Japanese Ease Regulations on Foreigners

The new government Tuesday ordered a slashing of some of the red tape that has blocked foreign businesses from the Japanese market, and the finance minister called for even more cuts.

The package to ease regulations on 279 products and services was approved in principle in the last days of the previous government, but outgoing Prime Minister Tsutomu Hata left final approval to the new government, which was formed last Wednesday.

A major part of the package is wider acceptance of foreign test data on home building materials, automobiles, food products, pharmaceuticals and other goods.

New Prime Minister Tomiichi Murayama is to explain the plan’s details to President Clinton this weekend while both are at the Group of Seven summit in Naples, Italy, officials said.

Japan has announced deregulation on 781 other items in the past year as part of measures aimed both at stimulating Japan’s sluggish economy and reducing its giant trade surplus, which reached $59 billion with the United States alone last year.

The huge surplus is one of the factors contributing to the yen’s rise against the dollar. The strong yen stifles Japan’s export-driven economy by making its products more expensive to foreign consumers.

The dollar last week fell to below 100 yen for the first time since World War II. It closed at 98.70 yen in Tokyo in late-morning trading today.

“This package is a step in the right direction, but more steps are necessary” to give foreign competitors a better chance at success in Japan’s market, said Jason James, an economist at securities firm James Capel Pacific.

But the new finance minister, Masayoshi Takemura, was among the critics who called the package insufficient. He urged other Cabinet members to promote deregulation more aggressively.

Masaru Takagi, chief economist with Fuji Research Institute, said the new Murayama government should make Tuesday’s package the starting point for further deregulation.

“The question is still how to increase domestic demand and thus reduce the trade surplus through deregulatory measures,” Takagi said.

Murayama told a news conference Friday that he would continue to promote economic reform and domestic consumer demand to try to increase economic expansion and ease trade friction.

The package calls for formulating a five-year deregulation action program by the end of the fiscal year, next March 31.

It is unclear how much power Murayama’s government will have to push new deregulation. The government is an uneasy coalition of Socialists and the conservative Liberal Democratic Party, and Murayama has said he will call national elections soon.