“Bedrock” Regulatory Reforms and Growth Strategy

(HARA Eiji, PPPC President)

Reform of “Bedrock” Regulations: Progress and Challenges

Bedrock Regulations: main issues		Progress in 2014	Challenges
<Regulations stumbling the “growth industry in the future”>
Agriculture	JA reform	△: decided course in June	Bill scheduled to be submitted à content yet known (completion or adaptation?)
	Corporate ownership of farmlands	-- (little progress)	No schedule à start?
Medical Care	Treatment uncovered by public insurance	△: decided course in June	Bill scheduled to be submitted à content yet known (completion or adaptation?)
	New medical school	-- (little progress despite discussion since 2013)	Schedule yet known à advancement?
Nursery	Corporate entry, equal-footing	-- (no progress)	No schedule à start?
Energy	Power reform	○: enactment of the second-round bill (entry into power sales)	Third-round bill scheduled to be submitted (content yet known; completion or adaptation?)
Education	Privately-managed public schools	△: bill (NSSZ act) submitted but discarded in Diet	Bill to be submitted again?
<Cross-sectorial regulations>
Labor	Working-hours regulation	△: decided course in June	Bill scheduled to be submitted à content yet known (completion or adaptation?)
Foreigners	Expansion of working visa	△: bill (NSSZ act) submitted but discarded in Diet	Bill to be submitted again?
Transport Infrastructure	Opening infrastructure to private sector (e.g., lifting ban on road concessions)	△: bill (NSSZ act) submitted but discarded in Diet	Bill to be submitted again?

(chart: drafted by PPPC)

Prime Minister Shinzo Abe pledged in January 2014 that “over the next two years, no vested interests will remain immune from my drill.” This direction was maintained in the growth strategy released in June (the Japan Revitalization Strategy Revised in 2014) and the LDP’s party line for the December 14 Lower House election.

The most remarkable point of the Cabinet’s growth strategy, known as third arrow of the Abenomics, is that it has the heaviest weight on reforms of the country’s so-called “bedrock” regulations, i.e., vested interests. The past administrations and Cabinets had released their growth strategies almost every year in eye of supporting and guiding such industries as agriculture, health care, environment/energy, etc., by regarding them as “growth industry in the future.” Nonetheless, unfortunately, these industries have still remained to be the “growth industry in the future.” The main reason is that there are full of “bedrock” regulations in these industries which have restricted new entries or ideas and hence kept the industries untouched.

Upon hearing a phrase “regulatory reform”, one may recall a stereotyped image that it “intends convenience for major companies and leaves behind the interests of consumers or workers.” However, such a criticism does not make sense at all from the author’s experience of having been involved with the several regulatory reforms from inside the government, municipal government, and also as a private sector member. Regulation almost always causes vested interests. It is easy to think of the relationship between companies already in the industry and restriction of new entries. It is because of such regulatory vested interests that regulations have been maintained or sometimes even enhanced although their necessities have been lost due to socioeconomic changes. Very often the major companies are in the side of benefiting from such vested interests and therefore intend to obstruct regulatory reforms.

Meanwhile, the most disadvantageous due to such “bedrock” regulations are the general consumers and people. This could be understood by an image that consumers and people are deprived of additional alternatives of goods and services due to the excessive regulations on new entries. Therefore, reforms of the “bedrock” regulations are the inevitable way to release the “growth industry in the future” from various restrictions and to deliver advantages to the whole economy and society

The Japan Revitalization Strategy Revised in 2014, under the slogan of “reforms of ’bedrock’ regulations over the next two years,” decided to start actual efforts on such “most-solid among the bedrock” issues as the JA reform and medical treatment uncovered by public insurance which have been discussed but untouched for decades. At the same time, the Strategy showed determination to promote reforms by tagging the Cabinet Office and ambitious areas (local government and private sector) by utilizing the framework of National Strategic Special Zones when tackling the challenges which are unapt to do uniformly throughout the country. These efforts can be regarded as the remarkable accomplishment making differences from the past administrations.

In the meantime, there are concerns whether it can really be implemented.

1.         There are quite a few “bedrock” regulations unmentioned in the Japan Revitalization Strategy Revised in 2014. One example is the provision in agriculture that “general joint-stock companies cannot own farmlands.”

2.         With regard to the JA reform, it only decided a course to advance reforms in June. A key to such reform is the actual drafting of the bill and specific legislative designing. It accompanies concerns that some will take the teeth out of a bill in its drafting process.

3.         There are more to do with the National Strategic Special Zones. While the bill entailing additional regulatory reform measures (relaxation of residing conditions of foreigners, lifting ban on privately-managed public schools, etc.), in addition to the initial reform menu in 2013 (floor-area-ratio, bed number in hospitals, etc.), was submitted to the extraordinary Diet session in autumn, it was discarded due to the Lower House dissolution and therefore shelved to the ordinary Diet.

To summarize, there was virtually no progress of “bedrock” regulatory reform realized as legislation last year (an exception is the second-round legislation of power system reform enacted in the ordinary Diet session). One year has already passed since Abe’s “two years” promise in Davos, meaning there is just one year left to realize his pledge. It requires great attentions to what extent the Cabinet will realize reforms of the “bedrock” regulations from the ordinary Diet session to be convened in this January.

Regulatory Reforms in the National Strategic Special Zones

(HARA Eiji, PPPC President)

It was this January when Prime Minister Abe announced “to drill through the ‘bedrock regulations’ in the National Strategic Special Zones” in Davos, which means 10 months has already passed. Given that many of the bedrock regulations are based on laws and therefore their reforms require legislative revisions, the time left in the current extraordinary Diet session is quite limited. It is a test for the Cabinet to what extent it could tackle with these challenges in this extraordinary and the next ordinary Diet sessions.

The National Strategic Special Zones Act was enacted in 2013, in which certain deregulations were accomplished in the themes of floor-ratio regulation, specification of employment rules (guideline and consulting center), partial relaxations of floor-to-bed ratio in hospitals, partial reform of agricultural committee, etc. Simultaneously, the NSSZ Advisory Council and NSSZ Regional Committee were established as Prime Minister-led framework to break through the regulations.

Nonetheless, there was no addition of regulatory reform menu in the ordinary Diet session convened in January 2014. Consequently, after the Cabinet reshuffle in September, the additional reform menu to be proposed in this extraordinary Diet session under the new leadership was arranged in the NSSZ Advisory Council meeting on October 10.

The menu is as follows (details are available from the following website)

http://www.kantei.go.jp/jp/singi/tiiki/kokusentoc/dai9/shiryou1.pdf

1.         Improvement and Globalization of Business Environment

1.1          Establishment of one-stop center for various applications to promote corporatizing and venture businesses including foreigners

1.2          Notarization of statutes by notary outside official notary center

1.3          Utilization of foreign human resources supporting housekeeping

1.4          Promotion of acceptance of diverse foreigners including entrepreneurs

1.5          Promotion of activities by those having the bar qualification in foreign countries

2           Opening Public Infrastructures to the Private Sector

2.1          Opening management of public schools to the private sector (lifting ban on privately-managed public schools)

2.2          Relaxation of human resource movement across the public-private boundary

3           Construction of Sustainable Social Security

3.1          Revision of qualification as chairman of medical corporations

3.2          Relaxation of working hours of aged workers engaging in agriculture and others

3.3          Creation of “local nurses” (tentative)

4           Construction of New Model of Local Revitalization

4.1          Simplification of procedures for establishing NPOs

4.2          Expansion of leasing and utilization of the national forests by the private sector

There was certain advancement in the fields including the longstanding challenges such as efficient use of public infrastructures and social security experiments along with creation of global business center (urban) and local revitalization model (rural).

Still, it is not a hundred percent score given the “two years” goal. Especially, there are yet satisfactory measures in the fields of…

l  Reforms in agriculture which can be the last card of “local revitalization” (corporate entry, etc.)

l  Advancements in the employment reform to promote further mobilization of human resources into growing industries

l  Reforms of medical care, nursing and nursery

For now, the menu arranged this time must be processed smoothly in this Diet and further efforts in eye of the ordinary Diet session are expected.

National Strategic Special Zones: new challenges found in meetings in September

(HARA Eiji, PPPC President)

With regard to the National Strategic Special Zones, meetings of the “Regional Committee” were held consecutively in the “Kansai” and “Fukuoka” zones last week (September 24, 25).

Those who attended the meetings include the new minister-in-charge Shigeru Ishiba, along with the relevant governors and mayors, and the author myself as a member of the NSSZ working group. Through the meetings, it was strongly recognized that the framework of the regional committee itself must be enhanced.

The regional committee was created as quasi-independent mini-government in the Zones composed of the central government (minister), local government (mayor/governor) and private sector. The committees were launched one after the other after selection of the six zones in spring, and entered full-dress discussions since this June. Still, it seems that the committees haven’t functioned in their full capacity yet.

Especially in the Kansai zone, it was sometimes observed that representatives of the central government, local governments and private sector haven’t shared their views on the topics adequately and discussions fell as far apart.

As it was discussed in the meetings, in order to make the committees function fully as an independent mini-government, it requires a firm, full-time secretariat; no way that they gather once a month to hold meetings (it doesn’t mean to establish a new bureaucratic organ but to create a common secretariat by attracting personnel from the central or relevant local government).

On a related note, it was widely reported that the Osaka City assembly rejected proposal of NSSZ-related ordinance and suspended its project (to utilize housing apartment to hotel businesses by allowing exceptions of the Hotel Business Act).

On this project, while it was proposed that the minimum days of staying (7-10days) of target exceptional measures would be arranged by the ordinance, it was questioned from the view of neighboring residents in the discussion process and led to rejection of the ordinance. As the result, the NSSZ-relevant project itself was suspended.

Set aside the political situation of Osaka City that any proposals by the mayor besides the NSSZ-related ordinance face difficulties passing the assembly, the issue relates with the essential nature of the NSSZ design.

The NSSZ is designed as a framework to implement regulatory reform measures experimentally in the local boundary, and the reform measures are to be provided in the NSSZ Act as reform menu; and in each zones the central government, local government and private sector implement the reforms altogether.

The incident in Osaka means that a local government denied the regulatory reform menu discussed and approved in the national Diet. However, such a situation that assemblies of the central and local governments respectively discusses the regulatory reform menus one after another may contradict with the goal of the NSSZ to implement regulatory reform experiments in a speedy manner.

While enhancing the framework of the regional committee, roles of the national Diet, local government and regional committees need to be further clarified in line with the purpose and aim of the NSSZ.

In the autumn’s extraordinary Diet session, it is scheduled that a revised NSSZ Act will be submitted to arrange the additional regulatory-reform menu (foreign worker’s visa, privately-managed public schools, etc., which were entailed in the revised growth strategy in June). Meanwhile, the NSSZ faces the challenge of enhancing the framework of the regional committees to realize effective regulatory reforms.

Internet Sales of Medicines and Real Estates

(HARA Eiji, PPPC President)

While it is commonly said that the banning on internet sales of medicines has been lifted since this June as result of discussions for the past several years, as a matter of fact, it was far from “lifting” the ban.

l  Although Prime Minister Abe had announced an entire liberalization of internet sales of general medicines at the beginning, the banning on sales of 28 items recently switched from prescription medicines has been maintained.

l  Further, while it was not reported widely, the banning on internet sales of prescription medicines has remained untouched.

While the government’s explanation is a “high risk of using internet,” there seems to be no clear background on such an explanation.

l  It is indeed necessary to confirm customer’s anamnesis or possible side effects upon purchasing high-risk medicines. Still, the internet should be more apt to confirm plural checking points than over-the-counter.

l  While there is such a discussion as “it is important that pharmacists make judgment by using the five senses through face-to-face sales” (message of subcommittee chairman Igarashi read in a meeting of the Industrial Competitiveness Council on Oct 29, 2013), it is unknown what kind of judgments are to be made as result of exercising the five senses.

After all, it was nothing but preservation of interests of traditional pharmacies under the nominal reasoning of safety control.

And now, similar discussions are going on with internet sales of real estates.

The focal point of discussions has been the “explanation on important matters” based on the Real Estate Business Law.

Under the current framework, it is provided that

l  An officer-in-charge must give face-to-face explanations on the important points in the contracts.

l  And documents must be handed on that occasion (e-mail not admitted).

It means that any explanations through internet cannot be accepted.

Readers may think that “there should be small needs for internet in real estate dealings because people usually do on-site checks on the properties,” but it is not always the case.

For example, there are quite a few needs for processing such procedures as receiving explanations on the important points in the distance afterward even though they actually went to see the candidate housings in case of short-notice transfers of timeless business persons.

Also, even in the case of short-distance moving, there are needs for internet explanations for such reasons as “please explain it via videophone because we want to share it in family,” or “we prefer answers by e-mail rather than over-the-counter in order to keep record.”

However, the current legal framework declines such voices and states that explanations on important points must accompany “face-to-face” processes.

According to voices that such regulation should be relooked, discussions started in the Ministry of Land, Infrastructure, Transport and Tourism in its study group since April 2014.

http://www.mlit.go.jp/totikensangyo/const/sosei_const_tk3_000092.html

Nonetheless, looking at the minutes of the meetings, there are quite many opinions opposed to internet sales for the following reasons.

l  Because people tend to look down (to read the documents) in case of videophone, it becomes difficult to estimate the extent of understanding by reading the customers’ faces.

l  Because the picture of videophone is not necessarily clear, ID duplication of officer-in-charge of real estate business cannot be prevented.

Here, let’s give it a little consideration.

l  People equally tend to “look down” in an over-the-counter dealing as well,

l  Because many people haven’t looked at the ID cards of officers in the first place, there is likely the case that we wouldn’t notice whether the ID is duplicated (countermeasures to duplication or imposture should be taken through different channels).

Doesn’t it sound like the discussion of “using the five senses…” at the time of medicines?

At present, the government is soliciting public comments on the study group’s “interim report” (until August 22). But unfortunately, it seems that the discussion is heading to a partial lifting of the banning on internet dealing of real estates in accordance with the cautious opinions mentioned above (for example, admission of remote contract of renting, etc.).

http://www.mlit.go.jp/common/001048355.pdf

Note that this is still at the point of “interim report”, and it is strongly hoped there will be advancements in the discussions.

Taxi Fare Regulation and Decentralization

(HARA Eiji, PPPC President)

In this May, there were consecutive rulings in Osaka and Fukuoka district courts to suspend the regulation by the central government over taxi fares.

The background was

l  Based on the legislation passed in the last year’s extraordinary Diet session, it’s been arranged that the Ministry of Land, Infrastructure, Transport and Tourism decides the “official latitude” of taxi fares.

For example, the fare of mid-sized cab in Osaka city is set as “maximum 680 yen, minimum 660 yen” and any fares above or below the latitude would not be licensed.

http://wwwtb.mlit.go.jp/kinki/tetsuzuki/taxi/20140325-73.pdf

l  Opposing to this decision, several taxi business operators having managed the business with reduced fares (MK taxi and others) maintained the reduced fare below the minimum after April.

Meanwhile, the MLIT instructed the operators to increase the fare. And further, the MLIT announced to release a compelling order to change the fares to the business operators.

Then the taxi operators appealed for a suspension of the order to the judiciary and the appeals were accepted in the Osaka and Fukuoka courts.

With regard to the taxi fares, it’s been ruled as “same fare in same region” since 1955, but the regulation has been relaxed gradually since 1990s given criticisms that such uniform regulation should be revised (“zone fares” was introduced in 1997).

In 2002, the “automatically-admitted fare” system was introduced (the fare below the maximum would be automatically licensed. Fares below the latitude would be examined individually), which opened possibility of discount taxi such as one coin.

However, the 2002 deregulation was later brought into criticisms as a symbolic example of “excessive deregulation under the Koizumi administration.”

It was argued that relaxation of not just the fare but the entry into the business caused an increase of taxicabs on the streets and excessive competition, which resulted to worsened working environments of the drivers and tragic accidents, etc. And there was a reregulation on the taxi fare in 2009 by the Taxi Correction and Promotion Law.

And it was the so-called “Law to decrease taxi” in the last year’s extraordinary Diet session that was proposed to enhance the regulation further. By the legislation, it‘s been returned to the framework in which the central government decides the “official latitude” of the taxi fare.

http://www.dpj.or.jp/article/103443

Still, the rulings in Osaka and Fukuoka district courts did not deny the entire framework of “official latitude.” These were the rulings that there was room for consideration on the price-setting as “maximum 680 yen, minimum 660 yen” in Osaka city.

However, if working environments or safety standards need to be reconsidered, it should be responded by labor regulation or safety regulation measures. It is nothing but a ducking of the issue to return to the “official latitude” framework. The author thinks the whole framework itself is not appropriate.

There is another point for discussion.

Even if the official latitude would be maintained, the problem is who decides the latitude.

While it is the MLIT under the current framework, should it not be the local governments well informed of the actual situation of the region that would arrange the latitude of the taxi fare?

Although the enthusiasm for decentralization reforms has been cooled down lately, it is hoped that local governments voice that such issues should be decided on their own discretion.

On Revised Japan Revitalization Strategy

(HARA Eiji, PPPC President)

The Cabinet of Prime Minister Shinzo Abe adopted a set of economic reform strategies to boost mid- to long-term economic growth. The Japan Revitalization Strategy — the “third arrow” of “Abenomics” — includes a pledge to cut corporate tax, welcome more foreign workers, help working women and other challenging reforms.

http://www.kantei.go.jp/jp/singi/keizaisaisei/skkkaigi/dai17/siryou.html

Still, detailed plans are to be elaborated in the future. For example, regarding the corporate tax, while the basic plan is to set at below 30 percent “over several years.” it is yet known how many percent it will actually be. Currently, while the average rate in the OECD countries is 25%, Japan’s corporate tax rate is 35%. There are huge gaps with the neighboring countries including Hong Kong (16.5%), Singapore (17%), and South Korea (24%), which explain the reasons that global companies transfer their business bases abroad. While the market and the public at large expect that the government hammers out measures to attract domestic and foreign investors, specific plans to realize the goal are to be considered. Under such circumstances, Fukuoka and Kansai voiced calls for more speedy and drastic corporate tax reduction than the national effort, and such propositions must be taken into consideration in designing detailed plans of the strategies.

With regard to working-hours regulations, while it is acceptable that the standard subject of white-collar exemption was set at employees receiving 10 million yen/year (there was an idea to subject those receiving 70 million yen) so that performance-based wages and diversity in ways of working are finally to going to be realized in this country, detailed institutional designing will be discussed in the Labor Policy Committee.

Also, while there were certain advancements in the agriculture such as agricultural committee, qualification of agricultural production corporation and JA reforms, specific plans have been postponed to the future so we don’t know yet how far the reforms will be advanced in such a challenge as “privatization/corporatization of JA.”

Attentions must be kept on specific and detailed plans in advancing such reforms in such fields.

Another issue that came to light in the process of revising the Strategy is segmentation of the government panels. For example, agricultural reforms were discussed in the agricultural subcommittee of the Industrial Competitiveness Council, Working Group in the Regulatory Reform Council, relevant panels of the National Strategic Special Zones, etc. In addition to these panels, the Council on Economic and Fiscal Policy discussed the issue of foreign workers. These government bodies are not necessarily communicating each other, and there was not even a discussion on “whether trial projects are to be undertaken as national-level regulatory reform or as regional experiments in the special zones,” as it was naturally so.

In order to realize Prime Minister Abe’s international pledge at Davos in January “to break through the solid rock of vested interests…over the next two years,” organizational arrangements must be made to meet such an issue.

Pointless Debate on “Zero-Overtime-Payment”

(TAKAHASHI Yoichi, PPPC Chairman)

Discussions in the Industrial Competitiveness Council on working hours regulations resulted in vain due to the stupid phrasing by mass media.

An incident which reminded the fact was the interpellation in the Lower House Health and Labor Committee on June 4. To the question by Michiyoshi Yunoki, Democratic Party of Japan, requesting it should be applied to the central government employees, the government official answered that the central civil service is not subject of the Labor Standard Act and therefore not subject of discussions in the Industrial Competitiveness Council.

It was just unfortunate that this DPJ lawmaker regarded the “white-collar exemption” proposed by a private-sector member of the Council as “zero-overtime-payment.”

The “white-collar exemption,” accurately speaking, is a rule to exempt labor regulations such as maximum 40 hours per week of working hours to so-called white-collar workers. In that case, the concept of overtime work itself would disappear. Instead, salaries are paid according to their performance.

There are actually such labor-rule exemptions in the western countries. Ratio of the workers exempted of labor regulations to all the workers is said to be 20% in U.S., 10% in France, and 2% in Germany. It has not been introduced in Japan’s private sector. And, as the official answered in the Diet, the employees of the central government are not subject of the Labor Standard Act. But it does not mean there are no overtime payments to them.

In fact, overtime payments of the central government employees are paid from the budget irrespective of the actual overtime working-hours. In short, paraphrasing the “white-collar exemption” into “zero-overtime-payment” is totally off-the-point.

Being asked whether to apply “zero-overtime-payment” to the central government employees, like this DPJ lawmaker did, the answer would automatically be “no” because there are overtime payments to them. But if the question was whether a “white-collar exemption” should be applied to the central government employees, the answer should have been “it is being applied already. Yet, there are overtime payments.”

After consultations, the Ministry of Health, Labor and Welfare finally accepted parts of the private-sector member’s new proposal by limiting the subject to highly-expertise occupations.

To note, there actually is a rule similar to such labor-rule exemptions in Japan; discretional labor rule that gives additional payments for assumed overtime works irrespective of the actual working hours. It resembles “zero overtime-payments” in that the salary would not change no matter how many hours spent on works.

Workers subject of the rule are 19 types (Labor Standard Act 38-3) including R&D, IT analysis and design, designer, producer and director, etc., amounting to 8% of all the workers.

Yet, boundary and definition of this rule is so ambiguous that its implementation depends on discretion of the officials of the Ministry of Health, Labor and Welfare. In that sense, white-collar exemption and discretional labor rule are similar but totally different ones. Ironically speaking, the “discretion” refers not to the workers’ discretion regarding their working hours but to the discretion of the bureaucrats in the MHLW. On the contrary, there are no rooms for the ministry’s discretion with regard to the white-collar exemption.

The debate resulted to a little “white-collar exemption” and discretional labor rule for the most other parts.

The subject of “white-collar exemption” is to be limited to those receiving more than 10 million yen a year. But the percentage of brochure receiving such salaries is 3.8%. Indeed, because this figure includes managers, the actual ratio of employees receiving such an amount of salary would be as little as 3%. In any case, it does not exceed the “8%” of discretional labor.

With regard to the discussions on relaxation of working-hours regulations, it resulted to 3% of “white-collar exemption,” 8% of discretional labor, which have nothing to do with overtime salaries of the rest 92% workers.

When the media reported the rule as “zero-overtime-payments”, officials of the MHLW should have maintained that “overtime payments of the central government employees are NOT zero.” While the central government employees are not subject of the Labor Standard Act, there are overtime payments from the budget in a manner not linked with their actual working hours. In short, it is totally misleading to name the exemption as zero-overtime-payments.

Winner of the discussions on working-hours regulation was neither the private-sector member of the Council nor the labors but the officials of the MHLW. It succeeded in minimizing the subject of white-collar exemption and responding to all the others by discretional labor. In fact, the “discretion” refers not to the workers’ discretion regarding their working hours but to the discretion of the bureaucrats in the MHLW. On the contrary, there are no rooms for the ministry’s discretion with regard to the white-collar exemption. This time, the interests of MHLW have been secured. The target of “white-collar exemption” will not likely be expanded.

The difference of white-collar exemption and discretional labor is that any change in the white-collar exemption requires legal revisions to the law while it only requires Ministry Order to expand subject of the discretional labor rule. Needless to say, changes to the law require much more efforts.

In any case, there are large rooms for the subject of discretional labor rule to be expanded by the MHLW’s discretions. Attentions should be paid to the “discretional labor rule” instead of the “zero-overtime-payments” having nothing to do with 92% of the entire workers.

The conclusion of the debate resulted in the victory of the MHLW which is not subject of the Labor Standard Act from the first place. While the white-collar exemption has been applied to the central government employees from the beginning, it was now only introduced in a small part of the private sector. Is it not a remaining custom of putting the government above the people?

How Much of the Corporate Tax can be Reduced?

(HARA Eiji, PPPC President)

Since this June, Prime Minister Shinzo Abe has announced to “reduce the corporate tax from the next fiscal year.”

Traditionally in the Liberal Democratic Party, the party’s Tax Commission has had more influences with　regard to the tax system than the Cabinet. In the last year’s budget-compiling process, too, it only resulted to termination of the special corporate tax for reconstruction, i.e., 38% to 35% in effect which had already been agreed even though Prime Minister Abe had shown a strong decisiveness to reduce the corporate tax.

This year, given the Prime Minister Abe’s remarks at many occasions, it seems that certain agreements have already been made with the ruling party and some message will likely be released within this month in eye of the Basic Guideline for Economic and Fiscal Policy and new growth strategy to be released in this June.

Yet, the question is how much reduction will be arranged.

In contrast to Japan’s 35%, the average rate in the OECD countries (except Japan) is 25%. There are wide discrepancies even with the neighboring countries such as Hong Kong’s 16.5%, Singapore’s 17%, and　　South Korea’s 24%.

Such gaps give global companies reasons to transfer their basements abroad and it derives domestic people of their employment opportunities.

Although Abe announced in Davos in January “to reduce the corporate tax to an internationally-compatible standard,” now it is a test for Abe whether to really keep his own words.

Nonetheless, so far as the government discussions are going on, it isn’t clear whether the Cabinet will really implement such drastic reductions.

For example, a document submitted by a private-sector member to the Council on Economic and Fiscal Policy on May 15 suggested that the government seek a tax reduction to some below-30 percent as a temporary measure in eye of 25% in the future, in a bid to realize “the easiest country to do business.”

http://www5.cao.go.jp/keizai-shimon/kaigi/minutes/2014/0515/shiryo_01_2.pdf

As the “below-30%” means “29.**%,” the intension of this proposal can be read as

l  Reducing the tax rate by 5-6% in the coming several years

l  To 25% in the later future

So, it will be long later when the country really becomes an “easiest country to do business.”

In government panels, the general pattern is that private-sector members make drastic suggestions at first and discussions reach moderate conclusions as result of consultations. But this time, the private-sector member’s suggestion is already so moderate that gives us unsatisfactory impressions. Please note that “reduction by 5-6% in the coming several years” is more passive than a “5% decrease on surface (35% in effect)” suggested in the past Democratic Party of Japan government.

In the meantime, local governments have made more drastic suggestions.

For example, Osaka Prefecture and Fukuoka City, selected as the National Strategic Special Zones, have proposed to decrease the corporate tax rate largely and more quickly in the Zones with certain restrictions. Especially Osaka has made this proposal based on its experience of reducing the local tax rates on certain companies (local corporate tax, fixed property tax) to zero both in the Prefecture and City.

In order to call back the outflowing industrial basements and to seriously consider attracting the world’s companies and human resources to the domestic land, we need to seriously consider drastic and speedy tax reductions even if such measures are to be applied in the special zones.