Of all the governmental policy-making bodies in Japan, one of the most important and influential today is the Council on Economic and Fiscal Policy. Reporting directly to the prime minister, its members include government officials and experts on all manner of economic and fiscal policy issues.

Earlier this week, the council called on the government to create more measures to support the coronavirus-damaged economy by funding an extra budget of sufficient size. Council recommendations and decisions form the basis of the government’s mid- and long-term policies.

What is the council and who are its members?

The council was established in January 2001 within the Cabinet Office.

It was part of a larger effort to reorganize government in a way that strengthened the authority of prime ministers against the bureaucracy over economic and fiscal policy, and to better utilize and reflect the opinions of private sector economic and fiscal policy experts.

It has three basic roles. The first is to carry out surveys and discussions on major economic and fiscal policy issues as requested by the prime minister. The second is, in response to inquiries from the prime minister or members of the Cabinet, to examine the government’s main economic policies to ensure their consistency. The council also provides advice to the prime minister on those issues.

A previous incarnation of the Council on Economic and Fiscal Policy, chaired by then-Prime Minister Shinzo Abe, holds a meeting in July 2018. | KYODO
A previous incarnation of the Council on Economic and Fiscal Policy, chaired by then-Prime Minister Shinzo Abe, holds a meeting in July 2018. | KYODO

By law, the council is limited to 11 members, including the prime minister. Except for the chief Cabinet secretary and the minister of state for economic and fiscal policy, there is no obligation for other Cabinet ministers to participate, although the prime minister has the authority to appoint them. However, the number of private sector council members must be at least 40% of the number of council members who are in the Diet.

Other ministers may also attend as temporary council members, but only for the purpose of discussing legislative proposals. The prime minister has the power to appoint outside economic and financial experts from academia or the private sector. They do not have a set limit on the number of times they can participate but often do so based on their expertise related to the items on the meeting’s agenda, which is set by the prime minister.

Why is the council so important to Japanese politics now?

Under the previous administration, the council saw its influence diluted by two new councils that had been established to debate economic growth strategies.

These included the Council on Investments for the Future and the Headquarters for Overcoming Population Decline and Vitalizing Local Economy. Both groups consisted of members from the ministry of economy, trade, and industry who were close to then-Prime Minister Shinzo Abe, and their economic policy suggestions during meetings were heavily influenced by the ministry’s attitudes and preferences.

Suga, however, has gone out of his way to curb the influence of advisers originally from the economy, trade, and industry ministry, replacing former ministry bureaucrats with loyalists who have no connection to it. As part of an effort to break the influence of the ministry on his economic policymaking efforts, he decided to make the Council on Economic and Fiscal Policy the main advisory body to his Cabinet. At its first meeting under his leadership on Oct. 6, Suga told the council it would serve as his administration’s “command center” for economic policy in order to realize ministerial reform and a path to growth.

Who is on the current council?

So far, there have been three council meetings under Suga.

In addition to Suga, Chief Cabinet Secretary Katsunobu Kato, State Minister for Economic and Fiscal Policy Yasutoshi Nishimura, Finance Minister Taro Aso, Economy, Trade and Industry Minister Hiroshi Kajiyama, and Internal Affairs and Communications Minister Ryota Takeda are members. Bank of Japan Gov. Haruhiko Kuroda is also one of the regular members. Administrative reform minister Taro Kono has attended as a temporary member.

Nongovernment participants include Shumpei Takemori, a Keio University economist whose specialty is foreign direct investment. Hiroaki Nakanishi, the head of the Japan Business Federation (Keidanren) and the executive chairman of Hitachi, has participated, as has Suntory Holdings CEO Takeshi Niinami, who is considered to be Suga’s economic “brain.”

What has the council discussed under Suga?

So far, discussions have centered on regulatory reform and digitalization of the economy, which Suga said would help create a flow of people from crowded areas to more rural areas, especially those in small and medium enterprises and startups, to spur regional growth.

How to promote more teleworking and distance learning are also topics that Suga wants council members to consider.

At the most recent council meeting on Monday, the emphasis was on realizing Suga’s goal to have Japan at zero greenhouse gas emissions by 2050 through more use of renewable energy. Nakanishi told council members that in order to realize these goals, a massive investment to strengthen the country’s electricity grid infrastructure and the development of large-scale batteries was essential.

What kind of influence has the council had?

When it was set up in 2001, then-Prime Minister Junichiro Koizumi appointed economic and fiscal policy minister Heizo Takenaka as council chair.

Under Takenaka, the council played a large role in helping Koizumi achieve his goal of structural reform. Though not a council member today, Takenaka has long been a strong advocate for the creation of a new digital agency to oversee the shift to a digital economy, a fundamental goal of Suga now being debated by the council.

How other council members also involved with digital economy issues, particularly the economy and trade minister and the internal affairs and communication, will advise the prime minister about a new digital agency not under the control of their ministries is likely to be the subject of lengthy discussion in subsequent council meetings and its recommendations are expected to greatly influence how the new agency operates.

What is the relationship between the Council on Economic and Fiscal Policy and the Growth Strategy Council?

The Growth Strategy Council was set up to debate the specifics of issues that will then be raised at the CEFP.

It is chaired by Kato and co-chaired by Nishimura and Kajiyama. Eight nongovernmental experts are council members. At least half have close relations with Suga. These include Takenaka and David Atkinson, a key adviser on Suga’s inbound tourism policy and the CEO of Konishi Decorative Arts and Crafts Co., as well as Yasufumi Kanemaru, president of Future Corp., and Tomoko Namba, founder of the DeNA mobile gaming company and owner of the Yokohama DeNA BayStars.

The council debates issues that include corporate restructuring, increased industrial production, supply chains, new ways of working and minimum wage issues, and energy and environmental policies.

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