A New Business Model for the Civil Service

One of the issues that affected the outcome of the House of Councillors election this July was the need for reform of Japan’s civil service system. The members of the national bureaucracy came under a barrage of criticism, as people decried the practice of amakudari—"descent from heaven," with senior bureaucrats leaving government service for high-paid jobs in the industries they once regulated—and blasted the sloppy work done by the Social Insurance Agency, which fouled up some 50 million pension payment records. This SIA scandal was clearly one of the main engines behind the ruling Liberal Democratic Party’s resounding defeat in the election. Before the contest, Prime Minister Abe Shinzô sought to resuscitate his administration’s dismal approval ratings by trumpeting proposed reforms to the civil service system, but these proposals had almost no impact on the election results. It seems likely that the reforms were far too limited to gain broad public support, having been pared back to little more than a set of restrictions on the practice of amakudari.

The time is now ripe for a more comprehensive rethinking of the situation: What should be the future duties of the government and public institutions in general? How should human resources be hired and allocated to the various divisions? The Japanese need to keep these broader perspectives in mind as they begin considering what sort of new "business model" is needed to rebuild the public sector.

THE ELITES ABANDON KASUMIGASEKI Kasumigaseki, the central Tokyo district where most of the national government ministries and agencies are headquartered, is now facing a hiring crunch. The essays by Takeshita Tsuyoshi and Nakano Masashi we carry below make three important observations. First, recent years have seen dwindling numbers of people taking the level 1 national civil service examination (the top level, used to select those who go on to the higher "career-track" ranks of the bureaucracy). In particular, graduates of the University of Tokyo, long a primary source of new Kasumigaseki hires, are now less open to the idea of going to work in the government. Up through the early 1990s nearly 200 graduates of the University of Tokyo’s Faculty of Law went into public service each year, but this figure fell rapidly during the latter half of the decade. In 2006 just 68 Tokyo law graduates took jobs in central government offices.

Second, growing numbers of younger civil servants are leaving their government posts. In the five years through 2006, a total of 292 elite civil servants resigned from central government positions of their own accord—a figure about 3.5 times higher than the equivalent number of early retirees in the mid-1980s. This means that about 60 career-track bureaucrats are leaving the ministries and agencies each year. The Ministry of Economy, Trade, and Industry in particular has seen many of its recently hired career-track workers—including nearly half of one "class" of employees who started in the same year—leave to seek employment elsewhere.

The third observation is that Kasumigaseki as a whole is now afflicted with a sense of blockage and a loss of vigor. One reason given for this development is the success of the deregulatory measures carried out under Prime Minister Koizumi Jun’ichirô (2001–6), which reduced the authority actually wielded by Japan’s top bureaucrats.

I entered the Economic Planning Agency in the early 1970s, when Japan was nearing the end of its period of great economic growth. The international currency system was undergoing massive change, and deep change was also being seen in the expected roles and duties of the government of Japan. Back then the people seeking to enter the national bureaucracy could by and large be divided into two categories: those who wanted to polish a set of specialized talents by participating in the realignment of the public sector that was taking place in response to the changes in the government’s role and those who still thought in older ways and wanted nothing more but to secure a post in the bureaucracy, where they would have authority and regulatory power over the private sector. The majority of new entrants were in this latter group.

The salaries were not particularly attractive, being lower than the private-sector average for jobs at manufacturing firms. What is more, these jobs were not guaranteed until retirement age: As the bureaucrats in each "class" by year of employment reached their forties and fifties, a few of them would be tapped to serve as bureau chiefs and vice-ministers, and the rest were expected to leave. This created a system in which many talented people resigned from the bureaucracy while still relatively young, and a job in the civil service came to include the expectation of sponsored reemployment in a government-affiliated or public-utility corporation or a private-sector firm.

This system was actually essential from the perspective of keeping up a vigorous inflow of new hires and maintaining the relative youth of the civil service as a whole. University graduates in their early twenties could take a Kasumigaseki post with confidence that even if they had to leave it in their forties they could look forward to another position—a second professional life—in a government-affiliated organization or a private firm with ties to the ministry or agency where they had worked. There was no guilt associated with this practice as there is with the amakudari we see today; it was seen as only natural for people in their forties or early fifties to leave the bureaucracy behind with the assurance that they could still contribute to the nation as useful workers.

This was not exclusive to the governmental sector; similar practices could be seen in large corporations. There were important differences, though. The taxpayers provided the funds that paid bureaucrats’ salaries, for one. Second, the retiring bureaucrats were obtaining their follow-up positions as an extension of the authority they wielded while in Kasumigaseki. The many public corporations in existence in the 1970s tended to function as a means for bureaucrats to expand and extend their posts in the name of effectively managing Japan’s "second budget," the fiscal investment and loan program. An important job for human-resource directors in the bureaucracy came to be the creation of new public-utility corporations that could absorb the people leaving the civil service. The existence of a system like this may have been one of the reasons that people were content to work long hours for the poor salaries that government employment provided.

LAGGING BEHIND IN REFORM Today the situation has changed. We have seen deep shifts in the global economy during the 1980s and 1990s, and Japan has experienced the results of its failed policies during that period. In the private sector there is a clear division between those companies that have carried out needed changes in response to these conditions and those that have remained stagnant. By comparison, the public sector has shown very little change, and Japan’s most talented people have picked up on this: Kasumigaseki is no longer an attractive employment destination for them, as noted in the essays by Takeshita and Nakano. The University of Tokyo’s law graduates are now looking for careers as legal professionals, particularly as lawyers with international qualifications.

This trend is only natural. These are positions that will let these bright young people extend their talents and specialties while being rewarded with handsome salaries. A decade’s worth of negative press coverage of bureaucratic scandals and the glaring self-interest of the mandarins in Kasumigaseki has resulted in a lack of faith that the bureaucracy is doing its job properly, as well as dwindling desire to join its ranks. It is hardly surprising to see Japan’s most talented graduates opting for positions with foreign financial companies, for instance, where they can take on challenging tasks and learn valuable skills in the process. In the public sector, where deregulation has stripped away much of the authority that used to be held by the ministries and agencies, the available positions are far less attractive to these top graduates.

Today, however, when the work to be done by the government is shifting from the protection of existing interests of various sorts to the construction of new frameworks for economic activity, this unbalanced allocation of the nation’s brightest minds—with fewer and fewer of them heading into public service—runs counter to Japan’s overall interests. The main reason that talented young people are not attracted by Kasumigaseki careers lies in the central government’s failure to create a new "business model" for itself. Despite this need for deep change, the "amakudari bill"—a revision to the National Public Service Law pushed through the National Diet before the House of Councillors election in July—was nothing but a limp piece of legislation that merely consolidated the system of arranging jobs for retiring bureaucrats in a single office (up to now, each ministry and agency has handled it independently for its own employees). The centralized job-placement agency proposed by this bill to find work for bureaucrats leaving the civil service is to be staffed by human-resources officers seconded from the various ministries and agencies, and they will simply continue finding plum positions for retirees from their own offices. The end result will be a situation no different than before. As Muramatsu Michio points out in his article, also in this section, public debate must focus on the true meaninglessness of this legislation at a time when the top priority for civil service reform is the fostering of talented specialists to fill government posts. The Japanese must consider the deeper reform needed in the broad frameworks that underpin the civil service system as a whole.

The need for this public debate is nothing new. Even back when I was aiming for my job in Kasumigaseki, the real attraction there was not the authority that high-level bureaucrats built up over the years. As I noted above, there were of course many young people attracted to the power of these positions, but these students were seen as conservative in nature—unable to look ahead at the coming economic trends, they would end up as creatures of the old order, clinging to the idea of the great power traditionally wielded by bureaucrats. For them, the attraction of a job in Kasumigaseki was likely to be nothing but amakudari.

There were, however, also bureaucrats who could sense that change was in the air. The administrative reforms pushed forward by Prime Minister Nakasone Yasuhiro (1982–87) brought about deep changes in the role of the bureaucracy that must have been apparent to many: Reform of Japan’s economic structures was, after all, the destruction of the existing structure of bureaucratic control over that economy. Be that as it may, it is evident today that the public sector has been glacially slow to react to this sort of upheaval. The Ministry of Agriculture, Forestry, and Fisheries was subjected to particularly strong winds of change in the form of Nakasone’s market liberalization measures, but some 20 years later the same ministry felt the shock of seeing not a single law graduate from the University of Tokyo seek a position there. The Agriculture Ministry is no longer an attractive place for talented young people to work. It is an example of the bureaucracy’s inability to adjust to new realities.

BUILDING A NEW BUSINESS MODEL As Muramatsu indicates in his essay, the American-style system of filling bureaucratic posts with political appointees is not likely to take root in Japan. We have now reached the stage when we must build a new model for the central government that is more likely to succeed.

The Financial Services Agency provides one possible model to apply to other parts of the bureaucracy. This agency has seen its needs for specialists grow with the times, and it has filled that need by hiring accountants, lawyers, and other specially qualified people from outside the government, making full use of their talents in reforming the nation’s financial systems. Discussion of civil service reform tends to focus on the total number of bureaucrats as a metric for change, but what is more important is the proper allocation of human resources to fields where they are needed most. Strict evaluations of on-the-job performance will cut down on idle workers who spend their days sitting around reading the newspaper. Increased interchange between the private and public sectors is another way to heighten the specialized knowledge of people in the government. The Industrial Revitalization Corporation of Japan is yet another example from which the government can learn; in the future more institutions may be created in a similar way as ad hoc project teams capable of carrying out their tasks with great efficiency.

It is clear that debating the civil service in terms solely of putting an end to amakudari will accomplish nothing. We need more fundamental discussion of the role of the public sector. Japan today is faced with the question of how best to tap the abilities of its brightest people. (Nariai Osamu, Professor, Reitaku University)

© 2007 Japan Echo Inc.