The meaning behind Koizumi's moves

On the surface, most elections are about personalities, false promises and special interests. But Japan's general election Sept. 11 is about a deeper historical reconciliation -- the effort to resolve differences between the country's cultural and behavioral preferences, and the organizational practices put in place by the Occupation forces after 1945.

Prime Minister Junichiro Koizumi has dispatched his loyal followers into the provinces of Japan to crush once and for all the postwar dominance of the Japanese bureaucracy.

As everything indicates, this is a highly personalized effort by the Koizumi family of politicians to resolve the leadership struggle between politicians and bureaucrats that was created 60 years ago by a flawed Occupation-era policy.

It should be remembered that the Occupation was designed to put political control in the hands of Japan's people and limit the role of political leaders. In America, the bureaucracy was weak and what the politicians did not control was left to the marketplace, state government and private enterprise.

To accomplish its political objectives in Japan, the Occupation was forced to operate through the existing Japanese bureaucracy, making it the dominant force in policymaking for decades after the war. Politicians have been fighting to restore their position ever since.

The Koizumi dynasty has been particularly focused on the post office. Koizumi's grandfather, Matajiro Koizumi, was once a minister of posts, and Prime Minister Koizumi has pushed for postal reform since he was posts minister in 1992.

With the weakening of the Japanese economy in the mid-1990s, Japanese politicians, including Koizumi, have moved aggressively to dismantle bureaucratic control of the government. This process is documented in recent political reforms -- the consolidation of government ministries, new ethics laws for bureaucrats, the appointment of politicians as vice ministers in ministries, the elimination of high-level bureaucratic positions and the elimination of lucrative postretirement posts for bureaucrats.

The issue of postal service reform, however, is an excuse and not the real reason for Koizumi's dissolution of Parliament on Aug. 8. The real goal of Koizumi in pushing postal reform is to strengthen the control of the prime minister's office over the government finances needed to fund mounting public debt.

In particular, Koizumi, who has close ties to the banking community and the Ministry of Finance, is very concerned with retaining postal funds for financing his growing level of deficit spending. The Finance Ministry, which subsidized the failing banking structure, is Koizumi's only protected bureaucratic power base. And this is one reason that so many of the new Liberal Democratic Party candidates he has fielded in this election are former Finance Ministry officials.

The postal reform being fought over at present is not about privatization or efficiency. The Japanese phrase for privatization used in the current election, mineika, is not about real privatization; it is about who will control the postal savings funds. In English, the purest sense of privatization means the transfer of assets or service delivery from government to the private sector. The upcoming election is about who will control the huge assets of the Japanese postal system -- the politicians or the semi-independent 250,000 postal workers.

Not surprisingly, over the years Japanese politicians and bureaucrats have agreed on one thing -- to restrain the privatization of government financial resources and to resist capitalist fundamentalism and market economics.

Deregulation, privatization, free-trade agreements and new economic openings have all been resisted by both bureaucrats and politicians who represent domestic special-interest groups (agriculture, construction, medical associations, postal workers, etc.).

Japan has 774 trillion yen of central- and local-government debt, the highest in the world. Japan Post holds a quarter of the nation's bonds (44 percent of its 350 trillion yen in assets). This year 34.4 trillion yen in new government bonds will be needed to fund public spending and public works projects needed to fill the economic gap attributed to low consumption spending and a weak private sector.

For a decade, Japan's government-driven economic recovery has relied on excessive and inefficient government public spending, financed in part by postal savings funds. Controlling postal funds is one way of avoiding a government debt meltdown.

Phase I of postal reform was completed in April 2001, with the creation of the current semi-independent postal corporation, which could operate outside direct political control. Before 2001, the Ministry of Finance managed and lent postal funds for off-budget projects. The 2001 reform put private-sector managers in charge of postal financial resources.

Many have argued that the current postal corporation has operated well -- that it has improved investment controls, diversified investments, introduced an incentive-based employment system and improved customer service. It is internally financed and gets no tax funds. The post office is also still the only financial facility in Japan that will accept overseas credit cards.

Phase II of postal reform, as proposed by Koizumi, has a double agenda: It would reduce the control of postal employees and pull a large portion of the postal deposits back under the control of the Japanese Ministry of Finance to purchase government bonds and finance public projects.

Postal privatization under Koizumi's plan, as detailed in election materials, would be completed by 2017, with access to mail-delivery service by private firms prohibited. The postal corporation would be broken up into four units: post offices, mail delivery, postal savings, and postal insurance.

Facts speak for themselves. This election is about further reducing bureaucratic havens and reinforcing the government's weak financial base by ensuring Finance Ministry solvency. Koizumi's postal reform, if successful, will give him and the Liberal Democratic Party greater control over the economic levers of government and solidify the power base for future generations of politicians.

On one level, an electoral victory for Koizumi will right the political wrongs of Occupation head Gen. Douglas MacArthur, but at another level it continues the old Japanese power game of state-controlled economics.

The Koizumi administration, often characterized as authoritarian and arrogant, reflects the growing centralization and strengthening of Japan's political power elite. Koizumi's neoconservative shock troops want a new constitution and a stronger military.

This new Japan appears likely to be more confrontational with its neighbors, especially China, and to be unwilling to express feelings of guilt over its prewar past. Increasing the power of the politicians and securing control over the financial resources to fund Japan's growing debt is what the Sept. 11 election is really all about.

Ronald A. Morse is CEO of Japan Entertainment & Gaming Associates. E-mail:

The Japan Times: Aug. 31, 2005
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