Asia Times: EDITORIAL: It won't be pretty



	April 02, 1999	atimes.com

Japan Economy

EDITORIAL: It won't be pretty

In February, Japan's unemployment rate climbed to 4.6 percent, with more than three million people out of work. Not surprisingly, consumer spending also declined year-on-year. But for once, and to its credit, the government of Prime Minister Keizo Obuchi did not panic and promise yet another public spending package. A government spokesman said further lay-offs will have to be expected in coming months as corporate restructuring and economic deregulation proceed.

At this point, that is the proper response. With already announced deficit spending, banking system recapitalization, sizeable tax cuts and record low interest rates, the government has created the fiscal and monetary framework for economic recovery. It is now up to the corporate sector to make the hard decisions - including manpower reduction - to regain competitiveness and profitability as the preconditions for resumed and sustainable economic growth.

Some major Japanese companies have already announced moves in that direction. Sony will reduce its workforce by 15,000 over the next four years. Mitsubishi Electric just announced a planned 13 percent workforce reduction through the ened of the fiscal year ending March 2002. Its stock price promptly jumped by 7.61 percent on the announcement.

We have previously drawn comparisons between the measures taken by the U.S. Reagan administration to revive the American economy in the 1980s and current Japanese moves.

Last week, the Obuchi government took another leaf out of Reagan's book when it formed a high-level industrial competitiveness panel modeled on the 1980s U.S. equivalent. What exactly the U.S. panel ever did or accomplished is not clear. But at the time, it was necessary to focus attention on the subject of corporate restructuring and industrial competitiveness and the private sector then did the rest. We hope the Obuchi panel will have the same signal effect.

That the Japanese government has now decided to speed up its three-year program to promote business deregulation is another positive sign. The revised program states that consideration should be given to allowing profit-making companies to enter the fields of medicine and agriculture. It also calls for a review of government-issued licenses for lawyers and hair dressers (hmm!), and for a review of standards and inspections of products and technologies by fiscal 2000.

Unemployment now in the three million range and rising as the result of restructuring and bankruptcies is the inevitable price Japan is paying for the inefficiencies of its over-regulated economy. Decades of limiting competition, leading to distorted pricing structures and the stifling of innovation, have produced the economic stagnation of the past decade and the results must now be paid for.

Upcoming elections in Tokyo and the November election for the Liberal Democratic Party presidency will show the extent to which the governing party is able to get its reform message across to the population and the extent to which the party itself is willing to reward Prime Minister Obuchi for his reform efforts with another term in office.

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