Regulations (and Bureaucrats) Are Strangling Japan

In March, according to a Nikkei Net Interactive article dated April 16, 2008, a major bank reportedly received a call from an irate customer. "Who on earth is the law (i.e., a new law regulating sales of financial products and services that mandates identity confirmation for elderly customers in financial transactions) designed for ?", the customer fumed. He went on to complain that "such an inflexible system only repels investors", and are apparently designed more as a means for bureaucrats to avoid being criticized for problems with financial products than as legislation to protect customers. The customer's name was Masajuro Shiokawa, the former Minister of Finance! Introduction of the law has led to plunging sales of mutual fund products OTC at banks, which had become the main sales channel for sales of mutual funds.

Another recent example is the revision to the building standards law in response to the scandal over falsification of earthquake safety data. Stricter safety standards were hastily crafted and rammed through the Diet, without giving developers time to develop new computer software to cope with the new regulations. The result was that new building virtually ground to a standstill for several months, and housing starts have yet to recover.

When the afternoon talk shows began focusing on the "gray area" interest rates charged to borrowers by consumer finance companies, the FSA was closely monitoring the TV gossip, and after the Japan supreme court basically allowed for open-ended claims for refunds of "excess" interest paid, the FSA came out with lower caps on consumer loan rates that slam-dunked consumer finance profits, which had been (and in many ways still are) foreign investor favorites.

Social security has been a major disaster, with successive revelations of local officials blithly committing personal and organizational fraud, and with new social security amendments pushing the medial burden onto the aged who had little understanding of the impact of the new changes.

Consequently, the current stalling of growth in Japan began with a "bureaucrat-induced recession", while the LDP and DJP play mud-wrestling in the Diet.