Japan seems to like the new and shiny. Tack the word “shin” (new) onto the name of a product — anything from a detergent to a political party — and automatically you gain an edge over the opposition.

Similarly with the word reform. People promoting some policy shift have only to claim it is a “kaikaku” (reform), and opponents are automatically seen as conservatives stuck in the mud of previous policies.

The so-called electoral reform of 1994 is a good example. The former system of multiple-seat electorates was said to be outdated. Single-seat electorates with first-past-the-post voting were supposed to be more timely and democratic. Anyone who hesitated was seen as a conservative troglodyte.

One who did hesitate was the former prime minister, Kiichi Miyazawa, who was then bundled out of office by that alleged reformer Ichiro Ozawa. Only now are some becoming aware of the problems inherent in the new system, particularly as they apply to Japan. A return to the multiple-seat system is being mooted.

An even better example of misguided reform was the “zaisei kaikaku” (fiscal reform) of late 1997, when fiscal stringency was supposed to propel Japan into a brave new era of firmly based economic progress. Instead, it pushed the country into an economic tailspin and had to be reversed within six months.

Yet the guilty, including most of Japan’s financial media and intelligentsia, remain unrepentant. The policy they advocated has been turned on its head, but they still seem able to tell themselves that as would-be reformers they were on the side of the angels.

Sometimes the somersaults occur without anyone seeming to notice. A good example is Japan’s financial system. In the past, it was contemptuously derided as a “convoy” system, with a “battleship” called the Japanese government trying to shepherd and control all financial institutions to guarantee they all remained on the same course, and afloat.

Then, in the early 1980s, driven by the free-market, liberalizing pressures that have since caused so much harm in much of the rest of Asia, Tokyo agreed that banks and others should be allowed to set their own interest rates and compete for business against each other. The strong, it was argued, would survive, and the weak would be weeded out.

The result was a kaikaku that ended up as “kaiaku” (a change for the worse). Weak or suspect institutions found they could gain funds simply by offering above-market interest rates. In the rush to expand business, they began lending to anyone able to offer land or shares at inflated values as collateral. Some of the more suspect borrowers did not even have to offer collateral. They or their friends had easily managed to infiltrate the top levels of the now-liberalized system.

Inevitably, many of those loans went bad, and the government has been forced to rescue the system at enormous cost to taxpayers. Institutions that went bankrupt have been seminationalized. The remainder have been told to accept public funds and subject themselves to strict guidance on how those funds are to be used.

In effect, far from abandoning the old convoy system, Japan has ended up with something far more controlled. Some of the fleet are being hoisted aboard the government battleship, while the rest cling to tow ropes behind.

But the “reformers” still congratulate themselves on having introduced free-enterprise efficiency.

Japan’s experience forces us to rethink the role of banks in our societies. If we are to go the genuine free-enterprise route, then bankers should be forced to risk their own or their shareholders’ money in exchange for the profits, fat salaries and dividends they seek. If depositors want high returns, they should be forced to face high risks, as in any other business.

But if it is decided that all this is too risky, that any breakdown threatens the entire stability of the financial system, then — as in the United States in the late 1980s — the government has to step in with a system of tight regulations, inspections and savage, on-the-spot fines for misbehavior.

If, as in Japan, it is felt that the government cannot be so Draconian, there is no choice but to accept the seminationalization that we see in this country today. Banking is too important to be left to the bankers. The spasmodic, weak-kneed, after-the-event attempts to punish bad bankers is meaningless.

But even as these truths are being revealed, we have the bizarre campaign, financed largely by the banks, for a further “reform,” namely, privatization of the one institution holding Japan’s rickety financial system together — the government’s flourishing post office savings and insurance system. The banks and their very vocal supporters insist that the post offices compete unfairly with the private sector, and that the funds they gather end up financing a range of bureaucratic boondoggles and wasteful public works.

In fact, if the public has preferred the safety and reliable service of the post office system, it was largely because of the incompetent and sometimes corrupt behavior of those same banks. In effect, the private system had become a conveyor belt directing the hard-earned savings of the public into the hands of bubble speculators, gangsters and corrupt politicians.

The post office system has, as required by law, simply delivered the deposits of a trusting public into the hands of the bureaucrats. If the bureaucrats then wasted the funds on pet projects or empire building, that was hardly the fault of the post offices.

Which brings me to yet another kaikaku: the plan of the previous Hashimoto administration to totally reform the bureaucratic system. Years of discussion produced a mouse, and even the mouse has yet to be let out of its cage.

Japan’s first priority should be to end the absurd system whereby each ministry is free to claim a fixed share of government funds and then squander it as the ministry’s bureaucrats see fit. Someone at the top has to ride herd, to decide what is needed in the national interest rather than the interests of particular groups. That would be real reform.

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