Reassessing reform outcomes in South Korea and Japan a decade after crisis: The paradox of political leadership

Conventional wisdom suggests that South Korea's financial reform, following the crisis in 1997, was successful due to its swift implementation: strong political leadership and international pressure from the IMF broke a deadlock between reform and anti-reform forces. In contrast, it has been argued that reform in Japan, after the country's acute financial crisis in the same year, was less successful: most accounts are of a gradualist reform approach managed by bureaucrats, taking much longer to get the economy back on track. Two different reform approaches seem to explain this divergent reform outcomes in the years immediately after the crisis. However, the scene looks very different a decade out from crisis. My findings suggest that initial strong leadership in Korea contributed to a new crisis in 2002-3 that created millions of credit delinquents. Meanwhile, reforms have been deeper and more enduring in Japan as strong political leadership eventually emerged to overcome political and bureaucratic resistance.;To explain the very different picture a decade after crisis, this dissertation analyzes divergent reform outcomes in Korea and Japan by taking seriously political leadership and its relationship with other key political variables. In particular, the short presidential cycle in Korea due to five-year single-term presidency, combined with a strong bureaucracy, leads to a cyclical process of presidential reform initiatives followed by their reliance on bureaucratic ideas and capacities to manage challenges in the implementation phase. This pattern of bargaining between political leadership and bureaucrats shows how initial success in recovering from the crisis lost its momentum for deeper reforms. Japan's belated response to a crisis with weak political leadership and a strong bureaucracy made people skeptical about the prospect of successful reforms. The very delayed response, however, with the bureaucracy tainted with a series of scandals paradoxically laid the ground for the strong leadership of Koizumi that transformed the old regime more successfully than anyone had anticipated. The paradox of political leadership shows the perils of strong presidency for deeper reform.