Prospect of Abenomics in Ordinary Diet

* Written by Eiji HARA, PPPC President

 The ordinary session of the Diet has opened. Prime Minister Shinzo
Abe has called the session as “Diet to Realize Positive Cycle,” but
its substance is yet known so far.

 Although Abe’s economic policy called “Abenomics” made a splendid
rocket-start in early 2013, it has idled since sometime around
mid-last year.
 The “Japan Revitalization Strategy” released in June was criticized
as lacking concrete action plans. Subsequently after the Upper House
election in summer, although it was expected that the Cabinet would
start putting the growth strategy into practices, the progress therein
has not been smooth at all, unfortunately. While the Cabinet called
the extraordinary session in autumn as “Diet to Implement Growth
Strategy,” publicly it was dominated by the special intelligence
protection act alone. In relation with the growth strategy, the
Cabinet released a group of;
・Inadequate legislation: e.g., bill to revise corporation act with
  regard to outside board members (carried over to the ordinary
  session)
・Legislation adverse to reforms: ban on internet sales of medicines,
  reregulation on taxi business, etc.
 Also, with regard to the issue of civil service reform, though it is
not often regarded as part of the growth strategy but indeed forming a
basis of various structural and regulatory reforms, completely
inadequate plans or even adverse-reform bills were proposed to the
last extraordinary Diet session (carried over to the ordinary session).

 Under such circumstances, while the question is whether and how the
Cabinet will regain momentum for the growth strategy this time, there
seems to be no key legislation that can be trump card among which are
scheduled to be proposed for that aim.
 One of the very few hope is the National Strategic Special Zone
enacted in the last ordinary session; one of the few fruitful results
in the autumn Diet. Prime Minister Abe announced at Davos Convention
that he would drill through the country’s “bedrock” regulation with
the Special Zone in the coming two years; we might be able to rely on
this tool if Abe really means to tackle with such remaining “bedrocks”
within two years or so.
 Nevertheless, in spite of Abe’s boastful remark, there seems to be no
schedule of submitting additional bill with regard to the Special Zone
to the ordinary Diet session at this moment.
 It is far from worth calling as “Diet to Realize Positive Cycle.”

This Week’s “Nagata-cho” (21-28.Jan, 2014)

 The 186th ordinary session of the Diet was convened last week on
January 24. Prime Minister Shinzo Abe on the same day gave general
policy speech in both Houses of the Diet. While Abe stressed his
economic policy dubbed “Abenomics” as the top priority task, he also
mentioned his longstanding policies of reinterpreting the Constitution
as to lift the ban on the right to exercise collective self-defense
and others.

*The state of deliberations in both Houses and committees are
 available from the following websites.can be seen.
 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 (Japanese only)：http://www.webtv.sangiin.go.jp/

 Regarding the ordinary session as “Diet to Realize a Positive Cycle,”
Prime Minister Abe stressed that he would connect corporate profits to
expansion of employment and increase in wages especially in the local
areas and small- and middle-sized enterprises (SMEs) so that everybody
in this country can feel the economic growth firsthand. As to the
concerns on negative economic effects of the consumption tax hike
scheduled in April this year, Abe emphasized that the Cabinet prepared
preventive measures in the 5.46 trillion yen of supplementary budget
submitted to the Diet on January 24 along with the initial budget for
FY 2014, and requested that the opposition parties cooperate with
passage of both the budgets during the ordinary Diet session. Taro Aso,
Deputy Prime Minister and Minister of Finance, also stated his view
that Japanese economy has firmly turned upward and that the Cabinet
will make efforts to alleviate impacts of the tax-hike.

 Abe stated that the Cabinet would further make efforts to support
companies pioneering new markets by advancing regulatory reforms and
tax reforms to expand investment or research and development. In
particular, Abe vowed that the selection of the National Strategic
Special Zone will be finalized by March and the abolishment of special
corporate tax reduction for reconstruction after the great disaster
which is one year earlier than originally scheduled. The Cabinet
officially approved the action plan in relation to the industrial
competitiveness on the same day to implement the growth strategy
within three years of the concentration period.
 Also, Abe announced promotion of women, for instance to increase the
ratio of newly recruited national public servants to 30% from 2015, as
well as establishment of a private-public infrastructure import
organization to developing countries and to support challenging R&D
projects that might change the country’s socioeconomic landscapes.

 In his speech, Abe emphasized “strategic top-diplomacy” and
“diplomacy with panoramic view on the globe” based on his diplomatic
experience of visiting 30 countries and held 150 meetings with foreign
leaders. Abe stressed significance of the concept of “proactive
contribution to peace,” and at the same time, appealed that Japan’s
door to dialogue is always open but not to concede with talks with
conditions particularly with China and South Korea with which Japan’s
relation has been tensing over the territorial or historical issues.

 With regard to national security, Abe announced to consider
reinterpretation of the pacifist Constitution based on reports to be
submitted by the Advisory Panel on Reconstruction of the Legal Basis
for Security in April. Regarding relocation of Futenma Air Station to
Henoko, based on approval by Okinawa governor on landfill application
to increase runway of the base, Abe vowed to swiftly advance the
procedures while mentioning that he would make efforts to reduce
burden on Okinawan people.
 Also on the Air Defense Identification Zone (ADIZ) issue raised by
China, Abe stressed that Japan would never accept such a unitary
coercive measure to change the status quo of the Asia Pacific region.

 On the energy issue including nuclear power, Abe stated that there is
no restarting of the nuclear reactors unless they meet the safety
standard of the Nuclear Regulatory Authority that is of the highest
strictness in the world, and to decrease Japan’s dependency on the
nuclear power as much as possible. It seems that Abe remained in a
cautious tone regarding the nuclear power issue as there awaits Diet
debates and discussions soon. Abe also stressed that the central
government will take initiatives in decommissioning the nuclear
reactors and countermeasures to the contaminated water, without
letting Tokyo Electric Power Co. handle the issues alone.

 The Diet Debate kicks off on January 28. The interpellation sessions
with party leaders will be held in the Lower House on January 28-29
and in the Upper House on January 30-31. The opposition Democratic
Party of Japan and Japan Communist Party will take confrontational
tactics especially over the special intelligence protection
legislation pushed through by the ruling camp in the extraordinary
session, as well as Abe’s visit to Yasukuni Shrine late last year, or
Abe’s view on employment, social security, nuclear issue, etc.

・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・

Significance of Local Elections

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

 Local Elections will likely be the focus of great interests in 2014

as there is no major national-level election this year. The mayoral

election of Nago, Okinawa Prefecture, which was just held on January

19, as well as the February 9 Tokyo gubernatorial race and the

February 23 Yamaguchi gubernatorial election have attracted great

interests so far.

 In Nago, incumbent Susumu Inamine, who opposes the Japan-U.S. plan to

relocate the U.S. Marines Corps Air Station Futenma from Ginowan, also

in the prefecture, to Nago, was re-elected despite the central

government’s support for another candidate.

 In Tokyo, former Prime Minister Morihiro Hosokawa announced candidacy

with support of another anti-nuclear former Prime Minister Junichiro

Koizumi. The Tokyo governor’s race will likely be between Hosokawa

and LDP-supported Yoichi Masuzoe, former health and labor minister. As

Masuzoe has voiced his no-nuclear stance in the past, the focal point

will be whether to suspend operation of the nuclear reactors

immediately, or in other words, the room for restarting the country’s

nuclear power plants.

 Similarly in the Yamaguchi gubernatorial election, it is also the

nuclear issue that will likely be the focal point of the race. This is

because Tetsunari Iida, the vanguard of no-nuke movements, will run

for the election, although a former bureaucrat Muraoka announced to

join the race as expert of local administration.

 However, both the policy issues that have been the focal point of

election are the realm of the central government and there is little

thing that local leaders can do about these policies.

 On relocation of the U.S. base, the authority to permit the landfill

application (to pave additional aircraft runways) is in hands of the

Okinawa prefectural governor, and it is in the central government’s

responsibility that the actual work is to be implemented. The mayor’s

authority is no more than giving permission on usage of roads or

fishing ports, whose excessive application may cause criticisms as

misuse of mayoral power.

 Similarly, with regard to restarting of nuclear power plants, while

the applications for restarting 16 reactors in 9 plants have been

submitted by 7 power companies, it is the Nuclear Regulatory Authority

which examines the applications, and it is only afterward that there

is a process of obtaining consents of the relevant local governments.

While the applications include the ones for 6th and 7th reactors in

Niigata Kashiwazaki-Kariwa nuclear power plants of Tokyo Electric

Power Co., there is nothing that Tokyo governor can do but to pressure

Niigata prefectural governor not to agree with decisions to restart

these reactors. While it also includes reactor 2 of the Shimane

nuclear power plant, it is a matter of Shimane governor.

 Even if candidates get elected with campaign pledges irrelevant to

authority of the office, that influence is no more than that of a

critique and it is only up to the central government whether the

pledge is to be maintained. It is a bit pity that achievements of

campaign pledges to change policies finally depend on the central

government despite public supports in the local elections.

 It may be difficult to let local governments to decide such policy

issues as relocation of the U.S. base as it is the matter of national

security. However, since the electricity issue can be solved in a

regional level, there is a possibility that the nuclear power issue

can be debated in the local elections if there is an institution

equivalent with Doshusei (regional governments). Precisely the service

areas of each power company correspond with the areas that should be

covered by Doshu governments.

 In any case, there is a fact that backgrounds of 46 prefectural

governors excluding Tokyo are heavily balanced toward former

bureaucrats; perhaps a vivid reflection of the current state that

decentralization has not been accomplished in this country. Among the

46 governors, 25 are former central government officials, while 8 are

from the Diet members, 2 from local politics, 5 from local 

administration, 6 from academic or private sector.

This Week’s “Nagata-cho” (15-21.Jan, 2014)

 Last week on January 19, Prime Minister Shinzo Abe gave an address at

the ruling Liberal Democratic Party’s convention held in Tokyo. Abe’s 

speech spent most of the time on economic measures and stressed the

achievements of “Abenomics”, not mentioning his longstanding

policies of revising the pacifist Constitution and lifting Japan’s

self-imposing ban on the right to exercise collective self-defense.

Abe then emphasized his determination toward a strong economy.

 Since the consumption tax rate is going to be hiked to 8% from this

April, Abe would like to prevent possible negative impacts of the

tax-hike on the nascent Japanese economy. For that purpose, the 5.46

trillion yen of supplementary budget for this fiscal year to provide

financial backgrounds to the economic stimulus package will be

submitted to the ordinary Diet session convening on January 24, in

line with the 95.88 trillion yen of initial budget for FY 2014. The

Cabinet and ruling camp plan to enter discussions on the supplementary

budget in the Lower House’s Budget Committee as early as on January

31. The Cabinet’s scenario is to pass the initial FY 2014 budget by

March subsequently. Also, Abe will keep requesting the economic world

to raise wages.

 The meeting of the Industrial Competitiveness Council held on January

20 compiled basic guideline for revisions on the growth strategy

scheduled in June. Abe instructed that the Industrial Competitiveness

Council and the Council on Economic and Fiscal Policy will jointly

elaborate the policy by setting common thematic strategies in revising

the growth strategy.

 The basic guideline entails a corporate tax reduction that Abe has

insisted, as well as reforms on the agricultural cooperative

association and medical corporations. It also emphasized active

promotion of women, in particular, setting targets of female

executives and managing directors in private companies, providing

subsidies to corporations that fulfilled the targets, and eradication

of waiting lists for child-rearing nursery facilities. Furthermore,

the government will likely start considerations on expansion of

reception of foreign professional workers like nurses and extension of

their working terms, as well as revisions to tax-deduction and pension

systems, etc.

 Prime Minister Abe schedules to attend the annual meeting of the

World Economic Forum (Davos Convention) on January 21-23, and to give

an address at the opening session on 22 to explain basic ideas and

concrete plans on his growth strategy.

・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・

Policy Issues in Tokyo Gubernatorial Election

* Written by Eiji HARA, PPPC President

 The prospect of the Tokyo governor’s election has quickly become chaotic due to the sudden entry of former Prime Minister Morihiro Hosokawa supported by another former Prime Minister Junichiro Koizumi.
There are several policy issues.

 First, there is an issue of the nuclear power generation as raised by the Hosokawa-Koizumi duo. Conventionally, I would say that the issue of energy policy is not a theme to be attributed to the responsibility of the Tokyo governor alone so it should not be the focal point in the Tokyo gubernatorial election. This time, however, it seems the nuclear power issue has already become inevitable at this moment.
 Nevertheless, as long as the nuclear issue becomes the point of dispute in the election, the candidates should go beyond “one phrase”
slogan but
・Make clear what will be implemented in relation to the nuclear power
  plants as Tokyo governor
・And engage in meaningful discussions with specific plans

 For example, if Tokyo alone chooses not to use the electricity generated by the nuclear power plants while the country’s entire preparation for alternative energy sources is not fully launched, it will possibly cause Tokyo to lose competitive attractiveness as international center as it may skyrocket the energy cost excessively in Tokyo alone. The nuclear issue requires discussions with reasonable scenarios and rational measures.

 Second is the urban design of Tokyo in eye of the 2020 Tokyo Olympic Games. It goes without saying that a successful hosting of the Olympic Games itself is important, but the biggest challenge to the new governor of Tokyo is how to internationalize and upgrade Tokyo as the world’s most advanced global city. The plans and capabilities toward this goal should have been the biggest point of dispute to be competed among candidates in the Tokyo governor’s election, rather than the nuclear issue.
 The future vision of Tokyo, as well as total plans as means to realize the vision, including utilization of the National Strategic Special Zone, enhancement of transportation infrastructures like airports (including efficient improvement through PFI) must be presented.

 The third issue is improvement and rationalization of administrative management, or eradication of dark parts in other words, of the Tokyo metropolitan government.
 The issue of vested interests and amakudari of the Tokyo metropolitan government has often been pointed out as equally serious or even worse than in the central government, but there have been few attempts to make corrections on the issue.
 Breakthroughs toward such structural issues must be carried out all at once when the new governor is inaugurated, otherwise the structure will be maintained for another several years if the new governor misses the timing.
 Candidates should present concrete plans to have discussions on how and to what extent they can break into these issues (the current state of vested interests and amakudari issues of the Tokyo metropolitan government will be described some other time).

This Week’s “Nagata-cho” (8-15.Jan, 2014)

 On January 14, the Cabinet officially decided to convene the ordinary

session of the Diet on January 24. Last week on January 10, Chief

Cabinet Secretary Suga had attended the Rules and Administration

Committees in both Houses and had obtained consents on the schedule.

The session will be for 150 days until June 22. The ruling parties

plan to hold the four speeches including Prime Minister Shinzo Abe’s

general policy speech on the day of convening and interpellation

session by the party leaders on January 28-30.

 On January 7, Prime Minister Abe showed his determination to continue

efforts to get out of the deflation and to achieve fiscal soundness

simultaneously in the second year of his term. In light of the

scheduled consumption tax-hike in April this year, the Cabinet Office

seems to be having a concern that it may have negative impacts on the

economy, wiping out the influences of Abe’s economic policy dubbed

“Abenomics”.

 It is scheduled that Prime Minister Abe gives a keynote speech in the

opening session of annual meeting of the World Economic Forum (Davos

Convention) to be held in Switzerland on January 21-23 for the first

time as Japanese leader. Abe will likely appeal the Abenomics and the

concept of “proactive contribution to peace” and his diplomatic

policy at the international summit to the world.

 Abe has regarded the ordinary session of the Diet to be convened on

January 24 as “Diet to achieve positive cycle of the economy,”

seeking passage of the 95.88 trillion yen of the initial budget FY2014

as well as the 5.46 trillion yen of supplementary budget for this year

to give backgrounds to the economic stimulus package to be submitted

on the same day. Also, Abe plans to revise the growth strategy by

mid-January to accelerate structural reforms in the field of

employment/labor, agriculture, medical care and nursery. Meanwhile,

the Cabinet held the first meeting of the National Strategic Special

Zone Advisory Council on January 7 and decided to finalize designation

of the zone by March.

 On the corporate tax reduction strongly requested by the economic

world, Abe has shown decisiveness to implement it from the next fiscal

year. Accordingly, the economic minister Akira Amari stated it will be

discussed in the Council on Economic and Fiscal Policy. Yet, the

finance minister and Deputy Prime Minister Taro Aso has thrown doubts

on economic impacts of the tax reduction by saying that it will have
nothing to do with 70% of the entire companies.

・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・

This Week’s “Nagata-cho” (1-8.Jan, 2014)

 On January 6, Prime Minister Shinzo Abe held the New Year’s Press

conference. In the address, Abe pledged to promote further his

economic policy dubbed “Abenomics” in light of the perception that

the economy has steadily turned upward from the ‘critical situation’

of one year ago, while reserving that it is still halfway of getting

away from the deflation. Also, given predictions of decreasing

consumption after the sales tax hike to 8% from April this year, Abe

vowed to deliver actual feeling of recovering economy to the people

firsthand by this spring. The idea is to let people throughout the

country feel the recovering economy by raising wages in mid- and

small-sized enterprises and revitalizing local economies in order to

achieve a “positive cycle” of economy and to regain the “strong

economy”.

 Abe has regarded the ordinary session of the Diet to be convened on

January 24 as “Diet to achieve positive cycle of the economy”. The

Cabinet has compiled the record largest 95.88 trillion yen of the

general account budget for FY 2014 in addition to the 5.46 trillion

yen of the supplementary budget for this fiscal year to finance the

economic measures to alleviate possible negative economic impacts of

the consumption tax hike in April.

 Furthermore, the Cabinet scheduled to revise the growth strategy by

middle of this year to promote structural reforms in the field of

employment, agriculture, medical care, etc., while implementing the

legislation of industrial competitiveness and special economic zones

steadily. Abe also mentioned decreasing of corporate tax rate by 2.4%.

 The government and ruling parties are willing to pass the

supplementary budget by early-February and the initial budget FY 2014

in March through the Diet. Yet, the opposition parties such as

Democratic Party of Japan have been repelled by the coercive tactic

taken by the ruling coalition in the year-end over the special

intelligence protection legislation, and there is likely a political

turmoil from the beginning of the ordinary Diet session.

 For more, Abe recognized the TPP as a “long-term strategy to form a

framework to secure prosperity of the Asia-Pacific region” and vowed

to carefully determine the final destination since it is a matter that

each country’s national interests confront each other. Over the

controversial 5 agricultural items, Abe sustained the conventional

recognition that the government has engaged in the negotiation while

holding both the aggressive and protective stances.

 Abe also emphasized his “proactive contribution to peace” stance in

the diplomatic aspect. In relation to South Korea and China, with

which Japan’s relationship has been worsened, Abe once again called

for summit meetings as the “door is always opened for dialogue.”

With regard to Abe’s visit to Yasukuni Shrine as well as Abe’s

determination toward reinterpretation of Constitution as to permit the

right to collective self-defense which have caused great concerns in

the neighboring countries, Abe said he would explain the intension

carefully to both the governments.

・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・

・・・・・・・・・・・・・・・・

On Proceeding of National Strategic Special Zone(January 7, 2014)

 First meeting of the newly established “National Strategic Special

Zone Advisory Council” was held on January 7, and its five private

sector members, including Heizo Takenaka, jointly submitted a proposal

paper at the meeting.

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

On Proceeding of National Strategic Special Zone(January 7, 2014)

Reiko Akiike

Tatsuo Hatta

Ken Sakamura

Masahiro Sakane

Heizo Takenaka

1.Reaffirmation of the Aim of the National Strategic Special Zone

  The chief aim of institutional design of National Strategic Special

  Zones is to realize an economic growth by breaking through

  the“bedrock regulations” to which adequate reforms could not be

  accomplished by the past attempts of special zones for structural

  reforms or comprehensive special zones, as well as to achieve

  drastic tax reforms which is an equally challenging task through a

  manner initiated by the Prime Minister. The “Special Zone” will

  serve as a breakthrough for that purpose (it is expected that

  ambitious people, corporations, and local governments will play

  major role to realize advance models overcoming the “bedrock

  regulations” and initiate the economic growth while gaining returns

  themselves).

2.Principles of Operation of National Strategic Special Zone and

  Management of Special Zone Advisory Council Meetings

　①thorough information disclosure

  ②sense of speed (close cooperation with Special Zone Working Group

    and regional committee, flexible management by utilizing of

    research committee by experts, etc.)

  ③promotion of competition among Special Zones (establishment of

    Plan-Do-Check-Act cycle, rescindment of Zones attaining inadequate

    success)

3.Issues to be Considered for the Moment

①Short-term challenges

  I.Designation of Zones

    Toward designation of Zones in March, the Working Group should

    swiftly start selection process taking into consideration the

    following elements as basic rules for selection.

    i.Selection of regions having “ripple effects” that could

      eventually lead to growth of Japanese economy through

      internationalization

   ii.Selection of “regions of actions” that could undertake reforms

     of the bedrock regulations decisively and steadily with a sense

     of speed(premised on an appropriate evaluation of “willingness

     and ability” of regions)

  iii.Subject of designation should be either of the following 2 types

　　　・“relatively broad designation” based on prefectural or

　　　　metropolitan scope

　　　・designation of “virtual zones” in certain fields

　　　　(zoning within certain field with explicit conditions)

　II.Launch of regional committee

　　・Following the designation of Zones in March, each zone should

　　　launch the regional committee as soon as in April

　　・Composition/membership should be as simple as to enable

　　　substantial discussions with the ministers (in addition to the

　　　minister-in-charge, the relevant ministers can participate the

　　　meetings). In particular, the membership requires high-rank

　　　delegate of private sector (well-known figure as promoter of the

　　　relevant special zones)

　III.Measures to be addressed in the next Diet session or thereafter

　　　(additional menu)

　　・The exceptional measures enacted in the last extraordinary Diet

　　　are no more than temporary initial menu, and it is predicted

　　　there will arise many challenges in implementing specific

　　　initiatives into practice in the future. Therefore, the Working

　　　Group should promptly review all the previous proposals and

　　　suggestions from the local governments and private companies and

　　　start advancing necessary coordination toward further

　　　legislative measures in the future Diet sessions including the

　　　next ordinary session with regard to the National Strategic

　　　Special Zone Act

　IV.Formulation of employment guideline

　　・The Working Group should immediately start discussions toward

　　　formulation of the employment guideline in March

②Setting of mid-term target in eye of 2020

・Discussions on mid-term targets should be taken place promptly in

  eye of 2020, including the Tokyo Olympic Games

・For beginning, it should be arranged that ways to break through the

  remaining bedrock regulations should be opened at least in the

  special zone in the following 2 years as intensive period

・Also, the special zone aims to conduct specific reforms within some

  boundaries of regional and business scope in a speedy manner, to

  review the result for further considerations, and to apply the

  achievements to national-level legislations. In this sense, the

  process and goal toward nationwide applications from the special

  zones should be clarified specifically

　(for example, a system to stimulate nationwide applications through

  competition of reforms among regions should be developed).