THE ＧＬＯＢＡＬＩＺＡＴＩＯＮ ＆ ＧＯVＥＲＮＡＮＣＥ ＰＲＯＪＥCＴ， ＨＯＫＫＡＩＤＯ ＵＮＩＶＥＲＳＩＴＹＷＯＲＫＩＮＧ ＰＡＰＥＲ ＳＥＲＩＥＳ

Decline of Successful Social Democracy in Japan‑‑‑What has Koizumi Revolution Changed?
Ⅳ−１８

Ｊｉｒｏ Ｙａｍａｇｕｃｈｉ, Hokkaido University(Translated by Aaron Skabelund, Hokkaido University)＊

Paper for the “Symposium on the Post-War Japan” at the Universityof Sheffield, 24-25 February 2006．

＊

None of these papers should be cited without the author’s permission.

"Decline of 'successful social democracy' in Japan---What has Koizumi revolution changed?"
Yamaguchi Jiro
Introduction
In the general election on September 11, 2005, the Liberal Democratic Party
had unprecedented landslide. Prime Minister Koizumi proposed privatization of the
postal service as the only issue in the campaign. He ousted dissenters who voted against
the privatization bill in the Lower House from the party. The LDP became monolithic interms of policy for the first time. Koizumi’s strategy gained great success in the urban
areas while the party did not have clear victory in rural districts such as Hokkaido andOkinawa. This result may show that the LDP is changing into a modernized party with
neo-liberal policy and urban supporters. It seems to me that it is too early to conclude
that Koizumi inaugurated a new regime. However, regime of 1955 has been apparently
collapsing. In this essay, I would like to look back upon the post-war political systemand try to explain why Koizumi became so popular in his attempt to crash the LDP.
Koizumi has been changing the framework of post-war politics in both domestic andexternal realms. Focus will be limited to domestic area in this essay.
1 Collapse of Post-war Welfare Regime1) Characterizing the Socio-Economic System
First of all, I would like to characterize the post-war socio-economic policy,
which Koizumi has been to reform. The postwar socio-economic system formed inJapan by the LDP and the bureaucracy is often called ‘successful social-democracy,’
especially by economists and business leaders keen to point out the limits and defects of
the Japanese system from a neo-liberal point of view.
It seems odd to label Japan as a social democratic nation, as it has been ruled
almost continually by the LDP, a conservative party that is largely dependant on
business for funding and votes. There are some basic features of the postwar Japanese
economy that looks similar to socialist or social democratic regime. These are: (1) that it
developed at a rapid pace even after two oil shocks in 1970s; (2) that it is subject tomuch government intervention in the form of regulations, public investment etc; and (3)that it created a society with a relatively small individual or regional economic
disparities—a society, in effect, in which everyone felt that they belonged to the middle
class. Almost all media discussions of economic policy in Japan are predicated on these1shared perceptions.
It is usually the second point that receives the strongest emphasis, as
commentators stress the role of Japan’s regulatory regime in creating an industrial orderthat ensures the survival of the weakest, thus minimizing the role of competition. Theynote as well the tendency to concentrate public investment in poorer rural prefectures, a
policy reflecting the importance of the farm sector in the LDP support base. These two
factors are thought to have contributed greatly to the leveling of Japanese society.
We can gain a better grasp of the distinctive features of the Japanesesocioeconomic system by analyzing the government’s mode of involvement in thesociety and the economy. A good way to do this is to plot a position relative to twoaxes—one representing the spectrum from discretionary to universal policy, the otherthe spectrum from individual to socialized risk.
The discretionary-universal policy axis measures the fairness and uniformity of
the government’s policies pertaining to industrial regulation and benefit distribution. By
the same token, it measures the degree of discretion exercised by the government
agencies responsible for implementing those policies.
As mentioned above, the Japanese bureaucracy has enjoyed relatively large
discretionary power in policy implementation. In terms of the distribution of benefits, auniversal policy is one that aims for uniformity in the implementation or expansion ofsuch comprehensive systems as long-term health insurance, pensions etc, or byincreasing the budget for systems like public education. In respect to the regulation ofindustry, a universal policy applies the rules strictly and uniformly to ensure faircompetition and consumer safety.
Discretionary policies, on the other hand, confer benefits selectively on certain
groups at the discretion of the policymakers, such as subsidies or tax breaks for specificregions or industries. Discretionary regulatory policies, meanwhile, are policies that callfor ad hoc decisions whenever an issue arises between the regulated and the regulators,
instead of applying the same rules to each situation; the classic example is the‘administrative guidance’ so common in Japan. Here the bureaucracy wields
tremendous discretion in deciding whether to apply the official rules, how strictly toapply them, or even whether to invent ad hoc regulations for the situation at hand.
The second axis, socialized versus individual risk, gauges the degree to whichsociety as a whole shares and lightens an individual’s responsibility with respect topossible loss, injury, disasters, and so forth. In the other direction, it gauges the degree
to which the principles of individual responsibility and free competition prevail.
Market purists place the greatest emphasis on individual responsibility and thus2

individual risk, insisting that each person assume the risk of losing his or her job, goingbankrupt, falling ill, and so forth. Policies associated with this orientation include tax
cuts, deregulation, and other measures that call on each individual to take on thecompetition and accept responsibility for the outcome. In opposition to this thinking,there are those who insist that individuals may find themselves sick or unemployedthrough no fault of their own and that society as a whole should assume the risk andcome to the aid of people who happen to meet such misfortune. They also believe that
regulations governing the behavior of individuals and corporations are necessary to
prevent environmental destruction and ensure consumer safety. With respect to the
distribution of risk, policies associated with this orientation emphasize the use of tax
revenues or social insurance premiums to pay for things like universal pensions andhealth care. Where regulation is concerned, policies reflecting this school of thought
strive to minimize risk to the consumer or environment through a regulatory regime,
even if it means higher prices or fees than would result from free competition in aderegulated environment.
Using both axes, we can categorize policies according to the scheme shown in
Figure 1. This process will aid us as we explore the reasons why Japan’s socioeconomic
system has been termed social-democratic.
The first reason why the Japanese system looks like a quasi-social-democracyis that the system has functioned to socialize risk through public-works projects in ruralprefectures and through a regulated, uncompetitive business environment, as
exemplified by the finance industry’s ‘convoy system.’ As table 1 show, Japan’s outlay
for social programs is relatively low as a percentage of tax and social insurance
premium, while its outlay for public capital formation relative to GDP is three times thatseen in the Western industrial nations. This reflects the government’s generosity toward
the rural prefectures through public works, which have helped create jobs in thoseregions. In addition, by curbing competition through its regulatory policies, thegovernment has coddled such uncompetitive industries as agriculture and distribution,
making them lucrative. The government has indirectly maintained a minimum living
standard through public-works projects and regulations that allow companies to operate
without regard for profitability or efficiency. This is what has led some commentators to
describe the system as social-democratic.

3

Figure 1. Antagonism of Policy Ideas and the Constellation of Political Forces
Socialization of Risks
Old LDPJapanese Third Way

Discretional

Comprehensive

PolicyPolicySurvival of LDP

Koizumi’s
Structural Reform

Individualization of Risks

Table 1 Social Welfare Contribution and Benefit (US $, per capita)
Income TaxandInsurance(A)Social Social
Benefit(B)Security B/A
(%)

Japan

26919

9825

4092

41.6

US

21351

7793

4142

53.2

UK

14444

6673

3929

58.9

Germany 20448

11492

6830

59.4

France

18668

11638

7038

60.5

Sweden

17453

12287

9320

75.9

Source: Cabinet Office of Japan, Yearbook of Social Security Statistics, 1997
The second basis for the label ‘social-democracy’ is the tremendous power
wielded by the state bureaucracy by virtue of its discretion in the implementation of
government policy. It is especially true of the ministries of agriculture and constructionthat had huge amount of subsidy budget. Bureaucracy in charge could allocate subsidy

4

to rural communities or industry associations at their discretion. Thus, politicians
representing these constituents rushed for subsidy and pork barrel politics flourished in
the world of discretion.
In short, the LDP has constructed a strong safety-net beneath the weakerelements of the economy—be they individuals, companies or prefectures—bysocializing risk with subsidies and through such regulatory practices as the convoy
system. At the same time, it has distributed profits at its own discretion throughpatronage and bid rigging. The discretion world was not transparent at all, therefore
corruption scandals took place frequently.
２）Metamorphose of the LDP
The pitfalls of such a politico-economic system became painfully apparent in
the 1990s with the advance of globalization. One problem is the strain on government
finances. Since the collapse of the bubble economy of the 1980s, stimulus measurescentered on public works helped prevent serious unemployment problems in the ruralprefectures, but as a result, Japan has accumulated a national debt of almost ¥700
trillion ($6 trillion or 5 trillion euros), the largest of any industrial nation. This puts theentire economy at risk. The second problem is that the competition-curbing regulationof industries has served to buoy up prices, creating a ‘high-cost society.’ The economic
inefficiency resulting from this state of affairs can be regarded as the upshot of
pseudo-social-democracy in Japan. The third problem is that the lack of transparency inthis type of system breeds corruption, as many Japanese came to realize in the 1990s
through a series of financial scandals involving bureaucrats as well as politicians.
According to the neo-liberal critics of ‘Japanese-style social-democracy,’ the problem
was that the big corporations and wealthy individuals that drive the economy wereforced to pay the price for the redistribution of assets in the form of high taxes, costs,
and fees, and the bureaucrats and politicians used that money wastefully, resulting in
inefficiency and corruption. They say Japanese style social democracy has been spoilingthe pseudo weak, such as farmers and small construction companies in rural areas.
Urban workers come to be frustrated with corruption and inefficiency.
In the midst of all this, Prime Minister Koizumi made his entrance, calling for‘structural reform.’ If we can take the prime minister’s advisors at their word, theKoizumi administration’s structural reforms are aimed at instituting universal policies
based on clear criteria, such as efficiency and profitability, and eliminating intervention
by bureaucrats and politicians. This is the argument behind Koizumi’s drive to privatize
Japan’s quasi-governmental organizations. The administration and its advisors also

5

stress policies that will provide incentives for more individual and corporate risk taking
in a competitive environment. Koizumi also calls for more individual responsibility insuch areas of risk as healthcare and pensions. The reform of the health-care system isdesigned to shift more of the cost to patients; together with recent proposals for tax
reform, this is all in line with the administration’s emphasis on individual risk. The
principle of individual responsibility is also being applied to the disposal of
nonperforming assets; creditors are calling in their loans to small businesses, andbankruptcies are mounting.
At the same time, Koizumi did not live up to the idea of small government orrule of market. He applied privatization scheme to such areas as express highway andgovernment loan bank. However, his privatization was far from perfect, and there
remained loopholes. Under the banner of small government, bureaucrats and politicians
found sanctuary where they kept their vested interest intact. Even in the final year of theKoizumi administration, huddling scandals (dango) broke out one after another. The
prosecutor office charged illegal practices in bid and procurement in various
government agencies. It is true that the Koizumi administration has not been serious
about eradicating corrupted relation between bureaucracy and companies.
The Japanese people are fed up with privileges that high-ranking bureaucrats
have enjoyed. Therefore, it is quite natural that they support Koizumi’s outward
initiative for slashing inefficient and ineffective public sectors. They enjoy Manichaean
political spectacle over structural reform although they cannot understand what the realissues are. Koizumi is bold and outspoken when he attacks politicians and bureaucrats
who have vested interest. It is no wonder average citizens are fascinated with his image
as a challenger to the ancient regime.
However, the LDP s line of using Koizumi—who ostensibly sails under theflag of rejecting the LDP—to maintain its grip on power, contains a decisive
contradiction. Hypothetically, if Koizumi were to smash the LDP as he promised, thenobviously the LDP would literally no longer exist as a party. Conversely, should the old
sections of the LDP be preserved, even if only in words, then the nation would bethrown into depths of despair, and voters would turn to other parties because of theirdislike of the LDP. The ballot in the past elections in 2003 Lower House and 2004
Upper House plainly showed the disillusionment towards Koizumi.
In these elections, the LDP followed the dual strategy of having Koizumi draw
in non-affiliated votes on the one hand, while acquiring block votes by having thebureaucrat old-boy network, supported by industry groups, appeal for the preservationof existing vested interests. In the Upper House election in 2001, in the midst of a6phenomenal Koizumi boom, few voters took stock of this contradiction. However, thenation became able to see past the double personality of the LDP. The bloc of
nonaligned votes abandoned Koizumi on the one hand, while the party s regional
support-base centered on the construction industry and industry groups declined as aconsequence of policies based on the nonfeasance of deregulation and retrenchments inpublic enterprises. This crisis of the LDP was not an acute reaction to Koizumi s verbal
gaffes. It could no longer go on camouflaging the problem, as it became manifest.
This contradiction culminated at the battle over privatization of postal service,
Koizumi’s pet project, in 2005. The government submitted the bill for privatization to
the Diet in 2005 ordinary session. Although many LDP members revolted, the Lower
House passed the bill with narrow margin in July. The Upper House killed the bill
because over 20 LDP members revolted. The attitude of these non-obedient members isa willingness to support the poster-boy Koizumi so long as they can recapture the oldways in terms of personnel and policies. They thought rejection of the privatization billwould be strong weapon to deprive Koizumi of his power. However, they
underestimated Koizumi’s determination for privatization. Then Koizumi did not resign
as the Prime Minister but dissolved the Lower House and called for the general election
or national referendum on privatization. The party banished the dissenters andnominated fresh candidates from business, civil service and local politics. People
thought Koizumi bravely cut off the old side of the LDP. His popularity soared because
he successfully emphasized the negative image of the old LDP. Especially, urban votersand young generation overwhelmingly supported Koizumi’s LDP. At this point, one cansay the LDP has changed from catch-all party into a party with neo-liberal ideology andurban voters. It is true that there still remain many old politicians in the party. But
politicians who are quick to seize their opportunities have already realized that if the
LDP returns to factional in-fighting at this stage of the game, and that if the same tired
old factional bosses are brought in to replace Koizumi, then the nation will become
utterly disgusted with the LDP.
2 Neo-Liberal Revolution in Japan
1) Risk society in Japan
Now I would like to look at the result of Koizumi’s structural reform andconsider why he has enjoyed unprecedented popularity. When we try to characterizesocio-economic condition brought about by the structural reform, notion of risk is useful.
In Japan, social scientists become more and more interested in risk, and there appear
many books on such broad issues as crimes, natural disaster, unemployment, education,7

pension and so on. The biggest reason for this interest is the fact that base for daily lives
such as permanent jobs, stable communities and education have been collapsing. In
addition, Japanese archipelago was often attacked by natural disaster in the last year,
which made people aware of risk. As table 2 show, lives for ordinary people are
becoming harder under the Koizumi cabinet. They are now confronting the hard factthat their lives are fragile. Those who already have big risk try to avoid other risk. For
instance, young people who do not have stable job tend to avoid marriage or having achild. That is why the birth rate has been declining constantly in Japan, which makes thesociety less sustainable. These risks cannot be covered by individual effort. In this sense,
measures for risk management are the most important issue in Japanese politics.
Table 2. Social Indexes in Japan since 2000
Item

2000

2002

2004

Average Household Income (1,000 yen/year)

7,210

6,830

6,600

Average Household Consumption (1,000 yen/month)

31.7

30.6

30.2

Average Worker Income (1,000 yen/year)

7,690

7,480

7,210

Average Worker Debt (1,000 yen/year)

5,790

6,070

6,050

No. of Unemployed (thousand)

3200

3590

3500

4.7

5.4

5.3

No. of Corporate Bankruptcies

18,76919,807

16,255

No. of Individual Bankruptcies

145,207

223,570

250,983

3840

4170

4500

No. of Suicides

30,95732,14334,427

No. of Homeless People

20,451

24,09025,296

No. of People on Public Assistance(thousand)

1,072.2

1,242.7

1,344.3

No. of Workers with a Permanent Job (thousand)

3695

3489

3444

Birthrate

1.36

1.32

1.29

Crime (thousand)

2,443

2,853

2,790

Reported Cases of Domestic Violence

1,096

1,528

1,574

Reported Cases of Child Abuse

18,80424,25426,569

Unemployment Rate (%)

No. of Juvenile Workers without a Permanent Job(thousand)We can find parallel between the United States and Japan regarding thestructure of risk. Prime Minister Koizumi is following his ally, Bush in handling risk.
What 911 is to American people, North Korean threat is to Japanese. The abduction
incidents and missile issue developed hostility toward North Korea in Japan. The
8

Japanese government decided a new mid-term defense plan, in which North Korea wasdesignated a threat and China a potential threat. Japan begins to leave the restraint
imposed by Article 9 of the Constitution, and take more active role in military
cooperation with the United States. In domestic society, news media emphasize loss oflaw and order and form public opinion that human rights should be restricted for thesake of public safety. The government has been making several laws to give the police
more power to intervene into civil society.
In contrast with such positive policy toward risk of war and crimes, thegovernment is indifferent to risk in socio-economic lives. For nearly five years, theKoizumi government has been pushing a phenomenon known as risk generalization. In
all aspects of life—from employment to medical care, to pension, to the education ofchildren—uncertainty is on the rise, and people feel great apprehension. A broad
spectrum of people, including the middle class which has heretofore enjoyed a stable
lifestyle, harbor a variety of risks now, such as aged parents suddenly needing nursing
care or children who are confined due to illness. In fact, the increase in risk—be it due
to a decline of regular employment, an increase in the number of retirees, or a rise in thenumber of suicides—is more than clear.
Although we can’t go so far as to say that the Koizumi government hasdeliberately increased risk, the “small government” line based in neo-liberalism seems
unmistakably to have promoted its expansion. Curtailment of local subsidies and publicconstruction funding has raised the employment risk in local areas. This problem isclosely related to the change in the LDP initiated by Koizumi. Politicians representing
rural communities used to pursue egalitarian policy for the weak in countryside, such as
farmers and shopkeepers. However, this type of politicians are ousted from or
suppressed in the party. The postponement of institutional reforms in the pension andnursing care systems has enhanced the risks for retirees. If free competition and cost
reductions for private enterprise go too far, security on the railway lines may beneglected, resulting in a major accident. The problem of asbestos teaches us that there
are areas in which the government must firmly regulate the activities of private firms toprotect its citizens’ lives. Then defective building scandal broke out. A number ofcondominium buildings were constructed based on falsified structural strength reportand sold to public. This means that many people have lost their asset at once. This sortof issue has enhanced the risk to society as a whole. New type of risk does not fit tojurisdiction of traditional bureaucracy. In the trend toward small government,
bureaucracy does not have enough incentive to cope with new issues in risk society.
If in fact it is evident that everyone will face the same risk, then an appropriate

9response would be the spread of solidarity as all cooperate in the face of a common risk.
We jointly pay taxes and contribute social insurance fees; and we bestow great powers
on our government to supervise the activities of businesses. It is natural to imagine thatin so doing we are building a more secure social environment. Also, the idea that risk beshared by society as a whole does not presuppose a society in which the powerful
pursue profit to their heart’s content; rather, it is linked to a society that places a certain
weight on equality and fairness.
The government, however, is moving in precisely the opposite direction. The
consequence of the small government line of argument is that people are exposed toever greater risk. If privatized postal savings banks seek profit, they would invest
heavily, “taking a risk” including the aged who lack concern or knowledge about
economics. Increasing the individual burden for medical expenses on the aged willcertainly encourage individuals to purchase medical insurance. People who are preparedto take risks are free to live by “high risk, high return.” However, the society that theKoizumi structural reforms target will force high risk on those who do not wish to live alife full of risk.
Equality is a relic of the past, we are now told, and the words winners(kachigumi) and losers (makegumi) have become our daily vocabulary. For example,
the cost of higher education, including entrance examination preparation, is becoming
enormous. In order to take the new examination to attend law school requires huge
expense. In other words, at the root of small government and laissez-faire, equality ofopportunity necessarily becomes irrelevant.
For example, over nine thousand people commit suicide because of economic
reason every year in Japan. However, no administrative ministry cares about it. The
national unemployment rate has been over 5% since 2001, with a more serious
unemployment crisis in rural areas like Hokkaido and Okinawa. The young generation
has serious difficulties job hunting. Slashing the public sector means reductions inpublic services such as education and medical service. Increase of patients’ payment inhealth insurance was first decided in Koizumi’s structural reform. The government got
approved a new pension bill by the Diet in June 2004 that will increase the burden ofcontributions and decrease the benefits in the public pension. The Ministry of Financeand Liberal Democratic Party start to mention coming increase of consumption tax.
2) Why do disadvantageous people support ruthless policy by Koizumi?
Then we encounter a big question: why do poor or weak people support
Koizumi who is apparently carrying out poisonous policy for these people?

10

My answer to this puzzle is as follows. The first reason is Koizumi’s politicaltactics. The socialization of risk has often led to vested interests. Closed policy
communities composed of politicians, bureaucrats, and interest groups have benefited
from this policy. Koizumi successfully connects the idea of the socialization of risk with
the negative image of selfish bureaucrats and corrupt politicians. People appear to
accept the idea of small government as a tool to clean up the political world. Koizumi isvery good at presenting a political spectacle in which he deals the death blow to thecorrupt bad guys.
The second reason is misunderstanding about welfare in Japan. Traditionally,welfare was thought to be mercy to the weak and was truly exceptional in postwar Japan.
During the era of high economic growth, Japanese society was young and vital andenjoyed high social mobility. These fortunate conditions made welfare a gift to a small
minority. What is happening now is that more and more people are becoming weak andat the same time turning against the other underdog amidst fierce competition. Insteadof establishing a reliable welfare regime based on popular contributions, people resent
the beneficiaries of risk-socialization policy. Urban dwellers complain about the misuseof public money in rural development, and workers in companies criticize protection forfarmers and self-employed people. Although everyone comes at some point to realize
his/her vulnerability, a sense of solidarity is not shared yet among the Japanese people.
In the recent general elections, the populace opted with a sigh of despair for
neo-liberalism and the Koizumi reform line, although it has brought increased risk andinequality. This cannot be explained simply as a consequence of Koizumi’s media
strategy or by the argument that the people, with the illusion of themselves as winners
conjured by Koizumi’s magic. Middle-aged salaried men surely understand that, if they
are just setting out in business for themselves, they can’t become multi-millionaires. It
is not that equality and a sense of justice have disappeared from Japanese society.
Rather, a warped egalitarianism and a distorted feeling of righteousness are inundating
Japanese society and the urban middle class and those who earn even less—whom wemight call the reserve army of losers—support Koizumi enthusiastically.
From a macro perspective, aside from a handful of winners, everyone is being
exposed to the same risk. Yet, it cannot be denied that subtle differences exist. In thebenefit allocation system put forward by the LDP to date, rural villages, people inconstruction, and the autonomous bodies of depopulated areas, among others, have been
especially protected. Subsidies, public works projects, and local grants-in-aid, among
others, have provided shelters against risk. From the perspective of urbanites, wholargely bear the cost of funding such shelters, there is unfairness and inequality

11

surrounding the political concern that their risk alone is undeservedly high. At the sametime, civil servants are a group of people who have guaranteed status and face no
exceptional risk whatsoever. This, too, reflects a large inequality when seen from theview of salaried men and people doing irregular labor, men and women who have madetheir way through the past ten years of restructuring after the bubble burst. Although
they have no feeling of shame looking at Roppongi Hills, the very symbol ofconspicuous consumption in housing, they are deeply angered by the public housing
nearby. In this situation antipathy for such petty inequality conceals a great inequalitythat accompanies the global economy.
Leftwing scholars like myself argue that the public sector must work forequality. City dwellers contribute both taxes and insurance premiums, and the public
sector should provide equitable welfare services generally, irrespective of differences in
the respective earnings and localities of those urbanites. This construction of equality iscommon knowledge in political science and public finance. This model could not takeshape without urbanites having trust in the public sector. At present this trust is lacking,and there is a widespread feeling that the public sector itself is the source of inequality.
There is the expectation that the creation of small government, the root of the slogan“from the government to the people,” or the creation of a situation in which everyone is
exposed equally to great risk, will bring about equality among the “non-winners.”
A certain sense of justice with respect to the politics of rights and interests,
heretofore the forte of the LDP, has been the motive force behind the eagerly sought
idea of small government. Criticism of political corruption and useless public works
projects has permeated the populace, and a widespread distrust has emerged based on
the belief that rural builders and farming families have used political connections toseize the lion’s share of profits. The expectation is rife that big government has become
entwined with special interests, which a selfish minority has pursued, whereas with theconstruction of small government true public interest transcending special interests will
be realized.
Privatization of the postal administration has been tailored to serve as the
symbol of “equality” and “justice” in these senses. The opposing view that, were it
privatized, post offices in sparsely populated areas would cease to exist, has evokedscarcely any sympathy. Perhaps urban dwellers imagine that specially designated post
offices, a source of rights and interests, will follow the laws of efficiency and thatweeding out abides with the interests of the majority. It is not that egalitarianism and asense of justice have disappeared, but they have taken a distorted form. In recent
elections, I would argue, this distorted sense of justice and egalitarianism ultimately has

12been mobilized with stunning success, using the symbol of small government, throughPrime Minister Koizumi’s popularity.
Distinctive of the debate in the recent general elections was the simple
formulaic opposition between “reform and resistance” and “private and governmental.”
Of course, the former in each case represented the just side and the latter the evil. By
participating in the attacks on everything dubbed evil, people were able to satisfy theirsense of righteousness. If this sort of political debate escalates, however, wither
Japanese politics?
Such dualistic oppositions as between “urban and rural” and “younger
generation and the aged” are becoming fixtures, and the latter in each case who support
themselves through redistributions may be shunned as good-for-nothing, vested-interest
groups. The political technique of gathering support by inciting a twisted egalitarianism
among people exposed to risk, not the management of risk itself, is an invitation tofascism. In this sense Japanese politics is facing a huge crisis
3) Prospect of two party system
To break through such a crisis, opposition parties must understand clearly theirown loss of position. More than anything else, there is a need for firm resistance to the
Koizumi reforms. Let me offer some thoughts on the tasks before the Democratic Party,
the major party now in opposition. The Democratic Party was in an utter depression as aresult of the elections, but on reflection the fact that the LDP has now shown that it will
be following a neo-liberal line means that an enormous chance has presented itself forthe opposition party. Because it has chosen to stand upright with a backbone of
neo-liberalism, toppling it has actually become possible.
We must start from the recognition that, if the Democratic Party were to give
serious thought to taking upon itself one wing of two major political parties, then there
would be space available to the left of the LDP. By “left” I am referring to those who
stress equality and redistribution more than does the LDP. Or, to put it another way, theideal of burdening the public sector with a specific role to supervise jointly sharedrisk—not giving in to a situation in which individuals are exposed to risk—is an ideal of
the left. Thus, the first step for the reconstruction of an opposition party is to forge
ideals different from those of the LDP.
Responding to an Asahi Shinbun interviewer’s question, Nakagawa Hidenao,
chairperson of Policy Deliberation Council of the LDP, addressed himself to the
Democratic Party in saying that two major parties, which shared the basic values ofsmall government and alliance with the United States, would be competing for reforms.
Nakagawa’s statement, which brings to mind Francis Fukuyama’s “end of history,”13

renders meaningless the vocation of politics, and by sealing up the populace’s hopes inpolitical possibilities, his aim appears to be the continual perpetuation of LDP power.
The Democratic Party must not be ensnared in this trap. Hopping on the same
neo-liberal bandwagon as the LDP and competing and bidding up reform to show whichside is more radical in numerical objectives would constitute effective abdication of itsrole as an opposition party.
In the area of policy, the Democratic Party needs to make clear a course of
supervising risk in society as a whole in response to the generalization of risk. However,continuation of the method of spreading past risk throughout society by such things aspropping up certain locales with public works projects or industrial protection of fleetsof transport ships most certainly cannot win national support. The populace is justifiably
dissatisfied with the business methods of the public sector with all its corruption andinefficiency. The two principal reasons for failures in the public sector are, I believe, thestructure of centralized power and the administration of discretion.
The structure of centralized power is the main cause of inefficiency born of amismatch between supply and demand in policy. While there was administrative
reorganization in the latter half of the 1990s, seen at the level of the ministerial bureau,
the policy supply system has been characterized by durability, one might even say
inertia. For example, in the sixty years since the end of World War Two, there has beena sharp decline in the rural population, but the organization and budget of the Ministryof Agriculture, Forestry and Fisheries has never been accordingly reduced. Althoughdemand has largely vanished with changes in society and economy, policy continues indesultory fashion. We now have a situation in which they call for reduction of acreage
under cultivation, while creating agricultural land through drainage. Also, supply in theareas of capital and facilities has in no way caught up with the new requirements fornursing care for an ageing population. There are now long waits to enter nursing
facilities, and salaries for home-helpers remain miserable. Thus, it is not that there is aneed to make government smaller, but the true task for reform needs rationalization(“scrap-and-build”) and liquidation of the supply-demand mismatch.
The administration of discretion is the fundamental reason behind corruption.
Corruption cannot arise in policy services and the allocation of benefits where rules andstandards are clear in such areas as the allocation of official pensions and local subsidies,for policies would be applied automatically on the basis of objective rules. Japanesebureaucratic organization, however, embraces numerous discretionary policies, such as
spot location of subsidies and special approvals. There are no rules in the allocation of
benefits and the coordination of interest in such policies, for they are controlled by the14concerns of those in charge of respective policy areas who have the power and thesources of wealth. And, the entire process remains murky. Thus, as soon as politicians
intrude, we find the rapid spread of politics by mediation and intermediaries.
To restore the trust of the populace in a plan for the socialization of risk, there
must first be devised policies to rectify petty inequality, as noted above. It would be
most welcome if the labor unions of civil servants independently launched a movement
to firmly establish workplace regulations. This is not, however, the essential issue. The
two points of the structure of centralized power and the administration of discretion
remain the essence of reform. To these ends, the local decentralization of power is a
strategically important task. By first decentralizing power, we can reduce the distanceseparating urbanites and the arena of policy formation, and we can make the demands ofurbanites reflected more accurately in policy. The local decentralization of power canthus serve as a decisive measure in rectifying the supply-demand mismatch.
Local decentralization of power is also effective in eliminating theadministration of discretion. The distribution of subsidies is the major example of thisadministration of discretion. If local power decentralization were to be pursued in thefinancial arena, then the insidious political competition, which appears to be making
inroads into the discretion of bureaucrats, would disappear. Protecting the community
with the closest governmental body, the local municipality, and supervising risk
jointly—this is the vision of a society that can resist neo-liberalism.
There are some factors that will influence the next party system. One iswhether the Democratic Party can take such center-left line vis-à-vis the LDP. The
Democratic Party is still amalgam of diversified politicians, and it is unpredictable whowill lead the party with what policy ideas. More important factor is who will succeed to
Koizumi. The LDP is to elect a new president in this September. If the party chooses tocontinue Koizumi’s line, two party system based on right-left axis will come into being
eventually. If the party chooses modify its policy line from neo-liberal to compassionate
conservatism, it will be difficult for the Democrats to make difference, and anotherpredominant party system is likely to continue.

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