problems
• 8 Crusaders of the lost archipelago: the changing relationships between environmental NGOs and government in Japan
• 9 Immigration and citizenship in contemporary Japan
• 10 The reformatting of Japan for the people: science, technology and the new economy
• 11 Japanese ‘Education Reform’: the plan for the twenty-first century
• 12 Conclusion
• Index