“Saraba Zaimusho!” さらば財務省 (Farewell, Ministry of Finance!)
Kodansha, March 2008 (11th printing in August 2008), 282 pages, 1700 yen
Review by by Fumiko Halloran
Yoichi Takahashi, a former career official at the Ministry of Finance (formerly the Okura-sho [大蔵省] before it changed its Japanese name to Zaimu-sho [財務省] – although the English translation remains the same) has written an explosive book criticizing his own ministry. His forthright critique propelled the book into a national best seller.
As implied in the subtitle, “Kanryo Subete O Teki Ni Shita Otoko No Kokuhaku” (官僚すべてを敵にした男の告白), which translates Confessions of a Man Whom All Bureaucrats Hated as Their Enemy, he was someone the Ministry hated because he kept pointing out the flaws in its policy. His proposals to reform the bureaucracy upset those who wielded power over politicians and interest groups.
The ministry could not ignore him, however, because of his expertise in collecting and analyzing numbers which often pinpointed an unpleasant reality in the ministry’s fiscal management. The ministry could not fire him because they could not find an instant where it could claim he violated the civil service code. Ministry officials used every tactic possible to force him to resign, from demotion to leaking damaging information to the press and even refusing to associate with him. But Takahashi refused to capitulate and succeeded in launching bureaucratic reforms while serving Prime Minister Jun’ichiro Koizumi, Minister for Economic and Fiscal Policy Heizo Takenaka, and Prime Minister Shinzo Abe after Koizumi left office. He finally resigned in 2007 after Prime Minister Abe resigned and is currently a professor at Toyo University.
A graduate of Tokyo University with a major in mathematics, Takahashi joined the ministry at the age of 25 in 1980. He says he was not particularly interested in government, preferring an academic career, and was pursuing the second degree in economics at the university. The ministry, however, actively recruited him.
Takahashi admits that, from the start, he was an outsider as the ministry was dominated not only by graduates of Tokyo University but by its Faculty of Law. He asserts that when he joined, only three
mathematics majors had joined the ministry in the post-war period. That was a major flaw, according to him, because those who studied law were not necessarily familiar with the latest financial and fiscal theories and were not capable of mathematical analysis.
Early in his career, he was once praised as a saviour of the ministry. Takahashi proposed to install an assessment of risk in fiscal investment policy, which was handled by the rizai (finance) bureau. The bureau took postal savings deposits and premiums of social security and lent them to government financial institutions and special public corporations. During high economic growth, this was useful to improve infrastructure but over the years the waste in many public corporations was criticized. Prime Minister Ryutaro Hashimoto in 1997 ordered an overview of the system.
When Takahashi was assigned to the finance bureau, he discovered that there was little risk management in the system. While the bureau acted like a large national bank, there was little consideration given to the ever-present risks due to fluctuations in interest rates and the time
lag between deposit and lending. Total deposits at the time were 400 trillion yen; even a slight change in interest rate could thus mean a huge loss.
His report was ignored but on his own, he formulated a plan for Asset Liability Management (ALM) that had been developed in the US in the 1990s. He wrote a book with co-authors entitled “ALM” (Ginko Kenshu-sha -銀行研修), 1996. When a new director general of the finance bureau read Takahashi’s paper outlining the disaster approaching in the ministry’s own bankruptcy, he was called back on to install ALM, which he did in a short time.
In 1982, Takahashi befriended Dr. Heizo Takenaka who was his superior at the ministry’s Zaisei Kinyu Kenkyusho -財政金融研究所 (Institute for Capital Investment Studies). Takenaka had been dispatched from the Development Bank of Japan. He was 31 years old, a graduate of Hitotsubashi University, another outsider. Takahashi was 27, and they organized various study groups and co-authored papers and articles for economic and business newspapers and magazines.
In 1998, Takahashi went for three years to Princeton University where he befriended Prof. Ben Bernanke, later to be the head of the Federal Reserve System. On his return to Japan, Takahashi got a call from Takenaka who had become the minister for economic and fiscal policy in the Koizumi cabinet. In secret meetings, they began to discuss specific ideas about government reform. Takahashi’s role was at first hidden from his superiors and colleagues because he was suspected of being someone who would propose ideas that would diminish their power. They also feared losing a comfortable retirement in cushy positions in special public corporations and government financial institutions, a practice called “amakudari” (天下り – descending from heaven).
Takahashi’s vision of the future of government was clear; he advocated smaller government with an efficient bureaucracy and would transfer many government functions to the private sector. By reducing the government programs and increasing efficiency, tax spending and waste would be
reduced. That, in turn would stimulate the economy. His argument was not ideological but was based on simulations of scenarios. He asserted that without reforming big government and cutting spending, Japan’s economy could not be sustained. Prime Minister Koizumi began in 2001 to push for reform of the postal system, which included banking and insurance businesses.
However, specific plans to privatize the postal system were not clear cut at the beginning, and it took three years to overcome opposition from supporters of the existing postal system, to building consensus on plans for privatization, and to reprogram the postal system’s software.
Four corporations took over mail, revenue stamp, banking, and insurance, and an umbrella corporation supervises the entire operation. While the format on the surface had not changed that much, postal corporations have to compete with commercial banks and insurance companies to retain customers. Complete privatization including joining the stock market would be finalized by 2011. Takahashi recalls fierce criticism and counterattacks from politicians who were supported by the postal service interest groups.
Takahashi’s talent was well known among senior LDP leaders. Each time Prime Minister Koizumi or Prime Minister Abe tapped Takahashi to lead a task force, he willingly accepted as he believed he was essentially a government official serving each cabinet’s policy. However, this cost his promotions within the Ministry of Finance where he was branded as a trouble maker who would upset the status quo and would not obey orders.
When you read this kind of book, it is easy to be swayed by the image of a knight on a white horse demolishing a giant enemy called government. Indeed, this book generated much interest among people who had little knowledge about the fierce power struggles within and among the ministries considered to be filled with the best and the brightest. Takahashi takes credit where it is due, showing little humility. I can imagine he must have been like a yapping dog or a Siren warning of dire consequences and disrupting the ministry’s comfort zone. I cannot help but feel, however, that the senior leaders in the MOF could have used Takahashi’s talent wisely. Too bad their bureaucratic training to smooth over differences pushed Takahashi out and he has come out with this book
that does not paint a pretty picture of the elite class.
Takahashi’s book disclosed a lack of accountability for wasted tax revenues, the inability of senior bureaucrats to remedy troubles, and the unwarranted elitism of government officials, particularly in the Ministry of Finance. They banded together to protect their power and disregarded the national interest, according to him. He warns that soon, the government will not be able to attract bright and dedicated talent, pointing out that between 2002 and 2006, some 300 career officials from all ministries left the government.