Political Realignment and Policy Change in the Coordinated Economy

The purpose of this paper is to analyse the policy changes which intended to liberalize the coordinated economy through the Japanese case. It explores why and how some policies which substantially promote restructuring the system of coordinated economy were made by using the political opportunity structure theory. The 'Varieties of Capitalism (VoC)' theory distinguishes the Coordinated Market Economies (CMEs) including continental European countries and Japan from the Liberal Market Economies (LMEs) (Hall and Soskice 2001). The VoC theory underscores the durability of market economies which are the nexus of formal and informal institutions. In recent years, however, these institutions in some advanced economies classified into the CMEs, such as Germany and Denmark, have been reformed to liberalize the market economies and strengthen competitive environments like the LMEs (Jackson and Thelen 2015; Thelen 2014). Likewise, the Japanese coordinated economy has experienced some reforms in policy fields such as corporate governance and competition law since the 1990s (Yamamura and Streeck 2003; Vogel 2019). Existing literature that focuses on institutional reforms and liberalizations in advanced economies is classified into tow strands: idea- and interest-centred approaches. The former highlights the effect of an economic idea, especially the penetration of neoliberalism (Vitols 2013; Schmidt 2013; Schnyder 2010). The latter underscores party politics and political coalition or organized business power (Cioffi 2010; Culpepper 2011; Gourevitch and Shinn 2005). In contrast to these previous studies, this paper points out that institution, more specifically political opportunity structure matters. It applies the political opportunity structure (POS) theory which establishes a position as one of the most popular frameworks in social movement studies to policy analysis (Eisinger 1973; Kitschelt 1986; McAdam 1999; Tarrow 2011). The main claim of the POS theory is that open political structure contributes to success of the social movement and closed one impedes it. Following the basic idea, this paper formulates a hypothesis that interest and idea of a “challenger” including (non-)organized policy actor inside and outside government will be realised in public policy if the POS is opened. The reverse is also true. The POS encompasses formal aspects including political institutions and state capacities as well as informal ones such as elite alignment, salience on media, and so on. This paper highlights political and administrative institutions as the POS. In Japan, political institutions are reformed to change from “consensus democracy” to “majoritarian democracy” in the 1990s and 2000s (Lijphart 2012). The Lower House electoral system based on multimember districts and single nontransferable vote are shifted into mixed system consisted of single-member districts and proportional representation in 1994. The administrative system and ministries also were transformed in 2001. This shift intended to reshape the Japanese political and administrative system and introduce a Westminster model (Estévez-Abe 2008). It indeed centralised political and administrative power to a prime minister and the core executive. This paper shows that these institutional reforms opened the political opportunities structure and resulted in the policy changes with the intention to transform the Japanese coordinated economy.