Tokyo Sticks With Industrial Policy

Wednesday, February 3, 1999

The cabinet of Prime Minister Keizo Obuchi adopted a plan January 29 to encourage industry to reshape and reinvigorate itself. The Industrial Revival Plan (unofficial translation) reiterates goals Tokyo has enumerated previously:

1. Create new business opportunities in promising sectors, such as the Internet, advanced telecommunications and computer software.
2. Shift labor from "old" sectors into these more promising areas.
3. Facilitate investment in the high-technology infrastructure that will be the basis of Japan's economy in the information age.

Developed under the leadership of the Ministry of International Trade and Industry, the plan hearkens back to earlier government "visions" for industry. And indeed, the plan says that industry and government must work together closely as the nation "carefully" transitions out of an economic structure based on inefficient manufacturing and into one more heavily dominated by services industries.

Tokyo wants private firms to "streamline" their productive capacity, eliminating the excess built up during the late 1980s "bubble economy." The plan is mute on how to get companies to go along with this idea, however.

The plan does foresee government assistance for retraining and relocating workers, including older workers.

Finally it calls for changes in the legal, government and corporate systems to make it easy for individuals to open their own businesses or for firms to spin-off operations into separate units.

The plan represents a paradox, relying on the government to encourage greater entrepreneurism and rationalization by industry. Clearly the bureaucrats in Kasumigaseki have not given up their belief in the government's role and responsibility to lead the private sector. The idea that free market forces should be allowed to shape the economy still has set few roots in this section of Tokyo.

"JEI's Spin on the News" are the opinions of one of more members of JEI's staff and do not necessarily represent the views of the organization.