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EPA Says Reforms Generated 7.9 Trillion Yen a Year

DECEMBER 16, 1996

Deregulatory measures implemented between fiscal 1990 (April 1990 to March 1991) and fiscal 1995 helped generate an average of 7.92 trillion yen (72 billion dollars at 110 yen to the dollar) in fresh demand annually, according to recently released computations by the Economic Planning Agency.

This, the EPA says, pushed up the nominal economic growth rate by 0.56 percentage points in each of the fiscal years.

The government's economic plan for fiscal 1995-2000 projects the economy will grow by 3% a year in real terms between fiscal 1996 and fiscal 2000. The EPA points out, however, that the rate will only reach 1.75% annually if deregulation and other economic reforms are not vigorously pursued. It emphasizes that further deregulation is essential for continued growth.

The EPA calculated the difference between actual levels of consumption and plant and equipment spending over the six-year period and compared them with hypothetical levels had deregulation not been implemented. Then it quantified the gains in terms of production volume and new employment. The computations were carried out in the six sectors of the economy that were thought to have benefitted the most from deregulation: telecommunications, distribution, housing, finance, personnel agencies, and small regional breweries.

Boom in New Retail Outlets
The biggest impact of deregulation has been felt in the distribution sector. Store openings increased mainly as a result of revisions to the Large-Scale Retail Stores Law, which facilitated the opening of large outlets. The EPA estimates that this generated 3.76 trillion yen (34 billion dollars) more in consumption and 910 billion yen (8.3 billion dollars) more in capital investment--or 4.68 trillion yen (42.5 billion dollars) combined--than had the revisions not been made.

In the field of telecommunications, 2.20 trillion yen (20 billion dollars) in new demand was created each year thanks to a more liberalized market. New companies entered the market for domestic and international phone services, and the use of mobile phones shot up rapidly. New broadcasting mediums, such as cable and satellite television, were also introduced.

In addition, the agency credits financial deregulation, chiefly the liberalization of issuances of commercial paper, for generating 720 billion yen (6.5 billion dollars) in new demand annually; a relaxation of rules governing personnel agencies and beer breweries for 170 billion yen (1.5 billion dollars); and liberalized housing regulations that encouraged imports and construction of three-story wooden houses for another 150 billion yen (1.4 billion dollars).

The cumulative total of 7.92 trillion yen in extra demand in turn triggered approximately 14 trillion yen (127 billion dollars) in additional annual production, the EPA estimates, and created an equivalent of roughly 1.03 million new jobs.

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