The newly reorganized government ministries and agencies began operating Jan. 6. The administration of Prime Minister Yoshiro Mori, however, seems to be oblivious to the purpose of the reform.

The purpose of the reorganization was not merely to reduce the number of government departments, but to reform Japan by ending government service based on centralized power, which had been the case since the Meiji era, and by creating a national system led by the private sector. The reorganization was not aimed at switching from bureaucratic control to political leadership in the government. For decades, bureaucrats and politicians have colluded to reap maximum gains together.

The KSD payoff scandal is a case in point. KSD, a mutual-aid organization, failed to raise enough private funds for its plan to establish a unique college of technologists, in itself a laudable concept. So KSD asked politicians and bureaucrats for help and obtained government aid totaling 8 billion yen to establish the college. The college’s legitimacy as a private institution is in doubt after it received such generous aid. The fine ideal of university education has been corrupted by politicians as well as by the retired bureaucrats who have landed KSD-related jobs.

Officials are talking about switching from bureaucratic to political leadership in connection with the government reorganization. However, growing collusion between bureaucrats and politicians is decreasing private-sector leadership.

There has been little private-sector leadership in Japan since the Meiji era. History shows that when the Meiji government took over from the Tokugawa shogunate government in 1868, roof-tile makers along the Sumida River in Tokyo offered to contribute then 100 yen a year to the government in exchange for restrictions on competition, which they said would cause extreme confusion in the market.

Since those days, there has been a widespread feeling that the people are subordinate to the government. This relationship between the public and the government is unchanged, despite the fact that political leadership has replaced bureaucratic leadership in the government. Collusion between politicians and bureaucrats remains firmly in place. In the recent government reorganization, bureaucrats tried to expand and retain their interests in their rivalries with politicians. Private-sector leadership was a secondary consideration.

If Japan seeks to implement major reform, it must create a system for private-sector leadership rather than replace bureaucratic control with political leadership. There are three principles for doing it:

First, the government should minimize its functions and relegate most of them to the private sector. The more functions the government handles, the more the private sector will depend on the government, creating a hotbed of corruption.

Second, market competition should be encouraged. Toward that end, restrictions that the private sector depends upon should be minimized. Much-ballyhooed deregulation is making little progress in Japan. Restrictions continue to prevent competition in many sectors, although the number of self-service gas stations has reportedly increased. Telecom giant NTT’s high interconnection charges have slowed the information-technology revolution in Japan, despite some progress in solving the issue.

In Japan, strong concerns persist over deregulation. Japanese officials recently expressed concern over the power crisis in California, on the grounds that it was caused by deregulation of the local power industry. However, the crisis stemmed from a wide difference between the supply cost and selling price of power, rather than deregulation.

Third, decentralization of power should be given priority. It should be based on decentralization of financial resources, rather than that of government functions. Decentralization of power will make little progress unless it is accompanied by decentralization of financial resources. The present financial system, in which postal savings and postal insurance funds are transferred to the Finance Ministry for use in the government’s fiscal investment and loans program, must be abolished. Otherwise, decentralization of power will never be achieved.

Government-backed corporations are the bases of centralized power, where politicians have little influence. Among these corporations, some of which are defunct, are Japan Highway Public Corp., Japan Housing Corp. and Pension Welfare Service Public Corp. Public corporations must be privatized to decentralize power.

The government reorganization was intended to implement the above-mentioned principles — not to consolidate ministries and agencies. The success of the reorganization depends on the implementation of these principles.

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