In the 50 years since its entry into the OECD, the Japanese economy and society have changed radically. Enormous efforts to build a modern infrastructure and spur education, innovation and trade have made Japan one of the world’s leading economies.
But Japan faces many challenges today that call for a renewal of its model, from strengthening the economy and improving Japan’s competitiveness, to addressing ageing and managing risks. Meeting these challenges demands more resilient and agile forms of governance. The Great East Japan Earthquake and tsunami in 2011 woke the country up to how large-scale disasters affect not only national competitiveness, but cut right across Japanese society. A rapidly ageing population will increase demand for public services, while budgets will come under increasing strain.
The central public workforce itself, however, is now smaller than ever. While most other OECD countries rapidly increased the size of their central government workforce in the 1970s, Japan tightly restricted its public employment. The general government sector, which includes central and sub-national employees, accounted for 6.7% of total employment (2010).That is one of the lowest shares of all OECD countries, and is well below the OECD average of 15.1%.
How can the government better respond to today’s challenges? Boosting the size of the civil service would not be an easy option, partly for budgetary reasons. Japan holds one of the highest public debts as a percentage of GDP in the OECD, although general government expenditure relative to GDP remains below the OECD average. The authorities have tried to get more out of the civil service by lengthening the working life of public employees, raising their pensionable age, from 55 in 1942 to 65 today. The Public Servant Reform Act of 2008 also created a new job assignment system for workers taking early retirement.
The issue lies not only in numbers, but also in effectiveness. The civil service needs to innovate and increase its productivity, while bringing in new skills and working in new ways. Public opinion increasingly sees civil servants as a protected group that is out of touch with the real world. Clearly, having a civil service that is fit for purpose is vital. Policymakers understand this, and public governance reforms in Japan to respond to these challenges have begun.
The public sector is evolving, in addressing large-scale risk for instance, and through decentralisation programmes, regulatory reform and new forms of partnership with the private sector. Such experience should prove useful when it comes to forming the kind of agile civil service Japan will need to help plan and implement reforms.
“Abenomics”, which is the popular name for Prime Minister Shinzo Abe’s strategy to address the economic challenges and revitalise Japan, has shown strong initial results, but its long-term impact will depend on these reforms. Innovative approaches will be important.
Consider public-private partnerships (PPPs), which are likely to feature prominently in future policy. In June 2013 Prime Minister Abe announced plans to establish a PPP market of approximately $100-120 billion by 2022. In October 2013 the Private Finance Initiative Promotion Corporation of Japan, which finances risk money to encourage private investment on infrastructure, while reducing the financial burden on the public sector, was established with both private and public funding.
This is welcome news, since PPPs have shown that they can be used to help build more resilient societies. In places such as Kitakyushu city, they have helped to overcome pollution and spur greener growth, so continuing the shift away from the more narrow economic growth agenda of the 1960s and 1970s.
Large-scale disasters have also driven governments at all levels to work in new and more integrated ways. Japan’s well-known resilience to major natural hazards has been sorely tested in recent years, but while mistakes have been made, lessons are being acted upon to preserve the well-being of citizens in a highly exposed country. Over the past 50 years authorities have worked hard to improve safety. The mortality rate due to earthquakes has decreased sharply, for example, because buildings are safer, and there are early warning systems that can stop everything from bullet trains to lifts before massive seismic shocks strike.
These successes are also due to less visible efforts, such as the enforcement of building codes and land-use plans. It is in these areas that Japan has excelled. New “compact” urban developments, such as Toyama city, designed to avoid sprawl and excessive public service costs in remote areas, are viewed around the world as a model for building efficient and robust cities designed for an era of ageing and depopulation. The country’s local government and private sector networks foster mutual support in case of peacetime emergencies by distributing tsunami hazard maps and conducting evacuation drills, for example. The OECD Principles on the Governance of Critical Risks, which will be presented to OECD members in May 2014, will draw from such experiences.
Whatever approaches and partnerships Japan adopts to meet public policy challenges, a skilled and nimble civil service will be an essential cornerstone. Public policy must be renewed, while maintaining the motivation of older civil servants, and tapping their knowledge and experience. The civil service has traditionally had a hierarchical and formalised structure, with tough civil service entrance examinations, clear and rigid career paths, little mobility, lifetime tenure, rigid remuneration based on seniority, and advantageous pension systems. These features served to minimise the risk of excessive political influence, corruption, misconduct, the exercise of private interests and the instability of government. Civil servants were viewed as ethical and impartial experts, committed to the public good. Moreover, a positive image of civil servants as custodians of broad national interests further supported the implementation of reforms.
The civil service today, however, has come under pressure to increase flexibility and improve performance. Under Prime Minister Hashimoto in the 1990s, the powers of the prime minister and cabinet were strengthened, the number of central ministries was reduced, and independent agencies were set up to strengthen the focus on performance. In recent years the Japanese civil service has undergone significant changes and reforms to help it work more efficiently. In 2001, a central government reform was implemented to merge existing ministries, strengthen the operation of the cabinet and achieve more efficiency. Reforms were also made to increase competition in the recruitment process for entry into the civil service, and the focus on performance evaluation was further strengthened.
Nowadays, Japan tends to follow the same grand reform paths as other OECD countries: decentralisation of human resources responsibilities, the accountability of managers, flexibility in recruitment and career development policies, a focus on individual and organisational performance management, and a general trend towards de-bureaucratisation.
The Japanese government needs to complement these efforts with measures to strengthen public sector skills in areas such as delivering social services to the elderly, managing partnerships with the private sector, contributing to organisation renewal and service innovation, and taking advantage of digital technologies. Japan has managed innovative public sector reforms over the years, but is also facing unique budget and demographic pressures. These will continue to push the civil service to raise its game and adapt new ways of working. This means both meeting the expectations of citizens and promoting innovation, while helping civil servants fulfil their role of building a more resilient society for tomorrow.
Draft principles on the governance of critical risk
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©OECD Observer No 298, Q1 2014