Some long-overdue structural changes finally are occurring in the world's second-largest economy. This assertion is particularly applicable to the financial sector, which is being reshaped by Tokyo's Big Bang reform initiative, but it also covers the transportation, retailing and communications industries. The ongoing transformation is partly a response to the bursting of the "bubble economy" at the start of the 1990s. The slowdown in growth that followed forced government decisionmakers and corporate leaders to take a hard look at the economy's structure as well as at established policies and practices in their efforts to explain Japan's persistently subpar performance. The collapse of asset prices also sparked a public discourse and made much more persuasive the arguments of those who maintained that Japan would do better if it abandoned the framework that had worked so well in the first three decades or so of the postwar era but that eventually became an albatross.
Noted Japan specialist Edward J. Lincoln, a longtime senior fellow in the Foreign Policy Studies department of The Brookings Institution, has published numerous books and papers on Japan's economy, including last year's Troubled Times: U.S.-Japan Trade Relations in the 1990s. He currently is researching structural rigidities in Japan and impediments to deregulation there. Mr. Lincoln recently offered his unique perspective on the subject of change in the Japanese economy in an interview with JEI President Arthur J. Alexander.
IET MOVES TO REFORM RETIREMENT
--- by Douglas Ostrom
The United States is not the only industrial nation to face a looming crisis in its program to provide retirement income to a broad cross section of older citizens. As a first step toward overhauling Japan's even more troubled system (see JEI Report No. 12A, March 28, 1997), the Diet approved a package of seven bills March 28 that will trim benefits and shore up funding. Critics complain, though, that the legislative initiative, which the Diet first tackled during last year's special session, raises almost as many questions as it resolves, in part because coalition government lawmakers tried to make some aspects of the reform less onerous to participants.
TOKYO TENDS TO FISCAL NEEDS
PRESENT AND FUTURE
--- by Jon Choy
Japan's three-party ruling coalition is taking care of fiscal business amid growing speculation about when it will call elections for the lower house of the Diet. The six-month-old alliance, composed of the Liberal Democratic Party, the Liberal Party and the New Komeito, moved the general account budget for FY 2000 through both chambers of the Diet at a record-matching pace. The spending plan was approved March 17, well ahead of the April 1 start of the new fiscal accounting period. The initial FY 2000 budget is the biggest ever a booster shot in the arm of an economy still not back on a steady growth track. Tokyo also hopes to inoculate the economy against longer-term fiscal ailments, especially the burden of a fast-expanding outstanding national debt, the increasing need for social services as the population grows grayer and the declining base of working taxpayers (see previous article).
CHANGING VIEWS ON SECURITY PROMPT PUSH
FOR BILL ON SDF ENGAGEMENT
--- by Barbara Wanner
Reflecting Tokyo's growing concern about potentially destabilizing developments in Northeast Asia, top Japanese officials recently urged the timely development of legislation to authorize the Self-Defense Forces to respond to acts of foreign aggression. Prime Minister Keizo Obuchi, addressing the March 19 National Defense Academy graduation ceremony, emphasized the importance of getting statutes on the books to enable the SDF "to effectively and smoothly implement their missions." A week later, Japan Defense Agency Director General Tsutomu Kawara reiterated the need for expeditious action on such initiatives, telling a National Defense Academy Medical College audience that JDA would work with the SDF in drafting new guidelines for the use of weapons in domestic emergencies.
EAST ASIAN FINANCIAL OFFICIALS AGREE TO
SET UP REGIONAL FUND
--- by Marc Castellano
Finance and central bank officials from the member countries of the Association of Southeast Asian Nations, the People's Republic of China, Japan and South Korea agreed March 24 to establish a regional fund that could be tapped during times of financial and/or economic crisis. East Asian financial officials, who had gathered in Bandar Seri Begawan, the capital of Brunei, for the annual "Asean+3" meeting, decided that such a facility was needed to protect their countries' economies from currency speculators, widely believed to have been a chief cause of the region's 1997-99 turmoil.