Dear readers,
This is an announcement of the recent independence of our research institute. The Research Institute of Economy, Trade and Industry (RIETI) was given the status of an independent administrative institution (agency) as of April 1st. Though still fully funded by METI, we now have more freedom to do policy research and recommendations.
In fact, policy recommendation is a mission unique to this organization, because no governmental organization has ever been given such a role. To make policy recommendations, in this context, means to say something different from the government. As I have been known to say, we are "Team B" here in Kasumigaseki. We will analyze and make recommendations in such policy areas as macroeconomics, finance, social welfare, local government, IT, environment, corporate governance, regulatory reform, trade laws and Asian regional integration; policy areas which are not necessarily within METI's jurisdiction. We now have fellows from the private sector as well as visiting and consulting fellows who are officials of METI, MOF and MOFA. Together with faculty fellows from universities, we are going to create a think tank which aspires to stand, in reputation, among those found along Massachusetts Avenue in Washington D.C. These think tanks have created a policy market for the U.S., something that we urgently need in Kasumigaseki.
Recently I returned to Washington to host a joint seminar with Johns Hopkins SAIS on the issue of Japanese economic restructuring. I accompanied Mr. Kaoru Yosano, a former MITI Minister, who gave a speech at the seminar. His policy recommendations are summarized in the 3-page attachment. The number one issue for Japanese economic restructuring is the non-performing loan problem (NPL). He said, "If there are banks with an insufficient capital base, we should not hesitate to inject public money, if it leads to further restructuring. The debt restructuring of over-leveraged firms should be promoted at the same time. Development of a more efficient corporate reorganization system must be put into place. We have taken too much time to deal with this problem. It is time for us to resolve this problem once and for all."
We have come back to where we started in 1998, as I said in the last Miyakodayori; however, one big difference is the fact that we now have tools in hand. What we need is political will. Fortunately, due to the recent commitment of Prime Minister Mori to President Bush, the issue for the next prime minister will be NPLs.
I saw many friends in DC with Mr. Yosano. Our impression is that Washington is again, just as in 1998, again very concerned with Japan's economy. There are many journalists claiming Japan's NPLs and stock market collapse are the cause of US stock malaise. (By the way, in Japan, the opinion is totally opposite: US weakness caused Japan's stocks to crash.) The US economy is definitely experiencing a downturn now, possibly much more serious than we perceive; pessimism grows.
What we should do? We should do our homework, both the US and Japan. Japan should restructure and clean up NPLs with "surgery," while the US should get rid of the dot-com bubble and return to productive investment for long-term growth.
As Mr. Yosano pointed out in his speech, Japan does understand its responsibility, as the second-biggest economy in the world, to get back on a growth track. For the US, the responsibility is even greater. RIETI plans to do its part in advocating policy that will lead Japan quickly to meaningful economic reform. We look forward to working with all of you to get both of the world's leading economies back to where they should be- in the lead.
Editor in Chief, Nobuo Tanaka
Vice President, Senior Fellow
Research Institute of Economy, Trade and Industry, IAI
e-mail: tanaka-nobuo@rieti.go.jp
tel: 03-3501-1362 fax: 03-3501-8391
The opinions expressed or implied in this paper are solely those of the author, and do not necessarily represent the views of the Ministry of Economy, Trade and Industry (METI), or of the Research Institute of Economy, Trade and Industry (RIETI).
