Modern Japanese Organization and Decision-Making "d0e4518"

Conclusions

We may now speak of cause and effect. Why should balance be so important in Japanese allocation patterns and elite political culture? And what difference does it make to how the business of the nation is conducted?

An attractive and immediately available explanation of why balance ideas are so prevalent in Japan is that of culture, perhaps even the Japanese "national character." That is, balance appears to correspond to many traits that anthropologists and others consider as typically Japanese. For example, Chie Nakane notes that in Japan "democracy" means that "any decision should be made on the basis of a consensus which includes those located lower in the hierarchy . . . it should leave no one frustrated or dissatisfied."^[46] A dislike of open conflict is also frequently noted. A case might thus be made that the Japanese budgetary system inevitably tends toward making decisions through relatively impersonal and mechanistic administrative devices that reward all equitably.

Such an argument has merit and is difficult to contradict. Still, I would prefer to emphasize the equally valid point that all budgetary systems probably have strong tendencies toward decision-making patterns that avoid value judgments. This is both because value judgments among programs are technically and intellectually very difficult and because making such judgments opens the decision-maker to attack from the disadvantaged parties. Therefore, budgeters will attempt to routinize their decisions—and balance is a sensible method of routinization—so long as they are not prevented from doing so.

If, then, balance or something like it is the "normal" mode of budgetary decision-making, what must be explained is not stability in allocation patterns from year to year, but deviations from stability. What factors might influence budgeters to change the decisions they made last year? One common situation is when some programs have to be increased because of inflation or other unavoidable cost increases, but resources are not sufficient to provide equal hikes for all programs. This has often been true in American budgeting, but in Japan rapid economic growth has

[46] Chie Nakane, Japanese Society (Berkeley and Los Angeles: University of California Press, 1970), pp. 144–145.

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produced enough "natural revenue increase" each year to take care of cost increases with some left over.^[47] Budgeting is more comfortable.

Table 2* Change in Budget Share over Ten Years (1961–1970), by Function
Japan			United States
	Change in Share (1)	Share (1970) (2)		Change in Share (3)	Share (1970) (4)
State Administration	83.2	6.7	Defense	83.7	39.6
Regional Finance	112.7	21.0	International Affairs and Finance	52.5	1.8
Defense	82.3	7.2	International Affairs and Finance	52.5	1.8
Special Foreign Obligations	25.7	0.4	Space Research and Technology	248.8	1.8
Land Preservation and Development	86.7	16.6	Agriculture and Rural Development	91.7	3.1
Manufacturing and Economy	145.3	11.3	Natural Resources	78.8	1.2
Manufacturing and Economy	145.3	11.3	Commerce and Transportation	90.8	4.6
Education and Culture	91.6	11.3	Community Development and Housing	765.5	1.5
Social Welfare	110.8	16.1	Community Development and Housing	765.5	1.5
Pensions	63.7	3.8	Education and Manpower	293.4	3.6
National Debt	188.9	3.7	Education and Manpower	293.4	3.6
Reserves	132.6	1.4	Health	735.1	6.4
Other	120.9	0.6	Income Security	101.9	21.6
			Veterans' Benefits and Services	75.3	4.3
			Interest	111.6	9.0
			General Government	110.5	1.6
Source: Japan, Budget Bureau, Ministry of Finance, Zaisei tokei^[]* (Fiscal statistics), 1970, pp. 212–213; U.S. Office of Management and Budgeting, The Budget of the U.S. Government , 1972, pp. 61–65.
* Columns 1 and 3 list the amounts budgeted for each function in 1970 over the amounts in 1961, divided by the 1970 total budget over the 1961 total budget. Columns 2 and 4 show the share of each function in the 1970 budget, as reference. The two sets of figures in this table are even less comparable than in Table 1 because the American figures are outlays (which include net lending) rather than expenditures. All figures are as calculated after the end of the budget periods and include supplements, except for Japan in 1970, which uses the initial budget. As with Table 1, this table should not be employed beyond the purposes specified. A further discussion of both tables will be found in my Contemporary Japanese Budget Politics .

Another and probably more important factor is illustrated by Table 2, which lists changes in budget share over a ten-year period (1961–1970) for the standard functional categories of the Japanese and American budgets. It is readily apparent, first of all, that the American shares have changed

[47] This analysis contradicts the proposition that high growth brings greater budgetary fluctuation, as suggested by Frederic L. Pryor in his Public Expenditures in Communist and Capitalist Nations (London: Allen and Unwin, 1968), p. 299. This book includes an excellent discussion of the problems of cross-national expenditure comparisons.

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more than the Japanese shares; in part this is because of the greater year-to-year stability shown in Table 1. But attention should also be directed to the items showing the greatest changes in the two countries. For Japan, these are in large measure items that are nondiscretionary, not part of decision-making on expenditures: "special foreign obligations" are mostly determined by old treaties with countries receiving war reparations; the increase in "national debt" expenditures is a product of the advent of deficit financing in 1965 (a decision on revenue mix, not allocations); and much of the change in "manufacturing and economy" is the increased deficit in the rice-price-supports program, supported by political pressures (leading to a "nondecision") but caused primarily by growing harvests and changing consumption habits, which turned Japan from a rice-deficit to a rice-surplus country.

The "unbalanced" American items have a different character. The enormous increase for "community development and housing" is a figment of accounting peculiarities and should be ignored, but those for the other three—"space research and technology," "education and manpower," and "health"—may be legitimately compared with the Japanese figures. All are the direct result of clear presidential decisions: Kennedy's to reach the moon; Johnson's—in response to the civil rights movement and urban riots—to initiate a "war on poverty." It is clear that the president has had a major impact on American allocation patterns, while no one has had a comparable impact on the Japanese patterns.

Two points may be offered by way of partial explanation of this difference. The first is that Japanese prime ministers have tended not to hitch their political fortunes to domestic issues, at least those requiring money. The chief exception is Ikeda and his income doubling plan, but his policies had more impact on macrobudgeting matters than on allocations (Tanaka is another exception, but his premiership lies outside the period of this study). The second, more structural point is that the prime minister does not occupy anything like the president's key position within the budgetary process. He may conciliate, mediate, and occasionally adjudicate, but he rarely intervenes actively, and his influence over the Ministry of Finance does not compare with the loyalty of the Bureau of the Budget to the president.

A complete discussion of the reasons for such passive prime ministerial behavior in this period would have to include the relative lack of newly formed pressure groups or social movements calling for more spending, the stability of LDP control of the government, a consensus within the elite on national goals, a historically nurtured respect for the bureaucracy, and Japanese styles of leadership behavior in other settings. These are beyond our scope. It is appropriate to point out, however, that the prime minister himself is not unaffected by considerations of balance. He holds his office because he is president of the majority party and, as any study of the LDP will show, maintaining this position requires keeping a majority of

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Dietmen satisfied, and balancing off interests of factions and other groupings within the party. The prime minister has most often found that the benefits of strong leadership in domestic policy matters are outweighed by the costs of such a position. Similar calculations apply to the other institutions in a structural position to influence overall allocation patterns, and therefore, none has intervened. Budgeting in Japan has been left to the budgeters. This may well be the primary reason for its expenditure patterns remaining so stable.

What have been the effects of balance and stability? Supporters of programs that are not enthusiastically backed by the LDP, such as public housing, welfare, and some education programs, have clearly benefited by the availability of appeals to fair share. Balance values have served as a counterweight to political pressure. More generally, conflict has been lessened and harmony promoted within the budgetary system. But perhaps the major positive effect of balance has been the avoidance of "boom or bust" financing patterns, which can severely damage the morale and effectiveness of an agency. Under the Japanese pattern, most program decisions are left in the hands of ministry experts. By extrapolating from past budgets, they are able to make accurate estimates of the resources to be available in the future, and thus can plan their activities realistically.

However, at least from the vantage point of a distant observer, the costs of maintaining balance over the long run would appear to be more significant. The annual budget is an expression of the government's policies—responses to the needs of the society. It is inevitable that these needs must change as the society changes. Japanese society has changed during fifteen years of extraordinary economic growth, and while the shape of the budget in the mid-1950s may have been quite appropriate for national needs and goals at that time, by the same token it seems improbable that the same mix of policies would be optimum in the 1970s. Balance tends to prolong the life of programs that are wasteful or no longer required, and to inhibit the shift of resources into higher priority areas and the initiation of large new programs, particularly if they threaten the jurisdictions and budgets of the existing ministries. The responsiveness of the government to its environment is severly limited. One would expect that if balance continues to dominate budgeting for too long, strains and dissatisfactions would build up to a point where they would have to be relieved by rather sudden and large budgetary adjustments. Such a crisis would allow a clearer assessment of the delicate relationships and mutual expectations that make up the Japanese budgetary system.

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