The Democratic Party of Japan swept into power with a call for “politician-led government.” Will it be able to live up to people’s expectations? This is the first of a three-part series of articles concerning political leadership and the policymaking process in present-day Japan. This first article reviews the traditional policymaking process.

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Half a year has passed since the Democratic Party of Japan came to power. A change of government offers a remarkable opportunity to break existing molds, and the public hoped the new administration would do so. Unfortunately, however, in the area of policymaking, the transparency of government operations has actually declined except in a few areas, such as program review. I have no argument with the DPJ administration’s direction for politician-led government, but I question whether it is truly desirable to have a policymaking process in which the policy decisions are made just by the ministers, senior vice ministers, and parliamentary secretaries of each ministry. In the manifesto that it issued before last year’s lower house election, the DPJ set forth a number of policies with a major impact on the economy, government finances, and people’s living conditions, including a child allowance, an individual household income support system for agriculture, elimination of expressway tolls, and a review of the privatization of the postal services. But the new administration has not fully analyzed and considered these policies in preparation for their inclusion in the budget for fiscal 2010 (April 2010 to March 2011). In this series of articles I will review the policymaking process of earlier administrations and discuss problems with the process under the current administration, with reference also to the approaches taken in other countries.

Traditional Policymaking: A Joint Endeavor

During the long period of rule by the Liberal Democratic Party (including the years when it was the main party in the ruling coalition), the key to the policymaking process was held by the divisions of the party’s Policy Research Council. There was a separate division for just about every ministry and agency, and each bill and institutional change that the government proposed had to be vetted and approved by the relevant division or divisions. This was generally called “prior screening.” Sometimes even cabinet ministers found it hard to disagree openly with the LDP division heads. So the responsible officers in the ministries and agencies often provided explanations to key figures in the party divisions even before they explained matters to their own minister. Ultimately, under this system of prior screening, the government proposals needed to be approved not just by the relevant divisions but also by the LDP’s General Council. Meanwhile, the ministries and agencies had outside experts participate in councils and other forums to debate and consider proposed measures, but in most cases the reports that emerged from their deliberations reflected not so much independent analyses and considerations by experts as the interests of the ministries and agencies in question. The councils were often criticized as being manipulated by officials so that their interests are reflected. The consideration of proposals by the ministries and agencies was conducted simultaneously with consideration by the councils and by the LDP divisions, and the final adjustments were made through moves to reach agreement between the government organs and the party divisions. Since these final adjustments were not carried out within the cabinet or the Diet, it was not necessarily clear who was making the decisions.

This traditional policymaking process was reformed by the creation of the Council on Economic and Fiscal Policy(CEFP) as part of the overhaul of central government organs implemented in January 2001. The CEFP was set up with the prime minister as its chair and with members consisting of the chief cabinet secretary, the minister of state for economic and fiscal policy, the minister of internal affairs and communications, the minister of finance, the minister of economy, trade, and industry, the governor of the Bank of Japan, and four private-sector members (two from the business world and two from academia). The council’s main responsibility was to study and deliberate important matters concerning economic and fiscal policy as directed by the prime minister, including basic policies for management of the economy as a whole, for management of government finances, and for compilation of the budget.

The CEFP played an active role during the administration of Junichiro Koizumi, who became prime minister in April 2001 and held the post through September 2006. Prime Minister Koizumi took the lead in formulating policy, setting the agenda for the council and having it conduct open discussions so as to achieve his own policy goals, such as privatization of the Japan Highway Public Corporation and of the postal services. The council became involved in the drafting of many key government documents, including the annual basic policies for economic and fiscal management and structural reform (nicknamed the honebuto no hoshin , or “basic policies”), the overall framework for the budget, and basic policy for budget compilation. At meetings of the CEFP, ministers were required to participate in the discussions using their own words (rather than simply reading aloud from memos prepared by bureaucrats), and the minutes of the discussions and the materials distributed at the meetings were made public, heightening the level of transparency in the policymaking process. The CEFP is legally an advisory council, not a decision-making organ, but with the prime minister as its chair, in practice it took control over policymaking.

Though the CEFP did bring about reform of the policymaking process, including increased transparency and decision making led by the prime minister, it faced limitations due to its nature as an advisory council. If it had been like an ordinary council, just a panel on which experts voiced their opinions, there would not have been much friction, but the more it became involved in making decisions concerning structural reform and other important policy matters, the more it became necessary to coordinate and adjust its decisions with the parties of the ruling coalition (the LDP, the New Komeito, and, until November 2003, the New Conservative Party). For example, in formulating the honebuto basic policies, on top of the process of coordination within the government, the initial draft prepared by the CEFP was modified on the basis of adjustment with the ruling parties. The daily newspaper Nikkei reported as follows on June 27, 2003, regarding the formulation of that year’s honebuto policies: “The original proposal to limit the latent national burden [the ratio to national income of the sum of taxes, social security contributions, and the budget deficit] to around 50% was substantially watered down. The final wording ended up presenting it as what might be taken as an example rather than a target.” “It was decided to reduce government subsidies by 4 trillion over a three-year period, but in the face of resistance from the ministries and agencies, not a single piece of the contents was decided.” “Neither Prime Minister Koizumi nor anybody else from the government, bureaucracy, or private sector managed to exert leadership, and matters on which there are bound to be differences with the ruling party have been put off to be handled as part of the year-end budget compilation and tax reform processes.”

The CEFP does not include senior members of the ruling party, so the process of adjustment between the government and the ruling party takes place outside of this council. Since the government requires the cooperation of the ruling party in enacting or revising legislation to implement the policies adopted by the cabinet, if the CEFP is to function as a de facto decision-making body, coordination with the ruling party is obviously necessary. Even though the prime minister chairs it, the CEFP is no more than an investigative and deliberative organ. In the approach to integrated reform of expenditures and revenues, which was on the agenda in the latter part of the Koizumi administration, the LDP’s Policy Research Council became actively involved in the drafting of a concrete proposal, and instead of the earlier top-down process led by the CEFP, deliberations were conducted as a joint effort by the government and the ruling parties. In specific terms, on May 22, 2006, a Council for Comprehensive Financial and Economic Reform was established, composed of six cabinet members, including Minister of State for Economic and Fiscal Policy Kaoru Yosano, Minister of Finance Sadakazu Tanigaki, and Minister of Internal Affairs and Communications Heizo Takenaka, and 19 officials of the LDP and Komeito. This council was effectively placed above the CEFP. The LDP, which had been sidelined under the Koizumi administration, thus rejoined the policymaking process. This was because the realization of policy was not possible without the involvement of the LDP. The newly created council considered practical cuts in spending.

Leadership by the Cabinet and Formulation of Policies

The CEFP played a major role in Japan’s policymaking process, but Koizumi’s successors as prime minister lacked the will to make active use of this council, and so its role receded. The relationship between the government and the ruling party within the policymaking process has still not been properly settled. It was in this context that the DPJ took power after a landslide victory in last summer’s House of Representatives election. The DPJ administration proclaimed its intention of eliminating bureaucratic leadership and replacing it with government led by politicians. In concrete terms, it abolished the ruling party’s policy councils and put the top-ranking politicians in each of the ministries and agencies—the minister, senior vice ministers, and parliamentary secretaries—in the center of the policymaking process. Also, it set up policy councils in each ministry to gather the opinions of ruling party legislators, and it created ministerial committees for specific topics to reconcile differences among the ministries and agencies. In addition, the DPJ manifesto included a promise to put more than 100 Diet members in government posts to effectively draft and make decisions on policy; the relevant legislation has been submitted to the current session of the Diet. The DPJ administration proposes to abolish the CEFP, the symbol of the Koizumi reforms, and all but a few of the government’s other councils have been put on hold.

The DPJ administration insists that politicians should be at the center of the policymaking process. I do agree with the idea of replacing the two-track system involving the government and the ruling party with a unitary system in which decisions are made by the cabinet. The previous set of arrangements did not make it clear who was to take responsibility. But I question whether it makes sense to leave the process of discussing and reaching decisions on policy just up to the politicians in the top three positions in each ministry. In its electoral manifesto, the DPJ set forth a number of policies with a major impact on the economy, government finances, and people’s living conditions, including a child allowance, an individual household income support system for agriculture, elimination of expressway tolls, and a review of the privatization of the postal services. But how has the new administration gone about considering these policies and including them in the budget for fiscal 2010? Next I would like to review the policymaking process as it was applied to the child allowance, which involves the largest amount of money among the new policies.