Bureaucratic Resistance and the LDP Leadership

CHAPTER 4

The Deregulation Project:

Bureaucratic Resistance and the LDP leadership

(January– August 1996)

The central ministries tend to react negatively to any new policy from local governments. Even if they approve the policy, they think it should not be enacted by local governments. If it is a good policy it should be enacted by the central government and applied uniformly.

S. Reed, JapanesePrefecture and Policymaking, 164.

In Japanese system of decision making the power of bureaucracyhas been acknowledged but contested (see chap. 2). The spectrum of opinions ranges from notions that “bureaucrats are far more powerful than politicians,”[1] to statements suggesting the opposite:“Bureaucrats may try to convince, oppose, and sabotage political leaders. They often are successful. But in the end they lose out to the political leadership when political leaders believe the stakes are high enough to fight for.”[2] The analysis of the second part of the Program for Autonomic Modernization, namely, the Deregulation Project will show that both stances are somehow justified. The bureaucrats were successful in blocking the local initiative that included various proposals for deregulation measures –the area strictly protected by the central ministries; at the same time, under the political leadership of the LDP party organ, the politicians were able to implementone item of the airfare reduction between Tokyo and Naha.

1. The New Cabinetof Hashimoto Ryūtarō

On 11 January 1996 the cabinet led by the Social Democratic Party (SDP)suddenly resigned and the new cabinet was formed under the lead of the Liberal Democratic Party (LDP),with the New Party Sakigake as the third coalition partner. The sudden change of coalition cabinets took the prefectural government by surprise, but the change did not seem to turn out entirely disadvantageous for the prefecture, at least not initially.[3]For Prime MinisterHashimoto Ryūtarō from the onsetdeclared a deep commitment to the resolution of theOkinawa problem, which was wrapped up in the rhetoric of “utmost efforts and special consideration.”[4]The consecutive developments discussed in this sectionrevealed however thatthe prime minister and his party’s commitment were of a limited nature, namely,it predominantly concerned the national security issues.

The new prime minister repeatedly displayed his interest and voiced commitment to the Okinawa issue. Hashimotomade references to Okinawavirtually in all main policy speeches,[5]appointedtothe important position of the chief cabinet secretary people with close ties to Okinawa, referred to as the Okinawa sympathizers, Kajiyama Seiroku (1926-2000) and Nonaka Hiromu(b. 1925),created a new post of special advisor to the Prime Minister on Okinawa affairs, which went to a well-known political analyst Okamoto Yukio,[6]and conveyedin unprecedented manner numerous meetings with Governor Ōta, ten times in the first year of his premiership, including twice in Okinawa, and seven times in the following year of 1997.[7]

Nevertheless, Prime Minister Hashimoto, whoshowed a strong personal interest in the issues of national security and defense–wasalso the key member of the biggest Obuchi faction(later the Hashimoto faction),which traditionally has been concerned with the policiesin those areas. Prospects for thefastestachievements, which often influence the choice of policy initiative by prime ministers,[8] seemed most promising in the Special Action Committee on Okinawa (SACO)activities initiated by former Prime Minister Murayama.On 12 April 1996, three days before the release of the SACO interim report and five days before summit with the U.S. President Bill Clinton, during which both leaders signed the U.S.-Japan Joint Declaration on Security: Alliance for the 21 Century,[9] Hashimoto announced the return of the most disputed Futenma Air Station at a press conference held together with the U.S. Ambassador to Japan,Walter Mondale.[10] Both Futenma and other military facilities included in the SACO interim report (15 April 1996) and in the finalreport (2 Dec. 1996),[11]that were to reduce the military land by total 21 percent,[12]were agreed however on condition of relocations within the prefecture. Such condition ran against the prefecture’s plans for complete base closures and hence soon after the announcementGovernorŌta voiced his opposition,[13]which in consequence was to lead to a major conflict between him and the central government a year later. But the relocation condition created alsoa powerful bargaining card vis-à-vis the centralgovernment, a card that the prefectureusedthereafter in negotiations on local policies.

Following the announcement of return of the Futenma Air Station, Prime Minister Hashimoto was determined to finalize the agreementby finding a relocation site, but so were the anti-base groups in Okinawa,not to let it happen. The influential Okinawa Branch of Japan Trade Union Federation (Rengō Okinawa)in cooperation with other citizen groups collected the required number of signatures in May 1996 and requested the governor to hold a referendum on the realignment, consolidation and reduction of the U.S. bases inOkinawa and the Status of Forces Agreement (SOFA)revision. The referendum, the first ever on a prefectural scale in Japan, was scheduled for 8 September, and although not legally binding, together with several other elections: the prefectural assembly election on 9 June and the Lower House election on 20 October, in addition to the still unresolved proxy sign –all added to the pressure put on the central government. The June election to the prefectural assembly resulted in reversing the power structure in favor of the progressive block supporting Governor Ōta.[14]That gave a raise to concerns both among the Japanese and American officials that Okinawawould become the major issue also in the October general election and jeopardize the U.S.-Japan security relations.[15]

2. The LDP Okinawa Special Research Council

The prime minister and other LDP members took the matter seriously, and on 18 June 1996, established theintra-party Okinawa Special Research Councilthat was to cope with the growing number of issues related to Okinawa, mostly through economic means. The party, in other words, decided that the Okinawa issue was politically too important not have it managed in a coordinated manner, and also that the most efficient strategy was through the financial and economic means. Such means, needless to say, were not an end in itself. What was at stake for the main ruling party was the national security, and more specifically the provision of military bases for the U.S. army. The financial and economic means were to sustain thereby the control over the military bases in Okinawa.

The Okinawa Special Research Council became the main intra-party coordinator and advocate of the Okinawa policies,[16]or in the terminology of the multiple streams theorists, acting policy entrepreneur of local policies, particularly in the negotiation on the airfare reduction discussed further in this chapter, and the All-Okinawa FTZ Plan analyzed in chapter 7.One of the indicators of the importance of the Okinawa problem for the LDP at the time was the prominence of the party members that joinedthe Council. The chair went to the LDP Number Two, Secretary General Katō Kōichi,and the other members included:Nonaka Hiromu (chief cabinet secretary) who served as the council’s secretary general,Obuchi Keizō (the LDP vice president), Shiyokawa Masajurō (chair of General Council or Sōmukai – the highest decision making body), Yamazaki Taku (chair of the Policy Research Council or Seichōkai – the highest policy deliberation body),Yamanaka Sadanori (chief advisor of the LDP Research Commission on the Tax System or Tōzeichō),Muraoka Kenzō (chair of Diet Affairs Committee), and others.[17]

Similarly, the LDP coalition partner, the SDP followed the suit and created the Okinawa Comprehensive Promotion Headquarter (Okinawa Sōgō Shinkō Honbu)on 4 July 1996, but whilethe LDP Okinawa Special Research Council became the main intra-party organ to comprehensively tacklethe prefectural financial and economic issues, the SDP headquarter became rathera “paper institution,”due to the fact that the Okinawa related problems were advocated by the party as whole, while some of its members (Murayama Tomiichi, ItōShigeru,Oikawa Kazuo) withclose personal ties to the prefectural executives functioned as the main communication channels and mediators, particularly in negotiations with the LDP members and the party organs.[18]

3. Formulation of the Deregulation Project in the Prefecture

The political pressure created by the upcoming prefectural referendum (8 Sep. 1996), elections of the prefectural assembly (9 June 1996), and the House of Councilors(20 Oct. 1996) was too favorable for the prefecture to letit pass by. In addition, the annual budget drawing was approaching the time of submission of ministerial budget proposals (by the end of August), and although the discussions on the Modernization Projects, which included the Deregulation Project,[19]with various interest groups in the prefecture had not been finalized yet, the local executives decided to submit the Request prior to the submission of the entire Modernization Projects (Nov. 1996).The power of the central bureaucracy in the absence of political leadership of the prime minister was to prove decisive however for shelving off majority of those proposals, with only one item of airfare reductions being implemented for reasons detailed below.

The unofficial stage of unofficial consultations or nemawashion the deregulation measures and the entire Modernization Projects, although difficult to pin point precisely because of its very nature, started soon after the first official explanation of the outlines of the Program for Autonomic Modernization and the Project for Return of Military Bases in January 1996 at the Okinawa U.S. Base Problems Council.[20] The local newspapers reported on the prefectural government involvement in the formulation of the request for the first time in length on 22 July 1996,[21] but already on 6 June 1996Governor Ōta held a meeting on the measures with the vice chairperson of the Social Democratic Party, Itō Shigeru in Okinawa.[22]On 26 June 1996,Vice Governor Yoshimoto brought up the proposalsin a meeting with the former Prime Minister Murayama,[23] after which the vice governor visited and petitioned other executives of the SDPthat from the onset had taken a positive stance toward the prefectural requests.[24]The local leaders were not able however to secure similar explicitsupport from the LDP members, particularly theprime minister or the members of the Okinawa Special Research Council.[25]On 22 June,GovernorŌta and Vice Governor Yoshimoto explained the prefectural proposals concerningderegulation and other special measures to the Okinawa Development AgencyDirector General Okabe Saburō, who attended the Okinawa Memorial Day for All the Fallen in the Battle of Okinawaon June 23,but no specific promises or commitments were obtained.[26]

On the local level, GovernorŌta explained theproposals for special measuresin the prefectural assembly on 3 July 1996. Two days later, on 5 July, the prefecture made public its decision to establish the Investigation Group for Deregulation (Kisei Kanwa Nado Kentō Han) chaired by Kuba Katsujiin the prefectural government office, for a comprehensive investigation and formulation of a final document. The study of the deregulation measures had been carried until that point by several prefectural departments such as the Commerce, Industry and Labor Department (Shōkō Rōdō Bu), and the Planning and Development Department, and thus the new organ was to coordinate the work across the departments that, as aforementioned, functioned in a vertical system of decision making alike the central government bureaus.

In formulation of the draft of the Deregulation Project, the Investigation Group for Deregulationdrew from the opinions and proposals provided by experts participating in the discussions of the UERI’sDiscussion Group for the Formation of International City of OKINAWA,[27]and prefectural Discussion Group for International City of OKINAWA.[28]The Investigation Group for Deregulation finalized formation of the Deregulation Project by August, and Governor Ōta, utilizing the existing institutions formilitary bases, since the deliberation forumfor the prefecture and Tokyo to discuss socio-economic policies, such as the Okinawa Policy Council, was not established yet–explained the draft at the second meeting of the Working Committee to Resolve Issues Concerning Total Return of Futenma Air Station (Task Force), chaired by the Deputy Cabinet Secretary Furukawa Teijirō, and at the sixth meeting of the Okinawa U.S. Base Problems Council secretaries meeting, both held consecutively on 9 August 1996.[29]

Ten days later, Vice Governor Yoshimoto, on behalf of the governor who was on a foreign trip to South America, officially submitted the Deregulation Projecton 19 August 1996. The vice governor handed it first to Chief Cabinet Secretary Kajiyama and to Deputy Cabinet Secretary Furukawa, the main prefectural contacts with the prime minister,[30]and continued visits on the same day to various top officials of the coalition parties,the vice chairperson of the SDP, Itō Shigeru, and the president of the New Party Sakigake, Hatoyama Yukio. Next day, on 20 August, Yoshimoto visited the LDP headquarters and handed the Deregulation Project to the chair person ofthe General Council, Shiokawa Masajurō, and other prominent LDP officials.[31]Such a supplication rout, accompanied usually by the Okinawa district Diet members, followed the standard operating procedure of the prefecture when requesting the central authorities.

Submitting the Deregulation Project while the political pressure wasthe strongest was seen crucial because local executives expected a strong opposition from some of the managers of the state, particularly the central bureaucracy that controlledthe measurestargeted by the prefecture for change.The introduction of the deregulationmeasures was perceived important because they constituted a prerequisite for execution of other goals set up in the Modernization Projects: promotion of industry, trade and investment, and ultimately development of a self-standing economy and autonomous region. The Deregulation Project was formulated into twenty six sub-items grouped under five main items(see TableA-6):(1) expansion and reinforcement of the FTZ,including:preferential tax measures, special customs system, duty-free shops, selective system of tariffs,[32] removal of import quotas (IQ), and establishment of a special independentcorporation to manage the zone[33]; (2) designation of Naha port as a base port; (3) expansion of no visa system and other measures necessary forpromotion of international tourism and destination-type resorts; (4)enhancement of information industry (e.g., preferential tax system); and (5) utilization of the government’s development aid.[34]The special measures, particularly related to the FTZ and promotion of new industries, articulated under the items (1) and (4) were radical, but the local policy makers were convinced at that time that they were in tune with the economic trends of globalization and regional integration, as well as political trends for decentralization, and hoped that Okinawa would be allowed to adopt them as a model case to be followed later by other regions and localities in Japan.[35]

4. The Ministries’ Evaluation of the Deregulation Project

Two days after the official submission of the Deregulation Project, on 21 August 1996, the Okinawa U.S. Base Problems Office in the Cabinet Internal Affairs Office – in charge of all the Okinawa related policies at that time– sent a notice to the concerned ministries asking for investigation of the items under their jurisdiction and preparation of written replies in two days, by 23 August,[36] the day of the coalition parties meeting. The notice included also the evaluation scale (A, B, C, D), in which A signified “possible for immediate realization,”B–“the same effect can be achieved quickly by an alternative,”C –“should be considered for intermediate-term investigation,” and D–“realization difficult,” the euphemism for “not viable” (see TableA-6).

The ministries, which from the onset showeda negative attitude toward the Program for Autonomic Modernization,[37]as in fact towards any new policy formed by the local governments,[38]investigated the prefectural proposals. In result, among the total twenty six sub-items, only three were given A, one – B, nine – C, and thirteen – D (including the airfare reduction),while two requests were given double marks of A & C and C & D respectively.[39] The ministries’explanation for A-marked items was based predominantly on the assessment that they did not require any alterations of the existing systems of taxes, customs, tariffs and other, no new budget frameworks (just budget increase), and could be executed under the programs already in implementation. The ministries concludedhence that the financial compensation, namely budget allocationwas the only option for meeting local demands, while more fundamental structural changes were unacceptable.The deregulation measures, such as removal of import quotas, introduction of a selective system of tariffs, special customs system and other in addition to the establishment of an independent institution to manage the FTZin Okinawa were opposed by the ministries presumably because their introductionwould lead to a lossor weakening of control over particular area by relevant ministry, and thereby infringing upon the ministerial territory.[40]