Japan’s prime minister Junichiro Koizumi is a master illusionist. Playing the media better than any of his predecessors, he has managed to create the widespread impression that voters will have chosen reform if they return him and the LDP candidates supporting his favorite project to the Diet next Sunday. Years before he became prime minister an idea was implanted in his mind that true reform in Japan would begin with an overhaul of the postal savings system. Ever since he has believed that they ought to be privatized, and he has frequently repeated that he would stake his “political life” on an attempt to accomplish this. In the four years that he has headed Japan’s official government he was creeping toward this seemingly receding goal until the Lower House of Japan’s parliament passed related bills, which were subsequently voted down by the Upper House on the 8th of August. This prompted Koizumi to challenge his own party, and Japan’s political elite more generally, dissolving parliament and calling for a snap election. In the current campaign he insists that his plan of privatizing postal savings is the sole issue deserving of debate. He makes it appear as if the future of Japan depends on it, and refuses to be drawn out on other subjects, including some that would appear to deserve more urgent attention.
The Japanese postal savings system is in effect the world’s largest bank. True privatization of it is unthinkable because of the role its assets play in making the informal part of Japan’s political economy go round. That part – relationships and transactions, which are never scrutinized and are beyond legal control – is huge, and gives the Japanese economy its peculiar and enigmatic strengths. Household savings have long been a core element of what used to be called the Japanese economic miracle. Their interest yield is minuscule, but the post office has always offered marginally better rates, which has made its savings system the most popular. The savings are controlled by the Ministry of Finance – a rival bureaucracy to the ministry of Post and Telecommunications. They used to be administered by its Trust Fund Bureau and went straight into the zaisei toyushiin, more popularly known as ‘the second budget’. Today the money follows a less clear course through other channels, known as the Fiscal Loan Fund but continues to be allocated at the discretion of Ministry of Finance officials through a myriad of largely unaccountable administrative entities. Among many other functions, it is crucial in sustaining the Japanese Government Bond system – which should not be called a market because it is deliberately insulated from market forces.
The national financing function of the postal savings system dates from the later war years when, along with the supposedly commercial banks, it helped ensure an unimpeded flow of funds to the munitions industry. That arrangement formed the basis of an intricate system of financing that served postwar Japan’s legendary rapid reconstruction. Once that was accomplished, the huge amounts that were allocated through the “second budget” found new purposes under the control of Japan’s postwar political genius Kakuei Tanaka – the most influential politician of two generations, who was most powerful when working behind the scenes. Tanaka ran an “army” of parliamentarians and political operatives that excelled in guaranteeing electoral success through public spending on infrastructure. In its post-Tanaka development this tradition has bestowed upon Japan numerous unnecessary tunnels, bridges and three-lane highways leading to nowhere or into unmovable mountain-sides. These porkbarrel benefits are still significant for many campaigning politicians, especially LDP candidates. Hence the “background story” today is that Koizumi must fight vested interests within his party who hate to see a reduction of porkbarrel spending. There is, however, much more to what is done with this “second budget” than waste. It guarantees flows of money to parts of the country that otherwise would have little to stimulate regional economic activity. But most importantly, Japan’s excessive public spending helps solve a little known and even less understood problematic aspect of its political economy. It is forever in need of ways to create yen so as to balance its gigantic dollar holdings, most of which can find no other destination than to circulate in the American economy. The creation of accounts for contractors, who subsequently pass on the money they theoretically receive for construction tasks to the accounts of subcontractors – there are roughly half a million of those in Japan – ensures that a lot of yen enters the economy.
Considering its many functions, some of them essential to the informal, extralegal ways in which things are done in Japan, exposure of this system of financing to anything remotely resembling a market would certainly constitute a revolutionary overhaul. But it would also cause the collapse of the construction industry and of vital financial and agricultural institutions. A collapsing Japanese financial sector would be like an earthquake whose tsunami would inundate Wall Street, London, Frankfurt and much more. Not surprisingly therefore, there are no serious plans for what Koizumi claims to be the first huge step toward an overhaul of the country, even as he avers that it will help solve all other problems.
A quick glance at Koizumi’s privatization scheme that the Upper House rejected is enough to put any worried minds at rest. It aims to split the post office into four entities (mail delivery, savings, post offices and postal insurance), but not before 2017. Any legislation of this type designed to be implemented twelve years hence does not constitute policy in any serious democracy. Furthermore, there exists no genuine private sector to begin with, with respect to large-scale financing. This is conceptually challenging, but elementary to understanding of how Japan is put together – the supposedly private sector banks, for instance, have never been in the business of profit making.
What then are we witnessing? An incredible show, the deeper significance of which may have escaped Koizumi himself. How to explain his role? One needs to keep in mind that Japanese prime ministers do not for practical purpose have the mandate that comes with the job in most European or other Asian countries. The Japanese political system has not in our memory, and perhaps never, made room for a genuine functioning prime minister; or for that matter cabinet ministers with a real say over the portfolios they hold. That is not the impression that outsiders get. Anyone who has observed Japanese cabinet ministers up close must have noticed how they are treated with exceptional deference by those around them. But this bowing and scraping is in stark contrast to the infinitesimal influence these politicians have in their own ministries, where they are usually considered mere temporary visitors. It is as if worshipful attention has to make up for the lack of factual power.
For the Japanese prime minister this is true in a magnified manner, since he gets much respectful international attention on top of what he gets at home. And in the case of Koizumi this odd discrepancy has led to trying big things in a way that gives the impression that he likes to jump into the water just to discover whether he can swim. His North-Korean initiative went haywire because he had not thought it through, and had not made it part of a much broader strategy that would have had to include a marshalling of forces – including the media – so as to ensure a broad national grasp of what he tried to achieve. Most controversial have been his stubbornly repeated visits to the Yasukuni Shrine, seen by China (and Korea) as a demonstration of misplaced respect for war leaders branded as war criminals, which has led to a worrisome deteroriation in Sino-Japanese relations.
If institutional obstacles deprive you of the power that the title of your office suggests you ought to have, you cannot ever test that power. You are also tempted to indulge in symbolic actions on a par with the ritual devotion you receive from your surroundings. Japan’s public political life is hardly ever concerned with the real substance of relations and transactions among those who share power; it is put together of gestures, symbols, and scandals. Koizumi thrives in this environment. He has never been suspected – this is very important – of involvement in a scandal. He has projected utter sincerity about urgent issues in his daily press conferences, and seems to be steadfast, even though he has not found a way to steer a new political course. He is the first Japanese prime minister who is also a TV celebrity, and is much more flamboyant than the average Japanese politician.
Helped by the wishful thinking of many in the media he still comes across as a reformist politician even after four unproductive years. Reform is what Japanese want. The almost magical term has resonated with the public since a period of party political upheaval in 1993 when the idea gained ground that fundamental change in the way things were arranged in Japan was not only desirable but also possible. But exactly what any genuine reform might actually entail is rarely put before the public, with frustrated voices of the more thoughtful opposition politicians hardly ever getting through the din of supposed public opinion created by the media. So far Koizumi has served the agenda of activist officials within the Ministry of Finance. These believe that they have been instigating reform ever since they felt the need to restrain the public spending excesses caused by the the Tanaka army corps. The postal money project fits in with this restraint and with their overriding aim to keep savings under their control.
The question now is whether the electorate will wake up in time to the fact that they actually do have a choice next Sunday. The events of 1993 gave rise to politicians who have come to understand how they might gradually reform what urgently does need attention. The Japan Socialist Party, which with its mainly ritualistic opposition had been a dismal failure for 38 years of Japanese politics has now been displaced by a party created by these reformist-minded politicians: The Minshuto (DPJ). Its more eloquent politicians convey a relatively good grasp of Japan’s real problems, as they speak of the horrendous pension problems and – a first for Japanese elections – the need to address the deteriorating relations with Japan’s neighbors.
This group of genuine reformists can conceivably form a coalition to end the virtual monopoly the LDP has enjoyed for half a century, and thereby re-introduce the prewar two-party system, as well as reclaim significant power for the prime minister. The election on Sunday can either bring this about or postpone it indefinitely.
They are up against grand theater. As his current challenge demonstrates Koizumi is capable of putting on quite a spectacle. He has shocked a public by shattering the (supposed) harmony within his party; helping to spread the notion that the great policy task he must fulfill also overrides basic Japanese social commands. Koizumi has brilliantly managed to accomplish something all politicians try when faced with onerous problems. He has changed the subject. The story now is about loyalty, about steadfastness, about followers turning against their master. Adding to the spectacle are the so-called “assassins”, handpicked candidates – ten of them female, chosen with an eye to their looks – to run against the heretics. The only thing lacking is a dramatic love theme, but otherwise it could be grand opera. Koizumi loves opera and, as I had ample opportunity to discover in conversations before he became prime minister, he is thoroughly familiar with many opera plots. This may be his own finest production. By using harsh tactics against opponents within the LDP he causes the public to believe that he is fighting vested interests. Whereas in fact and probably unintentionally he will if successful be prolonging their grip on Japanese politics.