The New Politics of Labor:
Shifting Veto Points andRepresenting the Un-organizedMari Miura
F-93
Institute of Social Science,
Domestic Politics Project No. 3
July 2001

Dept. of Political Science
University of California, Berkeley
Institute of Social Science
University of Tokyo
miura@iss.u-tokyo.ac.jp

An earlier version of this paper was delivered at the Conference on Japanese Politics, Gendai Nihon Seiji
Kenkyukai, June 28, 2001, University of Tokyo. Parts of the argument were also presented at theInstitute of Social Science, University of Tokyo and the Department of Economics, University of
Hokkaido. I would like to acknowledge the insightful comments that I received from the following
people: John C. Campbell, Nobuhiro Hiwatari, Jonah Levy, Mikitaka Masuyama, Keisuke Nakamura,
Koichi Nakano, Gregory Noble, Hideo Otake, Tetsuhiko Takai, Steven Vogel, and John Zysman.

1. The New Politics of Labor
Labor politics in Japan became quite contentious in the 1990s. Bureaucratic co-ordinationof conflicting interests at the level of advisory councils failed to reach a consensus andpolicy-making processes became more openly belligerent. Accordingly, the Diet became amore important policy-making arena1.
Traditionally, policy-making processes in the realm of labor law have long been consensual
and substantial decisions have been made by the MOL’s advisory councils2. It is acommon policy-making procedure across the board in Japan that substantial decisions are
already made before bills are proposed to the Diet, either by ministerial advisory councils
or the LDP’s PARC (Policy Advisory Research Committee?)3. Yet, the importance of the
MOL’s advisory councils as the locus of decision-making has been exceptional comparedto other jurisdictions. Moreover, interference of political parties at the level of the Diet
has been rare because labor laws neither provide distributive benefits to politicians nor
entices new players after the decision-making by the advisory councils. Thus, the normal
policy-making style in the MOL’s jurisdiction can be largely characterized as“bureaucracy-led.”4
The MOL’s advisory councils lost some of their consensus-building function in the 1990s,
which brought about more wrangling and involvement of political parties. Why did “thenew politics of labor” emerge in the 1990s? My paper shows that a new player, theDeregulation Subcommittee, entered the policy-making procedure, which impaired theconsensus-building capacity of the MOL’s advisory councils. Since conflicts were notreconciled prior to parliamentary deliberations, the Diet, the final veto point, gained its
relative importance as the locus of decision-making.
The shift in veto points in labor politics is foremost attributed to the change of thepolicy-making procedure at the level of governing processes (i.e., a creation of the
Deregulation Subcommittee). Nevertheless, the emergence of the new politics of laborneeds to be analyzed in a broader and structural context as well. What interest pushed theformation of the Deregulation Subcommittee? My paper argues that Keidanren’scommitment to deregulation and its lobbying style that tends to bypass advisory councils
changed the policy-making procedure of labor market regulations. Moreover, Rengo also
had its own reason to politicize labor politics. Due to the low and ever decreasing
unionization rate, Rengo needed to represent not only the interest of affiliated unions but
also that of unorganized regular workers as well as atypical workers. In order to appeal tounorganized workers, openly contentious politics serves Rengo’s strategy for recruitment
and organizational expansion better.
The rest of the paper is organized as follows. The next three sections examine three cases
1 On the similar observation, see Ikuo Kume, “Rodo Sesaku Kate no Seijyuku toHenyo,.” Nihon Rodo Kenkyu
Zasshi (No.475, 2000): 2-13.
2Toru Shinoda, “Singikai: Danjo Koyo Kikai Kintoho wo meguru Ishikettei,” Nihongata Seisaku Kettei no Henyoed. by Minoru Nakano (Tokyo: Toyo Keizai Shinposha, 1986): 79-110.
3 Sone and Iwai elaborate “the obstacle course model” to explain this political phenomenon of shifting
decision-making arenas to pre-parliamentary institutions. See Yasunori Sone and Tomoaki Iwai, “Seisaku
Katei ni okeru Gikai no Yakuwari,” Nenpo Seijigaku (1987): 149-174.
4Frank J. Schwartz, Advice and Consent: The Politics of Consultation in Japan (Cambridge: Cambdridge University
Press, 1998): 117.

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that deviated from the formerly prevailing policy-making procedures: statutory working
hours reduction in 1993 (Section 2), the 1998 Labor Standards Act (Section 3), and the1999 Dispatched Manpower Business Act (Section 4). These cases all illustrate theemergence of the new politics of labor, although they differ in causes, processes, andsettlements. The fifth section analyzes the role played by a new player, the Deregulation
Subcommittee. The sixth section then analyzes veto power of unions by looking at
political institutions and different strategies required at different veto points. The section
also argues that Rengo was both forced and enabled to represent unorganized interests in the
1990s, which also contributed to the emergence of the new politics of labor.
2. Working Time Reduction in 1993
The policy-making process of the introduction of a statutory 40 hour work week was thefirst case of deviation from the established procedure of labor law legislation. Major
small business associations asked the LDP’s intervention in order to gain their preferential
treatment, which fueled labor delegates’ opposition. All the labor delegates for the firsttime boycotted the advisory council. Despite unions’ boycott and protest, they were notable to overturn the MOL’s decision to allow small businesses to be exempt from the thenworking-hour regime. However, this unprecedented political process pushed the MOL totake unions’ side when the reduction of working hours became an agenda in following
years.
Statutory working hours are regulated by the Labor Standards Act in Japan and had long
been 48 hours. In 1987, the Labor Standards Act was amended, stipulating a new 40 workhour regime. Its full implementation, however, took ten years. Bearing in mind that theLabor Standards Act is compulsory with penalty rules, the MOL gradually reduced working
hours by revising additional clauses of the Labor Standards Act and amending theministerial ordinance. In 1990, the MOL first introduced the 44 statutory working hours.
Then in 1993, it finally implemented the 40 statutory working hours. At the same time, it
granted grace periods to small businesses. Exact terms of the grace periods varied
depending on sectors and firm sizes. In general, the statutory working hours forbusinesses granted the grace periods were 48 hours in 1988, 46 hours in 1991, and either 44
or 46 hours in 1994. It was only in 1997 that the all sectors of the Japanese economy
were bound to 40 statutory working hours.
According to the agreement reached at the Central Labor Standards Advisory Council in
December 1992, the implementation of 44 statutory working hours was supposed to startfrom April 1993 without exception. Despite its agreement, small business associations
objected to the implementation of 44 hours, arguing that the reduction of working hours
under recent severe economic conditions would harm small businesses. The four majororganizations of small businesses—the Japan Chamber of Commerce (Nihon Shōkō
Kaigisho), the Japan Federation of Societies of Commerce and Industry (Zenkoku
Shōkōkai Rengōkai), the National Federation of Small Business Associations (Zenkoku
Chūshō Kigyō Dantai Chūōkai), and the National Federation of Shopping Center
Promotion Associations (Zenkoku Shōtengai Shinkō Kumiai Rengōkai)—vigorously
lobbied the MOL and the LDP and demanded the extension of the grace period. They
wrote petition letters to members of the LDP’s Labor Committee, the chairman of theCentral Labor Standards Advisory Council, and the MOL, and requested that the statutory2

working hours to small businesses should remain at 44 hours instead of 40 hours and thatthe current grace period of 46 working hours should continue to be applied even after
April 1993.
The small business associations also lobbied LDP politicians at the local level. The
mobilization of their local federations and member-companies turned out to effectively
pressure the LDP, as they often run political machines in support of conservative
politicians during campaign periods.
Facing strong political interference directly from the small business associations, as well as
via the LDP, the MOL logrolled the legislation of the 1993 amendment of the Labor
Standards Act for the extension of the grace period for another year. The LDP pressed
the MOL to accept the demand of the small business associations by hinting at theabortion of the 1993 Labor Standards Act. The MOL judged that the compromise on
the grace period was a minor setback compared to the failure of legislating the wholeframework of the statutory working hours embodied in the 1993 Labor Standards Act.
Terms and conditions of the grace period were regulated by government ordinance. This
meant that review by the Central Labor Standards Advisory Council was required in order
to extend the current grace period. All of the seven labor delegates bluntly opposed
overturning the past agreement at the Council. They attended the council meeting, butleft before votes were cast to express their disapproval. The MOL, the chairman of theCouncil, and public interest representatives tried to convince Rengo and the labor delegatesto return to the negotiation table, but they refused to participate in voting. Rengo
organized several demonstrations in front of the MOL as well as expressed its opposition
via several channels to Nikkeiren, the Small and Medium Enterprises Agency, the MITI,
and the Tokyo Chamber of Commerce. Rengo also organized a nation-wide campaign
mobilizing its local offices. Thirty-four branches of the Local Rengo wrote petitions to
the Local Labor Standards Offices, articulated their discontent at the Local Labor
Standards Advisory Councils, or solicited agreements from public interest representatives.
Despite Rengo’s strong objection and wide mobilization, the Council voted for a newministerial ordinance without the presence of the labor representatives. It was
unprecedented that all of the labor delegates were not present at the advisory council, but
the MOL had no other option except to allow the special grace period to small businesses
in order to carry on the reduction of statutory working hours.
Reacting to the MOL’s decision, Rengo lobbied five opposition parties (JSP, Komei-to, DSP,
SDL, and Kaikakuren) and these parties agreed with Rengo to send a petition to the Labor
Minister, asking for an overturning of the extension of the grace period. Despite thispolitical pressure, the MOL did not change their decision.
Rengo’s setback, however, constrained the behavior of small business associations whenthe Labor Standards Act was revised in 1996. Both the MOL and the public interest
representatives did not allow the small business associations to ignore the Council. The
MOL dismissed continued claims for an extension of the grace period by the small
business associations. The use of political power ironically discredited the claim of thesmall business associations5.
5

The small business associations continued to pressure the MOL to allow them special treatment.

3

The

The political process of the reduction in the statutory working hours in 1993 was the firstcase in which the advisory council was steamrolled. The fact that such a reduction would
hit the small business sector the hardest made the decision-making process highly political.
Nikkeiren, where the interests of big business are represented, does not use political clout
and in fact it does not have resources to mobilize conservative politicians. In contrast,
small business associations were able to use their extensive networks at the local level andeffectively exerted pressure on the LDP politicians in their districts.
Facing the direct political intervention, Rengo declared that “a scuffle outside of thegrounds” should not be allowed in the labor law making procedure. Indeed, Rengo raised
an objection not only to the extension of the grace period per se, but also to the fact thatthe deal was struck by the LDP and the MOL behind the scenes without the involvementof labor representatives. It was thus the small business associations’ willingness topoliticize the issue that changed the concerted politics of the MOL, Rengo, and Nikkeiren.
3. The 1998 Labor Standards Act
Discretionary Work Hour Rules
The policy-making process of the 1998 amendment of the Labor Standards Act was also
very contentious. This time, it was not the politically mighty small business associations
but Nikkeiren, with the help of Keidanren, that actively advocated issues that labor would
not accept without qualifications. Unlike the small business associations, Nikkeiren did
not try to bypass the advisory council. Nevertheless, the emergence of the newpolicy-making procedure led by the Deregulation Subcommittee resulted in undercutting
the advisory council.
The amendment of the Labor Standards Act in 1998 was the most extensive revision since
it was first drafted in 1947. Several amendments were added after its initial passage, but
the 1998 amendment was by far the most wide-ranging in scope and the most controversial
in substance. It basically coalesced the liberalization of work hour rules and thestrengthening of regulations on employment contracts and termination notices. The
most contentious proposal was discretionary work hour rules. If discretionary work hour
rules are applied, certain hours set by employer-employee negotiations are counted asworking hours regardless of actual hours that workers spend to accomplish a task.
Discretionary work hour rules were first adopted in 1987 to professional jobs such as
designers, producers, directors, information technicians, and research and development
engineers. Another six jobs were added to the list in 1997, but all the jobs were still
limited to professional jobs. By contrast, the 1998 amendment enabled employers toapply the discretionary work hour rules to white-collar workers who deal with management
in a core division of a company. On the surface, employers succeeded in largely
extending the coverage of the rule. However, Rengo succeeded in inserting detailed
conditions for introducing the discretionary work hour rules, which made the new rules
Small and Medium Enterprises Agency issued a ministerial circular that allowed the small businesses to ignore
the Labor Standards Act. This circular became public later, which incited protests from the MOL and
Rengo. The Agency soon withheld it. In order to deal with political pressure from the small businessassociations, the MOL created new subsidy programs for small business employers who implemented the
reduction of working hours.

4practically unusable6.
The legislation of such a controversial law would have been quite difficult, had the MOL
waited for consensus to be made at its advisory council. Without a strong political willfrom the cabinet, the advisory council would have spent tremendous time for negotiation
and reconciliation between employers and unions. Indeed, until the cabinet endorsed thelegislation for the extension of the discretionary work hour rules, neither serious
discussions nor negotiations were conducted at the advisory council.
In 1992, the Central Labor Standards Advisory Council first recommended that a newresearch committee be set up to examine the scope of coverage of the discretionary workhour rules. Following this recommendation, in April 1994 the Study Group of theDiscretionary Work Hour Rules was formed in the MOL’s Labor Standards Division. It
published its report in April 1995, but it was not able to reconcile widely opposing views of
employer delegates and labor delegates. Nikkeiren demanded that the revision of theLabor Standards Act for the discretionary work hour rules be applied to all white-collar
workers7. Rengo argued that such a revision would result in long working hours without
wage premiums. Instead, it demanded full implementation of 40 statutory working hours
without any exceptions, reform of paid vacations, regulation of over-time work, and so on.
The MOL and the public interest representatives were willing to discuss new rules fordiscretionary work hours, but they were hesitant to rush to any conclusions. After thereport of the Study Group was published, deliberations took place at the Central Labor
Standards Advisory Council’s Working Hour Division from October 1995 to March 1997.
Yet, substantial negotiation did not take place at that point.
The MOL suddenly changed gears in July 1997. It presented to the Central Labor
Standards Advisory Council its own draft including the extension of the discretionary workhour rules to white-collar workers. The fact that the MOL presented a proposal to its
own advisory council was unprecedented. It is usually the role of public interest
representatives to present drafts to the advisory councils. They normally work closelywith the MOL, which makes the MOL’s conspicuous leadership all the more unnecessary.
The MOL’s sudden and strong initiative was pushed by the cabinet decision, which was, inturn, based on the recommendation of the Deregulation Subcommittee. In December
1996, the Deregulation Subcommittee proposed four items to be deregulated in the realmof labor law: the deregulation of one-year basis irregular work hour rules; the enlargementof coverage under discretionary work hour rules to include all white-collar workers; theextension of term-contracts from one year to three-five years; and the abolition ofprotective measures for women such as limitations on over-time and holiday work andnight shifts. The recommendation of the Deregulation Subcommittee was soon
incorporated into the cabinet’s decisions. In March 1997, the cabinet certified “theProgram for Innovation and Creation of Economic Structure” in which it claimed to
6 On the detailed preconditions for introducing the discretionary work hour rules to planning division(kikaku gyōmu-gata sairyō rōdōsei), see Kazuo Sugeno, Rodoho, the fifth edition (Tokyo: Kobundo, 2000):296-299. Both Rengo and Nikkeiren admit that the new rules based on the 1998 amendment would not
spread the introduction of the discretionary work hour rules (Interview with Kenichi Kumagai, Division
Director of Labor Law Division, Rengo, July 21, 2000; Interview record with Nikkeiren’s Labor Law
Department, September 7, 2000).
7 On Nikkeiren’s proposal, see Sairyō Rōdōsei no Minaoshi nitsuite (Iken), Nikkeiren Sairyō Rōdōsei Kenkyūkai,November 1994.

5

legislate necessary measures for deregulation of work hour rules. The Economic Council
under the Economic Planning Agency also proposed the relaxation of labor market
regulations, mentioning the same deregulation items that the Deregulation Subcommittee
and the Cabinet proposed.
Once the cabinet decisions are made, room for maneuvering narrowed for bureaucratic
co-ordination, as ministries need to respect them. The cabinet’s endorsement of the
Subcommittee’s recommendations in March 1997 apparently led to the sudden and strong
initiative of the MOL in July 1997. The cabinet also decided that the necessary legislative
revision to expand the coverage of the discretionary work hour rules should be proposedto the Diet in the regular parliamentary session of 1998. The Japanese regularparliamentary session starts in January and its term is 150 days. In order to keep up withthis political schedule, the Central Labor Standards Advisory Council was forced to closedeliberations by December 1997, which meant that only three months were left for
tripartite negotiations at the Council. As a result, the MOL did not have time to consult
with public interest representatives to draft a proposal. Instead, it had to present its own
proposal to the advisory council, even though such a direct intervention was
unprecedented.
Despite the MOL’s effort, the Council failed to arrive at a consensus and it reported its
legislative recommendation, juxtaposing irreconcilable opinions of labor, employers, andpublic interest representatives. Based on the council’s recommendation, the MOL thendrafted an outline of the government bill and sent it to the advisory council in January
1998. Five days later, the Council approved it without any objections.
Unlike the case of the working hour reduction in 1993, labor delegates did not take theCouncil hostage. They did not aim to thwart the operation of the Council. Instead,
Rengo shifted its focus from the advisory council to the Diet to seek substantial revisionsof the government bill. One of the reasons for such a strategy shift was that Rengo was
not able to unite its own organization. Some industrial unions agreed on the introductionof discretionary work hour rules. The confederation of Japan Automobile Workers’
Union and the Japanese Electrical Electronic & Information Union publicly supported theintroduction of discretionary work hour rules. Both of the industrial federations
endorsed Rengo’s opposition to the 1998 amendment of the Labor Standards Act because
they understood the importance of united actions as Rengo. Even though they could
tolerate Rengo’s official line and mobilization in general, it would have been difficult forthem to vote at the advisory council against what they officially supported. Therefore,
even if Rengo preferred to use the tactics of non-attendance to the advisory council, it
simply might have only resulted in producing defectors. Exposing a rupture in theorganization, obviously, would not have improved Rengo’s capacity to bargain with politicalparties. Thus, a veto point shifted to the Diet.
Parliamentary Politics: New Tactics and Mobilization
In order to realize substantial amendments to the government bill in the Diet, Rengo first
had to make the Democratic Party recognize the importance of the issue and support
Rengo’s opinions. In February 1998, Rengo drafted an alternative bill and made it public.
This new tactic turned out to be quite effective. Based on Rengo’s draft, the Democratic
Party8 negotiated with the Liberal Party, the Social Democratic Party, and the Komei-to9 at
8In the 1998 case, the Democratic Party was not yet existence.

6

However, five parties formed athe board meeting of the Labor Committee in the Lower House. The Democratic Party
even drafted its own bill, which was very similar to Rengo’s bill, in order to raise leveragevis-à-vis the governing LDP. The DP did not actually submit the bill to the Diet, but thepresence of the alternative bill made negotiations with the LDP and the government more
effective10. All the major parties including the LDP, except the JCP, agreed to the revisionof the government bill by May 16. However, the Japan Social Democratic Party (JSDP),
which did not officially have a seat in the board, proclaimed that it would not support therevision because it was not included in the negotiation process11. Since the JSDP was in
the coalition government with the LDP at the time, government bills could not be passed
without the JSDP’s support. In June, the Labor Committee was forced to continue
deliberating the bill in the next parliamentary session due to the lack of deliberative time in
the regular parliamentary session.
The Upper House election was held in July, and contrary to most people’s expectations, the
LDP lost badly. The change in the balance between the governing parties and the
opposition parties enabled the DP to gain more revisions when the bill was discussed in
the following parliamentary session. Rengo basically realized almost all of its demands
either in the form of the revised bill or the supplementary resolutions. As a result, theimplementation date of the new discretionary work rule was extended a year, which gave
Rengo time to influence the decision-making processes of ministerial ordinances. Rengo
also succeeded in inserting a phrase requesting the MOL to consult the Central Labor
Standards Advisory Council when it drafts ministerial ordinances regarding detailed rules
for introducing the discretionary work hours. The formal commitment of the advisory
council to policy-making procedures was all the more crucial for Rengo, which decried theDeregulation Subcommittee bypassed the advisory council. Finally, the most important
revision was that the acceptance of workers themselves became de-facto requirement.
Nikkeiren and many labor law experts admitted that this regulation made it extremely
difficult to introduce the discretionary work hour rules. In other words, Rengo succeeded
to a large extent in narrowing the possibility of the spread of the new discretionary workhour rules12.
The shift in power at the Upper House clearly helped Rengo achieve such a gain.
However, even before the Upper House election, the LDP has already made a concession.
Thus, demonstrations organized by Rengo contributed to such a substantial victory.
During the parliamentary sessions, in order to pressure political parties, Rengo named thelabor day of 1998 “the Labor Standards Act Mayday.” It also organized a demonstration
called the “10,000 workers’ meeting.” In the latter case, the actual number of mobilized
people was somewhere between 6,000 and 7,000 people, but it was nonetheless the largest
demonstration that Rengo had ever organized. In addition, Rengo’s activists visitedparliamentary caucus (kaiha) called Minyuren, and acted essentially like a party in the Diet. For
simplification, this paper calls Minyuren the Democratic Party.
9 At the time, Komei-to was renamed Shinto Heiwa.
In order to avoid unnecessary confusion, I use its oldand current party name.
10 Interview with the chief legislative assistant for a DP politician who was the member of the Labor
Committee at the time, September 19, 2000.
11 Even though the JSDP did not send a member to the board due to its small size, it was invited to theboard meetings.
12 According Rengo’s latest survey, only five unions reported that their companies introduced thediscretionary work hour rules, applying 53 employees, as of September 2000. See Kikaku Gyomugata Sairyo
Rodo sei noJisschi Jokyo ni Kansuru Chosahokokusho (Rengo, June 2001).

7

offices of DP members of the Labor Committee every time the committee sessions were
held, and they also observed the committee sessions. Rengo’s frequent presence in frontof relevant politicians made the DP prioritize the issue of the Labor Standards Act overother issues. Moreover, Rengo’s counter bill also raised the bargaining power of the DP
vis-à-vis the LDP.
Without the recommendation of the Deregulation Subcommittee, the extension of thediscretionary work hour rules would not have been legislated at such a pace. Had theadvisory council forged consensus prior to parliamentary deliberations, substantial
revisions would not have been added at the Diet. The birth of the Deregulation
Subcommittee, therefore, shifted veto points from the advisory councils to the Diet.
Once the Diet becomes a substantial decision making arena for labor-related laws, politicalprocesses turn out to be openly contentious because unions need to mobilize protest topressure political parties.
4. The 1999 Dispatched Manpower Business Act
The Deregulation Subcommittee’s Recommendation in 1995
The revision of the Dispatching Manpower Business Act is another case in which the
Deregulation Subcommittee made policy-making processes contentious. Unlike theprevious case, the major deal between unions and the government was struck not at theDiet, but at the level of the advisory council. Therefore, the amount of protest raised byRengo was smaller in scale. It was unions’ concerted action at the advisory council thatenabled them to receive substantive concessions from the MOL.
When the Dispatching Manpower Business Act was first legislated in 1985, it employed the“open list method” by which types of jobs were listed. The 1999 revision was quite
significant in such that it introduced the “negative list method” by which only exempted
jobs are specified. Like the introduction of the discretionary work hour rules, it was the
Deregulation Subcommittee that set the agenda.
In December 1995, the Deregulation Subcommittee proposed the introduction of thenegative list method. When its recommendation became public, the Central Employment
Stability Council, which is in charge of dispatched manpower business, was in the midst ofnegotiations for increasing entries to the positive list from sixteen to twenty six job types.
The timing of the recommendation was symbolic in such a sense that the Deregulation
Subcommittee clearly overrode the decision-making authority of the advisory council.
Moreover, in February 1996 the Deregulation Subcommittee invited the officials of the
MOL to its hearing and exerted explicit pressure on the MOL to introduce the negative list
method. Since it was still before the passage of the 1996 amendment in the Diet, theMOL responded that the deregulation by increasing the number of job entries wasappropriate. Some members of the Deregulation Subcommittee even hinted that the
MOL should respect the decision of the Deregulation Subcommittee rather than theadvisory council which might reach a different conclusion.
Following the policy proposal of the Deregulation Subcommittee, in December 1996 thegovernment decided to fundamentally review the framework of the dispatching manpowerbusiness, which in fact meant the introduction of the negative list method. Responding8

to the cabinet decision, the Central Employment Stability Council began to discuss thenegative list method from January 1997. Deliberations have continued for a year, but
substantial negotiations were not conducted, as the MOL and public interest
representatives did not provide a concrete platform. Discussions centered on the generaleffects and problems of the negative list method and the compatibility between the existing
long-term employment system and the dispatched manpower business.
The deliberation on the substance began all of a sudden on December 24, 1997. Thissudden change resulted from the cabinet decision, like the case of the 1998 Labor
Standards Act. On November 18, the cabinet made a decision to propose theamendment of the Dispatched Manpower Business Act in the next parliamentary session
as part of “the Emergency Economic Measures.” In order to keep the deadline, the
MOL had to close the deliberations in the Central Employment Stability Council by earlysummer. Moreover, the Deregulation Subcommittee’s third recommendation was
published on December 12, 1997, and stated that the advisory council should respect the
Subcommittee’s opinions as much as possible and demanded that the advisory council
introduce a negative list.
Negotiations at the Advisory Council
In December 24, 1997, the public interest representatives released a draft for the first timerevising the Dispatched Manpower Business Act. Since the introduction of the negative
list was already politically determined, they had to justify why such a policy change wasnecessary. They argued that the negative list should be introduced to facilitate thetemporary adjustment of demand and supply in the labor market. This rationale
legitimized that the period of using dispatched workers should be limited to a short time,and indeed they proposed a year limitation. The public interest representatives meant tocompensate the introduction of the negative list by placing a restriction on the time period
so that unions would agree. Unions feared the most that the liberalization of thedispatched manpower business might undermine long-term employment practices andencourage employers to replace regular workers with dispatched workers. The one-year
restriction, therefore, should have gained unions’ consent.
Labor delegates, however, intensely reacted against the argument that policy would serve asa “temporary adjustment of demand and supply in the labor market.” They were afraidthat such a justification would not allow manufacturing lines to be exempt. In the
manufacturing sector, demand for workers frequently swings and part-timers and seasonal
workers are traditionally employed to meet temporary peaks in demand. It was also
known that illegal dispatched workers were already spread in factories. Public interest
representatives aimed to legally recognize illegal dispatched workers so that they would
receive appropriate protection, whereas unions argued that such legislation would accelerate
the employment of dispatched workers. Unions’ real intent of disapproval is unknown,
but the exception of manufacturing lines was the most heated issue in the advisory council.
The public interest representatives of the Central Employment Stability Advisory Council
were not able to convince the labor delegates by the deadline. On May 14, the advisory
council reviewed its policy recommendation, which juxtaposed three different views oflabor, employers, and public interests. The labor delegates attended the council, but voted
against the recommendation. Despite unions’ opposition, the recommendation wasapproved by a majority at the advisory council. Following its passage, the MOL drafted9

an outline of the revision of the Dispatched Manpower Business Act. The outline was
supposed to be reviewed and approved by the advisory council on May 18. However, allof the labor delegates refused to be present at the advisory council to authorize the outline.
At least one labor delegate’s presence is required by ministerial ordinance to hold theCentral Employment Stability Advisory Council when it review outlines of laws. The
MOL, hoping to propose the bill to the Diet at the provisional parliamentary session
starting from July 30, urgently negotiated with unions. With the MOL’s effort, the labordelegates agreed to open the advisory council, but in return the MOL had to promise torevise its outline to a considerable degree.
The advisory council usually authorizes outlines of government bills on the same day that
it is consulted. The MOL broke this practice, presented its initial outline based on therecommendation on July 15, and presented a revised version of the outline on August 5.
The revised outline stated that the dispatched manpower business would not be allowed ininappropriate sectors, and that the Labor Minister must ask the opinion of the Central
Employment Stability Advisory Council to revise the boundaries of exception. Moreover,
the MOL pledged that the additional clauses of the revised Act would mention that
manufacturing lines would be exempt for a while. Due to the MOL’s concessions, themost controversial issue was settled at this point. The labor delegates’ united action of
nonattendance worked quite well to extract such a compromise.
Parliamentary Politics
Even though the issue that Rengo cared the most about was settled prior to theparliamentary session, Rengo still lobbied opposition parties in order to amend thegovernment bill. The Diet, in fact, significantly revised the bill. Why did the Diet
become a locus of substantive decision-making? The deadline set by the cabinet deprived
the advisory council latitude to discuss all the issues that labor and management did notagree on. Six months were basically used up deliberating the exemption of manufacturinglines and some other measures that would prevent the replacement of regular workers bydispatched workers. Other protective measures for dispatched workers needed to benegotiated.
Rengo claimed that the government bill should be revised over seven issues and organizeddemonstrations to raise its leverage vis-à-vis political parties. The magnitude of protest,
however, was much smaller compared to protest activities against the 1998 Labor Standards
Act. Dispatched manpower businesses burgeoned only in big cities like Tokyo, Nagoya,
and Osaka, which made the nation-wide mobilization difficult. The fact that dispatchedworkers are not usually unionized made responses of local-level unionists slow andsomehow detached. Given these conditions, Rengo targeted the DP members of theLabor Committee of the Lower House and the Labor and Social Policy Committee of theUpper House. Rengo did not draft an alternative bill, but instead worked closely together
with the DP to produce the basis of the “three parties’ joint demands for revisions.”
Among the seven issues that Rengo advocated, the DP accepted all but one andapproached the Komei-to and the JSDP to endorse the joint demands. All three parties,
then, negotiated with the LDP and the Liberal Party at the level of the Committee board
meeting. The governing parties approved the amendment of the government bill in linewith the “three parties’ joint demands for revisions proposal.” The revised act was thenapproved by majority at the Labor Committee.

10All six issues were accepted either by revision of the government bill or by supplementary
resolutions approved in the Lower House and the Upper House. All the supplementary
resolutions were later incorporated in ministerial ordinances13. The one issue that was not
accepted by the DP among Rengo’s seven demands was the ban of “the registration-type”
dispatched workers. This kind of dispatched worker registers at several temporary staff
service agencies and is dispatched when jobs are available. Depending on demands in themarket, incomes and work life can be quite volatile. The majority of dispatched workers
are categorized into this type. Rengo’s claim for banning the registration-type dispatchedworkers almost meant the abolishment of temporary work agencies and the denial of thelegal framework of the Dispatched Manpower Business Act itself. When the DP did notsupport Rengo on this issue and when the Lower House’s revision did not include it,
Rengo harshly criticized the DP and other opposition parties and mounted the level ofprotest and lobbying. Such an attitude taken by Rengo made the political process at theDiet seemingly contentious. However, it is probably safe to state that Rengo’s stance on
this issue was driven by its recruitment strategy. Since Rengo’s most serious concern was
already taken cared of at the advisory council (i.e., the exemption of manufacturing lines),
it was able to cover the interest of dispatched workers, hoping such interest representations
leads to an expansion of the organization.
5. New Players
The previous sections showed that the formation of an independent commission, theDeregulation Subcommittee, made the policy-making procedure more contentious andpolitical. In general, independent commissions are often established in part to stave off
political interference. Delegations of power to such institutions make policy-making
procedures non-partisan and make it easier to carry out decisions that are expected to faceintense resistance. The non-partisan characteristic of independent commissions allows
them to influence policy outcomes. The above cases, however, show that the cabinet’sdelegation of power to the Deregulation Subcommittee incited political parties’intervention in the Diet. In contrast, the cabinet’s delegation to the MOL’s advisory
councils usually prevents such intervention as the logic of delegation well suggests. Why
did the Deregulation Subcommittee invoke the contentious politics?
What is the Deregulation Subcommittee?
The Deregulation Subcommittee was created in response to domestic and internationalpressure for economic deregulations. By the early 1990s several advisory councils andstudy groups repeatedly reported that structural reform and deregulation wereindispensable for Japanese economic recovery and the US government also strongly
demanded economic deregulation to ameliorate the US-Japan trade imbalance. In 1993
the Hosokawa cabinet introduced ninety-four deregulatory items as part of its economic
recovery plan, which was the first explicit gesture of the government’s commitment toderegulation. In the meantime, the Third Administrative Reform Council proposed theestablishment of the Administrative Reform Headquarters attached to the Cabinet as wellOn detail comparisons of Rengo’s seven demands, the three parties’ joint demands for revision, therevised Dispatched Manpower Business Act, supplementary resolutions, and ministerial ordinances, see
Keisuke Nakamura and Mari Miura, “Rengo no Seisaku Sanaka: Rokiho, Hakenho Kaisei wo Chushin ni” inRodo Soshiki no Mirai wo Saguru: Henkaku to Teitai no 90 nendai wo Koete (Tokyo: Rengo Sogo Seikatsu Kaihatsu
Kenkyujo, 2001): 395-559.

1311

as a third-party organization in order to supervise the actual implementation of reforms
and deregulation. The Economic Reform Study Group headed by Gaishi Hiraiwa, thethen chairman of Keidanren, also claimed that the establishment of a third-party
organization with the appropriate authority would facilitate deregulation.
In 1994, responding to these recommendations, the government proposed to set up the
Administrative Reform Commission to supervise the three areas of reform: namely,
deregulation, freedom of information, and division of labor between the public and private
sectors14. In the following year, the Deregulation Subcommittee was founded under the
Administrative Reform Commission, which led the deregulation processes during the next
three years. It was dismantled in 1997 as planned, but the Deregulation Committee
immediately succeeded it with a three-year tenure. It reorganized into the Regulatory
Reform Committee in April 1999 and was disbanded in March 2001, as was planned.
During its existence, the Deregulation Subcommittee consisted of fourteen to nineteen
members including economists, legal specialists, journalists, representatives from
employers’ associations and business, and one representative of labor. It was divided into
several working groups (e.g., twelve in 1995) and each group consisted of three members.
Decisions were made at the working group level and there was no horizontal
intermediation across working groups. The Subcommittee held numerous hearings from
related organizations and ministries, decided on new items to be deregulated, negotiatedwith jurisdictional ministries concerning detailed plans for implementing deregulation, andpublished its annual report in the end of each year. The cabinet endorsed the reports as
the government’s official commitment by the end of the fiscal year in March. The
Subcommittee not only repeated this process every year, but it also monitored the extent towhich its proposed deregulatory measures were actually realized in the previous year.
When it found the implementation unsatisfactory, it recommended the same item for
deregulation next year. Hence once an item appeared on the annual report of the
Subcommittee, related ministries and interest groups had difficulties sabotaging it15.
Policy recommendations of the Deregulation Subcommittee and the Regulatory Reform
Committee were well respected by regulatory agencies, but the LDP overturned thecabinet’s decision to deregulate licensing liquor sales from September 2000. It was thefirst case that the policy recommendations of the Deregulation Subcommittee andRegulatory Reform Committee were reversed. It is also quite unusual that the
government revised a cabinet decision that is supposed to be binding. The government
was afraid that the authority of the Regulatory Reform Committee was tarnished a greatdeal. In order to promote further deregulation, it was necessary to grant higher legal
status to its successor. Keidanren and the US government also demanded the creation ofa stronger organization. Responding to these pressures, the government established theRegulatory Reform Congress in April 2001, directly attached to the Prime Minister Office,as an advisory body to the Prime Minister. It consists of less than fifteen members and it
monitors the government’s three-year plan of deregulation which was endorsed in March
2001. Ryūtaro Hashimoto, Minister of Administrative Reform under the second Moricabinet, was appointed as the first minister who is in charge of the Regulatory Reform
14 On the Administrative Reform Commission, see Atsushi Kusano, “Deregulation in Japan and the Role ofNaiatsu (Domestic Pressure),” Social Science Japan Journal (Vol. 2, No. 1., April 1999): 65-84.
15 This basic procedure and the workings of the Deregulation Subcommittee remained intact after it
reorganized into the Deregulation Committee and the Regulatory Reform Committee.

12Congress.
cabinet.

He was soon replaced by Nobuteru Ishihara due to the birth of the Koizumi

Labor Market Deregulation and the Role of the Deregulation Subcommittee
In the cases examined above, the Deregulation Subcommittee clearly played a crucial rolein setting the agenda. Without the presence of the Deregulation Subcommittee, thesepolicy changes would not have occurred, at least not at such a pace. The undercutting of
the authority of advisory councils was indeed intended by promoters of the Deregulation
Subcommittee. It should be noted that the Deregulation Subcommittee was devised by
the Management and Coordination Agency as part of its administrative reform attempts.
It was not fiscal or economic bureaucrats, but management bureaucrats that initiated thederegulation processes because the latter recognized that ministerial advisory councils often
serve to build consensus thereby obstructing deregulation16. Thus, a new policy-making
procedure, they argued, needed to be designed in such a way that a new decision making
organization would be able to circumvent advisory councils. This intention was fulfilledin the case of labor market deregulation.
The power of the Deregulation Subcommittee was an unexpected blow to Rengo. Rengo
was completely unprepared to the new channeling of political decisions in the realm oflabor law. Generally, at least until recently, Rengo had been sympathetic and supportive tothe basic principle of deregulation and administrative reform. Indeed, the predecessor of
Rengo, the Policy Promotion Labor Council, became heavily involved in the administrativereform process in the 1980s to support the privatization of Japan National Railways andNippon Telegrams and Telecommunications. Rengo’s delegates to the government’s
various advisory councils have always strongly supported deregulation. The context inwhich ‘deregulation’ was discussed allowed Rengo to take such a position. Both thegovernment and employers’ associations publicly stated that economic regulation should be
reduced or completely abolished, but necessary social regulation should be maintained.
Rengo was thus able to safely presume that deregulation would mean deregulation ofobsolete business regulations, not deregulation of social protection. When the
Deregulation Subcommittee was created, it was widely regarded that its main target would
be the distribution sector. Under these circumstances, it was not surprising that Rengo
did not foresee that the Deregulation Subcommittee would bluntly propose regulatory
reforms of the labor market.
More importantly, it was quite unimaginable to Rengo that the tripartite decision-making
procedure would not be respected. The corporatist decision-making structure under thejurisdiction of the MOL is considered to be necessary institution for industrial democracy.
Moreover, the advisory councils’ de-facto veto power made Rengo ill-equipped to adapt tothe emergence of the new policy-making procedure. Since unions’ input had been
institutionalized in the MOL’s advisory councils, Rengo reacted the most heatedly to thefact that the advisory councils were bypassed. When it demanded revisions of thegovernment bills for the 1998 Labor Standards Act and the 1999 Dispatched Manpower
Business Act, it sought to insert a phrase in the laws that the MOL would be required toask opinions of the advisory councils to determine ministerial ordinances. Rengo’s
demand illustrates how much Rengo feared the decline of the advisory councils’ role and
The Deregulation Subcommittee’s view on negative aspect of advisory councils, see its “First Report on
Deregulation,” Dec. 14, 2000 in Gyosei Kaikaku Iinnkai: Sori heno Zenteigen ed. by Gyōsei Kaikaku Iinkai OB
Kai, (Tokyo: Gyosei Kanri Kenkyu Center, 1998): 36-37.

16

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authority.
There is no doubt that the Deregulation Subcommittee led the deregulatory processes, but
it would be misleading to claim that its proposals completely deprived the MOL of its
agenda setting role and consensus-building capacity. The Deregulation Subcommittee
advocated both deregulatory measures and new regulations. It had concrete policy
proposals for the deregulation but only basic orientations for the new regulations, whichgave the MOL room to maneuver in deciding on appropriate protective measures. In
other words, the MOL was still able to lead the negotiations in the advisory councils by
proposing new regulations that would compensate for the relaxation of some regulations.
Indeed, when the MOL asked the advisory council to introduce the negative list to thedispatched manpower business, public interest representatives, on the behalf of the MOL,
proposed a one-year limitation period, which was meant to be a compromise between thelabor delegates’ refusal of the negative list and the cabinet’s and employers’ demand for its
introduction. Unions, as explained above, misinterpreted the MOL’s intention.
However, it should not be underestimated that the MOL still had room to maneuver, eventhough the Deregulation Subcommittee and the cabinet made decisions over the head of
the MOL. The dwindling capacity of consensus building by the advisory councils,
therefore, should be explained by the fact that the deadline to reach a decision waspolitically scheduled. Imposition of substantial policy changes, coupled with shortlatitude for negotiation outside the Diet, made the Diet the important locus ofdecision-making.
Who Wants Deregulation?
If the Deregulation Subcommittee had agenda-setting power, how did it decide on theagendas? Opinions of the Deregulation Subcommittee were basically determined at theworking group level, as mentioned before. Who became members of the labor issue
working group considerably affected the content of the Deregulation Subcommittee’s
recommendations. Committee members were not expected to represent theirorganizations, unlike in the case of ministerial advisory councils. Indeed, Hiroya Noguchi,
the only labor delegate at the Deregulation Subcommittee, supported the idea of thenegative list method per se. Two experts on labor issues, Naohiro Yashiro and Noriaki
Kojima, were sympathetic to reforming rigid labor market institutions and emphasized thenecessity of allowing flexible work styles. Since these members controlled theDeregulation Subcommittee’s agenda, their own opinions affected its output the most17..
Deregulatory issues that the Deregulation Subcommittee advocated were the ones that
employers’ associations had also demanded for years. With respect to influencing the
Deregulation Subcommittee, employers’ associations in general and Keidanren in particularwere better players than Rengo. Rengo was unprepared for such a new procedure,
whereas Keidanren even supported its creation. Indeed, Keidanren’s increasing presencein the labor law making is changing the corporatist policy-making processes. Traditionally,
Nikkeiren has been the representative of employers in the realm of labor related issues.
Keidanren does not send its representatives to the MOL’s advisory councils. As
Nikkeiren is often described as the human resource division of Keidanren, the twoorganizations’ opinions do not diverge. However, they differ in their lobbying styles.
Nikkeiren does not mobilize political power and does not lobby the LDP to influence
17 Interview with Hiroya Noguchi, Secretary General/Managing Director, JTUC Research Institute forAdvancement of Living Standards, July 25, 2000.

14

government bills in the Diet.
representation.

It prefers to negotiate within the framework of tripartite

Keidanren, on the contrary, frustrated with bureaucratic co-ordination, seeks direct accessto political decisions. One channel was the Deregulation Subcommittee. Keidanren alsofrequently lobbies the LDP to propose politicians-sponsored bills to undercut the advisory
councils. For example, Keidanren and the LDP’s Commerce and Industry Committee
worked together to draft a bill to revise the Commerce Act. Members of the Legal
System Advisory Council, most of whom were law professors, condemned the LDP’s useof a politician-sponsored bill, arguing that it undemocratically disregarded the advisory
council. The LDP-Keidanren-led legislation provoked Rengo’s oppositional reaction,
which drove the DP to propose its counter proposal that touched on issues that the LDP’sbill did not include. The DP-sponsored bill, the Workers Protection Act, in turn, drove
the MOL to draft a similar bill, the Labor Contracts Continuous Act. The government
bill was passed and the DP bill was aborted in the Diet, as was expected under the LDP’s
governance. This case also shows that Keidanren’s lobbying style is another factor which
made the Diet a more substantial arena of negotiations.
6. Veto Power and Strategies of Unions
The above cases illustrate that unions were able to obstruct deregulatory forces either at theadvisory council or at the Diet. What allowed them to influence policy outcomes? I
argue that unions have institutionalized veto power at the advisory council. As long as
they are able to maintain internal cohesion, the formal procedural rules of the MOL’s
advisory councils grant unions veto power. In contrast, unions need to negotiate with
political parties at the Diet. The shift in veto points from the advisory councils to theDiet, therefore, made the political process openly contentions because unions need tomobilize support in order to raise their leverage vis-à-vis parties.
Political Institutions and Veto Power: The Advisory Council
Political institutions clearly matter determining the number of veto points as well as
effective strategies required at each veto point. Unions are able to block legislations
because the advisory councils are the de-facto veto points and unions’ veto power isinstitutionalized at the MOL’s advisory councils. In other words, unions’ veto power isnested in the advisory councils’ veto power.
The MOL’s advisory councils’ de-facto veto power is constitutionally designed. With
respect to the labor standards act and other labor market regulations, the MOL is required
to consult its advisory councils on the legislation of bills and implementation of ministerial
ordinances. Usually, the advisory councils first report their policy-making
recommendations to the labor minister. Based on their recommendations, the MOL
drafts bills and asks the same advisory councils that produced the recommendations toreview outlines of the bills (hōan yōkō). Since the bills are drafted based on the advisory
councils’ recommendations, the advisory councils usually approve outlines of the bills
unanimously. After the legal examination of the Cabinet’s Legal Department, the bills areendorsed by the cabinet as government bills and finally proceed to the floor.
Under these procedural rules, there are two veto points: vote for recommendations and15

vote for outlines of laws. Although they are both veto points, their structures differ,
which makes different strategies necessary exert veto power.
At the first veto point, discontented parties are able to vote against the advisory councils’
recommendations. Under a majority rule of voting at the advisory council, a veto player
is formally a median voter. A median voter always resides among pubic interest
representatives because the MOL’s advisory councils consist of tripartite representation.
Labor delegates and employer delegates usually oppose, putting public interest
representatives in the middle. Therefore, the veto power of unions, or any otherdiscontented parties, will never be effective at this point unless a median voter (i.e., public
interest representatives) takes a side. Since public interest representatives do not vetowhat they proposed, no one can exercise veto power here.
In theory, labor delegates and employer delegates, if they ally, veto proposals made bypublic interest representatives. However, the MOL is not obligated to follow
recommendations of the advisory councils, even though it is required to consult theadvisory councils. Thus, veto power of labor and employer delegates is notinstitutionalized at this stage. Obviously, it is highly unlikely for issues that both unions
and employers oppose appear on advisory councils’ recommendations.
At the second veto point, discontented parties are again able to vote against outlines ofgovernment bills. At this stage, at least the presence of one delegate from unions,employers, and public interest representatives is required by ministerial ordinances. If allof the delegates of labor or employers are absent, the advisory councils will not be held
and then the bill will be blocked. It is this the procedure rule that institutionalize vetopower of unions or employers. As long as discontented parties are able to maintain internalcohesion, they are able to block reforms at this veto point. Unions hardly exercise this
veto power, however. The 1999 Dispatched Manpower Business Act was indeed a rarecase. The fact that unions have institutionalized veto power usually compels the MOL topre-empt unions’ discontent, thereby making the exercise of a veto unnecessary. The
MOL fears that non-consensual decisions might make it less smooth to implement labormarket regulations. It also averts disputes between unions and employers that wreck
legislation. The death of government bills at the level of the advisory councils forces adivision chief to resign18. As a result, the MOL has to meticulously formulate a plan
agreeable to both sides. When the MOL pursues a new agenda that would seemingly
cause squabbling between unions and employers, it devotes enormous time and energy andlogrolls labor-friendly reforms and business-friendly reforms. Thus, most controversial
matters do not get on the agenda in the first place.
Another reason for the rare exercise of veto power should be attributed to the division
within the labor movement. Rengo works closely with labor delegates of the MOL’s
advisory councils and manages joint actions of all the labor delegates. Even with the helpof such a mediator, labor delegates sometime split. Before Rengo was formed, joint
actions of labor delegates was much more difficult to maintain. The lack of internal
In the case of the Equal Opportunity Act in 1985, labor delegates hinted that they would not attend theadvisory council’s meeting that was supposed to review the outline of the act. The then division chief,
Ryoko Akamatsu, wrote a letter to resign. The labor delegates were later convinced by Akamatsu toprioritize the passage of an incomplete act over the non-passage of a complete act, and the advisory council
approved the outline.

18

16

cohesion and the existence of a defector in the same camp make it impossible for unions
to use this power.
Parliamentary Negotiations and Rengo
This paper has shown that the Diet became a substantive arena of negotiations. Since theDiet is formally the last veto point in the legislative process, the shift in veto points fromthe advisory councils to the Diet itself is not unprecedented. Those who are not satisfied
with the recommendation of the advisory councils, usually a fraction of unions or
employers’ delegates, look to political intervention to kill or substantially amend bills in theDiet. However, those attempts usually fail. Why was Rengo able to succeed inamending the government bills in its favor?
A fundamental difference between the advisory councils and the Diet is that unions areplayers in the former, but not in the latter. At the Diet, official players are members ofparliaments who actually cast votes on the floor. Given strict party discipline in theJapanese Diet, political parties are actual units of players. Thus, unions first need tonegotiate with their allied party. If their ally is not a median voter in the Diet, unions alsoneed to convince a median voter to make a concession.
Currently, Rengo’s allied party is the DP. Because Sohyo and Domei merged into Rengo,
the DP includes both ex-Socialists and ex-Democratic Socialists. Those who areinterested in labor-related issues usually come from either the JSP or the DSP, and ex-LDP
politicians in the DP hardly get involved. Yet, crossing the boundary of old rivalries is
not easy. The relationship between Rengo and the DP has not been as synchronized as
the one between Sohyo and the JSP or between Domei and the DSP. Ex-Domei affiliatedunions at times lobby ex-Socialist M.Ps who were ex-unionists of Sohyo or vice-versa,
which makes communication between Rengo and the DP sometimes prickly. Given the
DP’s fluid organizational structure and the under-institutionalized channel between the twoorganizations, Rengo was able to effectively use its resources to convince the DP to
support amending the bills favorable to Rengo. Rengo’s new tactics, such as drafting analternative bill, organizing mass demonstrations, and lobbying the DP members of theLabor Committees of the two houses, successfully worked.
The DP was not the median voter in 1998 and 1999. In the case of the 1998 Labor
Standards Act, the median voter was the JSDP until the Upper House election in July 1998.
The DP’s failure to convince the JSDP led to the suspension of the amended bill. Afterthe election, the JSDP stepped down from the coalition government, and the LDP under
Obuchi’s prime ministership began to try to build a coalition with the Liberal Party and theKomei-to. The Komei-to has been the median voter and its sympathy to the 1998 Labor
Standards Act and the 1999 Dispatched Manpower Business Act was crucial for Rengo andthe DP to gain extensive revisions.
Contentious Politics: Representing the Un-organized
The other reason for the contentious politics is that Rengo has incentives to make its
activities visible to the public in order to recruit members and expand its organization.
Even though Rengo expresses the interest of unorganized workers to an extent in theadvisory councils, unorganized workers will not see Rengo’s such endeavor. Open
conflicts appeal more to unorganized interests. The necessity of increasing unions’membership by expanding their targets is not novel. Indeed, Rengo tends to represent

17the interest of workers in small and medium-sized enterprises. What is new about the
new politics of labor in the 1990s? I argue that the appearance of labor market
deregulation as an important item on the agenda for Japanese economic reform bothforced and enabled Rengo to perceptibly represent unorganized workers.
Rengo was forced to defend the interest of atypical workers in order to protect the interestof their affiliated members. The interest of regular workers and that of atypical workers
converge to a large extent in the deregulatory process of labor market institutions.
Deregulation of the labor market deprives unions of their entitlements, yet new regulations
coupled with labor market deregulatory measures often give more social protection toemployees in small enterprises and atypical workers. Unions, that avert most the erosionof employment protection, have strong incentives to raise the labor costs for atypical
workers. If new social protection measures make it more expensive for employers to hire
atypical workers, the replacement of regular workers by atypical workers is less likely tooccur. Huge gaps between regular workers and atypical workers in terms ofcompensation packages and employment protection paradoxically make unions advocate
stronger regulation of atypical workers.
Rengo’s inclination to represent un-organized interests has a limit, however. Needless tosay, Rengo’s priority is protecting the interest of its members. For example, labordelegates to the advisory councils tend to focus on protective measures that might have aneffect of raising the labor cost of atypical workers rather than protective measures thatmight not have such an economic effect. Labor delegates tend to stress issues like theexpansion of social and employment insurance to atypical workers or the imposition of apenalty on employers who terminate contracts before the term has expired, compared toissues like sexual harassment and protection of privacy.
Labor market deregulation usually invokes a sharp insider-outsider cleavage. Such adivision, however, enabled Rengo to represent the interests of outsiders. The postwar
history of the Japanese labor movement was essentially composed of conflicts between
exposed-sector unions and public sector ones. Employment protection is one of thecentral issues that pit these sectors against each other because the public sector unions did
not share the same degree of urgency to deal with the problems of unemployment andcorporate restructuring. The formation of Rengo put an end to the conflict in the labor
movement, shifting the balance of power from radical public-sector unions to moderate
cooperative unions in the exposed-sector, both substantially and symbolically. The
cleavage between the two sectors in the labor movement did not cease to exist, but the
emergence of the inside-outsider cleavage accentuated by labor market deregulation tends
to downplay the old cleavage.
First, unionists share the common interest of defending employment protection of regular
workers against market forces that make work contracts more precarious. Second, theexposed-sector unions do not challenge the leadership of Rengo even if it aims torepresent interests beyond its organizational boundaries because the interests of regular
workers and of atypical workers can be compatible, as explained above. Internal conflicts
within Rengo tend to be contained since affiliated-industrial unions fear that open rivalry
within Rengo would undermine the finally united power of Rengo. The case of the 1998
Labor Standards Amendment clearly illustrates that the unification of the labor
confederations empowered Rengo by subduing the conflicting interests of industrial unions.

18Rengo’s leaders are able to represent un-organized workers without the risk of invoking
internal conflicts.
Conclusion
The number of veto points generally determines the ease of obstructing reform attempts.
Simply put, larger numbers of veto points allow opponents to fight back. Often noted
political institutions that influence the number of veto points include presidentialism vs.
parliamentalism, central state vs. federalism, and bicameralism vs. unicameralism. Whilethe number of veto points certainly indicates political institutional barriers to reforms, mypaper suggests that the structure of veto point deserves additional scrutiny. The shift inveto points from the advisory councils to the Diet made the otherwise consensus-oriented
policy making process openly contentious.
In representative democracies, the last veto point in policy-making processes is either thelegislative or the president/cabinet where veto players are elected members of parliaments
and appointed cabinet members. Policy opponents, such as unions in my case, are notformal veto players at the final veto point. Their veto power is not institutionalized at thismost important veto point. They need to negotiate with political parties and politicians or
the government in order to influence policy outcomes. Whether or not their lobbying orprotests succeed thus depends on negotiations between them and veto players. Thus, an
exclusive focus on the number of veto points discounts the importance of the structure ofveto points.
When unions are granted institutionalized veto power, policy advocates and thegovernment have incentives to create new political procedures in order to override theinstitutionalized veto power of reform opponents. Public commissions are often
established to legitimize reform proposals but also to bypass or undercut veto points.
German’s Deregulierungskommission, Sweden’s Lindbeck Commission, proposed reform plans
and led the deregulation debates. In a similar vein, the Japanese government created theDeregulation Subcommittee in 1995 in order to authorize regulatory reforms and bypass
ministerial advisory councils that functioned as veto points in the Japanese policy making
processes. Whether or not such public commissions actually override veto points
depends on whether authority and constitutional power are actually given to them. In thecase of the Deregulation Subcommittee that existed between 1995 and 1997, it hadsignificant ramifications on the process and content of labor market reforms. It
accelerated deregulatory processes by undercutting advisory councils, but it politicized thedecision-making process itself. Unions’ hostile resistance in part resulted from the factthat the government aimed to invalidate their institutionalized veto power.
Whether or not the Diet continues to be a substantial veto point depends on the power ofthe LDP in the Diet and pre-parliamentary negotiations. The substantial revisions in theDiet in 1998 and 1999 resulted from the fact that the LDP was not the median voter. The
necessity of extensive amendments in the Diet, in turn, came from the failure of
pre-parliamentary reconciliation. Now that Rengo is aware that the Regulatory Reform
Committee and its successor, the Regulatory Reform Congress, is the locus ofdecision-making, it actively lobbies it. As long as consensus is arrived at prior toparliamentary deliberations, the Diet does not play an important role in negotiations and19deal-makings.
At the same time, curtailed deregulation of the labor market institutions in the 1990s drive
employers to continue to demand further deregulation. Indeed, the Regulatory Reform
Committee published its third recommendation in December 2000, which included
revisions of labor market regulations. Keidanren also put a priority on the deregulationof the labor market19. These persistent pressures for deregulation may indeed keep labor
politics contentious.

See “21seiki ni Muketa Aratana Kisei Kaikaku no Danko to Taisei Seibi wo Yobo suru—2000nenndo
Keidanren Kisei Kaikaku Yobo,” Keidanren, October 17, 2000.

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