The Ministry: How Japan's Most Powerful Institution Endangers World Markets

In some ways January's biggest scandal was on the business page. Two officials from Japan's powerful Ministry of Finance were arrested on the charge of taking payoffs. The finance minister and vice finance minister resigned, another bureaucrat killed himself, and some reports fingered the MoF in the collapse of the century-old Yamaichi Securities. And as the final indignity, an outsider was chosen to head what had been an old boys club since WWII. Although Hartcher's book was finished before this wave of scandals was reported, it as good as predicts them. Hartcher, Asia-Pacific editor for the Australian Financial Review, describes how the MoF, created to support the war and postwar rebuilding, outlived its purpose and fostered the bubble economy of the late 1980s and the subsequent bank crisis that almost crushed the miracle it helped create. By the 1970s, three of the MoF's most cherished tenets no longer held--its absolute unwillingness to resort to fiscal supports; its insistence that no bank be allowed to fail; its general lack of faith in free-market forces. The MoF was further hampered by simple self interest: supporting protectionist measures in order to maintain the ruling Liberal Democrats' electoral base; and maintaining weak institutions that served as cushy outplacement positions for senior MoF bureaucrats. It's not quite Den of Thieves--aside from the incomplete example of ultimate bubble businessman, Haurnori Takahashi, the book lacks a human face--but it's filled with fascinating details and explanations that shine a needed light on Pacific Rim economics and into the fastness of the MoF. (Mar.) FYI: Hartcher will comment on recent events in an online postscript. The URL is www.hbsp.harvard.edu/the_ministry and will be posted March 18.