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"postal savings account for 260 trillion yen of the estimated 1,300 trillion yen
in private financial assets in Japan"
At 110 yen/dollar, this is $11.8 trillion
http://www.soumu.go.jp/gyoukan/kanri/speech.htm
Speech by
Mr.Yoshihiko Miyauchi,
Chairman of Regulatory Reform Committee
at Foreign Correspondents' Club of Japan
May 26, 2000
Good afternoon, ladies and gentlemen.
Thank you very much, Mr. Neff, for a very nice introduction of myself.
This is my great pleasure to be here and also an honor to be asked to talk about the
deregulation movement in this country at this esteemed Foreign Correspondents' Club of
Japan.
I happen to have been an associate member for almost 20 years but I seldom come to this
place. This is the really good time to see fellow members at this luncheon meeting.
I personally have been involved in deregulation issues - now the term became
"regulatory reform" instead of "deregulation" - for about ten years as
a member or chairman of government committees. Throughout these years I have been driven
by the belief that the Japanese economy will only be able to continue to develop if
markets are liberalized and market forces dictate the efficient allocation of resources.
For a very long time this has been a minority view in Japan, where politicians,
bureaucrats and also my fellow businessmen preferred the comfort of protection and
control. Many of them still believe economic recovery can be attained through government
fiscal policies.
As you know, sustained economic recovery has eluded us for around a decade. The
government has attempted to boost the economy through increased government spending.
Despite the active fiscal spending of the last few years to stimulate the economy,
however, it seems clear that fiscal policy has reached a limit in its ability to spark
demand. There has been over 120 trillion yen worth of economic stimulus packages to prop
up the economy since the burst of the bubble economy. The combined long-term debt of the
national and local governments at the end of this fiscal year will be around 645 trillion
yen, or close to 130 percent of GDP.
What this means, I believe, is that the only way to revitalize the Japanese economy
is through structural reform. However, one of the problems with structural reform in Japan
is that the government is too involved in economic activity itself, in terms of both its
economic activities and regulations. For example, postal savings account for 260 trillion
yen of the estimated 1,300 trillion yen in private financial assets in Japan, or that is
roughly 20%. There will not be a real financial "Big Bang" until these assets
move to the private sector. In terms of regulation, the government still places many
restrictions on private economic activities. According to one estimate, 42.3% of Japanese
industry is regulated in various manners.
It is clear, therefore, that one of the important pillars of structural reform is of
course deregulation or regulatory reform. While I have been publicly pushing the idea of a
market economy in Japan for close to a decade, we are finally beginning to see some
progress in the last two or three years, even if sometimes changes has been slow.
The promotion of deregulation in Japan was started in the early 1980's, when the main
objective of reform was the simplification and rationalization of administrative
procedures. In the latter part of the decade, the discussion of deregulation began to
include structural reform of Japan's economy. That was also when some progress was made on
privatization of three large public companies. Those are: Japan Railways, NTT and Japan
Tobacco.
In spite of these initial efforts, I think full promotion of deregulation was not
started until the middle of the 1990's. By then, more people finally understood the
importance of deregulation and came to support it.
In December 1994, the "Administrative Reform Commission" was established in
the Prime Minister's Office; four months later in March 1995, the government adopted the
so-called "Deregulation Action Program". This was the first comprehensive
program that covered all ministries and agencies. Then, the "Deregulation
Subcommittee" under this Administrative Reform Commission was established in April
1995. I took part in that subcommittee. This subcommittee surveyed the items included in
the Action Program and discussed new items. The Action Program was revised every year,
reflecting the discussions of the subcommittee.
The Administrative Reform Commission was dissolved in December 1997. In order to
continue work on deregulation, the "Deregulation Committee", chaired by myself,
was newly established in January 1998. Two months later, at the end of March 1998, the
government adopted "Three-Year Deregulation Program" (the so-called New
Program). The Deregulation Committee was changed to the "Regulatory Reform
Committee" in April 1999.
With the name changed, the scope of the Committee was widened, to discuss not only
deregulation or regulation but also tax and subsidy issues that are closely related to
regulation. At the same time, the members of the committee were increased and the
committee's secretariat was reinforced.
I do not have time today to go into the details of the Committee's activities and
organizational structure, so I will ask you to refer to the handouts for reference of the
action program, as well as a history of regulatory reform and a list of members of our
committee. However, I would like to stress two important characteristics of both the
former Deregulation Committee and the present Regulatory Reform Committee that replaced
it.
First, we now have an established forum for continued promotion of regulatory reform.
This encompasses both the proposals for new reforms and the systematic monitoring of
previous proposals. In this way, we try to push the government into acting on proposals
and we actively monitor the progress that has, or has not, been made.
Second, we have direct access to government and politicians. The Committee is under the
Cabinet Headquarters for Promoting Administrative Reform, which consists of all government
Ministers. The director-general of this headquarters is the Prime Minister, and the deputy
director-generals are: Chief Cabinet Secretary and the Minister of State for Management
and Coordination. In this way, we have direct access to Cabinet. We aim to keep important
items on the agenda and continue to persuade politicians to act on the proposals of the
Committee.
In addition to the establishment of a system of continued promotion and monitoring of
regulatory reform that I just described, we have seen some real economic benefits as a
result of deregulation so far. According to the Economic Planning Agency report in January
this year, deregulation in eight sectors has already resulted in 8.6 trillion yen in
consumer surplus. The eight sectors include: telecommunications, civil aviation, vehicle
inspections, electricity, gasoline and stock trading brokerage fees.
One specific example of successful deregulation in telecommunications was when
restrictions on the sale of mobile phones were lifted and the market exploded. Before the
deregulation, telephones could only be rented and were very expensive, but when sales were
allowed, companies began to compete and the prices came down. The number of mobile phone
users at the end of March this year was over 51 million, which represents and increase of
24 times the amount before deregulation. If this trend in mobile phone expansion
continues, we will soon have more mobile phones in Japan than people!
Meanwhile, the revised "Three-Year Program for Promoting Deregulation" that
was approved by Cabinet in March of this year, includes 1,268 measures in 16 areas, with
351 new measures included. These numbers have increased each of the last three years, so
it is clear that despite significant progress made so far the journey to regulatory reform
is still quite long.
What we have seen so far is that some regulations were relatively easy to reform because
a consensus existed. However, there are some areas that are proving more complex. These
include, for example:
1. Areas that require not just simple deregulation, but need the construction of an
entirely new regulatory system;
2. Areas on social regulations that are not just economic issues and produce widely
different opinions; and
3. Areas that touch on vested interests and could create strong political opposition.
Some specific examples that require more efforts include:
1. The question of NTT interconnection fees, which is essentially a question of how to
break up the monopoly of so-called "last one-mile" market. This comes to be a
very political issue as well at this moment;
2. Some areas that are considered more or less public goods like medical care, welfare,
education, or even labor and agriculture. I think there is still a strong belief among
people that the government should regulate the entire system in these areas;
3. Strengthening the role of the Fair Trade Commission in order for the market to work
efficiently; and
4. The expansion of legal services for dispute resolution.
When it comes to opponents of deregulation, people often blame bureaucrats for
dragging their feet. I think, however, that it is not so much bureaucrats that oppose
deregulation, but rather vested interests in the private sector that try to lobby against
reforms. One example is the issue of liquor sales. This is a very recent example. In
December 1995, the Administrative Reform Commission proposed the abolition of supply and
demand adjustment on the sale of alcohol. Then, in March 1998, a cabinet decision was made
to abolish restrictions on supply and demand related to population density and distance
from store to store. However, there suddenly arose strong opposition from a few vested
interests and the implementation became more complex.
Part of these regulations on alcohol sales are scheduled to be abolished in coming
September this year, but the issue has highlighted the difficulties in pushing through
some reforms. Maybe a historian in prohibition should add a chapter on contemporary Japan.
In the US, people tried to stop people from selling and drinking alcohol; in Japan at the
turn of the new millennium liquor dealers suddenly called for stricter controls on liquor
sales.
Some would say it is a natural tendency of democracy for politicians to be inclined to
support these vested interests who sometimes have more organizing ability than the average
consumer.
Some people look upon this as a backlash against deregulation. However, I see it as part
of the process of progress. Much work still needs to be done and change may sometimes be
slow, but the journey down the long and winding road to regulatory reform is finally
underway. I personally will continue to push for further reform, for without it the
Japanese economy will continue to stagnate.
Having said this, I would like to stop my initial talk and would like to welcome any
questions you have.
Thank you very much.
Profile of Mr.Yoshihiko Miyauchi
Yoshihiko Miyauchi is currently Chairman of the Regulatory Reform Committee of
the Cabinet Headquarters for Administrative Reform. He joined the Deregulation
Subcommittee of the Administrative Reform Commission in April 1995. He assumed the chair
of Deregulation Committee when it was inaugurated in February 1998. He has been the chair
since then though the Committee was reorganized as "Regulatory Reform Committee"
subsequently in April 1999.
He is Chairman and Chief Executive Officer (CEO) of ORIX Corporation, a multinational
financial services company. He began his business career at Nichimen & Co., Ltd. in
1960. Joining ORIX in 1964, he went on to become one of its original officers.
He is Vice-Chairman of the Japan Association of Corporate Executives (Keizaidoyukai),
and Director of the Japan Federation of Economic Organization (Keidanren).
After graduating from Kwansei Gakuin University, he earned his MBA at the University of
Washington.
(as of May 26, 2000)
{Note from the Secretariat}
The above speech was made by Mr. Yoshihiko Miyauchi, Chairman of Regulatory Reform
Committee in order to brief foreign correspondents stationed in Tokyo to give them an
overall view of Regulatory Reform in Japan. His speech was based on his involvement in
regulatory reform for almost a decade to date, most recently as Chairman of the aforesaid
Committee . The views expressed in the speech is, however, above all else Mr.Miyauchi's
and may not be construed as those of the Committee as a collegial body nor as those of its
Secretariat.
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