Has Agencification Succeeded in Public Sector Reform? Realities and Rhetoric in the Case of Japan

Abstract

The separation of implementation from policy has been diffused as ‘agencification’ around the world. It is considered an organisational reform based on new public management (NPM). The semi-autonomous public organisations executing policy are set up and are given a greater flexibility in operations in exchange for strengthening accountability for results. The central government of Japan also adopted the organisational reform in which agencies were called independent administrative institutions (IAIs). The reform intends not only to make the public service more transparent but to improve efficiency and quality of services through separating the implementing functions from the policy units, ministries and departments. It is assumed that flexibility in operations and result orientation would improve organisational performance through a feedback instrument of evaluating results into the budget other than an incentive mechanism. This article investigates whether the intended objectives have been accomplished. The specific focus is on the impacts on the budgetary system in terms of performance. The analysis shows that in Japanese agencies, ex-post performance information has not been fed into the budget process. Also the actual outcomes are explained by an incremental funding system, technical problems in measurement of results (performance measurement) and bureaucratic motivation through adopting a principal agent model.