May 15, 2002

[talk] Problems in bringing up the generations of children that represent the future of Japan

Haruo Shimada: Professor, Faculty of Economics, Keio University

Haruo Shimada graduated from the Faculty of Economics of Keio University in 1965. He earned an M.A. in Economics from the same university in 1967, and a Ph.D. in Industrial Relations from the University of Wisconsin in 1974. After holding posts as an assistant and an assistant professor in Keio University's Faculty of Economics, he became a professor in 1982. Since 2000, he has also been Visiting Professor at the University of Tokyo's Research Center for Advanced Science and Technology. Mr. Shimada is an economist specializing in labor economics and economic policy and acts as a special policy advisor to the Cabinet Office. His many published works include Akarui Kouzou Kaikaku---Kousureba Shigoto Mo Seikatsu Mo Yokunaru (Happy Structural Revolution---How to Improve Your Job and Your Life), published by Nihon Keizai Shimbun, Inc. He has two daughters and one grandchild.

Yuri Okina: Senior Researcher, Japan Research Institute

Yuri Okina graduated from the Faculty of Economics of Keio University in 1982, and obtained an M.A. in Business Administration from the graduate school of the same university in 1984. After graduating, she joined the Bank of Japan. In 1992, she became Assistant Chief Researcher in the Japan Research Institute's Research Division and was promoted to Senior Researcher in 2000. Between September 2001 and March 2002 she was a special guest professor at the Graduate School of Keio University. Her published works include Jouhou Kaiji To Nihon No Kinyu Shisutemu (Information Disclosure and the Japanese Financial System) and Kinyu No Miraigaku (Study on the Future of the Finance Business). She has a four-year-old son.

Yuko Kawamoto: Senior Expert, McKinsey & Company, Japan

Yuko Kawamoto holds a B.A. in Social Psychology from the Faculty of Letters of the University of Tokyo and an M.A. in Economics from Oxford University. Before joining McKinsey & Co.'s Japan office in 1988, she worked at the Bank of Tokyo (now Bank of Tokyo-Mitsubishi). From 1995 to 1999 she worked in Paris for McKinsey. Her major published works include Ginkou Shueki Kakumei (Revolution in Banking Profits). She is currently a member of the Finance Service Agency's Minister's Discussion Committee on the Future Vision of the Japanese Financial System and Administration in Japan and a member of the Infrastructure Development Council of the Ministry of Land, Infrastructure and Transport. She has two sons, aged 11 and eight.

Naoko Nemoto: Director, Financial Service Department, Standard & Poor's

Naoko Nemoto holds a B.A. from Waseda University's Faculty of Law and an MA in IL Economics from Chicago University. After graduating, she joined the Bank of Japan where she was engaged in finance industry research. She moved to Standard & Poor's in 1994 and as Director of the Financial Institute Group focuses on analyzing financial institutes in Japan and South Korea. She is co-author of Nihon No Kinyu Gyokai 2002 (Financial Industry in Japan 2002). She has two sons, aged 12 and eight.

According to the provision of the Child Welfare Law in Japan, public nursing services are provided for people who are unable to care adequately for their children. As a result of the high-growth period in 1960's and 1970's, the number of middle- and high-income households has increased in Japan and the types of nursing services demanded have diversified. The total number of services required has also increased as more and more women are participating in social activities. Today, the level of nursing services is insufficient to respond to these changes and demands.
This disparity between demand and supply is due to two reasons: the misallocation of public funds and the closed market of the nursing business. Public services should be provided for the low-income bracket at low price, while the high-income bracket should receive nursing services from the private sector according to need and at a fair, competitive fee. To achieve this, the government should allow private companies to enter the nursing service industry under the condition that they provide good quality service. Further exacerbating the situation, government officials who know nothing about the situation in the field of nursing authorize the providers who are engaged in the service.

Employment conditions represent another problem related to bringing up children in Japan. Japanese companies expect their employees to work long hours with short vacations and evaluate performance based on ambiguous factors, such as the impression they make on their boss and how long they spend in the office. This adds an extra level of stress to parents trying to raise a family. The evaluation system should be changed to focus on performance content.

In the future, the number of single income households will decline as the labor wage decreases. Accordingly, the number of dual income families will inevitably increase. To counterbalance this trend, Japan needs to establish social infrastructures and value systems in which not only both parents cooperate in bringing up their own children, but also local community residents participate in bringing up the generations of children that represent the future of Japan.

投稿者 gnpo : 08:06 PM

[paper] Considering a Grand Vision for Japan

Yoshinori Yokoyama: Director of McKinsey & Company

Yoshinori Yokoyama graduated from the Faculty of Engineering Department of Architecture at Tokyo University in 1966. He received a master's degree in urban planning at the graduate school of Harvard University in 1972 and received his MBA from MIT in 1975. He joined McKinsey & Company in 1975, assumed the position of Director in 1987, and was the General Manager of the Tokyo Branch from 1989 to 1994. His major published works include Seichou Soushutsu Kakumei, McKinsey Gasshou Renkou Senryaku, and many other translations and theses. He is also a part-time instructor at Touhoku University and the Graduate School of Hitotsubashi University.

There are opinions that nothing specific can be seen when talking about structural reform. However, Yokoyama, Director of McKinsey, clearly defines structural reform as being an improvement in productivity and a change in the design of the social system.

The productivity of the domestic industry of Japan (rather than the export industry), which specifically includes construction, food and distribution, remains about two thirds of that of the U.S. He points out the reason for this is not only the restricted barriers to entry, but also the exit barrier from which the life of companies with low productivity are expanded through subsidies and protective governmental measures. Competition is lacking among industries where information on price value (price for the value of service) is not provided, such as the medical and financial industries, also resulting in low productivity. Thus, he concludes that the productivity of Japan should recover if there is progress in removing the exit barriers and providing information on price value.

Also, Japan still drags on the social system for a developing country. This system is not only unworkable in this wealthy and matured Japanese economy, but also serves as a disincentive for structural reform. Specifically, a system for a developing country entails public corporations and government-affiliated financial institutions, or health insurance and pension plans which rarely avoid failure. For example, from the end-user point of view, a total healthcare system including not only the medical institutions but also the firms to design and construct hospitals, life insurance companies, medical information providing services, etc. is required. There is an urgent need to redesign the social system to match this kind of wealthy society.

Some people point out that the Koizumi administration does not have any vision after structural reform. Mr. Yokoyama presents the concept of "wealthy decline" for this vision. In Japan, where the age of booming growth has come to an end and which now faces problems such as an aging society and depopulation, the idea of uniform and equal growth is no longer valid. A declining sector and developing sector are expected to coexist from now on, and he explains that under this condition there is a need for a "tourism-based economy" type of industrial structure that focuses on the service sector, and a formation of an enormous city-state which centers around the metropolitan area of Tokyo.

投稿者 gnpo : 07:59 PM

[talk] Chain of Scandals Generated by Distorted Party Politics in Japan

Jun Iio: Professor at the National Graduate Institute for Policy Studies

Jun Iio was born in 1962. He graduated from the Faculty of Law at the University of Tokyo in 1986 and obtained a Ph.D. in political science from the University of Tokyo in 19ÍX2. He became Associate Professor of Graduate School of Policy Science at Saitama University, 1993; Associate Professor at the National Graduate Institute for Policy Studies (GRIPS), 1997; and Professor at GRIPS, 2000. His Major is contemporary Japanese politics. Among his numerous publications is a book entitled ÊgMineika No Seiji KateiÊh (The Political Process of Privatization in 1980s Japan).

Shinichi Ueyama: Research Professor of Public Management at Georgetown University.

After graduated from Kyoto University, he joined the Japanese Ministry of Transport as a legal expert. In 1986, he joined McKinsey's Japan office as a management consultant where he became a partner. His expertise is corporate restructuring, strategic alliances and change management. He published 13 books, mainly on public sector reform. He has a Master¬s degree of public affairs from Princeton University. ueyama@pm-forum.org

Hiroshi Hoshi: Member of the editorial board of Asahi Shimbun Publishing, Co.

Hiroshi Hoshi was born in 1955. He graduated from the senior division of the College of Arts and Science of the University of Tokyo, before joining Asahi Shimbun Publishing, Co. in 1979. He was assigned to the political department in 1985, and went on to work as a political correspondent in Washington, D.C. from 1997 to 1998. After time as assistant editor of the political department, he is now a member of the political editorial board of the Asahi Shimbun newspaper.

Mediation for public works allocation, the registration of policy secretaries only in name, the misappropriation of political money for private purposes great number of political scandals are being reported every day. These are "problems that have been repeated for more than ten years" (Iio). However, current discussion in the media has not successfully revealed what really happened, and "journalists cannot go beyond chasing scandalous affairs that come into the limelight one after another like fire spreading across a field of dead leaves" (Hoshi).
Japanese people are stricter than ever in the importance they are placing on the moral standard of politicians. They are not satisfied if politicians under suspicion only resign from their posts, leave their parties or resign from the Diet but fail to clarify their own responsibility, through the use of clever subterfuges. Should they assume legal responsibility, political responsibility, or moral responsibility? This should be clearly shown in individual cases, and the media should pursue the people under suspicion, taking such distinction into consideration.

In order to break the chain of scandals, which has existed for more than ten years, it is necessary not only to ensure that such immoral politicians quit the political scene but also to reform political parties that have ceased to function properly. Though Japanese political parties are currently in such an unfavorable condition that "they lack systematic or basic management" (Iio), new political parties in the true Western sense of the word may be formed by "adopting the movements and ideas of NPOs" (Ueyama). If a considerable number of Diet members are replaced and old political conventions are abolished due to such emergence of new political parties, political deterioration will be held back and a change of government, something that the Japanese people have practically never experienced despite being the citizens of a democracy, will be achieved.

投稿者 gnpo : 12:43 PM

[interview] Structure of "Routine Organizing" Apparent in Yokohama Mayoral Election

Hiroshi Nakada: Mayor of Yokohama City

Hiroshi Nakada was born in 1964 and graduated from the Faculty of Economics, Aoyama Gakuin University,entered the Matsushita Institute of Government and Management in 1989, before becoming involved in the launching of the Japan New Party. He was elected in the House of Representatives for the first time in 1993, after serving as a secretary for House of Councilors and Head of the News Office of the Party. He ran as an independent in the 2002 Yokohama mayoral election, was elected, and assumed the position of the Mayor on April 8. His major published works include Kokkai no Okite (Commandments in the Diet) and Gyokaku no Recipe ; Nihon no Ryouri Hou NZ Fuu (Recipe for Administration Reform ; How to Cook Japan NZ Style).

Interviewer:

Yasunori Sone, Professor of Political Science at Keio University Graduate School of Media and Governance

Yasunori Sone was born in 1948. He is a Professor of Political Science and Governance at Keio University. His publications include "Ketteino Seiji Keizaigaku"(The Political Economy of Decision-making) and the co-edited volume "Political Dynamics in Contemporary Japan"(Cornell University Press). BA, MA from Keio University. Visiting fellowships were at Yale University(1974-76), The Australian National University(1983-4), The University of Essex(1984), and Harvard University(1998-99).

In the latest Yokohama mayoral election, the incumbent candidate, who had joint support from the three ruling parties and the Social Democratic Party, lost against the independent candidate. Mr. Takahide's backbone was organized support from companies, labor unions and political parties, while individuals with their own motives supported Mr. Nakata. The race between these saw a result of "the power of unprompted citizens" winning over the structure of "routine organizing." It can be suggested through this result that there are institutional differences between national government and municipalities, which form a "double standard."
While ruling and opposing parties are inevitably generated in the national political scene, the election of mayors or members of assembly in municipalities is rather similar to a presidential election. Because the parties fail to present clear alternatives to the voters in these elections, the number of non-affiliates increase, which makes the raison d'etre of the parties itself unclear. Problems such as the same person being reelected many times or a candidate winning joint support from multiple parties, which are unrelated to the discussions involving policies or commitments, can also be analyzed in the same way. It is not because of a problem of the party political system, but because politicians and political parties do not fulfill their roles, that voters supported Mr. Nakata, who "became non-affiliated as a result."

On the other hand, in the national political scene, they point out that the Democratic Party, which constitutes the same political group in the Diet, basically lacks the inveterate urge for power that can be seen in those who do hold and try to maintain power. Sticking to the attitude of proposing policies that do not cater to the LDP's current state may lead to a chance to gain the public's understanding. Also, in terms of holding the reigns of government, it is necessary to smoothly encompass the conservatives whs have doubts about the framework of the Liberal Democratic Party. They claim that the opposing parties need toughness, such as in supporting Prime Minister Koizumi, who enjoys considerable popularity among public, rather than pulling him down, in order to deconstruct the LDP completely. The old-fashioned customs of the long reign of the LDP since the postwar era are especially deep-seated in the rural areas. There are even opposing party members who enjoy benefit together under the LDP mechanism. Both Mr. Sone and Mr. Nakata insist that from now on "it is necessary to deconstruct not only the LDP but also the mechanisms and cultures of the LDP."

投稿者 gnpo : 12:37 PM

[talk] No Time Left for Political System Reform

Yasunori Sone: Professor of Policy and Media Studies Department, Keio University Graduate School

Yasunori Sone was born in 1948. He holds a postdoctoral position in the Politics Department, Law Faculty of Keio University Graduate School. He was a visiting researcher of the Center for International Affairs, Harvard University from 1998 to 1999, before assuming his current position. His major published works include Kettei no Seijikeizaigaku (Political Economic Science for Decision Making) and Kono Seiji Kuuhaku No Jidai (In This Age of Political Vacuum) (co-written).

Koichiro Genba: House of Representatives member

Koichiro Gemba was born in 1964. He graduated from the Department of Law in the Law Faculty of Sophia University in 1987. He was a member of the Fukushima Prefectural Assembly before being elected for the first time as a member of the Diet in 1993. After joining the New Party Sakigake, he later became a member of the Democratic Party. He served as Vice Chairman of the Policy Planning and Research Committee, Vice Chairman of the Diet Affairs Committee, and is now a member of the Committee on Public Management in the House of Representatives. He specializes in studies of decentralization and diplomacy.

Yoshimasa Hayashi: House of Representatives member

Yoshimasa Hayashi was born in 1961 and graduated from the Law Faculty of Tokyo University in 1984. After working for Mitsui & Co., Ltd, he completed graduate studies in Harvard University. He was elected as a member of the Diet for the first time in 1995. He Worked for the Mansfield Bill in 1991, during his stay in the capital hill. He is now Secretary General of the Administrative Reform head quarter of the Liberal Democratic Party.

Although there are many political scandals in the news at the moment, the issue involving Muneo Suzuki and the scandals that were revealed after that, including that of Kiyomi Tsujimoto, differ in nature. That is because "while the problem of Muneo Suzuki is related to the essence of the political system, discussion about problems of Kiyomi Tsujimoto and those revealed afterwards has been rather trivialized" (Genba). While the Muneo Suzuki problem has an aspect of being an opportunity to once again study the relation between politicians and bureaucrats or that of lawmaking and administration from its base, the problems discussed afterwards are about breaking the law, namely breaching the law regulating political funds or fraud.
Ethics to which politicians should adhere must be considered separately from that of an individual's sense of ethics, and must be institutionalized based on their inherent functions such as the handling of powers, making laws and deciding national policies. This problem should be discussed individually, and it must be separated from the problem of politicians' policymaking function.

Policymaking and lawmaking are primarily the task of Diet members. However, in Japan, bureaucrats cover these jobs. On the other hand, politicians interfere in areas of budget and law enforcement that should primarily be carried out by administrators from a neutral position. "You call someone that interferes in individual matters in their implementation stage a lobbyist. The biggest problem here is that Diet members are becoming lobbyists" (Hayashi). It's high time for politicians to recover their authority in lawmaking and policymaking.

"Capable politicians should join the Cabinet and prepare cabinet bills using the bureaucrats of Kasumigaseki. In order to do so, politicians must always be thinking about their policies, whether in the ruling or opposing parties" (Sone). Also, "Politicians will join the government as a Minister, Vice Minister b or Ministerial Aid, while also bringing in non-politicians as political appointees. Policymaking must be done under these circumstances" (Genba). Coordination with bureaucrats is certainly needed, but it would be best to generally let them be in charge of employment and implementation of the policy.

Moreover, politicians must prepare a manifesto showing as specifically as possible the policies they will implement when they come to hold the reigns of government. The Koizumi Administration remains at a standstill in the materialization stage because it did not have this kind of manifesto.

投稿者 gnpo : 12:33 PM

[talk] How Can the Policymaking Function of Political Parties and National Diet Members be Enhanced?

Yutaka Matsuzaki: Secretary for Policy &Legislative Affairs Okiharu Yasuoka, House of Representatives, LDP
Shigeru Satake: Secretary of Sayuri Kamata, House of Representatives member
Hideki togasaka: Assistant General Manager of the Policy Research Committee of the Democratic Party of Japan
Takaaki Sasaki: Research Fellow of the Tokyo Foundation
Anonymous A: Member of the ruling party involved in policymaking

While the news reports on the series of scandals starting from Muneo Suzuki and Kiyomi Tsujimoto tend to be somewhat theatrical in nature, there is concern that substantial discussion about government-paid secretaries could be neglected. In order to avoid this, issues such as the link between politics and money, the government-paid secretary system that had been introduced for policymaking, or the policymaking function of political parties must all be discussed separately."
On the other hand, a strong tendency exists among politicians to regard the government-paid secretary system, which was originally aimed at enhancing the policymaking function, as a personnel cost supplementation from the government, as with political subsidies. Because manpower is certainly needed, there is also an increasing demand for introducing a "pool system," which is a system in which the Diet member office manages the salaries of government-paid secretaries as a whole and reallocates them among all the secretaries. Regarding the issue of this pool system, a contrary opinion was given from a participating member of the discussion: "It is reasonable if one demands a public system for subsidizing the personnel cost for employing private secretaries. However, government-paid secretaries are special position government employees, with an established wage system. Therefore, the introduction of pool system should not be a subject of discussion."

The fundamental problem regarding government-paid secretaries is that "there is no proper legal system." As long as they are special position government employees, "there should be clear delineation as to their rights and duties, or prohibited matters." Participants insisted that one must discuss the ideal situation regarding government-paid secretaries based on these circumstances.

These institutional problems also have an impact on management of Diet member offices and political parties. The treatment of costs of the Diet members or the office of Diet members are not put in a statutory form, and are defined customarily as public costs or private costs. Even the legal position of political parties is not clearly stated in the Constitution, so they are treated as voluntary organizations. Although an enormous amount is paid from the national treasury as political subsidies to these voluntary organizations, there is not even a duty to disclose the accounting information for these organizations.

These institutional problems must first be settled. Then, a mechanism to absorb the results of active discussion among the Diet members about the policies of the political parties is required.

投稿者 gnpo : 12:31 PM

[talk] The Flow of Political Money Should Be Put under Public Surveillance

Kenji Yasufuku: Lawyer at Yasufuku Law and Accounting Office

Kenji Yasufuku graduated from the Faculty of Economics of the University of Tokyo in 1972, and was admitted to the bar in 1978. He has specialized in a wide range of areas including the issue of public corporations.

Motoyuki Odachi: Partner of Odachi-Murakata Accounting Office

Motoyuki Odachi was born in 1963. He graduated from the Faculty of Economics of Keio University in 1987. After working at Arthur Andersen, he opened Odachi-Murakata Accounting Office in 1994. He also holds a post as visiting lecturer at the University of Occupational and Environmental Health, Japan. His many published works include Kessannsho No Yomikata (Understanding Financial Statements).

Mahito Ogawa: Certified public accountant with Shin Nihon & Co.

Mahito Ogawa graduated from the Faculty of Commerce of Keio University in 1983, before becoming a certified public accountant in 1990. He currently belongs to Shin Nihon & Co. and is engaged in consulting services such as accounting auditing, special auditing, and risk management for financial institutes in Japan and other countries. He is knowledgeable about U.S. accounting standards.

Nanpei Hayashi: Associate of McKinsey & Company

Nanpei Hayashi was born in 1974. He graduated from the Faculty of Economics of the University of Tokyo, before joining the Industrial Bank of Japan in 1996. He has held his present post since 2000. Mr. Hayashi is a qualified certified public accountant.

Mr. Koichi Kato has admitted misappropriating his office budget for private purposes and has resigned from the Diet. He had successively held posts as Secretary-General and Policy Research Council of the Liberal Democratic Party (LDP), and played a central role in revising the Law to Regulate Money Used for Political Activities in 1994. And yet, he made inquiries to officials of the Ministry of Public Management, Home Affairs, Posts and Telecommunications about whether his appropriation of political money would be in breach of the law. Mr. Yasufuku, a lawyer, expresses outrage on seeing how ignorant and unaware lawmakers are. Meanwhile, the other three participants, all certified public accountants, voice their objection to the present situation in which political money is exempted from taxation in all aspects. Based on the "principle of fairness," they argue that politicians should also be subject to taxation with respect to moneys related to their private lives and it is urgently necessary to make relevant rules. Another Diet member, Mrs. Makiko Tanaka, reportedly received money that was paid out of the national treasury as wages for her secretaries, which she passed on to a company in which she held a post as executive, without even taking it out of the bag in which it was received. Though the truth has yet to be revealed, it seems that the company paid wages to her secretaries as its dispatched employees and she paid them "a consideration for allowing her to use their names as her secretaries" in the hand. From a legal point of view, these secretaries are deemed to have made a "donation" to the company, but this is not the true nature of the problem. If the public money that were to be paid to government-paid secretaries were received by other persons, it would constitute complete "fraud" because such public money that is paid as wages for secretaries should be paid to the secretaries themselves in any circumstances. In order to regulate such an obscure flow of political money!?, it is necessary to make receipts and payments reports subject to public surveillance. Such "surveillance" will not be effective without rules for disclosure. The above three certified public accountants argue that rules should be made for politicians to submit receipts and payments reports according to business accounting principles such as balance sheets and profit-and-loss statements. Another way to ensure the transparency of the flow of money is to revise the Law to Regulate Money Used for Political Activities and concentrate political money at political parties. However, it is not easy to unite complicated multiple routes of political money into one. For the time being, the most effective measure to regulate political money would be to impose severer punishments breaches of the law.

投稿者 gnpo : 12:26 PM

[talk] The Challenges and the oppotunities of Japan's Reform

Donald P.Kanak: President and CEO of AIG Companies, Japan & Korea

Donald P. Kanak is a President and CEO of AIG Companies, Japan & Korea. He joined American International Group, Inc. (AIG) in 1992, elected Executive Vice President and appointed to member of the Office of the Chairman in 2002. He holds a B.A. degree in Economics from University of North Carolina, a Juris Doctor degree from Harvard Law School, and a Master's degree in Management Studies from Oxford University, England.

Mark Norbom: President & CEO,General Electric Japan

Mark Norbom is a President & CEO of General Electric Japan, he spent several years in business development roles focusing on Europe and Asia, President & General Manager of GE Capital Taiwan, Country President of GE Capital Indonesia, National Executive of General Electric Thailand and he was appointed as President & CEO of GE Capital Japan in 2001. He attended Pennsylvania State University and graduated magna cum laude with a B.S. degree in Economics in 1980.

Jesper Koll: Managing Director Chief Economist Japan Research Department of Merrill Lynch Japan Securities

Jesper Koll is a Chief Economist of Merrill Lynch Japan Securities, his work includes Nihon Keizai korekara Ougonkihe. Graduated from Johns Hopkins University.

Koll:
Thank you very much for taking time out of your busy schedule to discuss your views with GENRON today. We have a big agenda. I want to talk about Japan's government policies, corporate governance, the financial Big Bang and your insights into Japan's business environment, were you see the challenges and where the opportunities. But to start, perhaps you could tell me a little bit about your background, what brought you to Japan and your responsibilities here.

Norbom:

I'm Mark Norbom. I am the President and CEO of GE Japan. General Electric has all of its global businesses represented in Japan. Some of them have been here for over 100 years. We now have more than 15,000 employees in Japan. I have been here for about two years running the country organization and supporting all our various industrial and financial businesses. My background: I have been with GE for 22 years; in Asia for the last 9 years -- two here in Japan, with assignments in Thailand, Indonesia, and Taiwan as well. Prior to that I was working in the United States in the business development area. I have worked in various GE businesses, but I started out in finance.

Kanak:
I am Don Kanak. I am president and CEO of AIG Companies of Japan and Korea and Executive Vice President of the parent company. I came to Japan for the first time in 1981. I was working at a consulting firm and managed to get myself on a study that included Japan as a part of a global strategy study for a client.
I came to Japan in 1986 to help a consulting client start an insurance company. The client was Equitable Life of the United States. That was my first business experience in Japan. We started the company, built it up, and in 1991, sold the company to Nihon Shinpan. At that time, I joined AIG in Japan. I have been at AIG for over 10 years and now oversee the operations for Japan and Korea. We have 5 insurance companies in Japan. Alico Japan, a life insurance company, another life insurance company called AIG Star formerly Chiyoda Life. Three non-life insurance companies. AIU, American Home Direct, and a joint venture with JTB called Japan International specializing in Travel Insurance. We also have an asset management company, a small consumer finance company and several other members of the financial AIG group. I have now been here for over 15 years.

Koll:
So here we are in the year 2002. You both are living and working in Japan, running large, successful and growing businesses. From your perspective, where do you see the biggest obstacles to a prosperous future for Japan?

Norbom:

I would look at the current situation and focus first of all on the positive signs that have emerged recently. The Yen has stabilized, deflation is easing, exports seem to be picking up, but there are still huge issues here that cannot be ignored. The-Non Performing Loans (NPL) probably are the largest obstacle to a prosperous future. Also, government debt is very high. In my mind, what is really unclear is the path to a strong vibrant economy and also what is the vision of what you have once you get there. I think what has to happen is some of these huge problems have to be faced straight-on and then quickly try to put them behind you. I am not sure how to do that in every detail, but you have to put the problems behind you and focus on the future. Japan should articulate a clear vision for what the Japanese want the country to be, and set policies geared towards getting to that vision as quickly as possible.

Kanak:
We jump right into obstacles so we are leaping over what has changed and what has gotten better over all the years that I have been here. Let me go back to when I first got here. In 1981, the consulting project that I was working involved a very traditional distribution system, nothing related to financial services. It was actually straight-forward consumer products, actually spirits and liquor. It was a very traditional distribution system. At that time, it was the rule rather than the exception to have multiple layers of distribution between manufacturer and consumer. Now, over the past twenty years, that has begun to change very significantly. Now more and more distribution systems are flat and more efficient.
Also, 20 years ago, foreign companies could not hire good Japanese students out of good Japanese universities. I remember students would say, "I would love to join your company but I would not be able to get a good wife because my potential wife's mother would not have heard of the company and it is much safer for me to go to a well known company." This has changed fundamentally. Today I think companies like GE and AIG and others are able to present good careers to young people and get them to join. Moreover, think of the tremendous change in financial services that has happened. Deregulation has been going on. New types of capital markets and financial products have been created, often against the opposition of many who said that they should not exist.
For example, powerful people argued that securitization couldn't happen in Japan. The idea that Japanese banks would be thinking about returns on equity rather than the number of branches they had was deemed unthinkable. But in reality, there has been - and continues to be - tremendous changes in behavior. None of that in my view, or very little of that was accomplished by a national consensus of a clear vision. It was a combination of companies, and government bureaucrats, and politicians, and opinion leaders, and others who were working on different agendas and different scales and different reasons. That is the way countries are. Countries are complicated and change happens all the time.
Of course, there are the laws of gravity of economics. Old obstacles disappear and new ones emerge. I think that the problem with the NPLs is definitely a big problem. It is not going to go away for a quite a period of time but I don't think that is the core problem. The core issue is corporate profitability.
Think about it - each problem has two sides. With the NPLs, there is the lender and there is the borrower. If the borrower is not making profits, he is not going to be able to pay the loan back. Fundamentally, corporate return on assets and profitability is just too low in Japan. This is why the stock market is weak, which of course has all sorts of ripple effects on consumer confidence and investor confidence. Moreover, it then ripples through bank capital, which ripples through the economic system.
So, I would say that above everything else, the major issue is how to stimulate better corporate performance. And some of the people who are supporting Genron are people who are trying to work on this. It is important to discuss the idea of independent directors, the idea of shareholder democracy, of better disclosure and better corporate governance in general. In the end, however, the final goal of all this is to create corporations that are striving to make better returns. I think that is the core issue here. If corporations make better returns, you have a better stock market, you have more healthy banks, you have less non-performing loans you, have more confident consumers, you have the ability to have returns on pension funds that can pay for an aging society, you have a recovery in real estate prices. Without corporate profitability at the center, none of this can happen.

Norbom:

I think this point is absolutely right. I think the whole focus on creating shareholder value, which walks hand in hand with Don's comments, is absolutely essential to creating a more vibrant stock market and increase the value of assets across the board.

Koll:
Why do you think this is so difficult in Japan? We know that in the 1960's, in the 1970's, even in the early part of the 1980's the performance the Japanese corporations was excellent, that even on a rate of return basis many of Japan's companies were amongst the best on the world. Then, of course, Japan had the bubble economy, which meant that everything became to easy and corporate managers lost focus. Many stopped improving their companies core businesses and instead ventured into real estate speculation and "Zaitech" money games. From here, were would you start the attack to turn things around? What should Japanese managers focus on?

Norbom:

That is a very good question. What I see is that many of the advantages that Japan has had in the past are still here - the quality of products is high, productivity is good, technology is excellent and there is great public infrastructure. The managers' problem is not that Japan's competitive advantages have gone away, but that many of these advantages have been globalized. You can now do many of the things that you used to only be able to do in a place like Japan in China for a fraction of the cost. The world has changed. It is open and has become more global. How do you respond to that is the big question.
There has always been a very strong social aspect of Japanese businesses that have gone along with Japan's competitive advantage. Now the competitive advantage has been globalized, you're still left with the social benefits and social responsibilities of companies. Trying to bring up new competitive advantage and still keep the strong social responsibility that is ingrained in the companies is a huge challenge.

Kanak:
I don't expect to add much new to this debate. There are many scholars who have already commented on it. But I do think that all the success and all the advantages of Japanese management skills were developed during the high growth era. Now, it is inevitable that during periods of high growth the one skill, the one expertise you do not develop is the skill of restructuring. The core skills in a growth era were how to improve quality, how to expand market share, how to create new market segments, how to modify and invent small innovations in products to reduce the lifecycle of products so people would replace them more frequently. There was no need for thinking through radical changes in cost structure. That's the kind of change that you face when suddenly a competitor emerges with one tenth of the labor cost, like China. U.S. companies just happened to face that competitive threat a little earlier in history than Japanese companies did.
This reminds me of another consulting project I worked on. I was working for an industrial supplier who thought they were leading the world in a particular product. And then a Japanese competitor appeared within a few years and virtually took away their entire market share by reducing the cost of the product by about two thirds. So all of a sudden my client had to restructure very fundamentally. In fact they went out of that business and went into a new business. They had to do it to survive and had to do it very quickly.
I think what maybe has taken too long is for Japan to develop the skill of restructuring. The skill of restructuring requires new capabilities. Dealing with issues directly rather than indirectly. Bringing bad news into the office of the President or the Chairman and being prepared to talk about it frankly. I think that is not very easy to do for many people in Japan. It is not easy to do in the United States either, or in France or Germany or anyplace really, but I think the historical communication practices and organization decision making processes of corporations here which serve very well in a steady growth environment, impeded that kind of frank discussion, frank decision making, and radical change.
Now this is starting to change too but it is changing slowly. On a macro level, there are many good trends for deregulation. There are many good trends for restructuring, and in a sense there is progress on structural reform. But again it is a question of pace. How quickly can those decisions be made, how quickly can visions be set, and actions taken? To me it is more a question of timing and pace. I think, as far as I can see, there are many, many people who agree on what needs to be done. But it is how quickly is acceptable for this country? And that is a national decision. This is Japan's decision how fast Japan wants to make those changes because those changes come at a cost.

Koll:
Do you really think Japanese companies are slow to change? Look at some of the restructuring success stories that have been coming through. Everyone always says "Nissan this, Nissan that." Well actually, if you look at some of the restructuring that happened at Toyota in terms of cost by cost, they have achieved just as much, if not more. I think there are many companies here who have got excellent corporate governance, take very fast, very solid decisions, are hyper competitive, very globalized, have excellent R&D and are not at all afraid to make hard decisions. What amazes me is the growing gap between some very excellent companies getting better all the time against so many bad companies getting worse all the time.

Norbom:

Yes, there are several global first-rate companies in Japan. There are companies that have done the right things to compete in a global economy. You mentioned Toyota. The car industry is almost a commodity business. Yes, there are distinctions about quality and brand, but to achieve leadership in this market is quite a feat. Sony is the leader in consumer electronics. Canon and Ricoh have presented a huge challenge to Xerox in office equipment. So there are great examples of companies who have figured out how to deal with the global realities. Figured out how to do some of their manufacturing in China, figured out how the product technology and engineering can indeed be competitive. On a global basis, these are great examples of companies that have not just adapted to globalization, but have actually spear-headed it. And what I admire is that many of these same companies have been able to hold on to their traditional values and corporate culture while adapting to the changing market.

Kanak:
If the economy were composed of all Sonys and Toyotas, we wouldn't be having this discussion. That is true of any country. You have your stronger companies. I think the issue is how to have more strong companies.

Koll:
I think this gets us goes back to the fundamental divide in Japan's economy, the non-performing loans. Let's discuss the banks for a moment. I want to start with the year 1999, the year the banks did all the "mega mergers". The end result is an unprecedented concentration of power amongst four financial groups. All are so big that they are clearly too big to fail. And indeed, three years later it seems that the management strategy of the bankers was indeed primarily defensive, designed to prevent nationalization rather than becoming a catalyst for pro-active change. So we've got the world's largest bank starting out with a truly spectacular demonstration that neither top nor middle management can actually build a modern bank with a properly functioning computer settlement system. If you cannot even get the very basics of your business right, how can you be expected to gain the trust of the people or re-gain global competitiveness?

Kanak:
I think it is much more complicated than that. We cannot just fault bank management and I certainly wouldn't use the example of the recent problems at Mizuho as anything that is symptomatic of the non-performing loans. I think that anytime you try to merge organizations that have different computer systems that are very complicated and vast, it is an extremely complicated and difficult implementation. And if you are under a time schedule that puts more risk into it, mistakes could happen easily. That is a really unfortunate thing to happen, but I wouldn't say that was an unprecedented event. There have been systems problems in mergers probably in many other places as well.

Norbom:

And other problems than just systems problems do happen all the time. Those things happen in large-scale mergers.

Kanak:
Certainly the banking industry has a lot of difficulty but look at the total of loans that were written off last year. It is extraordinary. There was a huge amount of write offs, a huge amount of loan sales. They are doing a lot, but they are in a business that is a very difficult business right now. When you have deflation, how can you run a profitable banking business? Has anyone ever done that in the world?
Koll: Oh, I very much agree. From a macro perspective, ultimately it is not possible for a corporation to be better than its customers. That's especially true for banks.

Norbom:

It goes back to the point that Don made earlier about getting the focus on profitability so you can stop the new inflow of NPLs. In Japan, the inflow outpaced the outflow last year. And corporate profitability and a focus on that, and shareholder value is really the key to stemming the inflow of new problems. The banks have tremendous strength and they can last for a while trying to work through this problem. And with the low interest rates that they are paying, the burden of carrying the problems for a long time is low and trying to work them over time is a perfectly legitimate approach. If you think the economy will recover, and asset values will increase, and profitability of companies will increase, then it may indeed turn out to be a viable approach.

Koll:
I don't want to put words into your mouth, but the banks are a convenient scapegoat for the rest of corporate Japan not getting its act together and running proper companies. Or is that overstating it?

投稿者 gnpo : 12:20 PM

[talk] What Is Our Common Perception for Taxation Reform?

Hiromitsu Ishi: Chairman of the Government Tax Commission, President of Hitotsubashi University

Hiromitsu Ishi was born in Tokyo in 1937. He completed the Graduate Course of Economics at Hitotsubashi University in 1965. He later became a professor for the Faculty of Economics at Hitotsubashi University in 1977, and held a position as visiting professor for several universities including the University of Michigan and the University of New South Wales (Australia). In 1993, he assumed the position of dean of the Faculty of Economics at Hitotsubashi University and has been serving as the President of the same university since 1998. In addition to his role as a special member of the Fiscal System Council, he also holds positions as the Vice President of the Japan Association of National Universities and as a provisional member for the Central Council for Education in the Ministry of Education, Culture, Sports, Science and Technology. His major published works include The Japanese Tax System 3rd ed. (Oxford University Press, 2001) and Making Fiscal Policy in Japan (Oxford University Press, 2002)
Zeisei Watching (Fiscal System Watching), Kankyo-zei Towa Nanika (What is Environment Tax?) and Kuni No Shakkin (Debt of the Country).

Masaaki Honma: Member of the Council on Economic and Fiscal Policy, Professor for the Graduate School of Economics at Osaka University

Masaaki Honma graduated from the School of Economics at Osaka University in 1967. He withdrew from the Doctoral Course of Economics at the same university in 1973. He had served as visiting professor for Warwick University in the U.K., visiting researcher for STICERD at the University of London and Vice President of Osaka University before assuming his current position as a professor for the Graduate School of Economics at Osaka University. He is also a member of the Council on Economic and Fiscal Policy and the Tax Research Commission. His major published works include Sozei No Keizai Riron (Economic Theory of Taxation), Shin Nihon Gata Keizai System (New Japanese-type Economic System) and Nijuuisseiki Nihon Gata Fukushi Shakai No Koso (Concept of the Japanese-type Welfare Society of the 21st Century).

Talks between Mr. Hiromitsu Ishi and Mr. Masaaki Honma started with a criticism of the press for exaggerating the differences in the opinions of the Tax Research Commission and the Council on Economic and Fiscal Policy, which in reality generally coincide. Mr. Honma pointed out that there still can be seen attitudes among ministries to set aside the discussion in the Council on Economic and Fiscal Policy. However, he also explained that there are separate roles in taxation reform for both, such as that the Council on Economic and Fiscal Policy will be in charge of the basic policy and the Tax Research Commission will study the details of the design; and although there are minor conflicts near the border, they had agreed to cooperate by overcoming those gap. As for the purpose of taxation reform, Mr. Ishi showed a willingness to promote reform based on the “ideal taxation theory,” which is to remedy the mismatch between the changes in the socioeconomic structure since the postwar period and the taxation system. On the other hand, Mr. Honma pointed out the necessity of strategy for the reform evolving around stimulating the economy as well as remedying the mismatch. Although Mr. Ishi expressed a concern towards the danger that the stimulating may be dragged by the urgent need to revitalize the economy, he showed a general understanding of this opinion. Both agreed that economic growth was more appropriate as a purpose of taxation reform rather than a change in the canons of taxation, such as neutrality and vitality, which does not fundamentally conflict with the current state. They also agreed with the idea of “widening the tax base and declining the tax rate,” besides the timing of its realization, in the area of income tax and corporate tax. As for the tax mix of Japan in the future, their common understanding was that, although it is necessary to correct the income tax system which is full of loopholes, income tax should remain a core of taxation. They also agreed that an increase in consumption tax is inevitable. In this regard, Mr. Ishi insisted on enhancing the system of imposing tax on assets from the perspective of impartiality, while Mr. Honma objected to the idea of inheritance tax reduction. As for the relation between the taxation reform and the balance of government finances, Mr. Honma suggested the basic policy of the Council on Economic and Fiscal Policy, such as that tax reduction shall be compensated later by combining it with spending reduction. On the other hand, Mr. Ishi pointed out that it is hard to adapt the concept of a progress schedule in the case of taxation reform, which is also indicated from past experience, and that it is inevitable for the Tax Research Commission to consider the possibility of increase in revenues in the course of correcting the distortion of tax on a long-term basis. However, Mr. Ishi did not deny the idea of a policy tax reduction as a short-term anti-deflation policy, provided that it would be a truly effective measure for revitalizing the economy, and that there would be a prospect for funds.

投稿者 gnpo : 09:14 AM

[paper] Background on the Confusion in the Taxation Reform Discussion

Keimei Kaizuka: Professor at Chuo University

Keimei Kaizuka was born in 1934. He graduated from the Economics Department of the University of Tokyo, and completed the Doctoral Course at the Graduate School of Social Science at the same university. He served as a professor for the Economics Department at the University of Tokyo, before assuming his current position as a professor for the Law Department at Chuo University and emeritus professor of the University of Tokyo. His published works include Zaisei Shishutsu No Keizai Bunseki (Economic Analysis of Fiscal Expenditure) and Nihon No Zaisei Kin’yuu (Finances of Japan).

Recent discussion for taxation reform has been thrown into chaos. The background of this situation is very confusing, and the fact that the Prime Minister’s Official Residence and the Cabinet Office are trying to change the process of the ministries-led way of policymaking is having a potential but significant impact on the matter. Also, becoming more dominant are the ideas that policymaking must be done at the initiative of politicians and the role of bureaucracy shall be diminished. Thus, it is unclear who will be in charge of the actual policymaking, and there is a danger that a vacuum is being generated here. The process of decision-making for taxation reform is also vulnerable to this impact, so the gap between the intention of the Tax Research Commission and the Tax Commission of parties, who want to maintain the conventional way of decision-making for policies, and the changed process of decision-making on policies is inviting the confusion currently surrounding the discussion. The purpose of taxation reform depends on which of the desirable taxation system’s fulfillment requirements is declared to be the most important. Recently, the Tax Research Commission and the Council on Economic and Fiscal Policy disputed over whether neutrality or vitality was the appropriate principle. Although this dispute is considered to be rather unproductive since it is about the interpretation of the word, it does reflect a gap in the awareness of issues between the Tax Research Commission and the Council on Economic and Fiscal Policy. Neutrality had been used to mean neutrality towards business activity in the private sector. However, in reality, it is impossible for a taxation system to be entirely neutral, so it is commonsense in the field of tax theory that in some way it biases business activity in the private sector. In this way of thinking, achieving the principle of neutrality should only have second priority. Interpretation of the specific contents of vitality also varies widely. The author thinks that, considering the serious state of the current Japanese economy, the most important task for this economy is to get out of this stagnation and to maintain a certain level of economic growth for the middle and long term. In this sense, the current state of Japanese economy is somewhat similar to that of the U.S. economy in the 1980s. In brief, the task of taxation reform on a middle- to long-term basis is merely an attempt to achieve economic growth

投稿者 gnpo : 09:11 AM

[talk] Can the Koizumi Administration Realize a Strategic Taxation Reform?

Susumu Takahashi: Head of the Economics Department of the Japan Research Institute, Limited

Susumu Takahashi was born in Tokyo in 1953. He graduated from the School of Economics at Hitotsubashi University and joined Sumitomo Bank in 1976. He accepted a position at the Japan Research Institute in 1990 and is now the Head of the Economics Department at the same institute. He became a visiting professor at the College of Economics at Ritsumeikan University in 1998, and a visiting professor of the Graduate School of Asia-Pacific Studies at Waseda University in 2000. He currently holds positions as an Advisory Group Member of the Ministry of Finance, a Member of the Financial Research Conference of the Japan Fair Trade Commission and a Member of Immigration Control Policy Conference in the Ministry of Justice. He appears on the Television Tokyo program, “World Business Satellite.

Yasuyoshi Masuda: Professor for the Economics Department at Toyo University

Yasuyoshi Masuda was born in Tokyo in 1958. He joined Fuji Bank after graduating from the Faculty of Economics at Kyoto University, and assumed positions in the Research Department and others. He joined the Fuji Research Institute Corporation in 1988. After gaining experience in positions such as the General Manager of the London Office, he became the Chief Economist in April of 2001. He has been a professor for the Faculty of Economics at Toyo University since April of 2002. His major published works include Tettei Yosoku Nihon Keizai Korekara Juunen (Thorough Forecast of Japanese Economy’s Future in Ten Years) and Kin’yu Kaikoku (Opening of Japan in the Area of Finance).

Robert Feldman: Morgan Stanley’s Chief Economist for Japan

Robert Alan Feldman, born in 1953, He graduated from Yale University and received a Ph. D. in Economics from MIT. He joined Morgan Stanley after working for the Federal Reserve Bank of New York, IMF, etc. His published works include Nihon No Suijaku (The Weakening of Japan) and Nihon No Saiki (Starting Over). Institutional Investor magazine ranked him at the top of their “All-Asia Research Team Poll.

Jesper Koll: Chief Economist at Merrill Lynch Japan

Jesper Koll graduated from Johns Hopkins University. He joined OECD in 1984, later went on to work for JP Morgan, and then served as a Managing Director at Tiger Management LLC. He joined Merrill Lynch Japan in 1999. He has been in charge of investigating the state of the Japanese economy and participating in the planning of suggestions on policies in the governmental advisory council, such as the Industrial Finance Subcommittee of the Ministry of Economy, Trade and Industry. His major published works include Towards a New Japanese Golden Age. He also writes for a number of Japanese and foreign magazines and newspapers.

The discussion started with Mr. Takahashi's statement that fundamental taxation reform is necessary from three perspectives: an approach towards sound public finance, stimulation of the economy, and preparation for an aged society. Following this statement, Mr. Masuda responded, fairness and neutrality in taxation must be maintained, so short-term measures to stimulate the economy or an approach towards sound public finance and the issue of taxation structure must be discussed separately.
Mr. Koll raised a question to this issue: First of all, is there any strength left in the Koizumi Administration to launch any fundamental taxation reform? He showed concern that if any halfway measure for reform is suggested in this situation, the public’s disappointment will be greater yet.

As for the current standoff, in which the Council on Economic and Fiscal Policy, the Tax Research Commission and the Tax Commission of LDP each has a different approach to taxation reform and the discussion does not come to an agreement, Mr. Feldman pointed out that the reason is attributed to the confusion of principles and decision-making mechanisms. That is, the ambiguity of the terms simplicity, neutrality and fairness, which have been held up as the canons of taxation for many years, and the three-tiered structure of decision-making comprising the government, the Ministry of Finance and the party, are hindering the achievement of fundamental reform.

Taxation reform is inseparable with the issue of the grand design of the future of Japan. However, the opinion from Mr. Takahashi, consensus about the future of Japan may not be reached even among the Cabinet members, not to mention the public, was concurred by all of the other three. The discussion arrived at the conclusion that the only remaining alternative which Prime Minister Koizumi can take is to show the public the vision of the reform including taxation and seek a general election that would let the voice of the people be heard on such vision.

As can be seen in the cases of the Reagan and Thatcher Administrations, it will generally take three to five years for a taxation reform to be brought to realization. Of course it will take more time to fix the individual matters such as the rates of corporate tax and consumption tax, setting a vision for the basic policy of the reform should not be so time-consuming. The government must present this vision as soon as possible, for time is running out for Japan. Also, the administration must win the public’s support in order to stabilize its foundation and start with implementing the reform. This point was also met with consensus among the four.

投稿者 gnpo : 09:04 AM

[talk] Is Fiscal Balance a Purpose of Taxation Reform?

Tadashi Ogawa: Representative Director and Chairman of the Board of Japan Tobacco Inc.

Tadashi Ogawa was born in 1940 in Tokyo. He joined the Ministry of Finance after graduating from the University of Tokyo, Faculty of Law. He served as Director-General of the Tax Bureau and Commissioner of the National Tax Agency before assuming the position of Administrative Vice Minister of the Ministry of Finance. He retired from this position in 1997 and became a visiting professor for the Research Center for Advanced Science and Technology, the University of Tokyo. He assumed the incumbent position of Representative Director and Chairman of the Board of Japan Tobacco Inc. in June of 2001. His published works include Tobacco Shouhizei Shoukai (Detailed Explanation of Tobacco Consumption Tax) (co-written).

Naohiro Yashiro: President of Japan Center for Economic Research

Naohiro Yashiro was born in 1946 in Osaka. He graduated from the School of Economics at the University of Tokyo, and received a doctoral degree in economics from the University of Maryland, USA. He had worked for the Economic Planning Agency and OECD, served as a Professor of Economics at the Institute of International Relations, Sophia University, before assuming his current position as President of the Japan Center for Economic Research in 2000. He is also a member of the Council for Comprehensive Regulatory Reform and the Council for Gender Equality. His major published works include: Nihonteki Koyou Kanko No Keizaigaku (Economics of Japanese Employment System), Shoushi /Kourei-ka No Keizaigaku (Economics of Declining Population and Aging), and Shakaiteki Kisei No Keizai Bunseki (Economic Analysis of Social Regulation).

Prime Minister Koizumi gave direction to consider taxation reform to vitalize the economy. However, the answers to this issue differed largely in terms of its purpose between Mr. Tadashi Ogawa, the former Administrative Vice Minister of the Ministry of Finance, and Mr. Naohiro Yashiro, although their basic understanding was the same. As for the canons of taxation, both agreed that it is important to understand that, in the first place, the current taxation system does not strictly comply with the canon of ñfairness, simplicity and neutrality,î and the basic idea of the reform is to remedy this gap. They believe that using taxation as a measure for structural reform does not contradict the principle of ñneutrality.î Mr. Yashiro pointed out that this kind of argument ñuses up energy that could be spent discussing reform in areas that are aberrant from its original purpose.î As for the purpose of the taxation reform, Mr. Ogawa insisted that its basic idea is to recover the fiscal balance and not to stimulate the economy in the short term. However, Mr. Yashiro, although showing a certain level of understanding of this opinion, stated that ñalthough a long-term improvement of public finance is necessary, reform that has an impact on business activities in the private sector should be put forth at the same time,î insisting the need to sow the seeds of tax revenue improvement by stimulating the supply side. This opinion from Mr. Ogawa basically coincides with the current view of the Ministry of Finance. There are several weak points in this opinion, such as the concern towards the previous and current taxation system, which is no longer able to obtain enough tax revenue because of the repeated economic stimulus, or the question on the fact that the basic idea (that the burden of tax is shared among the public in order to generate fiscal expenditure) is ignored in the discussion on taxation reform. Both agreed that the taxation reform should be put forth in consistence with pensions and social security. What is completely absent in the current discussion on taxation reform is a conversation about the entire vision, suggesting which direction Japan must go in the future, together with analysis on the past examples. Mr. Ogawa says that the specific plans of government revenue and expenditure come after this. Both criticized the delay in setting a vision for the future in Japan. To this end, Prime Minister Koizumi should first speak out about the concept, or else the taxation reform will be one in name only.

投稿者 gnpo : 09:01 AM

[interview] Radical Reform under Deflationary Condition May Have Reverse Effect

Hiroshi Kato: President of Chiba University of Commerce, Emeritus Professor of Keio University

Hiroshi Kato was born in 1926. He graduated from the Economics Department of Keio University in 1950 and became a professor at the same Economics Department in 1966. In 1990, he assumed a position as professor and dean of the Policy Management Department of the same, and became an emeritus professor in 1994. He has been serving as the president of Chiba University of Commerce and Chiba Junior College since 1995. He specializes in comparative economics, public economy analysis and holds a doctorate degree in Economics. His major published works include Boukoku No Housoku (Rule of Ruining Nations), Kan No Hassou Ga Kuni Wo Horobosu (Bureaucratic Ideas Destroy Countries), etc.

We interviewed Mr. Hiroshi Kato, President of Chiba University of Commerce, who has served as Chairman for the Tax Research Commission for ten years since 1990. He had promoted the privatization of JNR and NT&T when he was the Chairman of the 4th Subcommittee of the 2nd Ad Hoc Commission on Administrative Reform (also called Doko Rincho). Prime Minister Koizumi was his student when Mr. Kato was teaching in the Economics Department of Keio University.
Four months had passed since its start this January, but the discussion of taxation reform has gotten completely tangled. Mr. Kato says that this is because Prime Minister Koizumi had ordered radical taxation reform to both the Council on Economic and Fiscal Policy and the Tax Research Commission. The Council on Economics and Fiscal Policy, which is supposed to be in charge of summarizing the middle- and long-term basic policies, is now also involved in the detailed short-term design of institutional arrangements and has therefore clashed with the Tax Research Commission, which was originally serving this kind of role.

Furthermore, discussion of taxation reform involves not only the Council on Economic and Fiscal Policy and the Tax Research Commission, but also the Tax Commission of the LDP, Tax Commissions of the ruling parties, the Ministry of Finance, and even the Prime Ministers Official Residence. Although it should not be an easy job to adjust to the different opinions, this situation calls for Prime Minister Koizumi to exercise his leadership. However, Mr. Kato sees that the Prime Minister does not show this kind of leadership at all in his words or in his actions. I suspect that because he lacks confidence in taxation, he simply adopted the idea of Heizo Takenaka such as in the case of the stimulation of economic activity, and he himself does not have any original ideas in the policy or concept of reform.

The general consumption tax of the Ohira Administration, sales tax of the Nakasone Administration, and national welfare tax of the Hosokawa Administration there are many cases in the past in which a collapse of taxation reform shook a certain administration to its foundation. Considering the current situation where the reforms of the Public Roads Administration and postal service are not progressing as expected, the foundation of the Koizumi Administration will be even more vulnerable if taxation reform falls into further chaos. Mr. Kato says, Radical reform under deflationary condition may have a reverse effect. He points out that it is currently a top priority for the economy to build up enough strength to lift its head above water, and one would be better off using taxation for it. He is now discussing this kind of policy in the commission organized by him to serve as a shadow Tax Research Commission, and is planning to submit the policy to Mr. Takenaka by the end of June.

投稿者 gnpo : 08:59 AM

[talk] What's Happening in the Discussion on Taxation Reform?

Economic bureaucrats A,B,C,D

Four of the bureaucrats who are currently in charge of the practical business of taxation reform in the administrative district of Kasumigaseki participated in this discussion, which was held by Genron NPO on the condition of anonymity. The discussion started with a consideration of the possibility of the fundamental taxation reform under the current economic conditions. Although three of the participants agreed that it was necessary to reform the current taxation, an official from the Ministry of Finance insisted that, judging from the principle that the main purpose of taxation is to obtain funds for spending, one must discuss such matters by strictly focusing on maintaining the fiscal balance. Participants from other ministries opposed this opinion from their respective positions, stating that spending reduction by using the tax as a leverage is the only way to regain the power of policy to cope with the current situation, and under the current state of decline in Japan's competitiveness, one must encourage the creation of new markets by utilizing the tax. The Ministry of Finance is cautious because the current taxation generated politically overoptimistic policies, which led to the shortage in tax revenues. Cabinet Office officials contradicted this opinion, stating that the public will never agree with a tax increase while spending remains intact. Because taxation is a subsystem of the economy, it must be considered in the whole framework of government finances. Thus, the discussion on this issue followed parallel courses without reaching an agreement. The Council on Economic and Fiscal Policy is currently putting forth the reform, presenting the quality of tax as its central issue, and planning to prepare the progress schedule of taxation reform to recover the fiscal balance in a middle- and long-term basis. However, there was criticism against this that it is the same old trick of only dangling the carrot (and keeping the stick hidden). As for the method of working for tap exaction reform, which is another focal point, there has been reported discord among the Council on Economic and Fiscal Policy, the Tax Research Commission and the Tax Commissions of the parties. In this regard, the opinion was divided between those who attribute the reason of conflict to the vagueness of the separation of roles, and those who put weight on the importance of discussing the matter among several parties rather than its separation of role at the current stage. Since the launch of the Koizumi Cabinet, policy formulation has been shifting towards the Cabinet-led style. Although it is expected that this trend will end with tax policies, there was also an opinion that the confusion in the policy formulation process is Because the Prime Minister's Official Residence does not order the idea or policy of taxation reform specifically and in detail. Thus, the problem of whether the strategy for the taxation system can be realized not only in the short-term stimulation of the economy but also in the middle- and long-term reform of Japan remained uncertain for each of the participants.

投稿者 gnpo : 08:56 AM