[interview] Economic reform in Japan and the role of journalism and public opinion

Heizo Takenaka: State minister in charge of economic and fiscal polic

Born in 1951; Ph.D in Economics from Osaka University; Takenaka joined the Japan Development Bank in 1973 and later worked at the Ministry of Finance's Institute of Fiscal and Monetary Policy as a senior economist, and Harvard University as a Visiting Associate Professor. He then became a Professor in the Faculty of Policy Management at Keio University. He has been submitting policy proposals as a member of the IT Strategy Headquarters and the Economic Strategy Council and working actively in a wide range of fields including TV programs and magazines

At the end of February, the government announced a comprehensive anti-deflationary package. From an early stage, Minister Takenaka had been appealing for the need for anti-deflationary measures, but he says that it took time to gain the people's understanding. This is because it is widely understood by the public that there is both good and bad deflation. An opinion that states that deflation is not bad clearly confuses the prevailing price with the relative price. When the price declines as a whole, the real amount of liabilities increases; and deflation can be a large burden for companies and households that are trying to adjust their balance sheets.
His opinion has now developed into the social role of journalism and public opinion. Although Minister Takenaka thinks it is inevitable for a fourth estate to criticize the government, it would be no more than ridicule without constructive development unless the discussion could be based upon the common knowledge of policymaking.

One of the frequently cited examples is a comparison between the Koizumi and Thatcher Administrations, or the Koizumi and Reagan Administrations. This comparison is usually used to point out the lack of speed for "Koizumi Reforms." However, Minister Takenaka claims that this is not true. It was 1984 when the Thatcher Administration, installed in 1979, privatized British Airways; and the Reagan Administration implemented the complete deregulation of airfares in its third year of administration. On the other hand, the Koizumi administration privatized or abolished no less than 64 government-backed corporations (out of the 160 in total) within one year.

In order to further speed up the reform, Minister Takenaka names tax reform as the largest issue of this year. Canons of taxation had hitherto been "fair, indifferent and simple," but Minister Takenaka thinks this should be vitalized. Taxation is a subsystem of an economy, and it exists to improve the economy. He says that he hopes to promote the tax reform based on such principles as keeping a balance between revenue and expenditure and maintaining an open forum for discussions.