Vested interests could hinder Japan's move to open markets

Japan's so-called "Big Bang", an ambitious programme of financial deregulation unexpectedly announced by the government on Monday night, was welcomed by business leaders yesterday, but faces formidable obstacles if it is to come fully into effect by its deadline of 2001.

Shunsaku Hashimoto, chairman of the Federation of Bankers' Associations of Japan, yesterday praised the government for its "plans to re-invigorate the financial market as a venue that can match New York and London". Opinion in Tokyo, however, was divided over whether political instability will consign the latest reform initiative to the sizeable scrap-heap of disappointed promises.

Details of the plan are vague, although finance ministry officials are presenting it as the most wide-reaching and detailed ever seen in Japan. Under the slogan "Free, Fair, Global", it is intended to cut through the regulatory red tape which is increasingly causing the Tokyo markets to lag behind international competition.

If fully realised it will open up competition across a range of financial sectors, providing lucrative opportunities for smaller Japanese companies, as well as foreigners, hitherto excluded by the iron grip of the ministry of finance. But it also raises the spectre of bankruptcies, especially for smaller firms, shakily emerging from a painful recession and banking crisis.

Prominent among the proposals are plans to increase competition by allowing banks, brokerage houses and insurance companies the right to participate in one another's markets. Government regulation of insurance premiums and stockbroking commissions will also be reduced, and greater access will be granted to Japan's vast, and hitherto closely regulated, pension market. Distinctions between commercial banks, long-term credit banks and trust banks will also be removed, enabling commercial banks to issue debentures and provide trust services, which at present are virtually unavailable to ordinary Japanese investors.

The outline for the plan speaks of legal reforms and changes in the tax and accounting regulations which would increase financial transparency and bring them closer to international standards. For instance, loopholes which make it difficult to calculate the precise assets of big corporations will be eliminated. The first step, an abolition of the rule which restricts foreign exchange transactions to authorised commercial banks, is set to be submitted to parliament in the new year.

The timetable for the rest of the programme is vague, and virtually all of the proposals have been fruitlessly floated before by various government panels and deregulatory bodies. But the high-profile nature of the announcement, endorsed by the Prime Minister, Ryutaro Hashimoto, less than a week after his formal re-election, will make it harder for politicians and bureaucrats to wriggle out of implementing them.

The biggest obstacle may be political. Mr Hashimoto's government is 12 seats short of a full majority and vested interests will ensure each new bill has a rough passage. Particular resistance can be expected from the many Japanese MPs who began their careers in the bureaucracy, and from big businesses which benefit from the current closed markets. "No matter how indispensable it may be for the Japanese economy in the 21st Century," concedes the draft plan, "such a thorough structural reform necessarily brings various pains."

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific