Levy, Joaquim, 2000, “Reform of Japan’s Insolvency Laws,” Post Bubble Blues—How Japan Responded to the Asset Price Collapse, IMF.
Ministry of Economy, Trade and Industry, 2001, Tsusho Hakusho 2001 (White Paper on International Trade 2001), pp. 39–63, May (in Japanese; English version forthcoming).
Nomura Securities Financial Research Institute, 2001, “2000 Nen no Nihon Kigyou ni Kanren suru M&A no Doukou (Development of M&A Concerning Japanese Companies in 2000),” Nomura Securities Co., Ltd., January (in Japanese).
Teikoku Databank, 2001, “Minji Saisei Hou Sekou 1 Nen no Shinsei Doukou Chousa (Survey on the Filings Under the Civil Rehabilitation Law After 1 Year of Enforcement),” April (in Japanese).
Prepared by Takashi Nagaoka (ext. 37613).
Reforms in fiscal and financial areas have been covered in earlier chapters.
The CEFP was established in the context of the central government reorganization in January 2001. Under the leadership of the Prime Minister, the Council develops a broad agenda for short- and medium-term economic and fiscal policies and reform initiatives which will be the basis for the annual budget formulation.
PFIs involve the private sector in building, managing and maintaining public facilities, such as roads, ports, and sewage. The private sector finances the operation, and collects payments from users or the public sector over time. Increased use of PFIs is expected to reduce the overall public works spending by the government, and increase efficiency and risk sharing through private sector involvement.
While the blueprint did not give details, a large-scale revision of the Commercial Code is being contemplated to improve corporate governance, including through expanding the role of external board members, clearly separating executive and auditing functions, extending the use of stock options, and using IT for shareholders’ meetings.
The Urban Revitalization Headquarters was established to lead the initiatives on urban revitalization based on the emergency package of April 2001. Headed by the Prime Minister, it will promote urban revitalization programs aimed at constructing recycle-oriented urban structures and introducing other measures to enhance the efficient use of land.
Assuming the labor force stays constant, estimates of the impact of NPL disposal by the CEFP and the private sector analysts imply an increase in the unemployment rate of about 0.1–0.3 percentage points and 0.4–0.7 percentage points, respectively, from 4.9 percent in May 2001. Meanwhile, private sector estimates of the impact of the overall structural reform agenda would imply a 1.5 percent increase in the unemployment rate.
For example, many restructuring plans involve reduction of workforce mainly through orderly retirement and restricting new hires over multiple years.
The vintage of the capital stock increased by 1½ years over the past decade to above 10 years.
For example, while the debt to equity ratio for the whole industrial sector was above 290 percent in FY2000 (comparable to that in Germany, but higher than the 200 percent in the U.S.), it was below 95 percent for Sony and 135 percent for Toyota, and over 1,200 percent for general contractor Kajima Corporation (all from FY2000 annual reports).
Numerical criteria are expected to include improvements in quantitative indicators such as ROE, ROA, and interest coverage ratio, and projected cash flows will need to be sufficient to eliminate excess debt within 10 years.
See Nomura Securities (2001). Excludes the financial sector. Cases aimed at pursuing intra-group restructuring and increasing the share in related firms’ equities are counted under group restructuring purposes.
The legal framework for takeover bids, introduced in 1971, has been used mainly as a vehicle for friendly mergers, rather than hostile takeovers. A takeover of a Japanese pharmaceutical company by a German firm in early 2000 was reported to be the first such hostile takeover (aimed at actually taking control of the company rather than reselling the shares to other incumbent equity holders for capital gains), while another widely publicized case by a Japanese consultant company ultimately failed to take over the target firm.
The Regulatory Reform Committee provided recommendations to the government on the reform agenda each year, on which the government based its revision of the three-year program. The committee was dissolved in March 2001, at the expiration of its three-year term, after its final recommendations were reflected on the new three-year program through 2003.
A total of 95 percent of the 1,268 item agenda has been either fully or partially completed.
One of the major barriers to entry in highly regulated industries, such as transportation, power, and telecommunications, has been the so-called “supply-demand adjustment clause.” The government estimated the appropriate level of service suppliers against the estimated level of demand, and limited the number of operators accordingly through licensing. However, this restriction has been abandoned in most of the sectors in recent years.
The new three-year program integrated the recommendations of the former Regulatory Reform Committee with items from other reform initiatives such as the revised Action Plan for Economic Structure Reform (December 2000) and e-Japan Priority Program (March 2001), as well as opinions from various quarters.
IAIs were modeled after the “agencies” introduced in the United Kingdom in 1988 to streamline the government. An IAI is independent from the government and provides public services that need not be provided directly by the government, but may need some public sector involvement—e.g., museums, research institutes, and colleges. It has greater freedom in its organization and resource allocation, compared to the past when it operated as a branch of the government, which is expected to result in increased efficiency. An additional five agencies together with some national health institutions will join the list by 2004.
The total figure does not include those 300,000 employees of the postal insurance, savings, and services operations who will be transferred to a public corporation in 2003.
A tokushu-houjin is defined as a corporation with special legal purpose established through a special incorporation process (e.g., Japan Highway Public Corporation, NTT, and Japan Railway Companies). Individual ministries establish and supervise such entities with the approval by the Ministry of Public Management, Home Affairs, Posts and Telecommunications (MPHPT). A ninka-houjin, on the other hand, is defined as an institution with special legal purpose established through an ordinary incorporation process in the Commercial Code, followed by government authorization (e.g., Japanese Red Cross Society, Japanese Institute of Certified Public Accountants, etc.). Tokushu-houjin and ninkahoujin collectively received ¥24½ trillion of subsidies and handled ¥24½ trillion of FILP operations in FY2001.
The Prime Minister called for the closure of the Japan National Oil Corporation ahead of the formulation of the broader consolidation plan at the year-end, to act as a model case. Its operations include managing oil reserves and extending loans to private oil developers, and are funded by fiscal transfers (subsidies exceeded ¥360 billion in FY2001).
A koueki-houjin is a non-profit organization for public purposes. They enjoy preferential tax treatment on the non-profit operations. There are currently about 26,000 such organizations registered. About 1,000 of them operate as agents for the government based on specific laws (e.g., nationally authorized safety inspections and certified proficiency examinations), some of which receive budgetary transfers.
The IT Strategy Council consisted of 20 private sector representatives, including business leaders and leading academics.
The IT Basic Law, enacted in January 2001, identified the need for Japan to move toward an advanced information network society, and called for the formulation of an action plan. It also required the establishment of the IT Strategy Headquarters headed by the Prime Minister and composed of all cabinet members and a number of private sector representatives.
See Callen and Nagaoka, 2001, in the accompanying Selected Issues volume for a discussion on the low IT usage in Japan.
The Action Plan for Economic Structure Reform of 1997 initially aimed to meet the target by 2001, but the timeframe was extended in the revised action plan in December 2000.
See Callen and Nagaoka, 2001, in the accompanying Selected Issues volume for a discussion on the labor market rigidity.