Title: "The Ministry: How Japan’s Most Powerful Institution Endangers World Markets"
Author: Peter Hartcher
Length: 310 pages
Reading time: 10 hours
Reading rating: 7 (1=very hard, 10=very easy)
Overall rating: 4 (1=average, 4=outstanding)
Reviewed by Robert F. Mulligan
Special to the Asheville Citizen-Times
Australian financial journalist Peter Hartcher has tremendous knowledge of the Pacific rim economies and Asian cultures. He shows off his background to best advantage in this highly readable new book published by Harvard Business School Press. Hartcher enlightens us about Japan’s mysterious and powerful Ministry of Finance, keeper of the nation’s purse strings.
Far less known, analyzed, and understood outside Japan than MITI, the Ministry of International Trade and Industry, the MoF or Okurasho, which means "treasury," wields immense influence. Endowed by custom and culture with unique extra-constitutional powers, the MoF dates to the seventh century. The Okurasho is dominated by University of Tokyo law school grads. Graduates of other colleges have only been hired in much smaller numbers, and only recently.
Economists are included, but only in small numbers. They often supervise but rarely make policy, and economic theory and financial expertise do not sway economic policy in Japan. Consequently the MoF takes a jurisprudential approach appropriate for some issues, but utterly inadequate for others. The MoF is more likely to promote government regulation than market solutions.
Part of the disdain for academic economic training arose from the fact that Japan’s college economics departments were dominated by Marxists until the 1960s. Why economists are still largely frozen out almost forty years after the fact is hard to understand.
Amakudari, or "descent from heaven," refers to the practice of placing retiring MoF bureaucrats in top executive positions in Japanese corporations. Each year the Ministry hires a cohort of approximately 20 young bureaucrats, who attrite every few years until the last man standing becomes Vice Minister for Administrative Affairs, usually at the relatively young age of 50-55, serving for only two years on average.
Bureaucrats who don’t progress must leave, but are typically placed in lucrative presidencies or directorships, sometimes in firms the candidate regulated. The MoF oversees a myriad of public corporations (which in number and diversity would make a 1930s New Dealer salivate) where departing candidates can land effortlessly. Each amakudari receives a lump-sum severance payment from the civil service when they leave the MoF, and again when they leave a government corporation.
Many amakudari flit from one public corporation to another, collecting severance bonuses, before going to a private firm as president. Hartcher claims amakudari-run organizations, whether private or public, are the most economically marginal in Japan. The most aggressive and independent organizations, like the Mitsubishi Bank, have successfully resisted amakudari infiltration.
The MoF even operates a match service and actively promotes marriages between its mostly male civil servants and the daughters of politicians, succeeding at the average rate of one or two such marriages each year. "The Ministry" is a fascinating and memorable examination of one of the most unique institutions of the world’s third-largest economy, after the U.S. and the European Union.
The Okurasho was difficult to criticize as long as Japan’s economy was strong – but now that one of the world’s leading trading nations is becoming an economic basket case, it becomes difficult to avoid criticism. It may be only a coincidence, but the MoF’s recent moribund performance largely parallels that of Japan as a whole.
Robert F. Mulligan is visiting assistant professor of economics, finance, and international business in the College of Business at Western Carolina University. His research interests are monetary and international economics and he is a fierce fan of Clarkson University and ECHL ice hockey. For previously reviewed books, visit our web site at www.wcu.edu/cob/bookreviews.