Published March 17, 2005 – Copyright The Wall Street Journal
Over a brief period of time, Japanese people have responded creatively and dynamically to the challenges left in the wake of the lost decade of the 1990s. A prolonged recession has discredited the Japan, Inc. that is shorthand for the cozy and collusive ties between big business, bureaucrats and the ruling Liberal Democratic Party. As a result, sweeping social convulsions and policy responses suggest that Japan is reinventing itself by laying the foundation for a more robust civil society.
One clear example of this reinvention is the slew of reforms aimed at overhauling the Japanese judicial system. In April 2004, 68 Japanese law schools opened their doors in line with the government’s plan to facilitate greater access to legal services by boosting the number of lawyers over the next decade. With remarkable speed, the government passed legislation creating an intellectual property rights court and established a system of citizen judges. These reforms have all happened since 2002, demonstrating that Japan is not nearly as mired in political gridlock as many commentators would have us believe. For foreign executives, they also highlight that while investment in China is the flavor of the moment, it may be in an increasingly transparent Japan where the most bankable opportunities lie.
Given that lawyer groups have been active in promoting transparency, there are good reasons to welcome the expansion in the number of lawyers as well as a training process not conducted by the government. Law schools can help facilitate the transition from the rule by law to the rule of law. It is also encouraging that the arbitrary discretionary authority of bureaucrats to issue informal guidance to those under their purview, or gyosei shido, is now formally banned. While the practice will certainly persist, the risks of getting caught and punished are rising: good news for foreign executives pining for a more level playing field in Japan.
Recent legal reforms in Japan are not happening in a vacuum. Under public pressure, politicians have also introduced wide-ranging new initiatives including privatization of the highway corporations and postal system, as well as a national freedom of information law. They have also eased regulations for establishing nonprofit organizations (NPOs). The decentralization of power and the empowerment of citizens through some 20,000 NPOs and 80,000 civil-society organizations reflect and encourage an increasingly diverse Japan. The embrace of open government by politicians with the support of NPOs and a somewhat feistier media is raising public standards of conduct. As a result, bidding on public contracts is more open than ever and is creating significant opportunities for those who do not have insider connections.
In addition, there has been a significant shift toward more flexible employment contracts and numerous changes in policies affecting working women. The goal: raising the nation’s birthrate and helping women better balance the competing demands of home and work.
The myth of the reluctant Japanese litigant is rapidly fading as workers, consumers and firms more aggressively pursue legal remedies. In cases ranging from employment discrimination and product liability to intellectual property rights, Japanese are demonstrating that they have fewer qualms about lodging lawsuits. The commitment to a more activist and accessible judiciary will reinforce this trend. The rules of the insider club are unraveling and corporate conduct is increasingly judged according to global standards. Foreign firms are well positioned to reap the rewards.
Although many in the Japanese establishment are unhappy about this, they know that fighting greater transparency has become risky. Already, in a cascade of scandals, the once revered mandarins have been caught with their hands in the till, driving the getaway car or asleep at the wheel. Citizens are now in a better position to monitor government activities and hold those who govern accountable. Governors in several prefectures have run against or distanced themselves from the political establishment, getting elected by promising to slash pork-barrel projects and make the government’s business open to public scrutiny. One governor with a flair for the theater of politics even went so far as to build a glass office where visitors can see him at work.
Local citizens increasingly resort to referenda to challenge government decisions on issues ranging from dams to nuclear power plants. The ebbing of public trust in the government is forcing officials to reach out to NPOs and involve them in policy deliberations. The courts are also facilitating an incremental shift in power toward citizens at the expense of a bureaucracy accustomed to almost always getting its way. In nearly two-thirds of cases involving information disclosure, the courts have sided with citizens against the government.
Why does the strengthening of Japan’s civil society matter? For foreign executives, these sweeping reforms are having a profound impact on the operating environment in Japan. Business will only benefit from the declining arbitrary powers of the government.
Mr. Kingston is director of Asian Studies at Temple University Japan and the author of “Japan’s Quiet Transformation: Social Change and Civil Society in the 21st Century” (Routledge: London, 2004).