Other soft landing sites for amakudari bureaucrats with golden parachutes are government advisory councils and kyokai, «industry associations.» Groups such as the Electronics Communications Terminal Equipment Testing Association and the Radio Testing Association administer standards and recommend new policies. This helps to explain why Japan's industry is so slow to update technical standards, for as one journalist has observed, «When you seek to abolish certain regulations, a stone wall is immediately erected. Abolishing regulations translates into destroying these cushy post-bureaucratic careers.»
Politicians exert influence through their relations with bureaucrats, and the press call the latter zoku giin, «tribal Diet members,» according to which ministry tribe they belong to. Former prime minister Hashimoto, whose prime area of influence lay in the Ministry of Health and Welfare, derived bis power from being a member of that ministry's tribe. Industry pays vast sums to tribal members who can secure contracts for them through their associated ministries. Construction Ministry tribalists sit at the top of the heap, as was illustrated in a major scandal of the 1990s in which it was found that Diet kingmaker Kanemaru Shin had made more than $50 million.
«Power,» said Mao Zedong, «springs from the mouth of a gun.» In Japan, even greater power springs from the issuing of rule and permits. Rules exist in every area and in a bewildering variety, most of them in the form of unpublished «administrative guidance.» How do you know what the rules are? Only by maintaining close ties with government officials through tbe practice of settai, «wining and dining.» Settai means giving expensive meals, but it extends into a gray area that most other advanced nations would call bribery at high levels: free golf-club memberships, use of corporate cars, and gifts of money.
Departments lower in the food chain need to curry favor with those higher up, which requires that officials practice settai with one another as well. Government bureaucrats spend billions of yen every year to wine and dine functionaries from other agencies. In this rich stream of slush funds, they have found ways to pan for gold – overbilling and charging for fictitious trips and nonexistent functions that cost prefectural governments millions of dollars a year.
Bureaucrats alone have the power to issue permits, and permits do not come cheap, as may be seen in the following example from the sports-club business. In the 1980s, although relatively new to Japan, sports clubs attracted the interest of men working in the Ministry of Health and Welfare (MHW) and the Ministry of Education. They saw ways of enriching themselves through the time-honored techniques of giving mandatory lectures and study sessions, issuing facilities permits, and creating credentials and «levels» for sports-club professionals; agencies staffed by amakudari would administer the study sessions and permits, as the social critic Inose Naoki has described. Nothing better illustrates the baroque structures Japan's bureaucracy.
First, the MHW created the Foundation for Activities Promoting Health and Bodily Strength, which licensed two categories of workers: «health exercise guides» and «health exercise practice guides.» The MHW and the Ministry of Education then jointly sponsored a Japan Health and Sports Federation, which granted permits to the first category, while the MHW alone founded a Japan Aerobics Fitness Association, which granted permits to the latter category. Not to be outdone, the Ministry of Education set up a Japan Gymnastics Association, which devised two credentials for Sports Programmer at the First Level and Sports Programmer at the Second Level. To gain a First Level certificate, an aerobics instructor has to pay ¥90,000, for the Second Level ¥500,000. In addition, something called the Central Association for Prevention of Labor Disabilities requires the instructor to attend twenty days study sessions-at a cost of ¥170,000-before obtaining a permit to be either a «health-care trainer» or a «health-care leader.» In short, if you want to teach aerobics, you must run the gamut of four agencies and pay for six permits. No laws explicitly require them, but nobody dares do business without at least some of these permits. The fees do not go back to the public purse but straight into the pockets of the amakudari who run the permit agencies.
With regulations earning so much money for bureaucrats, it is no wonder Japan has become one of the most heavily regulated nations on earth-former prime minister Hosokawa Morihiro once said that when he was the governor of Kumamoto he couldn't move a telephone pole without calling Tokyo for approval. Yet these regulations have created a strange paradox: they are a priori and exist solely on their own terms – they do not necessarily make business honest and efficient, products reliable, or citizens' lives safe.
The key to the paradox is that the regulations control but do not regulate in the true sense of the word. Industries in Japan are largely unregulated. There is nothing to stop you from selling medication that has fatal side effects, dumping toxic waste, building an eyesore in a historic neighborhood, or giving investors fraudulent company statements. But just running a noodle shop requires you to fill out lots of forms in triplicate, with stamps and seals. The point of Japan's red tape is bureaucratic control – the restriction of business to routine paths along which officials may profit.
Just as there is no environmental-assessment regulation, there is no product-liability law, no lender-liability law, very few rules against insider trading or other market manipulations, few testing protocols for new medicines – and no cost-benefit analyses for the gigantic building schemes of government agencies. Banks and securities firms routinely falsify financial information at the direction of the Ministry of Finance. When Yamaichi Securities went belly-up in late 1997, investigators found that MOF had instructed it to hide more than $2 billion of losses in offshore accounts. Hamanaka Yasuo, the trader who cost Sumitomo Trading $2.6 billion through his dubious commodities dealing, violated no Japanese law. While home builders must contend with a welter of ordinances that happen to keep construction-company profits high, there is no city planning in the true sense of the word.
Because of the paradox of control versus regulation, the world of rules in Japan has a Through the Looking-Glass quality. A store must wait three years after getting a liquor license before it can sell domestic beer – but vending machines sell beer freely, even to minors, everywhere. The supermarket chain Daiei had to apply for two separate licenses to sell hamburgers and hot dogs if it displayed these products in different sections of the same store – but meat-processing standards for food manufacturers had not changed since 1904. If a supermarket sells aspirin, a pharmacist must be present and have medical tools on hand – yet nowhere else in the developed world are physicians free to dispense drugs themselves, and as a result the Japanese use far more drugs, of dubious efficacy, than any other people on earth. The Through the Looking-Glass nature of Japanese regulations goes a long way toward explaining such preposterous prices as $100 melons and $10 cups of coffee. The aggregate cost to the economy is simply incalculable. These outrageous prices, absurd regulations, weird and inexplicable public works – all the ingredients of a manga-like world – exist for the simple reason that bureaucrats profit from them.
Officials have devised many ingenious ways of channeling funds into their own pockets. The River Bureau, as we have seen, has made a particularly lucrative franchise of its work.
While bureaucrats get the lion's share of the profits from construction work, a goodly percentage flows to political parties. The rule of thumb has been that contractors pay 1 to 3 percent of every large public-works project to the politicians who arranged it, in which practice the Tax Office colludes by recognizing «unaccounted-for expenditures» (i.e., bribes to politicians and bureaucrats) as a corporate-expense line item, which in the case of the construction industry amounts to hundreds of millions of dollars annually.