(For Reference Only)
(Provisional Translation)

Final Report of the Administrative Reform Council
(Executive Summary)

December 3, 1997

I. Philosophy and Objectives of Administrative Reform

1. To restructure "kono-kuni no katachi ('constitution' of this country)" by aspiring to form a society that is free and fair and composed of autonomous individuals, building on the achievements of the Japanese people to date.

2. To reform a governmental organization that has grown excessively large and rigid, and to realize a streamlined, efficient and transparent government that permits effective execution of important state functions.

3. With such a government as a keystone, to carry out positively an independently-initiated role as a member of the international society with a view to forming and developing a free and fair international society.

4. Administrative reform places in the center of its vision an image of the kind of state and society Japan should aspire to in the 21st century, and fleshes out such a concrete image. It is a process that should initiate comprehensive changes in social and economic systems.

II. Reinforcing Cabinet Functions

1. Basic Points of View

(1) In order for the Cabinet to conduct substantial policy discussions, and to function as the principal instrument for a top-down approach to the formation and execution of policy, there is a need to: reinforce the Cabinet's functions; define the "leadership of the Prime Minister" in terms of legal authority vested in that office; and reform and strengthen the structure of assistance and support provided for the Cabinet and the Prime Minister.

(2) The decentralization of power to local governments, the strengthening of the check functions of the Diet, and the reform of the judiciary (extending the "rule of law") shall also be taken into account.

2. Reinforcing Cabinet Functions

(1) As a process for reaching agreement among its members, the Cabinet should consider adopting majority rule as a possible method of decision making.

(2) Organizing meetings of Cabinet committees on specific issues with a focus on effective and responsive decision making of the Cabinet.

(3) Appointing Ministers of State with responsibility for specific issues.

(4) Reducing the total number of Ministers of State to between 15 and 17 (currently up to 20).

(5) Cabinet authorization of personnel appointment to senior ministerial offices, such as administrative vice-ministers, director-generals of bureaus, etc.

3. Strengthening Leadership of the Prime Minister

(1) Prime Minister's authority to propose basic policies shall be specified in the Cabinet Law.

(2) Provisions in the Cabinet Law relating to the directing and supervising of government departments by the Prime Minister shall be construed flexibly.

Cf. Article 6 of the Cabinet Law (Law No.5 of 1947, as amended): "The Prime Minister shall exercise control and supervision over the administrative branches in accordance with the policies to be decided upon at Cabinet meetings."

4. Strengthening the Structure of Assistance and Support provided for Cabinet and the Prime Minister (See Diagram 1.)

(1) Cabinet Secretariat

{1} A powerful planning and coordinating body that shall provide direct assistance and support to the Prime Minister.

{2} Its basic functions to include the planning and drafting of basic policies* for the national administration (the Cabinet's basic strategy), supreme and ultimate coordination within the government, as well as intelligence community, crisis management, public relations, etc. (Article 12 of the Cabinet Law should be revised to specify the planning and drafting role of the Cabinet Secretariat.)

*Basic policies: fundamental policies relating to external affairs and national security; fundamental policies relating to administrative and fiscal management; macroeconomic policies; fundamental policies relating to budget formulation; fundamental policies relating to organization and personnel of the national public administration; etc.

Cf. Article 12 of the Cabinet Law: "There shall be set up in the Cabinet a Secretariat." "The Cabinet Secretariat shall be in charge of general affairs such as arrangement of the agenda of Cabinet Meetings, be in charge of the coordination necessary for keeping integration of the policies of administrative offices such as the coordination of important matters for decision by Cabinet Meetings, and in charge of the collection and researches of information concerning important policies of the Cabinet."

{3} The Secretariat shall be operated basically by a politically appointed staff. Rules on personnel recruitment shall be established so that those outstandingly qualified persons could be appointed from both within and without the civil service.

(2) Cabinet Office

{1} While supporting the Cabinet Secretariat in the task of formulating the basic strategy of the Cabinet, the Office shall be responsible for interministerial planning and coordination on matters such as economic and fiscal policy, policy on arts and sciences and technology, disaster prevention, gender equality, Okinawa policy, affairs relating to the Northern Territories, consumer policy, etc. It shall also be responsible for handling the matters relating to the imperial family, honors, official institutions, etc.

{2} The Office shall set up both a planning and coordinating arm and an execution arm as its internal departments. Among the functions currently handled by the Economic Planning Agency, those relating to macroeconomic policy shall be transferred to the Cabinet Office.

{3} The Imperial Household Agency shall be made an extraordinary organization within the scope of the jurisdiction of the Cabinet Office.

{4} Council on Economic and Fiscal Policy, Council on Arts and Sciences and Technology, Central Disaster Prevention Council, and Council for Gender Equality shall be established within the Office as collegial bodies.

{5} A Minister of State in charge of Okinawa and Northern Territories Affairs (tentatively named) shall be appointed in the Cabinet Office. In addition, a section overseeing Okinawa-related measures shall be established in order to take charge of the planning and drafting of measures concerning Okinawa, compiling a unified budget for the economic promotion and development of Okinawa, etc. The Okinawa General Office shall also be placed as an local arm of the Cabinet Office.

{6} The Atomic Energy Commission and the Nuclear Safety Commission shall be placed within the Cabinet Office, where they will continue their present functions.

{7} Independent Organs

a. Defense Agency

- Shall be headed by a Minister of State, and continue its current functions.

- Fundamental defense issues shall be discussed separately in the political arena.

b. National Public Safety Commission
- Shall be headed by a Minister of State (who, however, will also concurrently hold other Ministerial responsibility), and continue its current functions.

c. Financial Supervision Agency

- The name, duties, etc. of the Agency shall be subject to further consideration hereafter.

- All the finance-related functions of inspection and supervision currently under the co-jurisdiction of the various Ministries shall be brought under the unified control of this Agency.

{8} The organizational positioning of the Cabinet Legislation Bureau, Security Council of Japan and National Personnel Authority shall remain as it is.

(3) Ministry of General Affairs

To be established as a part of measures to strengthen assistance and support for the Cabinet and the Prime Minister. (See section III-2-(2)-{1}.)

III. A New Conceptual Framework for Central Government Ministries and Agencies

1. Basic Points of View

(1) Based on the principles of "from the public to the private sectors" and "from the national to local governments", a far-reaching program of deregulation, decentralization, and role sharing between the public and private sectors shall be carried out, along with a vigorously pursued effort to streamline government and better allocate its resources on the basis of priority.

(2) To contribute to the creation of high-level policy planning and drafting capabilities, to the ensuring of a fair, neutral and transparent governmental process, and to the provision of efficient administrative services, etc., steps shall be taken to enhance the government's policy-drafting and execution capabilities, based on the principle of a separation of the policy-drafting function from the policy-execution function.

(3) The policy-drafting and policy-execution arms of government shall endeavor to work in close collaboration, based on a clearer designation of their respective responsibilities. Both arms shall establish a framework for evaluating policy.

2. Formation of Ministries

(1) Basic Policies

{1} Ministry's internal Bureaus shall give priority to the planning and drafting of policies.

{2} New Ministries and Agencies shall be established on the basis of the following principles: 1) organizing Ministries by functional objectives; 2) reorganizing and merging under large functional areas; 3) giving consideration to conflicts of interests; 4) inter-Ministerial balance; and 5) mutual coordination among Ministries based upon the objectives and duties of each Ministry.

{3} There is a need for innovative approaches that permit a flexible governmental reorganization, in response to changes in policy-related issues, international and domestic circumstances, and demand for new government services. Matters relating to the internal organization of the Ministries should be examined closely by the government, taking fully into account the overall contents of this report.

(2) Specific Measures

Including the Cabinet Office, the central government shall be organized into one Office ("Fu") and twelve Ministries ("Sho"). (See Diagram 2.)

The major points relating to each of the Ministries are as follows.

{1} Ministry of General Affairs

- Overseeing and managing the basic systems of government; overseeing and managing the system of local autonomy; and having the jurisdiction over telecommunications and broadcasting, postal services, and other matters not deemed appropriate to be handled by other specific Ministries.

- Augmenting functions relating to the evaluation and oversight of government policies and services (Administrative Inspection).

- With respect to the government's statistical services, correcting duplication and, where necessary, bringing various services under unified control.

- While taking into account the progress being made in decentralization, re-examining the ways in which the central government will have to relate to local governments from the perspective of respecting their autonomy.

- Reorganizing the current Communications Policy Bureau, Telecommunications Bureau, and Broadcasting Bureau of the Post and Telecommunications Ministry into two internal bureaus of the Ministry of General Affairs. No change shall be made in the division of roles in information and telecommunications policy between the current Ministry of Posts and Telecommunications and current Ministry of International Trade and Industry.

- Shall establish a Postal Affairs Planning and Management Bureau (tentatively named), which will have jurisdiction over the planning and management of the three postal services. A Postal Services Agency shall be newly established as the executing body (to be transformed five years later into a new Postal Services Public Corporation). (See section IV-2-(1)-{1}.)

{2} Ministry of Justice

- Augmenting and strengthening administrative efforts in the area of protection of human rights; supporting judicial system reforms, including the area of administrative tribunals.

- Streamlining the organization of the Public Security Investigation Agency. The government shall conduct a concrete examination hereafter, which will include a review of the agency's functions.

{3} Ministry of Foreign Affairs

- Augmenting and strengthening the Ministry's function to formulate integrated and comprehensive diplomatic strategies; fostering an ability to make more elaborated bilateral policy responses, etc.

- Taking on the role as the core ministry for the inter-ministerial coordination in formulating overall policies on economic cooperation (Official Development Assistance), including policies on loan aid (yen loans) as well as technical cooperation.

- As for cooperation through international organizations , collaboration between the Ministry and other relevant Ministries shall be intensified while basically maintaining the existing system.

- With regard to external economic policy, the system of cooperation with other Ministries shall be augmented and the divisions of roles clarified.

- Taking the initiative to appoint qualified non-MOFA personnel for the positions of ambassadors and ministers.

{4} Ministry of the Treasury

- Jurisdiction of planning and drafting to cope with financial institutions' bankruptcy and financial crises shall be considered hereafter.

- Fundamental reform of the Fiscal Investment and Loan Program (i.e., the elimination of mandatory deposits from the postal savings into the Trust Fund Bureau of MOF; fund raising based on market principles).

- The National Tax Administration Agency shall continue in its present form for the time being. So-called "administration through directives" shall be reduced. The question of unifying the collecting functions of national and local taxes shall be considered hereafter. The independence of personnel management in the National Tax Administration Agency shall be ensured.

{5} Ministry of Economy and Industry

- Withdrawing from/ reducing activities relating to promotion of specific business sectors; placing an increasing priority on measures to improve the overall business environment; respecting market principles.

- In terms of energy policy, emphasizing measures dealing with energy efficiency and new energy sources, while drastically eliminating and loosening regulations aimed at adjusting demand and supply.

{6} Ministry of National Land and Transport

- Promoting systematic efforts aimed at integrated development and utilization of national land and related resources.

- Developing an integrated transportation system that is unified in terms of both "hardware" and "software".

- Drastically deregulating governmental controls over transportation businesses.

- Shall refer the issue of comprehensive development plan on social capital to the Council on Economic and Fiscal Policy.

- Becoming the core player in inter-Ministerial coordination on the issue of traffic safety administration.

- Succeeding the duties and functions of the current Hokkaido Development Agency to continue to compile a unified budget on development in Hokkaido. No change shall be made regarding the transfer of the related budgets to the Ministry of Agriculture, Forestry and Fishery, and the direction and oversight of the Hokkaido Development Office (which shall be placed as a local branch of the Ministry).

- Implementing a thoroughgoing program of decentralization and the utilization of private-sector capabilities in relation to the execution of public works projects.

- Establishing Regional Development Offices (tentatively named) with responsibility for geographical blocs, compiling unified budgets and granting authority to these Regional Offices to execute public works projects. These Offices shall also be responsible for issuing approvals and licenses relating to land development.

{7} Ministry of Agriculture, Forestry and Fisheries

- Ensuring a stable supply of food, promoting rural and semi-mountainous areas, conservation and enhancement of forest resources, etc.

- Clarifying the respective roles of the national government, local governments and producers from the perspective of ensuring a stable supply of food.

- Structural improvement projects (public works projects) shall be limited to those that genuinely contribute to the stable supply of food. For those projects which are genuinely necessary to implement, the Ministry shall promote their execution in a consistent manner with other public works projects through mutual consultations with the Ministry of National Land and Transport.

{8} Ministry of the Environment

- Duties to center on the creation and conservation of the environment beneficial to human beings.

- Unifying jurisdiction over systems, operations, and projects aimed at conserving the environment, including regulations on air, water and soil pollution, waste management, etc.

- While sharing jurisdictions over recycling, the regulation of CO2 emissions, etc., with other relevant Ministries, the Ministry shall strengthen its role across the spectrum of government activities by taking action even on operations and projects that fall outside its jurisdiction. This shall include issuing necessary recommendations from the standpoint of environmental protection to the government bodies in question.

- Strengthening its function in international area including global warming issue, and its capabilities and organizational resources in this area.

{9} Ministry of Labor and Welfare

- Strengthening the integration and coordination of labor and social security policies; unifying the operations of collecting social insurance and labor insurance premiums; re-examining systems used to examine the safety of, and to approve, pharmaceuticals; etc.

- Taking the initiative as the core ministry for inter-ministerial coordination aimed at creating a comprehensive response to an aged society with fewer children.

{10} Ministry of Education, Science and Technology

- Consolidating comprehensive and strategic efforts relating to the administration of academic sciences in universities and that of other science and technology activities; ensuring the harmony and integration of academic research in university with scientific and technological research; reforming the administration of elementary and secondary education; augmenting capabilities relating to cultural administration, etc.

- In the area of international cultural exchange, improving collaboration with the Ministry of Foreign Affairs, with the Agency for Cultural Affairs playing a more important role.

3. Internal Subdivisions and Independent Organs

(1) Internal Subdivisions

Establishing functional organizations capable of making practical and strategic decisions. Even for large ministries, the number of internal bureaus per ministry should not exceed 10.

(2) Independent Organs

Centering on Executing Agencies that assume implementing functions, Independent Organs shall be reorganized into three types.

{1} Ministerial-level Agency (tentatively named)

- Headed by a Minister of State, to have both policy-making and implementing functions.

{2} Executing Agency (tentatively named) and Administrative Commissions

- Primary executing bodies operating under the jurisdiction of the Cabinet Office or the Ministries.

- To ensure autonomy and efficiency of Executing Agencies, the authority invested in their chief executives shall be clearly defined; implementation of management by objectives; establishment of independent personnel management.

{3} Policy Agency (tentatively named)

- With respect to existing Independent Organs, those primarily involved in policy-making could be maintained as Policy Agencies.

4. A New Inter-Ministerial Coordination System

While strengthening the functions of the Cabinet and reorganizing the government under large functional areas in accordance with administrative objectives, establishing a new system of coordination based on new ideas that shall contribute towards greater vitality and transparency in the policy-making process of the whole government. This shall entail combining: (1) the comprehensive coordination carried out by the Cabinet Secretariat; (2) the comprehensive coordination carried out by the Cabinet Office and by the Minister of State in charge of special issues; and (3) the coordinating system between Ministries.

5. Augmenting and Strengthening Evaluation Capabilities

Policy evaluation capabilities shall be augmented and strengthened. In addition, evaluation sections shall be established in each Ministry, and the central evaluation body in the Ministry of General Affairs; transparency shall be ensured through the release of evaluation results etc.; and the functions of the Board of Audit shall be strengthened.

6. Others

(1) Councils shall be limited to the minimum number necessary, with those that have little to show for their activities or little reason for existence eliminated. The operations of councils shall be improved by ensuring transparency, etc. In addition, a system of public comments shall be established which is designed to permit a wide range of opinions from the citizenry to be reflected in decision making of the government.

(2) As for "extraordinary organizations", the government shall conduct reappraisals appropriate to the character of the respective organizations.

(3) We request that the government seriously consider the "Concept of an Agency for Administrative Tribunals," which proposes the integration of the currently widely dispersed agencies involved in settling various administrative disputes.

IV. Cutting back Government Functions, Increasing Efficiency, etc.

1. Basic Points of View

(1) Cutting back government functions is an important issue. The privatization of operations and projects, or the transfer of administrative functions to the private sector, should be expedited. Even in instances entailing great difficulty, this process should be pursued by utilizing the systems of Independent Organs, or of Independent Administrative Corporations. The government shall also pursue a major transfer of functions to the private sector by contracting out.

(2) At the same time, the government shall revise its excessive intervention in private sector activities or in matters of local governments, and carry out a far-reaching re-examination of its use of regulations and subsidies.

(3) In accordance with the progress of measures above, steps shall be taken to streamline organizations throughout the entire government, and to achieve a drastic reduction in the number of personnel of the civil service.

2. Prescribed Steps for Downsizing

(1) Reform of Government-operated Enterprises

{1} Three Postal Services

The three Postal Services shall be transformed into a new public corporation ("Postal Services Public Corporation") in five years - a new corporation to be established directly by law.

a. Shall be operated autonomously and flexibly with responsibility for its own financial viability.

b. Shall make the thorough disclosure of information on its operations.

c. Employees shall be specially granted the status of national civil servants by the law establishing the Corporation.

d. Reasonable standards shall be examined regarding the issue of payment of surpluses into the national treasury, including whether or not such payments are appropriate.

e. Mandatory deposits into the government's Trust Fund Bureau shall be terminated; all funds shall be independently managed by the entity.

f. Examination of concrete conditions to allow the entry of private companies into mail services shall commence.

g. The incentive-payment system shall be examined in conjunction with a review of the organizational mode of operations.

{2} National Forest

a. The involvement of the national government in the entire area of forestry administration and in national forests shall put a greater emphasis on functioning effectively in the public interest; policy-related involvement shall be kept to an absolute minimum.

b. Departments involved in the management and harvesting of forests shall terminate the current mode of operations predicated on a self-supporting system. On-site operations shall be based on the consignment and subcontracting of work to the private sector, local governments, etc.

c. Rationalization of organization and staff, restoration of financial health. Accumulated debt shall be handled appropriately in accordance with the results of the evaluation conducted by the Conference on Fiscal Structural Reform.

{3} Mint and Printing operations

Appropriate forms of operation shall be reviewed hereafter.

(2) Establishment of Independent Administrative Corporations

{1} After separating planning and policy-drafting functions from executing functions, the government shall establish "Independent Administrative Corporations" with independent legal status outside the state's normal organizational framework. These corporations shall be designed to improve the efficiency and the quality of service of certain segments of the executing activity, and to ensure the transparency of such activities.

{2} While clearly establishing goals and rules regarding operations, the Government shall adopt a mechanism that permits the evaluation and improvement of the results of operations. At the same time, it shall grant such operations autonomy and scope for initiative (establishing incentive systems). Financial management shall be based on corporate accounting. These Corporations shall release a full range of information on their operations, financial results, etc. The Government shall also review their operations and necessity every 3-5 years.

{3} In terms of employees' status, there shall be two types of Corporations: those with employees given the status of national civil servants and those without. It shall be made possible to change its status from the former to the latter.

{4} To insure the objectivity and neutrality of evaluations, Operation Evaluation Committees shall be established in each Ministry, and an Evaluation Committee for Independent Administrative Corporations (tentatively named) with government-wide jurisdiction shall be established within the Ministry of General Affairs.

{5} The government shall evaluate and determine the specific areas to be undertaken by these Corporations.

(3) Organizations operating facilities such as national universities, national hospitals and sanatoria, and national experimental and research institutes shall also be subject to review.

(4) In other areas, a vigorous pursuit of privatization, consignment to the private sector, etc. is required. This includes the privatization of the alcohol monopoly, private sector consignment in the development of social infrastructure, etc.

3. Re-examination of the Use of Regulations and Subsidies

(1) Regarding the use of regulations, the government shall continue a thoroughgoing review, placing an emphasis on: urging the reduction and elimination of regulations; on the conversion to post-facto checking, on clarification of accountability; on reducing the burden on citizens, etc. The implementation of recommendations contained in the current Program for the Promotion of Deregulation shall, as a rule, be made no later than the end of March 2001.

(2) Regarding subsidies, the government shall continue a thoroughgoing review, placing an emphasis on eliminating and reducing subsidies, evaluating and making public the effectiveness of subsidies, etc. It shall formulate a plan for subsidies reduction at an early date.

(3) Regarding public works projects, the government shall carry out a thoroughgoing reappraisal of projects either directly under its jurisdiction or subsidized by it, and urge a markedly greater use of private-sector initiatives in their execution. The internal bureaus of Ministries shall place their emphasis on planning and overall policy coordination, while establishing a system to grant actual authority for the determination and execution of projects to integrated local branch offices with responsibility over bloc-level regions. It shall also urge greater efficiency and more transparency in the decision-making and execution process of the departments in charge of directly-executed projects.

(4) Local branch offices shall be limited to the minimum number necessary and be integrated within each Ministry. To the farthest extent possible, those with geographical jurisdiction smaller than a prefecture shall be eliminated. Also, regarding authority over permits and approvals, and over procedures relating to subsidies, etc., the maximum amount of authority possible shall be transferred to these integrated local branches, establishing a system that completes itself at local levels.

4. Streamlining the Organization; Reducing the Number of Personnel of Government

(1) The total number of secretariats and bureaus shall be drastically cut back, with the current total 128 to be reduced to around 90. The total number of "divisions" in the internal bureaus of Ministries and Agencies (currently about 1,200) shall be reduced to around 1,000 at the time of reorganizing Ministries and Agencies. Efforts shall be made to reduce this number ultimately to around 900.

(2) In 2001, the initial year for the reorganization of Ministries, the Law for the Total Number of Civil Servants shall be revised and a new plan for reduction of staff formulated. In the first 10 years of the plan, overall government staff shall be reduced by a minimum of 10 percent or greater.

V. Reform of the Civil Service System

1. The primary perspectives and directions of reform shall be as follows: (1) the construction of a personnel management system reflecting the reorganization of functions in the Ministries; (2) the establishment of a new unified system of personnel management; (3) the creation of a system for ensuring the availability of qualified personnel for the Cabinet Secretariat and the Cabinet Office; (4) the securing of a diverse range of qualified persons, and the implementation of a system of performance-based compensation, etc.; (5) the establishment of more appropriate systems of retirement.

2. Regarding the central government agencies involved in personnel administration, the National Personnel Authority shall concentrate on the functions assigned to it as compensation for the restrictions placed on the basic workers' rights of civil service, while, on the other hand, the Prime Minister shall carry out functions required to unify and maintain government-wide management over personnel. The personnel management functions shall be shared between the two in a way that is appropriate to the nature of their respective duties.

3. The Administrative Reform Council requests that the Council on the Public Service Personnel System pursue its review so that concrete results are produced at an early date.

VI. Others

1. A legal system of access to government information shall be established at an early date.

2. The recommendations made by the Committee for the Promotion of Decentralization shall be steadily implemented. Furthermore, in order to contribute to a radical advancing of decentralization, there is a need to establish a full-scale system of review which brings together the central and local governments for jointly considering the issues, which shall include the scale of local governments, their financial sources, and how to attract qualified personnel for them, etc.