RIETI Report September 2003

Economics Free From Borders <RIETI Featured Fellow> HISATAKE Masato

Greetings from RIETI

"Japan is a country that has four seasons..." is one of the first things I was ever taught to say in Japanese, although this year summer failed to make any real appearance. While the heavens unexpectedly continued to pour down here, Europe suffered a brutal and even more unexpected heat wave.

Amid the many forms of globalization currently taking place, global warming is perhaps the least sought for, but even the weather is now challenging cultural stereotypes and breaking down the molds set by borders. This runs quite contrary to the desires of the European Renaissance utopian writers, from Thomas More whose "Utopia" christened the genre to Francis Bacon in his "New Atlantis," who all held the same crucial idea at the centre of their plans for the perfect nation - a strict policy of isolation from the rest of the world. By these standards a world where you can drink the same coffee and eat the same burger wherever you are must be dystopia then.

Whatever one's views on the values of borders though, while many choose to hide behind them, evolution suggests that they have to be crossed. This month, RIETI Report had the pleasure of meeting Dr. Hisatake, learning a bit about his background, and hearing how economics can also transgress borders. (DC)

RIETI FELLOWS NOW

HISATAKE Masato
Upon graduating from the University of Tokyo, having read economics, Dr. Hisatake joined the Ministry of International Trade and Industry. After conducting research at Stanford University as part of the program of the National Personnel Authority, he joined the Ministry of International Trade and Industry Research Institute as a Senior Fellow, and a Member of the Policy Committee, Minister's Secretariat in 1995. The following year Dr. Hisatake moved to the post of Director of Research at MITI/RI, before moving again to the Agency for Natural Resources and Energy as Director of International Petroleum and Natural Gas Affairs in 1997. In 1999, he was made associate professor at the Research Institute of Economics, Kyoto University, while working at MITI and moving to the Trade Policy Bureau as Director of the Research and Analysis Division in 2001. This year, Dr. Hisatake has not only completed a Ph.D. in economics at Kyoto University, he has also taken up both the position of Senior Fellow and Director of Research at RIETI.

For a detailed biography, please click here

To learn about recent activities at RIETI, please click here

Interview

Economics Free From Borders

RIETI Report: Dr. Hisatake, last month you assumed the position of Director of Research at RIETI, as well as being made a Senior Fellow. We were wondering if you could tell us a bit about your background, your field of research, and what sort of studies you intend to perform in your time at RIETI. You recently received a Ph.D. in economics from Kyoto University - what was the subject of your dissertation?

Hisatake: The title of my dissertation is "Utilization of Natural Gas: Its Development and How Related Public Policy Should Be." The motivation for conducting research into this area dates back to the days when I was serving as Director for International Petroleum and Natural Gas Affairs at MITI from 1997 to 1998. I had an opportunity to work as co-chair on the Steering Committee for the utilization of natural gas initiative under the Energy Working Group of Asia Pacific Economic Cooperation (APEC). This experience led me to have a very heated debate with the representative for the United States Department of Energy, whose agenda was the liberalization of the entire natural gas market. I took a very different view, and argued that regulation was indispensable for the natural gas market, at least in the initial stage, to ensure the buildup of adequate infrastructure. I believe that if the whole market is fully liberalized then no newcomers dare take a risk to access it. Not only did the representatives from other Asian countries support my view, but also, interestingly, major incumbent oil companies took my side.

There are two different schools of thought as regards the result of deepening globalization. One side argues that globalization will lead to the convergence of economic systems worldwide, while the other believes that diversity of institutions will remain. Personally, I buy the latter opinion.

Through writing my dissertation, I finally came to the conclusion that an adequate level of regulation should be imposed upon the natural gas market, taking into due consideration each country's stage of development (I use this here as a value-free term), level of infrastructure building, and capacity of players both in the industrial and bureaucratic spheres.

In my dissertation, I also suggested certain reforms regarding the Japanese bureaucratic system. I believe that the current system for the career development of Japanese bureaucrats involved in regulating telecommunications, energy, and financial service sectors has to be changed. It has often been said that the Japanese bureaucratic system is career concern-orientated, while the U.S. and U.K. systems are profession concern-orientated. I'm not bothered with the argument of which is right and which is better, but where the energy sector is concerned, I would argue that Japanese bureaucracy should adopt a profession concern-based system. For instance, I feel that energy policy should be made and implemented by an independent administrative committee, as opposed to being handled by an agency within METI.

RIETI Report: As a senior fellow at RIETI, what areas would you like to research into?

Hisatake: I would like to conduct research into measures for revitalizing the Japanese economy, using the theory of economics of agglomeration. I believe we should shift from a nation-centered approach to a region-centered approach in the promotion of cross-border economic activities. In this case, "region" conveys two meanings: "region under nation-state" and "region which surpasses nation-state." If one considers the dynamics of agglomeration, one finds that the unit of actual economic activity does not necessarily match the unit of the nation-state. Therefore, at least in the realm of economics, the concept of national borders is only one of boundaries, which increases the transaction cost. Thus, it is my view that a nation-state level analysis does not lead to a proper understanding of the dynamics of economic activities. Rather than looking at Japan-China economic relations, I would focus on the ties between regional economic zones, such as Kyushu (or Southern Japan) and Shanghai for example. As a matter of fact, pre-war Japan was much less centralized than it is now with Osaka serving as another economic center together with Tokyo. However, with the flood of information and people into Tokyo after the end of the war, concentration of economic activities to the capital has continued to accelerate.

RIETI Report: How should this idea be applied in revitalizing Japan's economy?

Hisatake: The reforms I wish to address take a very long-term view of reshaping the Japanese economy. One idea is to divide Japan into eight blocs or so, and introduce federal governance into the nation's economic system as a whole. As I mentioned earlier, the current form of administration does not represent the actual economic activities of Japan. Thus, I propose that regulations pertaining to economic activities be imposed on a bloc-by-bloc, or federal basis. Good examples of this system can be found in the U.S. and Germany, where each state has rules and regulations that differ from the country as a whole. It is true that by carving up the country into economic blocs, it becomes more of a challenge for each bloc to compete in this global age, and sure enough some regions may fail to ensure competitiveness and gaps between different areas will be enlarged. However, such a risk should be taken, for the sake of boosting the Japanese economy. I am convinced that it will still take one more generation to decide the fate of Japan's economy, to define if the country suffers from a battered economy or not. Reforms must be launched while the economy can still spare enough energy to do so. Otherwise, there is the possibility that Japan will follow the fate of Argentina; and I definitely would not like to see that happen. Above all, though, it is crucial that we at all times believe that globalization does not have to lead to total convergence of the world, and diversity should be respected based on the history and culture of each region.

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EVENTS INFORMATION

9/12 RIETI Policy Symposium: "Auto Industry Symposium:
The 2003 RIETI-HOSEI-MIT IMVP Meeting"
For details of speakers and admission, http://www.rieti.go.jp/en/events/03091201/info.html

For a comprehensive list of past and upcoming RIETI events, please visit the website: http://www.rieti.go.jp/en/events/index.html

Brown Bag Lunch Seminars

9/9 Speaker: Scott Charney (Chief Security Strategist, Microsoft)
Commentator: Hiromitsu Takagi (Team Leader, Secure Programming Team, Grid Technology Research Center, National Institute of Advanced Industrial Science and Technology)
Moderator: Nobuo Ikeda (RIETI Senior Fellow)
"Toward Trustworthy Computing - Security Strategy of Microsoft"

9/10 Speaker: Peter Brookes (Senior Fellow for National Security Affairs and Director, Asian Studies Center, Heritage Foundation)
Moderator: Michael Yoo (RIETI Research Associate)
"Asian Security Challenges"

9/16 Speaker: Michel Fouquin (Deputy Director of the CEPII and Associate Professor at the University of Paris (Pantheon- Sorbonne))
Moderator: Kyoji Fukao (RIETI Faculty Fellow/Professor, Institute of Economic Research, Hitotsubashi University)
Title: TBA

For a complete list of past and upcoming BBL Seminars, please visit the RIETI website: http://www.rieti.go.jp/en/events/bbl/index.html

Research Seminars

9/11 KOBAYASHI Keiichiro (Fellow, RIETI)
"A Theory of Banking Crises"

9/18 HIROSE Ichiro (Senior Fellow, RIETI)
"Design of the J-League System? 'How the Un-lost Decade of J-League Was Materialized'"

For a complete list of past and upcoming Research Seminars, please visit the RIETI website: http://www.rieti.go.jp/en/events/research-seminar/index.html


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RIETI Report is published monthly.

This month's featured article

Economics Free From Borders <RIETI Featured Fellow> HISATAKE Masato

HISATAKE MasatoConsulting Fellow, RIETI

Event Information

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Symposiums

Workshops

BBL Seminars

Fellow titles and links in the text are as of the date of publication.

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RIETI Report is published monthly.