Tuesday, April 24, 2007

Postponing structural reform

Following on the heels of an announcement last week of a plan to amend Japan's rules separating banks and brokerages, the Abe Cabinet has announced, in connection with its Asia Gateway Initiative, that Japan will revise its customs rules and standards to better comply with international standards and make Japan more competitive regionally and globally.

Both of these plans reveal the broad thrust of the Abe Cabinet's ideas on economic reform. Both are reforms that serve Japan's corporations well, enabling them to better compete with other global corporations. Neither does much to change the structure of the Japanese economy over the long term, nor to address the concerns of Japanese citizens about their future of the Japanese way of life. And both are the kinds of reform that are relatively easy to pass when the currency is cheap, the economy is growing, and corporate chiefs see only blue skies ahead.

I think it would be a mistake to expect anything other than this kind of "pro-growth" tinkering from the Abe Cabinet; there will not be any ambitious, concrete plans to facilitate and hasten the shift to a post-industrial economy, to lessen the role of Japan's numerous, uncompetitive small- and medium-sized businesses -- Japan's mittelstand -- in the economy, or to transform the manner by which Tokyo governs the Japanese economy.

No, this is the reality of "growth, then reform": tinkering to ensure that coffers remain full, making it easier to delay the tough political decisions that will have to be made to ensure Japanese prosperity over the long term.

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