This Week’s “Nagata-cho”(19-26.Nov, 2013)

 Last week on November 19, the bill to boost the industrial

competitiveness, entailing reorganization of industry with excessing

competition and abolishment of so-called gray-zone regulation by

making exemption, was approved in the Lower House and sent to the

Upper House. There was an additional revision in the Lower House,

imposing compulsory submission of documents by the government to the

Diet every year.

 The bill on the National Strategic Special Zones, aimed at promoting

regulatory reforms within certain areas, was approved in the Lower

House and sent to the Upper House on November 21. The bill too was

partly revised in the Lower House, which enabled the items

experimented in the past special zones for structural reforms to be

applied in the special zones.

 Both the bills will likely be approved in the Upper House and passed

into legislation within the current Diet session.

*The state of deliberations in both Houses and committees are

 available from the following websites.(Japanese only)

 House of Representatives　Internet TV：http://www.shugiintv.go.jp/en/index.php

 Live broadcasts and video recordings of the deliberations in the

 House of Councillors：http://www.webtv.sangiin.go.jp/

 On the bill to establish a Japanese version of National Security

Council (NSC), the ruling coalition, on Nov 22, had asked the

opposition parties to take voting in the Upper House on Nov 25. Social

Democratic Party and Japan Communist Party had rejected, but the

ruling coalition decided to ram the bill through in the plenary

session of the Upper House on Nov 25. The bill was approved by

majority with agreements of Democratic Party of Japan, Your Party and

Japan Restoration Party, as well as the ruling Liberal Democratic

Party of Japan and New Komeito.

 On the special intelligence protection bill, the ruling coalition had

taken revision consultations with each opposition parties respectively.

On Nov 19, LDP proposed a revised draft of the bill to Your Party,

which was accepted on the same day.

 The revised bill was accepted by JRP on Nov 20, which had requested

an establishment of a third-party organization to designate special

intelligence, as such a provision was entailed in the supplementary

provision of the bill.

 On the duration of time which the government can protect certain

information as special intelligence, LDP maintained “less than 30

years in principle”, while JRP insisted 30 years. Both sides

compromised on that the information to be protected beyond 30 years

need verification of the Cabinet at the time, but not extending 60

years with exception of 7 items”. Further, while JRP had demanded

that the subject of protection should be limited to the Cabinet

secretariat, Ministry for Foreign Affairs and Ministry of Defense, LDP

rejected the idea and instead agreed to include provisions stipulating

that the ministries not maintaining special intelligence for 5 years

after the enactment of the legislation will lose the authority to

designate information as special intelligence.

 In the meantime, DPJ approved its own 4 bills as counterproposal to

make Diet intervention more available and submitted them to the Diet.

The revision consultations between LDP and DPJ, after all ended in

failure. DPJ leader Kaieda, on Nov 22, announced that DPJ would vote

against the bill in the Lower House.

 The ruling coalition on late Nov. 26 railroaded the state secrets

protection bill through the Lower House, ignoring overwhelming

opposition at a public hearing the previous day in Fukushima city and

outrage from opposition parties over the lack of debate. The bill was

finally approved, but the opposition party directors of the special

committee harshly criticized the move, saying sufficient debate had

not been conducted. The bill will likely be passed in the Upper House

within the Diet session, but the opposition camp will likely confront

the ruling coalition further.

・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・
・・・・・・・・・・・・・・・・

Counterargument on the Pharmaceutical Act Revision

 Prime Minister Abe, upon deciding the growth strategy in June, stated

loudly in his speech that “Regulatory reform is in fact at the very

heart of the Growth Strategy…if it is necessary for growth, I am

determined to take on any ‘bedrock’ without flinching.” (Speech on

the Third Round of Policies under the Growth Strategy on June 5).

However, because it lacked any concrete reform plans, the growth

strategy announced in June 14 (Japan Restoration Strategy) brought

about criticisms both domestically and internationally.

 In this context, still, one of the few specific plan entailed in the

growth strategy was a “lifting ban on the internet sales of general

drugs.” To borrow Abe’s own words,

“In the modern day, with online transactions now so firmly

established, it is logical to take an approach that in any event

enhances consumer safety and consumer convenience, whether purchases

are made face-to-face or online.

 We will lift the ban on the sales of all non-prescription drugs under

carefully crafted rules while ensuring the safety of consumers.” (the

same speech on June 5)

 Recently, however, the Abe Cabinet changed its course by withdrawing
the part of “all.” Instead, the Cabinet decided the policy direction
toward banning internet sales of totally 28 items of (1) general drugs
(available at drug stores) recently switched from the category of
prescription drugs by authorized doctors (*so-called after-switch items)

and (2)  powerful drugs.
 The government on November 12 stipulated this policy into articles

and submitted the “bill on amendments to Pharmaceutical Affairs Act

and Pharmacist Act.”

 But a group of private sector members released the following motion

opposing the bill.

----------------------------

Urgent Motion on the Revision of Pharmaceutical Act:

we request early reconsiderations on internet sales of drugs

 Although discussions have been going on over the revision of the

pharmaceutical act in the current Diet session regarding internet

sales of drugs, there are problematic points in said legislation.

1.While it is in line with prohibiting internet sales of 28 items of

  after-switch drugs and powerful drugs, there can be found no

  reasonable background for that. Looking at the report of expert’s

  investigation and verification meeting on after-switch items on

  October 8 which is believed to have justified the regulation, there

  is not even an explicit phrase such as that “internet sales should

  be restricted.”

  Further, there is no clear evidence that “while safety can be

  secured in face-to-face sales, internet sales are risky (therefore

  should be prohibited) even though pharmacists are involved as much

  as in drug stores.”

2.More problematic point is that the legislation entailed a provision

  banning internet sales of prescription drugs (having market size of

  ten times larger than that of general drugs) behind the back of

  disputed 28 items.

  With regard to prescription drugs, the provision to prohibit their

  internet sales was written-in without notice of the public or even

  without a process of discussion by experts’ panel. While some

  critics say the internet sales of prescription drugs should

  naturally be prohibited, the form of sales should not matter as long

  as they are based on the prescription by doctors. Internet sales of

  not only general drugs but some prescription drugs are permitted in

  the U.S., U.K. and in Germany under certain rules, but Japan’s

  legislation this time puts no evidence that “internet sales could

  be risky in this country.”

 When imposing regulations, it is the regulator’s task to release

reasonable evidences to impose such regulatory measures, including

making an international comparison and consideration.

 The process of policymaking this time lacks such procedures, and the

bill must be accused of having errors in its process.

Such a bill should not be passed into legislation.

 Even if it is the case that internet sales of the 28 items of

powerful drugs and prescription drugs should be prohibited this time,

the bill must at least promise that “the prohibition should be

reviewed promptly (within 1 year) after examination of the

reasonability of evidence and comparison with the other countries.”

 To note, the bill submitted by the Cabinet provides in its

supplementary clause (Article 12) that “the government shall consider

ways of sales of pharmaceutical products…given the effect of

implementation of this revised legislation after 5 years from

enactment.” This provision, in turn, might mean that the government

will not review the policy for the next five years. In short, the

legislation is not just satisfying.

Proposers:
Keiji ARITOMI, Advisor, Yamato Holdings Co. Ltd.
Munetomo ANDO, Associate Professor, Nihon University
Junji ANNEN, Professor, Chuo University Law School
Nobuo IKEDA, CEO, Agora Inc.
Hiroyuki KISHI, Professor, Keio Gijuku University
Takao KUSAKARI, Advisor, Nippon Yusen Kabushiki Kaisha
Shigeaki KOGA, former official of Ministry of Economy, Trade and Industry
Jiro KOKURYO, Professor, Keio Gijuku University
Toshiko SAWADA, Executive Director, EC Network
Masumi SHIRAISHI, Professor, Kansai University
Wataru SUZUKI, Professor, Gakushuin University
Yoichi TAKAHASHI, Professor, Kaetsu University
Atsushi TSUNEKI, Professor, Osaka University
Masayuki NAKAGAWA, Professor, Nihon University
Kazuhiko NISHIZAWA, Senior Chief Researcher, Japan Research Institute, Limited
Hiroyuki HASHIMOTO, Professor, Keio Gijuku University Law School
Eiji HARA, President, Public Policy Planning and Consulting, Co.
Hideo FUKUI, Professor, National Graduate Institute for Policy Studies
Michio MATSUI, President and CEO, Matsui Securities, Co. Ltd.
Naohiro YASHIRO, Visiting Professor, International Christian University
Fukuju YAMAZAKI, Professor, Nihon University
Shuhei YOSHIDA, Lawyer


(kana order)

The Bill on the National Strategic Special Zones: Prime Minister Abe’ s statement in the Cabinet Committee, House of Representatives （November 20, 2013）

On November 20, the bill on the National Strategic Special Zones was approved in the Lower House Cabinet Committee.

During the meeting, discussions took place with the Prime Minister Abe’s attendance, and the Prime Minister made the following statements.

Q (Manabu MATSUDA, Japan Restoration Party): I understand that the Special Zones is one of the critical cards of the Abenomics. However, it seems that the entailed reform menus are rather dissatisfying in comparison to its highfalutin title “National Strategy.” I have a concern that it may bring about an impression that the administration cannot get away from the vested interests or framework designed by the bureaucracy after all. With this regard, could you give us some comments that would eradicate such a concern if you have any?

A (Prime Minister ABE): Generally speaking, things tend to be understood through certain images casted on. Such criticisms as it is just a small-scale reform which only deals with easier-to-handle issues are not applicable this time. Although I do not mean to praise myself, I do believe this is a drastic legislation.

The items on which we gained results this time are the ones which the past administrations could not tackle with for many years, or even decades. Many regulatory proposals had been made throughout these years, but they had always been rejected. It includes the ones that couldn’t be legislated or implemented even though they were approved by the Cabinet officially. In particular, specification of employment rules, relaxation of regulation over the number of beds in hospitals, and lifting ban on the privately-managed public schools are the ones of which many had spoken in favor under the Koizumi administration, but could not be accomplished. The relooking of the agricultural committee can be listed as another example. I believe this is indeed a drastic reform. And I will steadily release this message both domestic and abroad to promote right understandings on this effort.

Q (MATSUDA): In order for the growth strategy of Abenomics to succeed, I believe it requires major reforms of such scale as to reshuffle the existing “postwar system” of Japan drastically. While I believe it will inevitably confront the existing vested interests, what is the extent of your decisiveness and what kind of vested interests are you prepared to fight against in realizing this National Strategic Special Zones?

A (Prime Minister): In the process of policymaking this time, I had asked the panel members from the private sector to play the role of attackers, instead of leaving the discussion to the government ministries. And the final decision was made by political responsibility, including that of myself. The strongly-composed team led by the chairman Tatsuo HATTA of the Special Zones Working Group took the initiative to select the subject reform items and even in the actual negotiation with the relevant government ministries. On these foots, and because I myself have given the final say, we were able to reach at this epochal achievement.

I believe that there is no end to regulatory or institutional reforms under my administration. I will continue to take the leadership to push forward such reforms in the field of medical care, employment, education, agriculture, etc., to turn Japan into a country where “the companies want to succeed the most in the world.”

Q (Toshiaki, OOKUMA, Your Party): I’ll ask on the Prime Minister’s understanding on the nature of the National Strategic Special Zones. Is this a new design to heighten freedom of business activities? Or, is it that the national government enters the field of business and starts a national project led by the national government? What is your understanding?

A (Prime Minister): The main player of the Special Zones is the private sector. We will implement regulatory reforms and other measures comprehensively and concretely to make an environment in which private, business operators to operate their businesses easily. It aims at promoting the private vitality by setting the surrounding in which it is easiest in the world to do business. Therefore, I believe that the private operators should play the role of promoting the business and investment, and the role of national government should be to set the environmental surrounding as such through regulatory reforms and other measures.

Q (Noriaki SASAKI, Japan Communist Party): You have said in the plenary session on November 8 that “with regard to drafting of the guideline on employment, we will not entrust the government ministries but elaborate it upon hearing experts’ views in the Council on Special Zones.” How are the things changing due to the guideline on employment? Also, do you mean that sketching of the guideline will be finally conducted u the responsibility of the Council on Special Zones, not the Ministry of Health, Labor and Welfare? Could you clarify on this?

A (Prime Minister): I understand that the problem residing with the existing employment rule is NOT that it is too strict. It has been problematic because of its ambiguity, instead. Therefore, a prescription should be neither abolishment nor relaxation of the existing rules but to sketch a new specific employment guideline and to monitor if the employment contracts are in line with the guideline. Our stance has been consistent since the initial plan through the current bill proposed at this time.

While the responsibility of sketching the guideline is left to the whole government, we plan to elaborate it upon hearing the opinions of members of Council on Special Zones, instead of delegating it to the Ministry of Health, Labor and Welfare alone.

Furthermore, the consultation and/or advisory services based on the guideline will be implemented under supervision of the “Headquarter of Special Zone” comprised of members from the central government, local government and private sector in each Special Zones to ensure effective operation of the services, based on the needs of each local characteristics and originalities.

This Week’s “Nagata-cho”(12-19.Nov, 2013)

 On November 15, discussion and voting took place in the Lower House
Health and Labor Committee on the bills to reform the social security
system pillared on the medical care, nursery, child-rearing and
pension and their schedules. The opposition parties such as Democratic
Party of Japan had demanded extension of the discussion, but the
ruling coalition, in a hurry to pass the other bills, moved a motion
to discontinue discussion and pushed the bill through the committee
among shouting and yelling of the opposition lawmakers. The bill was
approved by the committee.
 However, the ruling Liberal Democratic Party and New Komeito
abandoned sending the bill to the Lower House plenary session, having
an eye to discussion and negotiation over the other important bills
that the ruling bloc seeks passages within the current session of the
Diet. The bill was approved in the Lower House on November 19 and was
sent to the Upper House accordingly. Yet, the move by the ruling
parties indeed repelled the opposition parties and, to implement the
planned reforms in effect, further individual legislations will be
needed in the next year’s ordinary session. For that reason, it seems
that the ruling coalition avoided to maintain the confrontational
stance to the end.

*The state of deliberations in both Houses and committees are
 available from the following websites. (Japanese only)
 House of Representatives　Internet TV：http://www.shugiintv.go.jp/en/index.php
 Live broadcasts and video recordings of the deliberations in the
 House of Councillors：http://www.webtv.sangiin.go.jp/

 The Upper House Special Committee on National Security on November

13entered discussion on the Cabinet’s bill to establish a Japanese

version of U.S. National Security Council on which the Cabinet places

the most importance as new headquarter of the country’s foreign

diplomacy and security policy. The interpellation session was held on

Nov 18-19, and the government sought to pass the bill into legislation

as early as this week. The bill and other related bill will likely be

legislated because they have obtained the approval of the Lower House

already. On the other hand, revision consultations have been going on

between LDP and Japan Restoration Party. Although LDP had planned to

finish the consultation by Thursday and pass the bill on Friday, an

agreement could not be reached at due to the cautious stance by the

opposition JRP. Besides, DPJ had submitted its own counterproposal on

Nov 19 which is further discrepant from that of Your Party or JRP. The

focal point has been an establishment of external monitoring body to

prevent arbitrary designation of information to be protected, which

the ruling bloc has rejected for reason that a multilayered scheme to

prevent arbitrary designation has been already entailed. As for the

DPJ’s proposal, the ruling bloc recognizes the proposition has been

released too late so the revision consultation would be difficult to

be engaged in within the remaining time of the session. Accordingly,

LDP and Komeito took priority in engaging in consultation with Your

Party and JRP, and drafted a joint revised bill on Nov 19 Tuesday.

 More, the bill to promote power liberalization by allowing entry

into the power industry by 2020 and by establishing a regional body

that manages the supply and demand in a national level was approved by

the Upper House and passed into legislation on Nov 13. Your Party’s

counterproposal on this topic was not discussed in the Upper House

Committee.

 Also, on the growth strategy, the bill on National Strategic Special

Zones was taken up in the Lower House Cabinet Committee on Nov 13. On

Nov 15, the bill on Industrial Competitiveness was approved in the

Lower House, and will be set to the Upper House soon.

 Three weeks remaining for discussions and negotiation over the NSC

bill, Special Zone, Industrial Competitiveness, etc. The negotiation

over the special intelligence protection designation has reached at

its climax this week. Let’s closely look at the prospect of the

movements in the Diet.

 Following is the state of ongoing deliberations on legislations in the Diet.

・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・
・・・・・・・・・・・・・・・・

Koizumi, Why No-Nuke and Why Now?

* Written by Yoichi TAKAHASHI, PPPC Chairman / Kaetsu University Professor

 Former Prime Minister Junichiro Koizumi has repeatedly called for

Japan to abandon nuclear power, attracting attentions of media and the

public. But why at this point of time? As a matter of fact, Koizumi

stated that it would be better to lessen dependency on nuclear power

after the March 2011 disaster, and he has voiced in favor of natural

energy in informal settings elsewhere since then. Anyways, why has

Koizumi started speaking as such in public lately? The following

multiple factors could be thought of.

 First, Koizumi himself admits that it was a testament of the famous

economist Hiroshi Kato who passed away in January this year. Dr. Kato

was the figure who taught Koizumi the idea of Japan Post privatization

when Koizumi was a student at Keio Gijuku University. Dr. Kato also

has given comments to support elimination of the country’s nuclear

power plants since the March 11 disaster.

 Second, some rumor that Koizumi is learning the way of living from

Yukio Ozaki, known as Father of Japan’s Constitutionalism. Koizumi

often cited in his speeches the word of Ozaki “the true arena of life

always resides in the future.” It is a lesson that one should always

act for the future, regardless of ages. Koizumi, while in the Prime

Minister’s office, used to say in his speeches a number of times that

Ozaki would always care about the future even at the age of 94

 Third, there is a possibility that all his moves are just the

covering fires for his son, a member of the House of Representatives

Shinjiro Koizumi. Having in mind that Shinjiro will be a leader of

Liberal Democratic Party someday, the father may have introduced a

controversy policy issue that could be a focal point in times of

election. Actually Koizumi does care about his son, and they are said

to have frequent communications each other. Yet, although some hasty

ones speak that the father-and-son will unite all the anti-nuclear

groups and form a single political domain, it will not likely take

place at this point.

 Fourth, the messages might have come from Koizumi’s parental

affection to Prime Minister Abe. Koizumi, during at his office as

Prime Minister, had suspended discussions on the consumption tax hike

which was a long-dreamed ambition of the Ministry of Finance. Neither

did Koizumi produce a growth strategy, denying the idea of industrial

policy strongly addressed by the Ministry of Economy, Trade and

Industry. Contrastingly, it may seem to Koizumi that Abe recently has

come under the influence of MOF and METI. Maybe this is Koizumi’s way

of encouraging Prime Minister Abe not to be driven by the ministerial

bureaucracy.

 Fifth, perhaps, there is a possibility of financial reason. While

Koizumi has surely enjoyed his retirement-life at a think tank called

the Center for International Public Policy Studies which received some

billion yens of funds from the business circle, there are rumors that

the Center already ate up the funds in the last 7 years and will

likely be abolished in March next year. Therefore, Koizumi must find

some other ways to live. Even others say that Koizumi began to choose

seminars that pay more.

 Finally, one source with relationship to Koizumi says that he will

soon reach the age of 72, getting outward rather than inward for

seeking stimulations.

 All these may be forming the background of Koizumi’s recent moves,

but what precisely is the most likely one?

On the National Strategic Special Zones

 On November 14, Eiji HARA, President of our company, Public Policy Planning and Consulting Co., attended a meeting of the Diet's Cabinet Committee in the Lower House and stated his opinion regarding the National Strategic Special Zones on which deliberations are taken place in the Committee.

 Following is a translation of the document distributed in the Committee.



---------------------------
On the National Strategic Special Zones（November 14, 2013）

Eiji HARA

1.      Framework of the National Strategic Special Zones

annex: document submitted by private sector member in the Industrial Competitiveness Council on April 17)

①     Purpose of creating the system

l  Breakthrough as “experiment arena for regulatory reform” in Special Zones. It will tackle the “bedrock” regulation

<points to note>

l  Aimed at heightening freedom of business activities

l  Implementation should evade a practice such as that companies acquire approval for preparatory detailed business plan and are allowed to act within the range.

l  Aimed at regulatory reform (including tax reform)

ð  It should not be inclined to “supportive measures rather than regulatory reform”

②     Framework for realizing the goal

l  Minister in charge of Special Zones

l  Headquarter of Special Zones

“quasi-independent government” comprised of central government, local government and business

l  Council on Special Zones

Minister-in-charge and relevant ministers have discussion along with private sector member. Final say resides with Prime Minister

   <points to note>

l  Management of HQ

ð  It should not be implemented as arena for central government, local government, and business speak of respective interests (or even veto each other). (Article 8 clause 6 “agreement by all members”?)

2.      Further challenges concerning the framework

l  Integration or simultaneous implementation of the Special Zones and National-level Regulatory Reform

…during discussion this time, central ministries voiced “not suited to Special Zones” type of arguments (employment, local assembly)

ð  If not in Special Zones, then try nationally…

l  Further promotion of information disclosure

3.      Particulars of regulatory reform

Certain progress has been made while the framework hasn’t launched yet

Meanwhile, there were items not accomplished or on which agreements could not be fully obtained in time

l  Example of missing challenges this time

Tax, monetary, transportation infrastructure such as airport, foreign labors, etc.

l  Example of challenges not fully tackled this time

Employment (working hours), agriculture (corporate entry, etc.)

(FYI) document submitted in the Lower House’s Economy, Trade and Industry Committee

　　　　On the Industrial Competitiveness Bill　（November 12, 2013）

Eiji Hara

1.      Overall Framework

l  It is sound in that the bill is pillared on ‘regulatory reform’ and ‘industrial metabolism’ as well as that the bill limits the time span for intensive efforts.

2.      Regulatory Reform

<Past Efforts on Regulatory Reform>

l  National level: Regulatory Reform Committee (1998-), Panel for Total Reform on Regulations (2001-), Committee on Regulatory Reform and Market Opening (2004-), commission for regulatory and institutional reforms in Government Revitalization Unit (2010-), Regulatory Reform Council (2013-)

l  Special Zones: Special Zones for Structural Reform (2002-), Comprehensive Special Zones (2011-)

l  Every administration in the past showed the stance of generally accepting such ideas.
However, the common challenge has been how to get into the ‘particulars’ after the ‘generals’ soon and to what extent.

²  Exceptional measures to corporate evidence

①     Will it really achieve the regulatory reform effectively?

l  Past efforts (either national or in special zones) left the final coordination to the Cabinet, a highest-ranked decision-making body.

l  National Strategic Special Zones: because such efforts did not make visible achievements, the Working Group attempted to elaborate a framework on that purpose (e.g., Advisory Council on Special Zones and the HQs in each Special Zones, the arrangement that relevant ministers so not even attend the meeting.)

l  ‘Exceptional measures on records with corporate evidence’ => is it only that a supervisory government authority over an industry will request the regulatory authority of that same industry to ‘request for taking measures’?

②     Selection of reform menu appropriate?

l  Past efforts and the National Strategic Special Zones: transparent process of soliciting proposals and selection of them

l  Exceptional Measures on Records with Corporate Evidence (?)

③     Specific Images of Reform Menu and Sense of Speed?

l  Past ‘Zones’ and National Strategic Special Zones: Reform menus were shown at the initial stage (=> in case of National Strategic Special Zones, specific deregulatory measures will likely be taken in next spring).

l  ‘Exceptional measures on records with corporate evidence’ => no release of the initial menu

(items requiring legislative amendments will be arranged after the ordinary Diet session, implementation of the arrangement will be further later…?)

④     Relation with National Strategic Special Zones

Even in the National Strategic Special Zones, there discussed an idea of virtual special zones which is not restricted by locational boundary.

l  There is an aspect that the regulations are in fact newly enhanced behind the discussion of deregulations (e.g., loan business, internet sales of medicines, etc.)

3.      Industrial Metabolism

l  There were such discussions to boost metabolism of the industries in the government panels including the Industrial Competitiveness Council as the following:

²  Enhancement of corporate governance: highly independent outside executives, introduction of Japanese version of Stewardship Code, etc.

²  Labor Market Reform: Reform of Hello Work, Specification of Dismissal Rule, etc.

ð  The urgent tasks include, in addition to the government’s “promotion of industrial reorganization” and “stimulation of investments in venture businesses”, these measures mentioned in the paper above.

(FYI)<excerpt from LDP interim report by Japan Revitalization HQ, May 2013>

Enhancement of corporate governance, especially through introduction, proactive nomination and appointment, of outside executive directors.

Compared to other leading economies, it has been pointed that Japan has been losing in the international competition due to the excessive domestic competition because there are too many competitors in a same industry. Nonetheless, seemingly, the more problematic is the presence of managers, stockholders and financial institutions that have accepted the low profit-rates.

Normally, executive directors should bear responsibility to renew administration and cause metabolism by giving critical comments concerning corporate insolvency or industrial reorganization as representative of the stockholders in case that the managers of the company continued low-profit-making businesses.

This is to say, that, a steady introduction of autonomous, external directors, will be a step toward realizing industrial reorganization and metabolism in an autonomous manner.

This Week’s “Nagata-cho” (5-12.Nov, 2013)

 Last week the Diet’s Lower House plenary session approved a bill to
establish a Japanese version of the U.S. National Security Council on
which the Cabinet puts special emphasis as headquarter for Japan’s
diplomatic and national security policy after making some revisions
accordingly with the main opposition Democratic Party of Japan’
requests on November 7 and the bill was sent to the Upper House. Yet,
DPJ’s request to obligate the government to record minutes of the
four ministers’ meeting was finally rejected and it ended in being
entailed in the bill’s supplementary resolution.

*The state of deliberations in both Houses and committees are
 available from the following websites. (Japanese only)
 House of Representatives　Internet TV：http://www.shugiintv.go.jp/en/index.php
 Live broadcasts and video recordings of the deliberations in the
 House of Councillors：http://www.webtv.sangiin.go.jp/

 In the Upper House plenary session on November 8, it was decided to
establish a Special Committee for National Security. Prime Minister
Shinzo Abe stated in his speech that “the surrounding of Japan in
terms of security has increased in severity and the politics must take
a strong leadership to address the security policy further.” But the
ruling and opposition parties have yet reached an agreement on
schedules of discussion on the bill. Though with some points that the
parties haven’t agreed on, the idea of the bill obtains most parties’
approval in principle. so the NSC bill will likely be passed into
legislation by the end of this month.

 Accordingly, the Abe Cabinet had the special intelligence protection
bill to be discussed in the Lower House on November 8. At the same
time DPJ proposed a revision bill to information disclosure act as
counterproposal. On the same day, the Upper House Special Committee
took up both bills and there was a hearing with four experts on
November 13. Prime Minister Abe has emphasized urgency of its
legislation as tool to communicate with other countries, and Minister
Masako Mori stated that the bill sets in multi-layered system to
prevent designation of information as special intelligence from being
arbitrary. The Cabinet seeks to pass the bill within the current
ordinary session of the Diet, while the opposition parties are taking
confrontational stance for some inadequate points DPJ insists that it
won’t enter discussion unless DPJ’s revised information act is
discussed simultaneously. Japan Restoration Party released its own
counterproposal to the NSC bill exchanged it with LDP. LDP will see
whether to enter revision-discussion with Japan Restoration Party.

 On November 8, the bill to create National Strategic Special Zones
that the Abe Cabinet places special emphasis as an important measure
of growth strategy was submitted to the Diet. It aims to undertake
regulatory reforms in some limited areas in a top-down manner as
experiment to promote start-up companies and foreign investment in
Japan, to accomplish economic vitalization. Abe seeks an early passage
of the bill, and selection of 3-5 Special Zones will likely take place
as early as next year. The target of Special Zones as deregulation
items include the accommodation act, medical care act, building
standard act, road act, farmland act, etc., and also cabinet orders
and ordinances. The lawmakers will likely discuss over the legal
framework of Special Zones as well as subject items of the
deregulatory measures.

 Also, on the same day, both chambers of the Diet took voting on the
nomination of 29 personnel decisions of 12 organizations. Although DPJ
and several minor parties opposed to nomination of five personnel
arrangement as members of Board of Directors of Nihon Hoso Kyokai (NHK),
all the nomination including that of NHK was approved in both chambers
due to agreements of Japan Restoration Party, Your Party along with
the ruling coalition.

 This week had busy discussions on the special intelligence protection
bill, national strategic special zones bill, industrial
competitiveness bill, and social security reform bill in the Lower
House and the NSC bill and the electricity business reform bill in the
Upper House.
 With four weeks remaining in the Diet session, the Cabinet seeks to
accelerate discussions on the legislations while the oppositions have
taken confrontational attitude. Let’s see the Diet prospect carefully.

 Following is the state of ongoing deliberations on legislations in
the Diet.


～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～～
■Deliberated Policies

As of November 8 (Fri.) based on the website of the House of
Representativesand other sources（http://www.shugiin.go.jp/index.nsf/html/index_gian.htm）
 *The links include Japanese websites only.

・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・
・・・・・・・・・・・・・・・・

Urgent Motion on Revised Corporation Act:

We oppose adverse reform that prevents promotion of outside board member

We request legal obligation through legislation

November 15, 2013

While there are media reports saying that the Cabinet plans to submit a bill to amend the Corporation Act to the Diet soon, the outline of the bill now under discussion within the government is almost the same as that of bill being drafted under the former Democratic Party of Japan government. It is by no means in line with the policy to “promote introduction of outside board members” entailed in the “Japan Restoration Strategy” approved by the Cabinet in June as its growth strategy.

If the bill is to be passed into legislation without changes, it will be considered as a release of message that “the Abe Cabinet postponed mandating introduction of outside board members” to the world, largely betraying many international investors’ expectation toward the reform-minded standing of Prime Minister Shinzo Abe.

Currently discussed provision obligates stock offering corporations without outside board members to state reason that it is not appropriate to inaugurate outside board members in their business report; it is important, indeed. However, it does not automatically lead to a “promotion of introduction of outside board members.”

First, at least, it is necessary to explicitly provide legal obligation in principle by stating in the legislation that stock offering corporations “must inaugurate outside board members.” On that basis, we think that it should add a provision that “exceptional measures may be applied if reasons that it is not appropriate to inaugurate outside board members are specified.”

In recent years many companies have increasingly introduced outside board members, therefore the situation is very different from one and a half year ago when amendment draft of the Corporation Act was under discussion in the advisory panel. In order to make the legal revision one that addresses clearly the direction of Japan to move forward without turning back the clock, we strongly request that revision should be made to the bill currently under discussion.

Proposers

Representative: Hideaki KUBORI, layer

Takeshi KADOTA, Representative Director, Institute of Corporate Governance (as corporate status)

Hiroyuki KISHI, Professor, Keio Gijuku University Graduate School of Media Design

Shigeaki KOGA, former official, Ministry of Economy, Trade and Industry

Yoichi TAKAHASHI, Professor, Kaetsu University

Kazuhiko TOYAMA, former COO, Industrial Revitalization Corporation of Japan

Eiji HARA, President, Public Policy Planning and Consulting Co.

Robert A. Feldman, Chief Analyst on Japan and Managing Director, Morgan Stanley MUFG Ltd.

(note) proposers are in individual status therefore do not represent view of their affiliated organization are in individual, unless otherwise noted.

Opinion on the Cabinet’s Industrial Competitiveness Bill

 On November 12, Eiji HARA, President of our company, Public Policy

Planning and Consulting Co., attended a meeting of the Diet’s Economy,

Trade and Industry Committee in the Lower House and stated his opinion

regarding the Cabinet’s Industrial Competitiveness bill on which

deliberations are taken place in the Committee.

 Following is a translation of the document distributed in the Committee.

---------------------------

On the Industrial Competitiveness Bill (November 12, 2013)

Eiji Hara

1.Overall Framework

・It is sound in that the bill is pillared on ‘regulatory reform’

  and ‘industrial metabolism’ as well as that the bill limits the

  time span for intensive efforts.

2.Regulatory Reform

<Past Efforts on Regulatory Reform>

・National level: Regulatory Reform Committee (1998-), Panel for Total

  Reform on Regulations (2001-), Committee on Regulatory Reform and

  Market Opening (2004-), commission for regulatory and institutional

  reforms in Government Revitalization Unit (2010-), Regulatory Reform

  Council (2013-)

・Special Zones: Special Zones for Structural Reform (2002-),

  Comprehensive Special Zones (2011-)

・Every administration in the past showed the stance of generally

  accepting such ideas.

  However, the common challenge has been how to get into the

  ‘particulars’ after the ‘generals’ soon and to what extent.

○Exceptional measures to corporate evidence

①Will it really achieve the regulatory reform effectively?

・Past efforts (either national or in special zones) left the final

  coordination to the Cabinet, a highest-ranked decision-making body.

・National Strategic Special Zones: because such efforts did not make

  visible achievements, the Working Group attempted to elaborate a

  framework on that purpose (e.g., Advisory Council on Special Zones

  and the HQs in each Special Zones, the arrangement that relevant

  ministers so not even attend the meeting.)

・‘Exceptional measures on records with corporate evidence’ => is it

  only that a supervisory government authority over an industry will

  request the regulatory authority of that same industry to ‘request

  for taking measures’?

②Selection of reform menu appropriate?

・Past efforts and the National Strategic Special Zones: transparent

  process of soliciting proposals and selection of them

・Exceptional Measures on Records with Corporate Evidence (?)

③Specific Images of Reform Menu and Sense of Speed?

・Past ‘Zones’ and National Strategic Special Zones: Reform menus

  were shown at the initial stage (=> in case of National Strategic

  Special Zones, specific deregulatory measures will likely be taken

  in next spring).

・‘Exceptional measures on records with corporate evidence’ => no

  release of the initial menu

  (items requiring legislative amendments will be arranged after the

  ordinary Diet session, implementation of the arrangement will be

  further later…?)

④Relation with National Strategic Special Zones

　Even in the National Strategic Special Zones, there discussed an

　idea of virtual special zones which is not restricted by locational

　boundary.

・There is an aspect that the regulations are in fact newly enhanced

  behind the discussion of deregulations (e.g., loan business,

  internet sales of medicines, etc.)

3.Industrial Metabolism

・There were such discussions to boost metabolism of the industries in

  the government panels including the Industrial Competitiveness

  Council as the following:

・Enhancement of corporate governance: highly independent outside

  executives, introduction of Japanese version of Stewardship Code,

  etc.

・Labor Market Reform: Reform of Hello Work, Specification of

  Dismissal Rule, etc.

→The urgent tasks include, in addition to the government’s

　“promotion of industrial reorganization” and “stimulation of

　investments in venture businesses”, these measures mentioned in the

　paper above.

(FYI)

<excerpt from LDP interim report by Japan Revitalization HQ, May 2013>

 Enhancement of corporate governance, especially through introduction,

proactive nomination and appointment, of outside executive directors.

 Compared to other leading economies, it has been pointed that Japan

has been losing in the international competition due to the excessive

domestic competition because there are too many competitors in a same

industry. Nonetheless, seemingly, the more problematic is the presence

of managers, stockholders and financial institutions that have

accepted the low profit-rates.

 Normally, executive directors should bear responsibility to renew

administration and cause metabolism by giving critical comments

concerning corporate insolvency or industrial reorganization as

representative of the stockholders in case that the managers of the

company continued low-profit-making businesses.

 This is to say, that, a steady introduction of autonomous, external

directors, will be a step toward realizing industrial reorganization 

and metabolism in an autonomous manner.

This Week’s “Nagata-cho” (29.Oct-5.Nov, 2013)

 Deliberations on legislations started in the committees of the Diet

Lower House. The lawmakers entered on October 28 discussions on the

bill to establish a Japanese version of the National Security Council

on which the Cabinet places emphasis as control tower of the

diplomatic and security policy. On November 1, the opposition

Democratic Party of Japan submitted a counterproposal to the Lower

House Special Committee claiming that the bill has deficiency in the

line of orders and on its formal authority. Given that DPJ proposed

its counterproposal, the ruling Liberal Democratic Party and New

Komeito started informal trilateral discussion with DPJ, where DPJ

accepted the ruling camp’s idea that the bill would entail

propositions suggested by DPJ. DPJ decided to agree with passage of

the bill, and as Your Party already manifested to agree on the bill,

the bill will likely pass the Lower House plenary session on November 7.

*The state of deliberations in both Houses and committees are

 available from the following websites. (Japanese only)

 House of Representatives　Internet TV：http://www.shugiintv.go.jp/en/index.php

 Live broadcasts and video recordings of the deliberations in the

 House of Councillors：http://www.webtv.sangiin.go.jp/

 On October 29, the bill to boost the country’s industrial

competitiveness was put onto the discussion table in the Lower House

plenary session. The bill entails plans to promote regulatory reforms

intensively within 5 years since 2013. In particular, a

minister-in-charge will be nominated to supervise advancement of the

reforms, and new substitution plan will be released in case of failure

in the undertaking.

 Also, the Lower House Economy and Trade Committee entered discussions

on the bill to reformulate the energy business industry that was once

・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・
・・・・・・・・・・・・・・・・