Reports just beginning of road to deregulation

Reports released June 13 on financial deregulation should only be seen as the start, rather than the culmination, of the government’s efforts to ignite a “Big Bang” in the domestic financial market.

Most observers agree with the perception that Japan’s financial sector is in dire straits, and that rapid deregulation is needed for Tokyo to remain a key market on the international scene. But months of debate by advisory councils to the finance minister have only produced documents that many scholars and analysts say outline the amount of work remaining to be done to raise the mentality of the nation’s financial industry to international levels.

“Although Prime Minister Ryutaro Hashimoto’s Big Bang instructions (in November) called for reforms that will benefit the consumer, the reports remain focused on how to adjust the demands of the various players in the financial industry, and I could not see any real attention being placed on users’ needs,” said Toru Nakakita, economics professor at Toyo University. He said the reports were drawn up following the usual pattern of trying to please all parties concerned with a series of compromises and give-and-takes.

As a result, he said, what will ensue from the implementation of the recommendations put forth in the reports will most likely be a price-cutting war to be waged on financial products that have already been introduced in U.S. and European markets, rather than a rush to innovate and create new ones to attract consumers. However, Katsuhito Sasajima, a financial analyst at Nikko Securities Co., said it was significant that the reports managed to at least present a timetable for the reforms so that the public can get a clearer idea of the Big Bang concept.

“As we’ve seen in the past, Japanese society is one in which things get done once deadlines are drawn up, and so on this point the reports were a good step,” he said. It is still too early to tell whether these proposals will be enough to help Tokyo catch up with New York and London, he added, saying that such an evaluation should be made after the existing laws are revised.