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Wed, Nov 21, 2001 - Page 19 News List

Bureaucrats speeding the decline of Japan

AP , TOKYO

In posh offices across Japan, thousands of state employees are overseeing housing loans at absurdly low interest rates or leading a hopeless dig for oil. Others are helping build bridges to nowhere.

Government-funded operations -- "special corporations" -- and dozens like them are bleeding more than ?5 trillion (US$41 billion) from taxpayers.

Free from standards of profitability or openness, the 77 special corporations employing 440,000 people have been an astonishing drain on resources.

They are proof of the extremes of waste, senselessness and inertia that plague this nation that has been fighting an economic slowdown for 10 years, mostly with empty promises for change. But time may be running out for the world's second-largest economy.

Long dependent on exports to keep its economy going, Japan must fight a global slump that is worsening after the Sept. 11 terrorist attacks in the US.

Production is lagging, consumer spending is weakening, big-name companies are reporting losses and the unemployment rate is at a record high.

Special corporations are at the center of the reforms proposed by Prime Minister Junichiro Koizumi, who is winning support with his vows to tackle the fortresses of old-style government.

Koizumi wants to either abolish or privatize them, reducing by ?1 trillion (US$8 billion) the public funds getting pumped into them over the next fiscal year. An outline of his plan is expected before the end of the year.

How far Koizumi will get is a true test for Japan's future.

The Government Housing Loan Corp, which offers mortgages at unrealistically low interest rates compared to private lenders, is popular with some consumers but it's causing heavy losses in taxpayer money -- bad news for the Japanese economy.

If the operation is shut down, consumers who want to buy housing will have to get regular mortgages from the private sector that will weigh the risks of the loan and charge reasonable interest.

The special corporations are suspected of breeding corruption.

Japan Highway Public Corp is notorious for awarding contracts to construction companies that have become favorites of the ministry bureaucrats and politicians over the years. Critics point out some of the roads and bridges aren't attracting very many users.

At Japan National Oil Corp, which oversees the nation's oil supply and is behind an unfruitful oil search in Niigata Prefecture, half of the 10 board members retired from ministry jobs.

Retiring from ministries to plush special corporations posts is so common Japanese call it amakudari, meaning "descent from heaven."

"They do represent in a sense the old deal with the bureaucracy that they will be taken care of for life," said Robert Grondine, president of the American Chamber of Commerce in Japan and one of the few foreigners appointed to a government economic advisory group.

The same kind of wacky logic that dominates special corporations is rampant in Japan's private sector as well.

Japan's banks have racked up a towering amount of problem loans by continuing to lend to money-losing businesses. Dubious loans at Japan's banks are estimated by the government at ?32 trillion (US$263 billion). Private analysts suspect the real figure may be much higher. Koizumi has promised to fix the bad debt crisis in the next two or three years. If he makes good on his promise, corporate bankruptcies could rise.

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