Japan finalizes plans for sweeping reform

The government on May 15 finalized a detailed program to revamp the nation’s economic structure and maintain a leading position in the global market in the coming century.

The Action Plan for Economic Structural Reform and Creation represents one of the six major reforms initiated by Prime Minister Ryutaro Hashimoto. It will be presented to the Cabinet May 16 for approval.

The action plan, a detailed version of a program adopted in December, provides a road map to achieve previously pledged goals to reduce costs of doing business, create new business fields and revamp social security systems. To measure its effectiveness, the government will annually review progress in implementing proposed measures and related policies, according to government officials.

In its December program, the government promised to address the nation’s high-cost structure by cutting costs of energy, distribution, telecommunications and financial services to an internationally competitive level by 2001. The plan includes what the government claims to be “extremely drastic” steps to reduce electricity fees.

In a rare move, the government expressed its “expectation” that electric utilities will trim their fees in two stages, first next year and again in 2000. Some of Japan’s 10 electric utility firms have already announced plans to lower fees early next year.

Though the government has not set a numerical target for lowering fees, it is thought to be aiming for a 20 percent reduction, which would bring costs to around those in Germany. Toward that end, the plan calls for introducing numerical targets in curbing the peak load through such measures as utilizing electricity generated at night.

A key reason for Japan’s high electricity costs is the massive investment needed to construct new power plants to meet peak demand. Thus, trimming the peak load would mean less investment.

In terms of distribution, the government will complete a review of the Large-Scale Retail Stores Law, which symbolizes regulation over distribution services, by the end of December rather than by March 1998 as previously planned. A government panel is set to start deliberating the issue later this month.

The plan fails to stipulate specific directions in reforming the corporate tax system, another factor contributing to the high costs of doing business in Japan. Instead, it simply states that the government will reach a conclusion in its fiscal 1998 reform.