Proposals for Creating New Machinery for Promoting Deregulation to Prepare for the 21st Century

II. Creation of Machinery for the Promotion of Deregulation

In order to tackle these deregulation problems, powerful machinery for promoting deregulation must be created.
At present, deregulation is being pushed by two-pronged machinery -- the DAP and the Administrative Reform Committee -- pursuant to the recommendations made by the Third Administrative Reform Council(Gyokaku-shin) in its final report of October 1993 and the interim report of the Economic Reform Study Committee (known as the "Hiraiwa Report") in November the same year. More specifically, in response to the proposals it received from various quarters, domestic as well as foreign, the government has revised its DAP at the end of each year and has taken deregulation measures. Meanwhile, the Administrative Reform Committee has been closely following the deregulation measures the government has taken and has submitted its view to the government for consideration when it drew up plans for additional deregulation measures. The government owes the rapid progress it has made in deregulation since 1995 heavily to the advice and recommendations given by this deregulation promotion machinery.
As the DAP is due to run its course in March 1998, and as the term of the Administrative Reform Committee will expire ahead of the program (at the end of 1997), it is necessary to urgently create new deregulation promotion machinery by drawing on the lessons, positive as well as negative, from the DAP and the Administrative Reform Committee in order to push additional deregulation measures in the remaining years to the 21st century.

  1. Evaluation of the Machinery for the Promotion of Deregulation and Problems Facing it
    1. Evaluation of the Deregulation Action Program and Problems Facing it
    2. Thanks to the implementation of the DAP, the government has made substantial and great strides in its deregulation drive.

      First, the program, as stated earlier, has defined the basic approach to be taken in promoting deregulation and has laid down clear-cut guidelines for deregulation of different sectors, and this has helped the government overhaul the hard core of the regulatory system.
      Second, as the program has spelled out in specific terms the substances of deregulation measures and schedules for their implementation, the number of instances of foot-dragging by administrative agencies -- perfunctory announcement of their policy or prolongation of the period required for study -- has visibly decreased.
      Third, as the government adopted the form of a rolling plan -- a plan subject to revision at the end of each fiscal year -- it became possible for the government to add related or improved measures to the ongoing deregulation program.
      Fourth, the government released interim progress reports on studies it has made of views and proposals received from various quarters, domestic as well as foreign, prior to revising its deregulation program, and it also made public, after it had revised its deregulation program, reasons why it had not taken up certain proposals. Such a responsive attitude has helped promote understanding between the government and the private sector, and has paved the way for promoting deregulation through dialogue.

      On the other hand, the following two points may be pointed out as limitations of the DAP.
      First, as the government devised deregulation measures in response to specific views and proposals it has received from various quarters, domestic as well as foreign, they tended to be reactive in conception and as such, their implementation lacked the systematic unity of purposes focused on specific goals. True, the Cabinet and the leadership of the governing Liberal Democratic Party tried to remedy such shortcomings, but their efforts have fallen short of the goals of deregulation.
      Second, as the scope of deregulation has been limited narrowly to administrative technicalities, the government held back the full force of deregulation in cases, such as regulation measures for the protection of declining industries or for the development of local industries, where remedial measures are required to cushion transient friction that may be caused by deregulation.

    3. Evaluation of the Administrative Reform Committee and Problems Facing It
    4. Since its establishment in December 1994 as an independent body charged with the responsibility of drawing up plans for deregulation and the power to oversee its implementation, the first-ever in Japan, the Administrative Reform Committee has played an important role in pushing deregulation.

      First, the committee has overseen from an overall standpoint the implementation of deregulation by government ministries and agencies, and has submitted its opinion to the prime minister from time to time. The presence of this committee keeping a watchful eye on the progress being made has created nervous energy among the officials of different ministries and agencies in charge of deregulation measures, prodding them to tackle the problems in earnest.
      Second, in the area of planning for deregulation measures, the committee urged the government to overhaul the hard core of the regulatory system.
      Third, in reviewing outside opinions about deregulation, the committee made public issues raised by such opinions and discussed them in the forum open to the media, and this approach was instrumental in arousing popular interest in the importance and the necessity of deregulation.

      On the other hand, the following two points may be pointed out as limitations of the Administrative Reform Committee.
      First, as the DAP limited the scope of its target areas narrowly to the regulatory system, the review made by the committee did not reach out beyond reform of the existing regulatory system.
      Second, the committee did receive assistance from the Management and Coordination Agency, but the function of its own secretariat was less than effective. For instance, the secretariat was not adequately equipped for investigating and analyzing various deregulation measures on its own, quantitatively evaluating their effects both prior and subsequent to their implementation.

    5. Problems Requiring Legislative Remedy for Their Solution
    6. In the course of promoting of deregulation, the government has encountered several problems not amenable to solution under the existing legislation.

      First, there are problems posed by Cabinet orders, directives and notices that were instituted or issued by government ministries and agencies. As early as October 1996, Keidanren pointed out frustrations caused by these administrative rules and directives in detail in a position paper titled "Request for Deregulation." If government ministries and agencies were allowed to institute or create rules with considerable discretionary power to regulate industry and the market, the power of the Diet to enact laws would be seriously undermined, causing all the efforts toward deregulation to come to naught. As a matter of fact, ministerial notifications and notices have served as the basis for the interpretation of laws and regulations, or for determining quantitative limits for the purpose of regulating industry or the market. And steps should be taken to bring such administrative rule-making under some sort of democratic control.
      Second, ordinances enacted by local assemblies and regulations instituted by the heads of local authorities are another source of problems. While deregulation of certain areas has been implemented at the national level, that of the same area by local authorities, by and large, has been lagging. Conversely, there are quite a few local authorities that enforce regulations more stringently than the national government by enacting ordinances and regulations, or in certain instances, by issuing administrative guidance laying down specific guidelines.

      The problem is, there is no clear definition of relationships between the laws of the country and ordinances or regulations instituted by local governments. For instance, when a municipality enacts an ordinance that runs counter to the purport of a law, there is no adequate mechanism for resolving the conflict between the two. Nor is there any clear-cut criteria for the courts to rule illegality of municipal ordinances. This poses a threat to the rights of the people (or inhabitants, as the case may be), and the prospects for remedying such abnormality are anything but assured. Worse yet, as local regulations are instituted at the discretion of the heads of local governments without the approval of their assemblies, the situation is serious. Moreover, when viewed from the standpoint of ordinary people (or inhabitants), there is no discernible line separating municipal regulations and administrative guidance (such as guidelines).
      In recent years, opinions calling for the expansion of legislative autonomy have become increasingly vocal in the name of decentralization of power. However, in order to accelerate deregulation, the relationship between laws and ordinances or regulations should, first and foremost, be clarified and the process of rule-making has to be improved.
      The third problem has to do with the system of reviewing complaints against administrative actions. Government regulation is not always correct and fair. The rights or interests of the people are often infringed upon by illegal or unfair regulation. In such cases, the aggrieved party can sue the government for redress or file a complaint against the ordinance or regulation to obtain a summary or speedy solution. In practice, however, few have taken advantage of this system, because its existence is not known to many people, because there is little prospect of obtaining legal remedy, or because the procedure for filing such complaints is prohibitively complex. To compound the problem, no complaints against administrative guidance that often causes disputes can be filed. To enhance the effectiveness of deregulation, it is necessary to streamline the complaint reviewing system in such a way as to make it more accessible to ordinary people.

  2. Proposals for the Creation of New Machinery for the Promotion of Deregulation
  3. On the basis of our perception of the present state outlined in the foregoing, we propose the following for streamlining the deregulation promotion machinery and related systems by 2001.

    1. Action Program of Deregulation
      1. The government should draw up a new action program of deregulation ("New Program") for implementation during the period from April 1998 to December 2000.
      2. In addition to carry-over measures from the DAP, the New Program should incorporate measures drawn up on the basis of recommendations of the Administrative Reform Committee and opinions and proposals received from various quarters, domestic as well as foreign. And to process such opinions and proposals, the government should urgently establish a central contact point.
      3. The government should revise the New Program at the end of each year to reflect opinions and proposals received from various quarters, domestic as well as foreign, and opinions and recommendations of the Deregulation Promotion Council (a temporary name; see below). At the time it makes such revisions, the government should make public key matters (amendments of basic laws, business-specific governing laws, etc.) that are selected on the basis of opinions of the Deregulation Promotion Council, and adopt measures, such as tax and financial measures, in addition to those formulated in response to the council's recommendations necessary to carry them out smoothly.
        In revising deregulation measures, the government should release interim progress reports so that those who had submitted opinions and proposals have a second chance to submit additional proposals to justify their previous proposals. When the government elects not to take measures in response to given opinions or proposals, it should specifically make public the reasons why it has so elected.
      4. The New Program should comprehensively address the entire spectrum of deregulation the government plans, so that the people can grasp the entire picture of the government's approach to deregulation and follow the progress it is making in deregulating different sectors of the economy and the market. Deregulation measures implemented for a structural reform of the economy and financial system reforms should be incorporated in the New Program.

    2. Organization for Planning Deregulation and Oversight
      1. An independent body charged with the responsibility for planning and overseeing deregulation (temporarily called "Deregulation Promotion Council") should be established by enacting an enabling law.
      2. Members of the Deregulation Promotion Council should be drawn from among the leaders from various walks of life and knowledgeable persons.
      3. In revising the New Program, the Deregulation Promotion Council should present its view to the prime minister on necessary deregulation measures, including matters of special importance, on the basis of the findings of its studies or conclusions it has reached. At the same time, the council should follow the progress made by the government under the New Program and recommend to the prime minister new or additional measures it feels necessary for the improvement of the New Program. Also, upon the request from the prime minister, the council should plan and prepare for the necessary legislative measures which will be referred in a later section.
      4. The secretariat of the Deregulation Promotion Council should be expanded to a size that is capable of conducting investigations on its own into actual state of regulatory administration and making quantitative evaluation of the effects of deregulation on different sectors of the industry comparing the market prior to, and after, its implementation.
      5. The Deregulation Promotion Council should be reorganized into a permanent body directly attached to the Cabinet after the new Cabinet system and ministries and agencies have been put in place in 2001.

    3. Creation of a Statutory Framework to Improve the Effectiveness of Deregulation
    4. We hope that the Diet takes the following steps to streamline the nation's legal system from the standpoint of improving the effectiveness of deregulation.

      1. The streamlining of administrative rule-making process

        1. Cabinet orders and ministerial ordinances
          When the Diet delegates to government ministries and agencies the power to institute Cabinet orders and ministerial ordinances, it should spell out the substance of the power it delegates, the purpose underlying such delegation of power, and the scope of power thus delegated. In addition, the Diet should require government ministries and agencies to submit a draft of a proposed Cabinet order or ministerial ordinance before they institute such an order or ordinance, and the Diet should check their contents where necessary.
        2. Directives and notices, etc.
          To govern the issuance of such directives and notices, which are likely to affect the rights and duties of the people, the Diet should enact a general rules law requiring the issuers of such directive or notice to
          1. publish its draft,
          2. hear the views of the general public, relevant specialists and interested parties about its original draft,
          3. publish opinions presented to the issuing ministry or agency, and actions taken in response thereto, and
          4. hold a public hearing or debate where necessary.

      2. The streamlining of the legal system relating to ordinances and regulations

        1. Ordinances
          Certain matters -- those automatically reserved to a statute by the Constitution, those affecting the formation of a private law system (such as the civil code, etc.), those affecting the interest not just of local inhabitants but also the entire nation, or regulation whose effects extend not just to a locality but also to the entire country -- should not be dealt with by an ordinance. This principle should be incorporated into the Local Autonomy Law (Chihou-Jichi-Hou), and relevant laws should prescribe that these matters can only be dealt with by national laws and regulations, and should be excluded from the competence of municipal ordinances.
        2. Regulations
          In instituting regulations that affect the rights and duties of local inhabitants, local rule-making bodies should be required to follow the same procedures as those required of the issuers of directives and notices proposed above. Particularly, in the case of matters that have a far-reaching effect on people, they should be excluded from the scope of municipal rule-making power and be left to ordinances.

      3. Reform of the system of reviewing complaints against administrative actions

        1. Establishment of "Administration Adjudgment Agency"
          The existing system of reviewing complaints against administrative actions should be simplified, and the fairness of its review should be heightened -- and the professionalism of its review process should be enhanced -- by separating the review board from the executive bodies of the administration. Therefore, the reviewing functions currently performed by the executive bodies and the specialized review board should be consolidated as much as possible and "Administration Adjudgment Agency (a temporary name)" should be established to take charge of the work of dealing with complaints and grievances.
        2. Reform of the system of reviewing complaints against administrative actions
          In keeping with the changes suggested above, Law for the Examination of Objections Against Administrative Action (Gyosei-Fufuku-Shinsa-Hou) should be amended and the system should be reformed by taking the following measures:
          1. Areas exempted from the application of the system of reviewing complaints against administrative actions should be reduced, and efforts should be made to standardize as much as possible the review procedures prescribed in individual laws and regulations independently from others to conform to the general rules law.
          2. In light of its independence from other ministries and agencies, "Administrative Adjudgment Agency" should be given the power to check the appropriateness of administrative discretion exercised by different ministries and agencies, and notices issued by them. In addition, the board should be given the power to check the legality of their administrative guidances.
          3. Time period for reviewing should be specifically prescribed.

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