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A Policy Package for New Economic Development Toward the Rebirth of Japan (2000.10.19)

Preface

This Policy Package for New Economic Development Toward the Rebirth of Japan (New Development Policy) has two main goals of firmly placing the Japanese economy onto a self-sustained recovery path and providing the basis for launching a future society that will be appropriate for the era of diverse knowledge.

As a result of the swift and large-scale economic stimulus measures implemented by the Japanese government since 1998, the Japanese economy has averted the peril of falling into a deflationary spiral and is now gradually improving, after bottoming-out around the spring of 1999. The performance in the corporate sector has been particularly favorable, with an increase in corporate profits and a recovery in capital investment.

Nevertheless, employment conditions are still severe, and consumption is moving back and forth. Given these conditions, the government's immediate duty is to foster greater economic vitality and firmly place the economy onto a self-sustained recovery path.

Human civilization is now in the midst of the greatest transformation since the industrial revolution. We are seeing a great leap forward from an industrial society based on the mass production of standardized goods to a society of diverse knowledge, replete with diverse information and individuality. For Japan to remain a key player in the global economy of the 21st century, we must take the lead in implementing this revolutionary change. Consequently, another and still more important role of the New Development Policy is to make clear the direction of the structural reforms and the changes of people's mind required to realize a society of diverse knowledge.

Based on this perspective, the New Development Policy emphasizes four priority fields that are deemed to be particularly important for the society of the future. These are: 1) rapid promotion of IT revolution; 2) responding to environmental issues, including the establishment of a recycling society; 3) responding to the aging of society to create an vibrant future society; and 4) upgrading the urban infrastructure to create convenient and hospitable towns.

In embarking upon such a transformation of historical proportions, we must boldly adopt highly efficient policies and implementation methods, without adhering to the established systems and conventional practices.

The New Development Policy must incorporate an innovative policy framework not merely for the fiscal and monetary measures that need to be devised without delay, but also for key regulatory reforms such as reform of the judicial system and revisions to Japan's basic laws, adjustment of the legal system to promote greater corporate vitality, proactive measures to develop human capabilities and boost social efficiency, and measures toward securing a new foundation for future growth in terms of facilities and their utilization.

Part I: Basic Approach

1.Understanding of Current Economic Conditions

(1)The global economy is still maintaining a growth momentum overall. Nevertheless, there are several items of concern for the outlook, including the increasing uncertainty regarding the future direction of the U.S. economy, which has enjoyed a long period of prosperity, the economic trends in Asian nations, which have now passed the phase of recovery from the economic crisis, and the recent substantial rises in crude oil prices.

(2)The Japanese economy is now sustaining moderate growth, primarily in the corporate sector, as the effects of the "Emergency Economic Measures" of 1998, the "Policy Measures for Economic Rebirth" of 1999 and the various other stimulus measures have become manifest, and as Japan has also benefited from the recovery in Asian economies. Nevertheless, employment conditions are still severe, even though they have improved somewhat, and consumption remains sluggish. Thus, on the whole, the Japanese economy has not yet achieved a private-demand driven, self-sustaining recovery.

(3)Moreover, there are several items of concern in terms of their influence on the domestic economy. In the labor market, while the number of job offers is on a rising trend, there is a severe mismatch between labor supply and demand, and the improvement in the employment environment has been delayed. In the corporate sector, while profits and capital investment are rising, the number of corporate bankruptcies and the outstanding amount of debts remain at high levels. Land prices continue to decline although there is some variation by region, and stock prices have recently been falling. The problems of excess production capacities and excess debt have still not been resolved.

2.Leap to a Knowledge-Based Society

(1)Ever since the industrial revolution in the latter half of the 18th century, humanity has striven to form an industrial society based on the mass production of standardized goods. Since the 1980s, however, the advances in information science and software and the wave of globalization have created new value of knowledge, and significantly changed the direction of civilization. Especially, the rapid development of the Internet, which began from the U.S. during the first half of the 1990s, spread to the Europe and the East Asia and is now spreading worldwide, is creating a new society with values and human relations quite different from those of the past.

(2)The global economy is presently undergoing the most momentous transformation since the industrial revolution, with corporate mergers and alliances transcending national boundaries, the global-scale exchange of information, capital, and personnel, and the widespread adoption of IT in all industries, and is now leaping forward to an entirely new development stage. It is the value of knowledge which is generated from dynamic exchange of information that will form the foundation for the economy and civilization of the 21st century.

(3)For Japan to remain a key player in the global economy of the 21st century and contribute to the peace and prosperity of mankind, we must take the initiative in advancing the IT revolution centered around the diffusion of the Internet, create recycling society supported by sound economics and ethics, and lead other countries by addressing global environmental problems. Similarly, Japan must play a pioneering role in resolving the urgent problems posed by the rapid aging of the population structure via creating a society filled with vitality and pleasure, and thus contribute to all humanity by providing a role model for the many other nations facing the same issues.

(4)Another critical structural issue is Japan's national land-use structure, especially in the area of urban infrastructure. Japan's land-use structure has been developed to meet the needs of an industrial society based on the mass production of standardized goods, so there are many areas where the facilities, and the systems and practices, are now outdated from the perspective of the era of diverse knowledge. It will be critical to reinforce the competitiveness of our cities in the new era of globalization and to improve the efficiency of our land-use structure, and we should move quickly in upgrading the infrastructure and revising the relevant systems toward these ends.

3.Basic Policy Direction

(1)The main purport of the New Development Policy is to embark upon a major transformation to create a socioeconomic structure that is suitable for the era of diverse knowledge in the 21st century. For this purpose as well, it is necessary to firmly position the Japanese economy onto a self-sustained recovery path and to reinforce its foundation.

(2)Accordingly, given the present conditions, we must avert any sudden decrease in public demand and hasten to firmly place the economy onto a self-sustaining recovery path. In this process, it will be essential to foster a transformation in the spirit of the nation which should bring about a long lasting self-sustaining growth.

(3)Consequently, the New Development Policy takes a comprehensive approach by emphasizing the following four priority areas and promoting forward-looking economic structural reforms toward the new era.

(a)Rapid Promotion of the IT Revolution Secure the self-perpetuating development of IT by clearly establishing three main pillars of upgrading IT facilities, spreading IT utilization skills, and reinforcing information contents.

(b)Responding to Environmental Issues, Including the Establishment of a Recycling Society Move beyond individual waste product regulations to create a recycling society supported by sound economy and ethics through changing socioeconomic systems, developing technologies and facilities, and promoting the environmental industries and materials recovery industries.

(c)Responding to the Aging of Society to Create an Vibrant and Pleasant Future Society Prepare the social conditions that are appropriate for an aged society, create a society in which the elderly have the choice to continue working, and form a society wherein the elderly can enjoy their lives.

(d)Upgrading the Urban Infrastructure to Create Convenient and Hospitable Towns Amid the new conditions of civilization, that is, advanced information technologies, a fewer number of children per family, the aging of society, and globalization, create convenient, highly competitive, hospitable towns.

(4)In compiling government policies, we must clearly explain the status of each measure for the realization of the future society, and otherwise present persuasive measures that will gain the understanding and participation of the citizenry. To these ends, the goals and the target years of each measure should be explicitly stated so the policy effects will be patently clear to the citizenry, and the measures should be implemented on an intensive basis.

(5)The overall scale of the works to be promptly implemented under the basic policy direction presented above will be on the order of  11 trillion yen.

The implementation of these works shall give good considerations to the trends of each regional economy, and extensive local government finance measures will be devised for local government burdens for these works, in light of the extremely harsh conditions of local government finances.

Additionally, the government shall continue moving forward with the collection of the required data and the creation of macroeconomic models for examinations of Japan's basic policy for economic and fiscal management over the middle to long term.

Part II: Specific Policy Measures

I. Measures for the Realization of the Japan Rebirth Plan, etc.

1.Measures to Rapidly Promote the IT Revolution

(1)Promotion of the E-Japan Initiative
  • Rapid passage of the bill providing a basic legal framework for vigorously promoting dramatic advances in the IT revolution; compilation of an IT National Strategy (the E-Japan Initiative).
(2)Upgrading systems and facilities and promoting technological development that will constitute the foundation of the IT society
  • Systems reforms (responding to the various issues accompanying the ongoing integration of telecommunications and broadcasting; appropriate competition policy for telecommunications carriers; passage of a basic law to protect personal information; setting the rules for the open use of NTT's fiber optic network; etc.).
  • Upgrading of facilities (installation of public-access Internet bases; providing fiber-optic high-speed access circuits for Internet connections at approximately more than 1,000 schools; advancing the target date for installation of LANs at 8,000 schools by two years; completing a nationwide subscriber-access fiber optic network; etc.).
  • Promoting the development of technologies (accelerating the implementation of the "IT21 Promotion Project"; development of technologies that can easily be used by the elderly and people with disabilities; etc.).
(3)Measures to Boost IT Usage Skills Through Development of the People's Movement for the Spread of IT
  • Lectures on basic IT skills using schools, public halls, libraries, etc. (for approximately 5.5 million people); providing expanded opportunities to acquire IT skills, including public IT vocational training (for approximately 1.5 million people); promoting reduction of the fees charged for school Internet services; etc.
(4)Measures to Advance the Convenience and Pleasure of IT Usage
  • Early achievement of high-level electronic government (complete implementation by FY 2003; moving forward the implementation dates; etc.); upgrading the environment for expanding electronic commerce (Documentation Law; permitting Internet usage for notification of general shareholders' meetings, etc); enjoying the convenience of IT in people's lives and industrial activities (facilitation of Internet usage for the employment agency business; IC cards; etc.); promotion of Internet Fair 2001 Japan.

2.Measures to Respond to Environmental Issues, Including the Construction of a Recycling Society

(1)Upgrading Waste Treatment and Recycling Facilities; Making Legal Operations More Appropriate
  • Upgrading waste treatment by establishing wide-area waste treatment facilities and state-of-the-art recycling facilities; promoting the remodeling and construction of new incineration facilities that meet the dioxin concentration standards; improvement of the electronic waste product manifest system; etc.
(2)Technological Development for Construction of a Recycling Society, etc.
  • Evaluation of the risks posed by endocrine disruptors; accelerated implementation of "Millennium Projects" including the development of recycling and re-use technologies for waste products that are difficult to process; countermeasures to diesel and other automobile exhaust gases; etc.
(3)Promoting the Environmental Industry and the Spread of Environmental Products
  • Expand the coverage of laws to promote the effective utilization of resources to encompass automobiles, personal computers, etc.; recovery of CFCs from automobile air conditioners in the dismantling process for discarded automobiles; promote the adoption of residential photovoltaic generation systems; etc.
(4)Others

3.Measures to Respond to the Aging of Society Toward Creating an Vibrant and Pleasant Future Society

(1)Creation of Living Space Where the Elderly Can Enjoy Their Lives
  • Make public space barrier-free (accelerate the installation of barrier-free facilities at train stations; set goals for the installation of barrier-free facilities for other public transportation means); promote barrier-free housing; etc.
(2)A Society in Which People Can Choose to Work Until They Reach Age 70
  • Support measures for business proprietors who provide temporary employment of middle-aged and elderly workers on a trial basis; promote the arrangement of barrier-free workplaces by business proprietors; etc.
(3)Research and Development for the Health and Social Participation of the Elderly, etc.
  • Accelerate the implementation of the "Millennium Genome Project"; advance the implementation of the "Medical Frontier Strategy"; etc.
(4)Upgrading the Foundations for Nursing Care Services
  • To achieve the Gold Plan 21, accelerate the upgrading of special residential institutions for the elderly, public health bases to avert the need for nursing care, etc.; advance paperless nursing care insurance clerical works; etc.
(5)Establishment of Systems for the Peace of Mind of the Elderly
  • Social security reforms (across-the-board review of all social security systems providing coverage throughout citizens' lifetimes including pension, medical care, nursing care, and employment systems; rapid passage of the defined contribution pension plan bill; etc.).
  • Upgrading the medical care provision system, including advancing the adoption of IT in medical fields.

4.Measures to Upgrade the Urban Infrastructure to Create Convenient and Hospitable Towns

(1)Radical Measures to Resolve Traffic Congestion
  • Promoting prioritized resolution of traffic bottlenecks (resolve the bottlenecks at 100 key locations within FY 2000, and at another 100 key locations within FY 2001); promoting prioritized construction of loop expressways in the three major metropolitan areas; etc.
(2)Promotion of Comfortable and Energetic Towns
  • Promoting the burial of utility lines (1,300 km within FY 2000); improving street lighting (at 5,000 locations within FY 2000).
  • Promoting the creation of a pedestrian-friendly urban environment; shortening of commuting times in major cities and reconstructing existing urban areas; revitalization of urban industries; improving hub seaports and airports.
(3)Others
  • Promoting the securitization of real estate; promoting the appropriate utilization of real estate; review of the Land Expropriation Law.

5.Measures to Promote Education and the Healthy Upbringing of Youth

(1)Upgrading school facilities, etc. (2)Enhancing scholarship programs. (3)Upgrading childcare facilities.
  • Multi-function childcare facilities; family support centers.
(4)Measures to prevent drug abuse. (5)Measures for fostering and rehabilitating youth.

6.Measures to Enhance the Civil Infrastructure and to Prevent Disaster

(1)Upgrading the Civil Infrastructure
  • Efficiently upgrading sewerage and community waste-water systems; improving high-grade regional roads and other regional transportation infrastructure.
(2)Measures for Disaster Prevention and Disaster Relief
  • Advance of disaster-prevention measures including the prioritized implementation of urgent anti-flooding works in urban areas; rapid implementation of recovery works to respond to the recent spate of natural disasters.
(3)Housing Financing Measures
  • Expansion of the Housing Loan Corporation funding mechanism for an additional 50,000 homes.

II. Improvement of the Business Environment for the Revitalization of Industry

1.Revision of the Corporate Legal System and other Measures to Support Dynamic Corporate Activities

(1)Review of the Corporate Legal System
  • Review of the stock options system; fundamental revision of the Commercial Code.
(2)Revision of Employment Systems to Respond to Structural Changes
  • Revision of employment promotion laws to secure employment stability by promoting smooth labor mobility; resolution of the mismatch between labor supply and demand; etc.

2.Upgrading the Foundations for Creative Technological Innovations

(1)Strengthening the International Competitiveness of Japanese Universities; Wider Adoption of Competitive Systems for Awarding Research Grants; etc. (2)Greater Labor Mobility to Promote Stronger Ties Among Industry, Academia, and Government

3.Measures for Small and Medium Enterprises

(1)Financing Measures
  • Expansion of the general credit guarantee system by raising the upper limit on uncollateralized credit guarantees from 50 million yen to 80 million yen, enhancing the safety net, etc.
(2)Support for Response to the IT Revolution by Small and Medium Enterprises
  • Implementation of seminars and training programs, and development of standardized software for small and medium enterprises with the goal of having approximately 50% of all small and medium enterprises engaged in electronic commerce by the end of FY 2003; etc.

4.Stabilization of the Financial System, and Vitalization of Financial Markets

(1)Reinforcing Auditing and Supervision Systems (2)Stabilization of the Financial System (3)Advance of Paperless CP, Etc.

5.Promoting the Securitization of Debts

III. Others

1.Tax System

2.Appropriate and Flexible Management of Monetary Policy by the Bank of Japan

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