Business | Taking the Lead

Yoshihiko Miyauchi, Orix ex-CEO and former head of deregulation panel, knows what it takes to change Japan

by Kazuaki Nagata

Staff Writer

Yoshihiko Miyauchi, 82, may not be your average business leader.

As the former CEO of Orix Corp., he is credited with leading the leasing firm for nearly 34 years as it has grown into a financial conglomerate with a market value of about ¥2.5 trillion. Yet he is better known as an advocate of deregulation, which has earned him the nickname “Mr. Deregulation.”

Miyauchi served for more than a decade as a member of a key reform panel advising the government on regulations in need of change, between the early 1990s and mid-2000s — an unusually long stint for a business figure.

When he first joined the panel in 1991, Miyauchi realized that many regulations were hindering the freedom of business activities, blocking newcomers from entering certain markets, and interrupting economic growth opportunities.

“It was quite a mess,” said Miyauchi in an interview last month. He now serves as senior chairman of Orix, which runs a variety of businesses ranging from car leasing, real estate and banking to professional baseball, with its team Orix Buffaloes.

Even though Miyauchi is no longer a member of the panel, he still has a lot to say on deregulation, and is irritated by what he sees as slow progress by Prime Minister Shinzo Abe’s administration. At the same time, few other than Miyauchi realize how hard it is to change regulations in the fields of labor, agriculture and education, sectors heavily protected by powerful lobbies.

“Structural reform has hardly progressed,” Miyauchi said. Observers and overseas media generally agree.

“The third arrow of structural reform — and arguably the most important — has been sorely lacking, and Abenomics doesn’t work all that well without all three arrows working together,” noted a BBC article published on Oct. 17.

When the Liberal Democratic Party regained power in 2012, Abe said he would focus on three pillars — fiscal spending, bold structural reform and ultra-loose monetary policy — to accelerate the economy. The prime minister has since trumpeted his government’s achievements in crucial deregulation, including liberalizing the regionally monopolized power and gas markets and legalizing minpaku (private lodgings).

But Miyauchi said Abe’s efforts are still lukewarm and that he has avoided key “bedrock” areas including labor and agriculture, whose vested interests would put up fierce opposition to reform, Miyauchi said.

For instance, despite the government’s push on work-style reforms, such as capping overtime and promoting telecommuting, Miyauchi believes the government is dodging discussions on the most important topic — increasing productivity by creating a fluid labor market. “I’m not saying (work-style reforms) are a bad thing. But the focus seems to be on how to reduce work hours” rather than increasing productivity, he said.

According to data from the Organisation for Economic Co-operation and Development (OECD), Japan ranked 20th among 35 countries on its productivity per hour in 2015. “Unless productivity increases, you can’t conduct work-style reforms. But it seems discussions on this issue are not taking place,” said Miyauchi.

Under the existing labor contract law companies cannot easily fire full-time employees, creating a lifetime employment culture that has become deeply rooted in society. Many workers are reluctant to risk changing jobs even though they may be more suited elsewhere, resulting in mismatches in the labor market, labor market experts say.

Overhauling this system has been discussed in the past. But it faced fierce opposition from groups representing workers, such as the Japanese Trade Union Confederation (Rengo) — the nation’s largest, powerful labor organization. Rengo has said that the revision would make many employees more vulnerable, as companies will be able to fire workers more easily if it is put in place.

Rengo isn’t the only opponent. Medical, educational and agricultural industry groups — protected by bedrock regulations — can mobilize massive numbers of members and team up with politicians to protect their interests.

“There are people making their living practically out of the bedrock regulations …. they don’t know how they would survive without these privileges. That’s why they scream so loudly” when others try to deregulate, Miyauchi said. In contrast, those who want to break these regulations “can’t form a political force” because benefits from the changes are often hardly visible to the general public, so they are outnumbered, he added.

Miyauchi himself had to swallow this bitter pill while trying to bring about similar changes as head of the government panel on deregulation. The core regulations are part of the social and economic fabric of Japan and there is strong resistance to any effort to change them via a regulatory reform panel, Miyauchi noted when speaking at an event held in 2014 in Tokyo. He had tried to nullify some bedrock regulations but couldn’t win the battle, he added.

Even successful regulatory changes achieved during his stint came at a price.

When the panel decided to liberalize commissions for purchasing stocks, in line with global standards, major brokerages criticized him personally and said their profits would shrink from the rate competition, Miyauchi said at the 2014 event.

Before the liberalization, people had to pay an ¥11,500 commission whenever they purchased stock worth ¥1 million. But when the revision took effect in 1999, securities firms were able to set rates freely. Now some charge less than ¥1,000. Miyauchi touts the significant drop in rates as having contributed to energizing the stock market.

“I knew many leaders of securities firms and thought they were my friends. But they complained seriously, saying, ‘Miyauchi-san, what do you think you are doing?’ ” he said at the event. “In that sense, I think I lost many friends in the industry,” he said.

The panel also paved the way for convenience stores to sell nonprescription drugs in 2004, sales of which had previously only been permitted at drug stores.

Proving how Miyauchi’s ideas could be divisive, there are some books dedicated entirely to criticizing him. They argue that he took advantage of his position as chairman of the government panel to benefit Orix, given that he was well-versed in regulatory changes and how they could create new business opportunities.

Miyauchi calls that criticism absurd.

“When I was doing work for the government, I never thought about Orix. I swore to myself that I would never do such a thing,” he said. He has given the same advice to Orix colleagues who were sent to help with the panel’s management.

“I told them that you must not think about Orix, and must do your best. Otherwise, you would be a disgrace to Orix,” he said.

This section runs exclusive stories on top business leaders and executives interviewed by The Japan Times.