Seeking Action of Regulatory Reform for the 21st Century

Norio OHGA
(Vice Chairman, Keidanren (Japan Federation of Economic Organizations) / Chairman, Committee on Administrative Reform / Chairman of the Board, Sony Corporation)

Japan needs regulatory reform in order to create an economy and society appropriate to the 21st Century

In the half century since World War II, Japan strove to reconstruct itself and develop its economy. These were its national goals. In the last few years, however, Japan's socio-economic structure has begun to experience systemic fatigue. The fatigue has shown itself partly in the long-lasting economic stagnation, and the major changes in the environment (e.g., the borderless economy and the accelerating development of the telecommunication) are pressuring for the socio-economic system to change. Regulations and rules should exist to help the nation realize its vision and adapt to changing times. However, in the case of Japan, regulations which does not match reality, or which outlive their usefulness, still tends to remains. Many of them have become the treasures of vested interests. Some regulations date back to the Meiji "modernization" period of Japanese history, or to the period that lead to Japan's rapid economic growth. What is needed now is to abolish regulations that are no longer necessary, and to create a new set of rules that will help Japan renew itself for the 21st century. In order to ensure that Japan continues to play an important role in international society, and to realize the economic growth that enrich people's lives, we need to change our economic structure and create a private-led society based on self-reliance and self-help. For this purpose, we must continue, strengthen and accelerate regulatory reform efforts.

Regulatory reform shows steady progress

Government efforts at regulatory reform have gathered momentum in recent years. The first three-year Deregulation Action Program started in fiscal year 1995 (April 1995-March 1996). This program was begun as a result of the report of the Economic Reform Study Group (an advisory body to Prime Minister Morihiro Hosokawa) under the chairmanship of Mr. Gaishi Hiraiwa, then chairman of Keidanren.

The Administrative Reform Committee, an independent body set up within the Prime Minister's Office, has monitored the progress of action program implementation. The committee has also coordinated varying opinions relating to additional tasks that need to be addressed. The government has sought to improve the substance of programs by revising them at the end of each fiscal year considering these opinions as well as a wide range of perspectives on deregulation from other parties both inside and outside Japan.

Keidanren has participated in preparing a framework to promote regulatory reform. And it has made specific requests for reform to relevant government agencies. These requests are based on an annual questionnaire answered by member companies and organizations in an effort to ensure that the views and wishes of the business sector are reflected in the Deregulation Action Programs.

Regulatory reform has been carried forward on the theme of "abolishing economic regulations in principle and keeping social regulations to a minimum." Progress has been seen over the course of the two three-year Deregulation Action Programs (April 1995-March 1998 and April 1998-March 2001), due, mainly, to the active efforts of the Regulatory Reform Committee (successor of the Administrative Reform Committee). In particular, stronger competition -- resulting from the abolition of regulations relating to market entry and plant and equipment, which were designed to adjust supply and demand, and the relaxation of fee and price regulations -- has brought consumers various benefits in the areas of telecommunications, transport, retail distribution, and many others. A wide range of new services, and lower fees, fares, and prices has been introduced. At the same time, the scope of regulatory reform has been expanded to include recruitment, labor, education, legal services, and other fields where less progress in deregulation had been evident. This has resulted in greater industrial competitiveness, the creation of new industries and jobs, as well as other benefits.

Much still to be done

Nevertheless, there is still much to be done on the regulatory reform front, particularly when it comes to addressing the problems accompanying institutional reform.

Even though the theme of "abolishing economic regulations in principle" has been introduced, typical economic regulation still can be seen in some areas such as transport, customs clearance, retail distribution, and energy in spite of repeated cabinet decisions to review the situation.

There are many regulations and systems that hinder our approach to the problems presented by economic globalization and IT revolution. To take the IT revolution as an example, the government is currently tackling the expansion of what can be processed electronically under e-commerce (review of requirements concerning document delivery, affixing signatures and seals, person-to-person explanation, and so forth) and the implementation of "electronic government" through the introduction of electronic application procedures for government approvals and authorizations. However, it is equally important to rethink the application procedures themselves. For example, an application for the creation of mining rights requires as a supporting document a hand drawing of the sector boundaries in Japanese ink or pigments on handmade Japanese paper. As long as such regulations remain in force, even if electronic application procedures are introduced the realization of electronic government in the true sense of the word will not occur.

Consequentially, Keidanren prepared a document in October 2000 urging "Resolute Promotion of Regulatory Reforms and the Establishment of a New System for the 21st Century." In this we proposed that a new three-year Deregulation Action Program should be adopted when the present program comes to an end in March 2001. We also suggested that an authoritative body reporting directly to the prime minister be formed to tackle a wide range of issues from the standpoint of institutional reform of the economy and society.

Regulatory reform appropriate to the 21st century

The government approved an outline of administrative reform on December 1, 2000. This outline included the formulation of a new three-year Regulatory Reform Action Program starting in fiscal year 2001, and the establishment of a new framework to study and promote the implementation of regulatory reform. Specifically, it was decided to formulate a new three-year action program by the end of fiscal year 2000, taking into account the views of the Regulatory Reform Committee, the New Action Plan of the Industrial Rebirth Council, the Basic IT Strategy of the IT Strategy Council, as well as other views and requests from both inside and outside Japan. Therefore Keidanren, for its part, will continue to lobby relevant parties with a view to getting as many as possible of our October 2000 proposals to the government-356 items in 16 sectors-to be adopted in the new three-year action program.

The government will study the possibility of setting up a consultative body within the new Cabinet Office. The body would promote wide-ranging regulatory reform with structural reform of the country's economy and society in mind. It would form a concrete plan by the end of fiscal year 2000, taking into consideration the views of the Regulatory Reform Committee.

Keidanren intends to continue to watch the government's efforts at ensuring a consultative organ to be set up as part of the institutional structure. This organ, as a principally private-sector body, should be capable of putting forward objective proposals, as recommended by the Regulatory Reform Committee. We must also ensure that, from the point of view of structural socio-economic reform, it will have the functionality to apply itself to the task of reviewing not only individual regulations but also related systems.

The need for strong political leadership

It goes without saying that the determined implementation of regulatory, or indeed any, reform requires strong political leadership. At this point of transition to a new century, vigorous efforts are being made under the leadership of the government and the heads of the governing parties to clarify the form that the administration should take in the 21st century. We strongly hope that significant results will be achieved.

At the same time, regulatory reform is not a matter for the government alone. It is a task for industry. I believe that industry must rethink its attitude and act on the basis of self-reliance, self-help, and responsibility for its actions.