Download Dr. Hosen(Feb. 26)

Acceleration of Economic Reform
in Japan and the Role of the Council
on Economic and Fiscal Policy
February 26, 2007
Mitsuo HOSEN
ESRI, Cabinet Office
Contents
•
•
•
•
•
•
•
•
Acceleration of Structural Reform
Economic Impact of Regulatory Reform
Important Factor behind the Acceleration
The Council on Economic and Fiscal Policy
(CEFP)
Attributes of the CEFP
Reform Priorities of the Abe Administration
Economic Environment and Reform Agenda
Challenges Ahead
2
Acceleration of Structural Reform
Under the Koizumi and Abe administrations,
structural reform in various areas has been
accelerated. In particular,
• The NPL problem resolved
• Privatization of Japan Post decided
• Deregulation in financial, energy, telecom and
other sectors accelerated
⇒contributed to the recent economic recovery
3
Economic Impact of Regulatory Reform
• Cumulative consumer benefits between
the beginning of the 1990s and FY2002 are
approximately 3 percent of GDP
• Sectors with large benefits
-Trucking
-Electric power
-Petroleum products
-Mobile telecommunication
[Cabinet Office (2003)]
4
Economic Impact of Regulatory Reform
(Continued)
• Sector-wise TFP growth accelerated by 0.1
percent to 0.4 percent on average annually
between 1995 and 2002
• Sectors with substantial improvement
-Wholesale and retail
-Electric power
-Telephone and telegraph
-Petroleum products
-Pharmaceutical products
[Cabinet Office (2006)]
5
Important Factor behind the Acceleration
• Creation of the Council on Economic and
Fiscal Policy (CEFP) in 2001
(The Cabinet Office serves as the secretariat
for the CEFP)
In addition to
• Strong personal commitment of the PMs
• Enthusiasm of the Ministers of State for
Economic and Fiscal Policy
6
What is the CEFP?
• The centerpiece of a major reorganization
of the central government in 2001 to,
among others, strengthen the PM’s
initiative and leadership in policy making
• Deliberate on a wide variety of microeconomic, macroeconomic and fiscal
policy issues
• CEFP decisions become basic
government policies through Cabinet
Decisions
7
Members of the CEFP
• Prime Minister (Chair)
• Minister of State for Economic and Fiscal Policy
(The Minister in charge of the CEFP)
• Chief Cabinet Secretary
• Minister of Finance
• Minister of Economy, Trade and Industry
• Minister of Internal Affairs and Communication
• BOJ Governor
• 4 Private sector members (including Prof.
Yashiro)
(Other ministers may be asked to attend a CEFP
meeting, depending on an agenda of the meeting.)
8
Attributes of the CEFP
Success of the CEFP in accelerating
structural reform and in improving
economic and fiscal policy making in
general is, at lease in part, attributable
to the following virtues of the CEFP
• Transparency
• Economy-wide view
• Integrated approach
9
Transparency
• Minutes of CEFP meetings made public in
three days
• Press briefings by the Minister of the State
for Economic and Fiscal Policy just after
CEFP meetings
In sharp contrast with the decision making
process of old days, which was closed and
not transparent
10
Economy-Wide View
• Most of the CEFP member ministers have
a horizontal responsibility rather than a
sector-specific responsibility (So does the
BOJ Governor)
• Two members from academics are free
from any particular interest groups, and
bring objective economic analyses into
policy discussion
• Two members from the business sector
also have a broad perspective and costconscious management expertise
11
Integrated Approach
• The CEFP handles both economic and
fiscal policy in a coherent and consistent
manner
In contrast with old days, when economic
and fiscal policy not coordinated in an
effective manner
(However, this is primarily related to macroeconomic policy making)
12
Reform Priorities of the Abe Administration
•
•
•
•
•
•
•
Addressing globalization (Promoting FTA etc.)
Labour market reform
Improving productivity
Tax system reform
Decentralization
Social security system reform
Public sector reform
13
Economic Environment and Reform Agenda
• The post-bubble era (During the long
economic stagnation)
-Reactive reform such as resolution of nonperforming loans
• Since the economy was normalized (Since the
“post-bubble” era was over)
-Proactive reform to enhance economic
growth potential such as those on the previous
slide
14
Challenges Ahead
• The CEFP is a new institutional arrangement,
which is not deeply-rooted in Japanese political
system yet
• Risk of complacence under improved economic
conditions
Further efforts should be made to make more use
of the CEFP as a tool to improve policy making
15
and an engine of structural reform