I. Comprehensive Appraisal of "Lost Decade"

• KOBAYASHI Keiichiro, F

The key macroeconomic issues in Japan today are the fragile financial system, continuing deflation, the expanding public debt, and trends in exchange rates. To contribute to the solution of these problems, this project will use a macro model that gives consideration to the financial system to analyze the connection between the dynamics of public debt, consumer prices, and exchange rates on the one hand and the real economy (the welfare of society) on the other.

In addition, research will be conducted on several topics derived from this theme (e.g., the problems of bank credit and business-to-business credit, coordination failure in corporate and government sectors, et cetera). Analysis will center on theoretical research but may also include (1) construction of a theoretical model, (2) empirical research using data, and (3) case studies of various countries.

• FUKAO Kyoji, FF
• MIYAGAWA Tsutomu, FF

To understand Japan's economic stagnation over the past decade and devise policies to break free of it, analyses of productivity, industrial structure, and trends in the rate of return on capital are essential. Increases in productivity will constitute the major source of economic growth in Japan in the years ahead as the work force dwindles. The rate of return on capital affects the level of capital investment and investment in education. This study will use industry-level and establishment-level data to analyze these factors.

In terms of empirical research at the industry level, with regard to manufacturing sector, it will develop a database for analyzing efficiency of resource allocation and productivity in each of the four-digit industries. The project will also revise the JIP database, which covers the macro economy as a whole at the industry level for three-digit industries.

Using these databases, the project will analyze how productivity has been affected by the IT revolution, the emerging division of labor with other countries, the transfer of production facilities overseas, and so forth. In addition, by integrating data from securities reports and corporate financial data, including that of unlisted companies, from JADE, CRD, et cetera, it will analyze trends in productivity and the rate of return on capital in the economy as a whole from an industry-level viewpoint. With regard to certain industries, the project will also conduct case studies regarding the impact of structural reform on productivity.

• MOTOHASHI Kazuyuki, FF

The 1990s are considered "the lost decade" for the Japanese economy and low productivity in the non-manufacturing sector is regarded as one reason for the decade-long stagnation. This study will focus on an analysis of the retailing industry, which constitutes a major portion of the non-manufacturing sector.

In the 1990s, the government carried out regulatory reform geared toward large businesses through the repeal of the Large-Scale Retail Stores Law. At the same time, however, such systemic factors as tax provisions favoring "mom and pop" businesses remained in place. The study will examine the impact on productivity of this piecemeal approach to regulatory reform in the retailing industry.

In addition, this study will create panel data sets that longitudinally link micro data of the "Census of Commerce" by the Ministry of Economy, Trade and Industry and analyze market competition with a focus on the entry and exit of business establishment.

• MOTOHASHI Kazuyuki, FF

An accurate assessment of Japan's industrial competitiveness and the progress of other countries in East Asia is important from a number of standpoints, particularly policymaking. This project aims to compile KLEM data (industrial input-output tables and data on capital and labor) using industrial categories common to five countries, South Korea, China, Taiwan, Japan, and the United States, and to compare productivity in these countries by industry since 1980.

In addition, the project will compile data on relative prices in each industry, compare productivity levels, and conduct an assessment of Japan's international competitiveness in each industry.

• HATTA Tatsuo, FF
• TANAKA Makoto, FF

Deliberation on the details of institutional design for the liberalization of Japan's electricity market has continued after a framework for reform was decided by the Electricity Industry Committee of the Advisory Committee for Natural Resources and Energy, a consultative body to the Minister of Economy, Trade and Industry in late fiscal 2002. Nonetheless countless issues remain to be resolved, including the design of the wholesale electricity exchange scheduled to be launched in 2005.

Keeping in mind the unique technological aspects of the power industry, this study will attempt to develop a new "outside-the-box" approach by adopting an interdisciplinary perspective combining economics, engineering, and other fields. It will explore, from both a theoretical and empirical perspective, the best mix of regulatory and competitive policies to advance the electricity market beyond the limited reforms thus far adopted - including the establishment of a wholesale electric power exchange that includes a real-time market and futures market - with the goal of formulating policy proposals that can help accelerate the formation of an efficient electric power market.

• KAWAGOE Toshiji, FF

This project will attempt to examine issues in economic and industrial policy using the methods of experimental economics. At present, the project is conducting a survey regarding reform of the bidding system for public works contracts (particularly randomized bidding) and examining the effectiveness of the leniency system in connection with revision of the Antimonopoly Law.

As part of this effort, classification is being prepared for the various methods of randomization with regard to local governments' estimated-cost decisions and selection of contractors, and theoretical examination of the economic consequences. In addition, for some of these methods assessments are being compared that are derived from laboratory experiments with empirical data.

With regard to the leniency system, a theoretical model based on the repetition game is being prepared and the model is being used to conduct laboratory experiments to determine the effect differences in cartel size or the number of businesses receiving leniency will have on the prevention and elimination of bid rigging.

• NAKABAYASHI Mieko, F

In the Diet, the question "How are things done in the United States?" is asked quite frequently during the legislative process. This study will provide a systematic explanation of various aspects of the U.S. budget process that are poorly understood in Japan, in the form of "10 common misunderstandings," with the aim of providing Japan's business leaders, scholars, and others with a broader outlook on the organization, systems, and political actors in this process.

• AKAI Nobuo, FF

• YAMAGATA Hiroshi, CF

In its operations, administrative government must not only abide by the laws enacted by the Diet but also listen to a broad range of public opinion and take those views into account in performing its work. This assumes that the people are able to develop informed opinions and make sound judgments; and for that it is necessary to make information widely accessible in an easily understood form. In addition, since the composite of views in the nation as a whole often differs from the composite of views in the locale where the work is being carried out, a mechanism is also needed to reconcile the two.

In this project, we will discuss the roles of public input and public information and offer a basic theory with regard to their effective implementation. In addition, we will systematically present specific cases to assist administrative officials in gathering public input and providing public information.