Indeed, Keio alumni (students and faculty) have led the assault on Japan’s postwar development model based on regulated markets and big government. They inspired rule changes that opened Japan’s cozy banks and brokerages to foreign competition in the late 1990s, and since last year they’ve led Prime Minister Koizumi’s crusade to slash pork-barrel spending on roads, bridges and dams. They’re also leading a revolution away from the dark-suited Tokyo U style, including in their ranks a rumpled former professor turned talk-show celebrity, and a surfer. “Whenever something new happens there are Keio people in the background,” says Stephen Church of Analytica Financial Research in Tokyo. “They’re the antiparty group.”
Japan’s reform debate has become something of a crosstown college rivalry. Until recently the perennial champs resided at Tokyo University, or Todai, an exclusive training ground for bureaucrats established in 1877 to manufacture officials for the new Meiji state. The school internalized 19th-century European theory (heavily “Prussian, Marxist and authoritarian,” says Church). And Japan’s defeat in World War II did little to update that perspective. Todai graduates engineered Japan’s postwar manufacturing boom and by 1990 held most career-track posts in the all-powerful Ministry of Finance. Traditionally, Todai’s springboard to stardom was its law, not its economics, department. “It is an important difference,” writes Peter Hartcher, author of an exhaustive study of the ministry. “The economics graduate is far more likely to see regulation as a hindrance to be removed rather than an achievement to be preserved.”
Once honored as modern-day samurai, Japan’s bureaucrats have fallen into disrepute, dragging Todai down with them. They’re blamed for the country’s protracted recession and, increasingly, are viewed as corrupt, self-serving or (at best) inept. They’re also still jealously attached to the old school, dismissive of the upstart. Says one senior bureaucrat at the Ministry of Finance: “Among a hundred students who passed both entrance exams, maybe one would choose Keio over Todai.”
Maybe. But it’s Keio that harbors the youthful vigor. Its tradition of independence goes back to founder Yukichi Fukuzawa, a Meiji-era Renaissance man who implored Japan to modernize by studying the West. By the 1980s, Keio scholars were following the rise of neoclassical economics in the United States and Britain. As Japan’s asset bubble began to deflate, they embraced the ideas of the Reagan/Thatcher revolution: smaller government, freer markets and a painful industrial shakeout. Today, Koizumi’s appointments merely acknowledge Keio’s growing reputation as an “academic hot pot” of fresh thinking, says Aegi Hosoda, dean of the university’s economics department.
Keio began its reform drive on campus. It stopped selecting professors exclusively from the ranks of its former graduates and started poaching talent from other schools. Several outside hires proved to be local equivalents of Milton Friedman or Paul Krugman: serious thinkers with a flair for TV talk shows and op-ed pages. One of them, Heizo Takenaka, is now Koizumi’s chief economic guru. Wrinkled and professorial, he joined Keio’s teaching staff 10 years ago and quickly proved a popular talk-show fixture. As minister of Economic and Fiscal Policy, he leads the “hard landing” camp in the cabinet; his group favors deep cuts in public-works spending and opposes government efforts to prop up ailing sectors of the economy. His key ally is Keio grad Nobuteru Ishihara, minister of Administrative and Regulatory Reform, a telegenic young politician who loves surfing and dresses in leather bomber jackets. Together, these two ministers pushed through a plan to radically downsize Japan’s huge public-sector corporations, builders of the local public-works projects that keep many LDP lawmakers in office.
Keio reformers first came to the fore in 1996, when Prime Minister (and Keio man) Ryutaro Hashimoto took power on a pledge to revive Japan’s sputtering economy. Hashimoto invited Keio scholars to give him Sunday lectures. One of his tutors, Kazuhito Ikeo, inspired the “big bang” reform package that opened Japan’s inefficient capital markets in the late 1990s and changed accounting rules to make it harder for banks to mask bad loans. Hashimoto faltered when, on advice from Keio economists, he ordered a painful tax hike that triggered a popular revolt and cost him the prime ministry.
In response to Keio, Todai alumni invariably argue that “Western” solutions won’t work in Japan. Increasingly, Todai is seen as part of the problem. Last October, in a book titled “Have Todai Students Become Stupid?” political commentator and former Todai lecturer Takashi Tachibana declared the school “overvalued by Japanese society.” He described classrooms full of students unable to formulate their own opinions but deft at regurgitating his lessons. Many, he said, harbored an arrogance born of the “tasty bread already promised to them,” meaning career-track government jobs upon graduation.
Keio doesn’t share this image as a mill for making junior apparatchiks. The school’s reputation for intellectual integrity is showing itself anew in Keio critiques of Koizumi’s first year as prime minister. Recently, one of Keio’s celebrity lecturers, former finance vice minister Eisuke Sakakibara, blasted Koizumi’s reforms as “lukewarm” and said his administration had “chickened out” on his plan to force major banks to write down nonperforming loans. Intramural squabbling won’t diminish Keio’s reputation. According to Hosoda, the Keio dean, many Todai-trained bureaucrats have come to respect their crosstown rival. “Lots of them are sending their sons and daughters to our school,” he says. A vote for change if ever there was one.
