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Governments confront difficult political choices when they must determine how to balance their spending. But what would happen if a government found a means of spending without taxation? In this book, Gene Park demonstrates how the Japanese government established and mobilized an enormous off-budget spending system, the Fiscal Investment Loan Program (FILP), which drew on postal savings, public pensions, and other funds to pay for its priorities and reduce demands on the budget.

Although other governments have operated systems of policy finance, none have approached the Japanese system in size or been structured to deliberately relieve pressure on the budget so that it could remain balanced and low-tax. Park lays out a compelling puzzle leading us to ask why and how the Japanese created this system, why and how it was allowed to grow to such immense size, and then why it has begun to be reformed and wound down.

-Leonard Schoppa, University of Virginia

[P]rovides a compelling rationale for FILP's importance in Japan's postwar political economy. . . . [N]o one has brought to bear the sustained focus, historical scope, or analytical rigor that Gene Park has with this book.

-William W. Grimes, Boston University

Park's book argues that this system underwrote a distinctive postwar political bargain, one that eschewed the rise of the welfare state and Keynesianism, but that also came with long-term political and economic costs that continue to this day. By drawing attention to FILP, this study resolves key debates in Japanese politics and also makes a larger point about public finance, demonstrating that governments can finance their activities not only through taxes but also through financial mechanisms to allocate credit and investment. Such "policy finance" is an important but often overlooked form of public finance that can change the political calculus of government fiscal choices.


Gene Park is an assistant professor in the Department of Political Science at Baruch College. He has also been a Shorenstein Fellow at the Walter H. Shorenstein Asia-Pacific Research Center, and a visiting scholar at the Japanese Ministry of Finance's Policy Research Institute. He was also the receipient of a Fulbright IIE fellowship. He has a PhD in political science for the University of California, Berkeley.

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On February 23, John Roos, U.S. Ambassador to Japan, Robert Hormats, U.S. Under Secretary of State, and Norihiko Ishiguro, Director-General of Japan's Ministry of Economy, Trade, and Industry, will join the Walter H. Shorenstein Asia-Pacific Research Center's Michael H. Armacost, William F. Miller, and Robert Eberhart, as well as prominent Japanese and American business leaders, academic experts, and government officials, will meet at Stanford for a roundtable dialogue on entrepreneurship and innovation in Japan. Larry Sonsini, Chairman of Wilson, Sonsini, Goodrich, and Rosati, will give the keynote address.

After the first Dialogue on Japanese Entrepreneurship held in February 2010, representatives from the U.S. and Japanese governments met in Tokyo on May 27, 2010, to consider ways to foster an environment that would promote new businesses and job creation. Utilizing data from the Stanford Project on Japanese Entrepreneurship (STAJE) and the American Chamber of Commerce of Japan, business representatives shared their views with officials of both governments on policies and practices that would encourage such growth. On November 13, 2010, the White House and the Prime Minister's Office formally launched the U.S.-Japan Dialogue to Promote Innovation, Entrepreneurship, and Job Creation, elevating it to a policy-level dialogue, with SPRIE-STAJE providing academic expertise. The February 23 event aims to build on the conversation about how to foster innovation through entrepreneurship.

The event will consist of a roundtable discussion on policies and ecologies to promote entrepreneurship and job growth. Following the keynote address, a panel discussion on smart grid technologies will take place with representatives from Cisco Systems, Toshiba, GE, Panasonic, Toyota, IBM, and officials of the U.S. and Japanese governments.

This event will be held closed session to facilitate more open dialogue and will involve Stanford students and scholars, business leaders, and government officials.

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U.S. Ambassador to Japan John Roos, speaking at a STAJE event in November 2010.
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How do you effectively advise senior-level policymakers when a political crisis emerges? Stanford students taking the course U.S. Policy Towards Northeast Asia (IPS 244), sponsored by the Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC), are learning and putting into practice these very skills. Over the ten weeks of the 2011 winter quarter, students will learn about contemporary U.S. policy towards Japan, China, and Korea, and about how to write and present policy-style memoranda to top-level government decision makers. They will also take part in an in-class simulation of a Six-Party meeting to negotiate North Korea's nuclear program.

Students cover a great deal of content in a short amount of time. "Ten weeks goes by pretty quickly," says course leader Michael H. Armacost, the Shorenstein Fellow at FSI and a former U.S. Ambassador to Japan and the Philippines. The real-world approach to the course is similar to what you would find in a professional international relations school, he explains. In previous years, Armacost has taught the course both alone and as part of a team with other former U.S. senior-level policy officials. The current course has been offered in the Ford Dorsey Program in International Policy Studies (IPS) for the last three years. It is co-taught with Daniel C. Sneider, the associate director for research at Shorenstein APARC and a former long-time foreign correspondent in Asia; David Straub, the associate director of the Stanford Korean Studies Program and a former U.S. senior foreign service officer; and Thomas Fingar, the Oksenberg/Rohlen Distinguished Fellow at FSI and a former Chairman of the National Intelligence Council.

In addition to providing a strong understanding of the U.S. foreign policymaking process, each week of the course is dedicated to a different aspect of the relationship of the United States with the countries of Northeast Asia, including Taiwan and the Russian Federation. Students will closely examine the history and dynamics between the great powers of the region; U.S. security relations with Japan and China; East Asian regionalism; democratization in South Korea; the North Korean nuclear crisis; and economics and human rights in China.

Although the case studies that the policy-writing exercises are based upon are hypothetical, they are closely tied to real-world issues and events. A previous year's case study dealt with tensions between China and Japan over rival claims to the Senkaku/Diaoyu Islands, anticipating the September 2010 conflict between Japan and China in the waters around these islands. The simulation exercise, another highlight of the course when students have the opportunity to collaborate with one another, is also closely tied to current regional events.

In addition to the rich content of the course and the expertise of its instructors, the diverse background of the students lends itself to the overall learning experience. Some of the students are pursuing a master's degree through IPS or the Center for East Asian Studies, while others come from the Graduate School of Business and various other Stanford units. Each year, there are always a few undergraduate students, who Armacost describes as "very strong," as well as early-career foreign affairs and military officials from Northeast Asia.

Interest in the course remains strong each year, and Shorenstein APARC will continue to offer it in order to provide solid, real-world policy training for the next generation of scholars and government officials.

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Michael H. Armacost, course leader for IPS 244, talks to students about the history of U.S. policy towards Northeast Asia.
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The Japanese economy has been stagnating for almost two decades. During this event, Takeo Hoshi will describe the findings of a report that he co-authored with Anil Kashyap of the Booth School of Business at the University of Chicago, the National Bureau of Economic Research (NBER), and the Federal Reserve Bank of Chicago. In the report, Hoshi and Kashyap utilized the neoclassical growth model in order to try to explain the causes of this stagnation and to identify policy choices that might help restore growth. Their focus was intentionally on longer-term issues, rather than the immediate challenges that are associated with the fallout from the global recession.

Looking at financial globalization and the collapse of the fixed exchange rate regime they found that by the end of the 1970s Japan could not rely on an undervalued currency to boost its exports. It had to rearrange its production system and other economic institutions to cope with globalization to reduce its reliance on external demand.

Japan's population structure was shifting and becoming increasingly elderly. Aging meant slower growth of the labor force. Declining fertility combined with aging eventually reduced the domestic saving that supported economic expansion during the rapid economic growth period.

Finally, monetary and fiscal policy performed poorly. The Bank of Japan consistently undershot its inflation objective. The government pursued massive fiscal stimulus during the 1990s and 2000s, so much so that Japan went from having the best debt position amongst advanced economies to the worst.

Hoshi is a Pacific Economic Cooperation Professor in international economic relations at the Graduate School of International Relations and Pacific Studies at the University of California, San Diego. He is also a research associate at the Tokyo Center for Economic Research, and is on the board of directors for Union Bank. His major research area is the study of the financial aspects of the Japanese economy, especially corporate finance and governance.

He is a recipient of the 2011 Reischauer International Education award, the 2006 Enjoji Jiro Memorial Prize, and the 2005 JEA-Nakahara Prize. Among his many publications is Corporate Financing and Governance in Japan: The Road to the Future (MIT Press, 2001), which received the Nikkei Award for the Best Economics Books in 2002.

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Former Henri H. and Tomoye Takahashi Senior Fellow in Japanese Studies at the Freeman Spogli Institute for International Studies
Former Professor, by courtesy, of Finance at the Graduate School of Business
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Takeo Hoshi was Henri and Tomoye Takahashi Senior Fellow at the Freeman Spogli Institute for International Studies (FSI), Professor of Finance (by courtesy) at the Graduate School of Business, and Director of the Japan Program at the Shorenstein Asia-Pacific Research Center (APARC), all at Stanford University. He served in these roles until August 2019.

Before he joined Stanford in 2012, he was Pacific Economic Cooperation Professor in International Economic Relations at the Graduate School of International Relations and Pacific Studies (IR/PS) at University of California, San Diego (UCSD), where he conducted research and taught since 1988.

Hoshi is also Visiting Scholar at Federal Reserve Bank of San Francisco, Research Associate at the National Bureau of Economic Research (NBER) and at the Tokyo Center for Economic Research (TCER), and Senior Fellow at the Asian Bureau of Finance and Economic Research (ABFER). His main research interest includes corporate finance, banking, monetary policy and the Japanese economy.

He received 2015 Japanese Bankers Academic Research Promotion Foundation Award, 2011 Reischauer International Education Award of Japan Society of San Diego and Tijuana, 2006 Enjoji Jiro Memorial Prize of Nihon Keizai Shimbun-sha, and 2005 Japan Economic Association-Nakahara Prize.  His book titled Corporate Financing and Governance in Japan: The Road to the Future (MIT Press, 2001) co-authored with Anil Kashyap (Booth School of Business, University of Chicago) received the Nikkei Award for the Best Economics Books in 2002.  Other publications include “Will the U.S. and Europe Avoid a Lost Decade?  Lessons from Japan’s Post Crisis Experience” (Joint with Anil K Kashyap), IMF Economic Review, 2015, “Japan’s Financial Regulatory Responses to the Global Financial Crisis” (Joint with Kimie Harada, Masami Imai, Satoshi Koibuchi, and Ayako Yasuda), Journal of Financial Economic Policy, 2015, “Defying Gravity: Can Japanese sovereign debt continue to increase without a crisis?” (Joint with Takatoshi Ito) Economic Policy, 2014, “Will the U.S. Bank Recapitalization Succeed? Eight Lessons from Japan” (with Anil Kashyap), Journal of Financial Economics, 2010, and “Zombie Lending and Depressed Restructuring in Japan” (Joint with Ricardo Caballero and Anil Kashyap), American Economic Review, December 2008.

Hoshi received his B.A. in Social Sciences from the University of Tokyo in 1983, and a Ph.D. in Economics from the Massachusetts Institute of Technology in 1988.

Former Director of the Japan Program at the Shorenstein Asia-Pacific Research Center
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Takeo Hoshi Pacific Economic Cooperation Professor in International Economic Relations Speaker Graduate School of International Relations and Pacific Studies, University of California, San Diego
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The countries of Northeast Asia and the United States share a twenty-year legacy of war, beginning with the outbreak of the Sino-Japanese War in 1931 until the formal conclusion of the Pacific War in 1951. Historical memories of this period are often conflicting, as reflected by the master narratives presented in textbooks, and serve to impede effective, lasting reconciliation. In its groundbreaking new publication History Textbooks and the Wars in Asia: Divided Memories (Routledge Press, 2011), edited by Gi-Wook Shin and Daniel C. Sneider, the Walter H. Shorenstein Asia-Pacific Research Center examines the evolution of master narratives in China, Japan, South Korea, Taiwan, and the United States in an effort to help lay the foundation for eventual historical reconciliation in the region. This is the first in a series of three books dealing with wartime memories and reconciliation.
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Except for specialists working on the period, the Korean Empire's (1897–1910) project to develop Pyongyang as the "Western Capital" (Sŏgyŏng) is not all that well known even among Korea historians. From the perspective of international relations, there can be no doubt that the Russo-Japanese War sealed independent Korea’s fate. All the same, in the last two decades or so, Korea’s own effort toward modernization has received more attention among historians who no longer dismiss the history of the Korean Empire as the tail end of the Chosŏn Dynasty. For sure, the official rhetoric that empires old and new have had two capitals conceals imperial Korea’s self-perceptions about its place in the civilized world of the past, the present, and the future. Moreover, scrutiny of the circumstances in which the government undertook the project before it came to a halt allows insight into the Korean Empire’s understanding of geopolitical realities at the time.

Eugene Y. Park is the Korea Foundation Associate Professor in History in the School of Arts and Sciences at the University of Pennsylvania. He is also the director of Penn's Korean Studies Program. Dr. Park completed his doctorate in East Asian languages and civilizations at Harvard in 1999 and has received numerous research grants and fellowships, including: a 2007–08 Seoul National University Kyujanggak Institute for Korean Studies Fellowship; a 2003–04 Korea Foundation Advanced Research Grant; a 1999–2000 Yale University Council on East Asian Studies Postdoctoral Fellowship; a 1996–97 Foreign Language and Area Studies Fellowship; and a 1995–96 Fulbright Fellowship. His research interests focus on the sociopolitical history of early modern Korea, and his current work examines the chungin ("middle people") to address questions of modernity, identities, and agency. His book, Between Dreams and Reality: The Military Examination in Late Chosŏn Korea, 1600–1894, was published by the Harvard University Asia Center in 2007. He has published chapters and articles in venues such as Journal of Social History and Yŏksa wa hyŏnsil.

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East Asia's demographic landscape is rapidly changing and comparative academic research is crucial to help guide well-informed decisions in the many policy areas that are affected, such as security, economics, and immigration. From January 20 to 21, the Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC) gathered subject experts from numerous fields for two days of lively and productive presentations and dialogue to help identify key research issues and questions for its new, three-year research initiative on this significant subject.

Shorenstein APARC held a public panel discussion on January 20, featuring eight scholars from across the United States and Asia. The issue of aging featured prominently in their presentations, as did fertility rates and immigration. A full audio recording of the panel discussion is available on the Shorenstein APARC website and summaries of the presentations follow below. A closed-session workshop took place the next day, the discussions from which will serve as the foundation for future programs and publications related to the research initiative.

January 20 Panel Discussion Presentations

The link between demography and security is more tenuous in East Asia than in other parts of the world, suggested Brian Nichiporuk, a political scientist with the RAND Corporation. Nichiporuk discussed possible policy responses to demographic change in Japan, North and South Korea, the Russian Federation, and China. He suggested, for example, that Japan's new maritime security focus is related to perceived economic and political competition from China, which is magnified by its domestic demographic concerns.

Michael Sutton, a visiting fellow with the East-West Center in Washington, DC, stated that Japan's aging population would remain a major policy issue for the next 20–30 years. He emphasized that the policy challenges posed by this phenomena are complicated by the role that the United States plays in the regional security structure, and also by the growing dominance of China and the history that it shares with Japan. Nonetheless, maintained Sutton, despite the obvious challenges, it is possible for Japan and the other countries facing this demographic issue to successfully adapt.

Social attitudes and policy in East Asia do not favor immigration, as they do in European countries such as Spain and Italy, suggested John Skrentny, director of the Center for Comparative Immigration Studies at the University of California, San Diego. Skrentny focused his talk on low-skill immigrant workers in South Korea and Japan, noting that these two countries, which began receiving workers in the 1970s and 1980s, commonly associate immigrants with social disruption. According to Skrentny, immigration policy is often tied to economics and tends to favor co-ethnic workers.

Chong-En Bai
, chair of the Department of Economics at Tsinghua University, discussed numerous economic policy implications and responses related to demographic change in China. He noted areas where successful policies have been adopted but challenges still remain, including savings and investment, labor and urbanization, pension, healthcare, and long-term care. Bai described, for example, how the children of rural migrants now have access to urban schools, but that they still face the logistical challenge of having to travel back to their home provinces to take college entrance examinations.

Examining demographic change and health improvements is essential to understanding the significant economic growth in East Asia over the past several decades, emphasized David Bloom, chair of the Department of Global Health and Population at Harvard University. He noted the success of East Asian countries in lowering their infant mortality rates through investment in public health improvements, such as sanitation and vaccination. Bloom suggested that these and other past successful policy mechanisms have run their course, and that it is now imperative to find ways to address the region's key demographic issue of aging.

Naohiro Ogawa, director of the Population Research Institute at Nihon University, described findings from the National Transfer Accounts (NTA) project, an international effort to gauge economic flows across age groups. He discussed the pressure placed on Japan's working-age population by the increasing cost of caring for children and the elderly, as well as the challenges and possibilities related to having a large, healthy, aging population. Ogawa noted that institutional responses to demographic change, such as increasing the retirement age and adopting more open immigration policy, have moved slowly in Japan.

Andrew Mason, a professor of economics at the University of Hawai'i, Manoa, also utilized NTA data to make predictions about East Asia's economic future. He proposed that the amount of human capital, such as the money that parents spend on the education of their children, is likely to grow quite rapidly. He also suggested that financial wealth in East Asia is likely to increase significantly as the populations of its countries age. Finally, he suggested that the current trend of regional economic growth would continue, although at a somewhat steadier rate. Mason qualified his predictions with questions, such as whether the return on investment in education would be commensurate with what is spent.

James Raymo, a professor of sociology at the University of Wisconsin-Madison, described a wide array of findings about changes in fertility and family structure in Japan and their connections, as well as possible policy implications. Raymo discussed trends in marriage, childbearing, divorce, non-marital cohabitation, and the participation of women in the labor force. He pointed to gaps in current research, and suggested possible linkages to research on other demographic trends, such as Japan's aging population.

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China is becoming increasingly urbanized as the government adopts policies to encourage migration from the countryside. Rural migrant families face challenges amidst the new urban opportunities.
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Using research from the SPRIE-Project on Japanese Entrepreneurship (SPRIE-STAJE), representatives from the U.S. and Japanese governments met initially in Tokyo on May 27, 2010 to consider ways to foster an environment to promote new businesses and job creation. On November 13, 2010, the White House and the Prime Minister's Office formally launched the U.S.-Japan Dialogue to Promote Innovation, Entrepreneurship and Job Creation, elevating it to a policy-level dialogue in cooperation with SPRIE-STAJE. This dialogue aims to build on the conversation among Stanford's academic experts, prominent business people, and government officials about how to foster innovation through entrepreneurship. A roundtable discussion features the importance of innovation and entrepreneurship with leading Stanford academic experts, government officials, and business leaders. This will be followed by a panel discussion by experts from the U.S. and Japan on collaborative opportunities in pioneering smart grids for energy production, transmission, and distribution.

Featured speakers include:

  • John Roos, US Ambassador to Japan
  • Robert Hormats, Under Secretary for Economic, Energy and Agricultural Affairs, U.S. Department of State
  • William Miller, Co-Director, SPRIE, Shorenstein Asia-Pacific Research Center, Stanford Univeristy
  • Michael Armacost, Shorenstein Distinguished Fellow, Shorenstein Asia-Pacific Research Center, Stanford University and Former Ambassador to Japan
  • Norihiko Ishiguro, Director General, Ministry of Economy, Trade and Industry
  • Larry W. Sonsini, Chairman, Wilson Sonsini Goodrich & Rosati
  • Daniel I. Okimoto, Professor Emeritus, Department of Political Science & Director Emeritus, Shorenstein Asia-Pacific Research Center, Stanford University
  • Kathleen Eisenhardt, Professor, School of Engineering, Stanford University
  • Robert Eberhart, SPRIE Researcher, SPRIE, Shorenstsein Asia-Pacific Research Center, Stanford Univeristy
  • Nobuyori Kodaira, Senior Managing Director, Toyota Motor Corporation,
  • Donald Wood, Managing Director, Draper Fisher Jurvetson
  • Richard Dasher, Director, US-Asia Technology Management Center

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