- The Washington Times - Wednesday, September 23, 2009

ANALYSIS/OPINION:

About the time retired Harvard University professor Ezra Vogel famously declared Japan as “No. 1” in 1979, I was a small-time entrepreneur in the provincial capital of Maebashi, in Gunma Prefecture. Business was good, and I was implementing plans to construct a small building along a national road, Route 17. To begin construction, I needed to get permission to remove a guardrail in front of the property so I could move equipment into the site.

Because Route 17 is a national road, the local office of the Construction Ministry had jurisdiction over the guardrail. This was not to be my first instance dealing with Japan’s generally inscrutable bureaucracy, but it was a memorable one. My contractor applied for the permit, and the application was almost immediately rejected. I wondered how all the much larger buildings along Route 17 had managed to get similar permits, and mentioned my dilemma to friends.

Fortunately, I had well-connected friends. They made calls to the governor, the district’s lower house representative, and the city mayor, who in turn called the Construction Ministry officials. I reapplied for the permit, and it was granted as fast as it had been disapproved.

When the contractor went to pick up the permit, though, he got a mouthful of push-back. The bureaucrats were incensed that they had been called by three different politicians. One call, they said in a fit of transparency, was sufficient.

The bureaucrats got their revenge. The contractor was permitted to remove the guardrail. But we were not allowed to use equipment on the sidewalk, even if we provided a protected pedestrian walkway and pledged to restore the sidewalk to its original condition.

When I asked if the politicians should make some more calls, the contractor recoiled in horror, telling me, “That will only make things worse.”

The contractor, who had to live with the bureaucrats long after my job was completed, undertook the excavation in two phases. The rear of the property was excavated, half of the foundation constructed and covered back up, and the process repeated for the front of the property.

The result was additional expense, time and lost revenue. Although this episode took place 30 years ago, Japan operates exactly the same way today. Things are done by the rules, but the rules don’t work.

Japan’s new prime minister, Yukio Hatoyama, says he can change the bureaucracy. Like me, Japanese business is hoping he’s right, and sitting back for the show as Japan approaches the end of a second lost decade. The 62-year-old prime minister, who is president of the left-leaning Democratic Party of Japan (DPJ), led his party to a landslide victory last month riding a wave of voter frustration that felled three Liberal Democratic Party (LDP) prime ministers in rapid succession.

Mr. Hatoyama knows he faces a similar fate if he doesn’t deliver on his campaign promises. Those promises — to tame and shrink the bureaucracy, provide financial incentives for families with children, and redefine security ties with the United States — have only been articulated in vague campaign rhetoric.

As a result, Mr. Hatoyama is attempting to buy time. “We may have to repeat trial and error because we will be traveling in uncharted waters in politics,” he told lawmakers earlier this week.

That’s not entirely the case. Former LDP reformist Prime Minister Junichiro Koizumi navigated those same waters with decidedly mixed results. It’s not that they are unknown; rather, they are treacherous. That’s true in no small part because of the power Japan’s bureaucracy wields, especially the powerful Finance Ministry, which has seen many previous challenges come and go.

The fact that a former official of the Finance Ministry, the 77-year-old Hirohisa Fujii has been named to head and tame it, doesn’t instill confidence that Japan is on the cusp of bureaucratic reform.

Another appointment, that of 72-year-old Shizuka Kamei, as Postal and Financial Affairs minister illustrates the scope of Mr. Hatoyama’s challenge. Mr. Kamei deserted the LDP when Mr. Koizumi moved to privatize Japan’s sprawling and troubled post office network, which also competes with private-sector financial institutions by acting as a bank and insurance provider.

The presence of an outspoken opponent of privatization in a key Cabinet post suggests the DPJ’s idea of bureaucratic reform is, ironically, more bureaucracy.

What of Mr. Hatoyama’s other promises? The DPJ says it intends to increase subsidies for child-related expenses and education and drop highway tolls.

It hasn’t said how it will pay for these programs, other than wresting control of the budget from the bureaucracy. As for relations with the United States, Japan is a short missile flight away from nuclear-armed North Korea, and animosity towards Japan remains high in China despite significant Japanese investment there. Not surprisingly, Mr. Hatoyama now says he will build a better relationship with the United States.

Fixing Japan will require bold economic and bureaucratic reform. So far, it’s clear that Mr. Hatoyama has no real idea how to make that happen. Until he does, Japan will continue to operate the way it has, and the politics of frustration will endure.

Michael Alan Hamlin is the managing director of Team-Asia, a Manila-based business consultancy, a columnist for the Manila Bulletin newspaper and author of numerous books.

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