Deregulation Benefits All Japanese

By Ambassador Thomas S. Foley

[Note: The following, originally published in The Daily Yomiuri, January 25, 2001, in its Editorial/Opinion section, is reproduced here with The Yomiuri Shimbun's permission.]

When the subject of Japanese regulatory reform comes up I am often asked two questions: "Why is it any business of the United States?" and "Why should Japan subject itself to such change?"

The answer to the first is straightforward. Americans understand there cannot be a strong global economy without a strong, productive Japanese economy. And there cannot be a strong Japanese economy without regulatory reform.

Lack of productivity means consumers--housewives and businesses alike--will continue to pay too much for too narrow a range of products and services.

The answer to the second question-- why Japan should subject itself to such change--is also quite straightforward. Bold regulatory reform will benefit Japanese people in all walks of life.

Already we can see the benefits. The Economic Planning Agency last January found that deregulation in just eight business sectors since 1989 had saved each person nearly 70,000 yen. In 1998, reform in domestic telecommunications and electricity charges alone saved an average family nearly 50,000 yen. Deregulation has also produced new jobs. For example, a U.S. investment bank has hired nearly 900 additional Japanese staff over the last five years following reform of the financial services sector.

Adoption of the deregulation measures we suggested last year would reduce the price of imported goods delivered by express carriers by about 25 percent. This means a Fukuoka college student buying books from a European publisher, a small company or a farmer in Miyagi Prefecture buying urgent equipment from China, a salaryman or a housewife in Osaka buying gifts, or a high school student in Sapporo buying American CDs on the Internet would each save 2,500 yen of every 10,000 yen they spend.

Many U.S. deregulation proposals give special attention to information technology development. To benefit from the information age, companies and consumers must have ready access to reasonably priced IT products and services.

Those who want to use the Internet to help their business or simply for entertainment should not have to pay exorbitantly high prices for access to it.

Improved productivity in the retail sector is essential for economic growth. The reform process should give families the opportunity to choose from a wider range of reasonably priced goods at conveniently located stores.

Productivity in the construction of single-family homes in Japan is currently very low--only about 33 percent of U.S. productivity. Even if Japan achieves only a 25 percent increase in productivity, a Sendai family now paying 30 million yen for a home would only pay about 23 million yen for the same house. Or they could spend the same 30 million yen and choose from a greater range of better quality homes.

We support Japan's plans to modernize its Commercial Code--to give companies the tools they need to deal with global competition. As the Federation of Economic Organizations has noted, "Japanese businesses must realize a form of corporate governance that meets global standards--if they are to maintain and strengthen their international competitiveness."

Some of the most effective drugs used in the United States and other developed markets to treat depression, allergies and arthritis are currently not available in Japan. The U.S. deregulation proposals focus on giving Japanese citizens greater access to such innovative drugs and to newly developed medical technologies.

Bolder deregulation would also provide more diversified investment options. Individuals and families will have more choices when deciding how best to invest their savings.

There are those who say deregulation is to blame for some of Japan's economic problems. On the contrary, it is the solution to these problems! The U.S.-Japan deregulation talks are a win-win situation. While bold regulatory reform will certainly help American companies doing business in Japan, in each of those cases presented above, the end result is to make life better for Japanese citizens and companies by creating a more open, more efficient and less regulated economy.