The Council for Regulatory Reform released a report Tuesday calling for establishment of so-called special regulatory reform zones, backing the government's deregulatory efforts.

The panel's proposal came in the interim report of an annual update of the government's three-year deregulatory program adopted in March 2001. It is the first time the advisory panel has proposed such a plan.

The zones are intended to bring about radical regulatory reforms within specific areas that, if successful, might pave the way for nationwide reforms.

The special zones proposed by the council are almost the same as the "special structural reform zones" put forward by the government, a government official in charge of the panel said.

The panel, headed by Orix Corp. Chairman Yoshihiko Miyauchi, has preferred from the outset to dispense with tax breaks and subsidies within the zones, thereby preventing the national government from interfering in their planning, he said, adding the government had considered allowing tax breaks and subsidies within such zones.

The zones should allow municipalities to take the lead in planning specific deregulation steps, the report says.

"The scheme should allow exceptions to various regulations on the basis of the municipalities' own planning, making maximum use of private-sector ideas, and not limit the specifics of the special zones to the list of national government options," it says.

The government is planning to establish a Cabinet task force, led by Prime Minister Junichiro Koizumi, to quickly implement its proposed zones, which are a key feature of its latest economic package.

The report includes a number of proposals to be implemented or considered this fiscal year, including relaxing regulations on launching venture businesses, fundraising efforts and revivals in case they fail.

It calls for the public sector to be increasingly privatized, listing 38 topics related to infrastructure and government provision of goods and services, and another 26 administrative services for further consideration.

The topics include statistics, maintenance of prisons, bill printing, school lunches, management of national forests and wholesale markets, as well as elderly and child care facilities, road and port projects, and licensing and registration affairs.

The panel has yet to persuade any relevant ministries to move to deregulate these areas, but it suggests the government can spin off many and outsource others.

The report also calls for reforms to allow workers more flexibility in their jobs.