Administrative reform and the politics of budgetary retrenchment in Japan

Abstract

Entering the 1980s, Japan's budget deficit ranked among the highest in the circle of advanced industrial democracies. However, by the end of the decade, the government was able to entirely eliminate its use of deficit-financing bonds. This article explores the political dynamics that account for this puzzling and dramatic change. Focusing on the interests and interactions of the societal actors and political parties that comprise Japan's ruling coalition, I argue that this abrupt change is primarily attributable to the manner in which the fiscal crisis led to the unraveling of the decade-old compromise among coalition members in support of deficit-financing. However, the movement begun in the early 1980s to eliminate deficit-financing did not reflect a return of the budget-making powers of the Ministry of Finance, as is commonly argued, but instead represented a realignment of the relative strength and policy preferences of members of Japan's ruling coalition.