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Prime Minister Junichiro Koizumi’s administration should be given high marks for having addressed issues untouched by its predecessors, but there is still more to do, according to the chairman of the Japan Association of Corporate Executives (Keizai Doyukai).

“Instead of resorting to lavish government spending to stimulate the economy, Mr. Koizumi has been working to reduce inefficiency in the public sector,” Kakutaro Kitashiro, also chairman of IBM Japan Ltd., said during a recent interview. “Reform efforts have led to some progress in various fields.”

Unlike the Japan Business Federation (Nippon Keidanren), Doyukai is not openly endorsing any party. But in general it has been supportive of Koizumi’s moves to streamline the government by shifting some of its responsibilities to the private sector and local governments.

Kitashiro said some of the Koizumi administration’s successes were economic recovery, reduction in public works spending and banking reforms. However, it failed to deliver results in several key areas.

“A sustainable pension system has yet to be built; there is more room for progress in the reorganization of public corporations, and postal privatization efforts have also stalled — as we can see,” he said, referring to the House of Councilors’ rejection of the government-sponsored postal reform bills that led Koizumi to call the Sept. 11 general election.

For an administration that advocated a greater role for the private sector, efforts made at deregulation were particularly unimpressive, he said.

The Koizumi administration fast-tracked some economic deregulation in areas designated as structural-reform zones, but Kitashiro said decontrols are needed nationwide.

He said more deregulation is necessary in service industries, including health care, nursing care and education, so private firms can enter those markets.

And if there is to be a truly deregulated marketplace, the advantages and benefits — including financial ones — enjoyed by public entities need to be eliminated to create a level playing field, the Doyukai chief said.

He cited the example of nursery schools, an area where he said private schools have been struggling to compete against public facilities.

According to 2004 welfare ministry statistics, there were about 24,000 preschoolers nationwide on waiting lists for nursery schools. And for those who are enrolled, the hours are too short to accommodate working parents. Such conditions have been cited by many experts as one reason for the continued decline in the birthrate.

But private firms have not been encouraged to enter the market, as they have a hard time competing with public facilities, which receive government help.

The government has allowed private companies to operate nursery schools since 2000, but there were only 47 nursery schools run by such entities as of April 2004. Kitashiro said the government should do more to encourage the entry of more private firms, such as using some public nursery school funding for subsidies for parents so they are able to choose privately run nursery schools that might otherwise be too expensive for them.

That would be a better use of public money, he said.

Kitashiro also said that deregulation in the service industry would create jobs.

“It is hard to expect primary and secondary industries to create a lot of jobs,” he said. “It is necessary to stimulate the service industry through deregulation, which encourages the entry of challengers.”

As for postal reform, Kitashiro said privatization is the best way to boost efficiency and productivity.

While the Democratic Party of Japan says it will aim to downsize Japan Post, this will probably not succeed without privatization, he said.

As a public corporation, “it is difficult to solve the problem of a redundant workforce while keeping up employee morale,” he said. “But if it has to compete with rivals as a private entity in the future, its workers will be motivated to improve services and cut costs.”

He also said the Liberal Democratic Party platform lacked specifics on issues other than postal privatization.

“I hope it will present clear directions (on other issues) during the election campaign,” Kitashiro said.

And while the DPJ’s platform is more detailed, he said, given the party’s minority status in the House of Councilors, “it won’t be easy (for the DPJ) to pass bills” even if it gains a majority in the Lower House.

The question “is how the party will overcome that,” he said.

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