Journal Name: Social Science Japan Journal: April 1999, Vol. 2, No. 1
Print ISSN: 1369-1465, Online ISSN: 1468-2680
An introduction to this issue's special topic: deregulation and the Japanese economy (pp1-2)
Can Japan disengage? Winners and losers in Japan's political economy, and the ties that bind them (pp3-21)
SK Vogel (University of California, Berkeley, USA)
The Japanese economy has long been divided between world-class manufacturers, on the one hand, and uncompetitive small enterprises, inefficient service industries, and staunchly protected farmers, on the other. Recent economic troubles have made the system's inefficiencies less tolerable, exacerbating the conflict of interest between the two. In political terms, however, the two Japans have not parted ways. Japan's post-war system bound the competitive and protected sectors to each other through political bargains and economic relationships. And despite enormous pressures for reform, this legacy continues to slow the pace and shape the content of Japan's economic liberalization today. Those groups with the greatest stake in liberalization, such as consumers and exporters, have not always defined their policy preferences in terms of their economic interests narrowly conceived, and have not always demanded liberalization even when they favored it. And when they have advocated it, they have not achieved clear-cut victories but only complex compromises, with considerable compensation for the potential losers from liberalization.
Financial fragility and recent developments in the Japanese safety net (pp23-43)
A Horiuchi (University of Tokyo, Japan)
The bad loan problem of the early 1990s has revealed the fragility of the Japanese banking system. This paper examines how the safety-net mechanism operated by the Ministry of Finance (MOF) created this fragility. Although the safety net protected most depositors and other investors from losses associated with bank failures, MOF did not implement prudential regulations to prevent moral hazard that this comprehensive safety net was likely to elicit from bank management. The personal ties between regulatory authorities, particularly MOF, and private banks, cemented through the so-called amakudari system, were not effective in disciplining bank management. Rather, the amakudari system reduced bank capital and thereby made the banking system more fragile. This fragility did not come to light during the high growth period because stringent competition-restricting regulations worked to support the fragile safety net. However, deregulation and structural changes in domestic financial markets removed this support. Thus, as financial deregulation proceeded, it became increasingly likely that the potential fragility would surface. The extremely easy money policy since the mid-1980s and the drastic move to a tight money policy after the late 1980s were just the prelude to turmoil in the Japanese banking sector.
Historical features of Japan's public utility laws and the limits of 'deregulation' (pp45-63)
D Kishii (Faculty of Law, Hosei University, Japan)
Since the pre-war era, and especially since the financial crisis of the early 1930s, a conspicuous feature of Japanese legal institutions surrounding public utilities has been their regulation through bargaining with utility operators' cartels. This feature was reinforced by wartime economic policies that promoted an artificial concentration of economic power, and then by the seriously limited nature of post-war reforms undertaken during the occupation. In the resulting environment of weakened regulation, the practice of applying public utility law by making use of bankruptcy-resistant cartels took root. It was not until the early 1990s, with the government's decision to abolish, in principle, 'supply-demand balancing' requirements, that the regulatory mechanisms dating from pre-war days were subjected to comprehensive and serious reform for the first time. The reforms under way, however, are open to question on a number of counts, including the implementation of the Antimonopoly Act and competition policies, the reform of regulatory agencies and regulatory procedures, and the redesign of the new regulatory mechanisms needed to accomplish meaningful change. In light of these questions, the possibility still exists that the regulatory measures deemed necessary for promoting competition among public utilities and securing universal services will be distorted by various forms of bargaining. The success or failure of the ongoing reforms of public utilities needs to be judged on whether or not the new form of legal regulation can base itself on new foundations and, by overcoming these problems, stake a claim to legitimacy.
Deregulation in Japan and the role of Naiatsu (domestic pressure) (pp65-84)
A Kusano (Faculty of Policy Management, Keio University, Japan)
This paper examines the progress of deregulation in Japan, and attempts to explain why that progress seems to have accelerated in recent years, despite an entrenched structure of vested interests. Most observers cite the role of gaiatsu, or foreign pressure, particularly from the USA. But this explanation seems inadequate, as evidenced by the fact that the current deregulation program includes measures that have not been explicitly requested by the USA or other foreign countries. I present an alternative view here that focuses on five domestic factors: the installation of the Hosokawa administration that began pushing for regulatory reform in 1993; fortuitous political events that sustained this momentum even after the LDP returned to power; the government's weak fiscal position, which forced it to reject the typical Keynesian approach of 'pump-priming' and instead pursue deregulation to invigorate the economy; the relatively open deliberations of the Commission on Administrative Reform; and the increasing internationalization of Japanese firms. These factors combined to produce naiatsu, or domestic pressure, to step up efforts in Japan to eliminate or ease regulations.
The road to economic re-entry: Japan's policy toward Southeast Asian development in the 1950s and 1960s (pp85-105)
A Suehiro (Institute of Social Science, University of Tokyo, Japan)
This paper examines the changes that took place in the 1950s and 1960s in Japan's perception of and policies toward Southeast Asia, and clarifies how Japan's road to economic re-entry into the region was paved. By re-examining various views about the region expressed by Japanese political leaders, bureaucrats, business officials, and renowned academics, the author seeks to demonstrate that most of the key concepts that now guide Japan's economic policies toward the region, such as economic development, a common market, and regional co-operation, were coined, and gained influence, as early as the 1950s.
Following the Yoshida government's effort to enhance Japan's economic ties with South and Southeast Asian countries, the Kishi government hammered out a concrete formula for Japanese economic re-entry, based on a trinity of war reparation payments, economic development and economic co-operation. Prime Minister Kishi visited various countries in Asia in 1957, presenting his proposal for a 'Southeast Asian Development Fund' as a vehicle for promoting industrial development of the region. Although his proposal foreshadowed the initiative Japan would take in support of the 'developmentalist regimes', which would emerge later in the region in the 1960s, it failed to win the support of the 'developmentalist regimes', which would emerge later in the region in the 1960s, it failed to win the support of either the USA or the leaders of Asia. None the less, Kishi's idea was crystallized in the founding of two important government-funded organizations engaged in economic co-operation (i.e. OECF and AOTS), and a government-sponsored research institute specializing in Asian studies (IDE). At the political level, Kishi's policy was ultimately put into effect by the Satő government when it hosted the first Ministerial Meeting on Southeast Asian Development in Tokyo in 1966, which marked the beginning of both Japan's full-fledged commitment to support the USA in the Vietnam War, and Japan's economic re-entry into Asian markets.
Noda Shoichi and Roku-Roky Shoten, a machine tool manufacturer: a case study of a competent small-to-medium-sized enterprise in pre-war and wartime Japan (pp107-122)
M Sawai (Graduate School of Economics, Osaka University, Japan)
This study of business history in Japan has been concerned primarily with pre-war zaibatsu concerns and post-war corporate groups. Smaller businesses seldom attracted attention, except when discussion turned to the Japanese economy's 'dual structure', and the large wage and productivity gap between these and larger businesses. On those occasions, the former were usually portrayed disapprovingly as 'socially weak'. But Western researchers have recently come to pay closer attention not only to Japan's system of mass production, but also its system of 'flexible specialization', in which smaller businesses are important players. This system is viewed by many today as a key to Japan's industrial development. Advocates of the new school of thought maintain that the relative advantage of 'flexible specialization' is a function of neither industrial policy nor market mechanisms, but rather of 'politics' in a broad sense, including workers' career expectations, industrial relations, interfirm competition, a subcontracting system, and many other factors. But they fall short of answering the question of how all the forces constituting this concept of 'politics' can or should be ordered.
A first step toward answering the question through empirical study, this paper focuses on the machine tool industry in pre-war Japan, which was instrumental in sustaining the country's industrial growth, and even more narrowly - through a case study - on Roku-Roku Shoten, a typically small but competent firm led by its owner/manager Noda Schoichi. It traces the history of this enterprise from its establishment to its ordeal under the wartime control regime. The paper has two aims. One is to elucidate the process by which Roku-Roku Shoten developed from an import agency of machine tools, to a general trader of both foreign and domestically made machines, to a manufacturer of machine tools, and the process by which it accumulated technological expertise. The other objective is to examine the role Noda played in organizing and leading trade associations of small-sized manufacturers and traders of machine tools, and to examine, in particular, how he tried to co-ordinate conflicts of interests among members as they coped with the government's tariff reform policy in the 1920s, and the industrial policy favoring big business that was enforced as part of the wartime control regime following the outbreak of the Japan-China War in 1937 until the end of the Pacific War.
Social Science Japan Journal (1999)
Copyright ©1999 Oxford University Press
(This journal is available online at: http://ssjj.oupjournals.org/)
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