This Week’s “Nagata-cho”(18-25.Mar, 2014)

 Last week on March 20, 95.88 trillion yen of initial budget for next
fiscal year was approved in the Upper House by majority and thus
passed into legislation. The ruling Democratic Party of Japan, Your
Party, Japan Restoration Party and Communist Party voted against the
budget.
 The budget entails 30.51 trillion yen for social security (+4.08%
from this year), 5.96 trillion yen for public works including disaster
management like South Sea trough earthquakes (+12.9%), 4.88 trillion
yen for national security and defense including measures to China and
North Korea (+2.8%), 5.96 trillion yen for promotion of science and
technology (+1.4%). Combined with 5.46 trillion yen of the
supplementary budget enacted in February, the amount of government
spending exceeded 101 trillion yen. The government plans to implement
both the spending simultaneously so that possible negative impacts of
the consumption tax hike from April 1 on the country’s economy will
be alleviated. The government schedules to release numerical progress
of the budget soon.

*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/

 Prime Minister Shinzo Abe, having called the current ordinary session
as “Diet to achieve positive cycle”, once again showed decisiveness
to make efforts toward recovering the country’s economy as the top
priority in a press conference held right after passage of the budget.
Abe also stated he would try to minimize negative economic effects of
the consumption tax hike to 8%. With regard to growth strategy, Abe
showed strong willingness toward reforms of vested interests that have
been described as solid as bedrock, along with the National Strategic
Special Zones whose designation will be announced within this March.
Furthermore, in eye of new growth strategy scheduled in June, Abe
mentioned a corporate tax reduction, along with women’s promotion in
the society and agricultural reforms, as possible effective measures
but avoided detailed explanation; perhaps for considering different
views expressed by the finance minister Aso who has taken cautious
attitudes toward a corporate tax reduction.

 In the meantime, four other budget-related bills (revised income tax
act, local corporate tax act, revised local tax act, revised local
subsidy act) were approved in the Upper House and thus passed into
legislation, also. These entailed abolishment of special tax-increase
for reconstruction after the Great East Japan Earthquake one year
earlier than scheduled and other supportive measures to SMEs.


 On a country’s new basic plan on energy policy, although the ruling
parties roughly agreed in a working team to regard the nuclear power
as the country’s “important base-load resource”, they are yet to
reach an agreement on numerical targets of renewable energy for
multiple views within the ruling parties. While New Komeito has
insisted specifying a numerical target in eye of decreasing
dependencies on the nuclear power, Liberal Democratic Party has shown
a passive attitude. The parties gave up on reaching a conclusion in a
meeting on March 18, and while the parties will have a discussion on
whole picture of the new plan including operation of Monju, a
prototype fast-breeder reactor, it is yet known whether the
discussions will be settled in March. Sources view that discussions
and Cabinet’s approval will be delayed until sometime in April.

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Employment Guideline (Excerpts)

1. General Remark

[This part aims to point out that there are different standards applied in Japan’s court rulings depending on whether a company’s personnel/labor management is “internal labor-market type” or “external labor-market type.”]

l  With regard to personnel/labor management in typically-Japanese companies, the following features have often been pointed out;

①       New graduates are recruited from schools every year regularly without restrictions on duties or places of employment; and under the principle of lifetime employment, employees are expected to work for relatively longtime and there are expected increases in positions and wages under the personnel- and wage-systems taking into consideration proficiencies and years of experience in the works.

②       Dispatches and (re)shuffles are widely taken into practice.

③       There are uniform conditions of employment under company regulations.

④       During economic recessions, companies adjust employment via such means as reduction/suspension of overtime works, reduction/suspension of new recruitments, suspension of business operations, personnel (re)shuffles and dispatches; and in case companies still have to terminate employments, companies usually ask for self-resignations or early-retirements by increasing retirement moneys via labor-management consultations.

*These are all generalizations and the actual states may differ in individual companies.

l  On the other hand, even in Japan, there are companies adopting the personnel/labor management of “external labor-market type” such as foreign-invested companies or newly-startup companies which are not premised on longtime employment. These companies have often been said to have the following features;

①       In-house or public invitations for vacant positions are widely announced as occasion demands, not necessarily assuming longtime employments of internal human resources.

②       Duties of work are clearly specified in job descriptions, and ranges of (re)shuffles are not wide.

③       Conditions of employment, e.g., wages, are provided in detail for individual employees in accordance with their duties in the labor-contract documents.

④       With regard to employees who were recruited for specific positions, when the positions themselves are abolished, the employees are to be dismissed after the companies processed prearranged procedures, economic compensations and supports for reemployment (hereby mentioned as “retirement-packages”).

*These are all generalizations and the actual states may differ in individual companies.

l  In individual rulings with regard to Japan’s employment rules, the courts have used the value standards (moral conditions) such as objectively-reasonable reasons or socially-recognized appropriateness as grounds for the rulings under the basic principles of faith and honesty or restriction on abuse of rights. The courts in times have made judgments taking into consideration the differences in the personnel/labor management styles between companies adopting the aforementioned personnel/labor management of internal market-type (hereby mentioned as “internal labor-market type companies”) and companies adopting the aforementioned personnel/labor management of external market-type (hereby mentioned as “external labor-market type companies”) as well as other factors.

In particular,

①       With regard to internal-labor market type companies, there are many rulings that the courts did not regard (re)shuffles and dispatches decided by employers as abuse of personnel rights; meanwhile, the courts have often ruled that employers should have given more efforts to avoid dismissals in cases resulted to dismissals.

②       With regard to external-labor market type companies, in cases companies provide retirement-packages, the extent which the courts have requested the employers to avoid dismissals of employees (by utilizing, for example, large-scale (re)shuffles) tends to be smaller.

l  It should be noted that the respective features pointed above with regard to internal labor-market type companies and external labor-market type companies are the only general understanding, and actual states or combinations of the features may differ in individual companies. Also, within a company adopting internal personnel/labor management style as a whole, it may be a case that the same company adopts some personnel/labor management closer to the external labor-market type for some branch or post; so the question is not necessary a choice between the two.
Also, the tendency of individual court rulings mentioned above is just a general understanding, and it is not to deny that the rulings have been decided after thorough considerations on the economic/industrial conditions, state of management of employers and labor management, etc. according to each individual cases. This Guideline, having studied and classified the past rulings, is designed to be equally objective.

2. Individual issues to be mentioned in the particulars

[This part aims to imply advices to companies adopting the external labor-market type personnel/labor management, as the following for example, after examinations of various past court rulings that declared both validity and invalidity of restructuring dismissals.

In order to prevent conflicts in advance

In order to prevent conflicts in advance in companies adopting personnel/labor management of external labor-market type, in case of employees in managing or highly-specialized posts who had been hired for certain amount of rewards as immediate assets and do not need protection as laborers, for example, there are alternatives for the companies to set such provisions as the following in their company regulations or labor contracts and take them into practice.

*Consistency is required between company regulations and labor contracts.

u  That there may be the cases that the companies dismiss employees for reasons that the employees are not necessarily responsible for, for example, personnel restructuring and abolishment of posts due to management reasons or corporate reorganizations.

u  That the companies are prepared to provide appropriate volume of retirement packages in accordance with the positions, achievements, period of employment and other conditions.

This Week’s “Nagata-cho”(11-18.Mar, 2014)

 Public hearings on 95.88 trillion yen of the initial budget FY 2014
(general account, 3.5% increase from this year) were held in the Upper
House Budget Committee on March 13, in which intellectuals voiced
requests for acceleration of the “third prong” growth strategy,
efforts toward a women-friendly working environment, and other matters.
 Based on successive announcements by large companies to increase basic
wage levels after the spring labor negotiations, Prime Minister Shinzo
Abe showed an expectation that this trend will lead to increases in
basic wage levels in small- and mid-sized enterprises as well (on
March 14). Also, the industry minister Motegi said the government
plans to release survey information on salary figures (on March 13).

 So far the discussions on the budget FY 2014 have been initiated by
the ruling parties. On Mar 17, the ruling camp suggested taking voting
on the budget in the Upper House Budget Committee on Mar 20, by which
the opposition parties have been repelled for inadequate deliberations.
Nonetheless, the budget bill has already been approved in the Lower
House on Feb 28 so it will automatically be passed into legislation
after 30 days since being sent to the Upper House for the
Constitutional provision. Simultaneously, the Budget Committee entered
discussions on revised income tax act and local corporate tax act on
Mar 7 and on revised local tax act and local subsidy act on Mar 12.
These budget-related bills will likely be enacted within this month.

*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 Mar 12, the Lower House Cabinet Committee approved the bill on the
civil service reform which has been carried over from the last
extraordinary session in autumn. The bill entails plans to establish a
new Cabinet Personnel Bureau in the Cabinet Secretariat which will
control personnel of around 600 high-class officials in all the
central government ministries and that the Chief Cabinet Secretary and
ministers will jointly decide nominations of the bureaucrats. A
counterproposal jointly submitted by Your Party and Japan Restoration
Party, simultaneously discussed with the Cabinet’s bill, was rejected.
 The Cabinet’s bill was approved in the Lower House plenary session
on Mar 14 and sent to the Upper House on the same day. Since the Upper
House will take priority on the budget, a passage of the civil service
reform will likely be sometime in April. The government plans to
establish a new Bureau to be composed of 161 staffs in May to prepare
for the next seasonal personnel-reshuffle in summer. Its chief staff
will be selected from one of the Deputy Chief Cabinet Secretaries.


 On Mar 12, LDP and Komeito have finally agreed on reforms on the
Board of Education in the local governments. The draft bill plans to
(1) establish a new “education chief” (3-year’s term) to be
appointed by mayors/governors with consents of local assemblies, (2)
that the final responsibility on education (executor) will
continuously reside in the Board, and (3) to establish a comprehensive
panel on education as full-time body which will discuss and draft
basic guidelines on education including budget and ordinances chaired
by mayors/governors.
 Also, in eye of preventing excessive intervention by political
leaders, selection of textbooks and personnel of teachers were
arranged as matters exclusively handled by the Board of Education. On
matters related with bullying, the revised local education
administration act will entail provisions that enable the education
minister to release orders to each educational board.
 Given the agreement reached by the ruling parties, the Cabinet
schedules to finalize and submit the bill to the ordinary Diet in
early-April. Toward an early passage of the bill, LDP and Komeito have
shown flexible attitude to accept consultative discussions with the
opposition parties. Yet, as Your Party and JRP have stressed views to
abolish the Board and to integrate educational authorities under
mayors/governors, the gap of views has remained as far apart so there
are uncertainties whether it will lead to coordination or confrontation.

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This Week’s “Nagata-cho” (4-11.Mar, 2014)

 Last week on March 3, the lawmakers in the Diet’s Upper House
entered discussions on 95.88 trillion yen of the initial budget FY
2014 (3.5% increase from this year). As Prime Minister Shinzo Abe
schedules to attend the third meeting of Nuclear Security Summit in
Hague on March 24-25, the Cabinet and ruling parties are willing to
pass the budget into legislation on around March 20. Simultaneously,
budget-related legislations such as revised income tax act and local
corporate tax act will be taken as discussion issues in the Upper
House soon.

*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 (Japanese only)：http://www.webtv.sangiin.go.jp/

 On reforms of Board of Education in the local governments which the
ruling Liberal Democratic Party and New Komeito have progressed
discussions, the parties’ working team on March 5 decided to impose
obligations on each local governments to establish Comprehensive
Education Panel chaired by mayors/governors and let the panel sketch
educational guidelines through legislative measures on the local
education administration act. Due to various concerns shown by Komeito,
the revised plan entails softened expressions with regard to
authorities of local leaders and educational panels. Komeito have
finally agreed and accepted the legislation plan on the Board of Education.
 The term of newly-establishing post “education chief” will likely
be arranged as three years, as proposed in a meeting on March 7, as
the result of concession between LDP’s two years and Komeito’s four
years. On personnel authority over the new official, Komeito in turn
will likely accept LDP’s idea to give the local leaders to
nominate/dismiss the newly-establishing education chief. The ruling
coalition attempts to acquire the Cabinet’s approval on that bill
around March 14, so they schedule to finalize the draft bill on March 11.
 Meanwhile, although the opposition Democratic Party of Japan and
Japan Restoration Party had planned joint submission of a
counterproposal that abolishes the Board of Education and gives
overall administrative functions to local leaders, they have failed so
far to reach a final agreement on a monitoring body on the
mayors/governors. As the joint struggle may face a break-down, JRP
will seemingly call for consultative negotiations with Your Party or
Yuinotoh, rather than with DPJ which has confrontational attitude to
the Abe Cabinet.


 On March 5, LDP and Komeito entered discussions on a new basic plan
on energy which decides the country’s mid- and long-term energy policy.
 The parties established a working team on Mar 7. The draft plan
announced explicitly to recognize nuclear power as “important
base-load” and to seek resuming operation of the country’s nuclear
power reactors as soon as their safety are confirmed. Also, it
announces to accelerate utilization of various, domestic renewable
energy as much as possible by 2015.
 Yet, the draft has avoided mentioning numerical targets, causing
criticisms from the ruling parties that it should entail numerical
targets such as on nuclear-dependency or introduction of renewable
energy. Also, there are intraparty views that establishment of new
nuclear power plants must be refrained. Komeito, having bowed
expansion of renewable energy to 30% of all the power generation and
nuke-free policy in the future, have voiced such opinions.
 The ruling parties will seek reaching a conclusion and obtaining
Cabinet’s approval within March after discussions on such issues as
whether or not to entail numerical targets and how to handle Monju, a
prototype fast-breeder reactor.

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Bills related with Growth Strategy in the Ordinary Diet

* Written by Eiji HARA, PPPC President

 Among the so-called “three prongs” of the Abenomics, although the first arrow (monetary relaxation) and second arrow (fiscal policy) had certain positive effects on the economy since early 2013, the government has had difficulty with regard to the third arrow (growth strategy).

 The Cabinet’s Japan Revival Plan announced in last June caused disappointments both domestically and internationally for its inadequate efforts toward regulatory and structural reforms.

 At the time, there was an excuse that the ruling parties and Cabinet could not announce drastic reforms facing the July Upper House election. Nevertheless, unfortunately, there have been little moves toward accelerating reforms even after the Upper House election.

 The extraordinary session of the Diet in autumn was phrased as “Diet to implement growth strategy,” but in fact the special intelligence protection bill became the biggest political focal point of the Diet and bills related to growth strategy were left behind.

 There were scarce improvements on reforms of the so called bedrock regulations or tax reforms such as corporate tax reduction. Rather, there were enactments of such bills as regulations on internet sales of drugs and taxi businesses that actually enhanced regulations.

 Under such a circumstance, one of the few accomplishments was the enactment of the National Strategic Special Zones Law.

 Subsequently, in January of this year, Prime Minister Shinzo Abe announced at the World Economic Forum (Davos Convention) that “There(=in the Special Zones), over the next two years, no vested interests will remain immune from my drill.”

 While this Davos Promise deserves great attentions, a question here is whether the Cabinet could really realize it.

 So far, there have been no moves toward drilling through the vested interests in the ordinary Diet session at the beginning of the two years.

 For more, it is yet seen what sort of bills are to be submitted during this Diet session in relation to the growth strategy. Further, preparations toward regulatory reforms are particularly slow.

 From the viewpoint of growth strategy, of particular importance are the reforms of university governance and corporate governance.

 Taking into consideration the low profitability of Japanese companies and low international reputation of Japanese universities, it is vital to introduce a new management regime that reflects external perspectives (e.g., external board members, reforms of presidential

elections in universities).

 On these issues, while certain considerations have been given in the government (the Cabinet did propose a bill to reform the company act last autumn, indeed), the contents of the bill were not necessarily satisfactory; for example, the bill did not entail plans to make it compulsory to private companies to have external board-members. And reforms on university governance require further considerations.

Election System must be Population-Based

*Written by PPPC Visiting Fellow

 Discussions on reforms of the election system will likely be
delegated to a third-party panel composed by intellectuals to be
established directly under the President of the Lower House. Such
discussions on the election system would often face difficulties
reaching a conclusion because it would directly influence destinies of
individual incumbent politicians and partisan politics.

 Nonetheless, the current state of disparity in the weight of one vote
is doubtlessly ridiculous. Even under the new “0 increase, 5 decrease”
zoning held for the last Lower House’s small-district election, the
disparity remained to be as high as *1.998, and the gap seems to be
widening to more than double taking into consideration the most recent
population surveys in many constituencies.

 Meanwhile, there were plural numbers of court ruling in the High
Courts denying constitutionality of the last Lower House election,
including two stepping into announcing invalidity of the election.
Furthermore, the Supreme Court stated in last November that the
election was in the state of unconstitutionality and the issue of
disparity in the weight of one vote is yet to be settled despite the
“0 increase, 5 decrease” measure given the “single separate seat”
distributed for every prefecture in advance.

*The “single separate seat” is a measure that the single-seat
 constituencies are distributed to each prefecture proportionally to
 their population after allocation of one seat in advance. The reason
 behind the measure was to avoid a large and radical reduction of the
 Diet seats in the decreasingly populated prefectures when the
 lawmakers discussed and arranged the introduction of the
 small-constituency system, and that the election system reform was
 impossible without such an arrangement in the political situation at
 the time of electoral reform.

 With regard to this “single separate seat”, in addition, the
Supreme Court in March 2011 demanded its abolition, stating that there
is no rationality to cause unfairness in one-vote value for regional
reasons. Under the current election legislation, although the “single
separate seat” provision has been deleted in appearance, the rule has
substantially been maintained, including in five prefectures which
only reduced the number of seats for that rule.

 Facing such a situation, a group of lawyers seeking “one voter, one
vote” led by Hidetoshi Masunaga, voices that it is important that
Court explicitly states that the Constitution demands an universal
principle to realize elections that reflect population-balances to the
most possible extent.

 Recently, five opposition parties (DPJ, JRP, Your Party, Yuinotoh,
People’s Life Party) on February 7 released a basic idea on the
election system reform (two ideas).
In particular, it entails
Plan A: Small-district seats should be reduced from the current 295 to
        270 by 25. The 270 seats will be allocated to each prefectures
        according to their populations while abolishing the “single
        separate seat” measure both nominally and substantially
        (maximum disparity would be *1.877).
Plan B: one Diet seat would be distributed for 0.5 million population
        in each prefecture, which results to a reduction of 15 seats
        from the current 295 to 280 maximum disparity would be *1.692).

 According to these proposals, the disparity in one-vote would be
decreased to certain extents, but it must be said that the disparity
would remain largely still. Moreover, the idea is yet free from
considering the small-district Diet seats from the framework of
existing prefectures but from population-distribution in a true sense,
even if it abolished the “single separate seat” measure both
nominally and substantially. After all, it is not good enough from a
perspective of realizing a truly population-based election.
 The ruling parties have actually released a plan to apply special
measures to second-or-lower parties in proportional representation
while reducing 30 proportional seats, by which the disparity in
small-district remains the status-quo. So the ruling camp’s plan is
in fact more problematic from such a perspective.

 The current state of disparity in the weight of one vote is far from
the democracy in a real sense, even if the voting rights are naturally
restricted by current addresses. It is highly expected that a
third-party panel would propose truly drastic measures in line with
the basic principle of population-based election including
redistricting of constituencies. In advancing such proposals, it is
needless to say that selection of panel members is important, but let
me suggest here that a lawyer of “one voter, one vote” group should
be nominated as its member.

This Week’s “Nagata-cho” (25.Feb-4.Mar, 2014)

 On February 28, 95.88 trillion yen (general account, 3.5% increase
from this fiscal year) of the initial budget FY 2014 was approved in
the Diet’s Lower House by majority vote of the ruling parties and
sent to the Upper House on the same day. At the same time, four bills
related with taxation (revision to income tax act, local tax act,
local corporate tax, local subsidy act) were also approved in the
Lower House and sent to the Upper House.

*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/

 Although seven opposition parties, led by Democratic Party of Japan,
had repelled on the voting schedule for inadequate time of discussions
on the budget bill, the ruling Liberal Democratic Party’s Toshihiro
Nikai, Chairman of the Budget Committee in the Lower House,
unilaterally decided the voting schedule on the Feb 28 by authority.
Also, Ichiro Aizawa, Chairman of the Lower House Rules and
Administration Committee from LDP, decided to hold a meeting of the
Lower House plenary session on the same day.
 The opposition parties had struggled to submit a joint
counterproposal to the government’s budget, but they could not reach
a final agreement for discrepant ideas on the budget. For that reason,
Japan Restoration Party and Yuinotoh jointly proposed a
counterproposal decreasing new issuance of government bonds and Your
Party, People’s Life Party and Japan Communist Party submitted their
own counterproposals respectively. Although the counterproposals were
taken into discussion with the Cabinet’s budget bill, they were all
rejected in the Budget Committee. DPJ, boycotting the meeting of the
Budget Committee, took a confrontational tactic in the Lower House
plenary session by submitting a counterproposal, but it was rejected
by majority of the ruling coalition.

 Due to the passage of the budget bill in the Lower House on Feb 28,
it became certain that the budget will automatically be passed into
legislation after 30 days even if the Upper House rejects the budget
for the Constitutional provision 60-2. The Cabinet and ruling parties
seek passage of the budget by March 20 in eye of Prime Minister Shinzo
Abe’s attendance on the 3rd meeting of Nuclear Security Summit to be
held on March 24-25 in Hague, Netherland. On March 3, the lawmakers in
the Upper House entered discussions on the budget in the House’s
Budget Committee. Prime Minister Abe stressed importance of an early
passage of the bill and called for cooperation of the opposition
parties.

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