A new book explores the culture and history of Japan’s ministry of finance, or Okurasho, and explains how that organization may be endangering world markets and free trade. Will Japan ever be a totally open market? That is what many computer industry CEOs must have asked themselves from time to time. But judging by the bleak picture drawn by Peter Hartcher in his book The Ministry: How Japan’s Most Powerful Institution Endangers World Markets, the answer must be a resounding no.
By Graeme Burton
Hartcher is a senior journalist with the Australian Financial Review, Australia’s equivalent to the Wall Street Journal or Financial Times. As a foreign correspondent based in Tokyo, Hartcher witnessed the machinations of the Japanese ministry of finance, the country’s premier economic policy making body, as the 1980s boom turned sour. During this time, acclamation turned to recrimination and the ministry fought a bitter and sometimes dirty rear-guard battle to retain its extensive influence and power. Japan’s ministry of finance, the Okurasho, enjoys a political, economic and intellectual power without parallel anywhere in the democratic world. It has been central to economic policy making in Japan for more than a thousand years, even though most of its top recruits are not university trained economists. And its power is jealously guarded. Although, in theory, entry to the elite career stream of the civil service is the most open in the world, new recruits are almost exclusively plucked from Tokyo University. Via a series of interviews, the ministry also makes sure its new recruits share its conservative outlook, institutionalising opposition to change. Edicts from government ordering the ministry to make recruitment more open have been ignored.
Feudal
Once in, new recruits are well cared for until the day they leave. A marriage bureau will find eligible brides from among the daughters of top conservative politicians and industrialists – a practice Hartcher criticizes as feudal. At the end of their career, an employment agency can place washed-up bureaucrats in top jobs across Japanese business, by twisting arms and calling in favors. Between his two stints as a foreign correspondent, Hartcher noted a marked change of attitude both within the ministry and towards it by outsiders. [During the 1980s] everyone got down on one knee and genuflected to the ministry, says Hartcher. The ministry itself felt no need to justify its policies to anyone and remained stubbornly aloof from both press and public alike. During the 1990s everyone, including ministry officials, wanted to tell Hartcher what they thought. The ministry has held its supposed political masters in contempt for centuries. One bureaucrat in the late nineteenth century, during the reign of emperor Meiji, once described the Diet (parliament) as a collection of 300 farmers. And in the 1990s, one finance ministry official went as far as describing the prime minister and his cabinet as idiots, a claim strenuously denied by the ministry. Such an attitude, combined with economic policies designed to cut the country’s debt but which only wrought stagnation, crystallized in the election of 1996 when all the political parties campaigned on a platform of reform for the ministry. Independence for the Bank of Japan and stripping the ministry of its regulatory role in the banking and finance system were widely mooted.
Animalistic survival instinct
But the politicians did not bargain for the ministry’s animalistic survival instinct. One reforming government, led by Morihiro Hosokawa, the first in decades to be made up by politicians from outside the dominant Liberal Democratic Party, was even brought down in 1994 when the ministry refused to draw up a budget. The return of the LDP in 1996, outwardly committed to reform yet actually led by a former finance ministry bureaucrat, Ryutaro Hashimoto, led to such a watering down of proposed reforms that to all intents and purposes, the ministry is as powerful today as it has eve
r been in the past. While the ministry of finance remains all-powerful, Japan’s frequently obtuse approach to trade liberalization is unlikely to change, writes Hartcher. The ministry, a vital asset in Japan’s postwar re-industrialization and reconstruction, has become a liability in the nation’s transition to its proper status as a modern economy. And although it continues to trade on its ancient, quasi-mystical origins, its elite status, and fiscal vigilance as sources of moral authority, the Okurasho is not on a divine mission – it is just an institution of the civil service that has lost its way, concludes Hartcher.
The Ministry: The Inside Story of Japan’s Ministry of Finance (UK) * The Ministry: How Japan’s Most Powerful Institution Endangers World Markets (US) * By Peter Hartcher * $24.95/#19.99 * ISBN 0 87 584785 4 (US) * ISBN 0 00 255854 8 (UK)
