Most of the recommendations emerging from the second, management-oriented reform
phase of the 1960s and 1970s were not implemented as intended, although the central
bureaucracy was somewhat reduced and several public corporations were merged.
Unfortunately, while curbs were placed on the size of the civil service at the national level, it
expanded at the local level and special public corporations soon appeared. With the
subsequent increase in local government personnel, justified on the grounds that numerous
functions had been delegated by the central government, it appeared that local governments
had assumed greater responsibility. But the reality was that their discretionary powers had
been reduced; political scientists of the day cynically spoke of a “new centralization,” not
unlike Muramatsu’s classic vertical control administration model (1997, 21).
Although the two oil crises of the 1970s resulted in a national deficit amounting to more
than 30 percent of the government’s annual revenue, the introduction of a sales or
consumption tax was strongly opposed by the business community, which sought fiscal
restructuring without a tax increase. Thus in 1981, at the start of the third, liberal conservative
phase of administrative reform, the Second Provisional Commission on Administrative
Reform was established to promote cutbacks in management and the devolution of power to
local government authorities. Both the Ministry of Finance and the Ministry of Home Affairs
cooperated in this effort, but progress was limited, even though the spending cuts and
increased privatization of the then-three biggest public corporations—the Japan National
Railway, Nippon Telegraph and Telephone Public Corporation, and Japan Tobacco and Salt
Public Corporation—have been claimed as major victories of the administrative reforms of the
day. In short, there was little change in central-local relations.