News / Asia

    History Casts Doubt on Bold Japan Economic Reform

    People look at an electronic stock board of a securities firm in Tokyo, Feb. 25, 2013.
    People look at an electronic stock board of a securities firm in Tokyo, Feb. 25, 2013.
    Reuters
    If past is precedent, optimists hoping Japanese Prime Minister Shinzo Abe will defy vested interests to take bold action to open the country to more competition as a way to spur growth could well be in for disappointment.

    Japan's list of reports urging reforms date back almost three decades and have rarely led to the bold action that critics say is needed to dig the economy out of stagnation.

    Abe, who got a rare second chance at Japan's top job after his Liberal Democratic Party's (LDP) election win in December, has made structural reforms, such as deregulation, the "third arrow" of his "Abenomics" plan to revive the economy.

    But skepticism runs deep that he can be as successful with economic reform, which experts say will be the acid test after  his first two "arrows" of fiscal spending and hyper-easy monetary policy, a combination that spurred a stock market rally and bolstered Abe's popularity ratings.

    "People somehow think that Japan can get by so it's not really necessary to take painful steps," said Junji Annen, a professor at Chuo University who has sat on several past deregulation committees and is now a member of Abe's new panel.

    "We've been saying for a quarter century that action must be taken. I don't think this time will be all that different," he said, adding the government would face opposition to reforms and might well end up taking incremental rather than drastic steps.

    "I worry that if the economy gets a bit better, they will ease up on reform," Annen said.

    Proposals by a panel on industrial competitiveness and another on regulatory reform will be key to a growth strategy that Abe will unveil in June, ahead of a July upper house election that his ruling bloc needs to win to cement its grip on power.

    Abe's advisers, however, are split over how extensive a role government should play in economic affairs. Some are keen to see public funds invested in key sectors, while others want to loosen the government's tight grip that critics say stifles innovation and new businesses.

    Among the topics under discussion are loosening employment rules to make it easier to shed workers, deregulating medical and child care sectors, promoting use of the Internet, reforming corporate governance and overhauling electric power utilities.

    REFORM REFRAIN

    The list of reports urging reforms date back at least as far as the landmark Maekawa Report in 1986, when former central bank chief Haruo Maekawa and other advisers urged policymakers shift from export-led growth, to open markets and to make regulations the exception rather than the rule.

    Within months of the report's issuance, foreign diplomats were complaining that Prime Minister Yasuhiro Nakasone had reneged on promises of change.

    Taking up the reform refrain, a blue ribbon panel headed by business lobby Keidanren chief Gaishi Hiraiwa in December 1993  again urged the government to cut the red tape that was stifling growth. Four months after taking that advice on board, Morihiro Hosokawa had quit as prime minister, toppled by talk of a scandal and cracks in his unwieldy reformist coalition.

    Much of Japan's past two "lost decades" of meager growth -including five years under an ostensibly pro-reform premier, Junichiro Koizumi - were also marked by promises to deregulate the economy. Many were kept, but many were not.

    "The same issues have come up again and again," said Yoshihiko Miyauchi, the chairman of financial services firm Orix Corp, who served on a deregulation panel under Koizumi from 2001 to 2006.

    "It's simple - everything we need to do and how to do it can be written up in a day. After that, it's a question of whether it gets done or not," Miyauchi told Reuters in an interview.

    To be sure, few would argue that no progress has been made. Former economics minister Hiroko Ota, a member of Abe's deregulation panel, says deregulation has proceeded.

    "It is a very slow process but it has proceeded," she said, citing a freeing up of financial services and the telecommunications sector as two key examples.

    Still, Japan's World Bank ranking for ease of doing business slipped in 2013 to 24th place from 20th the year before, mainly because other economies implemented more aggressive changes.

    Singapore ranked first, followed by Hong Kong, while the United States came in fourth and South Korea eighth. China moved up to 91st from 151st.

    "PRO-ZOMBIES, ANTI-ZOMBIES"

    The split between advisers casts doubt on just how drastic any loosening of bureaucratic controls will be.

    "We don't have explicit confrontations and we don't yell at each other in meetings, but I am sure that there are different philosophies about how, and how much, the government should be involved in creating the strategy and reforming particular industries," Hiroshi Mikitani, CEO of e-commerce operator Rakuten and a member of the industrial competitiveness council, told Reuters.

    Some panel members, such as Takeshi Niinami, CEO of chain store operator Lawson Inc, played down that gap, saying it reflected different perspectives based on companies' core businesses. Some, like Rakuten, want the government to step aside and allow innovation now; others in fields where investments may not pay off for decades want official backing.

    Others, however, expressed concern that Abe's LDP would stick to its roots as a "big government" party especially if, as many now expect, it wins big in the July election. "The LDP is not a 'leave us alone' party," Chuo University's Annen said.

    "It's in favour of a controlled economy."

    Former U.S. trade official Byron Sigel, who negotiated bilateral trade deals with Japan in the late 1990s, echoed those doubts given the persistent clout of anti-reform interests.

    "The problem with the way the reform process has been set up is that there is an over representation of entrenched older industries who have the size, connections and motivation to maintain the existing system," said Sigel, who now works for a global U.S.-based device and pharmaceutical firm.

    "The industries of the future, the industries that need a more open deregulated economy to grow and the industries that will restore Japan's global competitiveness, are still relatively small players, if they exist at all today. Their voice is unlikely to be heard in the reform debate."

    Still, Abe moved more quickly than expected to commit Japan to talks on a U.S.-led trade pact, the Trans-Pacific Partnership, raising hopes history might not repeat itself.

    The TPP decision, which has helped keep Abe's popularity rates at sky-high levels of around 70 percent, was followed on Monday by an agreement with the European Union to start talks on a separate free trade deal that would further boost pressure on protected sectors.

    "There is a split between 'pro-zombie' and 'anti-zombie factions, between one set of politicians, bureaucrats, and businesses who want to preserve the current system of vested interests, and different set of politicians, bureaucrats, and businesses who want more open competition," said Robert Feldman, chief economist at Morgan Stanley MUFG Securities in Tokyo.

    "I think the anti-zombie faction will win this time because the standard of living has been deteriorating and I think the public has caught on to this," he said.

    You May Like

    Video For Many US Veterans, the Vietnam War Continues

    More than 40 years after it ended, war in Vietnam and America’s role in it continue to provoke bitter debate, especially among those who fought in it

    Video Newest US Citizens, Writing the Next Great Chapter

    100 immigrants graduated Friday as US citizens in New York, joining the ranks of 680,000 others every year in cities across country

    Family's Fight Pays Off With Arlington Cemetery Burial Rights for WASPs

    Policy that allowed the Women Airforce Service Pilots veterans to receive burial rites at Arlington had been revoked in 2015

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Vietnamese-American Youth Optimistic About Obama's Visit to Vietnami
    X
    Elizabeth Lee
    May 22, 2016 6:04 AM
    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video Vietnamese-American Youth Optimistic About Obama's Visit to Vietnam

    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video First-generation, Afghan-American Student Sets Sights on Basketball Glory

    Their parents are immigrants to the United States. They are kids who live between two worlds -- their parents' homeland and the U.S. For many of them, they feel most "American" at school. It can be tricky balancing both worlds. In this report, produced by Beth Mendelson, Arash Arabasadi tells us about one Afghan-American student who seems to be coping -- one shot at a time.
    Video

    Video Newest US Citizens, Writing the Next Great Chapter

    While universities across the United States honor their newest graduates this Friday, many immigrants in downtown Manhattan are celebrating, too. One hundred of them, representing 31 countries across four continents, graduated as U.S. citizens, joining the ranks of 680,000 others every year in New York and cities around the country.
    Video

    Video Vietnam Sees Strong Economic Growth Despite Incomplete Reforms

    Vietnam has transformed its communist economy to become one of the world's fastest-growing nations. While the reforms are incomplete, multinational corporations see a profitable future in Vietnam and have made major investments -- as VOA's Jim Randle reports.
    Video

    Video Qatar Denies World Cup Corruption

    The head of Qatar’s organizing committee for the 2022 World Cup insists his country's bid to host the soccer tournament was completely clean, despite the corruption scandals that have rocked the sport’s governing body, FIFA. Hassan Al-Thawadi also said new laws would offer protection to migrants working on World Cup construction projects. VOA's Henry Ridgwell reports.
    Video

    Video Infrastructure Funding Puts Cambodia on Front Line of International Politics

    When leaders of the world’s seven most developed economies meet in Japan next week, demands for infrastructure investment world wide will be high on the agenda. Japanese Prime Minister Shinzo Abe’s push for “quality infrastructure investment” throughout Asia has been widely viewed as a counter to the rise of Chinese investment flooding into region.
    Video

    Video Democrats Fear Party Unity a Casualty in Clinton-Sanders Battle

    Democratic presidential front-runner Hillary Clinton claimed a narrow victory in Tuesday's Kentucky primary even as rival Bernie Sanders won in Oregon. Tensions between the two campaigns are rising, prompting fears that the party will have a difficult time unifying to face the presumptive Republican nominee, Donald Trump. VOA national correspondent Jim Malone has more from Washington.
    Video

    Video Portrait of a Transgender Marriage: Husband and Wife Navigate New Roles

    As controversy continues in North Carolina over the use of public bathrooms by transgender individuals, personal struggles with gender identity that were once secret are now coming to light. VOA’s Tina Trinh explored the ramifications for one couple as part of trans.formation, a series of stories on transgender issues.
    Video

    Video Amerikan Hero Flips Stereotype of Middle Eastern Character

    An Iranian American comedian is hoping to connect with American audiences through a film that inverts some of Hollywood's stereotypes about Middle Eastern characters. Sama Dizayee reports.
    Video

    Video Budding Young Inventors Tackle City's Problems with 3-D Printing

    Every city has problems, and local officials and politicians are often frustrated by their inability to solve them. But surprising solutions can come from unexpected places. Students in Baltimore. Maryland, took up the challenge to solve problems they identified in their city, and came up with projects and products to make a difference. VOA's June Soh has more on a digital fabrication competition primarily focused on 3-D design and printing. Carol Pearson narrates.

    Special Report

    Adrift The Invisible African Diaspora