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Supported by the Friedrich-Naumann Foundation and the Monbukagakusho

ICT Business Associations in Japan:

Platforms of communication and socialization harmonizing between business and politics

Andreas Schaumayer (University of Konstanz and Waseda University) andreas.schaumayer@uni‐konstanz.de

July 11 , 2006 Paper prepared for 20th World Congress of the International Political Science Association (IPSA) in Fukuoka/Japan. Business and Politics Research Committee.

Abstract This paper identifies challenges for business associations and applies a dynamic view on organisational change of the Japanese associational system representing business interests in the ICT sector. Core business associations and their relations to governmental- and international actors are systematically identified and described with tools of network analysis. Emphasis is put on inter-personal exchange to explain the structural setting and the way business associations interact with other political actors and react on challenges in their environment. Keywords: Japan, Business associations, ICT, industrial relations, network analysis, shukko, amakudari, varieties of capitalism.

Andreas Schaumayer – Waseda University

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Introduction

Japan is changing. Its new election system reduced the power of the factions within the LDP. A

severe administrative reform in 2001 established a strong cabinet office, increased staff for the

prime minister and reduced the power of the omnipotent Ministry of Finance (MoF). Now a long

serving and charismatic prime minister challenges its own party and succeed with triumphant

election results. The Japanese Army, which is called a “self-defence force - SDF”, also serves

outside of Japan. In foreign policy, Japan demonstrates a strong will to be a full member of the

international community. And last but not least, young workers ceased to have stable jobs in big

firms (furiita). Institutional, cultural and societal changes can be observed at all levels. This article

attempts to show if those changes also influence the subsystem of business associations in an

intra- and interorganisational perspective1.

The relationship between business and politics is one of the dominant research topics in Japanese

studies and the influence and power of the bureaucracy has always been stressed by social and

political researches even though Japanese bureaucracy is comparatively small in budget and staff

(Knoke et al. 1996). Latest research about associations and special interest groups has broaden the

perspective through the inclusion of NGOs and their focus on civil society (Schwartz and Pharr

2003; Ohtomo et al. 2005). Nevertheless, the results of these studies show that organized business

is regard as the most influential, and associations have established “relatively” institutionalized

relationships with the bureaucracy, the LDP and other relevant interest groups (Muramatsu and

Krauss 1990, Kume 2006). The most influential associations are subject to either legal regulation

(kyoninka) or administrative guidance (gyosei shido). This demonstrates that independence from

bureaucratic control does not necessarily lead to more political influence in Japan, even though

recent studies mention a transformation process and a decrease in interest-group politics (see

JIGS-Japan Interest Group Survey)2.

In this case study about associations in the ICT sector (Information and Communication

Technologies) a systemic approach will be used “in order to make sense of this change, (that)

seems to be necessary to analyze political dynamics at a deeper level than the strategic choice of

the political actors” (Kume 2006: 11). The study inquires into the linkages between the socio-

political system and it constituent social and political actors because business associations are

seen as intermediaries who respond to external developments like internationalization and adapt to

complex and changing environments. Schmitter and Streeck (1999) emphasize that association

1 This study was part of a research project supervised by Volker Schneider and Jürgen Grote. 2 JIGS results can be found in Muramatsu and Kraus 1990, Tsujinaka 2002 and Kume 2006

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steadily try to fit their organizations structure to constraints that emanate from the logics of

membership and influence. “Interest organization formation seems to respond to economic and

political threats and opportunities, particularly major ideological shifts in legislative, regulatory,

and judicial decisions affecting the interests of previous unorganised social groups” (Granados

and Knoke 2002: 9). It is therefore assumed that the subsystem is adapting to those changes in

associational environments. This can be observed with respect to organisational structures,

attitudes and strategies at the organisational, population and community level (Baum 1996). On

the other hand, the associational system is also reflecting the broader political framework and can

therefore be used as clue to understand a given polity.

The data that are presented in this study are based on semi-standardized interviews which have

been conducted by the author in Tokyo with representatives of the most important business

associations in the ICT sector. This so-called focal organization set comprises 13 associations

which had been identified by a panel of experts evaluating at total list of 64 associations which

was compiled on the basis of official handbooks and internet research. This research reveals that

the domestic political influence is overestimated in contemporary relations between business and

politics since not only national but also international factors produce dynamics that affect the

environment of business associations (Schneider and Grote 2006). Especially in East Asia where

political and economical integration is just at a starting point, the internationalization of markets

implies rather different tasks compared to European associations that are tightly embedded in a

multilevel governance system.

Framework and developments in the ICT sector

The ICT sector in Japan is technologically one of the most developed in the world. The

emergence of this market through liberalization, privatization and deregulation is well

documented in the current literature (Vogel 1996, Schneider 2001.). A new perspective on ICT

and its pressure for convergence has been outlined by Latzer (1997). The following overview of

recent developments is based on this literature, publications by the MIC (Ministry of Internal

Affairs and Communications 2004) and several associational publications.

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During the late 1980s and early 1990s Japan's ICT revolution propelled a rapid spread of PCs, the

Internet, and mobile communications. Since then, this sector expanded at an average annual rate

of 5.6% becoming the largest of Japan’s industries (JETRO 2005). The above mentioned report

issued by MIC (2004) estimates the size of core- and related markets at 59.3 trillion yen in 2007


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and 87.6 trillion yen in 2010. With respect to employment, it counts for 18% of the total.

Compared to 6% in Germany or 9% in Great Britain, ICT companies are the major employers in

Japan. The development seems most turbulent in the high-tech sector. For instance, the future

market of broadband internet connections has increased by 350% in 2004. Japan is a high-tech

nation par excellence with a strong comparative advantage in the international markets, especially

in East Asia. The juridical framework for ICT business is set by the Basic IT Law (Basic Law on

the Formation of an Advanced Information and Telecommunications Network Society No.

144/2000). However, formal law (horitsu) does not have equal importance as it does in western

societies. Guidelines (meirei and seirei) and ministerial ordinances (shorei and sorifurei) that

specify the abstract law are common instruments for the governance of industrial sectors which

give the "guiding" ministry extraordinary power3. Particularly the procedures of ministerial

ordinances generate inefficiencies since ICT is regulated by three competing ministries namely

MIC, METI (Ministry of Economy, Trade and Industry) and MEXT (Ministry of Education,

Culture, Sports, Science and Technology). Three different laws apply to mobile communication,

television and internet. For a converging sector like ICT this creates obstacles and also causes

strong inter-ministerial competition (Lehmbruch 1995). Prime Minister Junichiro Koizumi is

trying to overcome this traditional counterproductive competition by establishing high-level

councils and committees in the prime minister’s office. An example is the “IT Strategic

Headquarter for the Promotion of an Advanced Information and Telecommunications Network

Society” which was established in 2001. It started to work effectively since the members of these

councils are transferred for a longer period to the cabinet office and serve exclusively for this

body. The IT headquarter consists of all cabinet ministers, as well as eight non-government

experts such as Nobuyuki Idei (Sony), Jun Murai (Keio University), and lead by Prime Minister

Koizumi.

Current challenges for the Council are the increasing internationalization of the markets with a

focus on East Asia, consumer protection and access to communication infrastructure for service

providers (Agata 2006). Japan has not yet established an integrated independent regulatory agency

like the Bundesnetzagentur in Germany, where all networks such as gas, electricity and

telecommunications are regulated by one administrative body and where disputes can be resolved.

In contrast, Japan has developed various dispute councils affiliated with the responsible ministry.

The “Telecommunications Business Dispute Settlement Council” is a MIC council. It was

3 In the hierarchy of laws, the Constitution (kenpo) ranks highest, followed by the other Codes and statute laws (horitsu) enacted by the Diet (the parliament). These are followed by orders enacted by government agencies (meirei) (such as cabinet orders (seirei) and ministerial ordinances (shorei and sorifurei)) or administrative guidance (tsutatsu and gyosei shido).

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established in 2001 for disputes over issues such as interconnection between telecommunications

carriers (MIC 2005). At the international level, standardization negotiations especially with China,

and APEC countries are dominating the agenda in mobile communication technology. Japan tries

to enforce the transition to 4th generation mobile communications technology particularly in China

from IPv4 networks to IPv6. An overview of what Japan is trying to achieve in East Asia is

currently announced in the Asia Broadband initiative that tries to promote Asia into the leading

ICT region until 2010.

Business Associations linking the industry with government

Japan’s society comprises of a large number of business associations. It is hard to imagine that its

total number exceeds 15,000, where more than 3,000 can be regarded as operating at the national

level (Schaede 2000: 43). Compared to the US, Japan with half the US-GDP outnumbers the

American business associations by seven (Aldrich et al. 1994). Even though concentration

processes are going on, it is still the most densely organized in the world. Hence, Japanese

business associations are very stable, both in terms of existence and membership. Member

turnover or dissolutions are extremely rare. The underlying mechanism which is driving Japan’s

governance structure in a rather constant way is self-regulation by industry. What differs over

time is the involvement of bureaucrats in this process (Schaede 2000: 258).

Historically, Japan has a long tradition of associational life. Dating back to the 10th century were

the so called za stabilised and controlled markets. As trade and commerce were prospering while

neither civic institutions nor a feudal system had yet fully developed, groups like the za

supplemented the missing institutional environment for trade by carrying out activities such as

forging trade agreements, creating barriers to entry to local markets, or establishing rules of trade

(Toyoda 1963: 167). Governmental institutions always used the associations to implement new

policies and to establish a consensus via reciprocal exchange of influence and responsibility.

Those governmental funded and established associations (toseikai) were also crucial in preparing

and transforming Japan into a war economy during World War II. After the war there had been

strong incentives by the government to establish new associations reflecting and sharing the goals

of the developmental state channelling the scarce resources to state selected industries. This post-

war developmental state, best described in Chalmer Johnson’s “Miti and the Japanese Miracle”

(1982) emphasised state-interference and administrative guidance (gyosei shido).

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After the oil crises in 1973, emancipation processes of the Japanese electronics and entertainment

industry remodelled and rejected the administrative guidance. When the bubble economy busted

in the late 80s, the end of the already outdated myth of the supreme MITI found its end. The

competence of governmental institutions became highly questioned and the system - the so called

tan-system (governmental regulation) - shifted to more self-regulation. This transition is also

indicated by the “Japan Interest Group Survey–JIGS” which supports these observations and

stresses that the support to political parties has declined. However, business associations still have

an important mediating role between a government with scarce resources and a very powerful

business sector. In this role “Japan’s trade associations have crafted a system of institutionalised

information exchange through meetings at various executive levels and through mechanisms of

personnel exchange” (Schaede 2000: 43). Associations also depend heavily on the bureaucracy as

a source of ‘information crucial to the organization’s operation (JIGS). In this survey, the

bureaucracy is ranked as most important followed by “members of the associations”.

This information exchange from the bureaucracy to associations can also be observed in the

network structure that will be shown below. In addition, exchange of staff between government,

associations and member-firms will be identified as a particular element in the Japanese

governance system, described by shukko and amakudari. Many studies on Japan suggest that

these personal networks lead to a trust-based society. This paper, however, does not follow this

line or argument. Like Yamagishi (1998), I would like to point to a common misunderstanding

with respect to the assurance of security and trust. In my perspective, Japan is not a trust based-

society. It is rather built on strong institutionalized and well-trained social exchange which starts

early in life and is enforced by a rigid education system. For instance, Japanese university

graduates are well trained to participate in group activities, to accept rules and to keep relations

working. However, this is not friendship, but the necessity to belong to a social group and to

establish a social identity to which one can refer to. It is a tradition of personal contacts,

established over many years rather then friendship relations or trust. Though, it can be regarded as

an important mechanism that enables this specific Japanese network governance.

Empirical findings for change and persistence The adaptation pressures that influence business associations to respond to external factors, are

subdivided in four dimensions and are operationalized by the variables political challenge,

economic pressure, technological transformations and social changes. The following analysis of

these dimensions will show, whether and to what extent associations perceive adaptation pressure.

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In a second step, the empirically observed variations on the dependent variable, namely

organisational change will be presented.

An important result of our investigation was that Japanese associations perceive large pressures to

adapt. About 92 procent of the associations are sensitive for changes in external environment. The

examined associations name these external factors as decisive triggers for organisational change.

As tables 1 and 2 show, economic factors are perceived to produce the strongest adaptation

pressure at the national level. Technological changes are seen as international processes instead.

Our data thus point to important environmental changes, and that the various associations were

able to differentiate among those triggering factors. Globalization and regionalization processes

thus were regarded as important factors driving organisational adaptation processes at various

levels.

> Insert Table 1 and Table 2 about here <

Organizational adaptation processes also can be described through changes within the

organizations and their internal processes of redistributing the budget, or reassembling internal

committees with respect to technological needs or political demand. Table 3 depicts the

distribution of the resources among various activities. An interesting result is that about 80

percent is spent for investments concerning members whereas only 20 percent is allocated to

influence political actors. This means that the membership side clearly dominates over the

influence side in interest intermediation. Almost one quarter of the total budget is spend for

“provision of information for members” and for “organising conferences”.

> Insert Table 3 <

The dominance of the investment in membership is surprising. Such a clear focus was not

expected in the Japanese system of organized interests. The consultation process with ministerial

agencies during the policy process was expected to be a much large share of the budget. Even

though the total spending on political consultation is only 11 percent of the total budget it is still a

core business of Japanese associations. This small share may have its origin in an institutionalized

and also monopolized exchange between associations and the bureaucracy4. Competition between

associations is very low. There are no competitors in the respective associational interest domains

(Schaumayer 2003). Such a context makes political influence cheaper while the management of

compliance with respect to member-firms and to mobilize expertise seems to be more resource

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consuming. In the policy process public actors are also interested in an association’s willingness

and ability to make its members accept the respective political decision (Streeck and Schmitter

1999). The marginalization of the influence investments can be contradicted by the fact that due to

a strong interdependency between the governmental sector and the business associations there is

necessity of communication and exchange. In an international perspective Japanese bureaucracy is

not over-staffed or over-funded, resources are therefore scarce. However, Japanese government

regards ICT as a key sector, and also the World Bank shows in a recent analysis that the Japanese

government concentrates a lot of attention and resources on the ICT sector. For further sectoral

policy-research, it would be helpful to determine what importance the Japanese government

allocates, because this shapes the policy-arena and determines the actors. A pure dominance of the

membership logic would mean that the country would have had fragmented and small internally

not distinguished associations which compete fiercely among each other (Grote and Lang 2003).

However, this is not the case in ICT. Also, the division of labor is not short-term oriented.

Informal meetings are so habitual in daily work that some association representatives do not

subsume their actions under the term lobbying.

Populism, political uncertainty and internationalization as a threat

Even though Japanese economy is strongly represented in governmental committees and Japanese

business participates on all levels of negotiations, it keeps distance to party politics, especially

since the 1993 election when the LDP lost its dominant power for a short time. At that time, it had

been a shock for business and even the Keidanren revised its expenditures for political parties.

Contacts with parliamentarians are not an influence channel for sectoral business associations. As

political uncertainty has risen, societal lobbying and PR by general media has gained importance.

Japanese business associations shifted their resources to other actors than pure political ones.

Table 3 illustrates an ongoing process of strengthening civil society and media contacts. In

addition to their privileged access to the bureaucracy, the top associations in the ICT sector also

have a political consultancy function. Since Prime Minister Koizumi revitalized the committee

structure at the prime minister’s office (first introduced by Nakasone), a new channel of political

influence evolved. This shift was necessary because of political needs to challenge the

bureaucracy and allow the Prime minister more control and leadership5. This new leadership

brought new impulses to the Japanese political culture, but political uncertainty is rising since the

prime minister can set its own agenda without consulting, neither his own party nor any pressure

4 The term lobbying is not very popular and associations do not regard or do not want to regard themselves as lobbyists.

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group. Hence, associations find themselves in multi-option situations. They have to maintain their

strong linkages to the ministries, which are still the most important channels of influence. In

addition they have to deal with a politicized domestic policy making process and are faced with a

tough international environment in East Asia. Key elements that keep the channels of

communication and the way of thinking together are the inter-personal relationships that will be

described in the last part of the paper.

International representation of business interest and effective political influence is an urgent task

for associations in Japan. Globalization implies to a large extent also standardization. Societies

developed their peculiar rules of exchange and domestic organisations adapted to these rules.

International standardization then is a field of strategic interaction where different interest

collides. International organisations like the WTO or international associations then try to settle

disputes and harmonize interests. Markets, trading partner and competitors of Japan are changing.

Now China, Korea and Southeast Asia are becoming the most important markets especially for

MNC (Rugman 2005). Even though East Asia nowadays has high barriers to trade and

investment, those markets matter. Associations react on these challenges either in the traditional

way by negotiating with the bureaucracy, or on the other hand by building strong relations with

associations in other countries.

Especially in Sino-Japanese relations these contacts are important. For some time, official

political relations were cooling down because of political issues, disputes about fishing territories

and overall about authority in East Asia. The visits of Prime Minister Koizumi to Yasukuni

shrine, where 14 war criminals are enshrined, were not only perceived as a threat for economic

relations but also for the security in the whole region. The countries are sharpening their language

and on high-level talks those topics are always on the agenda. In June and October 2005 the

president of Keidanren addressed that problem in a press conference and criticized the visits to

Yasukuni shrine (Keidanren June 13th, October 24th 2005). Activities of Japanese businesses are

negatively influenced by these events, but also institutions like JETRO face obstacles to work in

China. For instance, business associations currently have problems getting their employees

accredited in China. For Japan, there is no supranational actor like the EU or any other significant

international institution. National governmental institutions thus remain as lobbying targets. Even

though one could observe a stronger “Asian-Integration” especially in South-East Asian with

ASEAN and the Free-Trade zone AFTA, China, Japan and South Korea are on the edge of this

integration process, albeit they are the most important economies. The need of business for a

5 leadership is one of the most important words in contemporary political talks in Japan. Due to a lack of it for

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stable political environment is at stake. Associations react to this threat by establishing more

contacts to civil society. This situation is also triggering direct lobbying of MNC whereas on a

national level, direct lobbying by large Japanese firms has been answered in-between support and

denial from the associations. What can be drawn from the data is that in the ICT sector the

shingikai round-tables are still the central bargaining point. Committee structure and shingikai

participation reveals the importance of an association. If the association has no expertise in a

specific issue, it will not be invited to a shingikai meeting. In such a situation, member firms step

in and articulate their interest directly. But this is restricted to specific and issue based cases.

> Insert Figure 1<

As pointed out above, in international negations such round-tables have lost their importance

since political influence is shrinking due to current Japanese foreign policy. This is a deadlock for

Japanese industrial actors which heavily relied on governmental contacts to realize their interests.

The dominance of governmental actors can be observed in the network diagram. It indicates the

vertical structure of the sector. The graph was produced with the aim of Visone, a computer

program facilitating network visualization (Brandes et al. 1999, Brandes/Wagner 2003)6. The

diagram also shows that the Ministry of Foreign Affairs is not recognized by the associations.

Only indirect relations exist towards MoFA. Relationships with international actors are therefore

established by METI, MIC and MoFA but only METI and MIC have close relationships to the

associations. An important task for associations in Japan will be establishment of non-

governmental relationships with foreign partners. Otherwise business associations will loose their

representation monopoly to independent direct-lobbying MNCs.

A relational approach takes into account the ties to other associations, governmental organisations

or international actors. In such a perspective, business associations are not only perceived within

the framework of their interests and resources, but also within the network relations in which they

are embedded. Network analysis allows us to take it for granted that actors are connected and

secondary connection matters for spreading of ideas over those hubs and knots. Complexity is

managed, where different actors and levels coordinate themselves through direct and indirect

information flows. Both intra-organisational and inter-associational are significant, because not all

resources are provided by one organisation itself. For instance, the distribution of information to a

wider public is EJF’s duty. On the population level, the associations form a network that can be

interpreted as an exchange network of strategic information to generate a common position to

almost 50 years.

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enter shingikai meetings. On a working level issues are freely discussed in official meetings with

the ministry. On more important questions, associations start preliminary consensus building.

JEITA can be identified through relational and survey data as the central actor.

In order to sketch the second network, I was asking in the interviews, which actor from

perspective of your association is the most important one. The measurement is rank prestige.

Large rank prestige indicates that an actor is chosen by a number other actors that also have

relatively high rank prestige or by others that have low or moderate rank prestige (Wassermann

and Faust 1994: 207). The visualization is helpful in the sense, that it demonstrates how the

associations perceive the sector in a hierarchical perspective. JEITA is dominating the sector, also

by its budget, employees and committees, followed by CIAJ and JISA7.

This correlates with the hard facts about organisational structure. Surprisingly, FMMC as a

comparatively small association which is completely government financed, has a high ranking.

Direct access to government, a good financial base, access to and distribution of information, and

the purpose together with EJF “to promote the advancement of Japan’s information and

communications infrastructure and its liability” (Interview with FMMC 2003) explains the high

ranking.

> Insert Figure 2 <

The graph in Figure 2 illustrates the hierarchical order in Japanese associational system. JEITA

serves as a sector peak association, which is also member in the umbrella association Keidanren.

Smaller associations are sending information to JEITA about the situation in their respective

domain. In return, they receive political support. This asymmetrical relationship can also be

observed by looking at the linkages. Only 4 relationships are symmetrical, where both

associations regard their exchange in the same intensity. Even though all associations are

important in their domain and are well accepted actors, it underlines the inherent hierarchical

structure.

Technological progress made it necessary to create new associations, but those were either

merged with already existing ones or they find themselves under the umbrella of a national

operating association. The life histories of the various organizations are depicted in a simplified

time lines in Figure 3.

6 Network analysis conducted with UCINET - Borgatti (2002)

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> Insert Figure 3 <

One reason for those mergers may be that firms operating in the ICT sector are mostly big players

and members in several associations. In such a position they are not interested in strong

competition. But even though there is a hierarchical structure, the density of information networks

is not very high. The division of labour is well developed. Information is circulating, but the

network is not overloaded with to much information. It is thus easier to find the right person via

the network than in a more dense system. This seems also in the interest of the bureaucracy,

which prefers long-lasting relationships to avoid conflicts and facilitate side-payments for

compromises.

It seems that hubs like JEITA and smaller associations such as JCTA create a balance between

centralization of information and stability on the one hand, and direct on-the-field information by

smaller associations on the other. This makes the whole network more searchable. To find short

paths to all actors is easier, even if they are not directly linked. Those shortest paths and

interactions are safeguarded by exchange of staff, which will be explained below in more detail.

Lobbying and access strategies of business associations are differentiated functions. Multiple

levels have been identified which vary in their strategies. Political information goes more from

top-down to independent self-regulating associations on the national level that also have

specialized member associations. This generates knowledge position to deliver the industry with

vital information on forthcoming regulation. A further function is consensus building for new

policies. The following section will indicate how all this knits together.

Inter-personal exchange - balancing conflict and knitting all together

Associations find themselves in a dilemma situation between demands of its members and the

state. Balancing those confronting interests is a major task for business associations. In this

respect the integration of the logics of membership and of influence in Japan seems to be based on

institutionalized personal interlocks. This form of vertical integration in Japan is characterised by

intense intertwinement and personal relations. Vertical integration points to the combination of

interweaving contacts between the three levels – state, associations, and member firms. The term

vertical integration emphasizes the interweaving of the system rather than its strict differentiation.

Page | 12 7 Budget, employees, committees: Jeita (33 Mio.$; 140; 120) CIAJ (1,9 Mio.$; 43; 70) JISA (7,4 Mio$; 25; 30)


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Therefore legitimization and representation is improved by direct involvement of representatives

from member-firms and ministerial agency. Business associations thus serve as inter-personal

platforms form interest harmonization.

> Insert Figure 4 <

Shukko

Shukko is a human resources management tool, to send employees temporarily to related

organisations. This fulfils several functions: early retirement, knowledge transfer, and training-on-

the-job. The significance of this instrument can be illustrated by the fact that out of 12

associations 10 had shukko staff. The average shukko employee in Japan is around 45 years old

and the lending period is around 3 years (Futagami et al. 1998). In case of the business

associations the picture looks a bit differently. The average shukko employee is younger and is

supposed to return to the member firm after the period of not longer then 5 years. Their prime

function is to provide up-to-date expertise and increasing the representation of member-firm

interest within the association. Shukko employees come predominantly from specific departments

within the member firm to serve on associational committees. Through this, much knowledge

flows into the association that afterwards can be used in shingikai negotiations or association

committees. Through this mechanism business interests are represented directly. Moreover, the

authority of the association increases, based on the direct representation of the industry. A further

advantage for business is the communication of the shukko colleagues amongst each other. In this

respect, an elitist circle may meet for three to five years, building up new relationships between

employees of competing firms. It also can be the nucleus of a future top management. Moreover,

tight relations with the ministries are constructed which are maintained by daily contacts during

their stay.

Whereas in other sectors even the managing directors are shukko employees, such arrangements

cannot be observed in the ICT sector. A reason for this may be that Japanese firms emphasize the

need of an independent top management which is able to mediate between the different shukko

that constitute the middle-management. The managing director is in almost all cases somebody

with long-term experience in the association or an ex-governmental employee (amakudari). This

is necessary because the compilation of shukko is biased for large firms coming from Tokyo and

therefore tension arises. First of all because of high moving costs and the expenses for employees

working outside of an organization for at least 3 years are only affordable for very large

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companies. The former employer either pays the full salary and the move, or the costs are divided

between the association and the business firms (JCTA interviews 2003). Associations also send

colleagues into the ministries (amaagari) (TCA interviews 2003). Such personal exchanges occur

in all types of associations - not only the peak associations like Keidanren or JEITA in the ICT

sector, but all business associations run such programs.

Amakudari

Associations and the political system are interconnected with another highly disputed medium of

interpersonal exchange, called amakudari. Amakudari means “descent from heaven” and

describes a situation when top bureaucrats get retired and start to work for corporations, state

agencies, or associations. Because of the seniority system, every year hundreds of bureaucrats

enter the labour market, mostly coming from METI, MIC, MOF and the Ministry of Construction.

The total figure of amakudari is estimated to amount between 70.000 and 80.000 (Moerke 2000).

Every second private firm benefits from an ex-bureaucrat on its “board of directors” (Moerke

1999: 227). Amakudari allows instant access to the bureaucracy, based on inter-personal relations.

This generates

“a group with similar policy orientations whose members sit on the boards of almost 30% of list private firms, 67% of the largest 100 private firms, occupied 40%-50% of board positions in powerful public corporations, and accounted for 20% of lower house LDP seats and 20% of cabinet positions provides an argument for locational influence.” Usui and Colignon (2001: 892)

Out of our twelve associations, five had amakudari as managing director8. Three were originally

from METI and two from MIC. After their retirement and a 2-year break, when they want to work

in the same sector, the ex-bureaucrats “descent from heaven” into corporate management, top

positions in governmental agencies and also in business associations. In this new position they are

compensated very well. During their duty at the ministry they were badly paid and worked at least

the first few years extremely hard and long. Due to these financial incentives and a privately

organised pension system, there are many that decide for this second career. Kim (1996)

combined the salary of a manager and a civil servant both in their thirties and found that the

difference is more then 10%. Amakudari then want to get compensated in their new positions.

8 The negative side of amakudari was stressed by Nakano (1998: 116): “First, on the side of the industry, the web of amakudari bureaucrats clearly hinders the emergence of real competition [...]. Second, on the government side, amakudari entails a severe loss in the autonomy and neutrality of the state. […] quite plainly, the picture of ‘public servants’, who self-servingly seek and distribute ‘spoils’ seriously damages public confidence in the administrative elite as well as the wider democratic polity.”

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Because of this the salary of such employees are much higher then of normal managing directors

(JCTA Interview 2003). At the system level, amakudari is a mechanism for direct access to

bureaucracy and very helpful in sectors which are under tight governmental regulation or are

engaged in international negotiations.

Jinmyaku – legitimacy and representation

Amakudari and shukko are institutionalised elements of the Japanese governance system. In

Figure 3 we observe the interconnections between firms, associations and the bureaucracy. The

connection ensures direct information and cooperation through personal contacts. Like the veins

in the human body the transport goes to the most diverse places. The whole system is supplied

with information based on this logic. Interdependence and personal exchange is moving the

discussion to a mutual understanding of each other. This does not imply that the participants do

not have different interests, but that their relevant preferences do not only reflect the own use, but

also that of the other participants (Scharpf 1997). Certainly, approaching a common goal is always

a process of harsh negotiations and an exchange of position papers, especially in Japan. Japanese

decision-making can not be described as a majority system, it is rather a system of endless

exchange of statements of facts, not opinions, that in the end not only a majority supports a given

decision, but almost everybody. In Japan, there will be no conflict on the day of the decision.

The natural conflict between effective influence and satisfying the members is harmonized due to

the fact that all actors participate with the highest legitimization and representation. Associations

are the centre of the negotiation processes, because they are also socialization platforms, serving

as meeting points for divergent interests. Even though the ministerial shingikai is the place of the

decision making and agenda-setting formally takes place by the shingikai secretary department,

pre-negotiation and collecting divergent interests and perspectives is carried out by associations

within their own structure. As Figure 4 shows, the employees in an association are assembled by

member-firm shukko, former ministerial officials’ amakudari and permanent and more

autonomous employed association staff. This leads to strong representation of all actors involved

and decisions gains high legitimacy. Such socialization processes enhance the chance of acting

towards a common goal, as Max Weber has phrased it: "dass das Handeln des Gehorchenden im

wesentlichen so abläuft, als ob er den Inhalt des Befehls um dessen selbst willen zur Maxime

seines Verhaltens gemacht habe" (Weber 1956: 123). Federations thus fulfil their function to

represent their member’s interests because member-firms have their shukko still on their payroll,

and amakudari enable them to get direct access to their ministries.

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Interestingly this tradition-based system contains an important element of innovation. Japanese

bureaucracy is on a steady move, because of the rotation system. Every two years the departments

are partly reassembled with new staff. Within the three classes of public employees, class one is

changing its workplace every two years. On the other side there are shukko employees, and even

the managing director who work on a temporary basis in the associations. An adjusting

mechanism exists within the logic of the system. Through exchange of staff, complexity is

reduced but not extinguished. It can be described as an institutional configuration to harmonize

conflict. Through independent managing directors, shukko middle-management and support-staff

permanent employed by the association they find ways of balancing interest-conflicts on different

levels through rules and procedures that can be shared by a vast majority. This creates a particular

Japanese way of interest representation in a long-term interest perspective, strategic thinking and

long-lasting consultation processes with short implementation phases. This also explains the low

density of the network structure.

Conclusion

Japanese business associations in ICT have crafted a system that harmonizes inherent conflicts

between government on the one hand and industry on the other. Complexity is structured by

exchange of staff and division of labour. Hence the components depend on each other and

function as long as everybody understands and agrees to the rules. The interconnection of actors

can be interpreted as a hindrance of organisational change, but also as an institution to ensure that

change is not merely a subsystem phenomenon. The interrelations enable a more systemic and

coherent process.

At the organizational level, associational interest domains are separated and monopolized.

Resources are mostly spent for membership investments whereas political consultation is shared

with other associations in the sector or with the peak association. Domestic regulation shifted to

high level councils and committees and associations try to influence them by relying on higher-

level associations to represent their interest. Most of the associations react on technological

changes by founding new member association or incorporating new competitors. The channels of

influence remain therefore the same, which is necessary because of strong inter-personal

exchange.

In the context of domestic political uncertainty however, new ways of business interest

representation have been developed. Small but significantly more important then in the 90s, the

influence of public opinion through media and information campaigning is regard as a new tool

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besides traditional governmental lobbying. However, lobbying is performed through bureaucracy.

Other paths into the legislation process e.g. incumbencies and prime minister can be neglected.

This happens either multilateral via committees or in bilateral consultation with departments of

the ministry.

When it comes to internationalization, Japanese business associations are trying to enforce their

interest through traditional governmental actors namely METI and MIC and negotiate with them

over umbrella associations, because they are tight together by personal relationships. Whereas in

Europe and the US a political centre facilitates international lobbying, the political centre of East

Asia is not defined and therefore more sensitive approaches and issue based initiatives are

necessary. And these sensitive approaches are missing. If the political situation does not chang, a

major shift to more non-governmental approaches can be forecasted. As the demands posed by the

two conflicting logics of influence and membership are not in balance. Moreover, individual firms

will start direct lobbying to governmental and non-governmental actors. Associations are reacting

on this threat by establishing non-governmental cooperation, but still they are relying mostly on

the traditional channels of influence supported by the inter-personal governance system. In

combining approaches and perspectives this paper showed that Japanese business associations are

embedded in a coherent system that functions in similar logics over system boundaries. It does not

prohibit change, but it has to be in the logic of the system9.

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9 In reference to the varieties of capitalism literature this is not an obstacle, it rather enforces growth then hinders it.


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Associations CIAJ Communications and Information network Association of Japan

ECOM Electronic Commerce Promotion Council of Japan

EJF E-Japan Forum

FMMC Foundation for Multi Media Communications

IAJ Internet Association Japan

JCTA Japan Cable Television Association

JAMTA Japan Mobile Telecommunication system Association

JBPA Japan Book Publisher Association

JEITA Japan Electronics and Information Technology Industries Association

JISA Japan Information Technology Services Industry Association

NAB National Association of Commercial Broadcasters

PressNet The Japan Newspaper Publishers&Editors Association

TCA Telecommunications Carriers Association

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