NO. 24 &emdash; June 27, 1997


Feature Article


From the fury of the debates over taxes in the United States and Japan, bystanders could be forgiven for concluding that the two nations are the most heavily taxed on the planet. In fact, the opposite is closer to the truth. Tax burdens in both countries are low by the yardsticks of other industrial nations. Moreover, their tax structures differ little, arguably reflecting the closeness of bilateral economic relations in the postwar period.

The debates in the United States and Japan concerning tax changes also have parallels. Both countries long have worried about shifting tax burdens from corporations to activities, such as consumption in Japan's case, that are perceived to create fewer economic dislocations.

As pivotal parts of the increasingly global economy, neither nation will be able to escape the expanding cross-border impact of taxes, an issue that currently is of great concern in Europe. Eventually, the United States and Japan may feel compelled to become part of an international organization devoted to the prevention of national tax-cutting instituted to gain competitive advantage in world markets. For now, however, creation of such an organization is far from a foregone conclusion. It could prove highly controversial, particularly in this country.

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Weekly Review

Japan Takes Initiative, Incurs Criticism At Summit Of Eight by Barbara Wanner

Although applauded by other Group of Seven major industrial nations plus Russia for playing a leading role in trying to quell discord in an Asian Pacific hot spot, Japan also was singled out for criticism at the June 20-22 Summit of Eight in Denver, Colorado for its ballooning current account surplus. The June 21 economic statement called on all participants to do their utmost to realize sustainable economic expansion, but it specifically urged Japan to pursue "robust domestic demand-led growth," advance deregulation and avoid a significant increase in its external surplus.


Panels Issue Schematics For Financial Market "Big Bang" by Jon Choy

A wave of advisory panel reports issued in late May and the first two weeks of June provides a schematic for Prime Minister Ryutaro Hashimoto's "Big Bang" financial market reform plan. Mr. Hashimoto pledged last November to raise Japan's financial markets to a par with those in New York and London by the year 2001.


Diet Completes Busy Term by Douglas Ostrom

For the second year financial-sector reform dominated the deliberations of the Diet, which finished its 1997 regular session June 18. Among the 104 laws passed were measures changing foreign exchange trading, the corporate financial structure, monetary policy implementation and bank supervision. An important exception to this pattern was the approval of revisions to the Special Measures Law for Military Land Use that paved the way for the continued legal occupation by the U.S. military of facilities on Okinawa. The Diet also passed a measure authorizing organ transplants from brain-dead donors, thereby bringing Japanese practice closer to that in most other industrial nations, including the United States.



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