APEC Seminar for Sharing Experiencein APEC Economies on Relations between

Competition Authority and Regulator Bodies

June 11-13, 2008Bali, Indonesia

Professor. Tetsuzo YAMAMOTOGraduate School of Commerce,

Waseda University

Business State Judgment DⅠ（「Good」-「Bad」·％Point、（）means prospect indicated by firms at the last research

2007/12 2008/3 Dec.→Mar.

range of change

２００８/June(Prospect)

Mar.→June

range of change

Large Firms

Manu. 19 (15)11 -8 7 -4

Non-Manu. 16 (15)12 -4 13 +1

M.S.Firms

Manu. 10 (6)5 -5 -1 -6

Non-Manu. 2 (-3)-3 -5 -1 -3

Small Firms

Manu. 2 (-3)-6 -8 -9 -3

Non-Manu. -12 (-17)-15 -3 -21 -6

Total 2 (-2)-4 -6 -7 -3

Resource: The Bank of Japan

Figure 1-1 Recent business Trend

2006 2007 2008 2009 2007 2008 2009

1st half

2nd half

1st half

2nd half1st half

2nd half

Demand and output (volumes)

Consumption

Private 2 1.4 1.1 1.3 2.4 0.6 1 1.1 1.3 1.4

Government -0.4 0.8 1.9 1.4 0.4 1.5 2.3 1.3 1.4 1.5

Gross fixed investment 1.3 -0.3 -0.3 1.8 0.3 -4.4 0.3 1.8 1.7 2.2

Public -8.1 -2.2 -4.9 -4.4 8.3 -8.2 -3.7 -2.6 -5.1 -4.9

Residential 0.9 -9.5 -7.6 4.9 -4.9 -27.1 -4.6 1.7 6 6

Business 4.3 2.4 2.4 2.8 -0.4 2.3 2.4 2.9 2.5 3.1

Final domestic demand 1.4 0.9 0.9 1.4 1.5 -0.4 1.1 1.3 1.4 1.6

Stock-building 0.2 0.1 0 0 0.1 -0.1 0 0 0 0

Total domestic demand 1.6 1 0.9 1.4 1.6 -0.5 1.1 1.3 1.4 1.6

Exports of goods and services 9.7 8.8 7.8 7.2 9.3 10.5 7.4 7.6 7.2 6.8

Imports of goods and services 4.2 1.7 4.5 5.5 2.7 0.8 4.8 5.6 5.4 5.5

Net exports 0.8 1.2 0.7 0.4 1 1.5 0.5 0.4 0.4 0.3

GDP 2.4 2.1 1.6 1.8 2.7 1.1 1.6 1.7 1.8 1.9

Resource: OECD

Figure 1-2 Macro Economic Fundamentals

Figure 1-3 Japanese Economy at the landing

positive

・High Return or Profit Level of Large Firms f

・Reduction of Unemployment

・Good balance of Payment

・Weak Consumption Expenditure Level

・Slowdown of Private Capital Investment

・Inflation Pressure in a distorted way

・Concerns about un -certainty

negative

Current Position

Figure 1-4 Trend of CPI

National

Tokyo

Resource: MICNote: :Blue means the periods of recession

Regulatory Reform

Competition Policy

Public Sector Governance

Regulatory Reform

Corporate Governance

LAISR 2010

Leader’s Agenda to Implement

Structural Reform

Figure 2-1 LAISR’s Program

Resource: APEC Economic Policy

Structural Reform 2007

1.Improve-ment of Eco-Social Life

5.Public Sector Reform

4.Securing Equal

Opportunities

2.Agricultural Reform

3.Revitalizati-on of regional

economies

Figure 2-2 Structural Reform in Japan

Figure2-3Reform proposals accepted nation-wide under

the special zone initiative

GDP Trade Inward FDI

80-90 90-95 80-90 90-95 80-90 90-95

World Average 3.1 2 4.7 6 5.4 4.1

Australia 3.4 3.5 5.8 8.1 11.2 9.1

New Zealand 1.8 3.6 3.6 5.4 27.7 25.4

Papua new guinea 1.9 9.3 4.5 19.3 27.9 17.6

Brunei n.a 6.7 n.a n.a n.a n.a

Indonesia 6.1 7.6 5.3 21.3 7.6 4.3

Malaysia 5.2 8.7 11.5 17.8 43.7 21.2

Philippine 1 2.3 2.9 10.2 13.6 7.4

Thailand 7.6 8.4 14.3 21.6 10.2 3.7

China 10.2 12.8 11.4 14.3 14.5 15.9

Korea 9.4 7.2 13.7 7.4 1.9 0.8

Singapore 6.4 8.7 12.2 16.2 59.3 23.1

Hong Kong 6.9 5.6 15.4 15.3 12.2 6.7

Taiwan 8.8 6.6 11.6 5.9 5.1 2.4

Canada 3.4 1.8 5.7 8.4 6.6 5.9

U.S.A. 3 2.6 3.6 5.6 5.3 4.2

Mexico 1 1.1 12.2 14.7 16.9 10.4

Chile 4.1 7.3 5.7 10.5 21.5 9.2

Year average increment Resource: Cabinet office

Figure 3-1 Economic Prospects by The GTAP

Figure 3-2 Inward FDI Account of Advanced Countries（Ratio of FDI to GDP）

0

5

10

15

20

25

30

35

40

45

50

1980 1985 1990 1995 2000 2005 2006

English

France

Australia

Germany

U.S.A.

Korea

Japan

44.6

33.2

32.6

25.1

13.5

8.8

2.5

Resource: OECD

0

3

6

9

Employee1-19 Employee20-49 Employee50-499

Norway

Belgium

Austria

Portucal

Iceland

Finland

Newzealand

Sweden

Australia

Spain

Figure 3-3 Ratio of Compliance Cost to Turnover in European Countries

Resource: OECD

Ministry Number of Inquiry and Response Related law

FTC 1 Anti-Trust ActFinancial Services Agency 4 Insurance Act, Trust Act, etc.Ministry of Internal Affairs

and Communications 1 Telecom Act

Ministry of Justice 1 Immigration Control ActMITI 4 Energy related ActsTotal 11

*Trend of number of responses to no-action letters

2001 2002 2003 2004 2005 2006

9 14 20 23 8 11

Resource: The Ministry of Internal Affairs and Communications

Figure 3-4 Results of No-action Letters in Japan 2006

office No.RIAs classified by the

ordinances

Law Cabinet order Ordinance Notice

FTC 3 3(100%) - - -

NPSC 23 18(78.3) 5(21.7%) - -

FSA 3 - 3(100%) - -

MIC 19 10(45.5%) 4(18.2%) 5(22.7%) 3(13.%)

Ministry of Justice 8 - - 5(62.5%) 3(37.5%)

MFA 1 1(100%) - - -

MF 1 1(100%) - - -

MECSS 12 2(11.1%) 6(33.3%) 10(55.6%) -

MHLW 11 7(63.6%) 4(36.4%) - -

MAFF 37 31(83.8%) 6(16.2%) - -

METI 50 2(3.4%) 9(15.3%) 37(62.7%) 11(18.6%)

MLITT 27 25(92.6%) 2(7.4%) - -

ME 52 38(73.1%) 14(26.9%) - -

Total 247 138(52.1%) 53(20%) 57(21.5%) 17(6.4%)

Figure 3-5 Results of RIAs in Japan

Resource: The MIC

1987 1988 1989 1990 1991 1992 1993 1994

Telecommunication internal 983 3274 2884 2123 2439 2214

international 694 653 341 137 13 86

Transportation domestic aviation 495 468

private car

truck -1621 139 -965 -2323 6327

railway 771 728 958 902 1305 1523 1366 1520

taxi

Energy electricity

gas

petroleum things 706

Finance commission 514

Food Rice

Alcohol 354 196 2519

Total 771 728 2635 3209 4669 3171 2185 14355

Table 4-1Consumer surplus between 1987-1994

Resource: Cabinet Office

Table 4-1Consumer surplus between 1995-2000

Resource: Cabinet Office

1995 1996 1997 1998 1999 total 2000 total

Telecommunication internal 916 5747 7817 7143 2486 38027 4644 42671

international 149 213 118 569 388 3363 261 3624

Transportation domestic aviation 301 440 952 431 301 3387 201 3589

private car 2450 1728 866 552 377 5974 352 6326

truck 6418 6869 -363 3119 3215 20816 2832 23648

railway 1262 1092 1408 2072 2132 17038 2062 19100

taxi 28 4 4 36 8 44

Energy electricity 1918 7424 1262 5928 0 16532 3018 19550

gas 51 276 0 57 188 572 201 773

petroleum things 5936 6031 2667 3068 2542 20951 -1952 18999

Finance commission 95 512 -6 68 1278 2461 1276 3737

Food Rice 1278 1710 1635 1556 472 6651 1869 8520

Alcohol 1103 1387 -1797 1677 680 6119 400 6519

Total 21878 33431 14588 26243 14063 141927 15172 157099

Figure 4-2Estimation of Consumer surplus (image graph)

ＰProcedure of estimation:

• Estimation of demand function

• Calculation of Price contribution based on the estimated elasticity

• Calculation of incremental demand emerging from the price decrease (y+1)

• Squaring which correspond to the argumentation of consumer surplus{Qt+(Qt+Yt+1)+(P+1-Pt)}×1/2

Ｑｔ

Ｑｔ+1

Ｑ

Ｐ+

Ｐ+1

Figure 4-3The effect of Regulatory Reform on change of TFP

(manufacturing industry)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Eletr

olic

par

tsO

ther

s

Elect

roni

c eq

uipm

ent

Food

Med

icin

eCoa

lGla

ss

Min

ing

Indu

s try

petr

oche

mis

try

Autom

obile

par

tsAut

omob

ile

Refin

ing

Indu

stry

Flour

Indu

stry

Note: Oblique line means the effect of Regulatory ReformResource: The Cabinet Office

Figure 4-3The effect of Regulatory Reform on change of TFP

(non-manufacturing industry)

-1

-0.5

0

0.5

1

1.5

2

2.5

Fin

ance

Lease

Realt

or

whole

sale

car

serv

ice

sto

ckbre

edin

g

Info

rmati

on

delivery

reta

ilor

Farm

ing

advert

isem

ent

Educati

on

Note: Oblique line means the effect of Regulatory ReformResource: The Cabinet Office

Figure 4-4 Category of Advocacy Activities of the FTC

1.Monitoring the Competitive States of Markets

2.Observing the Competitive Circumstances of the Public Utilities

3.Cooperation with other Ministries in Making Guidelines and Proposals for the desired regulation

1.Submitting her view to the cabinet office concerning the ordinance

2.Consultation and so on.

Positive Advocacy Activities Passive Advocacy Activities

Figure 5-1 Performance of The FTC

0

7

31

14

1

8

22

22

02

40

13

04

30

6

13

6

0

14

0

5

10

15

20

25

30

35

2003 2004 2005 2006 2007

collusive bidding

private monopoly

price cartel

unfair trade

others

Resource: The FTC

0.4

38.3

77

34.5

0.7

188

28.9

63.8

39.2

73.7

0

20

40

60

80

100

120

140

160

180

200

2003 2004 2005 2006 2007

collusive bidding

price cartel

100 million yen

Surcharge per enterpriser unit:10 thousand yen

2003 2004 2005 2006 2007826 5,091 4,729 5,863 6,973

Resource: The FTC

Figure 5-2 Surcharge for Collusive Bidding

Figure 5-3 Flowchart of The FTC’s Activity

Resource: The FTC

Research Base on Official authority

Research based on Report from People

Use of Leniency system

Infringement Research Administrative Research

Warning, Notice

Prior Notification（Exclusive Measures）

Prior Notification（Surcharge）

Retraction Order Payment Order

Determination Claim for judgment Claim for judgment Determination

Judgment Judgment

Decision（rejection） Decision（Change of Order） Declaration of Illegality

Law-suit

Accusation