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Overcoming the Challenge of Regulatory Reform

Contemporary Japan-EU Relations¹

by

Paul James Cardwell

About the Author

Abstract

Regulatory reform has become a dominant feature in the legal and economic environments of states in different parts of the globe. Japan, however, stands out as one which has taken limited steps towards comprehensive regulatory reform. Developments over the past decade suggest that regulatory reform has now become central to the economic and administrative reforms undertaken by the Japanese government. The European Union (EU) has been increasingly vocal in pushing for regulatory reform in Japan. The EU-Japan Joint Declaration 1991, which established a new 'partnership' in international affairs between the two sides, became the basis on which a dialogue on market access began during the 1990s. This has since evolved into a Regulatory Reform Dialogue by which the EU and Japan exchange proposals for removing barriers to market access and related issues.

This article examines the nature of regulatory reform in Japan, and analyses the Regulatory Reform Dialogue against the background of the EU-Japan relationship. Although the amount of influence the EU has exerted on Japan during this period of reform is difficult to determine, the importance of the dialogue as evidence of a strengthening of the 'partnership' should not be underestimated.

Introduction

Japan stands out amongst the most developed economies as one which has only taken limited steps towards comprehensive regulatory reform. This is in contrast to the regulatory reform of economic activity undertaken by the member states of the European Union (EU)² and the United States. The apparent reluctance to reform in Japan can be explained by a number of factors, some which were also present in other states, and some unique to Japan. The primary reason was that consistently strong economic growth for three decades until the 1990s meant that successive Japanese governments were wary of making profound changes to the legal, administrative or economic system. In recent years, and in light of the Asian financial crisis during the late 1990s, excessive regulation of economic activity has been identified as a factor which has prolonged Japan's economic stagnation. Japan's political and economic leaders have begun to see the potentially positive economic effects of regulatory reform as part of an overhaul of the system in order to revitalise the economy. The regulatory reform horizon in Japan has therefore changed dramatically.

Recent changes to the Japanese regulatory environment have been welcomed by the EU, which, along with the United States, has been vocal in lobbying for regulatory changes. The strength of US influence on Japan and their bilateral relationship has been well-documented³, but far less attention has been paid to the EU-Japan relationship⁴. Nevertheless, the latter was placed on a formal basis in 1991 by a Joint Declaration, establishing an EU-Japan 'partnership'. This has been followed by the establishment of a number of bilateral channels for discussion of economic, political and other matters. The Regulatory Reform Dialogue is one such important channel in which each side has attempted to influence their respective regulatory frameworks.

The purpose of this paper is thus to examine the motivation and methods of the regulatory reform drive in Japan, and to assess the opportunities the EU has for influencing these reforms. In order for this to be achieved, it is first necessary to examine the regulation and deregulation process in Japan. This is followed by an overview of the development of the EU-Japan relationship and examination of the EU-Japan Regulatory Reform Dialogue. This allows for an analysis into the nature and pace of the regulatory reforms underway in Japan as well as how successful the dialogue has been in promoting the new 'partnership' between the EU and Japan. Although beyond the scope of this paper, the Dialogue also reveals both how Japan has reacted to an entity of regional integration, and conversely, to what extent the EU has succeeded in speaking with one voice in an external relationship.

Regulation and Deregulation in Japan

Strong regulation has been a hallmark of the Japanese economy. Tight control of the economy by the government through state ownership and regulation of industry was maintained after 1945 in order for Japan to 'catch up' with more economically developed states. This eventually paved the way for Japan's international competitiveness⁵. Statutory authority allowed government ministries, particularly the Ministry of Finance and the Ministry of International Trade and Industry, to build up considerable control over the Japanese economy during the years of strong economic growth⁶. Central to the ministerial control over industry was the system of 'licensing'. The powers of the ministries to grant permits and licenses in order to regulate all those in the market is the essence of what was known as 'Japan Inc'⁷.

Although Japan was by no means unique in maintaining strong regulation during the post-war period, comparative studies suggest that regulation has been more pervasive, more intrusive, more arbitrary, and more accepted by the public in Japan than elsewhere⁸.

Despite the high prices for basic consumer goods such as rice caused by strong regulation, the issue did not become politicised until the 1990s. During the years of economic expansion there was little or no domestic pressure for change. It seems that the Japanese public tacitly accepted higher prices as a part of the method for protecting the national economy and increasing prosperity⁹. This acceptance waned severely when the end of the 'bubble' economy led to knock-on effects in the form of rising unemployment and financial uncertainties, such as high-profile corporate bankruptcies.

It was on the international plane that Japan became the target of criticism because of the closed nature of its markets. Japan's relations with the EU and its member states were strained by trade friction. The EU joined a growing list of states and international organisations, such as the Organisation for Economic Cooperation and Development (OECD), calling for Japan to undertake regulatory reform.

The deregulation process in Japan began in the 1970s, though not always with sustained vigour. The word 'deregulation' first appeared in Japan in an OECD report advocating reform in 1979¹⁰. Although there were some initial moves towards reform in the early 1980s, especially following a fiscal crisis at that time, it appears that the first substantial drive for reform began in 1986¹¹. An advisory group set up by Prime Minister Nakasone delivered a report concluding that reform of the Japanese economy and overseas trade policy was needed¹². Unfortunately, Nakasone's successors did little to act on the report, in spite of the continued publication of influential reports recommending a more open and transparent economy¹³. It has been noted that the ministry bureaucrats given significant legal power in the post-war period by the regulatory framework are unwilling to relinquish it¹⁴. Frequent changes in leadership in the 1990s prevented deregulation from taking root in the bureaucratic system until the pressure increased following Prime Minister Koizumi's programme of reforms.

Many commentators on Japan have suggested that deregulation moves such as privatisation of the rail and communications networks have been insufficient, and mere window-dressing in order to pacify international pressure¹⁵. Divergence has also occurred between the notion of reforms in the EU and its member states and Japan because of a linguistic difference in the term 'deregulation'. The preferred Japanese term, kisei kanwa, literally means 'to undertake a relaxation of the regulatory environment' rather than kisei teppai (to abolish). Liberalising, rather than eliminating, is therefore a better characterisation of Japanese deregulation¹⁶.

However, regulatory reform in Japan has now come to be seen as part of an overhaul of the economic and legal systems. Such an overhaul is recognised as necessary if Japan hopes to shake off economic stagnation. As regulatory reform has now gained a place at the heart of the Japanese domestic political agenda, the EU has recognised a prime opportunity to exert greater influence in Japan. Its capacity to do so must, however, be seen in the context of its relationship with Japan.

Regulatory Reform in the Context of the EU-Japan Relationship

The EU-Japan relationship was characterised for many years in the post-war period by trade friction¹⁷. At the end of the 1980s, both the EU and Japan attempted to gain greater international roles for themselves and foster partnerships outside of their respective strong links with the US. Both the EU and Japan expressed a desire to move their relationship on from trade spats and engage in discussion on economic, political and other matters¹⁸.

The EU and Japan signed a Joint Declaration on Relations in 1991, which promised to increase dialogue by, 'pursuing cooperation aimed at achieving a sound development of the world economy and trade, particularly in further strengthening the open multilateral trading system, by rejecting protectionism and recourse to unilateral measures and by implementing GATT and OECD principles'¹⁹. Notwithstanding this commitment, the overall tone of the Joint Declaration was political, rather than economic. It contained no specific undertaking for regulatory reform on either side.

Although the Joint Declaration was vague in its terms and did not commit either side to specific obligations beyond increasing channels for dialogue, access to the highly-regulated Japanese market was of high importance for the EU. Officials from the Japanese government and the European Commission began discussing statistics on the performance of companies in their respective markets of comparable products in 1992²⁰, examining if these reveal any restrictive practices, and discussing what could be done if these were found. This eventually become the Dialogue on Regulatory Reform in 1994.

The Action Plan for EU-Japan Cooperation²¹, signed in December 2001, builds upon the Joint Declaration by expressing more precise objectives for the development of the EU-Japan relationship. This includes a provision entitled, 'Strengthening the economic and trade partnership utilising the dynamism of globalisation for the benefit of all'. Importantly, the Action Plan does not put the economic relationship in the vague terms as in the Joint Declaration 1991, but includes a commitment to, 'reinforcing ・regulatory reform dialogue in order to foster self-sustained growth'²². This is an important disposition because it gives a formal basis for the dialogue on market access and deregulation which was absent in the Joint Declaration. The Action Plan also commits the two parties to continuing the dialogue with a more 'consistent' approach in the future.

The most identifiable result of the Joint Declaration has been the creation of a regular Dialogue on Regulatory Reform, which has taken place since 1994. It can be seen as an important step for a number of reasons. First, it is part of Japan's gradual steps towards greater openness and internationalism. This is especially true in terms of market access and investment. Second, the European Commission has established itself as a negotiator on behalf of the member states in a third country and has succeeded, at least in the context of this Dialogue, in gaining a negotiating status on a par with the US. Third, the Dialogue and reforms undertaken thus far shed light on the nature of regulations and the variety of guises in which they exist on each side.

Although regulations which restrict market access feature most prominently in the dialogue, other regulations which impede EU and Japanese citizens in each others' territories as residents, businesspeople or tourists are also considered. Some of these barriers are not necessarily in the form of legal regulations but can also concern wider issues, such as weak law enforcement, a lack of available remedies or grievance procedures, restrictive practices and excessive administrative procedures.

The EU-Japan Regulatory Reform Dialogue

The EU proposals for regulatory reform in Japan are drafted at the Commission Delegation in Tokyo in cooperation with the Commission's External Relations Directorate-General in Brussels²³. Member states suggest items to be included in the proposals. The larger member states in particular tend to keep a close eye on the development of the proposals in order to ensure that their concerns are voiced. The UK, for example, has a deregulation expert from the Department of Trade and Industry seconded to their Embassy in Tokyo, specifically for this purpose²⁴. The proposals largely concern areas in which EU companies have experienced difficulties in accessing the Japanese market. As such, the European Business Community (EBC), the trade policy arm of the national European Chambers of Commerce in Tokyo, receives and collates specific complaints and issues from its corporate members²⁵.

When complete, the proposals are presented to the Ministry of Foreign Affairs, which is followed by a hearing at the Council for Regulatory Reform, part of the Cabinet Office²⁶. At this stage clarifications or justifications can be made to the proposals²⁷. This allows an additional opportunity for the EU to place particular stress on the areas which it feels substantial action is needed. In recent years this stress has been placed on the telecommunications and insurance sectors. It is also an opportunity to voice and reinforce more general concerns over other legal or regulatory issues, such as weak competition law enforcement.

This process is mirrored by the Japanese proposals for regulatory reform in the EU. The Japanese proposals are submitted by the Mission of Japan to the EU in Brussels to the External Relations Directorate-General of the Commission. After several months of consideration and/or investigation, the two sides exchange their responses to the proposals. These range from justifications for maintaining the existence of specific regulations, any reforms currently under consideration, to matters on which no action can be taken because of ongoing investigations. Each side may then press for further action to be recommended in the following proposals if necessary. The dialogue continues on an ad hoc basis depending on the outcome of the proposals submitted²⁸.

The EU Proposals for Regulatory Reform in Japan

An analysis of the proposals made by the EU to Japan and vice versa reveals much about the nature of regulatory reform on each side.

The EU proposals for Japan concentrate on more fundamental issues of regulatory reform which have already been completed (or are at least near to completion) in the EU and its member states²⁹. The continued dominance of the privatised Nippon Telephone and Telecommunications (NTT) in the telecommunications sector, the world's highest charges for airline landing 'slots' at Narita (New Tokyo) airport and the closed nature of the insurance market are some of the main examples of barriers that foreign companies have faced in Japan. The Commission proposed in October 2000;

Sweeping reform in the areas of competition, telecommunications, financial and legal services, transport, testing/certification and standards・[which] would go a long way towards lowering costs for all economic operators and stimulating investment, to the benefit of both business and the consumer³⁰.

It is interesting to note that these proposals are promoted as a way to benefit Japan as a whole, and not merely to benefit the EU. The self-interest of the EU in opening Japan's markets is evident. Nevertheless, regulatory reform is promoted as a way for Japan to accept wholeheartedly the opinion of the majority of the members of the OECD and WTO and thus to play the greater international role it desires³¹.

As the EU notes, the basis of regulatory reform in Japan has been completed in some areas, but there remains a lack of an overall spirit of a promotion of competition in traditionally domestic-dominated markets. In the words of the former Head of Delegation of the Commission:

Much of the easy work on regulatory reform has been done, and a number of costly and prescriptive regulations have been stripped away. The time has now come to capitalise on this. Regulations and practices need eliminating or revising in order to make Japan a more attractive a place to invest and do business³².

The primary target of the EU's proposals in 2000 was in the telecommunications market. In response to increased criticism about its dominance in the fixed-line and mobile networks, NTT was restructured in 1996³³. Japan has ratified the Fourth Protocol of the General Agreement on Telecommunications Services of the World Trade Organisation. This agreed that liberalisation and the promotion of competition are the best methods by which to extend the benefits of the industry to the whole economy³⁴. However, it is felt that despite the break-up of the NTT group (which includes NTT DoCoMo, the largest mobile network in Japan by far), the constituent parts of the group remain dominant in the domestic market. The lack of an effective regulator hinders the opening of the market to others, despite the abolition of excessive regulations³⁵.

The main route for European companies to enter the Japanese market has been to buy significant shares in Japanese companies rather than set up as independent operators³⁶. The European Commission has thus pressed for the creation of a fully independent regulator in the telecommunications sector³⁷ and greater enforcement of competition law across all areas of activity. The most recent proposals from 2003 reflect the view of the Commission that regulatory reform is not merely stripping away unnecessary regulations, but promoting transparency and predictability. This applies to both the nature of decision-making in government and in the business environment.

The EU, in its proposals, is quick to note where progress has been made and to continuously promote the perceived benefits to the Japanese economy and the consumer. In its latest proposals, the Commission recognises various 'successes' in regulatory reform in Japan. These 'successes' include the new regulations allowing foreign lawyers to practice in Japan, and the tightening of enforcement procedures under the Anti-Monopoly Act.

Japan's Proposals for Regulatory Reform in the European Union

The Japanese proposals for regulatory reform in the European Union are presented to the European Commission in Brussels. Two major differences can be noted from the nature of the Japanese proposals to the EU from the EU proposals to Japan.

First, the nature of the proposals is clearly different. The EU's proposals concern fundamental areas of regulatory reform which have yet to be achieved in Japan. The proposals put to EU do not generally concern issues where Japanese companies have found market access difficult or impossible. Issues of unfair competition or a lack of transparency do not figure strongly either. The latest proposals, delivered in November 2003³⁸, concern some points in the regulation of the automobile, electronics and telecommunications sectors, which are concerned either with technical standards or customs rules.

Second, as a supranational body, the proposals concern not only regulation at EU-level, but also proposed reforms in individual member states. The EU's Common Commercial Policy grants exclusive competence to the Commission to deal with third countries such as Japan³⁹, but it is unable to propose EU legislation in areas outside the Treaties. Unfortunately, some of the issues of regulatory reform Japan would like to see resolved in member states are outside the competence of the Commission. The most notable areas of concern are immigration and fiscal issues. The list of proposals contains many issues concerning the obtaining and renewal or work visas, the need for unusual documents, the considerable lengths of time of such processes, haphazard and/or regional differences in procedures within a member state and so on⁴⁰. The replies to these requests may come from the member states concerned to the Commission, though general comments are sometimes made if it has tried to coordinate EU wide policy⁴¹. The Commission therefore finds itself in the position of being unable to propose solutions to the problems Japan has raised because of a lack of widespread EU legislation in the particular area⁴².

Other areas involving manufacturer and trade committee discussions (particularly in the automobile sector) are clearly outside the competence of the Commission as an institution⁴³. On other issues, the Commission can only coordinate and not harmonise areas of concern⁴⁴. For example, the Japanese proposals have highlighted the lack of coordination of tax systems and social welfare as well as,

.. social policies, such as employment and environment policies, [which] seem to create excessive restrictions or obstacles to positive business activities by private companies⁴⁵.

The Commission may welcome the Japanese proposals if it is also dissatisfied with the regulatory situation in one or more member states. If the Japanese proposals concern issues relating to, for example, free movement within the EU, the Commission may take the opportunity to propose legislation if it capable of doing so. Highlighting the difficulties experienced by Japan can assist the Commission in proposing or modify legislation⁴⁶, or break a deadlock. A good example of the latter is the Societas Europea (SE), the European Company Statute which was first proposed in 1970⁴⁷ but until recently was never fully adopted⁴⁸. The Commission has always seen its adoption as an important step in completing the single market. Japan has been keen for the statute to come into effect because it would avoid the need for a company to set up a new subsidiary in another Member State. It could be suggested that outside pressure, particularly from Japan, can provide an impetus for the member states to adopt the Statute more quickly, in order to attract Japanese investment, on issues of this kind.

Conclusion: Evaluating Japan's Regulatory Reform and the EU-Japan Relationship

Regulatory reform has now become a key priority of the Japanese government. During the last decade, it has come to be seen as an integral part of the move towards renewal of Japan's economy and public administration. Support for regulatory reform has not only come from the EU, but also the US, international organisations such as the OECD and WTO and various domestic bodies. The most significant of these is Keidanren, the Federation of Economic Organisations. It has in recent years given its wholehearted support to rapid regulatory reform in Japan and regards it as, 'the linchpin of economic reform'⁴⁹.

Seen against the background of the EU-Japan relationship, it is clear that the Regulatory Reform Dialogue set up under the auspices of the Joint Declaration 1991 is a major step. The evolution of discussions about general regulatory issues to a more formalised and regular dialogue is proof that both sides have acted on their desire to forge the 'partnership' promised in the Joint Declaration. This has been reinforced by Objective 2 of the Action Plan agreed in 2001. By exchanging frank views on the respective problems experienced by corporate and other actors due to regulations, the EU-Japan relationship has evidently moved on considerably.

It is equally significant for the EU that it appears to have a similar standing in regular reform dialogue with Japan as that of the US, for two reasons. First, the Commission has established itself as a negotiator on behalf of all the EU member states with the highest levels of government in Japan. This would not be the case if Japan did not recognise the Commission as truly representing the European interest. Similarly, it is unlikely that any of the EU member states would individually be able to establish such a high-level and regular dialogue with the Japanese government about regulatory reform. Second, it is also evidence that Japan's international outlook has widened beyond dialogue with the US and that it regards that EU as a major economic entity.

Regulatory reform occurs at a slow pace in many countries, and Japan is no exception. Of the reforms that have been undertaken since the 1990s, the EU has been keen to recognise progress in its subsequent proposals. Evaluating how much of Japan's regulatory reform so far has been due to the influence of the EU is a difficult task. Many of the proposals detailed in this article were also part of the US-Japan Deregulation Dialogue and put forward by domestic bodies such as Keidanren. Furthermore, some changes requested by the EU, such as enforcing competition law and increase transparency within government, may take many years before they are in evidence.

Nevertheless, the mere fact that the EU-Japan Regulatory Reform Dialogue has continued for over ten years is evidence that both sides regard it at a valuable means by which they can attempt to influence changing patters of regulation. Both sides have welcomed in their proposals the steps taken to satisfy past requests. As the political will in Japan for regulatory reform has increased over recent years, the EU has intensified its arguments that reform can be a positive experience for consumers and international trade.

As far as the EU-Japan relationship is concerned, it is clear that the Regulatory Reform Dialogue will continue for as long as necessary. The EU-Japan Action Plan 2001 calls for further dialogue and cooperation on related issues, such as the examination of methods to facilitate market access and the recognition of respective industrial and technical standards. The Dialogue has thus become one of the foundations on which the EU-Japan 'partnership' has begun to take shape. Just as the enlargement of the EU offers new opportunities for trade and investment for Japan, regulatory reform in Japan similarly promises much for the EU.

Notes

1. School of Law, University of Sheffield, Crookesmoor Building, Conduit Road, Sheffield, S10 1FL, England

I wish to thank Professor Geraint Howells and Dr Richard Kirkham, University of Sheffield, Professor John McEldowney, University of Warwick, and two anonymous reviewers for their helpful comments on earlier versions of this article. I would also like to thank the staff of the Delegation of the European Commission, Tokyo, for their generous help and assistance during my research period 2000-2001. Any errors which remain are my own.

An earlier version of this article was presented at the Socio-Legal Studies Annual Conference, University of Glasgow, 6 April 2004.

2. The European Union came into existence following the Treaty of Maastricht 1992. Although references relating to events prior to 1992 should use the term 'European Community', in order to avoid confusion, this paper only uses the term 'European Union' or 'EU'.
3. See, for example, an exploration of US-Japan political, economic and security relations in G.D. Hook. J. Gilson, C.W. Hughes and H. Dobson, Japan's International Relations (2001) London: Routledge.
4. As well as Hook et.al. ibid., for an excellent analysis of the EU-Japan relationship, see J. Gilson, Japan and the European Union: A Partnership for the Twenty First Century? (2000) London: Macmillan.
5. T. Okazaki, 'From Wartime Controls to Post-war Recovery', in F. Gibney (ed.) Unlocking the Bureaucrats Kingdom: Deregulation and the Japanese Economy (1998) Washington DC: Brookings Institution, p. 29.
6. S.J. La Croix and J. Mak, 'Regulatory Reform in Japan : The Road Ahead' (1999) European Institute of Japanese Studies Working Paper no.63, p.4.
7. M. C. Tilton, 'Market Opening in Japan', in L.E. Carlile and M.C. Tilton (eds.) Is Japan Really Changing Its Ways? Regulatory Reform and the Japanese Economy (1998) Washington DC: Brookings Institution, p. 165.
8. E.J. Lincoln, 'Deregulation in Japan and the United States: A Study in Contrasts', in Gibney, op. cit., n. 5, p. 58.
9. Ibid.
10. T. Yayama, 'Who has Obstructed Reform?', in Gibney, op. cit., n. 5, p.93.
11. A high profile Commission set up by the Ministry of Finance and Keidanren, named Rincho, proposed privatisation of the air, rail and telephone companies in 1982. However, Rincho was set up to address the problems associated with the fiscal crisis, rather than addressing regulatory reform as means to open the Japanese market to foreign competition: L.E. Carlile, 'The Politics of Administrative Reform', in Carlile and Tilton, op.cit., n. 7, p.79.
12. The Report of the Advisory Group on Economic Structural Adjustment for International Harmony (Maekawa Report), submitted to Prime Minister Nakasone Yasuhiro, April 7, 1986.
13. For example, The Report of the Research Committee on Economic Reform (Hiraiwa Report), submitted to Prime Minister Hosokawa, 16 December 1993.
14. J.O. Haley, Authority Without Power: Law and the Japanese Paradox (1991) Oxford: Oxford University Press, p.148.
15. M. Trevor, How the EU Approaches Japan, Speech at the Nissan Institute, Oxford University, 1 June 2001.
16. M. Miyamoto, 'Deregulating Japan's Soul', in Gibney, op.cit., n. 5, p.69.
17. One of the first comprehensive works on the EU-Japan relationship addressed this issue in detail: A. Rothacher, Economic Diplomacy between the European Community and Japan 1959-1981 (1983) Aldershot: Gower.
18. K. Iwanaga, 'Europe in Japan's Foreign Policy', in B. Edstr (ed.) The Japanese and Europe (2000) Richmond: Japan Library, p.227.
19. Joint Declaration on Relations between the European Community and its Member States and Japan, 18 July 1991, accessed December 2004.
20. Source: Political and Economic Section, Delegation of the European Commission.
21. Shaping Our Common Future: An Action Plan for EU-Japan Co-operation, 16 December 2001, accessed December 2004.
22. Objective 2, Point 1
23. Source: Political and Economic Section, Delegation of the European Commission.
24. Source: Interview with Tom Goodwin, DTI, British Embassy, Tokyo, February 2001.
25. The EBC has a membership of 350 companies grouped into twenty-seven industry committees, and it seems that the most active committees are those where European companies have a presence in the Japanese market already, notably pharmaceuticals, chemicals and electronics. Source: European Business Community, Tokyo.
26. The Council for Regulatory Reform was established by cabinet order under Article 37 (2) of the Act on Establishment of the Cabinet Office on 1 April 2001, replacing the Regulatory Reform Committee.
27. Interview with Ellis Mathews, Delegation of the European Commission, Tokyo, January 2001.
28. ibid.
29. The most recent EU proposals were delivered in October 2003: European Commission Priority Proposals for Regulatory Reform in Japan, 16 October 2003, accessed December 2004.
30. European Commission Priority Proposals for Regulatory Reform in Japan, 16 October 2000, p.2, accessed December 2004.
31. ibid., p. 8.
32. O. Juul Jgensen, EU News (2000) 22/2000
33. Tilton, op.cit., n. 7, p. 183.
34. Id.
35. European Commission Priority Proposals for Regulatory Reform in Japan 2000, op.cit., n. 32, p. 8.
36. For example, Vodafone bought a 10% stake in Japan Telecom, the third-largest mobile phone operator in Japan in 2001: 'Vodafone to expand into Japan', Japan Times, 28 February 2001.
37. European Commission Priority Proposals for Regulatory Reform in Japan; op.cit., n.32
38. Japan's Priority Proposals for Regulatory Reform in the EU, 14 November 2003, accessed December 2004.
39. Articles 131-134 EC
40. The most recent proposals for reform highlight various separate problems linked to visas and work permits in 12 member states, along with a request to have a proposed directive on freedom of travel of third country nationals adopted. op.cit., n.40, pp. 18-22.
41. An example of this is the driving licence issue and the difficulties faced by Japanese individuals in exchanging their licences for national ones in each Member State.
42. For example, it is currently not possible to offset losses incurred by a corporate subsidiary in another Member State. op.cit., n.40, issue 4.7 presses for the proposal made by the Commission to this effect on 6 December 1990 (COM(90)595) to be adopted. It is recognised that this is a barrier to the single market, but would be problematic in adopting without a study of comprehensive tax reform.
43. This was requested in the 2000 proposals; Japan's Proposals for Regulatory Reform in the EU (2000) 26 October 2000, accessed December 2004.
44. This concerns the lack of a uniform system of social security across the EU. Regulation EEC 1408/71 coordinates, but does not harmonise national systems, and applies only to EU nationals, and not those of third countries. It is largely an issue to be dealt with under bilateral agreements between member states and Japan, such as the agreement between the UK and Japan, signed in February 2000: passed in the UK as The Social Security (Contributions) (Japan) Order 2000 no.3063 (HMSO).
45. Japan's Proposals for Regulatory Reform in the EU (2000), p.1,accessed December 2004.
46. For example, the Merger Regulation 1989 (OJ 1990 L257/14) concerning the tax treatment for cross-border mergers, exchange of shares etc within the EU has been a source of vexation for Japanese companies. The Commission hopes for reform and is preparing a study to present to the Council.
47. First proposal COM (1970) 600, later proposals COM (1989) 268-1 final, COM (1991) 170 and COM (1993) 570
48. The statute was finally agreed in principle at the European Council summit in Nice in December 2000: OJ C221/28 5.2. 7 August 2001. It came into effect in October 2004. The latest draft was much less ambitious than earlier drafts because of wrangling over the differing company law principles in member states.
49. Keidanren, Request for Deregulation Proposal (1997). Keidanren also made a 451-item deregulation list which was submitted to the government in 1999 and followed this up with two reports in 2000 highlighting the most significant areas in need of reform, and a policy document pressing for action in a range of areas including pensions, distribution, telecommunications and investment: Policy Recommendations and Priority Requests to the Japanese Government on the Promotion of Regulatory Reform (2000); Keidanren demands resolute promotion of Regulatory Reforms and the Establishment of a New System for the 21st Century, 17 October 2000; Keidanren demands resolute promotion of Regulatory Reforms and the Establishment of a New System for the 21st Century, 17 October 2000.

Keidanren recently published a policy document entitled Japan 2025: Envisioning a Vibrant, Attractive Nation in the 21st Century which states that under the objective of 'opening the nation', 'Lower regulatory walls will be a catalyst for growth and a force raising economic performance throughout the region'., see all these documents here, accessed December 2004.

About the author

Paul James Cardwell is Lecturer in Law in the School of Law, University of Sheffield. He specialises in Public and EU law, and has studied at the Universities of Warwick, Lille, Bordeaux and Nagoya, where he held a research scholarship from the Association of International Education Japan, 1999-2000. He also undertook a five-month research period at the Delegation of the European Commission in Tokyo. Although his primary research interests lie in the law and politics of the EU, in particular the Common Foreign and Security Policy, he maintains a keen interest in the law and international relations of Japan.

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