Kan will replace Fujii

As expected, Fujii Hirohisa announced his resignation as finance minister on Wednesday. Hatoyama Yukio wasted no time naming his replacement: Kan Naoto will shift over to the finance ministry, and Sengoku Yoshito will take over for Kan as head of the national strategy bureau while continuing to run the government revitalization unit.

Kan's appointment was to a certain extent obvious. Having been deeply involved in the budgetary process, he is better able than most to defend the budget in Diet debates in the months to come. While Sankei — who else? — sees this move as the latest battle in the struggle between Hatoyama and Ozawa Ichiro for power (seriously, their article uses description of Hatoyama's facial expression — "disinterested" — when he answered a question about Ozawa's role in picking Kan to suggest that Hatoyama's answer that Ozawa wasn't involved masks something), moving Kan to the finance ministry will not hurt Hatoyama politically. Kan is a Hatoyama stalwart, has an independent following among the party's backbenchers, and is one of the few DPJ members with previous ministerial experience. As I suggested yesterday, it does raise questions about the future of the new cabinet organizations created by the Hatoyama government, both of which are now headed by Sengoku, but the role to be played by these bodies was already uncertain, and, as Michael Cucek suggests, might make their work more coherent. As finance minister, Kan may be more of a deputy prime minister than he was when he was actually deputy prime minister. He will be more visible as finance minister, having more opportunities to present the government's policies, and, if Ozawa is in fact wielding undue influence, Kan is in a better position to push back.

That is, unless Kan is occupied fighting the finance ministry's bureaucrats. While Fujii was one of their own number, Kan is very much not. After all, Kan made his name during the mid-1990s when as minister of health he fought his own ministry's bureaucrats over their response to an AIDS-tainted blood scandal. His early involvement — when he was at the peak of his popularity — in the political party being formed by the Hatoyama brothers gave the DPJ a boost during its first years. But by the same token, Kan has not made many friends in Kasumigaseki. While during the campaign he backed away from overheated anti-bureaucrat rhetoric, he remains on uneasy terms with the bureaucracy, including the finance ministry's officials. (Back in October, Kan gave a speech in which he referred to bureaucrats as oobaka/大ばか, which translates literally as great fools but also has some more colorful translations, for mindlessly squandering public money.)

It's possible that Kan's relationship with the ministry will be more antagonistic than Fujii's, but, on the other hand, given that the partnership between the Hatoyama government and the finance ministry is a matter of convenience for both sides — and that the ministry was shifting the DPJ's direction even before Fujii was tapped as finance minister — Kan may be able to maintain the relationship Fujii forged. And if Kan lasts in the job, he will be in a position to introduce lasting changes to the budgeting process, as discussed here.

Meanwhile, it bears asking whether Kan's appointment will have any consequences for the government's economic policies. We got a glimpse at Kan's thinking recently when he debated Takenaka Heizo, Koizumi Junichiro's reform czar, at a meeting of the committee responsible for drafting the government's latest economic strategy. Takenaka advanced his supply-side structural reformism: deregulation, privatization, and tax reform to encourage more investment by the private sector. Kan answered by defending the DPJ's focus on the demand side, stimulating more consumer spending. At the same time, Kan is adamant about cutting wasteful spending. Given Kan's role in drafting the government's economic strategy, his appointment will not make much difference in the outline of fiscal policy over the medium term.

But on other policy areas, Kan's views are less clear. He has stated that it is too soon to debate tax reform, including a consumption tax increase. It is unknown how far he will let the yen's value rise, although in a speech in November, Kan fingered the high yen as a cause of Japan's stagnant growth and said that the government would watch market developments carefully.

In short, the transition from Fujii to Kan will matter more in terms of its political ramifications for the Hatoyama government than for economic policy. Kan was already playing an important role in economic policy. Moving him to the finance ministry gives him more formal power as an economic policymaker.

Finally, it is worth noting just how unusual it is that Kan is now finance minister. Thirty years ago, Kan was first elected to the Diet as a candidate from Eda Saburo's Social Democratic Federation, which split off from the Socialist Party. Today he is the head of the ministry that is the very heart of the Japanese establishment. While it is common to point to DPJ politicians like Hatoyama and Ozawa and conclude that the DPJ is a pale imitation of the LDP, Kan's career shows that the DPJ's victory has brought new politicians with different backgrounds and different concerns from LDP politicians to the fore.

Fujii will depart

On Tuesday, Fujii Hirohisa, the seventy-seven-year-old finance minister who was hospitalized late last year, indicated that he will in all likelihood resign his post sometime soon. While he is officially waiting for his doctor's advice on his health, Fujii seems determined to resign.

In trying to dissuade Fujii from leaving, Prime Minister Hatoyama said that since Fujii "gave birth to a child" (the budget), he should stay on "to raise it." Fujii, however, insists that he will not be able to handle the strain of budgetary debates, suggesting that he will likely be gone before the ordinary Diet session opens on 18 January. (For those who want some groundless speculation about the reasons for Fujii's departure, Sankei has it all: declaring that it is "difficult to understand" the "suddenness" of the resignation of a seventy-seven-year-old cabinet minister who had to be hospitalized for exhaustion, it turns to Ozawa Ichiro — Sankei's villain of choice — to argue that Ozawa hounded Fujii to exhaustion, and, moreover, that Fujii was about to be hit with a political finance scandal from his days as secretary general of Ozawa's Liberal Party.)

Hatoyama's metaphor is probably not far off the mark. Considering that it seemed unlikely that the government would get its budget done before year's end after it ordered the finance ministry to cease work and decided to start over from scratch, it seems likely that Fujii bears considerable responsibility for completing the budget on schedule — to the detriment of his own health. A recent Foresight magazine article documents the extent to which the finance ministry has become unified with the government, thanks to the employment of Fujii and cabinet office deputy Furukawa Motohisa. The article suggests that there is some surprise in this development, but I must admit that I am not surprised at all. As the DPJ-led government struggles to cut wasteful spending and reform national administration, I expected it would increasingly find an ally in the the finance ministry, which, after all, still possesses useful skills for political leaders even if the political leaders are establishing the country's priorities. For all Foresight's evidence about links between the finance ministry and the government, there are few signs if any that the ministry has been calling the shots. While Fujii has been relatively quiet as finance minister— especially compared to some of his ministerial colleagues — I suspect the finance ministry's willingness to cooperate with the new government has a lot to do with Fujii's influence and experience with the ministry.

For the same reasons that I thought Fujii would make a good finance minister (and why it was wise of Hatoyama to coax him out of retirement and convince him to campaign again last year), his resignation will be a blow to the Hatoyama government. Replacing him will be a challenge. Not only will Hatoyama have to find someone who can control the finance ministry but he will also have to find someone capable of resisting or ignoring the machinations of Kamei Shizuka, which Fujii was able to do. Sankei provides some names of potential successors — Kan Naoto, the deputy prime minister, Sengoku Yoshito, the head of the government revitalization unit, or Noda Yoshihiko, one of two finance vice ministers — but of these three, perhaps only Kan is up to the challenge. Kan does not have Fujii's stature within the ministry, but he has been the DPJ's most eloquent spokesman on changing the budgetary process and is a significant enough figure within the DPJ that he would be equal to the job. The same could not be said for Sengoku or Noda. Of course, appointing Kan as finance minister would spell the end of the national strategy bureau as an important group within the government. Its development delayed, without a leading figure like Kan at its helm the NSB would likely become little more than a research and advisory body for cabinet ministers than a policymaking actor in its own right. While this development may be for the best, it will be a consideration as the Hatoyama government considers how to proceed following Fujii's resignation.

The media will try to spin this development as another blow to the government, but as usual, a bit of perspective is necessary. For once a senior minister is leaving office not because he has said or done something that embarrassed the government or (provided that Sankei's rumor-mongering is just that) because he has been found to have engaged in corruption, but because he is simply not up to the task physically. The Hatoyama government will replace him — not without some difficulty— and soldier on. Hopefully his successor will last longer in the job.

Will the DPJ weather the global rebalancing?

David Brooks's latest column in the New York Times calls for a restoration of "economic values" in the United States, with the aim of making "the U.S. again a producer economy, not a consumer economy." Brooks sees a decline in traditional values of restraint behind the rise of consumer spending to ever greater portions of GDP and the growing indebtedness of consumers. Whether or not the emergence of the US as a consumer economy is a function of declining values, greater restraint by US consumers is the flip side of Japanese consumers spending more of hoarded savings. After all, the growth of the US consumer economy was accompanied by global imbalances, massive current account surpluses by countries like Japan.

The question now is how to execute the transition to a more balanced relationship among the world's economies, including and especially in the relationship between the US and Japan. How can the US become relatively more predisposed to production and Japan relatively more predisposed to consumption (especially of imports from the US and elsewhere)? The FT's Wolfgang Münchau praises the G20 for at least recognizing the problem of imbalances. For his part Münchau rejects the notion that adjustment can happen automatically simply by US households changing their behavior — or rather, that it can happen, but the transition will be painful everywhere, as Japanese exporters, deprived of American consumption, have discovered over the past year. Instead he argues that each country will have to adjust in its own way:

The answer is that policy will have to be tailor-made to suit the specific circumstances of each country. China will probably not be able to reduce its excessive current account surplus without a revaluation of the renminbi. In Germany, the best overall macro-policy instrument would be a big tax cut to boost domestic demand. In the UK, restoration of balance will have to include heavy cuts in public spending, while Spain will also have to raise taxes, even in addition to last week's announcement of a rise in value-added tax.

And what of Japan?

The DPJ fully acknowledged during the campaign that the challenge facing the government is managing the transition from the postwar producer economy — divided between efficient exporters and inefficient domestic producers and service providers — to a more consumer-centered economy.

But less clear is how the Hatoyama government plans to contribute to the global rebalancing. After all, the government has few policy tools at its disposal. Interest rates cannot go any lower. The government's debt burden limits its ability to use public funds to make up for weak private consumption. The yen's exchange rate is one tool available to the government, but as Finance Minister Fujii Hirohisa's conflicting remarks suggest, there are political limits to how far the government can permit an undervalued yen to rise. After stating following a summit with US Treasury Secretary Timothy Geithner on the sidelines of the G20 summit in Pittsburgh last week that the government would not intervene to keep the yen down, Fujii subsequently softened his position, alluding to intervention should the dollar-yen exchange rate rise too rapidly.

Richard Posner's note upon reading John Maynard Keynes's General Theory of Employment, Interest, and Money for the first time — "How I Became a Keynesian" — makes for interesting reading in light of Japan's dilemma. Posner highlights Keynes's focus on consumption as the engine of growth in an economy — and how uncertainty can trigger hoarding. "People do not save just to be able to make a specific future expenditure; they may also be hedging against uncertainty," writes Posner. "And the third claim, related to the second, is that uncertainty — in the sense of a risk that, unlike the risk of losing at roulette, cannot be calculated — is a pervasive feature of the economic environment, particularly with respect to projects intended to satisfy future consumption." This passage strikes me as a particularly succinct description of the problem faced by the Japanese government since the bubble burst: how can the government dispel the ubiquitous sense of uncertainty on the part of Japan's aging consumers? LDP governments engaged in policies that took the outward form of Keynesianism — large-scale construction projects — without appreciating the essence of Keynes, that the goal ultimately was (and is) getting consumers secure enough to spend their own money again. For all the dams and bridges built by the government, the money probably would have been better spent rebuilding the social safety net, which would have in turn made the economy better capable of weathering the transition from the producer-centered dual economy.

In short, the DPJ-led government will attempt what should have been done a decade ago, except that now its fiscal policy options are constrained and the global economy is recovering from a monumental crisis. It will have less recourse to foreign demand to ease the pain of transition than the LDP had up until the global financial crisis. Ultimately the DPJ may be able to do little more than make the transformation marginally less painful, but, as Noah Smith wrote at this blog earlier this year, it will be painful nevertheless. The DPJ may be able to extend its time in office if it is able to deliver adequate social spending in its budgets, but admittedly the prospects for success are grim. The government may simply not have the tools at its disposal to overcome the thriftiness of the Japanese people in an age of uncertainty — but it could pay the political price for "inaction" anyway.

Containing Kamei

While Okada Katsuya was securing his position as the undisputed leader in foreign policy making, Kamei Shizuka has made immediately clear that he was going to be a source of trouble for the Hatoyama government as minister of postal reform and financial services.

I already noted Friday that Kamei had used a press conference following a cabinet meeting to warn Haraguchi Kazuhiro, the minister for internal affairs and communciations, to stay off his turf, namely halting the privatization of the postal system. At the same time, Kamei, using his perch as director-general of the Financial Services Agency, has called for a three-year moratorium on the repayment of loans by small-and-medium-sized enterprises, which would naturally be devastating for banks, which, after all, not too long ago were laboring under the burden of bad debt to the point that they eventually required the infusion of public funds. Naturally markets have not taken kindly to Kamei's remarks. (Sasayama Tatsuo has more on radical financial regulations proposed by the People's New Party.)

Kamei also attacked Kan Naoto and the national strategy bureau as being intended to undermine the basic policy cabinet committee composed of Kamei, the SDPJ's Fukushima Mizuho, and Kan as the DPJ representative.

Finance Minister Fujii Hirohisa tried to calm worries, noting that while there is a precedence for this action — in 1927, in the midst of Japan's depression — the situation is not nearly so bad as that. But Kamei reiterated on NHK Sunday that implementing this program is his responsibility (although he said he would be "borrowing" the wisdom of the finance minister).

While Kamei's remarks are irresponsible, I do not think that they are indicative of anything more than Kamei's insecure position within the cabinet. Having no real authority of his own, of course he is going to throw elbows and try to find an area in which he can take the lead. It is unlikely that he will lead on either postal reform or this moratorium scheme — and it is unlikely that the cabinet will simply sign off on the moratorium scheme as floated by Kamei. Little wonder that he also attacked the NSB as undermining the one area in which he is sure to have some influence, the cabinet committee to coordinate among the government parties.

Fujii needs to speak that much more decisively on Kamei's irrelevancy on this matter. Perhaps he can sit on a cabinet committee, in which his views would be reliably drowned out by Fujii and whoever else they found to round out the group. All of which goes to suggest that investors and commentators should not overreact to Kamei's freelancing — he still has to convince his colleagues in the cabinet that his ideas are sensible.

However, refereeing turf battles is one role that Hatoyama Yukio should be playing. He should not be leaving his team of rivals to resolve their own disputes. Hatoyama as prime minister should be issuing orders to ministers and establishing boundaries. How many more days is he going to let Kamei make extravagant claims to the media about the powers of his portfolio?

Of course, there is also a media relations story here too. If Hatoyama were to appoint a press secretary to coordinate media affairs, he might not be able to keep Kamei from putting himself in front of cameras, but the media could then go to the press secretary who would stress that Kamei has no authority to speak on behalf of the cabinet as a whole and that policy X has not yet been submitted to a cabinet meeting for a decision. The government needs to control its image and it needs to control its message. For the moment, it seems to be having a hard time when it comes to dealing with Kamei.

But it is still early in the government's tenure, which is the final point. The policymaking process is still nothing more than a framework. It is still unclear which ministers will emerge as the leaders who make the cabinet work. It is far too early to say that Kamei, a minor minister on the basis of his portfolio if not on the basis of his party position, will wreck the government. But some cabinet ministers and the prime minister are going to have to find a way to manage the obstreperous leader of one of the DPJ's tiny coalition partners.

The Hatoyama government fills more positions and gets to work

On Friday the Hatoyama cabinet met and continued its work of reforming Japan's policymaking system.

The cabinet decided to create the national strategy office under the leadership of Kan Naoto, pending legislation to elevate the office to a full bureau attached to the cabinet. Another cabinet decision created the Administrative Renovation Council (ARC), which will nominally be headed by Prime Minister Hatoyama Yukio but will be managed by Sengoku Yoshito, a cabinet-level minister. Discussing the NSO, Kan stressed its role in economic planning and fiscal policy, and said the office's role would be controlling the "planning, drafting, and synthesis of the cabinet's important policies." The ARC's role is less clear, having some as-yet-undefined role in the budgeting process.

Another important but relatively unheralded institutional reform was announced on Thursday. As stressed by Kan in his July Chuo Koron essay — seriously, read it if you haven't read it yet, it's essential to understanding the DPJ's thinking as it reorganizes the government (I discussed it here) — essential to making the cabinet more dynamic is conducting its work in cabinet committees dealing with specific issue areas. Most significantly, the government announced that among the first cabinet committees would be a budget committee, an institutional feature of the Westminster system singled out for praise by Kan. The budget committee's members will be Kan, Fujii Hirohisa, the finance minister, Sengoku, and Chief Cabinet Secretary Hirano Hirofumi. The government will also create an environment committee composed of Hirano, Foreign Minister Okada Katsuya, METI Minister Naoshima Masayuki, and Environment Minister Ozawa Sakihito. It is unclear precisely how these cabinet committees will interact with the cabinet as a whole, but they should help streamline the policymaking process.

Naturally creating the budget committee — in addition to setting up the NSO, of course — is essential as the Hatoyama government prepares to redraw the budget. On Thursday Fujii stressed that the government would be taking a scalpel to "hothouses of LDP interests." Fujii introduced another approach the government would take to raising revenue in addition to cutting waste: it would investigate the efficiency of the special measures law on taxation. Fujii said the government would draft a law calling for an investigation by the Diet and the Board of Audit into the law, with an eye towards rationalizing it and possibly widening the tax base by closing tax loopholes that have favored certain corporations. As Sankei notes, closing loopholes would not only secure new sources of revenue for the government, it would also shed light on the relationship among politicians, bureaucrats, and interest groups under LDP rule (politically convenient in advance of next year's upper house election).

In Friday's cabinet meeting, meanwhile, the government issued a cabinet decision officially suspending a portion of the Aso government's stimulus package. The goal is to redirect roughly 3 trillion yen to next year's budget to pay for DPJ programs included in the manifesto.

The government has also announced its twenty-two parliamentary vice ministers, as well as the vice minister serving under Kan at the NSO. In this last position the cabinet named Furukawa Motohisa, a former finance ministry official and one of the DPJ's rising stars. Furukawa's appointment to the NSO reinforces the idea that its primary task will be taking control of the budgeting process. Joining Furukawa at the cabinet office will be Oshima Atsushi, a four-term lower-house member from Saitama, and Ootsuka Kohei, a two-term upper house member from Aichi who previously worked for the Bank of Japan, has written extensively on the Japanese economy, and has earned respect in the Diet for his expertise. It bears noting that these three appointees have spent their entire careers as DPJ members.

The same applies to the ministry of internal affairs and communications, the vice ministers of which will be Watanabe Shu, a five-term lower house member from Shizuoka, and Naito Masamitsu, a two-term upper house member from Tokyo; the justice ministry, where Kato Koichi, a four-term lower house member from Tokyo and former shadow vice justice minister, has been appointed vice minister; the foreign ministry, where Takemasa Koichi, a four-term lower house member from Saitama who is close to Noda Yoshihiko (also from Saitama), and Fukuyama Tetsuro, a two-term upper house member from Kyoto in the Maehara group (Maehara is also from Kyoto), will be the vice ministers; the environment ministry, whose vice minister will be Tajima Issei, a three-term lower house member; and the defense ministry, the vice minister of which will be two-term upper house member from Shizuoka Shinba Kazuya.

The remaining ministries are more mixed. Neither vice minister of finance — Noda and Minezaki Naoki — began his career in the DPJ (Noda in the Japan New Party, Minezaki in the Socialist Party). In the education ministry, former shadow finance minister Nakagawa Masaharu began his career as a New Frontier Party member but has been in the DPJ since its second creation in 1998 — and he is joined by Tokyo upper house member Suzuki Kan, who has belonged only to the DPJ. In the health, labor, and welfare ministry, neither Hosokawa Ritsuo nor Nagahama Hiroyuki began their careers in the DPJ (Socialist Party and Japan New Party respectively). In the agriculture ministry, Yamada Masahiko, who began his career in Ozawa Ichiro's Japan Renewal Party is balanced by DPJ-only upper house member Gunji Akira. Neither vice minister at METI is DPJ-only: Matsushita Tadahiro is a PNP member and was first elected as an LDP member in the auspicious election of 1993, Mashiko Teruhiko won two lower house terms as an LDP member in the early 1990s, defected, and eventually wound up in the DPJ and is now an upper house member from Fukushima. The vice ministerships at the land ministry are split between SDPJ member Tsujimoto Kiyomi and career DPJ member Mabuchi Sumio.

The point of investigating the backgrounds of the vice ministers is to show that even if the ministers picked their own vice ministers — as the DPJ said — the ministers may have been picking from a subset of potential appointees and may have had some restrictions. In ministries with two vice ministers, the two posts are split between members of the two houses — and in all but one case the upper house member last won reelection in 2007 and will therefore not have to worry about campaigning for the 2010 upper house election. Meanwhile, the point of identifying sub-cabinet members who have spent their entire careers in the DPJ is simply to show that the DPJ has been cultivating young talent and is not simply composed of outcasts from other parties. In the cases of Furukawa, Watanabe, Nakagawa, and a few others, these are rising DPJ members expected to vie for the party leadership in the future. (Richard Samuels and Patrick Boyd included both Nakagawa and Watanabe on a short list of DPJ future leaders in their article "Prosperity's Children.")

As this expanding Hatoyama government sets to work, it can for the time being count on the support of the public. Asahi's first public opinion poll found 71% approval for the new government. Moreover, 52% of respondents said they approved of the cabinet lineup, compared with only 14% who disapproved. When it came to policy, respondents approved of child allowances 60% to 30%; disapproved of lifting tolls on public highways 67% to 24% (little surprise that Maehara Seiji pledged prudence on this matter); supported the DPJ's plan to unify the pensions system and establish a 70,000 yen monthly minimum for pensions by 75% to 16%; and approved of lifting the gasoline surcharge 56% to 30%. Asked whether the DPJ could cut waste, 61% said yes, 26% said no. Respondents were slightly in favor of Ozawa's serving as secretary general, and overwhelmingly approved of the statement that the government should take the PNP's and SDPJ's opinions into consideration whenever possible, 61% to 31%.

Mainichi found similar support: 77% approval for the new cabinet, second only to Koizumi Junichiro's first cabinet. 68% were hopeful regarding Hatoyama's cabinet picks. Yomiuri recorded 75% approval, also second only to the first Koizumi cabinet's. (Yomiuri's poll also found 69% of respondents unconvinced by Hatoyama's explanation of his campaign finance problem.)

Even the DPJ's most intractable opponent within the bureaucracy is coming around. Ichide Michio, the administrative vice minister of agriculture, forestry, and fisheries, no doubt fearing for his job, said that he accepts the leadership of Akamatsu Hirotaka, the new minister, who chastized Ichide for his past remarks critical of the DPJ's plans.

I call attention to these data points not because they guarantee the Hatoyama government's success, but because they show that in the early going everything is working in the new government's favor. The Hatoyama government has set itself up to succeed; the prime minister chose wisely in picking his cabinet ministers. But now the question is how the cabinet will proceed and whether it will be able to hold itself together as it moves an agenda through the Diet. There is already at least one hint of trouble (aside from the Ozawa question): Kamei Shizuka, whose portfolio includes the "postal issue," declared at a press conference following the cabinet meeting Friday that responsibility for the issue was his, not Haraguchi Kazuhiro's, the minister of internal affairs and communications.

Apologies to Ikeda Nobuo, as it took less than three days for Kamei to start trouble in the cabinet. Giving Kamei a portfolio but no administrative role for postal privatization was clearly going to be a source of conflict. It is not beyond managing — how about a cabinet committee? — but resolving this turf battle will be Hatoyama's first act of arbitration as the committee chairman prime minister. Clearly the downside of a team of rivals is that rivals fight from time to time, requiring management by the man in charge.

As Japan heads into Silver Week, the Hatoyama government's standing could not be better. But now it will have to sort out the budget and have its legislation ready for the Diet session scheduled to open in late October.

The first day of the new era in Japanese politics

The DPJ wasted no time following the election of Hatoyama Yukio as prime minister Wednesday.

His cabinet lineup established, the DPJ-led government immediately set to work establishing a new relationship between the cabinet, DPJ backbenchers, and the bureaucracy.

Regarding the DPJ, its internal organizations, and its numerous backbenchers, the new government announced several measures to strip the DPJ of any policymaking role. On Wednesday morning Fujii Hirohisa, the new finance minister, reiterated an earlier pledge to abolish the party's tax commission and bolster the government's tax commission, reversing the situation that prevailed under the LDP. More significantly, the DPJ dissolved its policy research council completely. Contrary to earlier plans, Kan Naoto won't even carry the title of chair of the policy research council, because Ozawa Ichiro does not want cabinet members serving simultaneously in party posts. This single measure is a radical departure from LDP rule, under which the policy research council served as a shadow government, complete with committees and subcommittees mirroring the bureaus and offices of the bureaucracy. If bureaucrats wish to consult with politicians on policy, they'll have to go through cabinet ministers and the national strategy bureau.

The new government immediately established new regulations governing contact between bureaucrats and politicians not holding cabinet or sub-cabinet appointments. The regulations will require to bureaucrats to make the contents of all requests from Diet members known to their ministers — and bans, in principle, efforts by bureaucrats to influence Diet members. Abolishing the policy research council will close off an important avenue of influence under LDP governments. The government has also mandated that bureaucrats save records related to requests for subsidies, licenses, contracts, and the like from backbenchers and their secretaries.

Regarding the bureaucracy, the DPJ has made clear that it intends to constrain bureaucrats' activities. In particular, the DPJ plans to restrict media access to the bureaucracy, based on the idea that the cabinet is making policy and setting priorities and so its members should be responsible for explaining policies to the press, not the bureaucrats whose job is to execute the cabinet's policies. Discussing this proposal last week, Okada Katsuya naturally cited the British example: permanent secretaries in Whitehall do not give press conferences. Instead the government issued a new policy Wednesday. Political appointees in ministries will be responsible for communicating ministry policy to the media, and regular administrative vice ministerial press conferences are abolished. (To centralize explanations of the government's policies, the Hatoyama government ought to create a press secretary's office.) Naturally journalists have complained about this change.

The DPJ will also abolish the administrative vice ministers' council, which for 123 years has enabled bureaucrats to manage the work of the cabinet, as conservative newspapers did not fail to note in their reporting on its final meeting Monday. Bureaucrats will still meet amongst themselves, of course, but dissolving the council will strip them of a customary and powerful role in the policymaking process, hammering out disagreements across ministries before cabinet meetings.

The thinking underlying this framework can be found in a document released by the cabinet Wednesday. The document stresses that changing the balance of power between politicians and bureaucrats in favor of political leadership is essential to realizing "true democracy." This document is not a declaration of war on the bureaucracy as an institution. It is a constitutional document that aspires to restore constitutional government by ending the delegation of substantial powers from the cabinet to the bureaucracy. The second and third parts of the document contain most of the aforementioned regulations, but the first part explains the proper relationship between political leaders and bureaucrats, and the relationship of both with the public.

The role of politicians sent into ministries, the cabinet declared, is to command and supervise the work of officials on behalf of the public. Bureaucrats, meanwhile, are public servants — not a word regularly used to describe Japanese officialdom — and they are to implement the policies established by the public's representatives in government. They are to provide data to political leaders, present options for policies, and assist political leaders in the execution of their duties. The document stresses a division of labor between political leaders and officials: each should respect the other's responsibilities.

Ultimately these new regulations provide only a framework. It will take time for these principles to reshape the relationship in reality, time for bureaucrats to accept the leadership of politicians they may view as inferior, perhaps time even for politicians to accept that they are in fact the masters of the bureaucracy. Like any revolution, the DPJ's revolution in governance will entail a revolution in the mindsets of both politicians and bureaucrats.

But the Hatoyama government did not just outline a new framework for the relationship between politicians and bureaucrats on its first day in office. Its cabinet ministers hastened to set goals for the first weeks and months in office.

• Regarding the 2010 budget, Fujii stated that the government would decide upon a plan for the 2010 budgeting process by the beginning of October. The government will abandon the ceiling for budgetary requests established by the Aso government and start from scratch and hasten to find ways to save money in order to budget for programs promised by the DPJ during the campaign, such as monthly child allowances. In order to free up funds for next year's budget, the government plans to halt the Aso government's stimulus programs. The finance ministry informed the DPJ last week that it may be possible to recover nearly 6 trillion yen in funds that have yet to be distributed. Indeed, it turns out that more than half the budgeted funds have yet to be distributed. Tango Yasutake, the administrative vice minister of finance, indicated the ministry's support for cutting stimulus funds earlier this week, suggesting that as the Hatoyama government begins work it is already building a working relationship with the finance ministry.

• A critical player in drafting the new budget will be the national strategy bureau, the creation of which (or, its predecessor, the national strategy office, pending revision of the cabinet law) was one of the new government's first acts on Wednesday. Still no word, however, on who will be working under bureau chief Kan Naoto. Continuing on his theme of choice, Kan stressed that a cabinet budget committee will be created soon.

• Okada Katsuya, the new foreign minister, also made several key policy statements Wednesday. First, he instructed the ministry to investigate the circumstances surrounding the "secret" US-Japan agreement on the introduction of US nuclear weapons into Japan, with a goal of having the report ready by the end of November. He also stressed that he will take a flexible approach to the resolution of the Futenma issue.

• Relatedly, Kitazawa Toshimi, the new defense minister, said Wednesday that Japan will not be continuing its refueling mission in the Indian Ocean beyond the expiration of the enabling law in January.
  

Interestingly, as the Hatoyama government set to work, the LDP's Nakagawa Hidenao, who during the campaign said that preventing the DPJ from taking power was necessary to save Japan, wrote at his blog that the LDP ought to cooperate with the government as the new government works to shift power from the bureaucracy to the cabinet. He said that the LDP should in particular cooperate with the government to pass the legislation establishing the national strategy bureau. It seems that Nakagawa finally realizes that the DPJ is no less serious than Nakagawa and other LDP reformists about changing Japanese governance — indeed, arguably the DPJ's leaders are even more serious and have more comprehensive plans than anything LDP governments have offered in the way of administrative reform.

A new era in Japanese politics has truly begun.

The strengths and weakness of Mr. Hatoyama's government

After meeting with Ozawa Ichiro Monday, it appears that Hatoyama Yukio will get Fujii Hirohisa as his finance minister after all. The party's executive board — comprised of the inner circle of party leaders, including Hatoyama, Ozawa, Kan Naoto, and Okada Katsuya — has approved the roster, which will now go before the party's board of governors Tuesday evening for final approval, the evening before the two houses of the Diet will pick a new prime minister. Meanwhile, Ozawa will have full discretion to choose the DPJ's executives.

While the prospective cabinet lineup will not be announced after this evening's meeting, its membership is becoming increasingly clear. An anonymous source close to Hatoyama referred to the cabinet as an "all-star cabinet." Strip away the hyperbole and there is considerable truth to the idea that Hatoyama has picked a cabinet of DPJ heavyweights, even without knowing the identities of more than half the likely cabinet ministers. Kan and Okada will now be joined by Fujii. Other names mentioned include party group leaders Maehara Seiji and Noda Yoshihiko, and Sengoku Yoshito, a senior party leader close to Maehara. Nagatsuma Akira will be joining the cabinet in some capacity, possibly as the minister responsible for the new "Administrative Renovation" council that will work to trim waste for the government's budget. Naoshima Masayuki, an upper house member currently serving as the chief of the party's policy research council, could enter the cabinet as minister for economy, trade, and industry.

Hatoyama is also providing more details about the national strategy bureau. Addressing Okada's concerns that the bureau will step on his turf as foreign minister, Hatoyama stressed Monday that the bureau's primary task from its creation will be drafting a framework for the 2010 budget. It is still unknown how the bureau will function and who will be appointed to it — Kan, its director, will have the power to shape its work but has said nothing about his thoughts for how it should work, prompting Sankei to warn darkly about the "ambitious" Kan's power in the new government. (Apparently the "opposition" newspaper has tired momentarily of warning about Ozawa's power over the new government.) But of course we do know something about how Kan wants the cabinet itself to function: he wants cabinet ministers to do the heavy lifting through cabinet committees, especially in drafting the budget, suggesting that he would be reluctant to turn the national strategy bureau into a shadowy office unaccountable to other members of the cabinet. I am more confident that the NSB will serve the cabinet with Kan in charge than if another politician were made responsible for the bureau. It also seems that only DPJ members will staff the office: no SDPJ or PNP members will be included in its ranks. Excluding the DPJ's coalition partners from the office that will play an important role in shaping the government's agenda reinforces the idea that the DPJ is trying to limit the ability of its coalition partners to veto its policies.

It does appear that Hatoyama, far from being a presidential-style prime minister towering over his cabinet, will in fact be first among equals, the head of a committee of powerful politicians. The core of the cabinet will be comprised of some of the most experienced politicians the party has to offer, politicians who are distant from Ozawa and have their own followings within the DPJ, critical because a strong cabinet will have to keep Ozawa from bullying the government and its prime minister. Hatoyama may have won his first skirmish with Ozawa, but it is unlikely to be the last. (Indeed, part of me wonders whether the whole thing was staged in an effort to have Hatoyama get his way over Ozawa on some issue to show that Hatoyama is in fact in charge.) It will take the collective leadership of the cabinet to push back against Ozawa and prop up Hatoyama, a task of which Sengoku, among other prospective cabinet members, are acutely aware.

And what of Ozawa? Despite the Fujii "incident," there is still little evidence to suggest that Ozawa will be anything but respectful of the cabinet's authority. Yomiuri continues to warn of the danger of the "140-person" Ozawa group, although it buries an important caveat in its long article on the potential power of Ozawa: unlike LDP factions, DPJ members often belong to more than one group. The article also notes that Ozawa has already turned his attention to next summer's upper house election, leading me to wonder just how much energy Ozawa will have to spend on meddling in the policymaking process. Thus far there is still little evidence that Ozawa plans to use his veto power to do anything but keep the DPJ in line.

With the Hatoyama government's birth a day away, it bears asking two questions. First, what are the greatest weaknesses facing the Hatoyama government? Second, what strengths will work in the government's favor?

Weaknesses: Arguably there are three major weaknesses that could undermine the Hatoyama government and shorten its lifespan.

Hatoyama Yukio: I have been critical of Hatoyama in the past, and little has changed to make me any more impressed with his ability to lead the government.

In particular, I worry about his dealings with the press. The most recent example is a slip of the tongue in a press conference Monday in which he referred to "Ozawa Daihyo [party president, Hatoyama's title and Ozawa's former title" before correcting himself and saying "Ozawa Daiko [acting president, Ozawa's current title]." It is a minor gaffe that could be the result of fatigue, the similarity between the two words, and the fact that Hatoyama spent years saying "Ozawa Daihyo" when he was secretary-general before succeeding Ozawa as party president. But the point is that Hatoyama tends to be loquacious, which during the campaign prompted some in the DPJ to suggest that Hatoyama was being kept from the press to prevent him from saying too much and having to backtrack. The party is considering ending burasagari press conferences entirely, although it is unclear what will replace them. Will the Hatoyama government ultimately act like the Bush administration, keeping its head from appearing before the media in anything but the most controlled settings? (Bush was of course notorious for avoiding press conferences.)

The DPJ will not be able to hide Hatoyama from scrutiny — there is, after all, the unfinished matter of his campaign finance records — and if Hatoyama appears to not be in control of his own government, the press will naturally lambaste the prime minister for lacking the necessary centripetal power. Hatoyama may be first among equals, but he still has to be first. How will he keep himself from being overshadowed by his own cabinet? And if Hatoyama is regularly before the public, how can the DPJ prevent him from making damaging gaffes will still adhering to its commitment to transparent government?

Ozawa Ichiro: There is little to say here beyond what I have already written about Ozawa's role as secretary-general. The DPJ is taking a risk by concentrating such extensive powers in Ozawa's hands. The possibility exists that he could abuse it, forcing the government to negotiate its policies behind closed doors with Ozawa to secure his and the party's approval for every piece of legislation.

The media: Perhaps I should list the media as the greatest threat to the Hatoyama government. The Japanese media are politically powerful, and trusted by the public. The media can amplify small gaffes and mistakes, spinning them into a narrative that will undermine public confidence in the government. We've seen it happen with enough LDP governments in recent years to know how this process works. Public opinion polls conducted by media organizations are taken seriously by political leaders. And all of that is before taking into account the conservative media organizations who have made it their goal to undermine the DPJ government from even before it takes office.

The danger is of a vicious cycle. Imagine that a gaffe by Hatoyama results in a wave of negative media coverage — not just in the conservative press — that results in a sharp drop in public opinion polls. (Feel free to substitute a scandal implicating Hatoyama or Ozawa for a gaffe, or leaks from bureaucrats about the incompetence or malfeasance of some DPJ sub-cabinet member.) The drop in public opinion polls leads to panic within the cabinet and the DPJ. Maybe Ozawa decides to take a more active role in policymaking. Newspapers run articles noting that anonymous cabinet members are concerned about Hatoyama's leadership or Ozawa's influence. Perhaps some suggest a reshuffle. The media then repeats rumors of a reshuffle ad nauseaum, leaping on every hint. Faced with growing calls for a reshuffle — naturally he will be questioned by reporters in press conferences about his plans for a reshuffle — Hatoyama might waver, resulting in editorials about the prime minister's indecisiveness, which then becomes a leading theme on the wideshows. And so on until he is driven to resign. This is just one example, but the process is certainly familiar enough.

The government's survival will depend on breaking this cycle, whether by appointing an official to serve as a dedicated press secretary in place of the chief cabinet secretary and manage a government information office that will control how the cabinet communicates with the public or dissolving the press club system to break the power of the major media organizations. Perhaps both will be required. Whatever the solution, unless the DPJ changes how it communicates with the public via an at least partially unfriendly press, the Hatoyama government will be at its mercy. And for various reasons, both Hatoyama and Ozawa heighten the risks posed by the media.

Strengths: But the Hatoyama government is not doomed to fail, but at least not immediately. (All governments fail sooner or later.) It has several strengths working in its favor.

Policymaking: The DPJ takes power with clear ideas for how the government should formulate policy. It has studied how the Hosokawa government failed to develop a coherent policymaking process in 1993-1994, the pathologies of LDP rule, and strengths of the Westminster system and developed its own plans accordingly. Given that the DPJ's transition plans date to as early as 2003, the party has been thinking about how it would govern for most of its existence. In senior leaders have written at some length about the failings of the LDP system and offered detailed proposals for how to build a new policymaking process. Indeed, DPJ leaders have probably thought more about how to change policymaking than any other area of reform. In the weeks leading up to the birth of the new government, the DPJ has indicated that it will put these ideas into practice.

I have already written about the DPJ's emerging policymaking system, so I will only summarize it here: the goal is to create streamlined, top-down cabinet government that shifts the balance of power in policymaking in the cabinet's favor at the expense of the bureaucracy and the ruling parties. The cabinet will lead in budgeting through the national strategy bureau; cabinet committees composed of small numbers of ministers will take the lead in crafting policies for specific areas, while a DPJ-SDPJ-PNP committee within the cabinet will review the government's policies as a whole so to include the coalition partners in policymaking; Hatoyama's senior-most cabinet ministers have considerable prestige of their own and will constitute an inner cabinet, a steering committee that helps the prime minister override opposition from within the cabinet.

But this new policymaking system is only a means to an end: if the policymaking process at all resembles how it looks on paper, the cabinet should have considerable power to make the bureaucracy follow its lead in implementing the DPJ's campaign promises, and, when those plans inevitably conflict with reality, this system should give the cabinet the power to decide how to alter the party's policy plans. It should give the DPJ-led government the ability to try trial-and-error policymaking as it tackles the host of problems facing the government. The new policymaking process does not guarantee success, but a more flexible cabinet stands a better chance of making progress.

Ozawa Ichiro: Appointing Ozawa as secretary-general may be risky, but it is a risk that could pay off. As I've written previously, concentrating veto power in Ozawa's hands gives him power to challenge the government — but it also gives him the power with which to crush opposition from the DPJ's backbenchers. With Ozawa as secretary-general, the policy research council and other party organs will not wield the vetoes that their LDP counterparts wielded under LDP rule.

A public mandate: It is difficult to determine the precise nature of the DPJ's mandate. It's probably a fruitless exercise: it is impossible to say that the public supports this portion of the manifesto but not that portion. What is clear that when it comes to changing how the government functions the DPJ has the public's support. And just as the media can create a vicious cycle, so can the public support for a new policymaking process lead to a virtuous cycle for the DPJ. Using public support against bureaucratic and media opposition to its new administrative plans in order to win the day, the DPJ will then be free to use its newfound policy tools to implement portions of its agenda to prop up its public approval and win elections. Public support fades, but it doesn't have to collapse as it did for the Aso government.

These strengths and weaknesses are far from comprehensive — I said relatively little about how the bureaucracy might oppose the DPJ (it mostly involves using the media) — but I think these lists capture the dynamics that will shape the incoming Hatoyama government.

I may be overoptimistic, but given its focus on getting the policymaking process right, I think the DPJ stands a good chance of making real progress in changing Japan for the better. The Hatoyama government will undoubtedly make mistakes, there are still too many unanswered questions, and the scandals hanging over the heads of Ozawa and Hatoyama could shatter the government's support at any moment — but the DPJ is at least making decisions now that could set it down the path of success.

Transition troubles

The work of picking a cabinet is done, said Hatoyama Yukio Sunday. He is scheduled to meet with Ozawa Ichiro Monday to finalize the lineup.

It seems that Ozawa and Hatoyama are in disagreement over the appointment of Fujii Hirohisa as finance minister, perhaps because Fujii — despite having been close with Ozawa throughout the 1990s, following Ozawa out of the LDP and participating in his various parties before joining the DPJ with Ozawa — was one of a handful of prominent DPJ leaders who suggested that Ozawa ought to step down in response to the Nishimatsu scandal. (Although not a single story about Ozawa's disapproving of Fujii bothered to list a reason, leaving people like me to speculate.)

If that is in fact the reasoning behind Ozawa's opposition, then we're already seeing the potential downside of Ozawa's becoming the single greatest veto player within the DPJ, the "hyphen" between cabinet and ruling party. Ozawa's grudges should not be the basis for making cabinet appointments, especially one as important as the finance ministry — and a potential minister as capable as Fujii. Indeed, we can add another qualification to Fujii's already lengthy list: a willingness to stand up to Ozawa. This is precisely the quality that Hatoyama will need in a senior member of his cabinet.

In the process, the appointment of Fujii is the first test of whether Hatoyama can control Ozawa and force the incoming secretary-general to adhere to the will of the incoming prime minister.

Fujii is certainly speaking like a finance minister, with recent remarks about the DPJ's plans to roll back the Aso government's stimulus spending (see Ikeda Nobuo on the implications of these ideas in light of Keynesian economics). Perhaps Fujii's appearances discussing economic policy are a sign of Hatoyama's resolve to have Fujii in his cabinet.

Sankei, meanwhile, suggests that there is also tension between Hatoyama and Okada Katsuya, his likely foreign minister, with Okada essentially criticizing for the same reason that I criticized Hatoyama and Kan before the election: saying too much too soon regarding foreign policy. (Okada also warned against the national strategy bureau becoming too powerful and usurping the work of appointed cabinet ministers, namely his own duties as foreign minister.)

For now, these grumblings are not reason to write off the Hatoyama government, but they are developments to watch. The Hatoyama cabinet will certainly not be a cabinet of Hatoyama's friends, which may be better for the government, but it will take careful management by the prime minister and senior cabinet ministers. Hatoyama is going to have to discipline his own cabinet: if he cannot get them to relinquish their vetoes over every policy decision, his government will fail. If Hatoyama actually wants to include cabinet committees — there will, after all, be at least one, the committee for coalition consultations within the cabinet — then he and Kan Naoto (perhaps the leading advocate of cabinet committees) ought to provide more details for how they'll work, how many there will be, etc.

Hatoyama will also have to address questions about what exactly he intends the national strategy bureau — Okada won't be the only cabinet minister wondering about how to relate to the office. With Kan in charge of the staff, I anticipate it will play more of a supporting role for cabinet committees than an entrepreneurial role in cabinet proceedings. But with only two days until Hatoyama is scheduled to be elected as prime minister, there are many outstanding questions about how the Hatoyama government will actually function.

Building the inner cabinet

In the transition plan released by the DPJ's committee to prepare for government in September 2003, the party stressed that in the first five days after winning a general election, the victorious DPJ would convene a transition team that would quickly put into place the rudiments of a new system for governing.

Critical to this new system would be the speedy appointment of senior cabinet ministers, which would mark the beginning of an "inner cabinet," a group close to the prime minister that would usher in top-down leadership in place of the consensual system that has given each cabinet member a veto over cabinet decisions.

After initially announcing that he would wait until after taking office to announce his cabinet, Hatoyama Yukio appears to have reverted to the party's transition plan, having indicated his choices for chief cabinet secretary and three senior cabinet posts in recent days. (None of these decisions is final, however; Hatoyama chided the press Friday for being hasty in reporting Hirano Hirofumi's appointment as final when the DPJ still needs to consult with its coalition partners. Hatoyama did say Saturday that final decisions will be made Monday.)

Nevertheless, it appears as if the idea of an inner cabinet will be important for understanding the workings of the incoming DPJ-led government. As I suggested yesterday, Hatoyama will not be a presidential prime minister; the executive power will ultimately rest in the hands of a small group that will include Hatoyama but also Okada Katsuya as foreign minister, Fujii Hirohisa as finance minister, and Kan Naoto as head of the national strategy office, serving concurrently as deputy prime minister and head of the DPJ's policy research council. Perhaps this inner cabinet will also include the cabinet members from the PNP and SDPJ.

Hatoyama will, in short, have plenty of help in running the cabinet. I think that this system will be an improvement over top-down leadership model in which decision-making ultimately depends on the prime minister. As both Kan and Okada are both respected among DPJ backbenchers, their involvement should also help guarantee support from the party's legislators.

Of course, the more critical factor in linking the cabinet executive with the legislators who will be expected to vote for the cabinet's legislation will be Ozawa Ichiro. Ozawa and Hatoyama met Saturday and concluded that as secretary-general not only will Ozawa be responsible for election strategy, but he will also be responsible for the DPJ's Diet strategy, Diet strategy being the link between executive and legislative functions. Ozawa will be assigning committee positions and appointing the party's Diet strategy chair. Ozawa appears determined to unify functions in his office that in the LDP have been divided among several officials, consolidating the LDP's many vetoes into one big veto.

As I've previously argued, the question is what Ozawa does with his veto. The media seems to have concluded that personal rule by Ozawa is inevitable, but I think it is an open question. Having Ozawa concentrate the party's various functions (including, critically, financing functions) in the office of the secretary-general could result in a much weaker party relative to the cabinet if Ozawa respects the will of the cabinet and uses his position to keep individual party members down. Acknowledging these concerns, Ozawa made clear that he will respect the will of the prime minister, but it is too early to say: we'll have to see how Ozawa acts once the DPJ takes power. And if Ozawa decides to question the government publicly, an inner cabinet that includes two DPJ heavyweights plus Hatoyama could be better placed to resist Ozawa, even with Fujii, an Ozawa confidante included in the inner cabinet.

If this policymaking system actually emerges once the DPJ takes power after 16 September, the result will be a much more streamlined system than LDP rule, with its numerous veto points and bottlenecks. With Ozawa in control of the party machinery, he should be in position to punish backbenchers for inappropriate contact with bureaucrats and other behavior that undermines the executive. With power concentrated in the hands of a small group of ministers, the cabinet should be able to carry on even if a minister or two gets captured by their ministries.

A report on Shin Hodo 2001 this morning warned that the DPJ's efforts to streamline and centralize the policymaking process — copying the British system of government — could result in what some have called Britain's "elected dictatorship." To bring the point home, the accompanying image was of Iraq in flames, the consequences of the "dictatorial" powers that enabled Tony Blair to join hands with George W. Bush and commit Britain to war in Iraq despite public opposition. Checks on power are important, but given that LDP government has been characterized by a surfeit of informal checks and balances resulting in policy paralysis, an elected dictatorship might not be such a bad thing for the moment.

Will Hatoyama be first among equals?

After appointing Ozawa Ichiro as the DPJ's secretary-general and Hirano Hirofumi as chief cabinet secretary, Hatoyama Yukio has announced his intended choices for other senior posts, none of which comes as a surprise.

Okada Katsuya, a former party leader and runner-up to Hatoyama in the May party leadership election, is the incoming prime minister's pick for the foreign ministry — although the pick has not been completely finalized. Kan Naoto, another DPJ founder and along with Ozawa and Hatoyama a member of the troika that ran the party under Ozawa, is Hatoyama's choice to head the national strategy office. Fujii Hirohisa, a former finance minister who I pegged as the likeliest and best choice to return to the finance ministry, is being finalized as the appointee.

It is hard to disagree with these assignments. Okada, whose foreign policy views are more or less consistent with the DPJ's foreign policy consensus, is nevertheless a good pick, in that Okada should be able to speak to Washington in ways that ease whatever concerns the US has about a DPJ government's approach to the alliance. Earlier this year Okada articulated a vision for an alliance less centered on security policy, a message consistent with the party's manifesto and Hatoyama's own desires — the difference being that I think Okada has been able to articulate that message better than other DPJ politicians. Okada is a reassuring pick for the foreign ministry. He should be acceptable to the party's right wing, in that Okada is more likely to give their ideas a hearing, but he should be acceptable to the rest of the party as well, in that his foreign policy vision is markedly less hawkish than the right wing (and that he is independent from Ozawa).

Meanwhile, appointing Kan to head up the new national strategy office could be inspired decision, not only because Kan, a former health minister who became famous for taking the ministry's bureaucrats over a tainted blood scandal, has increasingly emerged as the party's most eloquent spokesman regarding administrative reform (see this post) but because Kan could keep the NSO's power in check. Hatoyama said that in order to raise the stature of the NSO he wanted to make its head an important cabinet member — appointing Kan certainly qualifies, but Kan has expressed a belief in the importance of cabinet government, government by appointed ministers, not by a cell of sub-ministerial officials like the NSO. Under Kan's leadership the NSO could become less a superministry responsible for coordinating the activities of ministers and more an advisory body to assist cabinet ministers as they attempt to wrest power from ministry officials. The difference is important: the former model would introduce a new, less accountable veto player into the cabinet, while the latter would support the goal of strengthening the cabinet's collective leadership of the government, while serving the goals articulated by sitting ministers. The point is that the NSO, still a wholly unknown quantity, will be strongly influenced by its first head, and given Kan's well-stated views on cabinet government, his appointment is an encouraging sign that the office will not become a new, unaccountable power center within the government.

Finally, there is little to add to what I have previously written about the value of Fujii as finance minister. Fujii is pragmatic but in complete agreement with the party's administrative reform goals; he is a former finance ministry official who also served as finance minister in the first non-LDP government since 1955; he is close to Ozawa, but given his age and experience would not be Ozawa's puppet at the finance ministry. He will no doubt be at the center of the Hatoyama government, as various party leaders have suggested in recent weeks.

In light of these pending appointments, Hatoyama's appointment of Hirano as chief cabinet secretary makes a certain amount of sense. MTC is disappointed in the Hirano pick, but given that Hatoyama's cabinet will clearly be packed with officials independent of Hatoyama, Hirano will be the one Hatoyama confidante in senior cabinet position, one with a reputation as a troubleshooter and a political crisis manager. Hirano will undoubtedly be overshadowed by Okada, Kan, and Fujii, who have standing of their own in the DPJ and considerable policy expertise, meaning that he will undoubtedly play a smaller policy role — but that his role as, in MTC's words, "traffic cop for the Cabinet" he will be a key adviser for the incoming prime minister as he tries to command a cabinet full of heavyweights.

That is the picture that emerges from these appointments. Hatoyama will be the prime minister, the face of the government, the man who attends the summits, but in practice the Hatoyama government may be characterized by collective leadership, with cabinet ministers being relatively strong and policy decisions resulting more from deliberation among the cabinet's ministers than from decisions handed down by the prime minister. As prime minister Hatoyama may have the final say, but it seems unlikely that he will exercise presidential-style leadership — rather he will be first among equals in a powerful cabinet.

Hatoyama, changing his mind, will appoint senior officials quickly

After suggesting at the start of the week that he would hold off on announcing appointments, Hatoyama Yukio, a day after announcing that Ozawa Ichiro would serve as secretary-general of the DPJ, has announced his chief cabinet secretary, Hirano Hirofumi, a five-term representative from Osaka.

Hirano is one of Hatoyama's three closest lieutenants, along with Ozawa Sakihito and Matsuno Yorihisa. It is only natural that Hatoyama would name a close confidante as chief cabinet secretary. Hirano has no previous government experience, but has held several party leadership positions, serving as a deputy secretary-general when Hatoyama was secretary-general under Ozawa and most recently head of the party's executive staff office. Important considering that he will address the press frequently, he recognizes the importance of being able to communicate effectively in various media.

So there is little to say about Hatoyama's appointment of Hirano. But it seems that Hatoyama will start appointing senior officials in advance of 16 September after all. Asahi reports that the process will be accelerated, to avoid chaos within the party as members jockey for government positions. And with Hirano as CCS, the question is what position Kan Naoto will fill, seeing as he had been the previous front runner. Will Kan end up running the national strategy office? Asahi's report suggests that Hirano will likely be joined by Okada Katsuya as foreign minister and Fujii Hirohisa as finance minister.

Is anyone else seeing a pattern emerge? Hatoyama makes a decision, only to change his mind days later. Why didn't Hatoyama just stick to the plan of appointing senior leaders within days of the election in the first place?

Clearly he is going to need all the help he can get.

The DPJ prepares for its first steps towards a new style of government

The general election may be another four days away, but the DPJ's position in the polls seems secure and so the party is acting like a "responsible party" and putting plans in motion for its transition into government.

I have already written of the names mentioned for the leading positions in a Hatoyama cabinet — but naming politicians to the leading cabinet positions as early as next week is but one of the party's plans for the first days after an electoral victory.

In order to hasten the formation of a cabinet, the party has reportedly already begun vetting some 200 politicians who could be apppointed to the cabinet, the new national strategy office, and the new administrative reform and decentralization council whose task will be to identify areas where the government can cut waste from the budget. The goal is to have the cabinet lineup set before the new Diet is convened to choose a new prime minister. As for the vetting process itself, it seems that it is focused mostly on the political suitability of prospective appointees: namely, the state of their political finances and whether they have any past or present indiscretions that might embarrass the government (women, money troubles, etc.). I am a bit dubious about the process itself — as Sankei reports, the DPJ, lacking the government resources that have been available to the LDP when forming cabinets, is basically conducting open-source investigations using newspapers and weeklies, as well as talk in a candidate's hometown to gather information. But at least it's a start, and Japanese journalists are remarkably well informed. (I hope and presume that they're talking to journalists and not just reading articles.)

But beyond laying the groundwork for quickly staffing up a Hatoyama government, DPJ leaders are trying to set the tone for the party's first months in office. Kan Naoto's remarks on foreign policy — discussed here — are for better or worse part of this trend. I am more impressed with the party's initial moves regarding preparations for administrative reform.

Plans for the national strategy office are being finalized. The party plans to staff the office with ten Diet members, and gave them the power to oversee not only the budgeting process, but foreign policy and administrative personnel decisions. The Diet members will be joined by ten outside experts, and the plan is ultimately to amend the National Government Organization Law to legitimate the office.

As for the administrative reform council, its membership will include Diet members, outside experts, and representatives from the National Governors' Association and six local groups. The council will have a role in the budgeting process, mostly by looking for ways to economize so that the DPJ might be able to afford its manifesto.

The DPJ, moreover, is considering plans for reorganizing the government's tax commission, mainly by scrapping its party tax commission. The government's tax commission has long existed alongside the LDP's tax commission, with the latter being the more important of the two. The DPJ's plan is to make the finance minister the chair, the internal affairs minister the vice chair, and to fill the commission with parliamentary secretaries responsible for taxation from ministries and agencies. This reform follows the same principles of the DPJ's other administrative reform plans: put politicians in a position to oversee and instruct the work of bureaucrats.

The bureaucrats themselves continue to brace for the likely arrival of their new DPJ overlords. The first skirmish will be over the second FY2009 supplementary budget, portions of which the DPJ has made clear it wants removed. In a speech in Fukuoka Tuesday, Fujii Hirohisa, the likely next finance minister, repeated the party's call to remove spending related to Prime Minister Aso Taro's so-called "anime palace" (AKA the "state-managed manga kissa") and other public works spending from the supplementary budget and replace it with unemployment benefits and other spending directed to the immediate needs of Japanese citizens.

It is a worthwhile question whether the DPJ can actually follow through on its desire to introduce a policymaking process centered on politicians in the cabinet. Indeed, it is the central question facing a likely DPJ government. Journalist Shiraishi Hitoshi, writing in the monthly magazine Foresight, looks into the party's manifesto for clues as to whether the DPJ will be able to succeed in reforming Japanese governance. Not unlike LDP reformists like Nakagawa Hidenao, Shiraishi sees a number of points on which the DPJ appears to have compromised previously espoused principles and thus constitute warning signs of the DPJ's going soft on the bureaucracy. Most notably, he cites the absence of a proposal for radical decentralization (either the creation of a state system or the outright elimination of the prefectural level of governance) and the absence of the party's earlier call to demand resignations from top ministry officials, which he argues will undermine the impact of more political appointees and the proposed dissolution of the administrative vice ministers' conference. He is also concerned that the party will not be able to deliver on its proposed 20% cut in administrative personnel expenses and that the party will end up working hand-in-hand with the finance ministry.

I think Shiraishi makes some fair points, but on the whole I am less worried. I have no doubt about the DPJ's desire to accomplish consequential administrative reform once in power. But revolutions are not won by zealots; they are won by the realists capable of making tactical compromises with the old guard in order to outlast their enemies. The DPJ not only has to reform Japanese governance — it has to last long enough in power to do so. Nothing would undermine a DPJ government quicker than to declare open war on ministry officials, which would likely result in an endless stream of leaks, sabotage, and foot-dragging on the part of Kasumigaseki, a unified Kasumigaseki, which would in turn undermine the DPJ's ability to deliver on some of its promises in advance of the 2010 upper house election. And as for joining hands with the finance ministry, the finance ministry may prove to be the DPJ's best friend in Kasumigaseki during the early days. The DPJ has no greater enemy than ministries like the ministry of agriculture, forestry, and fisheries, whose work has been deeply integrated in the LDP machine. It is these ministries that are especially threatened by the DPJ's plans to cut waste, and it is the finance ministry that is keen to cut waste. I have previously expressed my support for the DPJ's "realistic" turn in administrative reform, because I think it signals a recognition on the part of the party's leaders that the fight for administrative reform will be a long one and that they are better off dividing and ruling the administration than facing a Kasumigaseki united against the DPJ.

Fujii characterized it thusly: "The LDP is currently beneath Kasumigaseki. We will place Kasumigaseki under the DPJ. It is imperative to have a system that uses Kasumigaseki." The DPJ cannot govern alone. It needs to be able to use the talent and diligence of the national administration in order to realize its plans, imperative to remaining in power, which is turn imperative to reforming the government over the long term. Administrative reform still will not be easy, but at least the DPJ appears to recognize that it is a goal to be pursued steadily and patiently.

A DPJ government takes shape?

Apropos my comments on the probability of Fujii Hirohisa's being named finance minister in a Hatoyama government, Sankei has a long article speculating that to the three important posts of finance minister, foreign minister, and chief cabinet secretary, Hatoyama Yukio will appoint Fujii, Okada Katsuya, and Kan Naoto respectively. Okada, mentioned as a possible finance minister, would reportedly be unacceptable to the party due to his unwillingness to rule out the possibility of a consumption tax increase. I like the idea of Kan as chief cabinet secretary, as he has gradually become the party's chief spokesman on administrative reform, the task that will be central to the job of the chief cabinet secretary in a DPJ government. The report also mentions the possibility of Nagatsuma Akira's entering the cabinet.

Not surprisingly, it also suggests that Ozawa Ichiro will be named DPJ secretary-general. I am still a bit skeptical about the advisability of not including Ozawa in the cabinet, although I am increasingly less worried about the danger of Ozawa's using DPJ members loyal to him to pressure the cabinet. I do not doubt that there are DPJ candidates who are particularly indebted to Ozawa for helping them get their starts in politics, but it is questionable whether Ozawa will force them to choose between loyalty to Ozawa and loyalty to the party. It is not impossible that Ozawa could be a force for stability in the party, serving in effect as chief whip while helping the party position itself for forthcoming elections. Ozawa obviously has a questionable past when it comes to being loyal to parties, even to parties he created — Ito Atsuo, in his account of Ozawa in the current Bungei Shunju, digs up a quote from Ozawa about parties as being nothing more than tools — but on the other hand, Ozawa has also not been in a position to lead a party that had just unseated the LDP and received close to a two-thirds majority of seats in the Diet (as seems possible).

In the case of Ozawa, will history simply repeat itself? There is reason to think not.

Japan's next finance minister?

As the DPJ was finalizing its proportional representation lists for the 30 August general election, one name was inserted at the last moment onto the party list in the South Kanto block: seventy-seven-year-old Fujii Hirohisa. Fujii had previously announced his retirement after a long career that included service in the finance ministry that ended at the level of budget examiner; two terms as an LDP member of the upper house; and six terms as a member of the lower house for the Japan Renewal, New Frontier, Liberal, and Democratic parties. Most importantly, he was the finance minister in Hosokawa government. But it seems that at the urging of Hatoyama Yukio he agreed to run one more time.

The reason for Hatoyama's wanting Fujii to run again is obvious. The DPJ desperately needs experienced hands if and when it forms a government. On Thursday Okada Katsuya, the DPJ secretary-general, alluded to Fujii's being at the center of a Hatoyama government. But Hatoyama has also quite rightly said that the most important posts in the government should go to Diet members. So naturally Fujii finds himself running once more. It also does not hurt that Fujii is close to Ozawa Ichiro, as the list of parties to which Fujii belongs suggests.

I have previously written of Fujii's position on how to change the budgeting process to give politicians a bigger role: his pragmatism may be the perfect approach to get the DPJ at least through to the 2010 upper house election, and probably longer. As important as any task facing the DPJ in its first months and years in office is convincing the public (and investors) that the DPJ has a competent and steady hand on the tiller at the finance ministry. It might also be received as a gesture of good faith by the finance ministry itself, making it easier to get the ministry to sign on to the party's plans.

I still think that the DPJ might push for more radical changes after a transition period, but Fujii could at least help ensure that the DPJ will last longer than a year or two. The DPJ, having few members with any cabinet experience whatsoever, needs all the help it can get. Some might question is age, but, after all, in 1998 Miyazawa Kiichi returned to the finance ministry just shy of his seventy-ninth birthday and served in the job for more than two years, the longest a finance minister had served since the Nakasone cabinet.

Given Hatoyama's questionable leadership abilities, picking good cabinet members is that much more indispensable for a Hatoyama government to succeed. Fujii would be a good start — and by requesting that Fujii run once more, Hatoyama has at least demonstrated that he knows he will need qualified people around him in government.

Now to solve the Ozawa problem...