Organizer and Chair: Ulrike Schaede, University of California at San Diego

Discussant: Sheldon M. Garon, Princeton University

This panel reviews four critical reform programs that have recently occurred in policy areas long considered to be impossible to reform, since these are pillars of the Japanese political-economic system as well as targets of intense political opposition: agriculture, banking, the postal system, and pensions. Rather than simply chronicle recent developments on the reform front, however, the papers represented on this panel explore some of the big questions in contemporary Japanese politics: What are the long-term causes and short-term triggers behind reform? Should specific reforms be viewed as the product of entrepreneurship on the part of Prime Minister Koizumi, his predecessors, or his cabinet members? Or is something more systemic at play? How extensive have recent changes been, and what do those changes suggest about broader interest group or institutional configurations in Japan? And how do recent reforms fit into the longer, historical reform process observed in Japan? This panel is interdisciplinary by bringing together political science, business/economics, and history.

Ulrike Schaede, University of California at San Diego

The pillars of Japanese banking regulation between 1949 and 1997 were informal, based on regular contact between the regulating ministry (MOF) and banks, as well as on administrative guidance. This has changed dramatically. Laws have been rewritten, a new regulatory agency established, new inspection manuals drafted and supervision processes introduced. This radical change is the result of the confluence of several domestic and global factors, including PM Hashimoto’s 1997 Big Bang reform program (aimed at increasing the global competitiveness of large Japanese banks); the non-performing loan crisis of the 1990s and new policies to push the clean-up; and the increased participation of foreign banks in Japan. The politics of this is messy, however, since reforms favor large banks and threaten smaller ones. Therefore, many politicians have attempted to obstruct reforms by insisting on exemptions for small banks. The resulting compromises have introduced great distortions in Japan’s financial markets.

Margarita Estevez-Abe, Harvard University

This paper examines how politics changes when institutions change. Japan provides us with an excellent case to explore this issue. Japan has reformed its key political institutions since the mid-1990s. This paper examines how changes in the institutional context affected the way political actors interacted with one another. It does so by looking at recent politics over pension reform, perhaps one of the "stickiest" policy areas in any country.

Christina Davis, Princeton University

Agriculture has long been one of the most protected sectors in Japan. Farmers benefited from the rural bias of the electoral system, the strong organizational capacity of the agricultural cooperatives, and the vested interest of the agriculture ministry to support interventionist policies. This powerful combination of domestic interests had long allowed agriculture to resist reform efforts. Over the past decade, however, major policy changes have begun to introduce market principles and partial liberalization. This paper evaluates the depth of these reforms and analyzes what explains the timing and form of the policies that were chosen. I compare the role of international pressure, changes in the electoral system, budget constraints, and food safety crises.

Sheila A. Smith, East-West Center

Created in 1954, Japan's postwar military has been scrupulously restrained, and for many decades, its mission of "exclusive self-defense" meant that the use of force could only be imagined in response to a direct attack. In the late 1990s, however, the mission of the SDF expanded to include cooperation with US forces in "areas surrounding Japan," suggesting the Korean peninsula and even Taiwan Straits. Closer to home, the Japanese Coast Guard (with assistance from the Maritime Self Defense Force) tracked and ultimately fired upon a North Korean fishing vessel suspected of spying and drug trafficking in open waters. In the wake of 9/11, the Japanese government expanded the mission of the SDF even further, and dispatched naval and air forces in support of the US war in Afghanistan in support of the "war on terror." Even more dramatically and in the absence of a UN mandate for the war, Prime Minister Koizumi's administration crafted legislation that sent ground troops to Iraq in 2003. Often seen as one of the most resistant aspects of Japan's foreign policy, the use of the SDF and the political controls on their operations have been significantly transformed. This paper will examine the domestic changes that have affected the civil-military balance in policymaking on the SDF, including the role of the Diet in legislating changes, the consolidation of policymaking in the Prime Minister's office, and Prime Minister Koizumi's use of the Constitution to legitimize an "international" role for the SDF.