Aug. 13 (Bloomberg) -- The bureaucracy that oversaw Japan’s postwar economic boom and a two-decade stagnation faces the biggest threat to its power since the U.S. occupation as Prime Minister Shinzo Abe seeks to seize control of ministries’ most senior appointments.
Chief Cabinet Secretary Yoshihide Suga, 64, is leading the initiative, years after he got an education in civil servants’ sway when they frustrated his move as internal affairs minister to shift revenue between regions. The proposal in debate in the ruling Liberal Democratic Party would give the Cabinet Secretariat oversight of top bureaucrats’ promotions.
The plan would open a path to accelerating change as Abe, 58, readies steps from strengthening the military to bringing Japan into the U.S.-led Trans Pacific Partnership trade bloc and paring agriculture regulation. Enacting it could usher an end to promotions influenced by tenure and support from bureaucratic peers in a system cemented over decades when politicians relied on civil servants to nurture exports and dole out public works.
“When you want to change the direction of national strategy, it becomes very important to rein in the bureaucracy,” said Kenneth Pyle, a University of Washington professor of Asian studies in Seattle, who has been teaching Japanese history since the 1960s. “Abe realizes that if he’s going to succeed he has to be able to centralize policymaking.”
The civil service wields power over the 92.6 trillion yen ($957 billion) budget, from approving construction projects to bestowing foreign aid. Seniority often trumps merit in deciding appointments, said Hiroaki Inatsugu, a professor at Waseda University’s Okuma School of Public Management, who has served on a panel advising Abe on the revamp.
Success isn’t certain -- three similar attempts in the past five years unraveled as officials, along with some lawmakers, pushed back against change. The former ruling Democratic Party of Japan swept into office in 2009 on a platform that included a vow to wrest power from the ministries, only to end up enacting the first legislation to raise the national sales tax since 1997 -- something long sought by the Finance Ministry.
DPJ lawmaker Hirohisa Fujii said in August 2009 it was “outrageous” that bureaucrats had a prime role in crafting the budget. Three years later, his colleague Yoshihiko Noda pushed the consumption-levy increase through parliament after backing the move while finance minister. The step triggered a split in the party and the collapse of Noda’s administration, setting up the December 2012 election that ushered Abe into office as prime minister for the second time.
“The new legislation will not work unless there is a strong disciplinarian in charge to control it,” said Jun Okumura, senior adviser to the Eurasia Group in Tokyo.
“Regardless of that, Abe has been making some very interesting senior appointments to push through his agenda, starting with Bank of Japan governor Haruhiko Kuroda, who was plucked from outside the mainstream,” Jun said.
The government dumped the head of Japan Post Holdings Co., a Finance Ministry insider selected days before Abe took office, and replaced him with Taizo Nishimuro, the former chairman and chief executive of Toshiba Corp. The new head of the Japan Coast Guard is the first chosen from within the ranks, rather than someone from the Transport Ministry. The Health and Welfare Ministry has its first female vice minister, a step in keeping with Abe’s push to put women in 30 percent of leadership positions.
“Bureaucrats will do anything they can to stop something new from happening,” Suga wrote in “A Politician’s Determination -- Dealing With Bureaucrats,” a book prompted by his ultimately successful battle to let people pay a proportion of their taxes to their home town. Bureaucrats said it would be “hard to define what someone’s home town is,” Suga wrote.
Reducing opposition to the reform would aid Abe’s efforts to reshape the nation’s economy, as his administration prepares legislation on industries from health care to agriculture and energy. The bill on appointing the top officials is also planned this year.
“Political control of the bureaucracy will strengthen sharply, as incentives for civil servants shift to serving the government, rather than the personnel departments of their own agencies,” Robert Feldman, head of Japan economic research at Morgan Stanley MUFG Securities Co. in Tokyo, wrote in a note to clients last month.
The Abenomics campaign to end 15 years of deflation through monetary easing, stimulus spending and structural change helped drive the Topix index of stocks up about 44 percent since the December election. The yen has fallen about 14 percent against the U.S. dollar in that period, helping exporters’ profits.
Abe’s ruling coalition strengthened its position last month by winning a majority in the upper house of the Diet, enabling passage of legislation without opposition support. Abe’s bigger source of concern is now internal dissent -- something he faces with the civil-service appointment proposal.
“Resistance comes from both bureaucrats and lawmakers,” LDP deputy policy chief, Yasuhisa Shiozaki, who has pushed for change since Abe’s first administration in 2006-2007, said in an interview last month. “The details are yet to be decided and there are extremes of opinion on both sides.”
Among opponents within the ruling LDP is former Transport Minister Makoto Koga, who says “I don’t think the cabinet should have this power -- I think each minister should have the right to pick the top officials, as in the past. If you’re not right in the thick of things, you won’t know what abilities a person has and what experience they have built up as a bureaucrat. Will you be able to pick the right person every time?”
While criticized for inflexibility and infighting between ministries, Japan’s bureaucrats are generally dedicated, often working through the night to brief ministers, said Inatsugu at Waseda. “It’s not about the money. They could get more in the private sector. It’s seen as a pure way of life,” he said of their motivation.
The bureaucracy saw some change during the American occupation led by General Douglas MacArthur, when tests for the civil service were altered “to break the near-monopoly of Tokyo University graduates and to facilitate the entrance of those with more heterogeneous preparation,” political analyst Kazuo Kawai wrote in his 1960 book “Japan’s American Interlude.”
A new agency, the National Personnel Authority, was established to oversee recruitment and training, and set standards for appointments and dismissals. Even so, the bureaucracy “largely maintained its traditional position of importance,” Kawai wrote.
During the 1960s economic boom, bureaucrats honed the practice of gyosei shido, or administrative guidance. Ministry for International Trade and Industry staff would give direction to manufacturers, and the Finance Ministry would offer the same to banks, according to Gary Alinson in his 2004 book “Japan’s Postwar History.” MITI also controlled the allocation of foreign exchange and imported technology, according to Alinson.
Bureaucratic influence also was cemented through the practice of amakudari, or descending from heaven, when senior career staffers would retire in their 50s to take top posts in public corporations or private businesses, according to “Japan: A Country Study,” published by the Federal Research Division of the U.S. Library of Congress in 1994. Others went into politics, with most of the LDP’s postwar prime ministers until the late 1980s being ex-civil servants, according to the study.
Abe’s grandfather Nobusuke Kishi rose through the ranks of the Ministry of Commerce and Industry -- which became MITI, and is now known as the Ministry of Economy, Trade and Industry -- before entering politics and serving as prime minister in the late 1950s.
This background may offer Abe perspective on how to approach bureaucratic reforms, making him less likely to adopt a directly confrontational stance, Pyle said.
Civil-service power has waned in recent decades from its heyday, with the rise of LDP policy groups and repeated efforts by administrations to strengthen the role of politicians.
“Bureaucrats can be obstructive, but I don’t think anyone in Japan worries that they hold all the power these days -- that’s no longer a concern,” said Takeshi Sasaki, a former president of Tokyo University who served on bureaucratic reform panels under Prime Minister Junichiro Koizumi and Abe during his first stint as premier.
Even so, the proposal to wrest top appointments away from the ministries may require politicians relying on bureaucrats themselves to write the legislative language for the change. The impact of past reform -- such as attempting to reduce the sway of the Finance Ministry over the annual budget process through a new panel under the Cabinet Office -- has been limited, according to political scientist Koichi Nakano.
“If the move to centralize appointments under the prime minister’s office were to succeed, it would be the biggest blow to bureaucratic power since the end of the U.S. occupation,” said Nakano, a professor at Sophia University in Tokyo. “This legislation will doubtless also be opposed by all the ministries. I think it will end in compromise.”
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