Newspaper article The Christian Science Monitor

Japan Promises a 'Big Bang;' but Some Say It Could Fizzle Deregulation Seen as Key to Competitiveness of Financial Industry

Newspaper article The Christian Science Monitor

Japan Promises a 'Big Bang;' but Some Say It Could Fizzle Deregulation Seen as Key to Competitiveness of Financial Industry

Article excerpt

Prime Minister Ryutaro Hashimoto demonstrated last week that he can talk the talk of deregulation and reform. But analysts, having heard much of this sort of rhetoric before, are waiting for action.

Just days after being confirmed a second time as prime minister following his party's election victory last month, Mr. Hashimoto announced a list of measures designed to liberalize and internationalize Japan's financial industry. Newly appointed Finance Minister Hiroshi Mitsuzuka promised a "big bang" that would match the 1986 deregulation of London's banks, insurance companies, and investment houses.

Hashimoto also gave his new trade and industry minister a one-month deadline to come up with a package of reforms that would allow the world's second largest economy to flourish in the 21st century. The prime minister, in accepting a report urging a more powerful central bank, also said the reform of the Bank of Japan was a "top priority." "Japan must implement free market rules and promote competition in order to revitalize the economy and reform the economic structure," said a deregulation advisory group commissioned by the Economic Planning Agency. Its report called for changes in six industries. The announcement of proposed financial-industry reforms appeared to have been drawn from the advisory group's work, which also recommended deregulation in information technology, the way goods are distributed from producer to consumer, the rules governing land use, employment practices, and medical care. Perhaps most significant is the tone of the recent pronouncements - a sense that the time for real change has finally come. Concern is widespread in Japan that the high level of regulation will make this country's industries less able to compete in a globalized economy. That disadvantage, economists warn, will make it difficult for the government and big companies to keep paying pensions and providing health care and other social services to an aging populace. Seiroku Kajiyama, the chief Cabinet secretary, said last week that Hashimoto "thinks Japan will not be able to function in the new era if it does not make fundamental changes now." The financial industry seems likely to be the most immediately affected. …

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