"For the promotion of deregulation aimed at economic revival and the establishment of a transparent system of governmental management"

Basic Thinking

October 20, 1998

Our nation's economy faces its greatest crisis in the postwar period, and we stand now at a crossroads at which our ability to build an "attractive Japan" for the 21st century is at stake. At a time when the world is moving into an age of mega-competition which requires innovative approaches and a spirit of bold endeavor, this nation, as the Administrative Reform Council has pointed out, is enveloped by a variety of state regulations, conventions, and customs, which have molded a society of striking uniformity and rigidity. To prevail over this dead-end situation, structural reform of the economy and society is essential, and ridding the nation of the barriers of regulation is particularly important.

While we recognize that a significant amount of progress has been made under the previous 3-year Deregulation Acthion Programs (DAP) , the fact the present Keidanren questionnaire survey elicited a total of 1800 demands for deregulation from 264 enterprises and organizations demonstrates precisely how stubborn the barriers of regulation are. There is a need to review individual regulations and eliminate or relax them, and, in conjunction with the reform of the central government ministries etc. being undertaken in preparation for the shift to the new system on January 1, 2001, to implement greater systemic transparency in governmental management.

In the following, we would like to express once again the business and industrial community's thinking with regard to measures to promote deregulation.

  1. Reinforcing the system for promoting deregulation
  2. A number of reasons can be cited for the disappointingly slow results that have emerged to date despite the considerable deregulation that has taken place. For example, these include:

    1. instances in which, despite a change from a system of licensing to one of prior notification, actual implementation is the same as a licensing system because standards of processing remain unaltered {transportation tariffs etc.};
    2. instances in which the impact of deregulation cannot be realized because an activity is regulated by multiple laws, and although regulations have been relaxed under one set of laws, they remain in effect under others {four public safety laws; shift to ex post facto notification under the Act for Planning the Utilization of the National Land, and prior notification under the law relating to promotion of expansion of public-owned lands};
    3. instances in which coordination is extremely time-consuming due to the large number of ministries involved {matters relating to computerization of government};
    4. instances in which, despite the relaxation of regulations, benefits cannot be substantially utilized because administration by local governments, and tax and other related systems, are not changed {the response of local governments to the system of high-level land-use districts aimed at functional renewal; tax systems relating to pure holding companies and to stock option systems, etc.};
    5. cases in which long periods of time are required from the policy decision to deregulate until actual deregulation, and in which strict reviews are unexpectedly mandated in exchange for de-regulation {move to self-service operations at gasoline stations; population standards for retail liquor licenses; authorization of independent security, etc.}; and
    6. cases in which de facto regulatory authority is shifted to public service corporations, and the system changes to one of so-called "private-private regulation" {standards; certifications, etc.}.
    To prevent deregulation from ending up as superficial treatment only , there is a need to reinforce the system of promoting and monitoring deregulation. There is also a sense of irritation being conveyed to us from overseas about "a Japan that doesn't live up to expectations for change," and the speed has also become an extremely important element in deregulation.

    To expedite the process, powerful political leadership is essential. In addition, based on the final opinion of the Administrative Reform Council issued last December, there is a need to reorganize the current Committee on Deregulation into a more significant third-party body with statutory responsibility for drafting plans and monitoring the process of deregulation and of reviews of related systems. This third-party agency should be granted the right to demand material from government ministries and the right to make recommendations to the cabinet. In Addition, a secretariat of substantial size, capable of conducting its own surveys of the status of deregulation and of quantitatively assessing deregulatory measures before and after implementation, should be placed under this agency.

  3. The establishment of a transparent system of governmental management
  4. The Basic Law on Reform of Central Government Ministries Etc., dealt as much with the principles of regulation as with the strengthening of Cabinet functions and the simplification and enhancement of government efficiency. With regard to regulation, the act provided that the emphasis be shifted from ex-ante regulation to activities based on the free will of the private sector. Indeed, what is required now, in addition to the relaxation of individual regulations, is the establishment of a transparent system of governmental management. While working steadily toward the concretization of the basic law, there is a need to develop a system which will supplement these efforts.

    Specifically, there is a need first of all to place so-called administrative legislation - the government and ministry ordinances, announcements, official notices, etc. that are set by administrative agencies - under democratic control. Beginning in areas where it would be feasible, a system of public comments should be introduced, and after know-how is accumulated, a Law on Procedures for Administrative Legislation (tentative name) should be promptly established.

    Secondly, regarding the Government Ministries Organization Law, which is frequently cited as the basis for administrative guidance, steps should be taken to prescribe, in precise and concrete terms, where agencies have jurisdiction and to eliminate the authority-granting provision.

    Thirdly, the Administrative Procedures Law provides with respect to administrative guidance that "when issuance in writing is requested, the government must issue such written guidance, so long as no extraordinary administrative obstacles prevent it from doing so." However, in view of the superior position of the governing agencies, the law should be amended so that administrative guidance is executed in writing as a rule.

    Fourthly, when citizens' rights and interests are jeopardized by illegal and unfair regulations, establishing a proper system that allows for easy and rapid lodging of objections, and for prompt remedies becomes a deterrent to such illegal and unfair regulations. The present system for evaluating complaints against the government is defective because the system is complex and offers little prospect of relief. Hence there is a need to amend the Law on Suits Relating to Governmental Incidents and the Law on Evaluation of Complaints about Government in order to make the system easy to use by citizens. In addition, examinations of the concept of an Administrative Ruling Agency should be expedited.

    Fifthly, the release of government information is important for increasing the transparency of governmental operations, and we urge the prompt passage of the Bill to Release Government Information, which the government has introduced to the Diet.

  5. The establishment of autonomy, self-reliance, and individual responsibility, and the utilization of deregulation
  6. The criticism exists that, in the face of calls for deregulation, it is industry that is seeking regulation. Eliminating or relaxing economic regulations and leaving things to be settled through fair competition in the market is the global trend, and business concerns that remain content with regulations and fail to innovate will eventually be forced out of the market. The business and industrial community must endeavor to refine and strengthen its capabilities on the basis of the principles of autonomy, self-reliance and individual responsibility so as to avoid being criticized for agreeing in principle but refusing to act on specifics.

    We firmly believe that displaying an entrepreneurial spirit in a deregulated environment, and aggressively developing new businesses and industries are duties of the business and industrial community, and that such actions constitute the means of contributing to economic revival.

  7. Priority issues
  8. The basic thinking and specific demands for deregulation in each area are as spelled out in Parts 2 and 3. Important issues that we believe would have a particularly large impact on the economy and employment creation, and that should be given priority in implementation are as follows.

    {Priority issues}
    Note: + ... Issue thought to have a large impact on the economy
    * ... Issue expected to make a contribution to employment creation

    1. Employment and labor
    2. {Basic thinking: To sustain economic vitality through greater advances in the industrial structure, a system for adjusting the supply and demand for labor must be developed in a way that supports smooth labor mobility and increasing diversity in employment modes.}

    3. Pensions
    4. {Basic thinking: Radical reform of corporate pensions systems should be pursued as a unity with reform of public pension systems}

    5. Health care and social welfare
    6. {Basic thinking: To restore the soundness of insurance finances and to enable providers to supply health care and social welfare services that meet the varied needs of citizens, the principle of full-fledged competition should be introduced into the fields of health care and social welfare.}

    7. Education
    8. {Basic thinking: Reforms should be pursued that enable education to respond to environmental changes, such as globalization, the spread of sophisticated informational technologies, the trend toward falling birthrates and a graying society, etc.}

    9. Law
    10. {Basic thinking: It is essential to improve and construct a legal system that draws out the corporate vitality needed to sustain and strengthen the international competitiveness of our nation's companies.}

    11. Distribution
    12. {Basic thinking: Restrictions on entry adopted from the standpoint of adjusting supply and demand should be promptly abolished.}

    13. Land, housing and public works
    14. {Basic thinking: In order to create high-quality living spaces that make it possible for the nation's people to live diverse lifestyles, there is a need to develop good-quality housing and to expedite appropriate land use. Furthermore, there is a need to promote greater liquidity in land markets in order to foster ideal urban development.}

    15. Environmental conservation, centering on waste material
    16. {Basic thinking: Deregulation is necessary to promote recycling and to support voluntary efforts by business operators to protect the environment.}

    17. Hazardous material, disaster prevention, safety
    18. {Basic thinking: The prevention of accidents and disasters is only possible through the independent endeavor of companies, whose efforts will be based on improvements in levels of technology etc. Reevaluations should be made that are appropriate to the degrees of technological improvement and levels of safety involved.}

    19. Information, communications
    20. {Basic thinking: As a means of sustaining and developing economic vitality, and of securing employment opportunities, data communications has a potentially large role to play. To infuse life into the data communications market, there is a need to develop the market both in terms of the supply side and the demand side.}

    21. Finance, securities, insurance
    22. {Basic thinking: As finance grows increasingly sophisticated, there is a need to enhance user convenience and to strengthen the competitiveness of the financial industry through promotion of competition in the industry.}

    23. Transportation
    24. {Basic thinking: From the standpoint of rectifying the high cost structure of the Japanese economy, greater efficiency of distribution should be promoted through deregulation of goods distribution.}

    25. Energy
    26. {Basic thinking: The three issues of securing a stable supply of energy, making further reductions in costs, and dealing with the problem of global warming must be solved in a balanced way while sustaining economic vitality. To achieve this objective, voluntary efforts by the private sector must be pursued.}

    27. Trade and investment
    28. {Basic thinking: In order to foster the development of our nation's economy while encouraging harmony with international society, Japan must eliminate as many trade-related barriers as possible at points of entry, and, while adopting the perspective of business, conduct a review of its various trade-related procedures.}

    29. Agriculture
    30. {Basic thinking: While taking the initiative to introduce the principle of independent responsibility into agriculture and utilizing the market principle in that sphere, Japan should promote policies that elicit the vitality of the full-time farm households and farming corporations that will be the driving force for agriculture.}

    31. Other

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