Proposals for the Annual Revision of
the Regulatory Reform Action Program

Japan Federation of Economic Organizations

October 12, 1995

  1. Basic Position
    1. The Necessity of Regulatory Reform in Rebuilding the Japanese Economy
    2. In order to wipe out the sense of "suffocation" that permeates the Japanese economy and to get the brighter perspective for the twenty-first century, we must take a bold step to achieve the drastic reform of the economic structure, while continuing implementation of the policy measures to boost our economy. Regulatory reform is the key to structural economic reform and the first critical step Japan must take in rebuilding a strong economy.

      In a recent consumer study conducted by Keidanren, we found that the overwhelming majority of respondents also thought that regulatory reform serves to revitalize the economy and regulation should be kept to a minimum, whenever possible.

    3. Expectations on the Government in Revising the Regulatory Reform Action Program
    4. The government's 1091 items Regulatory Reform Action Program compiled in March 1995, is of critical importance since it is the first substantial program to outline implementation of regulatory reform measures. To the credit of the Government, original five year program was decided to be front-loaded as the three year program to the fiscal year of 1997 at the time of crafting "the emergency economic measures toward the yen evaluation" of April 14th. The government should also receive credits for early implementation of about one-quarter of 1091 items in the first half year of the program. However, from the standpoint of rebuilding the Japanese economy, we must say that the current government effort is insufficient to tackle the price and entry regulations to adjust demand and supply in the field such as finance, security and insurance, labor, agriculture, etc.

      The regulatory reform sub-committee of the government's Administrative Reform Committee has taken up the forty-six major policy issues and these items are expected to work as supplement for weak points of the above program.

      The government program states that the program will be revised every year based upon the result of surveillance of the Administrative Reform Committee by receiving opinions and requests from concerned parties in Japan and foreign countries. We expect that revising system functions effectively and recommendation to sufficiently expand the program to trigger structural economic reform.

      Keidanren proposed the relaxation of 456 items for the program November 17, 1994 and a little less than a half of these items has been included into the program in somewhat ways. At the time of this revision, we request that the items, which have not been adopted last year, be incorporated and the items, which have been adopted but not effectively be further relaxed. We are asking now to add new items such as follows.

      1. Expectations to the Cabinet
      2. Based on the Program's requirement to "advance revising the program with sufficient lead time", we hope that the reform schedule will be made public as soon as possible. We also expect that the opinions and requests of concerned parties should not be treated as one of the simple public hearings, but as the effective impetus to the program, under the political leadership at the meetings with the Administrative Reform Promotion Headquarters.

        The principle to revise the program is stipulated in the program itself and we expect that the rules listed below will be obeyed with regard to economic regulations:

        1. prompt abolish all entry and facility regulations such as installation and expansion from the standpoint of supply/demand adjustment.
        2. abolish import regulations in principle. Regulations that have a due date imposed by international agreement should be abolished at the date of termination.
        3. abolish price controls. Such regulations should be applicable only to a minimum number of essential public goods and services and implemented in the form of price ranges and price ceilings, etc.

      3. Expectations to the Administrative Reform Committee
      4. We hope that the Committee will fully demonstrate its leadership in assuming its role as a third-party organization. This role requires making bold decisions on the basis of the overall benefit to the nation's citizens and going beyond the narrow limits of vested interests.

    5. Roles That Should Be Played by the Government and the Private Sector to Effectively Implement the Program
      1. The Role of Administration
      2. Economic reform is always accompanied by pain. First of all, in order to minimize the pain and friction that are inevitable during the period of adjustment, the government should make efforts to keep the economy "afloat" through appropriate economic management initiatives. In addition, in order to encourage a mobility of workforce, nurture small and medium-size businesses, and revitalize local economies, additional measures should be considered in certain situations -- The key concern is that policies should be implemented in the manner of centering on both individuals and on independent business which seek for true rescue. Traditional "convoy" approach should be abandoned.

        Second, there is an urgent need for reforms that promote fair competition, if the benefits of regulatory reform are to be shared equally and if we are to avoid the danger of regulatory reform resulting in the "law of the jungle" becoming the norm in business. This may include the strict enforcement of anti-monopoly laws (AML) to promote fair and free competition.

        The need to reform our laws regulating competition is especially acute. An across-the board abolition, including accelerating abolition of cartels exempted from AML based on the separate laws should be undertaken. As well, we recommend a review of policies governing cartels based on the Law Concerning Exemptions, with an eye toward its abolition. We also expect that there will be a review of the Fair Competition Rules, which are a defacto impediment to competition.

        Third, we need to complete administrative reforms on both the national and regional levels. Especially, we expect that local governments will adhere closely to the spirit as well as the letter of federal laws by restraining enactment of any local legislation that enacts additions to federal law. We also expect that local governments will honor the spirit of the Regulatory Reform Action Program and undertake a fundamental review of their local laws. In addition, to ensure fairness and openness in local government administration and operation, we advocate early adoption of local administrative procedure laws to assist in implementation of the Administrative Procedure Law.

      3. The Role of the Administrative Reform Committee
      4. The first obligation of the Committee is to be come the "eyes of the people" by keeping a strict and watchful eye on implementation of the Program as it unfolds. This obligation does not only entail monitoring of the plan's implementation in a timely and appropriate manner: The Committee must seek explanations if results fall short of expectations and must promote further refinements or "fine-tuning" of the Program's provisions, when appropriate. The most important responsibility of the Committee is to make an advice and recommendation, if necessary, for refinement of the Program to the Prime Minister and other cabinet Ministers, as the "voice of the people".

        Second, we expect the Committee to actively provide information to the public. Popular support is essential if the Committee is to fulfill its mandate, and we fully expect the Committee to periodically make public its findings. In these reports, the Committee should widely publicize, using an easily understandable format, the intent of the reform and the steps taken for each individual regulatory reform measure. We hope that the Committee will make thorough efforts to clearly explain the costs and benefits of regulatory reform, using specific economic indicators.

        Third, we expect the Committee to not only monitor the implementation of specific items, but also to ensure that there has been strict observance of past Cabinet decisions on regulatory reform. For example, the Regulatory Reform Action Program stipulates that a review clause should be incorporated in principle whenever a new legal regulation is being adopted. We hope that the Committee observe and evaluate compliance with these decisions and publicize its findings.

      5. The Role of the Private Sector
      6. The role assigned to the business community is a major one. The first task of business is to acknowledge that fundamental economic restructuring is the only route left by which we can reconstruct the Japanese economy. Business needs to begin from the firm position that is committed to active implementation of regulatory reform, with acceptance of the pain that will accompany these changes. Business should work to repeal and revise any regulation that may harm the interests of our citizens and consumers, even if the regulation may have benefited industry. The private sector should therefore work toward realization of an improved quality of life for all citizens through active competition in the market.

        The second task of the private sector is to secure transparency and to stop improper business practices. Keidanren has asked reviews of business practices of member corporations and organizations. In our consumer research, we have also found reports of many abuses from cartel-type institutions. We place a great deal of weight on these finding and should firmly address these opaque practices and institutional restrictions on competition. Correction of business practice will lead society to a deeper, and more solid understanding of and trust in the business community and its activities.

        The third responsibility of the private sector is to demonstrate its dynamic and creative entrepreneurial spirit in applying the benefits of regulatory reform to the creation of new industries and businesses. At Keidanren, we recently requested that our members earnestly employ the positive results of regulatory reform, and we will continue to urge members to put the "fruits" of regulatory reform to good use.

  2. Specific Request Items
  3. The main points in each sector are outlined below.

    (1) Land and Housing Sector

    (2) Information and Communications Sector

    (3) Distribution Sector

    (4) Agricultural Sector

    (5) Transportation Sector

    (6-1) Commercial Sector

    (6-2) Sectors Related to the Asia-Pacific Economic Cooperation Conference (APEC)

    (7-1) Financial and Insurance Sector

    (7-2) Securities Sector

    (7-3) International Financial Sector

    (8) Energy Sector

    (9) Environmental and Waste Products Sector

    (10) Maintenance and Safety Sector

    (11) Economic Regulation and Accounting Sector

    (12) Technology Development Sector

    (13) Competition Policy Sector

    (14) Nonprofit Foundation Sector

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