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Japan's Digital Agency debut marred by Suga's waning clout

Search for leader to spearhead government efficiency drive veers off course

Japanese Prime Minister Yoshihide Suga talks at the launch event of the new Digital Agency in Tokyo on Sept. 1 as Digital Reform Minister Takuya Hirai looks on by video link. (Photo by Uichiro Kasai)

TOKYO -- When the New Context Conference kicked off in Tokyo on Aug. 11, it almost looked like an official curtain-raiser for Japan's new Digital Agency, Prime Minister Yoshihide Suga's proposed solution to the bureaucratic inefficiencies exposed by the COVID-19 pandemic.

Three cabinet ministers -- digital reform chief Takuya Hirai, who led preparations for the launch of the agency; Taro Kono, the administrative and regulatory reform point man; and Environment Minister Shinjiro Koizumi -- attended the event hosted by Digital Garage, stock-listed internet company, as speakers.

Hirai and Kono sat on a panel discussion on government digitalization chaired by Joichi "Joi" Ito, co-founder of Digital Garage and former director of the Massachusetts Institute of Technology's Media Lab.

Ito's name emerged as the government was searching for candidates to head the Digital Agency, which was in last-minute preparations for its official start on Sept. 1. On Aug. 5, Japanese media started reporting the Suga cabinet was close to appointing Ito as the Chief Officer of the new agency.

Ito's presence on the stage with the Japanese ministers and such other influential guests as Taiwan's Digital Minister Audrey Tang and Kathy Matsui, former Goldman Sachs chief Japan strategist and founding partner of a new ESG-focused venture capital, suggested he had been cleared in Tokyo's background check.

Then on Aug. 18, media reports, apparently based on leaks from people in the prime minister's office, unanimously said the cabinet had dropped Ito as a candidate for the Digital Agency's top unelected leadership job.

The wavering over picking the Digital Agency chief showed the decline of Suga's political capital. This weakness led him to decide not to seek a second term as ruling Liberal Democratic Party chief, meaning a new prime minister is on the way and leaving the new agency's leadership mandate up in the air.

Digital Reform Minister Takuya Hirai, center, and Taro Kono, administrative reform minister, second from left, sat on a panel discussion chaired by Joichi Ito, left, former director of the Massachusetts Institute of Technology's Media Lab. (Courtesy of Digital Garage)

While the government ignored all media reports, which started in early August, media coverage was negative, focusing on how Ito had resigned from MIT two years before and how media had alleged that he and the Media Lab tried to conceal donations from Jeffrey Epstein, a convicted sex offender who died in his jail cell in August 2019.

Their articles generally copied two-year-old US media reports saying that Ito and MIT had conspired to conceal donations from Epstein, although the allegations had later been proved incorrect by MIT's official investigation report.

The independent investigation report, commissioned by MIT to law firm Goodwin Procter LLP and submitted in January 2020, dismissed earlier media allegations that Ito and MIT executives had been aware of the seriousness of Epstein's crimes and conspired to conceal Epstein's donation to the Media Lab.

Showing detailed email exchanges and testimonies, the report concluded that it was the university's, not Ito's, decision to make Epstein's donations anonymous, and the purpose for the anonymity was not to conceal them from the public but to prevent Epstein from publicizing those donations to improve his reputation.

Furthermore, the report confirmed that both university executives and Ito were aware of Epstein's earlier criminal record as of mid-2013, when the university executives authorized accepting Epstein's anonymous donation. But it also showed that they were not yet aware of the true nature of crimes he had committed at that time. The criminal record they recognized as of 2013 was that Epstein had served 13 months in jail, between 2008 and 2009, for felony solicitation of an underage girl for prostitution.

It was only after the Miami Herald ran a series of investigative reports in November 2018 that Ito and MIT recognized the seriousness of Epstein's crimes, the Goodwin report showed. The Herald's articles revealed, with abundant evidence, that Epstein had repeatedly trafficked underage girls for prostitution and sexual abuse for years. After that, MIT never accepted any donation from Epstein and Ito cut ties with him.

It was also the Herald's reports that prompted the US Federal Bureau of Investigation to restart an investigation into Epstein, which eventually led the FBI to arrest and prosecute him for new, more serious charges in July 2019.

Epstein, believed to have been a billionaire, utilized philanthropic activities to make connections with highly influential figures. He frequently hosted parties with celebrity guests at his mansion in New York City and his estates elsewhere, which functioned as something of an endorsement circle of influential invitees such as Bill Gates and Larry Summers.

Ito also met powerful people at Epstein's gatherings and asked other influential people for their opinions on Epstein. Most of them encouraged Ito to accept research funding from Epstein.

Ito responded to our request for comment with an emailed reply: "Hearing many esteemed people endorse Epstein and through direct conversation with him, I came to think he was rehabilitated. When it came to light that his offenses prior to his prosecution in 2008 had been far, far worse than his conviction addressed, I realized I had made a huge mistake. I truly, deeply regret that I cultivated him as a Media Lab donor and allowed him to invest in my venture funds," Ito wrote in mid-August.

On Aug. 21, Hirai complained in a live online program that no media had sought Hirai's confirmation about the prospect of signing Ito. Asked about Ito's qualifications, he said: "I think he is a brilliant person. Japan should make the most of his insights in digital transformation efforts."

Hirai's comments suggested he had tried to recruit Ito but a decision was made by others in the cabinet not to appoint him. Sources told Nikkei that there was a group of politicians and high-ranking bureaucrats who were trying to undermine Hirai's control over the Digital Agency. Ito was said to be seen in the bureaucracy as a potentially radical reformer who would closely ally with Hirai.

With Suga's approval ratings slumping, a new controversy was the last thing the prime minister wanted. The government ended up on Sept. 1 appointing Yoko Ishikura, professor emeritus of business administration at the Hitotsubashi University, as the Digital Agency Chief Officer. While not a tech expert, Ishikura is known for her broad business management knowledge and well-rounded character.

After this flip-flop in leadership recruitment, the Digital Agency opened on Sept. 1 and Hirai was appointed the initial Digital Minister.

The agency faces a huge backlog of tasks. The list includes overhauling laws and regulations that have hindered the digitalization of everything from driver's license renewals to tax filings and private-sector contracts. More than 1,000 computer systems scattered throughout the public sector at ministries and local governments also need to be modernized and connected.

To tackle these challenges, the government has transferred 300 officials from existing ministries and hired 200 private-sector engineers and consultants.

Despite high public expectations for a jump-start of Japan's digital campaigns, political turbulence in the LDP has kept the new agency on the starting line. In a surprise announcement on Sept. 3, Suga said he would not seek a second term as LDP leader in this month's party election, effectively turning himself and Hirai into lame ducks.

The winner of the election will lead the LDP, and if the party secures a majority in the lower house general elections likely to be held in November, he or she will become the next prime minister.

Depending on those election results, Hirai may be replaced as digital minister. If that happens, other positions held by lawmakers at the Digital Agency may be replaced, as well as the top bureaucrat and other unelected officials.

That places Ishikura and elite bureaucrats transferred from other ministries at the Digital Agency in a difficult position. While they face public pressure to move forward with rapid reforms, any major decisions they make may be overturned by the new administration. This dilemma has many in the agency in a holding pattern.

The Digital Agency needs strong leadership to corral a staff of people from diverse backgrounds, set policy priorities and then drive the entire team toward a unified goal.

However, this cannot happen until a new cabinet is formed after the elections. "Everything is interim until the general elections are complete," said a person close to senior bureaucrats at the Digital Agency.

Japan's Digital Agency: The new body, tasked with bringing the country's paper-bound government offices into the 21st century, was officially launched on Sept. 1.   © Kyodo

Some of the Digital Agency's new private-sector hires said they were puzzled in their new workplace because they had not been given clear assignments. Some bureaucrats who have been transferred to the agency from other ministries have reportedly given cold responses to their former private-sector colleagues telling them to "figure out" their tasks for themselves.

Meanwhile, the government announced on Sept. 7 that Ito was among the members of a new expert panel commissioned to advise on the agency's policy priorities and action plan. Other members include Japanese tech business leaders such as Kentaro Kawabe, president of Z Holdings, the parent of Yahoo! Japan and Line messenger app, and Hiroshi Mikitani, founder and CEO of Rakuten, Japan's top e-commerce company.

The panel, called the Digital Society Design Conference, will likely have a major influence on how the Digital Agency operates.

The political turmoil engulfing the agency may have a silver lining, allowing its staff more time to strategize, discussing their priorities and how they can achieve their goals. A slow start is not always a bad thing.

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