True reform means embracing competition

The Japanese government’s deregulation package is a “good first step” but a lot of work still remains to be done, said Glen S. Fukushima, vice president of the American Chamber of Commerce in Japan.

“Freedom in principle and restrictions only as exception … that’s what we’d like to see,” he said. “However, I think it’s still the case that in many areas the Japanese government’s view is the opposite.”

Comprising 2,823 deregulatory measures, the government’s package is touted as a radical structural change to the nation’s economy that will boost domestic demand and facilitate imports. Fukushima acknowledges some “relatively significant” steps in such areas as housing, certification and standards, and transportation.

At the same time, however, he said that frustration that things are not moving fast enough is growing — not only among American and other foreign business communities but also among some in the Japanese business community. “Although some people in Japan may think deregulation is happening very rapidly, when seen from the outside it looks quite slow,” he said. “Even when deregulation takes place it’s done on a very small scale over a long period of time. Somehow it’s done in a way that minimizes the degree of competition that might result from deregulation.”

He said the Japanese government’s deregulatory efforts up until now have been very much based on an inductive approach, that is, looking at regulations one by one, discussing whether a specific regulation should be relaxed or eliminated. “This could go on for decades, having bit by bit, piece by piece, deregulation,” Fukushima said. “And yet it may not have the desired effects of stimulating the economy, benefiting consumers or opening the market.”

Noting that there still remains a tendency in Japan to distrust the market and to dislike competition, Fukushima said that the general public and Japanese bureaucrats as well should recognize the benefits of competition. He said many Japanese bureaucrats want to maintain tight control over the pace and direction of deregulation out of fear that “excessive competition” will bring socially undesirable results, such as mass unemployment.

“It is surely undesirable to have a lot of unemployment,” he said. “But the experience in other countries is that some degree of dislocation and restructuring is necessary to promote efficiency and to realize the true benefits of deregulation.”