This report analyzes the Japan’s regulatory reform, which constitutes the core of the Growth Strategy of Abe Cabinet, to present policy implications toward the Korean government. Chapter 2 examines the significance of social regulation reforms conducted by the Koizumi Cabinet in the early and mid-2000s and figures out that the regulatory reform of the Abe Cabinet is composed of ‘General’ regulatory reform, regional-level regulatory reform, and enterprise-level regulatory reform. Chapters 3 and 4 examine the progress made in these three types of regulatory reforms. And Chapter 5 analyzes the regulatory reforms of the Korean government in terms of the framework of regulatory reform in Abenomics. Chapter 2, “The Development Process of Japan’s regulatory reform” outlines

why the Koizumi Cabinet emphasized social regulation reform as a policy tool to overcome low growth. The results can be summarized as:

First, since the early 2000s, the government became aware that the reform of social regulations with strong economic characteristics, prevailed in agriculture, medical and welfare, education and jurisdiction areas was essential to revitalize the markets. However, they did not simply intend to deregulate or abolish the regulation but to transform the regulations, which were arbitrary in nature, to Ex post facto regulation or rule-based regulation. Second, regulatory reforms of the Abe Cabinet focus mainly on three sectors:

medical and health care, employment and agriculture which followed up on reforms of the Koizumi cabinet. The government strived to reform several areas in each sector, for example, expanding the scope of mixed medical treatments (kongoshinryou: A combination of insured and uninsured medical treatments) and allowing retail and online sales of OTC (Over-the-Counter) drugs in the medical sector, improving worker dispatch system in the employment sector, and allowing enterprises to buy farmland in the agricultural sector. 

Third, the regulatory reform presented in Abenomics has promoted the regional and enterprise levels of regulatory reforms as social experimentation. The National Strategic Special Zone system has been introduced as a regional-level reform to make up for the weaknesses of the general regulatory reform such as difficulties in reaching a consensus among stakeholders. And in the enterprise-level reform, the government promoted the Corporate Special Regulatory Exemption system (Kigyouzissyoutokurei seido) which introduces special ordinances and enforcement acts rather than a full revision of the law, in order to effectively support the companies’ new business plans. 

Chapter 3, “The Japanese government’s regulatory reform(1): General regulatory reform” examines regulatory reform in medical care, employment and agriculture, selected as major areas for regulatory reform of the Abe Cabinet. The results are as follows: 

First, in the medical sector, its main achievements would be allowance of online sales of OTC drugs, improvement of the government approval system on regenerative medical products, expansion of the scope of mixed medical treatments, and permission of the establishment of medical corporations in the form of holding companies, and so on. 

Second, regulatory reforms still follow from the existing regulatory framework that protects permanent employees and restricts hiring of temporary workers, and has been criticized as main contributors to inflexibility of the labor market. Third, in the agricultural sector, the government revised the Agricultural Land law to expand the farmland ownership by enterprises via agricultural production corporations. However, the revision of the law in August 2015 only raised the investment limitation for agricultural production corporations owned by enterprises to 50 percent, and there are still institutional limitations for enterprises to become a real owner of farmlands. 

Chapter 4, “The Japanese government’s regulatory reform(2): regional-level and enterprise-level regulatory reforms”, analyzes the National Strategic Special Zone system as the regional-level regulatory reform, and the Corporate Special Regulatory Exemption system and the system to Remove Gray Zone as the enterprise-level regulatory reform. The results can be summarized as: 

The characteristics of the National Strategic Special Zone system are; firstly, it has well equipped with centralized implementation system-the Advisory Council which is under the Prime Minister’s direct supervision. Secondly, it adopted a batch method which lists the provisions for regulatory exemption actions on the National Strategic Special Zone Law enacted in December 2013. Thirdly, it selectively applies regulatory exemption actions that reflect regional and industrial comparative advantages of each zone. Its tangible achievements-urban renewal projects in the Tokyo zone, development of the medical industry in the Kansai zone, and corporate entry in agricultural sector in Niigata and Yabu zones-should be acknowledged. 

In the enterprise-level regulatory reform, despite the government’s goal to support creating new businesses in new growth engine industry, the application of the Corporate Special Regulatory Exemption system for Japanese enterprises still falls short of their expectations. 

Chapter 5, section one of “The current state and tasks of regulatory reform, in Korea” analyzes general regulatory reforms of Korean government, by focusing on three sections corresponding to Japan’s regulatory reforms: medical care, employment and agriculture. The Korean government selected five service sectors of health and medical care, education, banking, tourism, and software as the main reform sectors. However, the progress in related legislations such as Service Industry Development Act has been poor; though their legalizations are important to respond high demands from the market. The results are summarized into three parts. 

First, the would-be achievements of Korean regulatory reforms from easing of medical regulations: allowing commercialized medical care, attracting foreign patients, and deregulating telemedicine treatment has been delayed due to strong resistances from rent seekers. The progress in medical regulation reform has been slow and requires backup plans. 

Second, the government has promoted labor reforms on application of the wage peak system and general dismissal requisites etc., which would be significant as an initiation of earnest labor market reform. However, the government needs to provide supplement policies for the agreement between labor and management and to achieve labor flexibility and employment stability at the same time. 

Third, although the government has eliminated obstacles for agricultural corporations, more is required to improve the quality of agricultural enterprises and induce more enterprises’ participation. And as a reform of the National Agricultural Cooperative Federation, the government separated the federation into finance and economic sectors. However, the federation’s economic sector faces challenges to compete with other agricultural distributors and improve management efficiency. 

Section 2 “Regional-level regulatory reforms: Special Zone system” and Section 3 “Enterprise-level regulatory reforms” in Chapter 5, outline the present condition of the regulatory reforms at the regional and enterprises levels. Firstly, the results of the regional level regulatory reform can be summarized as: 

First, special zones are basically being promoted to create good business environments focusing on introducing education institutions, foreign medical center and etc., to encourage more foreign direct investment. Also in the local special zones, regulatory exemptions for land-use and authority transfer are introduced with consideration of each region’s own characteristics.

Second, challenges that special zones face are: first, due to overlapping designation, there is insufficient differentiation among the zones. Also the lack of governance system, delays in development work and sluggish foreign direct investment are being pointed out as problems. Impediments, in particular, to development in the Special Economic Zones include phase-in development restrictions, provision of lands to enterprises below the cost, and resistance to establish foreign medical corporations. Also, the impacts and the utilization of regulatory exemptions by enterprises in Special Economic Zones are still low. 

As for results of the enterprise-level regulatory reform, they can be summarized as follows:

First, Korean government also has enterprise-level regulatory reform system, so called Conformity Verification System and Fast Track-and-Temporary Licensing System while these systems can be applied only to new products and services of industry convergence.