Japan's Prime Minister Ryutaro Hashimoto is giving Tokyo's financial markets a second chance to become a world-class player in the global markets by announcing a major overhaul of Japan's rigid, heavily regulated financial system by 2001. If he can overcome Japan's long history of announcing deregulatory reforms without actually implementing them, Hashimoto can reverse Tokyo's gradual decline as a financial center and perhaps open a wedge for wider economic reform. If he can't, foreign corporations will continue to delist from the Tokyo Stock Exchange, investors will continue to buy stock in Toyota Motor Corp. in London to save on commissions, and the Japanese people will continue to receive below-market returns on their savings.
Hashimoto's plan would let market forces determine insurance premiums and brokerage commissions. And it would finally open Japan's $2 trillion pension-fund market to American and European money managers and generate competition for savers' yen, thereby driving up their rates of return. Banks would no longer be protected, and the Finance Ministry would end its virtual domination of all aspects of financial life.
It all sounds too bold for Japan. This is especially true given Hashimoto's appointment of old-fashioned politicians to his Cabinet who still believe in protecting domestic markets and taking big campaign contributions from industry. If he succeeds, however, Hashimoto may be able to move on to downsize the nation's bloated bureaucracies, cut taxes, and get Japan growing again. We wish him luck.