February 27, 2003

[paper] Japanese Deflation is a Monetary Phenomenon

Haruhiko Kuroda

The global economy presently carries three risks. One is the global stock market collapse. Its impact has put most of the Central and South American countries into currency and monetary crises. These have all resulted from collapse of the IT bubble and the new economy bubble in the U.S. In addition, though still indefinite, security problems such as a U.S. attack on Iraq and related terrorist movements may come up. I do not believe that the U.S.-triggered worldwide fall in stock prices and its influence are bottomless, but today, these risks must be sufficiently considered in carrying out economic management. Today, the top-priority policy targets for Japan are to dispose of non-performing loans and to stop the deflation. The issue of non-performing loans will be dealt with under the leadership of Fiscal and Financial Services Minister Heizo Takenaka; the basic direction seems correct, but as long as the continuous decline in prices goes on, new non-performing loans will keep on increasing in spite of the disposal efforts. Although the present deflation in Japan is partly attributable to such factors as the presence of China, excess capacity, and deregulation, the fact that prices are continuously falling in the long term unrelated to the cycle of the growth rate suggests that this deflation is after all a monetary phenomenon, and can only be remedied by monetary policy. What is more, a sense of deflation is already built into the economy. Such a sense could only be overturned by the Bank of Japan (BOJ) setting a target for price stabilization and expressing a strong determination to attain it, as well as making a commitment to use any kind of monetary policy instruments. Since traditional monetary policy no longer proves to be effective, the BOJ should drastically change its course and continue to buy long-term government bonds, targeting growth in money supply, until prices become stable. This decision must be made by the BOJ. The government cannot stabilize prices; only the BOJ can. Price stabilization and anti-deflation measures are basically the roles of the BOJ, and for this reason, price stabilization is listed as the primary goal in the Bank of Japan Law.

投稿者 gnpo : 08:45 AM

[paper] How Should We Avoid a Critical Deflationary Spiral?

Kazumasa Iwata

The continuous fall in prices in Japan is an extraordinary situation for postwar industrialized countries. I see three factors behind this deflation. They are the burst of the stock and land price bubble at the beginning of the 1990s, a sharp hike in the yen during that period, and the stringent monetary policy in the first half of the 1990s that caused the deflation to accelerate further. These factors combined made deflation settle in Japan from 1995. There are arguments that the fall of the prices have been caused by the regulatory reform and the global market expansion, including China, but they are not the main causes; I believe that the deflation is fundamentally a monetary phenomenon that can only be addressed by monetary policy. According to my economic model, the Japanese economy has been in an unstable deflationary equilibrium since 1995. My calculation indicates that this equilibrium will definitely be broken once the deflation rate breached 3% points and will go into a critical deflation spiral. As long as we remain on our present track, the equilibrium will hold up to a 3% deflation rate, but once we get off this track, we could fall into a spiral at any time. Today there are three risk factors for such possible deviation from the deflationary equilibrium. The greatest shock would be a U.S. attack on Iraq. Also, the disposal of non-performing loans would have an effect, though it cannot be avoided for radically reforming the Japanese economy. The most problematic of all, however, is that not all power is put into anti-deflation policy measures. The top priority must be placed on “checking deflation,” and a desirable policy package would be one that drastically changes the BOJ’s conventional policy and implements more comprehensive and daring tax cuts than in the past. Looking back at the time of the Showa Depression and the U.S. Great Depression, the BOJ’s enormous purchase of government bonds had checked deflation and lowered the exchange rate to a large extent. With the government and the BOJ coming to share common awareness about non-performing loans around the time of the earlier Cabinet reshuffle, the required conditions are beginning to be met. A concrete package covering taxation, monetary policy, and the disposal of non-performing loans must be presented to the nation in a visible form; the faster the better. It is my belief that the period from the end of this year to January or February of 2003 will be the last chance.

投稿者 gnpo : 08:43 AM

[paper] What Kind of Economic Policy is Required under Structural Deflation?

Eisuke Sakakibara: Professor of Keio University, Director of the Global Security Research Center

Eisuke Sakakibara is now a professor at Keio University and serves as director of the Global Security Research Center, being engaged in an analysis of global markets including Asia. Sakakibara graduated from the Economics Department of Tokyo University in 1964 and received his Ph.D. in economics from Michigan University in 1969.

Deflation is not something caused by a temporary lack of demand or a temporary monetary phenomenon, but it is a structural phenomenon that is progressing worldwide under the globalization trend. In Japan, the deflation is deepened due to the lack of potential high-earning opportunities pertaining to socialistic regulations. Since the low investment and low consumption pertain to structural factors, any supply of money would only build up assets to generate a bubble, and would not lead to inflation. Since there has been an immense qualitative change from the time of inflation to the time of deflation, there must be dramatic changes in policy, business management, and ways of thinking. Policy discussions based on conventional macroeconomics are meaningless today; the premises and framework of the theories have been changed. As structural deflation cannot be controlled, the policy target should be to prevent rampant deflation while making an allowance for gradual deflation. Under deflation, the disposal of non-performing loans would inevitably be conducted in a benevolent manner. Being in the same phase as the U.S. Great Depression in the 1930s, the current problems in Japan are supposed to be resolved by the depression itself, but preventing this, the government must take extremely bold measures. The state should voluntarily establish a corporate revitalization fund, gather knowledgeable people from various fields and work from the viewpoint of how industries and businesses should be rejuvenated. If this organization is established under the Deposit Insurance Corporation of Japan, huge funds can be raised with government-guaranteed bonds. At the same time, banks should think about making profits as private companies, and the financial supervisory function should be made independent from politics. The government also has to refrain from the populist attitude of requiring bank managers to take a greater responsibility rather than resignation or censuring banks. While public funds should not be readily expected but only allotted to any losses that have resulted from a bank’s rehabilitation efforts, the amount of public funds required would be 50 trillion to 60 trillion yen. This should be financed by one-time issue of a government note. The Japanese economy must undergo a major surgery of about five years with commitment under the initiative of a truly competent surgeon. The serious discussions on it have only just begun.

投稿者 gnpo : 08:41 AM

[paper] Drive in the Microeconomic Level Provides the Only Way Out of Deflation

Haruo Shimada: Professor of 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.

I find that few of the deflation arguments in this magazine are based on the real state of the economy. Deflation cannot be checked by macroeconomic measures. In present-day Japan where the economic structure is dynamically changing, deflation will not end unless entrepreneurs increase their confidence in their business or individuals take challenging actions. Despite the emergence of new potential demands from these structural changes, there is a lack of confident people who are willing to lead us into the “future,” which must be just around the corner. That is what makes it difficult for us to find our way out of the current deflation. My strongest advice is “do not be easily affected by empty macroeconomic arguments.” Such arguments tend to become government-dependent and make it difficult to see the task of individuals, which is to take challenging actions. The same applies to the arguments of a government-lead safety net. The most important point in establishing a national safety net is to prevent the most needy from being ruined for having no means of support. Repeated arguments have been made to increase the budget. However, Japan did not yet have data or strategy on how and for what to use the money. A later survey found that the number of householders seeking jobs and receiving no unemployment benefits, who were the most urgent targets, was 330,000; if so, more detailed and strategic employment measures can be taken. The number of the most needy householders may double as a result of the structural change of the economy, so a strategic safety net should be established. However, those people cannot be absorbed without industrial revitalization and the emergence of new industries. The reason that Japanese private companies are unable to make new progress is that they are not meeting the needs of the new era. What I sincerely feel is that the individual’s morale is completely undermined. As can be seen in the recent movements of special economic zones and deregulation, those who have will are repressed by the government and those without will make no move even if encouraged in present-day Japan. Still, there are many people who have not yet suffered and only expect the government to take some macroeconomic measures. Such mindset is the most serious bottleneck for Japan’s future, which may well put the nation into a decline.

投稿者 gnpo : 08:38 AM

[paper] Global Increase of Financial Assets and the Risk of Credit Contraction

Kazuto Uchida: Chief Economist & Senior Vice President NY Research Office, The Bank of Tokyo-Mitsubishi, Ltd.

He joined the Bank of Mitsubishi in 1985. He has been in the present position since 2002. He is a coauthor of "Beikoku Keizai no Shinjitsu (the truth of the U.S. economy)" and he contributed to many economic newspapers and magazines. He received his B.A. from Keio University in 1985.

The end of the Cold War in the middle of the 1980’s brought on two important structural changes in the global economy. The first was globalization and the second was the increase of financial assets. The progress of globalization accelerated the shift of production to the developing countries and brought about deflationary pressure from the aspect of both general price levels and the balance of supply and demand, that is, the pressure of price differentials and the decrease of domestic investment demand which were prevalent in the high cost developed nations. As a result, there occurred the so-called deflationary cycle. However, if this itself accelerate in the transformation of industrial structures and the horizontal division of labor, it is possible to return the global economy to a sustainable growth process. The problem is the expansion of financial assets. In the US, the ratio of the balance of financial assets to the nominal GDP has increased ten times in the past twenty years over three phases, but the burst of the stock price bubble in the US has ended this expansion, and the increase of global capital which had continued for approximately 20 years has stopped. At present, the most frightening issue is not the competitive deflation coming from globalization, but the debt deflation that comes from the contraction of credit in the financial side. The dead end of global capitalism shrinks the international flow of money and causes a backward flow of the favorable cycle of global capitalism in the 1990’s. The most prominent phenomena are the instability of the key currency, the dollar, and the squeeze of the flow of funds to the newly industrialized nations, which is causing a serious situation in the Latin American countries. With the burst of the stock price bubble in the US, the amount of direct investment from Europe to the US decreased dramatically, and the contraction of financial assets has strengthened the adjustment pressure on balance sheets. Within this process, macroeconomic policies such as the monetary expansion and increased fiscal expenditures have been less effective due to the decrease in the credit multiplier and the increase of saving rates. These symptoms have begun to become clear in the US, as it has already been seen in the Japanese economy. To achieve a soft landing of sharp contraction of financial assets in such a phase, there needs to be a continuous supply of excess liquidity so that there is not an over-contraction of credit, and the only thing to be done is to wait for the next inflationary cycle. The factors that caused the destruction of the American economy and its financial sector in the world depression in 1930 were the repatriation of short-term overseas funds from the US and the withdrawal of deposits (the increase of liquid funds). As a lesson from the global depression, it is vital to avoid capital flight from the US. Capital flight will occur more in the process of financial contraction in other countries than in the process of the decrease of confidence in the American economy. At present, the risk is in Japan that has just started a surgical operation of its economy and its financial sector.

投稿者 gnpo : 08:37 AM

[talk] It is Impossible for the Japanese Economy to Achieve ”Revitalization of Industry” if it cannot Destroy Itself

Tadasu Ohe: President and a principal archtect of Plantec Architects, Inc.

He established Plantec Architects, Inc in 1985. His works include Shiga prefectural University and Toshima office of Tokyo Metropolitan Government. He received various awards for his works, including Japan Institute of Architects "Young Architects of the Year" (Fun house) in 1994 and Good Design Awards (Tea house in Yokohama) in 2001. He received his B.A. in Architecture in 1977 and M.A. in Architecture from The University of Tokyo in 1987e.

Michio Matsui: President, Chief Executive Officer, Matsui Securities Co.

Michio Matsui has been since 1995. He has authored O Yannasaiyo demo Tsumannnaiyo (Do It, but It Won't Be Interesting). Mr. Matsui graduated from the Economics Department of Hitotsubashi University in 1976.

Can the “Takenaka Plan” solve the serious problems that are troubling and weakening the Japanese economy such as the issues of non-performing loans, persistent deflationary pressure, and increases of bankruptcies and unemployment that have not changed in the past decade? The specific debate concerning the newly established “Industrial Revitalization Organization” which will be set up to help with the restructuring and revitalization of enterprises will begin from now on. The main point is how to categorize the firms that carry excessive debt into “rebuild” and “bankrupt”, but Matsui points out that “Politicians and bureaucrats do not have criteria to say ‘We should close this firm’ or ‘We should keep that firm’”. The key to this issue is the market. If the market which can bring about drastic selection and decide on the winners and losers, those within the firm will no doubt move to say that “with the old management, this firm will fail”. Along with these movements, the old structures will be removed as well. However, in the Takenaka Plan, there are no market-oriented ideas. Matsui points out the doubt of “why Mr. Koizumi or Mr. Takenaka does not realize this point”. However, it is not possible for the state or the regional governments to continue ignoring the market decisions and ordering projects for general contractors with stock prices of 10 yen. It can also be mentioned such as Mr. Ohe says that even without the selection process of the Industrial Revitalization Organization between restructuring or bankruptcy, “deflation will do away with the enterprises which should be done away”. Mr. Ohe sees “this deflation will continue throughout the next 20 years” and even if the present situation is left as it is, only the firms that “welcome deflation” will continue to survive. It may be nonsense to select problem firms and try to rebuild them. First, natural selection of firms should progress and all resistance power should be broken down. If the Japanese economy is able to completely destroy itself in this manner, it should find the natural birth of new industries that should promote the IT revolution in the 21st century. At that time, the problems of the Japanese economy will definitely be overcome.

投稿者 gnpo : 08:29 AM

[talk] What is the Ultimate Goal of the Revitalization of Industry?

Shinji Fukukawa: Adviser to the Dentsu Inc.

Born in 1932, he graduated in 1955 from the Law Department, the University of Tokyo. In 1955 he entered the Ministry of International Trade and Industry (currently the Ministry of Economy, Trade and Industry) and became the administrative vice-minister. In the meantime, he served as a Private Secretary to the Prime Minister. In 1988 he left MITI and in 1994 took the present position via Vice President and Vice-Chairman of Kobe Steel Co, Ltd. Concurrently, served as together with the adviser to the Dentsu Inc. Currently, he is a member of the Research Committee of Resources and Energy (the Ministry of Economy, Trade and Industry) and a member of the govemment's deliberative council. His works include 21 Century: Japan's Choice and Age of Information Technology: Idea of Successes.

Motoshige Itoh: Professor, Faculty of Economics, The University of Tokyo

After graduating from a faculty of Economics, The University of Tokyo in 1974, received his PhD in Economics from the University of Rochester in 1979. He has worked as a member of various Government Committees; Ministry of International Trade and Industry, Ministry of Finance, Economic planning Agency, Fair trade Commission, etc. His published works include “Makuro Keizai Gaku (Macroeconomics)” and “Nihon no Shokuryo Mondai wo Kangaeru (On food Industry in Japan)”.

The Japanese economy will not be reborn only by handling the problem of non-performing loans. Real revitalization needs the recovery of industrial strength. … Such voices are heard from various sectors recently. Professor Motoshige Ito of Tokyo University and Shinji Fukukawa, a consulting director of Dentsu and former MITI Vice Minister held a dialogue on what should be done to handle past negative inheritances while simultaneously implementing positive policies.

Both gentlemen likened the Japanese economy to a sick person and they agreed that there was no room for doubt that the illness called non-performing loans must be cured and that it was necessary to set up a fund to help firms revitalize.

They also emphasized that not only for government funds represented by administrative investment banks but also funds led by the private sector including foreign capital should be able to respond to various needs, such as funds to revitalize favorable projects and funds which would finance funds when there was a restructuring within an industry.

In addition, Professor Ito stated that both fiscal and financial policies were required for tackle against deflation. Furthermore, Professor Ito pointed out the situation of the distribution industry, which was one of the three problematic sectors from the view of an expert in distribution theory. According to this, he stated that for firms who had already applied the Private Sector Revitalization Law and the Corporate Bankruptcy Laws in a smooth manner were starting to recover, and for those regions in which even just one of the firms closed or combined excess shops, excess supply was eliminated and there was an increase in revenues for the other firm. The safety nets is required to be build for small and medium sized wholesale sectors which are expected to experience chain reaction bankruptcies along with structural reforms.

On the other hand, Mr. Fukukawa who has experience on the field of the restructuring of structurally depressed industries such as coal and textiles stated that there should be “accountability and visions” from the government and the administration, methods to minimize social friction, and the development of policies which lead to the revitalization of industry. Also, concerning the non-performing loans of banks, he criticizes the debates that there should be infusions of public funds from the beginning. He points out that responsibilities between politics, the administration and the management of banks in the past should be clarified. In addition, taking up the example that the Chinese threat was not considered significant in South Korea which placed importance on IT, Mr. Fukukawa claimed that Japan must also make clear which industries will be important for Japan in the future.

投稿者 gnpo : 08:26 AM

[talk] Government Involvement and Limitations concerning Revitalization and Non-Performing Loans

Norihiko Ishiguro: Director of the Industrial Restructuring Policy Division of the Ministry of Economy, Trade and Industry of Japan.

He is in charge of making a mid and long-term policy for Japanese industry and special legislation for industrial revitalization. His published works include "Nihon no Kyousou Yuui towa Nanika(What is Japan's superiority in competition?)" and "Shin Syotoku Baizouron(New Theory of doubling income)". He graduated from the faculty of Law of the University of Tokyo in 1980.

Takaaki Kawashima: MKS Partners Limited, Managing Partner

Before MKS, Takaaki Kawashima spent 24 years in a wide range of banking businesses at Industrial Bank of Japan (IBJ). He was involved in corporate finance, investment banking, project finance, and in management of alternative assets both in Japan and internationally. At IBJ Securities, he was executive director and responsible for both debt and equity primary markets. He has a LLB from Keio University and an MBA from Northwestern University.

Paul Sheard: Chief Economist -Lehman Brothers Inc.

Born 1954. Currently, Managing Director - Economy Research, Lehman Brothers Inc., Tokyo Office. Ph.D. from the Australian National University. Worked at the Stanford University, Institute of Monetary and Economic Studies - Bank of Japan, Osaka University and more. Committee member of the National Economy Council. Authored "Crisis on Main Bank Capitalism", "Mega-reorganization Corporations"

The pillars of the government’s comprehensive policies against deflation are the accelerated write-offs of non-performing loans of banks and the revitalization of industries that are currently under structural recession. There is a sense that in these policies, an argument on the infusion of public funds. However, there was agreement that in the present debate, if the banks fall into a situation of lack of capital by accelerating the write-offs of the non-performing loans, the infusion of public funds would be unavoidable, and there should be a clear political message of the burden of taxpayers. Also, in cases of temporary nationalization, Mr. Kawashima states that “the government does not have the ability to manage banks” and Mr. Sheard emphasized the important issues of “the reform of bank governance”.

The most important focal points are the resolution of excessive corporate debt that is the other side of the coin of the non-performing loans problem and how to draw the road to industrial revitalization. There is also the issue of how the Industrial Revitalization Organization established by the government will function. Concerning this, a large part of the debate was focused on who would bear the business risk of those firms that would be revitalized. The three experts agreed on the recognition that the government could not bear the business risk, but Mr. Sheard claims that the main banks should be the in-charge of corporate revitalization, Mr. Kawashima states that it should be new financial institutions such as the corporate revitalization funds and Mr. Ishiguro places the emphasis on governmental financial institutions.

Mr. Ishiguro alarmed of the fact that within governmental circles, the debate started with the notion that the write-offs of the non-performing loans was the miracle drug for recovery of the Japanese economy, and positions the write-offs of the non-performing loans and industrial revitalization as structural problems which should be handled seriously in the medium to long term. He also claims that in the short term, the government should implement macroeconomic policies such as fiscal and financial policies. Mr. Kawashima emphasized the necessity of changing the social system that had continued from the period of high growth and Mr. Sheard argues that an economic environment should be provided in which the market mechanism could work sufficiently. Both of their views stand at the viewpoint of medium to long term. In this sense, it can be said that in the implementation of specific policies against deflation, the differential between short term and medium to long term and between macro and microeconomic policies will become more important than ever.

投稿者 gnpo : 08:22 AM

[talk] Learn Lessons of Economic Surgery from South Korea

Takashi Anzai: President I.Y. Bank

Born 1941. B.A. from Department of Law - Tohoku University in 1963 and joined the Bank of Japan. Worked as: Director of the Niigata Branch, Assistant Director - Operations Department, Director - Bank Examination and Surveillance Dept. and Executive Director. President - The Long Term Credit Bank of Japan in 1998. In 2000, Executive Advisor - Ito Yokado Inc. Current job since 2001.

Yukiko Fukagawa: Associate professor of the department of economics of Aoyama Gakuin University.

She also works as a faculty fellow of the Research Institute of Economy, Trade and Industry (RIETI). She has specialized into East Asian economic development and published "Kankoku senshinkoku keizairon("Korea's economic development: a micro analysis on the maturity process") , "Chugoku no WTO kamei to NiChuKan boueki no mirai"("China's membership in the WTO and the future of Japan-China-Korea trade"). She received her B.A. in Economics from Waseda University, M.A. in International Economics from Yale University and finished PhD in Business History from Waseda University.

The Japanese financial system is already about to fall into a serious phase. The Koizumi administration clarified its stance to accelerate the final disposition of the problems of non-performing loans with the change of his Cabinet, which comes from the recognition that a financial crisis is about to emerge before our very eyes. Unless the proper steps are to be taken now, the Japanese economy will fall further into recession. To avoid a financial crisis, what should we do?

One answer might come from our neighboring country, South Korea. At the end of he 1990’s, South Korea’s short-term debts far exceeded its government reserves of foreign reserves, and South Korea experienced a hard time of its currency, the Won collapse. However, under the strict guidance of the International Monetary Fund (IMF), its growth recovered starting from the year 2000 (Fukagawa). The structural reforms were implemented during the three years from 1998 to 2000, and if we look at these three years in South Korea, we should be able to learn lessons for Japan regarding how to implement structural reforms.

The most important lesson from the South Korean case was that “South Korea did not permit postponement” (Fukagawa). Corporations and financial institutions implemented structural reforms together under strict time limits. From this, “the market moved in a direction which gained confidence” (Anzai). There was also strong intervention by the government. President Kim Dae Jung required “sharing of the pain” by the South Korean people, and showed that if temporary pain is borne, there is an exit towards revitalization.

Because there are many differences between South Korea and Japan in the political and economic situations, it is not necessarily possible for the every lesson from South Korea to be applied to the case of structural reform in Japan. However, looking at the present situation of Japanese reforms, “even if we are in the phase where postponement is impossible, there is too little sense of crisis in Japan” (Anzai). People neither see the exit from this serious situation, nor they will hear the government message that the exit is this way. In the South Korean structural reforms, there was a clear message of the exit because there was a sense of crisis. The decision by the Koizumi administration to undergo surgery must proceed with the communication of such a message.

投稿者 gnpo : 08:18 AM

[talk] How do the Top Labor Union Officials see the Koizumi and Takenaka Reforms?

Nobuaki Koga: President of Denki Rengo: Japanese Electrical Electronic & Information Union.

After graduating from a Faculty of Engineering of Miyazaki University, he joined Matsushita Electric Industrial Co., Ltd. He is also a director of Rengo: Japanese Trade Union Confederation, a member Central Labor Relations Commission, Research Institute for Advancement of Living Standards.

Katsutoshi Suzuki: Currently Chairperson Japan Council of Metalworkers

Currently, Chairperson - Japan Council of Metalworkers Unions. Born in 1942 he entered Toshiba in 1957, became the General Secretary of the Toshiba labor union in 1982. President of the Japanese Electrical Electronics & Information Union since 1996.

Tsuyoshi Takagi: President of UI Zensen: the Japanese Federation of Textile, Chemical, Food, Commercial, Service and General Worker's Unions

After graduating from a faculty of Law of the University of Tokyo, he joined Asahi Chemical Industry Co., Ltd.(now, Asahi Kasei Corporation). He was a Deputy Director, Labor Policy Bureau of Zensen in 1980. He became an official of the Ministry of Foreign Affairs of Japan in 1981 and worked in the Japanese embassy in Thailand. After retiring from the ministry, he became President of Zensen in 1996 and assumed present position in 2002. He wrote a book named "Tai Mitamama Kanjitamama(Thailand, watching and feeling)".

The structural reforms being undertaken by Mr. Takenaka, the Minister of Financial Services, Economic and Fiscal Policy. The progress towards final disposition of non-performing loans will almost undoubtedly bring on an increase in unemployment and job insecurity. How should corporate employees view such a situation? We asked this question of Mr. Katsutoshi Suzuki, chairman of the All Japan Metals Industry Labor Union Council, Mr. Tsuyoshi Takagi, chairman of the Zensen Domei and Mr. Nobuaki Koba, chairman of the All Japan Electric, Electronic and Information Related Industries Labor Union Conference.

All three gentlemen agreed that the government should not postpone structural reform such as the final disposal of non-performing loans and that anti-deflation policies should be conducted simultaneously.

On the one hand, these three had common recognition of the fact that the role of labor unions stood at a historical turning point. Mr. Suzuki in particular stressed that “labor unions should not be an organization for the protection of vested rights of present employees”. Considering the fact that the group of employees such as part timers who were not members of unions represents the majority in workplaces, “if the job was the same, it is necessary to apply equal treatment regardless of whether the workers were union members or not”.

Mr. Takagi took up the example the participation of labor unions in a committee to review corporate governance when unapproved food additives were used in a fast food restaurants chain. He suggested that there was a possibility of participation by employees in corporate management through the unions”. Furthermore, he stated that when Mycal management broke down, the labor unions played an important role in calming down the employees.

Mr. Koga described the role that unions should play as “policy formation capabilities and career design” which is different from the past role of demanding wage increases.

In the future, it will be necessary to prepare a framework whereby unemployed workers can find a job across industries once they go through an appropriate period to learn new industrial skills. In such a situation, the role and organization of labor unions must change as well so that such workers can find a job not only outside an enterprise, but also across industries.

投稿者 gnpo : 08:12 AM

[paper] Japan - Who cares?

Gillian Tett: the former Tokyo bureau chief of the Financial Times

Gillian Tett is the former Tokyo bureau chief of the Financial Times. She is currently on sabbatical from the FT, writing a book about Japan's reform challenges, which will be published by Harper Collins next year.

As international policy makers gathered in Washington late September 2002 for the annual meeting of the International Monetary Fund, one G7 finance official made a heartfelt comment. "These days, the capacity of the Japanese government to disappoint is amazing," he chuckled, after news tricked out about the "confusion" created by the conflicting statements at the press conference of Masajuro Shiokawa, finance minister. "Just when you think that Japanese policy is really bad, it gets worse."

The remark was meant as a light-hearted aside. However, it captures a sentiment discreetly echoed in many global finance ministries and central banks this year. For though Junichiro Koizumi was hailed as a bold reformer by the international community when he took power last year, in recent months there has been a rising sense of frustration and disappointment about his apparent inability to produce rapid, coherent policies - particularly in dealing with the banks.

Now that Heizo Takenaka has launched a new reform campaign to tackle the banking issues, apparently with the backing of Koizumi, there is a new glimmer of hope that the Japanese government may finally be moving back onto the reform track again. However, Koizumi faces a momentous task if he wishes to convert the current mood of international cynicism into respect. For the perhaps the most pernicious problem dogging Japan these days is an international deflation of expectations - and concern. In public, the rest of the G7 continues to prod Japan towards reform. However, after a decade of disappointing policy packages, suspicions abound that Japan's economy could keep rotting for years. More striking still, this scenario triggers resignation, rather than panic. The brutal truth is that these days international policy-makers now have less and less respect for the Japanese government - and dwindling levels of interest. Reversing this will be a Herculean task.

To a certain extent, this dwindling interest reflects a peculiar type of "success" the Bank of Japan has enjoyed in recent years. Back in 1997, when the financial crisis first started to erupt in Japan, amid the collapse of Sanyo Securities, Yamaichi Securities and Hokkaido Takushoku, there was a genuine international alarm that a banking crisis in Japan would destabilize the rest of the world's financial system. Then, when Long Term Credit Bank ran into serious problems in the spring of 1998, there was similar concern that the jitters could spread overseas. Indeed, Larry Summers, then the US deputy Treasury Secretary, was so nervous about what was happening inside Japan that he flew to Tokyo for an emergency meeting of G7 ministers to discuss measures to deal with the Asian crisis - and the Japanese banks.

Nowadays, however most international policy makers think the systemic risks currently posed by Japanese banks are relatively low, even though the balance sheets of the banks are in an appalling state. For although financial crises cannot be predicted - by definition - Japan still appears quite well placed to calm a panic, at least in the short term. One reason is that most international investors have already tried to protect themselves from weak Japanese banks. This is a sharp contrast to 1997, as Hiroshi Nakaso, a senior Bank official, pointed out in an excellent BIS paper last year*. Back then, Nakaso explains, investors were unprepared for bank failures and under Japanese law it was not entirely clear what would happen to financial counter-parties in a case of default. In particular, the country lacked a legal framework to allow derivatives contracts to be "netted off" against each other - meaning that defaults could have conceivably created chaos in global derivatives markets. Now, however, Tokyo has put these laws in place. And although these news laws cannot guarantee that a panic would not erupt, since investor sentiment is always fickle, this framework makes the likelihood of chaos less likely.

A second reason why international policy makers are less alarmed than before is that the central bank has excellent crisis management skills – precisely because it has had so much practice since 1997. In recent years, the Bank has repeatedly stepped in to calm incipient crises - almost before anybody was aware of the jitters. It has flooded the markets with liquidity to ensure shaky banks can obtain funds. When wobbly banks have been locked out of overseas markets, Norinchukin, a quasi-public bank, has "voluntarily" offered foreign exchange services. Japanese banks have secretly used Treasury bonds as collateral to raise dollars, apparently with the Bank's blessing. These actions have prevented return of the so-called "Japan premium", or the extra cost which Japanese banks need to pay to borrow dollars overseas. Thus, unlike 1997, there is no visible sign of whether international investors are nervous about the Japanese banks. Irrespective of the banks' fundamentals, there has been an impression of calm.

A third factor which has reassured observers - or encouraged a mood of indifference - is Japan's vast reserves of funds. Quite apart from the Bank's willingness to supply liquidity, the FSA has its financial stability fund and there are enormous foreign exchange reserves, reflecting the nation's current account surplus. American observers thus assume that if a terrible crisis did ever hit the banks, the government would eventually throw money at the problem. It also means that Japan is in a radically different situation from its neighbors during the 1997 Asian currency crisis.

Fourthly, Japanese banks have dramatically reduced their international presence since 1997. Experts are divided about how much reassurance this really offers, since even after this reduction, Japanese banks' consolidated foreign exposure, in the form of loans and other instruments, still totals $1,200bn and 19 of the world's largest 100 banks are Japanese. Moreover in asset size, groups such as Mizuho are monsters by global standards and have enormous levels of international financial investments. Meanwhile, Japanese investors hold a fifth of actively traded US treasuries - leaving some US officials nervous that a Japanese banking crisis could hurt the US bond market.

However, the International Monetary Fund considers it unlikely that Japanese banks would sell their US treasuries in a panic, since they are one of the few assets in their portfolio that are actually producing returns. The IMF also thinks that the economic impact of a sharp reduction in Japanese overseas lending would be limited. For although some corners of the Asian economies might be dented if the Japanese banks suddenly withdrew their loans, the slack could soon be picked up by other Asian, European or American banks. "Any potential Japanese fall out on the regional and global financial system seems manageable - mostly as a result of the increasing de-linkage of Japan's financial system from international markets," the IMF concluded in a quarterly report in June that was closely read by many American officials.(**) Indeed, when the IMF issued the latest edition of the same report on global financial stability in late September, it appeared so relaxed about the Japanese banks that the issue barely merited any mention at all.

The "bad" news about this appearance of calm, however, it also reduces the sense of reform urgency inside Japan. Indeed, in many ways the Bank of Japan has been its own worst enemy during the last two years. By ensuring that every sign of market unease has been smoothly suppressed, the Bank has found it harder to get politicians to take its message for change seriously - precisely because there has been no sense of panic.

Moreover, as institutions such as the IMF have issued their "reassuring" statements, American and European officials have quietly lowered their expectations about what Tokyo could achieve with its policies. Indeed, after a decade of watching Japan repeatedly disappoint on the policy front, most observers tend to assume that the Japan government will fail to live up to its policy promises - almost before it delivers them.

This is not a shift that any European or American diplomat will openly admit to. In contrast, during recent weeks the US government - to name but one example - has emitted a barrage of statements calling for Japan to implement more bank reform. The Treasury and State departments have implored the country to act quickly. "Each day of waiting means that the cost of resolving the problems gets greater," Glenn Hubbard, chairman of the American council of economic advisers, recently told Japanese officials. The Americans have also tried to offer some potential models for reform. In particular, Hubbard pointed to America's own tactics for cleaning up its 1980's Savings and Loans debacle as one approach Japan might emulate. This entailed using open markets to sell bad assets to a host of private sector players. And while Americans have avoided explicit demands for public fund injections, other international observers have been more forthright. A few months ago, Howard Davies, the chief British financial regulator, took the highly unusual step of openly calling for measures to boost the capital of Japanese banks. Last month, the IMF published a report describing its policy disagreements with Japanese regulators - and demanding injections of public funds to encourage the banks to remove bad loans. "There has been enough muddling through," argues Horst Koehler, head of the IMF. "It is time for decisive action." Meanwhile, behind the scenes a number of international organizations, ranging from the American Federal Reserve, CIA, Bank of England and US State Department, have quietly held brainstorming sessions to look at the potential scenarios for Japan's economic future. "We very much hope that Japan will reform for Japan's sake," Hubbard recently added. "We have great faith in the potential of the Japanese people."

However, what these internal discussions in international institutions have often produced is considerable cynicism that the Japanese government will have the guts to actually produce the "decisive" action that is needed to revive the economy. Instead, the central scenario that many policy makers have discussed is one where Japan remains locked in slow economic decline. In this vision, the country continues to prop up hopeless banks and borrowers for another two - or even ten - years, tapping into a dwindling supply of national wealth, while bad debts keep rising, deflation rumbles and debt to GDP levels soar.

Some US observers believe that this "slow decline" scenario poses little danger for America. Thus, the main emphasis of US policy, this argument goes, should be a strategy of "containment" to stop the rot spreading beyond Japan's borders - while tacitly accepting that Japan is doomed to become more irrelevant in global affairs. Other American officials are uneasy about the implications of decline. Japan remains Washington's main ally in Asia, they point out. There is also concern than a rotting Japan could poison the region's chances of economic growth. "What worries American officials is that a weak Japan cannot be a strong political ally or gateway to Asia," argues Richard Katz, of the Oriental Economist. "Japan's problems did not cause the 1997 Asian crisis - but its weakness made it much harder to recover."

The other issue which worries some financial experts is that the longer the banking problems rumble on, the bigger the potential eventual crisis - and the harder it will be to contain the problems inside Japan's borders. If Japan keeps consuming its national wealth to prop up banks, debt-to-GDP levels could hit 200 per cent or more in a few years, and domestic investors might eventually panic. At that point, even the Bank of Japan's crisis-management skills might be overwhelmed - irrespective of how competent the Bank is at containing crises now. "In the last resort, crises are triggered by investor emotion, not macro-economic logic," argues the former chairman of one of America's largest banks. "Without policy change, it is hard to see how Japan can avoid a (crisis) eventually. It is also naïve to think this could be contained to Japan."

Indeed, Adam Posen, of the Institute for International Economics, believes that the implications of a Japanese financial crisis are so serious, that American should try to "shock" the Tokyo government into reform by using the ultimate sanction - threatening to strengthen ties with China in a form of diplomatic "Japan-passing". "The United States has a real national security interest in keeping Japan from financial crisis," he recently argued. "The US should use the now credible threat of Japan passing as the leverage. An ally should not be left unchallenged for endangering US foreign policy interests and global stability just because it is an ally and the source of danger is economic rather than military."

However, Posen's view remains a minority one. As long as Japan continues to toe the American line on security issues, the US State department seems unwilling to do anything to deliberately upset Tokyo. And while some American officials are paying more attention to China these days, this is primarily because they consider the "China issues" to be more interesting than the hitherto slow-moving "Japan" policy debates. It is no accident that the only comprehensive research institute covering Japanese affairs in Washington recently shut down.

Some Japanese politicians or bureaucrats may welcome this disinterest. After all, the penchant of the American government to hector Japan has often caused deep irritation in recent years - not least because Washington's appeals for reform have sometimes smacked of arrogance. A few years of peace from American "advice" might seem distinctly desirable in the eyes of the Ministry of Finance. However, a drift towards indifference also has more alarming implications. Would-be reformers can no longer assume that they can rely on gaiatsu, or any other external threats, to trigger the reforms that Japan so badly needs. America simply does not care enough about Tokyo to expend too much energy promoting reform in Japan - or at least not when there are so many other pressing issues on the global stage. Thus if Takenaka and the rest of the Koizumi team wish to reform the banking sector, they are going to have to find the energy and impetus from within Japan.

That is a daunting state of affairs for a country which has traditionally only changed in response to foreign shocks - or at least with the excuse of gaiatsu. Indeed, it is striking that even during the 1990's, most of the significant banking reforms only took place after a market crisis, fervent appeals from the rest of the G7 and a well-trailed meeting between the Japanese and Americans. However, unlike 1945 - or the Meiji restoration - Koizumi now needs to carve out a new path for Japan primarily on the basis of domestic pressures. Moreover, unless the Japanese government can find this internal momentum to implement serious reform, the sense of marginalization and cynicism is likely to simply grow stronger. It would be nice to hope that Takenaka can buck this trend. Perhaps by the next time the IMF holds its next policy meeting in September 2003, Koizumi's team will have dashed international expectations yet again - but this time by finally implementing some effective banking reforms.

(*) The Financial Crisis in Japan during the 1990's; how the Bank of Japan responded and the lessons learnt. www.bis.org/publ/bispap06.pdf

(**) Global Financial Stability Report. International Monetary Fund. June 2002

投稿者 gnpo : 08:11 AM

[talk] Round Table Talk among Anonymous Members of the Financial Industry: Does the Banking Sector have a Strategy for the Revitalization of Banks?

As a study of the Takenaka Plan progress, the issues of accelerating the final disposition of non-performing loans and nationalization of banks have been raised. What do the top officials of major city banks think of such a situation? The participants of this talk explained that the process of deflation increased the non-performing loans looking at the situation of their branches and relationship with the customers. They also had common recognition that the tightening of credit, etc. directed towards nationalization would cause the chain reaction bankruptcies of small and medium sized enterprises and deflation would become even worse. Concerning nationalization, while some stated that this would be unavoidable, others stated that it would take some time to get to such a point if we consider tightening of credit to avoid nationalization and transrormation from an international bank to a domestic bank. Concerning the reconstruction of how to manage a bank, it became clear that the business model of banks as lending organization itself no longer work under the condition of the declining demand for credit, and that there were great difficulties for banks to recover their functions as banks during such deflationary periods. The issues of deflation was emphasized during this talk, and even if public funds were to be infused, non-performing loans would increase as long as deflation continues, and there were concerns that the problem would exist for long term even with nationalization. Concerning the change of bank management, there were opinions that even with the change in management, banks would not change, but younger bank officials expect that with the introduction of younger management, the problem of credit would be solved through the infusion of public funds, etc. Furthermore, they unveiled underlying thoughts among the bank officials that with regard to the situation of credit withdrawals, the workers in the field wanted to treat borrowers valuable as they are the source of revenue, but that due to profitability being a goal, the credit review would not give approval for such borrowers, and hence, there was a dilemma between the improved profitability and the increase of lending volume being conflicting objectives. Also, doubts were raised whether we try to reconstruct banking sector seriously. Because the portfolio of major banks approximates that of Japan as a whole, we will encounter a fallacy of composition whereby deflation would be accelerated and it requires a considerable burden to the nations. In the present circumstances, government managed economy has bee continuing where the space created by market shrink was filled by the credit granted by the government, and it would tend to imagine a resolution by a great depression where private sector debt would be offset against savings. Recognition was raised that the government must clarify its position whether it will choose inflationary policies to overcome the problem or whether it will live with deflation and how to estimate the cost of such policy to the nations.

投稿者 gnpo : 08:08 AM

[talk] Highway Reforms without a Ground Design, which Inhibit Regional Autonomy

Masuda Hiroya: Governor of Iwate Prefecture

He graduated from the Faculty of Law, the University of Tokyo in 1977 and then, joined the Ministry of Construction of Japan. He also worked in Chiba prefectual Police and Ibaraki prefectural government. After retiring from the ministry, He was elected as the youngest governor in Japan. He is promoting a new style of local administration like introducing a new evaluation system for public construction projects and transferring powers from the prefectural government to municipal governments.He is famous for his "Ganbaranai Sengen" ("Don't work too hard" slogan).

Masayasu Kitagawa: Governor of Mie prefecture

Born in 1944. Graduated from Commerce Department of Waseda University in 1967. After being a member of the Mie Prefecture Congress, he was elected his first time as a member of the House of Representatives in 1983. In 1990, he worked as Deputy Secretary of the Ministry of Culture and Education. He has been Governor of Mie Prefecture since 1995. He introduced “an office work evaluation system” to proceed reforms by means of zero-base evaluation of the projects. He also draws up and promoted "The Declaration of Mie Development", an all-around plan targeting 2010. He actively tackles reforms of the prefecture politics through these activities, using Start from average lives as a key concept and Information open to public as a key word.

Yoshiki Kimura: Governor of Wakayama Prefecture

After graduating from Kyoto University, Faculty of law, he joined the Ministry of Home Affairs of Japan in 1974. He also worked in the local governments of Kitakyusyu City and Saitama, Ehime, Wakayama, and Osaka Prefecture. He was elected as the governor of Wakayama Prefecture in 2000. His proposal of preserving the forests and retaining jobs through the "Green Employment Policy" has resulted in the revitalization of under-populated areas. He also promotes structural reform by the local regions.

Yoshihiro Katayama: Governor of Tottori Prefecture

After graduating from a Faculty of Law, the University of Tokyo, he joined the Ministry of Home Affairs of Japan in 1974. He also worked in Tottori Prefectual Government several times. After retiring from the ministry with the position of director of Prefectual Tax Planning Division, he was elected as a governor of Tottori Prefecture in 1999. He is working for disclosure of information and securing transparency in the prefectural administration.

Yoshitsugu Hayashi: Professor, the graduate School of Engineering of Nagoya University

He is an expert of sustainable transport and special development. He works as a member of government councils, editors of international, journals and received numerous awards. His published works include "The Environment and Transport" and "Global Environment and Metropolises".

In Japan Highway Public Corporation Privatization Committee established by Prime Minister Koizumi, debates on privatization became in name only and they were replaced by debates on how to reform organization of the Public Corporation. The Committee debates concerning the handling of highway construction were heated up to the end. On the other hand, the Liberal Democratic Party’s supporters of highway construction came out in clear opposition of the Committee stating, “It was the nation’s responsibility to construct according to the plans”. The media headed by television took up this issue as a composition of “the Koizumi reforms vs. resistance forces” and it appears that the debates concerning the highway construction issue proceeding towards the final report of the Privatization Committee will be quite heated.

However, there is concern that the focus is placed only on the question of economic efficiency such as profitability and progress of construction other than the issue of how to reform organization of the Highway Public Corporations, and that “the debates were cut down with narrow viewpoints even though the level of priority of certain highways handled by the Public Corporations is extremely high compared with other projects” according to Mr. Katayama. If highways are considered as the “basic framework” of the nation and the most important public good, Mr. Masuda states that their construction and maintenance should be “considered along with a ground design for the national land as a whole” and Mr. Kimura claims that “the burden of their construction and maintenance should be allocated to multiple generations through the issuance of construction bonds”. The more a regional governor wants to work towards regional developments, the more that these debates appear to be out of focus.

These debates at the Committee also lack the viewpoint that “it is unfair to criticize those regions which await the construction of highways and to force the region to bear the costs” according to Mr. Katayama. The Privatization Committee does not care about the viewpoint of political fairness because it does not understand the realities of the regions, and there is no healthy leadership from the government that should consider the necessity and the system of highways within the national structure itself.

Of course, this does not mean that there are no problems on the part of the regions. Mr. Hayashi states that “when a region constructs a ‘passage’, the issue of whether there is a ‘core’” is important, and the issues for regions in the future are how to change vulnerable regional policy. The regions should clarify its authority and responsibility and become autonomous vis-a-vis the national government. To this end, it is necessary to place significance on “the debates on the issue of highways to the level of how to decentralize and what is the plan for the nation”, according to Mr. Kitagawa.

投稿者 gnpo : 06:47 AM

[paper] Genron NPO’s Opinion against the “Final Report” on the Highway-related Public Corporations

The final report of the Promotion Committee for the Privatization of the Four Highway-related Public Corporations compiled in December had content far removed from the viewpoint of “privatization,” though there were some highly-regarded points such as limiting the construction of new roads. The reason that there was confusion in the committee until the last minute was that the committee had low understanding about “privatization” throughout the discussions and while the discussions were made with an even construction of new expressways in view.

From the first place, this promotion committee did not seem so promising. From time to time, Prime Minister Koizumi has used the political method of breaking through the wall of vested interests with “privatization” as a tool. A method that stimulates the opposition would be interesting for “show,” but in order to really derive a conclusion with “privatization,” political decisions and instructions would be required to precede that. These are decisions on whether new expressways should be constructed, who should bear the excessive debts of the past, and what would be the ideal expressways considering the future conditions of Japan. It is nothing but political irresponsibility to wholly entrust the “privatization” arguments to the committee without making such decisions. There is a clear misunderstanding that “privatization” will solve everything. It is obviously an illusion that a company with excessive debts of over 40 trillion yen, which takes almost 50 years to repay by toll revenue, can construct new roads as well as become listed. If the public corporations were really to be “privatized” and taken over by private companies, the present excessive debts would have to be reduced to a repayable amount by public burden so that the private companies could support themselves in the market, and a scheme would have to be created to enable the private companies to carry out business management based on their independent decisions completely free from politics.

In the recent final report, however, the conclusion was to minimize public burden, and to divide the public corporations into an organization that would inherit the expressway assets and the debts, which are to be repaid at an early stage (in 50 years at the latest), and five private companies divided by area, which are to manage and construct expressways by paying the lease fee to the above organization. This content is far from the real “privatization” that allows self-sustained business in the market. A company that takes 50 years to repay its debts cannot survive in the market, and also the asset holding company is under the large influence of the state. The private companies, which will borrow those assets and continue to pay the lease fees from the toll income, are only companies that borrow the roads and collect tolls merely sending the cash flow from right to leave. There will be no business incentive to improve efficiency and increase the cash flow.

This conclusion is chiefly a result of the promotion committee shouldering all the issues that should have actually been decided by the government. During the course of discussion, the committee chairman at the time repeatedly stated that “that would be politically difficult to accept” and some other members also seemed to have an ulterior aim to make the conclusion convincing for the highway related politicians as well. Then there would be no reason being in the “privatization” promotion committee. The only policies that could be passed by majority vote in the end were to limit the private companies’ construction of new roads and to convine the asset holding organization and the private companies in ten years’ time.

In October, the Secretariat released an estimate that the Japan Highway Public Corporation itself had debts exceeding its assets; in a sense, this was the last chance for the committee to return to previous arguments. At that point, the promotion committee should have focused on the real “privatization” scheme and asked the government for a decision, because if the supposedly profitable Japan Highway Public Corporation also had excessive debts, it would be a great problem that would overturn the arguments up to that point. However, that estimate was burked within the committee without being examined seriously, and confusion continued only over the limitation of the construction of new roads.

We think that expressways already attained the civil minimum in the 1980s and had to prioritize economic rationality ever since. In our opinion, expressways cannot be constructed by the conventional toll pooling system or long-term reimbursement, and the direction of expressway construction must be changed. We thought the road-related public corporations themselves should be “privatized”, but without running away from public burden for the repayment of past debts. To avoid the public burden at present means to hand over the burden to future generations. It would be unduly irresponsible to think that future generations would be able to repay the debts that could not be repaid even now. Furthermore, we think future expressway construction should be considered within the system design of Japan, which takes account of Japan’s future conditions, such as a population decrease and economic stagnation, and its realization should be sought, based on the premise of injecting public money, in the process of realizing decentralization where taxpayers can decide on such road construction. To keep the conventional style of road construction that had been conducted under rapid economic expansion means to give top priority to road construction. Funds would be further limited since the national finance is on the verge of collapse. Will general taxpayers continue to hold such demand when the aging of the population and the decline in the birthrate gives rise to higher policy demands for welfare, nursing care, and the environment? Politicians must make this inquiry to the nations.

If we are to return to the argument of the “privatization” of the road-related public corporations based on the above, the private companies must strictly keep corporate business principles by definition of “privatization”. Since the important thing for private companies is to restructure their balance sheets, they must be free to review their respective assets and the generated cash flows, and dispose any roads that should be cleared up. In this respect, the task for the promotion committee would have been to assess the assets of the public corporations and find a way for them to survive as private companies without establishing a separate asset-holding organization. Even if there were roads that had to be disposed of as a result, it would be more reasonable for the government to take responsibility to make the decision on the injection of tax income or continuance of the construction.

The final report was apparently a partial solution. However, as long as it has been decided upon, the initial goal must be attained at all costs. The initial aim of privatizing the public corporations was to put an end to plans that lacked economic rationality in view of market rules, to settle the debts that had ballooned in the past, and to stop any further increase of debts. Although the arena will be shifted to the government from now on, the government should at least avoid repeating the past mistake of only emphasizing further road construction, but should review the direction of expressway construction from the standpoint of Japan’s new system design.

投稿者 gnpo : 06:45 AM

[talk] Why was the Privatization Debate left Unconcluded?

Yasuyoshi Masuda: Professor for the Economics Department at Toyo University

Yasuyoshi Masuda is professor at the Economic Depertment of Tokyo University. His major published works include Kinyu Kaikoku (Opening of Japan in the Area of Finance) and Global Money. He is a graduate from the Department of Economics at Kyoto University.

Akira Yasujima: President and CEO of Nippon Mirai Capital Co., Ltd.

He joined Industrial Bank of Japan in 1979 and worked in the area of investment banking as an adviser of MBO and M&A. He worked for Private Equity Department of the IBJ as a General Manager. He left the bank in 2001 and established his company in 2000. He received his B.A. in Economics from the University of Tokyo in 1979.

Isn’t there a misunderstanding that privatization would solve all problems…..

From their experiences in corporate acquisitions and restructuring, both Mr. Yasujima and Mr. Kawashima expressed similar viewpoints and cast doubt on the proposals by the Japan Highway Public Corporation Privatization Committee. The repayment of the huge amount of debt reaching approximately 40 trillion yen and the construction of new highways while incurring such a debt. These two come to the following concluding comments on the Committee’s proposals: Even if the assets and liabilities are moved into the holding organization by separating asset holding and operation, there would be no investors who want to invest in such a new corporation which assumes future consolidation of asset holding and operation. Therefore, listing of such a new corporation would not be expected.

The problem of huge amounts of debt of the Japan Highway Public Corporation should be solved as little burden to the nations as possible. Towards that end, the inefficient and uncontrolled construction of highways must be stopped. Most of the Japanese people aware on this point. However, Professor Masuda points out that privatization is just one of the many measures towards the resolution for such a problem, and that the debate of the Privatization Committee itself will become meaningless unless there is a vision for road administration.

What should be the assumptions to draw a vision for future highway policy? The three gentlemen point out following two conditions: First, who is going to bear the burden of repayment of past debts that have amounted to 40 trillion yen, and secondly, who is going to bear the cost of new construction. Both issues are extremely political questions and conclusion to these issues can not be reached at the level of the Privatization Committee. Therefore, the three points out that the real role expected to the Privatization Committee should have been to initialize the debate on privatization and to return the debates to the field of politics.

Seven members of the Privatization Committee were forced to started without clearing these conditions, and according to Professor Masuda, “in a sense, they were given a losing deal”. However, the real shape of the Japan Highway Public Corporation which were kept in the dark have gradually become clearer, such as the huge amounts of debt which added up to 40 trillion yen and the deficit of 7 trillion yen in substance about. Therein lies the raison d’etre of the Privatization Committee.

投稿者 gnpo : 06:41 AM

[talk] The Reform of the Highway Public Corporation should be Included in Japan’s Future Designs

Tokunosuke Hasegawa: Professor, Meikai University

Born in 1936, he received his BA in Law from Touhoku University and worked in the Ministry of Construction and the Research Institute of Construction and Economy as executive director until assuming his current position in 1995. Hasegawa researched an international comparison of "mortgage financing crises in 1980s and 1990s" as a visiting scholar in the Department of Land Economy at University of Cambridge. His main publications include: "Tokyo no takuchi keisei-shi," "Fudousan kinnyuu-kiki saigo no shohousen" and many other books.

Akihiko Matsutani: Professor of the National Graduate Institute for Policy Studies

He joined Ministry of Finance of Japan in 1970, worked as a director of the Research division of the Budget bureau, a Budget Examiner and Director general of Yokohama customs and retired when he was a Concilor of the Minister's Secretariat. His specialities are Macro Economics and Public Finance. His published works include "JInkou Gensyou Syakai no Sekkei"Social plannnig in declining population)" and "Shakai Shihon no Mirai(the Future of social infrastructure)". He received his B.A. in Economics in 1969 and Business Administration in 1970 from the University of Tokyo.

Yoshinori Yokoyama: Director of McKinsey & Company

Yoshinori Yokoyama is a former director of McKinsey & Company. He now serves as a part-time instructor at Tohoku University and the graduate school of Hitotsubashi University. His published works include Seicho Soshutsu Kakumei (Growth Creation Revolution), McKinsey Gassho Renko Senryaku (McKinsey's Alliance Strategy), and many translations and reports. Mr. Yokoyama graduated from the Architectural Department at the Engineering Department of Tokyo University in 1966, worked for a Architectural Farm and received a Master of Urban Design degree from the Graduate School of Harvard University in 1972 and an MBA from the Massachusetts Institute of Technology in 1975.

Mr. Yokoyama points out that the problems of the Highway Public Corporation arose because the construction of roads continued at the same pace and there was no further economic rationale for such new highways even after the organization of infrastructure to support basic living levels twenty years ago and the achievement of a civil minimum. Mr. Hayashi states that the system of fiscal investment and lending no longer fit the current era, which had functioned during Japan’s developing years. He also showed his view that the careless usage of land left problems for road administration to wrap up.

What is the approach for the reform? Mr. Matsutani emphasizes that the debate on highways should be handled from a medium to long-term viewpoint with careful analysis of Japanese social and economic trends where the population is declining and experiencing an “aging society” with the increase of senior citizens. Mr. Hasegawa states that debates on where road issues should be placed in a total picture including the administrative and fiscal reforms and various public works, and priorities should be discussed among them.

However, there is the pressing issue of what to do about the enormous debt incurred by the Japan Highway Public Corporation. On this point, there was an agreement of opinion that the burden to the Japanese people was unavoidable. Taking the low growth of the economy into consideration, Mr. Hayashi states, “we should not leave the debt to be paid by the next generation”. This is the view that we should stop new highway construction, and further, freeze highways construction of which the work has already been started not only because construction costs but also maintenance management costs will be incurred.

They also agreed that there should be a transfer of authority and budgets to regional governments. The debates in the Governors’ Conferences which demand highway construction are based on “the idea that highways can be built with other people’s money”, according to Mr. Matsutani. Their thinking is to stop policy determination by the national authorities, and to give wide ranging budgeting authority to the regions for highways, railways and welfare, etc. in return for the regions selecting such policies under its own responsibility and bearing the fair share of the costs.

Concerning privatization, careful arguments were prevalent. Mr. Hasegawa questioned about the debates in the government Privatization Committee, in which he can not find a difference from the issues of existing third sector arguments. Mr. Yokoyama and Mr. Matsutani were of the opinion that in redesigning the public corporations, it was necessary to separate the portions that should be privatized and those that should not.

投稿者 gnpo : 06:33 AM

[talk] Highway Reforms without a Ground Design, which Inhibit Regional Autonomy

投稿者 gnpo : 06:24 AM

[paper] Global Increase of Financial Assets and the Risk of Credit Contraction

投稿者 gnpo : 03:42 AM

February 27, 2003

[paper] Japanese Deflation is a Monetary Phenomenon

[paper] How Should We Avoid a Critical Deflationary Spiral?

[paper] What Kind of Economic Policy is Required under Structural Deflation?

[paper] Drive in the Microeconomic Level Provides the Only Way Out of Deflation

[paper] Global Increase of Financial Assets and the Risk of Credit Contraction

[talk] It is Impossible for the Japanese Economy to Achieve ”Revitalization of Industry” if it cannot Destroy Itself

[talk] What is the Ultimate Goal of the Revitalization of Industry?

[talk] Government Involvement and Limitations concerning Revitalization and Non-Performing Loans

[talk] Learn Lessons of Economic Surgery from South Korea

[talk] How do the Top Labor Union Officials see the Koizumi and Takenaka Reforms?

[paper] Japan - Who cares?

[talk] Round Table Talk among Anonymous Members of the Financial Industry: Does the Banking Sector have a Strategy for the Revitalization of Banks?

[talk] Highway Reforms without a Ground Design, which Inhibit Regional Autonomy

[paper] Genron NPO’s Opinion against the “Final Report” on the Highway-related Public Corporations

[talk] Why was the Privatization Debate left Unconcluded?

[talk] The Reform of the Highway Public Corporation should be Included in Japan’s Future Designs

[talk] Highway Reforms without a Ground Design, which Inhibit Regional Autonomy

[paper] Global Increase of Financial Assets and the Risk of Credit Contraction

About Genron NPO