10 April 2009

The End of Japan's National Development and Reform Eras for Higher Education

An earlier version of this article ran last year at MR ZINE. Here is an updated and corrected version.

The End of Japan's National Development State for Higher Education
Charles Jannuzi, University of Fukui, Japan


Japan's vast higher education system has around 5,000 institutions, with the count still growing. This includes a tertiary level of about 1,300 government-certified, degree-awarding colleges and universities. Seven hundred forty-five of these are designated as 'daigaku'--a term which refers to any institution that has received government sanction to award four-year degrees equivalent to a baccalaureate. These four-year universities along with junior and technical colleges enroll close to three million undergraduate students, including about 120,000 foreign nationals, the vast majority of whom are from China.

One reason why Japan, despite a lack of population growth, is able to sustain such a huge system is that the national and local governments directly fund and indirectly subsidize higher education in multiple ways. However, the national government's central role and enormous fiscal commitment to the higher education system also places many requirements upon its beneficiaries. Here lies a central paradox in the neoliberally inspired reforms of higher education: the government asserts that universities need to establish 'local autonomy' but at the same time it asserts the right to have control over most aspects of the institutions, starting with the finances.

In the case of the private universities, the financial measures are more like 'carrot and stick'.  The national government does attempt to exert strong ministerial control over how institutions run degree programs and spend grants and research funding. In the case of the national universities, the government also oversees how they carry out research in science, technology, and engineering.

Any analysis of a detail sufficient to be informative about how public and private monies are used to fund higher education in Japan will reveal considerable disparities and complexities across the entire system of universities, institutes of technology, attached and associated research centers, two-year junior and technical colleges, and special training institutes. In the case of the universities, many of the differences in funding and financial base depend on the institution's traditional type and charter: national, public (prefectural or metropolitan), or private (non-profit).

Over a Decade of Economic, Fiscal and Budgetary Woes

Japan's government continues to struggle with the country's extended period of low economic growth which started in the early 1990s and is well into its second decade. The export-led recoveries of the past 7 years have been hit first by the disruptions of 9-11 and its aftermath and then the finance-driven US debacle of 2008. Because of regular and supplementary budgets designed to stimulate the stagnant domestic economy, there have been growing fiscal deficits and an accumulation of more and more public debt. Servicing the national debt takes up over 20% of the annual budget, and the value of bonds issued by the government every year exceeds that budget. In 2005 the proportion of national and local government debt to GDP was 170%, which is much worse, for example, than the EU's fiscal delinquent, Italy. All this has left the national government basically unable to respond with any large stimulus measures in 2008-9. On the bright side, unlike the US, Japan can draw on its large pool of personal and corporate savings to purchase the government bonds that underlie all this deficit spending (both directly and through placing deposits with savings institutions). It does not have to export its debt service requirements.

Since fiscal stimulus and monetary measures (such as very low interest rates) failed to counter a lack of growth and price deflation, some politicians and think tanks have called for an end to the 'national development state' that characterized much of Japan's political economy in the period 1945-2000. Instead they have proposed privatization of the public sectors of the political economy combined with liberalization of regulatory regimes (both of which already find precedent in the privatizations and liberalizations of the 1980s and 1990s). Their new Japan is to be a post-industrial, services-oriented, consumption-driven economy more in ideological harmony with its dominant ally and frequent bilateral trade disputant, the U.S. (since trade imbalances in Japan's favor have periodically led to protectionist measures from the US).

According to consumer price indexes in 2007-8, deflation had finally turned into inflation because of high oil and commodity prices, the results, in part, of an oil pricing bubble centered in NYC and London but which Japanese investing patterns most likely helped 'fuel' (because of the constant search to escape low returns on investments in Japan). Japan must import almost all of the mineral resources it uses in industrial production as well as 60% of its food in terms of caloric value. The moderate inflation of 2007-8 most likely did not translate into improved pricing power for domestic producers and retailers because when the oil futures bubble burst the global economy had already fallen into a calamitous state. Moderate inflation instead of deflation might have helped them to realize higher profits in the domestic market if they could have exerted more control over pricing, instead of relying on exports to more lucrative overseas markets, such as the U.S. Even the positive surge in GDP in 2007 was marred by two negative quarters and was more likely a deviation than any indicator of future steady growth.

Reformers Push for 'Improved' Higher Ed Sector

After Japan's financial and economic bubbles came unwound in the late 1980s and early 1990s, corporate leaders collectively warned the government that the private sector would be unwilling and unable to maintain such a large investment in basic scientific research and development. They also complained about what they perceived to be the low quality of research produced by Japan's university system, particularly its national universities. The national universities, in

turn, countered that the problem was a lack of government investment in new infrastructure in support of research at the institutions. So, from 1995 the national government has been implementing basic five-year national plans to increase public spending on R&D in order to make up for the decline in the private sector's research.

Much of the increased expenditure has been money pumped into the construction of new research centers (and high-rise buildings to house them) at the national universities and research institutes, with the goal of significantly expanding the types of research and the scale. At the same time, the national universities and research institutes have been forced to accept major changes in administration in order to use the funds to build new facilities as well as become eligible to more future funds that will be awarded on a competitive basis.

Somewhere between 8-10% of the annual national budget goes to the category of 'education and science.' Statements of exact amounts for the past decade vary by year, source, definitions, and exchange rates, but this 'super category' of expenditure can be estimated to be between US$ 60-80 billion year after year. That figure grows by tens of billions more if much of the national funding for medical research that is disbursed through the ministry of health is also included in the accounting.

Again depending upon definitions, all forms of education that are tertiary or other higher probably receive close to 40% of this, an amount that could be put at around $25 billion. The national government also subsidizes education and higher education through its revenue sharing and tax grants to local governments. Local governments nationwide spend about double the amount the national government does on school education, but higher education only receives about 7% of this. Much of that 7% goes to fund the country's 86 public (prefectural or metropolitan) universities. Total spending on higher education, both public and private, probably only accounts for about 1% of total GDP in Japan, making this sector of education enormous but under-funded, especially when compared to the United States.

Big Bang Reforms in Higher Education

The past two decades of reform in higher education have resulted in a blurring or even loss of old categories for classifying institutions. For example, publicly listed stock companies have formed a consortium to run the country's first for-profit university. Meanwhile, many former private (non-profit) junior colleges have upgraded to four-year universities in an attempt to keep enrollments up, as more and more young women graduating from high school choose to enter university instead of the traditional two-year college (which are largely now seen as irrelevant 'finishing schools').

The most important change, though, in reducing--if not eliminating--the government's role in making higher education equitable, affordable, and accessible in all regions of Japan, has been the 'privatization' and 'corporatization' of around two hundred national and public universities under P.M. Koizumi (2001-6). Unfortunately the consequences of these drastic alterations of the role of government in higher education in Japan could severely damage teaching and research at lower-ranked and smaller universities, especially ones in more remote regions. For example, many former national and public universities will eventually have to raise their exam, application, and tuition fees 30-50%, to levels more like those of private universities, in order to survive because they have no other way of realistically keeping their accounts in surplus.

The reforms could also undermine institutional autonomy and academic freedom. Former national and public types of universities had been collegiately and departmentally managed but almost completely dependent on annual disbursements of public funds in bloc grants. Although the faculty of these institutions were overall vehemently opposed to corporatization, they found themselves collectively unable to organize in any way that might have affected the outcomes of the reform process. Their much coveted life-long employment was actually not academic tenure as an American professor might recognize it but rather a benefit of civil servant status. However, as civil servants they were unable to organize industrial actions such as walk-outs and strikes. Now they have lost much of the protections and restrictions of their civil service status and can, in theory, go on strike, but the reforms that they opposed are already in effect by law, administrative structure, and implemented policies.

NUCs Are Born

With legislation enacted in October 2003, Japan's 87 national universities were re-established on 1 April 2004 as individual national university corporations (NUCs). The newborn NUCs are being weaned from annual bloc grants by a reduction of 1% per year. These formerly national institutions have enrollment quotas set by the national government which then determine the size of bloc grants disbursed annually in support of taught programs. Under the old system, this meant that the top university in Japan, the University of Tokyo, would receive the same amount per student from bloc grants as do the handful of tiny national teachers' colleges.

To help compensate for the formulaic reduction in annual bloc grants, NUCs are now allowed to raise their tuition fees by a maximum of 10%. Eventually the smaller NUCs that are unable to win the contest for competitive grants or fail to build large endowments may be permitted to charge rates that are similar to the more numerous private universities. Private institutions make up around 75% of higher education, and their average annual tuition fees of around US $7,400 are about 35% higher than those at national or public institutions.

In the next decade, NUCs must scramble to shift their finances to the business operations of their school corporations, deriving funding from the sort of mix that private universities and colleges have long had to subsist with--limited competitive government grants, higher fees (e.g., tuition, but also admission and entrance exam fees), donations, investments, joint ventures with other corporations, and revenue-earning business activities. Meanwhile, as the NUCs' guaranteed share of national education funding is reduced, elite private universities (such as Waseda and Keio) are sure to increase their efforts to compete for the national funds that are being offered to create an elite 30 world-class universities.

During the period 2004-6 the national and prefectural governments severed ownership ties to higher education in order to save money, though the covers of social and institutional reform were used to sell to the public this fundamental shift in the government's role. The biggest cost savings come about because the national and local layers of government will be able to jettison the obligations of lifetime employment for the hundreds of thousands of civil servants employed

in national and public higher education. Also, as the national and public universities were forced into corporate status, the national government, by acts of legislation, put more centralized administrations in charge of the institutions. The newly centralized, streamlined administrations of the university corporations are now in conflict with the previously well-entrenched collegiate and departmental styles of management that have characterized national and public higher education in Japan since 1947.

Former National Universities Tasked with Research

While bloc grants to the former national universities is being reduced by 1% per year, the national government is directing more money into competitive grants for research. A prominent goal has been to spend annually an amount of public funds at least equal to 1% of GDP on scientific research and development. Unlike the US, very little of this is earmarked for military purposes. This has benefited universities with research laboratories and centers, especially those within the national university system of 87 institutions with colleges of science, engineering, or medicine.

Japan's commitment to civilian scientific research matches in size the 1-1.5% of GDP that is annually put towards higher education in total from both public and private sources. To put the higher education figure in perspective, Japan's proportion is similar to most other OECD nations but is also less than half of what the US commits. But there are two ways of looking at that. Does this show that the US is the world's only superpower in higher education expenditure? Or does it show, just as with its health care sector, the US is a high-cost, irresponsible rogue state that does not fit with its OECD satellites?

Universities Must Accept External Evaluation

Japan's political economy is structured around a centralized national government, which attempts to exert control across the entire country from the top down to the lowest of government. The higher education sector is no exception. American-style accreditation has not yet been a major factor in standardization and quality assurance at universities and colleges. However, it soon could be because the national government has forced the former national and public universities into an external review process administered by four accrediting agencies.

Still, until the outcomes of the first external review process become clear next year and until a critical number of private institutions agree to join this process, the national government is the single source of 'legitimacy' for universities and colleges. Institutions can issue degrees, certificates, and diplomas only because the national government approves and certifies them. The government also sets enrollment quotas for all certified universities and colleges.

Academic Imperialism?

It is also uncertain whether or not American-style accreditation processes can validly assess Japanese institutions. First, in 1947-8 the American Occupation attempted to establish American-style accreditation when it controlled the reform of the entire education system of Japan. But the conservatives who have run the Japanese government since the end of the Occupation have always asserted control of the university system as an integral part of territorial sovereignty. Second, it should be pointed out that American-style accreditation is not understood well either inside or outside of Anglo-North America and is not inherently 'universal.' An American institution does not have the legal right to issue a valid degree because of its accreditation but rather because of its charter with its respective state government.

American-style accreditation does not even seem to have kept up with higher education in the US, let alone elsewhere. Is it really a model for export to countries where higher education is characterized by a strong relationships with a centralized national government? Can it assess new modes of delivery (such as modular study done through distance learning over the Internet)? These are questions that have not even been answered in the US.

Higher Fees, Less Affordable Higher Education

The national government has set the quarter of Japan's higher education sector that had been public down the path of corporatization and privatization in order to save money. Removing hundreds of thousands of civil servants from the national and local government's books will certainly make finances look better. But it is not going to do anything to help the long-term financial health of higher education. Parents and students will end up bearing the costs of the government's down-sizing of its civil servant ranks.

A 50% decline in the size of the cohorts of senior high graduates over the past decade and a half has meant that getting into most private universities and colleges is more a matter of money than measured academic achievement. Reduced annual bloc grants to the former national and public universities will most likely lead to a rise in fees closer to the level of private ones -- from around $4,500 now to $7,500 in the next five years. Family income, then, will become the single biggest factor in determining access to mass higher education -- if it is not already. Increases in fees may not be enough for smaller institutions and programs in more remote areas, so many locations will see the loss of schools, departments, courses of study through mergers and disestablishment.


Has Japan's government abandoned its central role in higher education? It is getting rid of the bloc grant system while at the same time drastically reducing the number of civil servants in lifetime employment. Such measures will make national and public universities less equitable and less accessible nationwide. This change will most likely have its most negative impact on taught programs at smaller national and public universities, typically ones in more remote and rural areas of Japan. As the national government drastically shifts out of subsidizing higher education, the short-term effect may make the government look more sound fiscally through the reduction of deficits. However, if the higher education system becomes more like the U.S.'s, the impact on the entire political economy could be wasteful and inflationary. The parallels between American laissez-faire inefficiency in both health care and higher education are striking.

But here emerges the strongest paradox: The very government that has been dead set on forcing liberalization onto national and public higher education under the catch phrase 'local autonomy' is now seeking to expand its regulatory authority over that sector. For example, the national government has now proposed setting specific curriculum guidelines for higher education in much the same way it already sets standards, specifies curricula, and approves textbooks for the elementary, middle, and high schools. At those levels of education, the government's 'standards' result in constant and unnecessary nationalist disputes with China, the Koreas, and even Okinawa (the center of a culturally distinct region of Japan) over the treatment of controversial history, such as the second world war or the ethno-genesis of the cultures of Japan relative to the rest of East Asia.

What remains to be seen is whether the centralized administrations of the university corporations can emerge independent enough to resist this new assertion of the right of the national government to control higher education. It seems more likely that the faculties, now fractured across tenured and non-tenured lines, will be unable to organize any serious opposition to the government or the university executives loyal to it. Attempts by some prestigious private universities to manage their own financial resources by investing Harvard-style at a time when multiple investment bubbles were coming undone in the US and UK have proven to be disastrous, with losses mounting to billions of dollars.

Moreover, 21st century Japan finds itself unable to respond to the finance-driven calamity that has overtaken the global economies. The long-ruling LDP looks to be losing its monopolistic grip on power; however, its main political rivals (to quite an extent made up of LDP dropouts) are even more wedded to the now- bankrupt ideas of deregulation, liberalization, marketization, and privatization. The Japan national development state seems to have committed ideological suicide in the form of reform overreach while never really escaping its monomaniacal, US-dominated approach to globalization.

For the world's number two political economy and the higher education system it created, this would seem to be not only the end of the national development state but the end of the neo-liberal era of 'reform for reform's sake' as well.

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