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    The unholy trinity

    Koizumi’s three-pronged reforms (usually more literally translated “trinity reforms”) are not part of his campaign that we’d been hearing a whole lot about lately, what with the emphasis on Japan Post and the resulting landslide election victory and cabinet reshuffling. They’re back in the spotlight these last few days, though. Yesterday, the government made a few announcements:

    On 8 November, the federal government gave instructions to slash ¥630 billion from the budgets of seven ministries. The purpose of the move is to effect decreases in the amount spent on subsidies, in line with the ¥600 billion worth of the tax revenues that will no longer be transferred to the federal government as a result of the national and regional three-pronged reforms. Though the goal is to speed [the implementation of the Koizumi administration’s platform through] cabinet-level leadership, Kasumigaseki has objected to what it sees as quotas. The government and the LDP have mobilized their machine to take the lead politically through, for example, the new establishment of regular talks between the vice-ministers and the party chairman.

    “It is necessary for us as the cabinet to throw even more energy into coordinating [these reforms]. The relevant cabinet members, we would ask to marshall all their resources swiftly”–so said Chief Cabinet Secretary Shinzo Abe at an informal gathering after an 8 November cabinet meeting. He requested concrete proposals for fulfilling [each ministry’s quota of reductions in] allocations by 14 November.

    That was one of those little articles that are easy to understand but surprisingly difficult to translate. (Or maybe the difficulties I was having in getting it into non-mangled English were a signal that I was missing something, but I don’t think so.)

    Assuming the vice-ministers referred to are the administrative vice-ministers, the meetings with the LDP point person are going to be very important. When cabinet ministers appointed by the PM (and their immediate subordinates) have problems, it’s usually because they run afoul of and are outmaneuvered by those under them: the career bureaucrats, who are led by the administrative vice-ministers. These are the people who have devoted their entire post-university careers to going up the escalator in their chosen arm of the government, and they are notoriously resistant to change–especially the kind of change that involves cutting their budgets, and thus their power and influence.

    To recap, the three prongs of reform are

    • to slash outright federal subsidies to regional and local governments

    • to overhaul the federal “revenue sharing” system, in which tax revenue comes from local taxpayers to Tokyo, is divided for redistribution in little packets after being haggled over by agencies in the federal ministries, then makes a U-ey back to local governments (or local branches of federal agencies)
    • to make up for the resulting loss of federal subsidies by increasing the amount of locally collected taxes that goes straight into the coffers of regional and local governments–which is to say, to decrease the role of the federal middle man

    You can imagine what the middle man thinks of all this, but self-serving complaints from Kasumigaseki are not the only ones being leveled at Koizumi’s plan. The “three-pronged reforms” have been portrayed as simply shifting much of the government debt burden from federal to regional bodies. One might note that, given the federal government’s notorious wastefulness in handling money, shifting its debt somewhere–anywhere–can hardly make things worse. There’s another problem, though, as noted, for example, in this Asahi editorial from a month or so back: decision-making power is not necessarily being decentralized along with tax collection.

    With regard to the transfer of 3 trillion yen in tax revenue, some people say a figure of 2.4 trillion yen has already been agreed upon. But in reality, the Education Ministry is still against slashing 850 billion yen from compulsory education fees now paid from national coffers. The Central Council for Education, an advisory body to the education minister, took an extraordinary vote during a recent meeting. It is scheduled to issue a report shortly recommending that state funding of compulsory education be maintained at current levels.

    In addition, entities like the Ministry of Health, Labor and Welfare, or the Ministry of Land, Infrastructure and Transport, have refused to cooperate with a plan submitted by the National Governors’ Association to abolish state subsidies.

    Thus, the situation has not changed from last year. Koizumi is still at odds with the ministries.

    Final resolution of the issue depends on the outcome of talks between the government and the ruling parties. In order to prevent having the subsidies under their control abolished altogether, the various ministries will probably offer their own versions of reducing subsidy rates, or suggest ways to switching to grants, whose purpose is not designated, and, therefore, more convenient for local governments.

    But we cannot approve of switching purpose-specific subsidies to nonspecific grants. This would allow the ministries in Tokyo to retain their power of allocating money. That would be counterproductive to the decentralizing principles of reform.

    It’s worth noting that while left-leaning organizations such as the Democratic Party of Japan and, uh, the Asahi editorial board are reliably against privatization, they often do support decentralization of government budgeting and allocation. Whether that testifies to their economic liberal-mindedness or to the sheer undeniable inefficiency of the bureaucracies is an open question.

    It will be interesting to see what happens on and after the fourteenth.

    One Response to “The unholy trinity”

    1. Simon World says:

      Daily linklets 10th November

      Slavery and Hong Kong's mui tsai system. The (mis)-rule of Disney law in Hong Kong. And on the Mouse that Could (with Government help), I paid HK$25 billion and all I got was this lousy theme park. A conference on new media and social transformation in Hong Kong, preparing citizen journalists (a term that reminds me of citizen arrests) for the upcoming WTO meeting. A crackdown on professional beggars in Guangzhou. China's strong bargaining power on the East China sea gas fields, although Japan turned away Chinese planes 30 times in the past 7 months. Hospitals in China find profit in AIDS. Cool things on the Chinese internet. Hu Jintao's a ruthless meanie, although there's at least one lady excited to meet him. But there are reports that Jiang Zemin is still calling the shots. China's migrant worker pool dries up. Gwen Stefani and her Harajuku girls. An…

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