Competition policy in Japan

Finally, the third phase is the adjustment policies for the declining industries after the oil crisis. Entering 1970s, the period of low growth, it was the subject of policy to protect the industries, which had lead to excessive production capacity and fell into a structural recession where the reconstruction seemed extremely difficult. The Law on Extraordinary Measures for the Stabilization of Specific Industry enacted in 1978 had an intention to assist these structural recession industries in renovating old facilities and scrapping the excessive facilities.

As the Law became a time limited, the Law on Extraordinary Measures for the Structural Improvement of Specific Industry was legislated in 1983 instead, which was continuously to progress the adjustment support policies for these industries. Competition policy in Japan has been treated as a species of regulation, not an organizing principle for the economy.

Competition policy was assigned to a separate agency, which was Fair Trade Commission, independent of the government but politically not strong enough to promote its policies effectively, while the ministries that regulate industry and investment, and that have historically encouraged non-competitive practices, were more powerful. Japan's economic success now makes it possible, indeed imperative, to shift policy goals from "catch-up" development to consumer welfare. The competition agency is responding to this change by redirecting its own efforts, to concentrate on practices that impair efficient markets.

Competition enforcement was on the rise again in the 1990s. This revival is mostly caused by pressure from abroad, just like the original competition law itself. This time, it was claimed, in trade disputes with the US, that lax competition law enforcement gave Japanese firms unfair trading advantages while tolerating restraints on competitive imports. Whatever the merit of those claims, the response from Japan was a number of explicit commitments to increase the resources and the visibility of competition enforcement. Many of these represented changes that the FTC had long been advocating.

The FTC was an object and active participant in the negotiations. At their conclusion, the Japanese government committed to increasing enforcement against exclusionary cartels, to greater reliance on more formal, public methods of enforcement, and prosecutions, and to increasing attention to competition issues in the distribution system and in inter-corporate keiretsu groups. The FTC has increased its formal enforcement activity, strengthened its guidelines about horizontal and vertical issues, modernized its merger standards, added to its staff and budget, and raised its profile in advising about competition issues at other ministries.

Despite the recent successes, competition policy remains an awkward import into Japan's business and government culture, and its long-term status remains uncertain. A recent analysis by Japanese and British scholars describes the FTC as "a unique and vulnerable agency administering deeply unpopular laws based on a widely rejected model of market competition," playing an "ambiguous and difficult" role, with a "huge gap" between its theoretical powers and its actual practice.

The gap is closing, but "the renaissance of competition policy in Japan is recent, partial, and far from fully secure. "4 1 Iyori, H. and Uesugi, A. (1994), The Antimonopoly Laws and Policies of Japan, New York, pp. 30-52. 2 Noguchi, Y. (1995) 1940 nen Taisei (The 1940's System), Toyo Keizai Sinpo-sha, Tokyo, Japan. 3 OECD Review, Regulatory Reform in Japan: The Role of Competition Policy in Regulatory Reform, July, 23, 1999