[ Keidanren ] [ Policy ]

Keidanren demands resolute promotion of Regulatory Reforms
and the Establishment of a New System for the 21st Century


October 17, 2000
(Japan Federation of Economic Organizations)

  1. Regulatory Reforms Designed to Build an Economic and Social Structure of the 21st Century Type
  2. With the 21st century just around the corner, the environment surrounding Japan is undergoing rapid changes, pressing this country to address various problems - those caused by the globalization of the economy, the information technology (IT) revolution, and the declining birth rate - that, if left to take their own course, would have a seriously negative impact on the future of this country. In order to climb out of "the lost decade" (the 1990s) by properly addressing these problems and attain prosperity led by the vitality and initiatives of the private sector in the 21st century, it is necessary to resolutely carry out drastic economic and social structural reforms with dispatch.

    To do this, we must, first and foremost, take a searching look at the roles played by the government, particularly, the regulatory regime that regulates - and intervenes in - the wide range of private economic activities and has created and sustained a bureaucrat-led and bureaucrat-dominated economy in this country, and change its role from one of the before-the-fact type to one of the after-the-fact type. In addition, as pressure for overhauling the financial structure of the country grows, the creation of a small government by rationalizing - and by increasing the efficiency of - the expenditure of the central and local governments has taken on a growing importance and urgency. At the same time, the existing regulatory system and administrative procedures that have become irrelevant to the changed situation on account of the globalization of the economy and the IT revolution and are standing in the way of progress have to be reformed drastically to create a new regulatory regime that is capable of meeting the challenges posed by these problems. Therefore, it is vital for this nation to redouble its effort to build on the regulatory forms it has been carrying out, strengthen them further and speed them up in order to create a free and fair market of the 21st century type.

  3. Regulatory Reforms that Have Made Certain Headway
  4. Collective efforts at regulatory reforms began in earnest following the final report of the Third Administrative Reform Council (October 1993), the launching of an independent Administrative Reform Committee in December 1994 on the proposal made in the final report of the Economic Reform Study Group ("Hiraiwa Group") in December 1993, and the formulation of Deregulation Action Program in March 1995. These committee and study group have since monitored the implementation of deregulation measures taken by the government and the government has sought to improve the substance of deregulation plans by revising them at the end of each year on the basis of views on deregulation heard from various parties in and out of Japan and those presented by the Administrative Reform Committee. It is fair to say that thanks to their efforts, an institutional framework of deregulation has, as it were, thus been established, and that together with the leadership provided by the successive Cabinets, have become the driving forces pushing the reform movement forward during the periods of the Deregulation Action Program (April 1995 - March 1998 and April 1998 - March 2001). At the same time, by publishing the main points of discussion concerning important deregulation topics and by holding an open debate on issues taken up by the Administrative Reform Committee or the Regulatory Reform Committe, and by the introduction of a system for ministries to publish interim response to requests they had received from private organizations for deregulation and report on reasons why they are not changing the regulations in question, the process of reforming the existing regulatory system has become more transparent than in the past. In addition, efforts have been made to enhance the fairness and transparency of making, changing and abolishing rules and regulations by enacting the Administrative Procedures Law in October 1994 and by introducing the system of public comment on the institution, revision, or abolition of given regulations in April 1999. Thanks to the introduction of these procedures and publishing of white papers on deregulation, public awareness of the regulatory reforms has increased.

    Against this backdrop, the regulatory reform have been carried forward on the principle of "abolish economic regulations in principle and keep social regulations to the minimum." And the two rounds of the three-year deregulation action programs that had been carried out have made certain headway. Particularly, the abolition of restrictions on market entry based on the idea of adjusting the supply and demand and deregulation of price and fees regulation has brought about significant benefits for the consumers, such as various services that were given rise to, and a fall in fees and prices touched off by the encouragement of competition in such fields as telecommunications, transport, and distribution. At the same time, the scope of deregulation has widened to include such areas as employment and labor market, education, and legal services, that had not shown much progress in deregulation, and helped strengthening the competitiveness of the nation's industry and creating new industries and employment opportunities.

  5. Essential Tasks Lying Ahead, and Approaches to be Taken
  6. However, there are a number of issues - particularly those involving the reform of systems- that are yet to be addressed. What is more, pressure is growing to tackle urgent problems currently facing the nation from the standpoint of regulatory reforms. Therefore, it is important to bear in mind the following standpoint in planning and carrying out regulatory reforms in coming days.

    1. Through implementation of the principle of "Abolish Economic Regulations in principle and keep social regulations to the minimum"
      First and foremost, we must abide by the basic guiding principle of "Abolish Economic Regulations in principle and keep social regulations to the minimum" in carrying out regulatory reforms, abolish wholesale, or relax where appropriate, the regulation of the market (restrictions of entry into the market, creating facilities, and prices) in various areas of business, and create a new environment where firms and individuals can enter the market freely and display initiative according to the principle of the market. Despite the decisions successive Cabinets have made to "revise the existing regulation of entry into the market" that was enforced in the name of adjusting supply and demand with a view to abolishing them, restrictions of entry into the transport, customs clearance, distribution, and energy markets still exist. Entry of profit-making firms into the medical services and welfare, agriculture, inspection and certification markets is also restricted. Moreover, regulations impeding free business activities - restrictions of service areas of trucking firms and the requirement of government authorization for opening branches and the marketing of new financial products by financial institutions - still remain in force, and these restrictions should be fundamentally reviewed and abolished at the earliest possible date.

    2. Intensive and cross-sectional approach to solving current problems
      Second, it is important to take an intensive and cross-sectional approach to solving the various problems currently facing this country - those arising from the globalization of the economy, the IT revolution, the ageing population and declining birth rate, environmental issues, etc.

      Steps to be Taken to Meet the Challenges Posed by the Globalizing Economy

      The globalization of the economy is expected to help business firms expand their sphere of activities dramatically and create new business opportunities. In order to exploit the potential provided by a globalized economy and strengthen the competitiveness of our industry, it is essential to facilitate two-way, cross-border movement of people, goods, services, money, and information. To accomplish this, the government must remove various barriers standing in the way of trade of goods and services with other countries through a free trade agreement negotiated, for instance, with Singapore or various negotiations conducted on the forum of the World Trade Organization (WTO). At the same time, it is essential to push ahead with regulatory reforms in various fields, such as the relaxation - and international harmonization - of standards and certification systems and requirements for authorization, rationalization and simplification of port and harbor regulations and customs clearance procedures, and the relaxation of regulations of the security-sensitive products export control system.

      Measures to Meet the Challenges Posed by the IT Revolution

      The IT revolution is a fountain of vigor that strengthens the competitiveness of business firms, creates new industries and business and helps improve the quality of life of the people by upgrading the means of communication. The government also can increase the efficiency, and dramatically improve the quality, of the administrative services it provides to the people by utilizing information technology and can create what might be called "digital opportunity" for businesses, individuals, and the society as a whole. Aware of such benefits that could be derived from information technology, the government has been making a vigorous effort to expand the contents of electronic commerce (the abolition of the requirements of issuing documents, the affixing of signature and seal, and the making of person-to-person explanation, etc.), and the electronic processing of applications for government permits and authorizations. No less important are the improvement of basic competition environment among telecommunications service providers and the simplification of the procedures for applying for government permits and authorizations. More specifically, it is of vital importance not just to electronically process applications but also to create a basic framework to realize a world-class electronic government through the rationalization and simplification of papers and procedures for applying for government permits and rationalization of government activities.

      Measures to Deal with Problems Given to Rise by the Ageing Population and Declining Birth Rate and Environmental issues

      When viewed from the standpoint of improving the quality of public services by realizing the e-Government, it is important to promote informatization , not only at the central government level but also at the local level, and local public bodies should take initiatives to promote it. Particularly, the improvement of efficiency of medical services and nursing care provided to the aged is an important issue, and it is necessary to create, with appropriate safeguards for privacy, a framework for building a data base containing information concerning medical services and nursing care including receipts that can be shared among parties involved. Meanwhile, with impending revision of the level of benefits of national pension plans, privately-financed pension plans, particularly corporate pension plans, are taking on growing importance. And it is necessary to allow greater flexibility in designing pension plans and improve the solvency of corporate pension plans so that corporations can deal with changes occurring in the economic environment in a flexible manner.
      In the area of environmental protection, the promotion of a recycling-oriented society is taking on an increasing importance, and it is strongly recommended to overhaul the existing regulations and systems, such as the current law on disposal of wastes, that impedes efficient utilization and recycling of waste.

    3. The Reform of the Regulation-Related Systems, and Approaches Taken by Local Governments to Regulatory Reforms
      The third item is a reform of the regulation-related systems. In addition to various existing systems, it is necessary to improve the mechanism through which the views of the general population and the people concerned are reflected on the process of planning regulations and policies. For instance, the public comment system now being implemented an administrative procedure is applied only to the institution and abolition of regulations. Furthermore, the regulatory agencies are not required by law to invite comments from the public. Efforts should be made to actively utilize the existing system and enact an administrative procedures law as soon as possible on the basis of the know-how gained through the implementation of this system.
      Pursuant to the Omnibus Decentralization Law enforced in April this year, the government has stopped wholesale delegation of its administrative services to local public bodies, has restructured the division of administrative work, and delegated broader administrative power to them. As the power of, and the roles to be played by, local public bodies increase, they are coming under increasing pressure to carry out reforms to build a simpler and more efficient local administrative system and ensure the fairness and transparency of the administrative procedures they follow. It is recommended for them to carry out systemic regulatory reforms to the extent comparable to those of the central government - the procedures to participate in the institution or the abolition of regulations, the invitation of views and requests for deregulation at periodic intervals, and taking systematic approach to regulatory reforms, etc.

  7. Promotion of Further Regulatory Reforms and Institutional Reforms
  8. In order for the government to tackle these problems and achieve meaningful results in coming years, we need a strong leadership of the Prime Minister assisted by a strong support mechanism. At a meeting of the Administrative Reform Promotion Headquarters held on August 4, Prime Minister Yoshiro Mori instructed its members to draw up general guidelines for administration reforms within this year. Among other things, he instructed them (1) to formulate a new three-year regulatory reform program starting in fiscal 2001, and (2) review what the new regulatory reform promotion machinery should do. On our part, Keidanren wants to request the government to take the measures set forth below to further promote regulatory and institutional reforms.

    1. Priorities and Standpoints of the New Three-Year Regulatory Reform Promotion Program
      In addition to the medical services and welfare, employment, labor, and education to be covered under the instructions of Prime Minister Mori by the three-year regulatory reform program starting this fiscal year (April 2000 - March 2001), Keidanren areas in which the people are most keenly interested, such as pensions and social security, to be included in the program. In running the program, the government should set cross-sectional themes, in addition to the full implementation of the principle of "abolish economic regulations in principle and keep social regulations to the minimum," such as the globalization of the economy, the IT revolution, the declining birth rate, and environmental protection, wich demands urgent reactions.

    2. The Expansion and the Strengthening of the Machinery for Promoting Regulatory Reforms and Institutional Reforms
      In order to strengthen the substances of the new three-year regulatory reform program and carry out the program steadily, it is vital to expand and strengthen the machinery for carrying it out. The Ministries and Agencies Reform Promotion Headquarters and an advisory council are to finish its term in June 2001 and the Decentralization Promotion Committee in July the same year. Therefore, we recommend the government to establish a new organization by law, under the direct authority of the Prime Minister, charged with responsibilities not just to map out plans for regulatory reforms but also to address wide-ranging problems in such a way as to contribute to a reform of the existing economic and social systems as a whole including the reform of government-subsidized special corporations, decentralization of executive power, and the reform of local administration. It is our view that such organization (1) should have the power to investigate, present their views, and make recommendations, to the Prime Minister, (2) that the Prime Minister should be obliged to respect and implement their recommendations, and (3) that they should have an independent secretariat capable of carrying out effective investigations and analyses.

  9. Political Leadership and Roles of the Private Industry
  10. Needless to say, strong political leadership is necessary to push through regulatory reforms. We are strongly impressed by the energetic efforts made by the collective leadership of Prime Minister Mori and the leaders of the ruling coalition parties to come up with the vision of the government in the 21st century. We earnestly hope that his Administration will steadily carry out reforms in accordance with the policies he has announced so far and achieve substantive results in solving new problems.
    Regulatory reforms are challenges the private industry itself also must meet. Article 1 of the Corporate Behavior Charter of Keidanren states that business firms must "provide goods and services developed with due care exercised about the safety of their products." Naturally, providing safe goods and services regardless of government regulation is a matter of utmost importance. If only to avoid the same mistake where an accident caused by a product invites more rigid regulation, business firms must clean up their act and behave in accordance with the principle of self-reliance, self-help, and self-accountability. Some say that it is the private industry itself that seeks the regulatory protection. The fact remains that firms that come to anchor behind the breakwater of regulatory protection and fail to make efforts at self-renewal will outlive the market confidence, here and abroad, and will eventually have to go out of business. The market wants each and every firm to display their entrepreneurship instead of seeking to protect their vested interest, actively seek out new business opportunities created by regulatory reforms, and create a new market and job opportunities.

  11. This Year's Regulatory Reform Priority Requests
    1. Measures to be taken to meet the challenges posed by the globalization of the economy
    2. Measures to be taken to meet the challenges posed by the IT revolution
    3. (Those relating to electronic commerce)

      (Matters relating to electronically processing government services, the creation of telecommunications infrastructure, encouragement of competition, and utilization of information technology, etc.)

      (Measures to trim application procedures, etc.)

    4. Measures to be Taken to Meet Challenges Posed by the Ageing Population and Declining Birth Rate and Environmental Protection
    5. (Those relating to the ageing population and declining birth rate)

      (Measures to be taken to deal with environmental issues)

    6. Other Priority Requests

Home Page in English