Preferred Citation: Woodall, Brian. Japan under Construction: Corruption, Politics, and Public Works. Berkeley, Calif: University of California Press, c1996 1996. http://ark.cdlib.org/ark:/13030/ft5489n9zf/ Japan Under Construction Corruption, Politics, and Public Works Brian Woodall UNIVERSITY OF CALIFORNIA PRESS Berkeley · Los Angeles · Oxford © 1996 The Regents of the University of California To Joyce, Leslie, and Melissa Preferred Citation: Woodall, Brian. Japan under Construction: Corruption, Politics, and Public Works. Berkeley, Calif: University of California Press, c1996 1996. http://ark.cdlib.org/ark:/13030/ft5489n9zf/ To Joyce, Leslie, and Melissa ― ix ― Acknowledgments In researching this book, I have drawn extensively on Japanese-language materials: newspaper reports, periodicals, industry association publications, and government documents. In addition, I conducted over one hundred open-ended interviews, primarily in 1987–1988 and in 1993–1994. Almost all of these interviews were conducted in Japanese, each lasting about an hour. I spoke with construction contractors, industry association officials, elected politicians and their aides, political party officials, government bureaucrats, newspaper reporters, and academics. Because of the highly sensitive, and sometimes sub rosa, nature of the subject matter, I cannot identify these individuals by name. For their willingness to answer sometimes naive questions and to assist in other ways, however, I owe a deep debt of gratitude. At the time I undertook this study, sensible people warned me about the quagmire that lay ahead. They alerted me to the difficulties of handling the shadowy actors engaged in the complex and secretive process of rigging bids on public works projects. Others warned me about dealings with the government bureaucrats and legislators who also animate the policymaking stage in this heretofore strictly "domestic" domain. To my pleasant surprise, I found these warnings unnecessary. Indeed, with assurances that my intention was to analyze objectively the political economy of Japanese public works, these supposedly shadowy characters proved enormously helpful and astonishingly forthright. Some of these individuals went to amazing lengths to ― x ― help me understand the rationale behind informal practices and behavior. For instance, more than five years before the general contractors scandal was splattered across the front page of every newspaper in Japan, self- confessed bid-riggers treated me to candid and enlightening accounts of Ibaraki Governor Takeuchi's "voice of heaven" in steering public works contracts to specific contractors. I am also grateful to several institutions and many individuals, both in Japan and the United States. Financial support for a fruitful year of fieldwork in Tokyo during 1987–1988 was provided in the form of a Japan Foundation Dissertation Fellowship. Various grants and fellowships from the University of California at Berkeley supported the completion of my dissertation, and a Faculty Research Grant form the University of California at Irvine and sundry forms of research support from Harvard University helped in the lenthy transition from dissertation to book. I made the final revisions to the manuscript in Japan during 1993–1994 while on a grant from the Abe Fellowship Program of the Social Science Research Council and the American Council of Learned Societies with funds provided by The Japan Foundation Center for Global Partnership. Institutional and infrastructural support on two separate occasions was generously provided by the Institute of Oriental Culture at the University of Tokyo under the wise and good-natured sponsorship of Inoguchi Takashi. Among the people who provided key introductions, suggestions, and comments on drafts are John Creighton Campbell, Robert L. Cutts, R. P. Dore, Bernard Grofman, Inoguchi Takashi, Chalmers Johnson, Kinjo Kunio, Kito Makoto, Edward Lascher, Murakawa Ichiro, Masumi Junnosuke Nagayama Keiichi, Gregory Noble, Okajima Shigeyuki, T. J. Pempel, Susan J. Pharr, Robert A. Scalapino, Thomas C. Smith, Ezra Vogel, Yakushiji Taizo, David Weinstein, and three anonymous reders for the University of California Press. Even though their generous suggestions were not always heeded, they made this a far better book than it could possibly have been otherwise. Dennis Encarnation kindly suggested the title. Valuable research assistance was provided by Toshiro Mochizuki, Emily McNeal, Kaye Yoshino, Matsui Mieko, and Steven Niwa. Kuniko Yamada McVey offered vital infastructural support through the Documentation Center on Contemporary Japan, one of Harvard University's underappre- ― xi ― ciated research gems. The editorial efforts of Joanna Lieberman, Kaye Yoshino, and Amy Einsohn did much to improve the quality and clarity of my prose. while Sheila Levine, Scott Norton, and Betsey Schenier guided the manuscript to publication. Finally, I am extremely grateful to Saito Hiuga and his wonderful family for the generosity and kindness they showered upon this American researcher and his family during the final stage of this book's completion. Joyce, my wife, I has served as an ever-dependable and challenging sounding board for innumerable partially baked ideas, and she has provided a constant stream of support and encouragement. My daughters, Leslie and Melissa, did their best best to keep me from completing this book before its time. ― xiii ― Note on Conventions Throughout the text, Japanese personal names are given in the common Japanese manner, with the surname followed by the given name. The only exception to this rule is made in the case of Japanese writers whose works are well known to Western readers. Most corporate names are given in the abbreviated form listed in the Japan Company Handbook , which includes all companies listed on the First and Second sections of the Tokyo, Osaka, and Nagoya stock exchanges, as well as many local market, over-the-counter, and unlisted companies. Macron marks are used except in cases where the word in question is widely familiar to Western readers (e.g., Tokyo and Osaka, instead of Tokyo and Osaka). ― 1 ― Introduction For three decades, U.S.-Japanese relations have been marked by a succession of disputes over Japanese exports of textiles, steel, automobiles, machine tools, semiconductors, flat panel display monitors, and consumer electronics. Japan's potential for overseas conquests in pharmaceuticals, biotechnology, and high-definition television has exacerbated these tensions, as has Japan's unwillingness to open its protected domestic markets in agricultural commodities, telecommunications equipment, and forestry products. Over the years, of course, the United States has issued various demands fur "fairness" and "reciprocity." Nonetheless, it came as quite a surprise to many in 1986 when the United States began to mount an extraordinary effort to force Japan to open its domestic construction market to foreign bidders. To be sure, Japan's domestic construction market was the largest in the world (valued at about ¥53.6 trillion a year), and it was expanding at an unparalleled rate. But given the size of the mounting bilateral trade imbalance—some $50 billion annually, about half of the total U.S. trade deficit—one would have expected Washington to focus attention on policies regarding automobiles and automobile parts, which accounted for about two- thirds of the trade imbalance, or perhaps on office machinery, the second- largest component of Japan's exports to the United States. The sudden burst of enthusiasm for penetrating Japan's domestic construction market was even more surprising in light the U.S construction industry's seeming disinterest in Japan and the ignominious withdrawal, some twenty years earlier, ― 2 ― of the last American firm to have been awarded a major Japanese public works contract.[1] No one was more startled by the uproar than Japan's public works bureaucrats, who never would have imagined that domestic public works would occupy center stage in a major trade dispute with the United States. To their dismay, the dispute soon broadened, as Canada, South Korea, France, Britain, and China all weighed in, pressing their own demands for access to the Japanese construction market. Eventually, the threat of additional U.S. retaliation—in the wake of a Congressional bill that excluded Japanese firms from selling goods and services for federally funded public works—compelled Tokyo to compromise, but not before the protracted conflict had come close to humiliating Japan's newly elected prime minister and his party. (For a chronology of these events, see Appendix A.) The first question raised by these events is why the Japanese government allowed the apparently trivial issue of construction bidding procedures to jeopardize its continued access to vital U.S. markets, the destination of one- third of Japan's vast export product. As we will see, Japan's seemingly irrational economic behavior in this affair was, in fact, politically rational. For the pressures to open the domestic construction market threatened the interests of three sets of powerful political actors: construction contractors, public works bureaucrats, and career politicians, especially members of the Liberal Democratic Party (LDP). Naturally, the construction contractors opposed any market-opening measures that would have provoked additional uncertainty in an already volatile industry. But the U.S. demands also threatened to undermine the occupational mission and postretirement prospects