The Japan That Must Say Yes To Reform

The world that Japan dominated economically in the Eighties has become a very different place in the Nineties. Rivalry from the U.S. at the high end and from Asia at the low end is squeezing Japanese corporations as never before. A new integrated global economy is taking shape. Every country, including Japan, is open to new forces of fast-moving goods, people, and capital.

Japan's elites have only just begun to respond to these worldwide changes. Grudgingly, the political system is being reformed to reduce corruption. Japanese corporations are cutting costs, shipping production overseas, and focusing on profits, not just expansion and market share.

But much more must be done. Massive deregulation is necessary for Japan to become competitive again. Such a move would bring the financial benefits of the strong yen--cheaper imports--down to the consumer.

Deregulation is needed even more in huge areas of the economy: telecommunications, airlines, land, food, construction, and the Byzantine distribution network. Excessive rules have choked off proliferation of everything from pocket phones and computer networks to satellite broadcasting.

But to deregulate industry, Japan must first end the cozy symbiosis between bureaucrat and businessman. Bureaucrats protect the industries they supervise in exchange for jobs later on. Prime Minister Morihiro Hosokawa's effort to reform the legislature is a good first step. He should go further and reform the bureaucracy as well.

Unless that occurs, Japan will find it very difficult to make the next high-tech leap: the integration of telecom, information, and entertainment. While Japanese prowess in the Eighties in automation, quality-control, and miniaturization drove the world economy, America is widening its lead in the information technologies that will dominate the future.

To win economically again, Japan must liberalize and democratize its society and its economy. The old ways won't work anymore.

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