ABSTRACT
Why has Japan been slow in carrying out economic reforms – reforms that many astute observers of the Japanese political economy have been saying for some years now are needed? The answer commonly offered by many of those observers is that opposition by powerful interest groups has blocked reforms from taking place. For instance, according to Yamazawa (2003), the farmers, construction companies, banks, and small and medium-sized enterprises and the Liberal Democratic Party (LDP) they support have formed an effective coalition against institutional reform. For Sato (2002), it is the “triad of elite bureaucracy, political parties, and big business” that has “been dragging their feet, [thus] stalling deregulation to protect their own interests” (p. 234). While there may be disagreement as to exactly who these powerful groups are, there appears to be no dispute over the reason why Japan has not been able to carry out economic reforms: that is, but for the opposition by powerful interest groups Japan would have carried out the necessary reforms and would have made a rapid recovery from the economic malaise that began in 1990.1
While agreeing with the view that Japan’s powerful interest groups have blocked the necessary economic reforms from taking place, La Croix (2002) finds nothing extraordinary about its laggardly response to the crisis,
as rich countries such as Japan are typically slow in responding to a crisis. Pointing out that it took ten years for New Zealand and two decades for Switzerland to carry out their respective reforms, he offers three reasons why such rich countries are slow in changing their institutions in response to a crisis: first, people in rich countries can afford to wait; second, institutions by their own nature cannot be too pliant; and third, policymakers in rich countries believe that they are already carrying out the right policies and are not, therefore, inclined to carry out extensive reforms.2
