Reforms, cornerstone for Japan's economic recovery
16 Jun '06
4 min read
The cross-shareholdings that bound banks to their biggest corporate borrowers have diminished and companies now turn increasingly to capital markets for financing, said Junichi Ujiie, Chairman, Nomura Holdings, Japan; Co-Chair of the World Economic Forum on East Asia. "I think we're about to go through a core transformation," he said.
Corporations, meanwhile, are now having to answer more than ever to shareholders rather than to bureaucrats, forcing them to improve corporate governance, and room is being made for entrepreneurs, said Kakutaro Kitashiro, Chairman, Keizai Doyukai (Japan Association of Corporate Executives).
With changes to corporate laws, thousands of new companies are being created. Others are being combined thanks to a wave of mergers and acquisitions. And employees feel freer to change jobs and companies to pursue better opportunities without fear of being stigmatized as disloyal.
A corresponding sea change has come to Japanese government. While once the ruling LDP concentrated on using pork-barrel politics and fiscal outlays to gain votes and fuel corporate profitability, it is now committed to reducing Japan's enormous fiscal budget deficits and shrinking the government.
"This is a revolution, if I may say so," said Hidenao Nakagawa, Chairman, Policy Research Council, Liberal Democratic Party, House of Representatives, Japan. Perhaps most significantly, the Koizumi government has begun the process of privatizing the Postal Services and thereby freeing up one of the largest repositories for public savings to more efficient and productive use in the economy.
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