Japan's telecommunications market has been undergoing steady deregulation and reform since 1984, when Tokyo privatized the government telephone monopoly and permitted domestic companies to enter the field. Until recently, the Ministry of Posts and Telecommunications has maintained an incremental approach to deregulation and reform. MPT's method and policies have been criticized by observers both in Japan and abroad as preventing real competition, keeping innovative firms out of the market and slowing the pace of the industry's development.
The rapid evolution of the Internet with its potential to revitalize individual firms and the economy as a whole has highlighted the shortcomings of Japan's telecommunications industry and the inadequacy of MPT's policies. The fast-paced growth of the Internet and the changes it has brought to business and society have forced Japanese firms to scramble to keep up and have pushed MPT to abandon its paternalistic policies and its insistence on gradual reform in favor of a hands-off approach. As it enters the 21st century, Japan's telecommunications industry has strengths as well as weaknesses that will shape its development and its role in the global marketplace.
JAPAN'S ECONOMIC DECLINE ACCELERATED IN
--- by Douglas Ostrom
Anyone not perplexed by economic conditions in Japan does not understand the situation. Gross domestic product shrank 5.5 percent on a price and seasonally adjusted annual basis in the final three months of 1999 on top of a revised 3.9 percent contraction in the July-September quarter, the Economic Planning Agency disclosed March 13 (see Table). However, the very same EPA reportedly was planning to upgrade the status of the economy to a "self-sustaining recovery" in its monthly report for March, due out just days later. These incongruous developments speak volumes about the current confusion over what the Japanese economy really is doing and also about economic pronouncements during an election year.
INSURANCE AT CENTER STAGE OF BIG BANK
--- by Jon Choy
After two decades of work to align Japan's financial-market rules and regulatory practices with those of the United States and Europe, the end of the process is in sight. Tokyo has drafted legislation that will allow a wider range of firms to sell insurance policies and give insurers new freedoms to restructure and compete. Also on the drawing board is a government-backed system for dealing with failed insurers that mirrors the approach adopted for the banking industry. Even though the proposed changes will not be implemented for more than a year, companies already are rushing to prepare for the new competitive environment.
JAPAN'S RECOVERY CRUCIAL TO EAST ASIAN
--- by Marc Castellano
East Asia's developing economies will continue to recover and strengthen in 2000 on the back of a robust global economy, the Manila-based Asian Development Bank forecast in a report released March 10. However, the head of the group that produced the study warned that growth in Japan is crucial to sustaining the region's rebound since that country is the top or second-biggest market for the exports of its transitioning partners. The linkage made by economist Yoshihiro Iwasaaki obviously is not new. For more than two years, regional leaders have been calling on Japan to play its historical role of an engine of expansion for its neighbors, but the world's second-largest economy, stuck in a slump since the early 1990s, has not provided much help on the trade front. In yen terms, Japan imported just 2.7 percent more from Asia in 1999 than the year before (see JEI Report No. 5B, February 4, 2000).
RESUMPTION OF FOOD AID AIMED AT EASING
JAPAN-NORTH KOREA RELATIONS
--- by Barbara Wanner
Japan's frosty relations with North Korea could begin to thaw in the weeks ahead. That prospect is due largely to Tokyo's March 7 announcement that it will send food assistance to the famine-wracked country for the first time in three years. More importantly, the promise of 110,000 tons of rice, which will be distributed by the United Nations World Food Program, has set the stage for the resumption of negotiations aimed at normalizing diplomatic ties. These talks collapsed in 1992 when North Korean negotiators walked out in a huff over Tokyo's demands for information concerning Pyongyang's alleged kidnappings of at least 10 Japanese from northwest Honshu in the early 1970s.