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Home > Debates Last Updated: 14:30 03/09/2007
Online Debate

Evaluation of Keizo Obuchi's Economic Policy and Future Prospects

Main Participants:

Kazuhito Ikeo
Professor of Economics at Keio University (Tokyo)
Specialty: Banking and Finance
Ph.D. Economics, Kyoto University
Also taught at Kyoto University and Okayama University.

Koichi MERA
Clinical Professor of International Business at the University of Southern California (Los Angeles)
Specialty: Regional Development and Planning, and International Business
Ph.D. City and Regional Planning, Harvard University
Also taught at Harvard University, Tsukuba University and Tokyo International University

Takahiro MIYAO
Professor and Senior Research Fellow at GLOCOM, International University of Japan (Tokyo)
Specialty: Urban Economics and Information Networks
Ph.D. Economics, MIT
Also taught at Tsukuba University, the University of Southern California, the University of California-Santa Barbara and the University of Toronto

Debate schedule and process:

The debate consists of two rounds of discussion among the main participants who took up questions and comments from the online audience in the second round.

1) April 20 (Thursday, 19:00 - 21:00)

In Round 1, the three main participants exchanged opinions live on our BBS (Bulletin Board System) for up to two hours.

2) April 21 (Friday, 19:00 - 21:00)

Questions and comments received from the audience by noon on Friday were reviewed by the three main participants and selected comments were posted to the BBS just before the second round of discussion starts. In Round 2 these questions and comments were taken up by the three participants in discussion on the BBS.

We intend to have a more interactive system in place as soon as possible.

Message Colors:
Prof. IKEO Prof. MERA Prof. MIYAO

[1] Online Debate to Start at 19:00, April 20 (Japan Time)

from  Platform Staff   02:08 Thu. 4/20/2000 - 03:02   

Welcome to the Online Debate BBS.

An opening statement will be posted here at 19:00, April 20th (Japan time) to initiate Round 1 of the debate.

In Round 1, the three main participants will exchange opinions live on this BBS for up to two hours, beginning at 19:00. At the conclusion of the exchange, the audience will be invited to send any questions or comments.

Please come back here by 19:00, April 20th to follow the online debate. We are looking forward to your participation.

[2] Introduction

from  MIYAO   19:00 Thu. 4/20/2000  

MIYAO: Hello, everyone. Wecome to our first online debate.
Are you with me, Prof. Ikeo and Prof. Mera? Before starting our debate officially, why don't we introduce ourselves to the audience briefly.
I am Takahiro MIYAO, professor at the Center for Global Communications, International University of Japan. I am now sitting in my Roppongi office, looking out at the lights of Tokyo Tower and highrise buildings, as it is almost 7pm here in Tokyo.
Where are you now, Prof. Ikeo?

[3] Introduction

from  IKEO   19:06 Thu. 4/20/2000  

IKEO: Hello, everyone. My name is Kazuhito IKEO. I am Professor of Economics and Finance, Keio University in Japan.
Hello, Prof. Miyao and Mera. I am home now. Where are you, Prof. Mera?

[4] Introduction

from  MIYAO   19:12 Thu. 4/20/2000  

MIYAO: I understand that Prof. Mera is not in Los Angeles, as he normally is, but somewhere in Asia. Where are you, Prof. Mera?

[5] Obuchi's fiscal policy

from  MIYAO   19:16 Thu. 4/20/2000  

MIYAO: Hoping that Prof. Mera will join us later, let us start our debate officially. First we will take up former Prime Minister Obuchi's economic policy in the past and then talk about future prospects for the new administration later.
Let us discuss fiscal policy in the last year and a half, when the government has been spending money as if there were no limit to it. As a result, the total amount of national debt is now about 600 trillion yen, which exceeds Japan's GDP.
Here one might argue that the Obuchi government made a serious mistake in accumulating national debt while spending money inefficiently and thus failing to reform the old system in Japan
But others might say that former Prime Minisiter Obuchi was correct in adopting a series of economic stimulus packages to get the Japanese economy out of the worst kind of recession which had been brought about by the previous Prime Minister Hashimoto.
What do you think, Prof. Ikeo?

[6] Obuchi's fiscal policy

from  IKEO   19:21 Thu. 4/20/2000 - 19:41   

IKEO: I don't think that fiscal expenditure and tax cuts should be used as a stimulus measure as Keynesian suggests, except a very emergent situation. The Japanese economy was on the edge of deflationary spiral in October 1998. In such an emergency situation, it could be justified for the ex-Prime Minister Obuchi to take fiscal measures on a large scale in order to stimulate the Japanese economy.
However, the emergency situation has passed by the spring of 1999, then fiscal policy should have been changed. I think that Obuchi continued expansionary fiscal policy so long that fiscal discipline was fatally destroyed. In sum, I appreciate Obuchi's fiscal policy during the fall of 1998, but do not his policy since then.

[7] Introduction

from  MERA   19:26 Thu. 4/20/2000  

Hello, this is Koichi Mera.
I was looking for instruction for sending in messages. Now, I have it, and can send messages.
I am Professor at Marshall School of Business of University of Southern California, Los Angeles. But, now I am in Jakarta, Indonesia. I have a project here. This is an interesting country for learning various matters including economic policy.
I am joining the debate now.

[8] Obuchi's fiscal policy

from  MIYAO   19:30 Thu. 4/20/2000  

MIYAO: I am afraid that I do have to disagree with your statement that the emergency situation has already passed in Japan. Cirtainly on the surface, the banking system now appears to be OK, but the overall balance sheet problem for not only some financial institutions but also many corporations and individuals is still quite serious. That means we are still "on the edge of deflationary spiral." We should not repeat the same mistake the Hashimoto administration made by cutting government spending and raising taxes a couple of years ago.

[9] Obuchi's fiscal policy

from  MIYAO   19:36 Thu. 4/20/2000  

MIYAO: Welcome to our debate, Prof Mera. What do you think of Obuchi's fiscal policy?

[10] Obuchi's fiscal policy

from  IKEO   19:37 Thu. 4/20/2000 - 19:54   

IKEO: I agree with Prof. Miyao that the Japanese banking crisis is not over. The Japanese financial system does not stand on its own feet, but can stand only with the government's aid.
But, is the expansionary fiscal policy a right prescription to the problems to which Japan is now facing?

[11] Fiscal policy

from  MERA   19:40 Thu. 4/20/2000  

I am more sympathetic to Mr. Obuchi. He was chosen as Prime Minister when Hashimoto Administration's economic policy failed. As Prof. Ikeo says Obuchi policy was good in the beginning, not because he invented a policy, but a chance was given to him. Later, as Professor Ikeo says his policy start failing. This is not because he did not work hard, but he was not given good policy advice. In a sense, he was a transparent head, representing the level of knowledge of the people around including the entire population. He should not be blamed, but the system should be blamed if you want to blame for economic policy failures.

[12] Fiscal policy

from  IKEO   19:46 Thu. 4/20/2000  

IKEO: Again, I agree with Prof. Mera that the sytem shoud be blamed.
The Japanese economy has fallen not into a temporary recession, but into a long-lasting stagnation in the 1990s. The recovery form the stagnation cannot be attained by a fiscal stimulus measure. It is indispensable to restructure the economic system for the recovery.
For example, the social security systems, especially the public pension system, must be reformed to eliminate the Japanese people's anxiety about the future which has depressed their consumption demand.

[13] Financial problem

from  MIYAO   19:48 Thu. 4/20/2000  

MIYAO: Let's turn to a related issue, that is, Obuchi's handling of Japan's financial problem
Some people may regard Obuchi as the savior of the Japanese financial system, as he set aside a total of 60 billion yen to deal with the financial crisis that was haunting Japan and the rest of the world when he took office two years ago. But others are critical of his policy of injecting public funds into the financial institutions on the ground of moral hazard, that is to say that Japanese banks have failed to reform themselves because of the injection of massive public funds to bail them out without requiring them to take necessary managerial responsibilities. What is your opinion about Obuchi's handling of the financial crisis, Prof. Mera?

[14] Present situation

from  MERA   19:51 Thu. 4/20/2000  

There is some time lag between responses. So, it is not easy to make timely comment. But, the Japanese economic situation is still serious as before. I agree with Prof. Miyao on this matter.
If expansionary measures were not taken by Obuchi Adm., please think what would have happened to Japanese economy last year? It would have recorded a significantly large negative growth. People talk about "reforms." But, many of the reforms are deflationary. This was the mistake that was made by Hashimoto Admin. In that sense, Obuchi was better than Hashimoto.
At this point, we should not worry about the size of the national debt. To change the direction of economic situation should be given higher priority.

[15] Financial problem

from  MIYAO   19:56 Thu. 4/20/2000  

MIYAO: Prof. Ikeo, you may also respond to my question about Obuchi's handling of the financial problem.

[16] Banking crisis

from  MERA   19:59 Thu. 4/20/2000  

Prof. Miyao.
Obuchi did a good job in stabilizing major Japanese banks. Of course, this involve moral hazard. But, this is a minor proble, relative to possible collapse of banks. Without functioning banks, an economy does not function. Japan went fairly close to the catastrophic situation. Please rember the serious concern expressed by leaders of major industrial countries in the second half of 1997.
As a result of recapitalization of major banks, people started having some hope in the Japanese economy. The stock market welcomed as evidenced in its rise in index. However, he has exhausted means of rescuing the economy.
The situation was that bad. No government official admitted it.

[17] Present situation

from  IKEO   20:00 Thu. 4/20/2000  

IKEO: The persistence of the expansionary fiscal policy has enhanced the economic structure depending on the government spending. The construction industry expanded its scale and employment. Thus, it became more difficult to change the industrial structure in Japan. How do you think of the construction business in Japan, Prof. Mera?

[18] Financial problem

from  IKEO   20:04 Thu. 4/20/2000  

IKEO: Unfortunately as I wrote, I don't think that the financial crisis in Japan is over. What Obuchi did concerning the Japanese financial system was only to cover its crisis with some patches. Our government has guaranteed all of banks' debts beyond the scope of deposit insurance system yet.
The Financial Reconstruction Commission (FRC) was established in January 1999. The first chairman of FRC Yanagisawa did fine jobs. However, Obuchi appointed Otchi, who was well known as a reactionary to the financial reform, to the second chairman of FRC. Recently, Otchi incurred blame for his inadequate speech and resigned. The significant part of responsibility for this rested on Obuchi who appointed Otchi.

[19] Banking crisis

from  MIYAO   20:09 Thu. 4/20/2000  

MIYAO: My view is that the Japanese government has not done enough to deal with the so-called balance sheet problem which has been depressing the economy so long. What Obuchi did was only "financial reconstruction," but not "economic reconstruction."
For example, land prices are still falling and the balance sheet problem is getting ever more serious in all sectors of the economy. Unless something fundamental is done to the real sector such as real estate, the problem is not going to go away, and another banking crisis will occur in the near future.

[20] Spending measure

from  MERA   20:13 Thu. 4/20/2000  

Prof. Ikeo:
I agree with you in the sense that the way of spending was not good. All the money was dumped into roads, dams, ports, and other civil engineering projects. They do not contribute to the economy in the current situation. The money should have been spent in other sectors. Alternatively, the government could have terminated the notorious Consumption Tax for a limited period, or reduced tax rates. However, this would not solve the problem for good. This is because consumers' concern for the future will not be erased by tax cuts. They are afraid of losing jobs, reduced income in the future, and extended old age. This is particularly true when people cannot get any interest income due to reduced interest rate.
This is a process of change. The japanese economy has to shift to a more flexible, mobile system. People need to be adjusted to such a sysstem. But, this process of change will take time. One or two years will not be enough. it will take more than 10m years. Already 10 years has passed since the "bursting of bubble". But, people have not changed much.
I am on this point quite pessimistic. The old Japanese system is totally outdated. Unless the system is changed, the economy will not recover. This is not the responsibility of Obuchi alone. Everyone is resposible. But, most people are not eager to change.
However, Japan is an excellent country. Its culture is good, people are nice and courteous, food is wonderful. But, from the economic point of view, it is totally outdated.

[21] banking crisis

from  IKEO   20:19 Thu. 4/20/2000  

IKEO: Yes, land prices are still falling. But, are the prices below their fundamental values? I don't think so.
If it is true, the only way of stopping the decrease in land prices is to increase the productivity of lands. Can the expansionary fiscal policy increase the productivity of lands?

[22] New agenda for the Mori government

from  MIYAO   20:20 Thu. 4/20/2000  

MIYAO: It looks like we need some fresh air now.
So, let me turn to future prospects for the new Mori administration based on our analysis of the policies taken by the Obuchi government so far.
What is the most important and urgent policy agenda for the new administration?
It seems to me that what has been missing in the past is national priorities and strategies to capitalize on the info-telecommunication revolution in Japan. More public funds could be used to build informational infrastructure on a nationwide basis, and at the same time more tax breaks should be given to encourage corporations as well as individuals to invest in computers and networks for productivity improvements How about this point, Prof. Ikeo, and what do you think is the most important agenda for the new administration?

[23] Fundamental remedy?

from  MERA   20:20 Thu. 4/20/2000  

Prof. Miyao:
What kind of fundamental measures for economic recontrsution are you rpoposing?

[24] Future prospects for new policy

from  MIYAO   20:25 Thu. 4/20/2000  

MIYAO: Hopefully we will be able to find some answer to Prof. Mera's question to me by discussing future prospects for the new administration.
Any ideas, Prof. Ikeo and Prof. Mera?

[25] Agenda for Mori Administration

from  MERA   20:30 Thu. 4/20/2000  

One important policy for the new administration is to reduce control. My view about the government role in telecommunication differs from Prof. Miyao's.
Let us have a free market decide what and how much investment should be done in telecommunication or e-commerce. The old MITI style of administrative guidance will damage the economy rather than help it.
The government can reduce tax and remove obstacles for private activities. Let economic competition take care of problems. Realistically, we cannot expect very much in this direction. This is because just like Obuchi administration, Mori administration will follow the general "wind"in the country. There will not be an independent thinker/doer. It follows the political pressure to LDP.
The only expectation is the possible LDP failure in the coming election. When the number of seats LDP gets in the next election, then the country will start searching for a new direction.

[26] Spending measure

from  IKEO   20:31 Thu. 4/20/2000  

IKEO: Facing to significant changes in the environment in the 1970s, the Japanese economic system after World War II has been hardened: modifying to maintain the status quo and thus hardening the system so that the dynamism and flexibility that the Japanese economic system used to have was lost.
It is not true that the Japanese economic system has not changed, but it has changed in a wrong direction. The Japanese economic system at present is not identical to the system that supported Japan's high-economic growth. In other words, the present one is a distorted version of the Japanese-style economic system. Prof. Okuno-Fujiwara of Tokyo University calls the present system as "the 1975 system."
I approvevery much of Prof. Mera's opinion that "[T]he Japanese economy has to shift to a more flexible, mobile system". The Japanese economic system of post-1945 used to be a felexible, mobile system.

[27] Agenda for Mori Administration

from  IKEO   20:37 Thu. 4/20/2000  

IKEO: The progress in technology by itself does not automatically settle the economic problems.
What is mostly required for the new government to do is to resolve the structural problems to which the Japanese economy has been facing. Especially in order that Japan can enjoy the fruits of the info-telecommunication revolution, it is urgent to recover flexibility and dynamics of the Japanese economic system through radical regulatory reforms.
For example, the current organizational structure of the Japanese government is never suitable for making full use of information and networking technologies. I think that administrative reform takes precedence over public investments on information infrastructure and tax cuts.

[28] 1975 system

from  MERA   20:38 Thu. 4/20/2000  

Prof. Ikeo:
I agree that the system in 1945 was much more flexible, and the current system may be 1975 system.

[29] Agenda for Mori Administration

from  MIYAO   20:42 Thu. 4/20/2000  

MIYAO: While I agree with Prof. Mera and Prof. Ikeo about deregulation and structural reform in general, I do not think we can afford to wait for complete governmental and social reform and to rely on the free market to survive in this age of the info-telecommuncations revolution. As a matter of fact, not only the United States, but Canada, EU, and other Asian countries seem to be adopting national strategies to connect their businesses and communities.
And their governments are not much better than ours.
Of course, we should and can make full use of the market mechanism and private sector input, but that is not enough to create a new information society for everyone to prosper in the 21st century.
We must act now, however imperfect we and our government might be.

[30] 1975 system

from  IKEO   20:44 Thu. 4/20/2000  

IKEO: The Oil Crisis that took place in 1973 initiated modifications resulting in the distortion.
The Oil Crisis broke out when Japan was proud of its economic success. The sudden occurrence of the Crisis made the Japanese people afraid that the fruit of their success would be completely lost, so the Japanese were compelled to adopt an extremely defensive stance. Japan's attempt to defend its economic success be any means possible resulted in the opposite of their goal: the hardening of the system.

[31] Administrative reform

from  MERA   20:48 Thu. 4/20/2000  

It is interesting to note that Japan is probably the most conservative country in the context of administrative reeform. Many of developing countries have gone through a series of gogernmental reforms. Many countries went through centralization to decentralization. Indonesia, for example is in the middle of changing from a highly centralized system to a totally decentralized system of governance. The law for decentralization was promulgated in 1999, and the country is going to become one of the most decentralized system of governance by 2001.
many other countries have gone through a series of changes. South Korea is another example. The present Korea is very, very different from Korea 10 years ago.
Even, the United States has changed. It went through Civil rights movements, Nondiscrimation, and gender equality, and now dot com ventures.
Relative to these changes, Japan remains relatively unchanged. People may be satisfied, but this will delay changes and reforms.
Serious warning is warranted to Japanese people.

[32] Agenda for Mori Administration

from  IKEO   20:54 Thu. 4/20/2000  

IKEO: I agree with Prof. Miyao that we must act now. However, I don't think that an activist necessarily means an advocate of Keynesian fiscal policy. I propose the activism in regulatory reforms to produce a pro-competitive regulatory regime. What is the US government doing for promoting IT revolution?

[33] Concluding remark

from  MIYAO   20:55 Thu. 4/20/2000  

MIYAO: There seem to be too many things to discuss, especially looking into the future. Why don't we stop here to check questions and comments from the audience over night.
Besides we need some rest. We will discuss more about future prospects when we return tomorrow at 19:00.
Thank you for your participation, Prof. Ikeo and Prof. Mera.

[34] Information age

from  MERA   20:58 Thu. 4/20/2000  

Telecom and other internet related companies are growing on their own without any help from the government. The market is deciding what should bre developed. As you know well, the stock price represents their future earning capability. AOL could purchased Time-Warner. This could happen in Japan as well.
We should have the market decided what kind of information age we should have. Not the government, particularly the government that is working for its employees, as in japan. If the government works for the entire population, let it do.
Unfortuinately, Japan's government is not that kind.
Let us have people decided what should be developed.

[35] Concluding remark

from  MIYAO   21:00 Thu. 4/20/2000  

MIYAO: Thank for your last word, Prof. Mera.. We will discuss your point tomorrow when we return.
Thank you and good night, Prof. Ikeo and Prof. Mera.

[36] Conclusion

from  MIYAO   21:04 Thu. 4/20/2000  

To the audience:

We are looking forward to receiving your questions and comments on the discussion.

Please keep your comments concise and include your full name.
Affiliation information is appreciated but not required.

Thank you for your participation.
See you again tomorrow at 19:00 in Japan time.


from  MIYAO   18:54 Fri. 4/21/2000  

[From the audience(1)]
I thoroughly enjoyed reading the transcript of the debate. I agree with the statement that suggests the policy in Japan has been one of applying a band aid or patch to give the appearance of reform, but that in general, real reform has yet to take place. This is not to say that such reform is not possible, its just that such reform tends to take an extraordinary amount of time in Japan. This I believe is due to a government structure that loves the status quo. Whenever change is needed, it seems to have to come from
the outside. (gaiatsu)
The question is: How does a government reform and change itself while at the same time concentrating on maintaining itself and by extension the country in state of stasis while the world in general is rapidly reforming and changing to meet the needs and challenges of the future?
(R. Mike Oswald, Director, University of Southern California Regional Office - Tokyo)


from  MIYAO   18:56 Fri. 4/21/2000  

[From the audience(2)]
The past attempts of structural (administrative, economic, and political) reform suggest two crucial factors for their success, i.e., strong leadership and some lucky circumstances. I get the impression that Mr. Obuchi had tried to demonstrate his political leadership as the Prime Minister of Japan in one way or anther including his various (sometimes artless) public relations exercises, just as the political leaders of economically developed countries normally do. Of course, as we know, his administration was too short to witness the outcome of his economic policies, and it must be too early to settle the dispute over the success and failure of his administration's economic policies. However, I think that the debaters could at least discuss and evaluate Mr. Obuchi's actual leadership in the course of his economic policy-making by selecting a few of his key decisions about economic revitalization.
(Akio Sone in Massachusetts, USA)


from  MIYAO   18:58 Fri. 4/21/2000  

[From the audience (3)]
It seemed to me that PM Obuchi just wanted everyone to get along, and so factional strife undermined his health more than any overwork could have. Not to lay blame on this account, but I think it shows just how much importance is attached to human relations in Japan.
This subtle point may be missed when foreignersare exasperated by the lack of principles guiding the actions or obfuscations of leaders in this country.
Intercultural communication researcher Dean Barlund was struck by his finding that no Japanese friends who parted ever made up again. Principles seem to be operative in this sphere! However, I wonder what the panelists think of the notion that surface harmony
is maintained with deadly seriousness because of the inability of Japanese ways to reconcile real differences.
Government officials want to know all that is going on, but then it seems that they can look the other way for years while really controversial practices are taking place. (in Japanese, "shiran kao o suru"). Bad elements are appeased, bought off, or even bailed out. This would be to avoid confrontation, because the social world in which Japanese people live has few workable mechanisms to resolve real conflicts or differences?
(Steve McCarty, Professor, Kagawa Junior College, Japan)

[40] Welcome back

from  MIYAO   19:01 Fri. 4/21/2000  

MIYAO: Welcome back to our debate. Are you with me, Prof. Ikeo and Prof. Mera?
I had a great time with you yesterday, so let's enjoy ourselves again.
I think all these comments from the audience are quite relevant to our discussion on structural and administrative reform in Japan. It seems to me that both Prof. Mera and Prof. Ikeo are saying that the Japanese government and society at large are now resisting change. And Some of the points made by the audience may be regarded as good explanations for such resistance.
What do you think, Prof. Ikeo or Prof. Mera?

[41] System persistence

from  IKEO   19:05 Fri. 4/21/2000  

IKEO: Not only in Japan, but in general, there exists a strong tendency that a system once introduced is not abolished and continued even after the environment was substantially changed from that where the system was introduced. When a system is introduced, people respond by undertaking investments which are sunk in order to benefit from it. Then they increase their willingness to pay for retaining the system and its persistence comes to be produced by their pressure in order to protect the value of their investments.
In Japan, people may have more sunk costs than in other countries because we have made huge efforts to adapt to the Japanese-style system.

[42] System persistence

from  MIYAO   19:09 Fri. 4/21/2000  

MIYAO: I agree that Japan is suffering from huge sunk costs, but that is a matter of comparison. Wherever you go except the U.S., you feel tremendous rigidities and large sunk costs (like "history and culture") risisting change.
By the way, Prof. Mera, are you there?

[43] Reform

from  MERA   19:09 Fri. 4/21/2000  

Hello, Prof. Miyao:
I was reading the comments. Yes, they are highly relevant. The society that is resisting change is due to'"satisfaction." On the whole, Japanese people are not feeling a sense of crisis. So, if they are satisfied, let them be them themselves.
Of course, everybody can stimulate other by agitating or expressing views. This process will lead to change. But, in the case of Japan, it will take a long time.
Prof. Miyao cannot wait for that long time, I am sure.

[44] Reform

from  MIYAO   19:12 Fri. 4/21/2000  

MIYAO: I have another comment from the audience for Prof. Mera. How would you respond, Prof. Mera and also Prof. Ikeo?
[Question from the audience for Prof. Mera]
When you mention that Japan's economic system is totally outdated and that Japan should shift to a more flexible and mobile system what exactly do you mean?
Are you suggesting that Japan should model itself entirely after the US and just let the market determine everything?
Do you not think that this is quite a dangerous policy considering the absolute fluidity of world markets and the current flutters that the US economy is facing?
In the 1980's people spoke about the Japanese model of development. Asian economies were asked to follow the flying geese model of development. Presently, because of the boom in the technology stocks and the internet business, people advocate following a freer market system (albeit, not as vehemently as they did a month ago). Economic policy cannot be decided on a single global model. People must consider the Japanese people's mindset.
While a freer economy allowing for greater global access and competition is warranted, Japanese are not innovators in the financial industry (only the manufacturing industry) they are more inclined towards accepting a government directed economic policy (despite individual cries for restructuring).
I do however believe that much greater transparency and public education is the key for Japan.
(Prasanna Ganesh in Tokyo)

[45] System persistence

from  IKEO   19:16 Fri. 4/21/2000  

IKEO: The efforts which created huge sunk costs also produced the success Japan was enjoying until quite recently. The Japanese-style system tends to ask people to invest more in order to adjust to it.

[46] Market or else

from  MERA   19:23 Fri. 4/21/2000  

Thank you for your comment, Mr. Ganish:
You appear to be saying that Japan has its own way, and U.S. model does not fit well to Japan. Even you are saying U.S. model may be dangerous to Japan.
I am not saying that everything should be decided by the market, but the Japanese system has excessive control on the market. In a sense, I am saying that Japan should appproach U.S. system.
Even though Japan wants to maintain its own system, Japan cannot maintain it. If it doesn, this will lead to the 18th centruy Japan. If Japan wishes to be isolated, that is fine. But, Japan will be a total stranger to the rest of the world. Alars, globalization has started, and it is encompassing every part of the world. Just like to opening of the country in the 19th century, Japan has no choice, but to open itself to the world. Japanese people are trying to delay this process.
To the extent they are successful in extending, they will regret it in the future to the greater extent.

[47] Transparency

from  MERA   19:26 Fri. 4/21/2000  

One more point.
Transparency is the most difficult trait for Japanese. If transparency can be achieved in Japan, anything can happen. It becomes a great country.

[48] Devil's advocate

from  MIYAO   19:27 Fri. 4/21/2000  

MIYAO: Since you, Prof. Ikeo and Prof. Mera, are more or less in agreement on Japan's resistance to change, let me be the devil's advocate by saying that Japanese society is now undergoing fundamental change, despite various resistance.
As Prof. Mera says, there is no choice but to change due to globalization. So you don't have to cry for change, since everyone has to change with or without tears
You could feel the change if you were working at a business organization which is under intense pressure from outside. Of course, foreign-affiliated companies are playing an important role in changing the structure of business and the market.
And even public institutions like the government are changing in the right direction, however at a slower pace than the private sector, to form "virtual agencies" cutting across vertical divisions of ministries to deal with priority issues such as information, education, etc. What do you think Prof. Ikeo?

[49] Devil's advocate

from  IKEO   19:30 Fri. 4/21/2000  

IKEO: "The 2000 system" may be coming into existence. As Prof. Miyao said, there are a lot of symptoms that show the change is breaking out in Japan now.
But, it might take a significant time for the new system to give us the full picture of it.
Additionally, it is not clear at least as of present whether the new system is a welcome one, or an unwelcome one. I am afraid that the Japanese society may be divided and struggles among different interest groups, e.g. the old vs. the young or urban people vs. rural people, become (more) violent in the near future.

[50] Devil's advocate

from  MIYAO   19:32 Fri. 4/21/2000  

MIYAO: Prof. Ikeo, very interesting observation!
What do you think, Prof. Mera?

[51] Change

from  MERA   19:34 Fri. 4/21/2000  

Prof. Miyao:
Indeed changes are taking place in Japan, mainly in the market place. Banks are merging, and foreign capital is coming in. I think this is a welcome change. But, even those banks are not chaning in real sense. Mergers do not change the fundamental operating principles. They are merging in order to protect their operating principles. For example, high skill financial operations should be done by high skilled people. By, Japanese banks are not emplying such peole. They are still rotating people from one section to another. No specialists will be retained, excpet temporarily hired foreigners.
So, I say they pretend to be changing, but not reallchanging.

[52] Still the Devil's Advocate

from  MIYAO   19:40 Fri. 4/21/2000  

MIYAO: Prof. Mera, yes, the existing banks are quite conservative, but new banks from other sectors, such as ORIX, Softbank, and even Toyota, are breaking into the market. So there are signs of real change, compared to the past in Japan. Of course, compared to the US, or some of the Asian countries, Japan appears to be slow changing, but that does not mean that the change is only appearance.

[53] Foreign capital

from  MERA   19:40 Fri. 4/21/2000  

Another sign of change is the entry of foreign firms. Now Japan is having many more foreign firms every yera than before. They will contribute to change.
In a sense, this is a foreign induced change. However, in proportion, the foreign sector is small. As a result, its impact is small as well.
Historically, Japan prevented colonializm during the 19th century. The price of avoiding it is now due. Irony.

[54] Change again

from  MERA   19:44 Fri. 4/21/2000  

Prof. Miyao:
Yes it is a good point. New entrants to the fiancial sector may be different. Soft bank may be different from others. But, Is Toyota so innovative? Is Orix so good?
Toyota is trying to defend the Japanese system such as life-time employment. It is great if they succeed.

[55] Change

from  IKEO   19:44 Fri. 4/21/2000  

IKEO:Prof. Mera's statement is correct in regard to incumbent firms, but not to some newly born Japanese firms. The Japanese under the age of 40 are radically changing so that I worry about struggle between the old and the young may begin soon. The old has sunk costs while the young does not.

[56] Government Role in Information

from  MIYAO   19:45 Fri. 4/21/2000  

MIYAO: Regarding a new agenda for the Mori administration, there was one more important issue which was raised yesterday and needs further discussion today, that is, national priorities and strategies for an information society in Japan.
It might appear that Prof. Mera and Prof. Ikeo emphasized the free market while I argued for some governmental initiative, but I don't think we hold opposing views. In fact, I was talking about informational INFRASTRUCTURE investment, whereas Prof. Mera and Prof. Ikeo may be thinking of business in the info-telecommunication market. The distinction is similar to the nation's highway system vs. the auto industry. The government needs some priorities and strategies for building highways, but should stay away from private business matters. Would you agree, Prof. Mera?

[57] Generation gaps

from  MERA   19:47 Fri. 4/21/2000  

Always younger generations are diffeerent from old ones. New species appera every 10 years. But, the apparent differences vanish as they grow older. At least this has been the past experience.So, the generational conflict may not that serious.

[58] infra

from  MERA   19:50 Fri. 4/21/2000  

Prof. Miyao:
If you say it is infrastructure that should be given priority in IT. Then, I might agree. But, what infrastructure? Most of the infrastructure in It can be built by the private sector. And it should be built by the private sector. Isn't it true?

[59] Generation gaps

from  IKEO   19:51 Fri. 4/21/2000  

IKEO: I wish that the past experience applys to the current case. I would not like to fight.

[60] infra

from  IKEO   19:56 Fri. 4/21/2000  

IKEO: I agree with Prof. Mera. The US government has strongly promoted the GII (Global Information Infrastructure) plan. However, has the US government directly invested on informational infrastructure or been spending money to build physical facilities? Prof. Mera may know it more accurately.

[61] Mori Adm

from  MERA   19:58 Fri. 4/21/2000  

I would like to know how Mori administration is different from Obuchi Adm. in regard to reforms. I have not detected any sign that would indicate Mori is more aggressive in reform than Obuchi. This appears to indicate that Japanese Government is going back to pre-1993 system. Do you agree, Prof. Miyao and Prof. Ikoe?

[62] Info Infra

from  MIYAO   20:01 Fri. 4/21/2000  

MIYAO: I think we really need some kind of collective decision either at the national level or at the local level as to how to help connect everyone in a high-speed fashion.
EU nations are adopting their own strategies to help connect everyone through wireless, mobile stuff, while Canada and Sweden are trying to achieve the Fiber To The Home arrangement. In a sense, the U.S. can afford not to have explicit national strategies and priorites for now.
But look for other countries.
One might choose a centralized approach to the Fiber To The Home, or a decentralized (community) approach to build a community area network. In other words, we need strategies and priorities for the nation's information infrastructure, although actual work can be done by private companies by utilizing such methods as Private Finance Initiatives.

[63] Mori Adm

from  IKEO   20:03 Fri. 4/21/2000  

IKEO: The Mori cabinet may be an election management one. We had better to wait to decide finally after the Diet election.

[64] Mori Ad

from  MIYAO   20:07 Fri. 4/21/2000  

MIYAO: My reading about the Mori administration is that it is going to be a mixed bag. Given that Mori is reelected as PM after the election, he might do something positive on two accounts, i.e., to deal with the nation's balance sheet problem focusing on the real estate market, and also to search for national priorities for an information society, as he stated in his inaugural speech earlier this month.
Do I sound too optimistic?

[65] Info Infra

from  IKEO   20:08 Fri. 4/21/2000  

IKEO: I proposed the activism in regulatory reforms yesterday. I think that governmental initiative is required for encouraging such an activism. I never deny the importance of governmental initiative. My point is concerning what direction the initiative should turn to. So I said yesterday that administrative reform takes precedence over public investments on information infrastructure and tax cuts.
In this sence, I satisfy with the current opinion by Prof. Miyao.

[66] National strategy

from  MERA   20:09 Fri. 4/21/2000  

Prof. Miyao:
National strategy may be valuable. Then, how strategies can be chosen? Should this be based on "experts" views or pressues from some powerful companies? I am afraid that if this is done by experts, it may lead to a bad choice. If a group of companies agree with one or selected methods, then that will be better. So, national strategies should be honoring sectoral champions. I am not saying this is bad. But, this wil be the way to do it. It may be called national strategy, but it is a result of market competition.

[67] National Strategies

from  MIYAO   20:16 Fri. 4/21/2000  

MIYAO: I have said that we need some collective decision at the national level or at the local level. Try not to oversimplify the picture. We have the national govenment, local governments, global companies, local businesses, academic institutions, and volunteers! Choice is not necessarily between the market and the central government. My point is that we need some kind of priorities and strategies for information infrastruture much like construction of highways. Could you rely entirely on the market to build the nation's highway system?

[68] Japan's future

from  MIYAO   20:23 Fri. 4/21/2000  

MIYAO: Prof. Ikeo and Prof. Mera, why don't we look beyond the next administration. Do you think Japan will survive this age (century?) of globalizaiton and the information revolution, or will virtually disappear from the global scene, say, in the next decade or so?

[69] Natl strat

from  MERA   20:23 Fri. 4/21/2000  

I may be upsetting Prof. Miyao. I am saying that national strategy should be built upon the foundations already existing. I do not want to rely on experts. I am questioning who should decide on this issue. There are political representatives, and many other decidion-makers. But, we should not depedn on experts more than we should depend on industry champions. They are real stakeholders. Experts live on writing. So, if a national strategy is to emerge, it should reflect the interest of sectoral champions. Possible conflict of interst is serious.
We should give due respect to companies in the industry. I am not saying this is bad.

[70] National Strategies

from  IKEO   20:24 Fri. 4/21/2000  

IKEO: I think Prof. Mera also admit the we need some collective decision, of course. The problem is how to make collective decision. What mechanism should we use to decide?

[71] Next 20 years

from  MERA   20:29 Fri. 4/21/2000  

MERA: There is no hopeful sign. People are more or less contented. Competition is curtailed. People resist to change. Not much incentive exist to new enterprises. People are aging.
So, one scenario is that Japan will approach Argentina of the 20th century. It has good culture, and people enjoy life, but economically stagnant. This is a likely consequence.

On the other hand, if current younger generations are different, and eager to start afresh, then the situation would be different. That is if Mr. Son is the role model for many young people, Japan will change. I believe there is 30% chance that this direction will be taken.

[72] Japan's future

from  IKEO   20:31 Fri. 4/21/2000  

IKEO: I am pessimistic about the future of Japan in short run while optimistic about it in long run. What I worry about is whether we have to go through painful decades before arriving at the brave new world.
I absolutely agree with Prof. Mera's forecast about next 20 years of Japan.

[73] Future

from  MIYAO   20:37 Fri. 4/21/2000  

MIYAO: I am bit surprised to read your pessimistic messages. I think and hope that Japan is on the verge of breaking into a new age where private and local initiatives will prevail in various sectors of the society, as more and more young (at heart) people are trying to change their old mindset, and adapt to the trends of globalization and the information revolution. Never underestate the great ability to change on the part of the Japanese people. Do I sound like an ultra-nationalist?

[74] Conclusion

from  MIYAO   20:42 Fri. 4/21/2000  

MIYAO: Well, it is getting late. Besides it's Friday evening. So, let me conclude by saying that it is important to let the outside world know that there are sufficiently diverse opinions like ours in Japan on important issues relating to Japan. It apparently is not true that the Japanese do not have their own opinions or different opinions from each other.
I believe that although the Japanese economy and government may be "ill," the Japanese people and society in general are still healthy enough to embrace various opinions for promotion of improvement. We sincerely hope that our debate is contributing to such an improvement in Japanese society, and hopefully to future economic and governmental prosperity.
Do you have anything to say to conclude, Prof. Mera and Prof. Ikeo?

[75] Hopeful

from  MERA   20:42 Fri. 4/21/2000  

MERA: Prof. Miyao's optimism may be justified. If everyone is optimistic, then the society as a whole will grow. Now, most of Japanese are pessimistic. As a result, consumption declines, and then the economy stagantes.
Japan needs more of optimistic people like Prof. Miyao.
The Internet may change the society.

[76] Good night

from  MERA   20:44 Fri. 4/21/2000  

MERA: Thank you Prof. Miyao for giving me this opportunity. I enjoyed the debate. So long , and good night.

[77] Future

from  IKEO   20:46 Fri. 4/21/2000  

IKEO: I think there exist two Japan: Old traditional Japan and newly born Japan. In order that Japan changes in a right direction, the latter Japan has to defeat the former in struggle. The former Japan cannot die without resistance. Its last-ditch resistance may be too strong to win the newly born Japan.

[78] THE END

from  MIYAO   20:47 Fri. 4/21/2000  

MIYAO: With your final words, Prof. Mera and Prof. Ikeo, we bring the online debate to a close.
Special thanks to you, Prof. Ikeo and Prof. Mera for your participation, and to contributing audience members.
Please send any comments or suggestions, and we will respond soon.
Thank you everybody and see you again.

[79] Good night

from  IKEO   20:50 Fri. 4/21/2000  

IKEO: I enjoy the debate, too. Thanks to Prof. Miyo, Prof. Mera, and audience.
Good night. Have a good week end.

[80] Good night

from  MIYAO   20:51 Fri. 4/21/2000  

MIYAO: Again, thank you, Prof. Ikeo and Prof. Mera.
Good night

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