[talk] Second Round Table Meeting ―Evaluation of Koizumi Scheme of Reform among Foreign Entrepreneurs―

James Ian Yellowlees Ph.D.: CEO of Global Daigaku.com Inc.

James Yellowlees was born in Canada in 1957. He took a B.A. in East Asia studies at the University of Toronto, and a Ph.D. in Modern Japanese Politics and Economics at Tokyo University. He served as a producer/director for Canadian Broadcasting Corporation Japan Branch, and a director in the Office of the Agent General for British Columbia in Tokyo, before becoming the President of Pacifica Consultants, which is a company providing business-consulting services for the Asian markets, especially Japan, in 1995. His major published work includes Cross-Cultural Issues, Kokusaika Seyo..

Nicholas E. Benes: President of JTP Corporation

Nicholas E. Benes has a B.A. in Political Science from Stanford University, and received his MBA and law degree (JD) from UCLA. He worked for JP Morgan before becoming the President of JTP Corporation in 1997, a boutique investment bank specializing in M&A advice and complex financial transactions. He has written frequently for the editorial page of the Asian Wall Street Journal and other newspapers and magazines

Allen Minor: President of SunBridge Corp.

Allen Miner was born in the United States. He joined Oracle Corporation in 1986 after graduating from Brigham Young University. He was dispatched to Japan a year later as the Representative of Oracle Japan. Miner returned to Oracle's U.S. headquarters in 1996 as a Vice President in charge of Linux/open source. In 1999, he founded SunBridge K.K., a net venture supporting company in Japan. He established Sun Bridge Venture Habitat in April 2000.

Chairman:

Jesper Koll: Chief Economist at Merrill Lynch Japan

Jesper Koll holds a master's degree from the Johns Hopkins University, SAIS and graduated from the Lester B Pearson College of the Pacific in 1980. Before becoming the Chief Economist for Merrill Lynch, his current position, he was a Managing Director of Tiger Management L.L.C. and he was the Chief Economist and Head of Economic and Market Research for J.P. Morgan in Tokyo. Koll joined Merrill Lynch in 1999. He has been serving on several Japanese government advisory councils, including the MITI committee on "Big Bang 2001" Japan' financial system reform." Recently, he was chosen as a member of a task force within the Economic Planning Agency that reassesses the viability of the economic indicators now in use. His major published work includes Towards a New Japanese Golden Age.

We discussed the evaluation of the Koizumi Reforms with the above three foreign managers in Japan, all of whom are members of American Chamber of Commerce in Japan. These three executives each have experience founding a company in Japan and are very knowledgeable about the Japanese economy.
As for the basic policy of the reform being put forward by Prime Minister Koizumi, all three of them evaluated it positively to a certain degree. However, each of them expressed dissatisfaction about the current state, in that there have been no specific achievements in terms of reform. They were all clearly against the attitude of the government and banks: trying to extend the life of large companies that are in excessive debt.

This is a discussion with Mr. Benes, who operates a consulting company specializing in M&A and investment in Japan, Mr. Yellowlees, who operates IT-related ventures, and Mr. Miner.

While the above three individuals value the basic policy of the Koizumi Reforms, Mr. Benes points out that Prime Minister Koizumi lost his chance to carry out reform with the sharp decline of his approval ratings. On the other hand, Mr. Miner thinks that the fundamental reason for the lack of speed in reform is likely not a problem in the ability of Prime Minister Koizumi alone, but rather the political system of Japan, where the base of political power of the prime minister is always insecure.

Mr. Yellowlees raises the point that, although the current Cabinet members talk only about macroeconomics, there is no one who has detailed knowledge on the actual state of the economy, so it may be impossible to put forward effective economic policies. As for the disposal of the massive amount of bad loans, only measures to extend the life of large companies with excessive debt stand out, which takes away the opportunity of growth from new businesses. He warns that the government must speed up its venture supporting policies, including those related to taxation, or international competitiveness against Asian countries will only decline.

Mr. Benes insists that a substantial and uniform tax reduction, and not the conventional limited tax reduction measures, will be required in order to vitalize industries. He says that there are too many loopholes in the current Japanese tax legislation, and this generates a sense of unfairness and decline in tax revenues. Mr. Benes stresses the need for the Japanese government to introduce a substantial and uniform tax reduction, and at the same time to strengthen tax enforcement in order to realize taxation that takes little from many. His opinion is that although substantial uniform tax reduction is expected to generate strong opposition from bureaucrats, it would have a great effect on recovering the approval ratings, which would make it possible to defeat the bureaucrat-led system.

Mr. Miner says the government should utilize the cardinal rule for business in reform implementation, which is "selection and focus." In other words, select only one plan which Prime Minister Koizumi himself most keenly wishes to implement, and bring about a specific achievement by focusing on this plan. If he can show one successful case, it will lead to the second and third successes in the reforms.

He asserts that the government should maintain its principle of policy, which means that as long as many Japanese companies possess a large amount of excessive debt, Japan cannot fundamentally settle the problem of non-performing loans and other related issues.

Mr. Koll stated that the government has not regressed, which is good news for the people, because the Koizumi cabinet has neither increased its fiscal spending nor postponed again the starting date of a pay-off system.
Mr. Koll also maintained that taxation reforms are important to implement real anti-deflationary measures.

He indicated that the cornerstone of cabinet policy is the philosophy of taxation reforms, which are to be made public this June.
Because the current taxation system includes various kinds of tax exemptions and deductions, 70% of Japanese firms do not have to pay taxes, while heavy taxes are levied on the remainder.

The significant points of the philosophy embedded in tax reforms are how it is amended and who is given what kind of incentives.
All the three discussants agreed that the government must brave declining approval ratings and the people should again put pressure on the government to carry out reforms.