Organizer: Mark Tilton, Purdue University
Chair: Lonny E. Carlile, University of Hawai'I
Discussant: E. Barry Keehn, Cambridge University
Deregulation has been at the top of Japan's economic policy agenda for a number of years. Though the Japanese economy was built with considerable supervision by government bureaucrats, since the early 1980s there has been a powerful political movement to restrict the reach of government regulation. The issue was first raised by the big business-dominated Commission on Administrative Reform (Rinchô) back in 1981, but in recent years it has expanded its base and taken on an increasingly politicized tone. Both key peak associations-Keidanren representing big business and Rengô representing labor-as well as a number of vocal public interest groups like the People's Economic Conference (Kokumin Keizai Kaigi) and management guru Ken'ichi Ohmae's Heisei Renovation Society (Heisei Ishin no Kai), have declared themselves devoted to the promotion of administrative reform and liberalization. Japan's first post-LDP prime minister, Hosokawa Morihiro came into office on a platform of deregulation, inspiring American pundits to predict a reform movement that would sweep away market controls, encourage competition, and create new opportunities for imports from abroad. Though disappointed by Hosokawa, many hold out hopes that deregulation may yet open up the Japanese economy.
This panel will explore both the political roots of the deregulation movement and its impact on the Japanese economy. It will discuss business's motives for supporting deregulation and its political strategies for putting it into effect. The panel will also look closely at deregulation in three major economic sectors: energy, finance, and manufacturing. These sectoral studies will ask how governance in these sectors has changed or is likely to change, and what economic effects deregulation has or may have. The panel will explore, too, the effect of deregulation on the organizational characteristics of Japanese firms. Finally, the panel will consider the implications of deregulation for access to Japanese markets for foreign imports.
The Impact of Japanese Oil Industry Deregulation on Japan's Overall Energy
Strategy
Kosuke Oyama, University of Tsukuba
The Japanese oil industry has been gradually deregulated over the past decade, beginning with the Action Program of 1987 and leading up to the abolition of the Designated Petroleum Products Imports Temporary Measures Law in March 1996. Though such deregulation has certainly benefited consumers by lowering prices, this paper will consider the broader impact of deregulation on Japan's overall energy policy. First of all, the paper will examine the impact on the energy policy making process. It appears that the "vested interest policy network" dominated by industry, government bureaucracy and 'zoku' politicians has been weakened while the "reform network," consisting of "gaiatsu" (foreign pressure), industry outsiders, consumer groups, and reform bureaucrats and politicians, has become stronger. Nevertheless, Japan's system of national energy strategic planning still appears to be dominated by the small number of experts on the government shingikai (deliberation councils). Second, the paper will consider the implications of oil industry deregulation for industry organization and political decentralization. A dominant theme in discussions of future energy strategy is a shift from supply-side to demand-side management. It is thought that such a shift would be accompanied by a downsizing of power plants as well as a devolution of power from the national to regional policymaking levels. This paper will explore the question of whether deregulation is likely to promote changes in these directions.
The Political Dynamics of Japanese Financial Deregulation
Elizabeth Norville University of Puget Sound
This paper will examine the deregulation (or better, the "reregulation") of Japanese finance since the 1980s, with particular emphasis on the Japanese life insurance industry. It will demonstrate the extent to which the Japanese Ministry of Finance (MOF) has succeeded in directing the process of financial liberalization in Japan on a course that is consistent with its own design for the strategic development of the financial sector.
The paper will engage the general debate about the nature of government-business relations in Japan. Consistent with recent trends in the literature on Japanese state-society relations, observers often depict the financial reform process in Japan as dominated by societal interests. Besieged by client demands, the MOF appears to possess little autonomy in formulating its industrial policy towards the financial sector. Official action is seen as geared primarily toward mediating disputes between competing financial interest groups. While recognizing that MOF must be responsive to the industries its regulates, the paper will argue that the Ministry is anything but an agent of industry. Rather, MOF has its own agenda, and has been able to exercise a significant degree of leadership over the content, pace, and order of financial liberalization in Japan.
Will Deregulation Change Japanese Capitalism?: The Impact of Deregulation on
Corporate Governance and Finance in J-Type Firms
Hideaki Miyajima, Waseda University
Previous research by Aoki, Fruin and others have produced an ideal typical model of the Japanese firm (the J-Type Firm) that is different from that of the market governance model that is prevalent in the U.S. and U.K. Key features include: a stable set of shareholders maintained through cross shareholding within corporate groups, autonomy of top management from shareholders, and debt financing via a main bank. A number of regulatory arrangements supported the J-type firm. For instance, without the low interest policy of the Bank of Japan and monitoring of city banks by the Ministry of Finance the financial arrangements characteristic of the J-type firm would have been difficult to maintain. These policies have been modified through deregulation in recent years and will undoubtedly continue to do so in the future. The paper will clarify the ongoing and anticipated impact of deregulation on the corporate finance and governance of the J-type firm.
Deregulation and the Interests of Large Manufacturing Firms
Mark Tilton, Purdue University
This paper will discuss the political role of big business in pushing for deregulation and the impact of deregulation on Japanese markets for manufactured goods. The paper will start by exploring the political motives for business support for deregulation. Why has big business, which seems to have benefited in many ways from close cooperation with the government bureaucracy, called so vocally for deregulation? Given the breakdown of monolithic LDP rule, what political strategies have business groups, such as the Keidanren, used to push deregulation forward? The paper will next discuss the impact of deregulation on domestic manufacturing. The main suggestions for deregulation from the Keidanren seem to be for repealing the formal regulations on transportation, services and small businesses that provide part of Japan's social safety net, while increasing costs for big business. Have there also been moves to do away with the often informal regulations that protect manufacturing from competition? Finally, the paper will examine the link between deregulation and the opening of Japanese markets to foreign imports. Has deregulation helped do away with informal barriers to imports of manufactured goods and made Japanese markets genuinely freer?