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Keidanren Urges the Government to Resolutely Carry out Sweeping Regulatory Reforms


(Japan Federation of Economic Organizations)

October 19, 1999

Vice Chairman Ohga's Press Conference on Japan's Regulatory Reforms

On October 19 Keidanren adopted a document appealing for regulatory reform titled "Urging the Government to Resolutely Carry Out Sweeping Regulatory Reforms", which was presented on the same day to the government's Committee on Regulatory Reform and others concerned.
The Keidanren's recommendation includes:

  1. The establishment of a market-led socio-economy based on self-accountability for the twenty-first century;
  2. the need for sweeping regulatory reforms consistent with measures to shore up competitiveness, promote consumer interests, and increase employment, rather than piecemeal lifting or relaxing of regulations;
  3. the promotion of regulatory reforms geared to such changes in the socio-economic environment as the fluidizing of employment, the decline of the birthrate and graying of the population, and increased reliance on information technology.
The document puts forward 451 specific items for reform, including the further relaxation of the Special Purpose Company Law and the Real Estate-Specific Joint Venture Law; the revision of four public safety laws to harmonize with international standards and unify domestic regulations; the application of regulations relating to the formation of consortia to enhance the international competitiveness of Japanese firms; the more flexible application of regulations on the duration of employment of temporary staff; the return of the delegated responsibility for the public pension portion of the employees' welfare pension fund; and the digitalization of receipts forwarded by the Social Insurance Medical Expense Reimbursement Fund to insurers.

  1. Establishment of the Market-Driven Socio-Economy Based on Self-Accountability for the 21st Century
  2. The economy of Japan is undergoing the gravest crisis since the war, and the dislocations it has caused are pressuring businesses - indeed, the economy itself - to drastically restructure and rationalize their operations. Meanwhile, the people are facing increasing uncertainties created by e.g. growing job insecurity and the increasingly shaky pension system.
    To overcome these difficulties and build and maintain a vibrant economy ahead of the 21st century, it is essential to create an economic environment conducive to displaying individual initiative without unnecessary concerns by restructuring the economy from the government-led and government-dependent one which has been in existence since the Meiji Era (1867-1912), to a market-driven one, based on self-accountability. To accomplish this, the existing regulatory framework which lost its flexibility and which now works to protect vested interests has to be reformed boldly, and in its place created a free, fair, and transparent regulatory regime based on the principle of self-accountability and market discipline in a way consistent with the protection of consumers and the environment.
    A very important factor that determines the success - or failure - of this endeavor is speed. No doubt political pressure ba various groups will be brought to bear on such undertakings to tackle the vested interests to thwart the efforts, but the government must press ahead with reform programs by winning popular support and sympathy through full and timely disclosure of information concerning such reform programs.

  3. A Sweeping Regulatory Reform, not Piecemeal Deregulation
  4. As the Organization for Economic Cooperation and Development (OECD) pointed out in its April 1999 report on Japan's regulatory reforms, the necessity for carrying out regulatory reforms in ways consistent with the regulatory regimes of other industrial nations - not just piecemeal deregulation of isolated areas, but a comprehensive reform that covers policies for encouraging competition, the protection of consumers, the disclosure of information and the promotion of employment - has taken on a growing urgency. For instance, it has long been pointed out that the streets of Japanese cities have no sense of planning in terms of the color or the height of buildings. It is also pointed out that the difficulty of expropriating private land was responsible, at least in part, for the delay in developing infrastructure. Other instances pointed out include the inadequacy of security-related systems and the laggard development of safety nets in the such areas as finance and employment. These shortcomings call for further abolition or the relaxation of regulations and, at the same time, the establishment of new rules geared to meet challenges of the 21st century. In April this year, the government has changed the name of its Committee on Deregulation to the Committee on Regulatory Reform, to signal its commitment to promoting regulatory reform which places more emphases on instituting new rules designed not just to relax or abolish the existing regulations but to facilitate the conversion of the regulatory regime into one based on an after-the-fact checking system, and systemic development of competition rules. We look forward to seeing these efforts succeed.
    Meanwhile, businesses that had grown complacent within the protective regulatory wall and failed to make self-renewing efforts have fallen out of favor of the markets, here and abroad, and are being forced have out of the market. Business should, from global perspective, remind themselves of the need to break with the away from reliance on government by self-imposing the disciplines of self-help, self-reliance and self-accountability, and establish business ethics from global perspectives to win the trust of consumers and people at large.

  5. Main Perspectives of the Regulatory Reform and Issues to be Addressed
  6. Since the first half of the 1990s, the government has dealt with a number of regulatory problems with success particularly in certain economic areas. As a result, new industries and employment have been created, and the convenience of consumers has improved markedly. However, many problems have yet to be addressed, and need for a bold reform from the perspectives set forth below is more acute than ever.

    1. Regulatory Reform to Revitalize the Economy
    2. Revitalization of the economy is a task of great urgency facing the nation. To do this, it is of utmost importance to relax or abolish across the board the regulations in existence in various fields of economic activity, especially those that impede entry into new markets or those restricting the creation of new facilities or free and competitive pricing, and create an environment in which businesses and individuals can freely enter the market and display their talents and initiative under the market discipline.
      Successive Cabinets have decided on repeated occasions to review, with a view to abolition, the existing regulations restricting entry of new competitors to check the development of oversupply of certain categories of goods or services. However, the licensing system for the production and distribution (wholesale and retail) of alcoholic beverages, retailing of tobacco products, transport service (taxicab) and customs brokers etc., are left in place. In addition, restriction on service areas of trucking companies, permit system for establishing branches by banks and marketing new products by insurance companies are still left in place. These should be abolished, in principle, as soon as possible.
      Furthermore, as regards areas where the entry of private firms has been restricted, such as the establishment and management of public facilities, and testing and certifying goods etc., the entry of private firms should be encouraged to realize a small government, vitalize these areas of activities, improve services and cut costs through freer competition.

    3. Regulatory Reforms to Strengthen the Competitiveness of Industries and Rectify the High-Cost Structure
    4. To revitalize the economy by strengthening the competitiveness of industries of this country and by enabling them to supply quality goods and services at a lower cost, regulations that restrict their activities and add extra costs to their goods and services should be overhauled. The regulations relating to the procurement of raw materials (such as the price support for wheat and sugar), energy-related regulations, those relating to the distribution service (such as specifications for automotive vehicles, etc.) and those relating to building lots and housing units (such as the requirements of a parking space and waterworks, as a condition for housing development etc.) should be reduced or rationalized as soon as possible. What is more, the existing competition policy should be reviewed to help the companies of this country compete with their Western counterparts on an equal footing in world markets.

    5. Regulatory Reforms Geared to Changes in the Socio-Economic Environment
    6. In response to increasingly diversified and fluid employment, rapid progress of decline of the birthrate and the aging of the population, changes in economic and social environment e.g. growing demand for the establishment of recycle-based society and the increasing pace of computerization, pressure is growing for overhauling the existing regulations that have been instituted on the basis of the past life- and business style of individuals and companies, and the scope of their activities. They include regulations that impede the mobility of labor, those hampering the efficiency of welfare and health-care services, those relating to waste disposal, which does not reflect the "reduce, reuse, recycle" concept, and various business laws that stand in the way of the efficient employment of electronic technology, such as business transactions through the Internet, which are expected to grow rapidly in coming decades. It is necessary to overhaul these regulatory system in a flexible manner, in keeping with changes in the demand of the times.
      Furthermore, the existing system requiring individuals and businesses to obtain permits or authorizations from narrowly defined local administrative subdivisions imposes unnecessary burden on them. The national government should draw up guidelines to simplify and rationalize these formalities.

  7. Specific Regulatory Reforms Requested
    1. Regulatory Reforms Contributing to the Revitalization of the Economy
    2. Regulatory Reforms Contributing to the Strengthening of Industrial Competitiveness and the Rectification of High-Cost Structure
    3. Regulatory Reforms Geared to Coping with Changes in the Economic and Social Environment
    4. (For the creation of jobs and the facilitation of labor mobility) (For the reform of systems relating to pension, medical service and welfare) (For Educational Reform) (For the realization of recycle-society) (For building an information-oriented society)

    5. Other Matters

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