Reflections on the Lecture by Mr. Tadenao Nakagawa, Chairman of the Policy Research Council of the LDP
June 20 (Tuesday) 2006
Recently I attended a lecture by Mr. Tadenao Nakagawa, Chairman of the Policy Research Council of the Liberal Democratic Party. The lecture was given at a study group for business managers that I host, and it was also attended by several researchers from FRI. Spirited and intellectually curious owner-managers and venture company managers from around the country gathered for the talk. As the lecture was closed to the public, Mr. Nakagawa was very frank and presented his thoughts in a straightforward manner.
Mr. Nakagawa's lecture was extremely informative and helpful for us in many ways, so I will take the time here to introduce the key points of the talk.
As Chairman of the Policy Research Council of the LDP, Mr. Nakagawa received a strong request from Prime Minister Koizumi to press forward with the party-led Integrated Reform of Expenditures and Revenues. Rather than relying on an administrative institution to do the work, Mr. Nakagawa solidified the proposal by using his role as chairman to mobilize the vice minister and government bureaucrats.
The greatest challenge facing the combined reform is to rationalize and shrink expenditure as much as possible. However, compared to many other countries, the number of government employees and the size of expenditure are both not very large. On the other hand, approximately 40% of Japan's economic activities are controlled through government regulations and permissions. As a result, the Japanese market lacks efficiency and has strong socialist economic qualities. These mechanisms must be radically reformed.
Another lingering issue is the attitude of “honoring the bureaucrats and looking down on the citizenry”. This is fostered not only by the control of the bureaucrats, but also by the citizens themselves. Specifically, attitudes such as, “It's okay to let the bureaucrats do this,” and “It's not something that we're doing personally,” are very strong in Japan, and it is crucial that the nation as a whole reform their own perceptions on this issue. In Japan, a dichotomized society must be created that not only separates the government from the market, but also encourages citizens to proactively consider how much they can do for society before deciding on proper tax burdens.
Mr. Nakagawa's speech unfolded from the perspective of promoting further reforms, and one point that was particularly memorable was his remark on how to grasp the importance of the current IT revolution. According to Mr. Nakagawa, the IT revolution is just as significant as the industrial revolution that changed the world in the 1800s.
During the latter half of the 19th Century, Japan was the single most successful nation out of all of the countries in Asia to ride the wave of the industrial revolution and achieve modernization. The major powers China and India and the countries of Southeast Asia were all unable to successfully evolve and take advantage of the industrial revolution on their own, ushering in a century of delayed development. On reflection, it is undeniable that there are many grave problems with how modern-day Japan should respond to the historic IT revolution that is currently taking place. On the other hand, Korea, India, and China are using the IT revolution as a vehicle to create their countries anew.
Just as in the Meiji Restoration, Japan's position in the world in the coming years will be decided by whether or not it can use this historic revolution in technology effectively to adapt itself to the new global environment. I wish to put particular emphasis on the way that the above historical perspectives are threaded through Mr. Nakagawa's concepts for creating a new strategy for growth and continuing on the path of structural reforms.