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Kozo Kaikaku No Shinjitsu: Takenaka Heizo Daijin Nisshi

Kozo Kaikaku No Shinjitsu: Takenaka Heizo Daijin Nisshi

By Heizo Takenaka and Isao Iijima

Nihon Keizai Shimbunsha, December 2006, 344 pages, 1800 yen

“Koizumi Kantei Hiroku” (Confidential Records of the Office of Prime Minister Koizumi)

Review by Fumiko Halloran

When Mr. Junichiro Koizumi was elected in April 2001 to the presidency of the Liberal Democratic Party (and thus, in Japan’s parliamentary system, prime minister) few politicians, opinion leaders, journalists, and private citizens imagined that he would lead the nation for five years and five months, among the longest tenures in the post-war period. When he became the national leader, Japan’s economic and financial situation was so dire that there was fear abroad that Japan might trigger a worldwide financial crisis.

During that period, however, Prime Minister Koizumi launched reforms in the national budget system, special public corporations, the postal savings and insurance system, and the medical insurance and national pension systems. By the time he stepped down in September 2006, the national budget system had been restructured, legislation to privatize the highway public corporations and postal savings and insurance system had passed as had legislation to reform the medical insurance and national pension systems. Mr. Koizumi’s goal was to streamline the bloated bureaucracy that wasted the taxpayer’s money, to privatize nationally run organizations as much as possible, to cut the national deficit, and to reenergize the private sector, particularly the banking system. Japan had suffered from a ten-year recession after the collapse of the bubble economy.

Premier Koizumi’s success was achieved only after brutal debate about his policies and acrimonious attacks on the prime minister and his team, particularly Dr .Heizo Takenaka, an academic with a PhD in economics. Mr. Koizumi chose him to be Minister of State for Economic & Fiscal Policy and to lay out the framework of Japan’s economic and financial recovery. It was no wonder that the opposition to the reforms was fierce since each reform would strip power from numerous interest groups. Opponents ranged from retired senior government officials who had enjoyed lucrative second careers in public corporations to general construction companies that were accustomed to getting large scale highway and urban development projects from politicians who brokered deals on government financed projects in exchange for election campaign contributions. Lobbying by business groups was intense. Bureaucrats who had enjoyed powerful control over budgets and legislation were dismayed to see their control over policy taken over by the Office of the Prime Minister. At every step of reform, senior bureaucrats resisted the changes, even openly lobbying against the prime minister. In at least one case, Mr. Koizumi, through Minister Nobuteru Ishihara of the Ministry of Land, Infrastructure and Transportation, fired the president of the Japan Public Highway Corporation (Nihon Doro Kodan) for resisting reform.

Three months after Mr. Koizumi stepped down, two books revealed in detail how these policy debates were conducted, how the Koizumi cabinet dealt with opposition to reform, and above all, the role politics played in efforts to bring about reform. These books are valuable primary sources for research on the Koizumi years.

Isao Iijima, PM Koizumi’s chief of staff, wrote one. He was in the center of domestic and foreign policy-making as Mr. Koizumi’s aide for 35 years. He was considered to be Mr. Koizumi’s alter ego.

Dr.Takenaka, the minister of state for economic and fiscal policy, wrote the other. In addition to that post, he was later appointed to be Minister of State for Financial Affairs and finally as Minister of Internal Affairs & Communications, to oversee the entire structural reform. At first, his position was a political appointment but, in 2004, he ran in an election and was elected to the Upper House. Last September, he resigned from parliament at the same time Prime Minister Koizumi stepped down and immediately began to write this book based on the diary he kept during his tenure as a cabinet minister. He is back at Keio University as president of the university’s Global Security Institute and a frequent visitor to the UK.

Mr. Iijima begins his book with an explanation of PM Koizumi’s strategy to succeed in radical reform of the government’s structure. First, Mr. Koizumi could exercise leadership because he was not a traditional Liberal Democratic Party politician. He won the LDP presidential election by ignoring factional games and appealed directly to three million LDP members who reflected the public’s desire to see a change in politics. Indeed, throughout his tenure, PM Koizumi continued to enjoy public support, from a high of 88% at the time of his winning the premiership to 62% at the end, according to Japan News Network of TBS TV Station.

Second, PM Koizumi set clear goals that the public could understand and support. To achieve this goal, the Koizumi team came up with a strategy for a public relations campaign, including an electronic magazine, “Lion Heart,” that drew the attention of more than one million viewers. Mr. Iijima writes that the prime minister’s office studied the different nature of the media and divided it into the printed press, TV, and radio journalism, inviting different sets of editors and reporters for meetings with the prime minister himself. Town meetings by the prime minister and cabinet ministers were set up to have direct conversation with the citizens.

PM Koizumi established the pattern of setting comprehensive policy proposals without consulting his own party, which resulted in a confrontation with the LDP Policy Research Council (Jiminto Seimu Chosa-kai). Mr. Koizumi authorized policy proposals by the Council on Economic & Fiscal Policy (Keizai Zaisei Shimon Kaigi), then made public on the cabinet homepage the conference materials and the minutes three days after each meeting. Further, rebuttals by ministries to specific proposals were also posted on the homepage. This meant the public and the press had access not only to the proposals but information on who supported and opposed each.

Both Mr. Iijima and Mr. Takenaka make it clear that this advisory council was the key player in the efforts for reform. It was established by Prime Minister Ryutaro Hashimoto and continued by Prime Minister Yoshiro Mori but it came into full function under PM Koizumi. The members included cabinet ministers (finance; internal affairs; economy, trade & industry), the chief cabinet secretary, president of the Bank of Japan, minister of state for economic and fiscal policy, and four representatives from the private sector such as academics and business leaders. During his reign, Prime Minister Koizumi attended and chaired all 187 meetings.

Mr. Iijima focused on recruiting reform-minded bureaucrats to work for the prime minister and orchestrated the political battle in getting legislation passed. Dr. Takenaka laid out the framework and specific measures for reform in close consultation with the prime minister. Their relationship went back more than ten years before Mr. Koizumi won the premiership, when both were members of a study group that discussed ways to get out of the collapsed bubble economy. Dr. Takenaka argued against the traditional approach of pumping public funds into large-scale projects intended to lift the economy. He argued that not only was it wrong policy but it was done because of the close relations among the LDP politicians, business executives, and bureaucrats. That had to be broken. Eliminating wasteful projects, reducing the issuance of national bonds, and privatizing public corporations, as well as reducing subsidy to local governments were their ultimate goals.

PM Koizumi’s passion for structural reform has a long history, starting in 1970’s when he was parliamentary vice minister of the Ministry of Finance and the national deficit was escalating. As Minister of Health and Welfare and then Minister of Posts and Telecommunications in the 1990’s, he tried to restructure the flow of funds from postal savings, postal insurance, and national pension into supplementary budget but was not taken seriously. When he ran unsuccessfully in the LDP presidential elections in 1995 and 1998, his policy speeches focused on the same theme. In his third attempt, in 2001, he again advocated an efficient, stronger but smaller government to stop the hemorrhaging of public funds.

Both books describe in detail the fierce opposition to the reforms, PM Koizumi’s never changing convictions, and his charisma that earned the loyalty of those who worked for him. Dr. Takenaka was especially grateful that, each time he felt criticism and personal attacks wearing him out, PM Koizumi gave him encouraging words. At the same time, with shrewd political skill, Minister Takenaka reached out to key LDP leaders and senior bureaucrats whenever a major proposal came up, to do a thorough “nemawashi” (prior briefing and negotiation). He seemed to have abundant patience to weather criticism and to find common ground with his political enemies.

Mr. Iijima was born in 1945, Dr. Takenaka was born in 1951, and they are products of Japan’s post-war period. But their careers were quite different. Mr. Iijima served only Mr. Koizumi during his entire career as “hishokan” (secretary; a combination of executive and legislative aide). Dr. Takenaka, a graduate of Hitotsubashi University, was with the Japan Development Bank, was a senior analyst at a think-tank affiliated with the Ministry of Finance, and taught at Harvard, Osaka University, and Keio University. Mr. Iijima was thoroughly familiar with the legislative process and party politics while Dr. Takenaka was a novice in politics. He found a wide gap between politicians and policy experts and saw a shortage of policy experts. Despite the differences in experience, the two shared PM Koizumi’s passion for his goals and worked hard to achieve them.

There may be a valid criticism that both books are attempts to justify the Koizumi regime. In that sense, every book written by a politician is suspect. There is already criticism that, while the reforms may have saved Japan from a worsening economic and financial crisis, it created a widening gap between winners and losers that may threaten the safety net and the social fabric of Japan. What is striking about the two books, however, is that they articulate the Koizumi team’s sense of the crisis of a nation in deep trouble, their ideas and solutions, their strategies and framework of policies connected with each other, and the political tactics for dealing with reform. Taken together, these books certainly present a vision for the future governing of Japan.

A different version of this review first appeared on the National Bureau of Asian Research (NBR) Japan-U.S. Discussion Forum and is reproduced with permission of the author. The original review can be found here: http://www.nbr.org/foraui/message.aspx?LID=5&pg=3&MID=27329