Government of Japan: Cabinet Office

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Yale University EliScholar – A Digital Platform for Scholarly Publishing at Yale YPFS Documents (Series 1) Browse by Media Type 10-26-2001 Summary of the "Front-Loaded Reform Program" Government of Japan: Cabinet Office Follow this and additional works at: https://elischolar.library.yale.edu/ypfs-documents Recommended Citation Government of Japan: Cabinet Office, "Summary of the "Front-Loaded Reform Program"" (2001). YPFS Documents (Series 1). 9407. https://elischolar.library.yale.edu/ypfs-documents/9407 This Document is brought to you for free and open access by the Browse by Media Type at EliScholar – A Digital Platform for Scholarly Publishing at Yale. It has been accepted for inclusion in YPFS Documents (Series 1) by an authorized administrator of EliScholar – A Digital Platform for Scholarly Publishing at Yale. For more information, please contact elischolar@yale.edu. Provisional TranslationSummary of the "Front-Loaded Reform Program" October 26, 2001Chapter I. Basic Principles1. Current situations of the economy The economy continues to deteriorate. Not only the US but also the world economyas a whole is beginning to show a clear sign of slowdown of economic expansion,which has slashed exports and industrial production, and thereby decreasedcorporate profits and business investment as well. Some weakness has recentlybeen observed in private consumption, and the unemployment rate has risen to anever-highest 5 per cent level. Furthermore, the economy suffers from deflation,which has clouded business outlook and increased personal and corporate debts inreal terms.As for short-term prospects, a decline in corporate profits is likely to further cutbusiness investment, and a concern grows over adverse effects of the terrorists'attacks on the world economy.2. Basic principles Based on the "Outline of Basic Policies for Macroeconomic Management andStructural Reform of the Japanese Economy," (Cabinet decision of June 26, 2001),the government committed itself to formulating a "Reform Schedule" outlining thesequence of structural reform initiatives, including medium-term measures. TheReform Schedule contains certain initiatives which must be formulated andimplemented in advance of the general body of reform. These initiatives, includingthose measures to be included in the supplementary budget, are brought into theFront-Loaded Reform Program.The Front-Loaded Reform Program actively contains measures for regulatoryreform and other forms of institutional reform. Measures requiring a supplementarybudget are limited to highly urgent ones with a direct linkage to structural reforms.The Front-Loaded Reform Program excludes simple demand-increasing measures,including such public works projects, and focuses on measures which can beexpected to generate prompt and tangible results in job creation and therevitalization of private-sector economic activities.Based on the above general principles, the program is complied to achieve thefollowing three objectives: First, activate the economy and enable private sector tooperate lively; Second, ensure the strength of safety net, paying attention to thepossible adverse effects on employment and SMEs; Third, deal with the trend ofthe economy such as dissemination of IT and progress in ageing.In order to attain these objectives, the program incorporates various measuressummarized in five pillars shown below:1. vitalize the economy through actively promoting regulatory reform,facilitating competition and innovation, creating new industries andencouraging challengers to start new businesses;2. reform securities markets and financial system, thereby reallocating resourcesto growth sectors more efficiently;3. reinforce the safety net for the unemployed by helping the young and, inparticular, the middle-aged and old job losers to get new jobs and providingfinancial supports to stabilize their lives;4. support start-ups and management innovations in SMEs on the one hand, andalso help restructuring, thereby preventing SMEs from going into chain-reaction bankruptcies, on the other;5. selectively promote highly urgent measures to enhance the convenience of thepublic, promote human resources development in line with the advance of theIT revolution, and empower women and other individuals and privatebusinesses to realize their full potential, thereby accelerating the process ofstructural reform.Because the measures included in this report shall be brought into practice swiftly,legislative and budgetary measures shall be taken, in principle, at this extraordinarysession of the Diet.Promotion of structural reform planned in the report shall enable domestic demand-led economic growth. Pursuing structural reform, the government shall conducteconomic management, if necessary, in a bold and flexible manner.In addition, the government strongly hopes that the Bank of Japan will implementmonetary policy in an appropriate and flexible manner to eliminate deflationarytendency, in view of future developments of the economy, price developments inparticular, and the government's substantial measures to accelerate structuralreform.Chapter Chapter II. Specific policies1. Institutional reforms and other measures to invigorate the economy andgenerate new industries, challengers, and employment(1) Active promotion of regulatory reform Regulations shall be eliminated as much as possible to promote competition andinvigorate innovation so as to revitalize the economy and to develop consumer- andpeople-oriented social and economic structures. Particular attention shall be givento rigorously implementing regulatory reform in IT-related fields and such "people-oriented service fields" as medical services, welfare and childcare, humanresources, education, the environment, and urban rejuvenation where reform hasremained relatively behind. For this purpose, a maximum effort shall be made toobserve "Interim Summarization concerning Six Priority Areas" of the Council forRegulatory Reform and to implement its recommendations ahead of schedule.a. In IT-related fields, regulatory reform shall be carried out, for example, inthe following areas:Promoting the use of under-utilized optical fiber networks;Facilitating the installation of optical fibers in multi-unit housing; andPreparing legislation for establishment of rules of responsibility forInternet service providers and others.b. In "people-oriented service fields," various measures shall beimplemented to promote appropriate responses to changes in employmentconditions and to accelerate structural reforms in areas of particular interest tothe public. Furthermore, bold measures for regulatory reform shall be taken ina fashion not bound by traditional institutional frameworks.Medical servicesPromoting use of IT in medical services such as recording receiptsAllowing patients to choose more freely between medical serviceswith and without a public insurance schemeReviewing regulations concerning management of medicalinstitutionsReviewing system of doctor's fees (e.g. extended use of lump sumpayments for certain diseases)Welfare and childcareLifting the ban on corporate management of care houses and otherfacilitiesPromoting private-sector participation in the management ofchildcare facilitiesPromoting the diversification of childcare servicesHuman resources (labor)Legislating a special temporary bill to facilitate hiring of themiddle-aged or elderly as dispatched workersFundamentally easing regulations pertaining to employmentagenciesReviewing management of the temporary job-placement systemwith a view to permanent employmentEducationEstablishing standards of accreditation for private elementary andjunior high schoolsDeveloping new types of elementary and junior high schoolsEnvironmentComprehensive measures in preparation for the ratification of theKyoto Protocol.Establishing measures for soil detoxification in urban areas andother areasUrban rejuvenationFurther disclosing real estate related informationPromoting the circulation of second-hand housingFacilitating the rebuilding of multi-unit housing(2) Structural reform of securities markets and financial system In order to revitalize the economy, it is necessary to reallocate resources togrowth sectors more efficiently through securities markets and financialsystem. Thus comprehensive measures shall be taken to undertake structuralreform in securities markets and financial system.a. Structure reform of securities markets Highly transparent securities markets shall be developed to enable the generalpublic to participate in these markets with ease. In particular, a bill to reformsecurities settlement system shall be submitted to the next ordinary session ofthe Diet at latest.In line with the transition from preferential treatment of savings topreferential treatment of investment, from January 2003, capital gains onlisted equities shall be subject to self-assessed separate tax system uniformly,there shall be lower tax rates and carry-overs of losses from the pasttransactions shall be permitted. Moreover, as for newly obtained listedequities, taxes on capital gains shall be made exempt under certain conditionsby new legislation planned for this extraordinary session of the Diet.b. Reinforcing disposal of NPLs (non-performing loans) and enhancingintermediate functions In order to normalize the NPL problem within three years at the latest, thefollowing measures will be taken urgently in order to intensify the disposal ofNPLs and invigorate intermediate functions of finance at the same time aspromoting of structural reforms in other fields:Enhancing availability of loansFacilitating loans to "healthy" customersTaking measures promptly and decisively to ensure soundness of banks'assetsUpgrading inspections of major banks by increasing the frequencyof comprehensive inspection from once every two years to onceevery yearRequesting major banks to disclose their financial statements andother informationUtilizing RCC to speed up disposal of NPLs and corporate restructuringMaking purchase price setting of NPLs by DIC and RCC moreflexible, thereby disposing NPLs intensively by the end of FY2003. These institutions shall diversify ways to dispose theobtained assets and try to sell them in three years after theacquisition. Furthermore, on November 1, RCC shall set upheadquarters for corporate restructuring in order to facilitaterehabilitation of failed companies.Making loans from the DBJ (Development Bank of Japan) andother public financial institutions available to companies underrestructuringRequesting the DBJ, private investors and RCC to set up and/orparticipate in funds, which will buy shares issued by companieswith promising restructuring plans (and obtained by banks throughdebt-equity swaps) and help those companies to realize the plans.Paying attention to carrying out the final resolution of NPLs (with in 2years for existing NPLs and within 3 years for new NPLs )Taking necessary measures to prevent sound SMEs from goinginto chain-reaction bankruptcies2. Measures for strengthening safety nets relating to employment andSMEs(1) Employment measures With the unemployment rate exceeding 5%, the situation in labor markets isbecoming increasingly severe. In view of this fact, in addition to theimplementation of institutional reforms and other measures for the creation ofnew employment, "the Bill for Emergency Employment Measures" shall besubmitted to this extraordinary session of the Diet and other efforts shall bemade to further strengthen employment-related safety nets.a. Improving job-placement function through utilizing private-sectorinitiatives In view of increased unemployment due to mismatching in the labor markets,private-sector initiative shall be utilized to improve job-placement functions.Extending eligibility for employment subsidies to hirings though privatejob-placement servicesStrengthening supports to temporary and permanent transfer fromdepressed businessesProviding want ads on InternetReinforcing function of supporting system at job-placement officesb. Strengthening job training and capacity building programs While allowing for maximum individual choice, all education and trainingresources, such as private education and training institutions, universities, andprivate employers, shall be utilized to strengthen various job training andcapacity building programs which are especially effective for displacedmiddle-aged and older white collar workers.c. Encouraging reemployment efforts and supporting lives of theunemployed Systems for unemployment benefit payments with job training shall besubstantially extended to support reemployment efforts. Support measures foremployers shall also be reviewed to promote job creation in new growthareas.A new program shall be launched to provide financial supports to theunemployed who used to be self-employed and, therefore, are not under theemployment insurance scheme.d. Employment in new types of public service In order to cope with employment problems during a period of intensiveadjustment (forthcoming period of 2 to 3 years), funding shall be establishedfor the creation of emergency and temporary employment (jobs in new typesof public services) in the public sector (including private businesses andNPOs). Such jobs shall target middle-aged and older unemployed persons andpersons not receiving unemployment insurance benefits, and shall include thefollowing: teachers' assistants at schools, support personnel for police force,and forestry workers for environmental preservation.(2) Measures for SMEs In conjunction with the progress of structural reform, support shall beprovided for the establishment and business innovation of highly motivatedsmall and medium-sized enterprises with outstanding potential. Appropriatesteps shall be taken in conjunction with such support to avoid moral hazards.To prevent chain-reaction bankruptcies and to support business innovationamong such highly motivated and promising SMEs, safety net mechanismsshall be further strengthened, including the creation of new financial measuresand facilities for SMEs, esp. a loan guarantee using credit sales as collateraland a loan program for SMEs under restructuring.3. Highly urgent measures for accelerating structural reformsHighly urgent measures shall be implemented for accelerating the process ofstructural reform. The following specific measures shall be considered for thepurpose of enhancing the convenience of the public, promoting humanresources development in line with the advance of the IT revolution, andempowering women and other individuals and private businesses to realizetheir full potential.a. Realization of electronic government"E-Japan priority program" and "e-Japan 2002 program" shall beactively promoted to realize e-Government in 2003.b. Promotion of information infrastructure in schoolsLAN system shall be developed in public elementary and junior highschools.c. Promoting zero waiting-list for nursery schools and development ofafter-school childcare systemsThe number of openings at nursery schools shall be increased by150,000 by FY 2004 through utilizing a scheme where the public sectorbuild facilities and the private sector manage their operations.Facilities for after-school children shall be increased by 15,000 by FY2004.d. Urgent improvement of waste disposal facilities (control of dioxinemissions, etc.)Construction of waste disposal facilities meeting a new standard(stipulated by a special law for controlling dioxin emission and otherchemical substances) will be supported.e. Innovation and the creation of new industries for revitalizing localeconomies based on the promotion of local science and technology throughthe cooperation among industry, university and government.Formation of human network between industry, university andgovernment will be encouraged.Ties between research institutes, local governments and companies willbe facilitated.f. Promoting PFI contributing to urban rejuvenation, urbandevelopment, and improvement of public facilitiesPrivate initiatives shall be fully utilized in building or rebuilding centralgovernment offices and multi-unit houses for government officialsAppendixBudgetary measures from the general account of the central government toimplement the measures incorporated in the Front-Loaded Reform ProgramBillionyenEmployment measures 550.1 (note 1)Employment in new public services 350.0SME Measures 251.1 (note 2)Highly urgent measures to accelerate structural measures 198.9 (note 3)Realizing E-government 47.0Promoting information infrastructure in schools 29.5Promoting zero waiting-list for nursery schools and developmentof after-school childcare systems 21.0Improving urgently waste disposal facilities 44.5Innovation and the creation of new industries for revitalizinglocal economies based on the promotion of local science andtechnology through the cooperation among industry, universityand government46.9Promoting PFI contributing to urban rejuvenation, urbandevelopment, and improvement of public facilities 10.0Total 1 trillion yenNote 1. For implementing a trillion yen projects in total. 2. For loans and guarantees worth 4.5 trillion yen in total. 3. For implementing 0.3 trillion yen projects in total.

Summary of the  Front-Loaded Reform Program

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Summary of the Front-Loaded Reform Program

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