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No. 21 — May 26, 2000

Feature Article

JAPAN'S AVIATION INDUSTRY: DEREGULATION ADVANCES ON BROAD FRONT

Arthur J. Alexander

JEI Report will not be published June 2, 2000 because of the Memorial Day holiday.

Summary

Since the mid-1980s, deregulation has moved Japan's aviation business unevenly but persistently toward a more open, competitive market structure. The process was given a sharp nudge forward in late 1998 when two new domestic carriers started service. It received another boost February 1, 2000 with the almost complete liberalization of fares and routes.

The remaining hurdle to achieving "open skies" in the domestic market is the shortage of takeoff and landing slots at Japan's two busiest airports — Tokyo's Haneda and Osaka's Itami, which together handle three-quarters of all in-country passengers. At the same time, the limited availability of takeoff and landing slots at Tokyo's Narita International Airport, the principal overseas gateway, is holding up further liberalization of foreign flights. With new runways at both of Tokyo's airports planned for completion within the next two years, many of the remaining barriers to a liberalized aviation environment in Japan soon will be eliminated. Still to be accomplished, however, is the thorough restructuring of the country's major carriers, which will entail reducing costs and otherwise improving finances in order to increase profitability.

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Weekly Review

MORI'S GAFFE HEIGHTENS CONTROVERSY OVER TIMING OF OBUCHI FUNERAL, LOWER HOUSE POLLS
--- by Barbara Wanner

The May 14 death of former Prime Minister Keizo Obuchi, six weeks after an incapacitating stroke (see JEI Report No. 14B, April 7, 2000), was not completely unexpected. Nevertheless, it cast a pall over Japan. Coming in the wake of the announced retirements of former Prime Minister Noboru Takeshita and Liberal Democratic Party doyen Seiroku Kajiyama, among other party strategists, Mr. Obuchi's passing seemed to signal a major political transition. The generation that had governed Japan during its rise from postwar devastation to global economic power largely has moved on, making room for a new group of leaders. These elected officials must guide the nation in today's fast-paced, technology-driven world — a challenge that, according to some experts, the "old way" of politics cannot meet.

 

TOKYO HOPES TO TRADE YEN FOR JOBS
--- by Jon Choy

In keeping with Prime Minister Yoshiro Mori's pledge to continue the economic policies of his predecessor, the government has put together a second package of measures designed to combat Japan's rising unemployment rate. Echoing the initial June 1999 jobs plan (see JEI Report No. 23B, June 18, 1999), this year's scheme provides money for direct job creation as well as for the retention and the retraining of workers at smaller businesses. With the jobless rate near 5 percent in recent months, the package also beefs up the national unemployment compensation fund. Pointing to the meager results of the first effort, however, analysts are skeptical about the impact of the new plan.

 

JAPAN'S CURRENT ACCOUNT SURPLUS RISES DESPITE DIP IN TRADE SURPLUS
--- by Douglas Ostrom

The latest quarterly numbers for the broadest measure of Japan's trade, the current account, hint at a potentially dramatic change in the nation's external position. According to data that the Ministry of Finance released in mid-May, the current account surplus climbed 15.2 percent in the January-March period, even though the trade balance dropped 5.5 percent (see Table 1). For those accustomed to thinking of the current account surplus and the trade gap as synonymous, this result appears puzzling. In fact, though, it is consistent with predicted long-term trends. If the pattern persists, Japan in the medium term could import more every year than it exports.

 

MITI HAILS REGIONAL FREE-TRADE AGREEMENTS, URGES JAPANESE PARTICIPATION
--- by Marc Castellano

The Ministry of International Trade and Industry's latest trade white paper urges Japan to pursue regional and bilateral trade agreements. According to the authors of the 2000 report, released May 16, such deals not only promote competition but also expand market opportunities. Moreover, the deepening economic integration of East Asia likely will benefit Japan and, thus, is a phenomenon that should be embraced.

 

NOTES

As part of its commitment to contribute to international peace and stability, Japan hosted a major conference on the reconstruction of Southeastern Europe — a region plagued by continuing ethnic violence and civil strife since the end of the 1999 Serbia-Kosovo conflict (see JEI Report No. 14B, April 7, 2000). Participants in the May 15-16 gathering in Tokyo discussed ways to promote a stable political environment, to "redeem and establish human dignity" and to foster the development of a market economy. In attendance were delegates from Bosnia-Herzegovina, Bulgaria, Croatia, Macedonia and Romania as well as Hungary, Slovenia and Turkey. Officials from such international organizations as the United Nations and representatives of the major economic powers also participated in the meetings.

JEI Report will not be published June 2, 2000 because of the Memorial Day holiday.
The next issue will be dated June 9, 2000.

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