DPJ’S GOVERNING FIASCO: Party never challenged Finance Ministry

April 05, 2012


Among the Democratic Party of Japan's many pledges when it came to power was to loosen the hold that bureaucrats had on policy issues and put politicians in charge.

Yet it never challenged the Finance Ministry, the bastion of the nation’s bureaucratic hierarchy.

In reality, the Finance Ministry has gained more clout under successive DPJ administrations, winning over prime ministers Yukio Hatoyama, Naoto Kan and now Yoshihiko Noda.

The DPJ thrashed the Liberal Democratic Party in the August 2009 Lower House election with a promise not to increase the consumption tax rate for four years.

Less than three years after the historic change in government, the Noda administration submitted a bill for the consumption tax hike to the Diet. Noda has vowed to stake his political life on passage of the legislation.

While in opposition, the DPJ pledged to overhaul the nation's governance structure, breaking the shackles of bureaucrats.

In June 2009, Hatoyama and Kan secretly met with Yoshimi Watanabe and Kenji Eda, who were preparing to form Your Party.

Eda, a former industry ministry bureaucrat, said the DPJ should rein in the Finance Ministry, describing it as "the most important citadel of Kasumigaseki (Japan’s bureaucracy)."

Kan said the DPJ was fully aware of that, adding, "We beseech you to cooperate in breaking down the structure of the bureaucratic leadership."

Watanabe, who now heads Your Party, had doubts about the DPJ’s commitment to severing its reliance on bureaucrats.

When he attended a meeting with mid-ranked DPJ lawmakers, such as Noda and Seiji Maehara, Watanabe overheard one politician saying: "We will come down hard on mediocre bureaucrats at the infrastructure, farm and other ministries. But we will work together with the Finance Ministry."

Before the Lower House election, the DPJ was divided over its stance toward the Finance Ministry. Lawmakers pondered whether it would be a "friend" in helping the DPJ to eliminate wasteful spending or an "enemy" that championed bureaucratic interest.

Many leaned toward a two-stage approach: first teaming up with it on spending cuts and then sticking the knife into it.

Immediately before the election, Hatoyama secretly met with senior Finance Ministry bureaucrats, among them administrative vice minister Yasutake Tango and Eijiro Katsu, director-general of the Budget Bureau. He met with Tango and Katsu on a number of occasions.

Looking back, Hatoyama said the DPJ needed to slash wasteful spending and secure revenue for its key campaign policies, one of which was a monthly child allowance.

"We concluded that we can cooperate with the Finance Ministry if it helps cut government expenditures," he said. "We mistakenly believed that the ministry's most important mission was to achieve a reduction in government spending."

Hatoyama now labels the Finance Ministry as the guardian of the bureaucratic apparatus. He said its ultimate goal is to raise the consumption tax rate, thereby expanding its influence.

Heizo Takenaka, who battled with the Finance Ministry over the initiative in budget formulation when he served as a Cabinet minister under Junichiro Koizumi, said tax increases, not spending cuts, benefit the Finance Ministry.

"The Finance Ministry derives its power by allocating money from a fat pocketbook," he said.

In the 2009 manifesto, the DPJ promised to deprive the Finance Ministry of the right to compile the budget and shift that responsibility to the national policy unit to be set up under the prime minister’s office.

Keisuke Tsumura, who was parliamentary secretary in charge of national policy, recalled how the strategy collapsed.

In late September of 2009, Kan, who was national policy minister, was irritated because the government had not been able to decide on a basic budget policy due to a lack of revenue for the DPJ’s campaign policies.

Katsu, chief of the Budget Bureau, appeared. Kan asked when the basic budget policy should be drawn up if the budget was to be compiled by the end of the year.

"The DPJ has a grand manifesto," Katsu said. "If you issue a sheet of paper and tell us to compile the budget based on the manifesto, we will follow the instruction."

Kan was visibly relieved. "That makes it easy," he said.

The meeting effectively put Finance Minister Hirohisa Fujii, not Kan, in charge of compiling the budget under the first DPJ administration.

Fujii, 79, is a former Finance Ministry bureaucrat. He became a Diet member after Hatoyama’s father, who was an administrative vice finance minister, advised him to go into politics.

"I don't think politicians can make correct judgments on details of the budget," Fujii said. "The Finance Ministry has a tradition encompassing more than a century. What is expected of politicians is to make decisions."

Fujii was instrumental in installing Noda as senior vice finance minister under him.

In a book he wrote before the DPJ came to power, Noda stressed the need to cut wasteful spending and stop bureaucrats from landing cushy post-retirement jobs. But not a line touched on a consumption tax hike.

But Noda suddenly turned into a tax hike advocate after he was appointed senior vice finance minister.

Successive DPJ administrations have failed to make meaningful spending cuts. Despite rounds of budget screening, the three budgets compiled by the party effectively ballooned to record levels on an initial basis.

On the other hand, the DPJ administrations have steadily laid the ground for the consumption tax hike.

Kan, who served as finance minister and then became prime minister, abruptly called for a consumption tax hike before the Upper House election in 2010.

Noda emerged as a leading voice of the Finance Ministry's arguments in the political world after he was promoted to finance minister under Kan.

He met with former finance ministers of the LDP through the intermediation of Finance Ministry bureaucrats.

Noda won the DPJ presidential election in 2011 even though he had called for a consumption tax hike. In March, the Noda administration submitted a bill to raise the consumption tax rate to the Diet despite strong opposition among DPJ lawmakers.

Noda surprised the political world last autumn when he appointed Jun Azumi as finance minister, his first Cabinet portfolio.

But Finance Ministry bureaucrats approached Azumi even before the change in government because he stood out for his handling of Diet affairs.

The ministry has regularly held policy study meetings for Azumi, assigning Shigeaki Okamoto, a budget examiner and his acquaintance, as a lecturer.

Okamoto now supports Azumi as director-general of the Finance Ministry’s Secretarial Division.

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