The long-running debate over breaking up the Ministry of Finance has ended with a compromise that will keep the ministry more or less as it is -- the most powerful of Japan's government offices. The MOF will be renamed the "Treasury Ministry," and will be charged mainly with fiscal and budgetary affairs, beginning in 2001, but will continue to have its say when dealing with failures of financial institutions and crises in the financial system.
These functions will be shared with the "Financial Agency," the reinforced policymaking and regulatory body for private financial institutions that will absorb the existing Financial Supervisory Agency. Under this "cojurisdiction" formula, worked out last week by the ruling Liberal Democratic Party and opposition New Komeito, responsibility will rest primarily with the new body. But in financial failures and crises involving the use of public money, the Treasury Ministry will have as much say as the Financial Agency.
The political compromise on the MOF reform represents an anticlimax for the bureaucratic streamlining program that was launched with such fanfare by former Prime Minister Ryutaro Hashimoto. Downsizing the MOF is the centerpiece of the government reorganization that, beginning in January 2001, will halve the number of ministries. The current bloated bureaucracy comprises the Prime Minister's Office (to be renamed "Cabinet Office") and 21 ministries.