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Deregulation has played a significant role recently throughout the world, and Japan is no exception. We would like to reinforce this movement, taking into account the remarks of attendants from this meeting.

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The Japanese economy needs further deregulation for the following four reasons.

• Stagnation

Despite a series of fiscal and monetary stimulation measures by the Government, the average annual growth rate between FY1992 and FY1995 was as low as 0.7%. In this respect, further deregulation is required to broaden the choice of consumers, which should lead to expansion of domestic demand.

• Deepening of deindustrialization

With the appreciation of the yen after 1993, an obvious trend in Japanese manufacturing sector to shift its product bases abroad emerged. The percentage of overseas production of the Japanese manufacturing sector, which was 6% in FY1991, rose to 10% in FY1995. This movement has eroded job opportunities. Therefore, it has been recognized that it is necessary to develop new frontiers in Japanese industry through deregulation.

• Increasing dissatisfaction with low standard of living

In FY1994, per capita GDP was $37,618, the highest among OECD member countries. However, living standards of the people are by no means the highest. This gap is partly due to Japan's high prices. In November 1995, prices in Tokyo were 1.59 times higher than those in New York. It has been recognized that deregulation is the key in reducing price differencetials between Japan and abroad, through encouraging competition, as well as through improving productivity, especially in the non-manufacturing sectors.

• Sustained current account surplus

The current account surplus to GDP rose from 1.2% in 1990 to 3.2% in 1992 (2.2% in 1995). It has been pointed out that Japan should open its market and increase imports in order to decrease its current account surplus.

Responding to these issues, the Japanese Government has given top priority to economic policies that promote deregulation.

The Government decided on its "Deregulation Action Plan" at the ministerial meeting in March 1995. It includes deregulation on 1091 items in 11 areas over the next five years. This plan was drawn up under a transparent process while listening to views and requests from Japan and abroad. This plan is to be revised every year. The Government decided to reduce its terms to three years. In March 1996, the plan was amended by adding more items; there are now a total of 1797 items.

The Government also decided at ministerial meeting in December 1995 its "Social and Economic Plan for Structural Reforms Towards a Vital and Secure Life". The Government assumes that rectifying the high-cost structure of the Japanese economy is an issue of significance, and has listed detailed "Action Plans" for ten major areas. "Action Plans" deregulation will be promoted along with concrete goals. One example is the plan to cut construction costs to two thirds of the current cost by the end of the year 2000.

In the Economic Plan, economic growth between 1996 and 2000 is estimated to be 3% per annum if Japan immediately and actively implements the structural reform measures in the plan. It forecasts, however, a 1 3/4% growth if little or no progress is made in structural reform. This indicates that structural reforms including deregulation will raise economic growth by 1 1/4% points per annum. This is because structural reform will : (1) increase productivity in the non-manufacturing sectors; (2) increase investment in plant and machinery related to information technology; and (3) increase consumption as a result of wider choices for consumers.

In this plan, the Government also assumes that because of the progress of economic structural reforms, production will rise by 瞼28.6 trillion in areas of promising growth such as information and telecommunications, health-care and welfare service, and environmental services, which will create employment for 4.21 million people.

We can already see the effects of deregulation in five years we have promoted.

• Increase in consumption for new industries

Deregulation in telecommunications service has caused the rapid spread of the cellular telephone. The number of subscribers rose by 8.8 times between 1990 and 1995.

• Decline in prices as a result of competition

Charges for domestic calls were cut in half; international calls fell to one third of their 1985 price.

• Increase in plant and machinery investment

In FY1995, investment in plant and machinery in the telecommunications industry is already 5.2 times as large as that of the steel industry.

• Increase in productivity in non-manufacturing sectors

Deregulation on the large-scale retailers resulted in a 35% expansion of supermarket floor space over the past five years.

• Expansion of imports

Deregulation in the housing sector increased the import of house components by 3.6 times over the past seven years.

Deregulation is by no means complete. Mr. Shusei Tanaka, Minister for Economic Planning, recently emphasized that we should accelerate deregulation further in six major areas : (1) information and telecommunication; (2) distribution; (3) finance; (4) real estate and housing; (5) employment; and (6) health and welfare. We will promote deregulation mainly in these six areas to revitalize the economy.