Q&A on the Central Government Reform

I. Overview of the Reform of the central government

II. Questions and Answers

(1) The composition of the cabinet and its implications for the distribution of power in the new structure

(2) Question on the recruitment of personnel from the private sector

(3) The Council on Economic and Fiscal Policy

(4) The role of the new state secretaries

(5) Questions on the logic driving the reorganization of ministries and agencies

(6) The extent of reform across ministries

(7) Questions on the status of the Defense Agency

(8) The creation of the Ministry of Land, Infrastructure and Transport

(9) Announcements on public works and the issue of disclosure

(10) Decision-making in public works projects

(11) The issue of increased workload

I. Overview of the reform of the central government

Let's go through the four major pillars of this reform by referring to the "Gist of the Central Government Reform." You may already know about the background. In fact in December 1997, the Administrative Reform Council, which was chaired by then Prime Minister Ryutaro Hashimoto, submitted a final report. The Diet passed legislation in the form of the Basic Law of the Administrative Reform of the Central Government in June 1998. In fact we had the figures as well as the timeline and timescale enshrined into the enacted Basic Law on Administrative Reform of the Central Government, which reflects basically the content of the final report by the Administrative Reform Council.

To date, within the two and a half years that have elapsed, together with officials from the respective ministries and agencies within the Japanese Government, we have teamed up with private-sector participation, and have enacted several pieces of legislation in order to specifically implement the reforms. Let's come back to the "Gist."

In fact what has been completed at this juncture is coherent with the pillars that have been enshrined in the final report submitted by the Administrative Reform Council back in December 1997. The first pillar, as you can see on the top of the "Gist," is to enhance the Prime Minister's leadership. Of course you can go through the details by reading what is written below pillar number one of the "Gist," but in brief, we will create a Cabinet Office that will replace the Prime Minister's Office, and as well the Cabinet Secretariat will be further enhanced in its functions. The second pillar is to restructure and reorganize the government ministries and agencies. The current one office and 22 ministries will be halved into one Cabinet Office and 12 ministries.

Third, we will adopt the IAIs (Independent Administrative Institutions) for more efficiency. Fourth, we will streamline the administration by making the government slim and more effective.

The timescale of implementation for the second pillar, i.e., the restructuring and reorganization of Government ministries and agencies into one Cabinet Office and 12 ministries will take place on 6 January 2001.

On the third pillar, to introduce the IAIs, this will be implemented in its major content on 1 April 2001. Amongst the fourth pillar, the streamlining of administration, the first part- which is to reduce the number of national civil servants- will take place over the next decade.

Also on the second part of the fourth pillar, with regard to streamlining the administration with regard to the reduction of posts in terms of Directors-General and heads of division, this will take place from January 6 2001.

Let's come back to the first pillar. I believe the prime minister's leadership really depends on how much leadership is exerted in the execution of the reform itself with regard to the first pillar, therefore, gradual implementation is to take place as for the first pillar.

With regard to the second, third, as well as the fourth pillars, we have preparation well under way in the reform of the administrative organs and restructures; we have the movement that has been actually taking place for some time now to complete the second through fourth pillars.

As for the first and second pillars, what needs to be done and handled properly on the part of Government officials has been well under way in preparation and in fact, prepared and implemented on our part. As you know, the recent Cabinet reshuffle that took place on 5 December 2000 has already given the names of the ministers who will take their new portfolios with the reorganization of the ministries and agencies to take place on 6 January. The ministers have been assigned to their current positions to take over their assignments on 6 January 2001.

In a nutshell, I do believe that the administrative reform mainly consists in the narrower sense with regard to second, third and fourth pillars.

On the other hand, as you can understand, the first pillar is more of a political reform in a sense.

II. Questions and Answers

(1) The composition of the cabinet and its implications for the distribution of power in the new structure

Q: I want to use some historical perspective. This administrative reform was proposed during then Prime Minister Hashimoto's tenure, in a time when the bureaucracy was in a sense under siege. As you correctly said, part of the reason for doing this administrative reform was to give the politicians somewhat more power. Does this suggest that we will soon be in a place where a faction of the ruling party will have more power to run the country without real administrative challenge from the bureaucracy?

A: I am not in any position to make comments as to the power struggle amongst the factions. I think it might be of some reference to you to introduce what I have heard from a certain university professor. The professor stated that political leadership should mean the following: that the ruling party within the Diet should form the Cabinet, assert political leadership and govern the country. I have learned from this professor that under the parliamentary cabinet system, just as in the United Kingdom, the major functions of the ruling party as well as the policy making and planning, the major portions of such functions will be incorporated into the Cabinet. As you know, in comparison currently in Japan even if it is perceived as led by bureaucracy and central government officials, we need the approval from the ruling party.

If the current system were to stay untouched, especially with regard to the ruling party, and the leadership and authority to come from their part, we would be faced on two sides by the political leadership. I will quote what the university professor said, that would mean "a dual political leadership." Even if there may be a number of factions within the ruling party, under the Prime Minister, if leadership is to be functional as has been stated, the impetus should come more from the Cabinet. The professor also noted, in the case of a party-led political leadership if it were to come out stronger, it would have no clear definition as to who should take responsibility and accountability.

(2) Question on the recruitment of personnel from the private sector

Q: I have a question about the first pillar regarding the prime minister being supported to strengthen the prime minister's leadership. The press has been focusing in part on the problems with attracting private-sector personnel to some of the posts in the new Cabinet Office, especially in the crucial Council on Economic and Fiscal Policy. Are you disappointed with the number of private-sector personnel you managed to attract? If so, could you explain the reason why so many of the posts are being filled by bureaucrats?

A: To my regret I am not well informed as to how many recruitments we have made from the private sector so far so I cannot make any further comment on that point. Of course, I can go further on my personal views to the extent that I know as much as you do by reading what the major newspapers have published.

In fact the Headquarters that I belong to has some private-sector personnel taking part. The mechanism that allows for private-sector participation is the following: we first approached top management of companies in the private sector, and with their approval we have their corporate employees dispatched to us for a term with a commitment that they will return to the private sector company after the fulfillment of their term.

It is notable that job-hopping, especially in the US and to some extent in Europe, is most prominent amongst the most capable people. However, that labor mobility is yet to exist here in Japan. Unless we change the social climate or culture of the corporate world with regard to employment as well as the structures of paying larger sums of money at retirement if one stays on longer with a company, it would be a hard decision on the part of private sector employees to make the choice to work temporarily for the public sector. Even in my case, I would be more hesitant if I were in their position. Unless the practices regarding employment in Japan undergo a major change I believe it may be difficult for private sector employees to take up official positions. Even in the case of university professors, they have a close structure to lifelong employment. Therefore, even if we approach university professors, they are hesitant to work for three years for instance in a public office because after this term they would not have a post to go back to since a new professor would probably be in their place by that time. Mobility, even among university professors, is not as high as you would imagine, when compared to the United States or to some extent Europe. Of course we do have hopes that this labor mobility situation should gradually change.

(3) The Council on Economic and Fiscal Policy

Q: My question regards the Council on Economic and Fiscal Policy, the members are yet to be named publicly and we are not yet clear on the functions and structures. I believe that in regards to budgeting, the expertise as well as the information will be relocated to the Council on Economic and Fiscal Policy. How much of a transformation will be made and over what timespan is not yet clear to me, are there any issues that relate to the transition period?

A: The law and legislation has been clearly stipulated, that is to say that the Council on Economic and Fiscal Policy will draft the basic principle in budget allocation and fiscal management. It has been already decided that the original principle should be decided not by officials of the Government but by the Council on Economic and Fiscal Policy itself as to add the information that has already been decided at the Cabinet meeting as well as other relevant pieces of legislation. By giving the authority on the part of the Council on Economic and Fiscal Policy to order the submission of documents, if this function works out or plays out as stipulated, I do believe there will no turbulence in its function.

Q: How will this work out?

A: There are two ways. The media has expressed concerns about how the Council on Economic and Fiscal Policy will play itself out in its relation with the ruling party and the leaders of the Government/Ruling Parties Budget Conference. This question most frequently appears in the press conference that the Chief Cabinet Secretary holds, and what I can say on this issue with regard to the structure is the following: It rests with the Prime Minister's decision on whether it would suffice that the Cabinet decision would be enough or whether he would have to consult with the Government/Ruling Party's Budget Conference. It really is a decision to be made by the Prime Minister himself.

As for relations with the Ministry of Finance, I am not directly in a position to make any further comments but I do hear these opinions that I am going to mention: As for the major national revenues sourced from taxation and the tax reform, if it should come, it has been shaped out for the most part on the part of the ruling party's Tax Reform Council as the media reports.

The media reports tell us that to a further extent in shaping out the public spending on public works as well as social welfare spending, the major framework is laid out by the ruling parties. So some people in the media argue that already we have political leadership in place, though of course, the detailed documents are submitted by the bureaucracy and government officials with regard to tax declaration systems and schemes, as well as social welfare systems. I do believe amongst the parliamentarians of the ruling party a number of people would support this. I would like to also add that some people expect a more transparent and readily understandable and visible agenda to come upon the table of the enacted Council on Economic and Fiscal Policy as supported by the legislature for its establishment instead of the former dealings and negotiations that took place between the ruling party and the bureaucracy.

(4) The role of the new state secretaries

Q: I have a question with regard to political leadership. From 6 January 2001 we will have new state secretary positions along with new parliamentary secretary positions. In comparison to the former arrangements, how do their authorities and work content compare to the existing system that we have to support ministers?

A: The contrast between parliamentary vice-ministers and the newly established state secretaries are stipulated within the reforms to be more precise. But I can give you a rough description. In the case of the new parliamentary secretaries, they will be designated a theme or a matter to address or probe into as well as to construct and to give feedback to the minister. The state secretaries are deemed to be in succession to the ministers if anything should happen to them. In fact the state secretaries have a more comprehensive position as to take over the ministerial position whenever contingencies may occur. That is more precisely mentioned in I.4. of the "Central Government Reform of Japan (January 2001)."

(5) Question on the logic driving the merger of ministries and agencies

Q: The logic of the reorganization as I understand it, as you say in the second pillar, is to make decision-making more efficient and effective. But in Nagata-cho, there is already conversation for instance that the new Ministry of Public Management, Home Affairs, Posts and Telecommunications, which in itself is a very awkward name, is going to be a monster agency. Why does combining agencies make them more efficient and more effective, especially since no jobs are being lost, at least not for a number of years. I do not understand the logic behind how combining makes things more efficient if the same bureaus and the same bureaucrats are still there.

A: To some part, what you have pointed out may be right. In fact, within deliberations of the Administrative Reform Council there were ideas expressed to the following direction. One of the elements that came out through the deliberations of the Administrative Reform Councils was the following: to date, Japan was effectively ruled by bureaucrats and a section of her bureaucracy hampered efficiency of decision-making to a certain extent. However, with the reform the intention came from the Administrative Reform Council that it should enhance political decision-making. Therefore, for this reason we have a number of appointments yet to come for each ministry to their state secretary posts and parliamentary secretary posts. The large number of appointments of state secretary and parliamentary secretary posts are coming from a decision made by the Reform Council on how to enhance political leadership.

Another element that I had just pointed out is that the Administrative Reform Council has stated a sense of crisis, that the giant ministries that represent the ministries of the Kasumigaseki bureaucratic community may be detrimental. This was the background reasoning to the two of the following decisions to come in terms of setting directions: first, reforms should come so that more power should be delegated to the private sector from the public bureaucracy; and secondly, reform should take place in giving more power to local municipalities from the central government. The two reforms that I have mentioned, about shifting power from the bureaucracy to the private sector and shifting more power to the local municipalities from the central government have been partially completed. However, the majority of the work still remains to be completed.

Unless we cut the workload, and not only the headcount of the national civil servants, what you have stated will not materialize. Currently we have 1,800 pieces of legislation in Japan. Just imagine that the one Prime Minister's Office and 22 ministries that we currently have are 23 plates on the table, and on those plates we have to in fact allocate the 1,800 pieces of legislation. From 6 January 2001 we will reduce the number of ministries and offices to a total of 13, however the 1,800 pieces of legislation will remain on the reduced number of plates.

I believe the present challenge that remains will not go overnight because I do not believe the 1,800 pieces of legislation will diminish overnight. But at the very least we need to lighten up the proportions of servings on each of the plates, which are diminished to 13 from the current 23. We need a system or mechanism that should allow us to do so. Unless this is made feasible, what you have suggested will not take place substantially.

You have rightly pointed out we have huge servings on each of the plates representing the ministries and offices currently in place. With further reductions on the plates, we need to lighten up the servings on each of the plates, and we need a system that will allow us to do so. Unless that is made feasible, it is unlikely that what we have suggested will take place.

(6) The extent of reform across ministries

Q: Some ministries have not undergone any status change. Does that mean that there are no administrative reforms in these ministries, such as the Foreign Ministry and the Ministry of Justice?

A: That is not the case. In fact even if the ministry may not be renamed, we have abolished the former law of establishment to have it completely renewed from its very grounding, right from the establishment laws that give the foundation to the ministries. This means a complete rebirth of the ministry though it may carry the same name as before. The reduction of the number of bureaus as well as divisions is going to take place in every ministry without the exception of the Ministry of Foreign Affairs and the Ministry of Justice. This is to say that we have in fact changed the structure by a rebirth to the establishment laws of each ministry. However, the number of pieces of legislation remains the same for the time being and you might argue that though we have changed the structure of the ministries, the content of the work that is done within the ministries may not have changed much. I do believe that in the workload and content, we respect the continuity aspect.

Besides, of course, both the Ministry of Foreign Affairs and the Ministry of Justice will adopt the new state secretary posts and the new parliamentary secretary posts.

(7) Question on the status of the Defense Agency

Q: I noticed that only the Defense Agency has not been turned into a ministry. What is the background of this?

A: As mentioned, this reform is based upon the final report submitted by the Administrative Reform Council back in December 1997. In fact, then Prime Minister Hashimoto finalized the views and opinions that were expressed in the Administrative Reform Council in coming to submit the final report. As pointed out, there was strong support of the notion that the Defense Agency should be upgraded to a ministry at that juncture. However, there was also a strong divided voice that supported the notion that the Defense Agency should remain as an agency as it is known today. I believe the final decision came from then Prime Minister Hashimoto. With that decision from then Prime Minister Hashimoto, the law establishing the Defense Agency remains as an agency in status. Therefore any upgrading to a ministry would require changes and amendments to the law regarding the establishment of the Defense Agency.

(8) The creation of the Ministry of Land, Infrastructure and Transport

Q: Could you explain the thinking behind the merger of the National Land Agency, the Transport Ministry and the Construction Ministry, and why this appears to be in contradiction to Mr. Hashimoto's wishes to spilt the Construction Ministry into two?

A: Before the final report was submitted in December 1997 from the Administrative Reform Council, I recollect that it was in September that they had submitted a mid-term report, I believe the deliberations go way back further to November 1996, as for the Administrative Reform Council itself. However, I believe that the entire report that came out in September 1997 carried the views of then Prime Minister Hashimoto.

As far as I can recall, as you have mentioned, in the interim report it was suggested to reorganize the ministries, for them to split the construction ministry into two, and to separate the national conservation elements and functions from the Construction Ministry to be combined with the Ministry of Agriculture, Forestry and Fisheries. You can go back to the records as we have all the proceedings disclosed, to find the internal report yourself as for confirmation. I believe that after that interim report in September, there were various debates on this matter and the final adoption came with the report that was finalized in December 1997 with which came the current form, the ministry that you mentioned, the Ministry of Land, Infrastructure and Transport that has combined four ministries and agencies.

Q: As I understood, one of the problems that these reforms were supposed to address was the so-called ceiling system, which is supposed to lead to rather rigid public sector outlays in Japan, and what was desired was a less rigid way of spending tax revenues. Presumably, the Hashimoto suggestion to split the Construction Ministry was to try to break the power of one of the big spending ministries down a little bit. Now we have a ministry, which controls 80% of public works outlays in Japan. Does that not make the situation rather more difficult rather than less?

A: Of course even then, at the final report submission period, there was already criticism of this gigantic ministry appearing for the reasons that you mentioned: they will have most of the spending power within this ministry. In fact there was a condition in the financial decision made on the part of the Administrative Reform Council to delegate some of the authority held by the Ministry of Land, Infrastructure and Transport to be separated and transferred to establishments in the local community or in the regional administrative bureaus of the national organs and the municipal governments in exchange for approving the Ministry of Land, Infrastructure and Transport to take shape.

Of course it goes beyond my apprehension and anticipation as to how the public works will unfold with the new ministry, but there are some views with regard to the following points. The railway business operators have voiced interest that with the Construction Ministry and Transport Ministry coming together, if there are any possibilities that the spending for road purposes can be recruited and used. On this suggestion of recruiting this spending to fund railway systems and infrastructure, the industry has voiced interest on this. The policy research council of the ruling party as well as the newly appointed minister has been negating that the funds will be utilized for railway infrastructure building to date.

One other relevant issue here is that Japan is trying to use the fiscal impetus to get the Japanese economy back on its recovery track through public works spending. However, as the papers have reported the major framework of spending is not decided by the Ministry of Land Infrastructure and Transport, but instead by the ruling party members, as well as a politically led process.

I believe as things are likely to unfold in the future, I see it in the following manner: the economic stimulus package needs to be shaped out further, and that would depend, of course, on fiscal reform and how much - to what extent we can implement the reform on the fiscal side. Those two issues are the two sides to the coin as I may say. As we firm out these two wheels of the cart, I do believe that the major framework for public spending will emerge and the specific allocation of the public spending funds will be properly allocated within the process.

(9) Announcements on public works and the issue of disclosure

Q: With regard to reviewing public works spending, in the past we had announcements made to suspend certain projects and the first question is will that be continued on as far as the ministries to come in 2001? My second question is, as far as I could learn from the newspaper articles the review process itself was elusive, and to what extent should disclosure come into the process and what organization should take the initiative on this front?

A: Coming to the conclusion first, it will be continued by the newly established ministries in 2001, and to a further extent enhanced.

Though it does not appear on the "Gist" it does appear to some extent in II.2. of the "Central Government Reform of Japan (January 2001)." With regards to policy evaluation it will be introduced from 6 January 2001, we are currently on a working process to enact this. There was severe criticism to the Kasumigaseki central bureaucracy to date that though they come up with new drafts and proposals they do not care more about the completion of the plans, they are abandoned to some extent and no evaluation has effectively been done. For instance, dams where they have excessive supplies of water and roads that are constructed in the most remote areas in which nobody ever drives would be examples of this.

We have two tiers of evaluation to come on this side. Each ministry will have evaluation committees and councils, and the second tier to this will be those to be established by the Ministry of Public Management, Home Affairs, Posts and Telecommunications having their third party evaluation council. The enforcement of the information disclosure law should become effective from 1 April 2001, which coincides with this. So we do believe that if things are combined well and a synergetic effect is felt by this information disclosure act together with the evaluation councils that are implemented we should expect a boost to come in terms of the evaluation of public works and the system that currently exists. So we believe that with the law on information disclosure, combined with the evaluation systems and mechanisms this should further enhance and ensure transparency at a high level to the process.

(10) Decision-making in public works projects

Q: I would like to ask as to who will be the final decision maker in suspending public works projects, who will take the ultimate responsibility I wonder? Should it be the policy chief of the ruling party? How forceful is the decision and the views expressed by the policy chief of the ruling party going to be in the new system? Though the ruling party argues that some projects should be cut off and suspended, some local communities argue against them. I wonder where the final authority should be with regard to public works projects?

A: I am not personally informed as to in what manner the review took place within the ruling party and the response that came from the Government in affecting the ruling party's review that was conducted. I am not clear on that point. However, the responsibility for the execution of the project rests with each responsible ministry which has the jurisdiction over the project, so I think the ultimate accountability and responsibility will rest with the minister to negotiate and collaborate with lawmakers including the policy chief of the ruling party to reach a final decision.

(11) The issue of increased workload

Q: I am interested in what you mentioned about the workload not being reduced with these reforms, if that is not the case, because what is happening now, because most of the ministers are talking about how much work the ministries have and in fact they are asking for more people. I think it has been mentioned that they have got so much work to do: they need more people. This piece of legislation, is the solution political or bureaucratic?

A: If we conduct business as usual, the quantity of work in the bureaucracy, as well as the number of pieces of legislation, is not likely to decrease. In fact the fundamental reason is given by the awareness of the electorate, the Japanese citizens, which gives meaning and significance to the administrative reform. I believe that in fact the subsidies for constructing roads in rural areas, on the part of electorates and local residents, was firmly decided on the part of Kasumigaseki or the central government. I believe that this authority underpinned by the 1,800 pieces of legislation was really the so-called power base of the central government to date. Therefore, as I have mentioned, on the part of the local residents, they may prefer otherwise as to having more devolution and power shifting from the central government to the local municipalities, and also a power shift to the private sector from the public sector.

There are some expected areas where the workload may increase. In Japan, the financial Big Bang or the deregulation of financial markets has taken place. Before the Big Bang, a small number of high-ranking bureaucrats from the Ministry of Finance went to talk with the top bankers of major banks and the top executives of the security firms that we have in Japan to negotiate a conducted and controlled behavior in the form of a convoy system. However, the ex-posto checking is now in place, and the principle of not making prior notification, as used to be and was mandatory is no longer residing and has in fact unleashed the convoy system that existed in the financial world prior to the Big Bang. This has led to a large incremental increase in the number of financial inspectors who are now regarded as necessary. They have continued to add one hundred to the number of their staff at the Financial Services Agency. With the shifting of regulation from the prior to a reporting post-event, we may expect a large number of inspectors in the financial markets and the workload to increase as well.

(11 December 2000; by Masakatsu Okamoto, Counsellor of the Headquarters for the Administrative Reform of the Central Government)