March 2021
The budget for fiscal 2021 has passed the House of Representatives, meaning it will become law within 30 days. Much of the budget consists of allocations for the government’s fight against the new coronavirus pandemic, but much of the debate over the spending package was centered on vaccines and the government’s pandemic response. The opposition, as well as the LDP’s junior coalition partner Komeito, saw an opportunity to criticize the government for the delay and lack of clarity in the vaccine rollout. Japan considerably lags behind the U.S. and many EU member states in deploying the vaccine. The state of emergency is now lifted everywhere except Tokyo, Kanagawa, Saitama and Chiba prefectures, but much work remains.
Despite the critical importance of the vaccine rollout for the Suga administration’s own survival, the supply of vaccines is lower than expected. Vaccine Minister Kono Taro is confident that the government can administer second doses to the elderly between May and June, with vaccination slated to start in April. But export restrictions from the EU might affect Japan’s supply as well, as the vaccine delivery schedule.
Kono, who has been on the spotlight since he took over his new portfolio, is seen as a likely candidate to become the next prime minister — about 4 times more people expect Kono to be the next premier that those who expect Suga Yoshihide to stay on, according to a Nikkei poll. Within the ruling Liberal Democratic Party, Kono’s position in the second largest faction could support his candidacy for the party presidency, and therefore the premiership. Suga, in contrast, is not a member of any factions. The vaccination campaign will be a major yardstick by which the public judge whether both the government as a whole and Kono himself were able to successfully fight the virus. However, there is no scenario where the Prime Minister Suga can claim success without Kono also winning public support.
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The government has also passed a set of 5 bills that would establish the Digital Agency and set in motion Japan’s much-needed digitization. Even then, if Japan starts to digitize most of its outdated administrative services, part of the success will go to Kono, as his portfolio involves regulatory and administrative reform. Should the government’s efforts fail, blame will inevitably fall on Suga. In other words, success will in part benefit someone who the public already sees as their future prime minister, while it remains to be seen how much failure in these two massive endeavors can damage Kono’s viability for the premiership.
This month’s edition of Policy Radar covers developments in Healthcare, Energy, Technology and Integrated Resorts.
Energy:
METI to Reinforce Support for Asia's Shift to LNG for Power Generation
The Advisory Committee for Natural Resources and Energy within the Ministry of Economy, Trade and Industry (METI) committed to further support Asian countries’ transition away from coal to liquefied natural gas (LNG). While the ministry had doubled its public-private investment initiative to $20 billion in 2019 to help build infrastructure needed for LNG exports in the region, the critical LNG shortage this winter demonstrated the need to reduce purchasing costs and ensure a stable supply for Japan, which relies on LNG for nearly 40% of its total power generation. METI envisions that broadening its LNG procurement to include producers from India, Indonesia, Vietnam, the Philippines, Malaysia, Thailand, and Myanmar will not only establish an LNG market with flexible pricing, but also effectively reduce carbon emissions by 864 million tons.
METI to Create System to Support Procurement of Renewable Electricity
METI Minister Kajiyama Hiroshi announced plans to establish a system to facilitate the procurement of electricity generated from carbon-neutral sources. Under this new system, the government aims to make it easier for companies to buy carbon-free electricity and boost exports of products manufactured with renewable energy. The government will also review the trading system for non-fossil certificates — which prove that electricity is generated from renewable sources and nuclear energy — so that electricity retailers purchasing such certificates will be regarded as procurers of carbon-free power. The subcommittee for constructing a sustainable electricity system is scheduled to devise a draft of the system by this summer with its operation (certificates and trading system) starting within several years.
Langley Insight: A series of events, from the depletion of LNG stocks amid unseasonably cold winter weather to the major earthquake off the coast of Fukushima Prefecture in mid-February that cut power to over 900,000 homes, have called the disaster-prone nation’s energy reforms into question. Ahead of revisions for the nation’s Energy Basic Plan due to take place in summer, the Suga administration will need to show its commitment to achieving carbon neutrality by 2050. With calls within the LDP and from industry leaders to restart nuclear reactors to accelerate decarbonization efforts, Suga will be called upon to take a position on nuclear energy, which previous administrations have long avoided for fear of strong public backlash.
Technology:
Law Regulating Tech Giants’ Business with Smaller Companies Comes into Force
A law aimed at ensuring that technology giants do business with small companies on fair terms has come into force. From now on, tech giants will be obligated to disclose the terms of contracts with smaller business partners and report regularly to the government. The government will decide which companies are affected by the law in spring, but online shopping operators with annual domestic sales of ¥300 billion or more and app store operators with annual domestic sales of ¥200 billion or more will be subject to its effects. The law also requires tech giants to establish a system dealing with complaints and resolving issues related to business practices: the industry minister will be able to issue recommendations and disclose information about cases, and if problems persist, the minister will be able to initiate proceedings for monetary penalties through the Fair Trade Commission. The law is designed to help prevent larger companies using their strong bargaining tactics on smaller businesses, and avoiding unfavourable business terms or contract revisions for the latter.
Government Introduces Digital Bills
The Diet has started the deliberation of five bills aiming to accelerate digitization, including one to establish the country’s first governmental Digital Agency. At a plenary meeting at the House of Representatives, Minister Hirai Takuya provided a detailed explanation of the bills and took questions from other lawmakers. If approved, the government will establish the Digital Agency by September, which will then tackle central and local governments’ digitization of administrative and regulatory services, as well as the expansion of the My Number identification card. Prime Minister Suga defended his government’s digitization drive as an effort to effectively reform the country. The bill stipulates that the prime minister will be able to oversee the agency’s actions, with the digital minister able to issue recommendations to ministries and agencies on efforts to digitize. The agency will also look to standardize rules from municipalities to protect personal information. Minister Hirai also apologized for giving out explanatory materials with 45 discrepancies to members of the Diet last month. The government aims to approve the set of laws at the end of April.
Integrated Resorts:
Osaka Officials Delay Integrated Resort Schedule, Dropping 2027 Opening Date
Officials from the city of Osaka have decided to push back plans to open an integrated resort in Yumeshima by March 2027 because of the novel coronavirus pandemic. The initial schedule was to align the opening of Japan’s first casino with Osaka’s World Expo in 2025. That was later delayed until fiscal 2026 to allow for more preparation by the business consortium in charge of the casino resort. Additionally, the city will be accepting more applications from private consortiums to partner with Osaka to co-host an integrated resort; so far only a consortium between MGM and Orix has met the criteria. In its change of the request-for-proposal (RFP) process, the local government has extended the deadline for RFP submissions until July 2021, with final deliberations occurring in September 2021. Once the city officially selects a business consortium for its IR, it will present the development plan to the central government in April 2022.
The delay beyond March 2027 was affected by the central government’s decision to delay formal applications from January to October this year. Applications will be submitted by local governments looking to have one of the three integrated resort locations initially permitted by the bill establishing the framework for integrated resorts. The central government also revealed that it will not set up a framework of taxation for the casino profits made by foreign tourists.
Langley Insight: After significant delays, the government released its basic IR plan at the end of last year, putting the IR local development phase back on track. The plan sets a timeline in which the government will accept IR plans from local governments from October 2021 until May 2022. It is a result of a draft from the Japan Tourism Agency, an agency under the Ministry of Land, Infrastructure, Transport and Tourism. Nagasaki is currently being reviewed by five commercial groups who have submitted their RFP and will advance to the next stage, in which the city will select 3 candidates. Yokohama is currently in phase 1 of its RFP process, which is due to end in May. Wakayama has confirmed that only two companies made submissions for its delayed RFP deadline in the middle of January. The Tokyo Metropolitan government is still considering whether to apply for this round of IR selection, while the Hokkaido government has reiterated that it will not apply for the first three IR locations.
Healthcare:
Japan Begins Vaccine Rollout
Japan’s vaccination campaign kicked off in mid-February with an initial group of 40,000 health workers. The government has since begun the rollout for the nation’s 4.8 million front-line health care workers, including doctors, nurses, paramedics, and Self-Defense Forces personnel. From April 12, the government is scheduled to vaccinate the 36 million people aged 65 and older, followed by those with pre-existing conditions, those working in nursing home facilities, and those aged 60 to 64. Finally, vaccination for the general population aged 16 and older is scheduled for the summer. Municipalities will distribute coupons to those eligible for the vaccination, which Minister Kono Taro expects to be delivered by late April.
Langley Insight: Although the government has signed contracts to procure enough vaccine doses to inoculate 77.2 million people from Pfizer, 60 million from AstraZeneca, and 25 million from Moderna, the nation’s vaccine rollout has been slow. With the current deployment inhibited by Pfizer’s production systems and EU export approval requirements, Kono indicated his hope for an expanded vaccine supply with the approval of the AstraZeneca vaccine, of which 75% of the contracted doses will be manufactured domestically, along with the Moderna vaccine in May. However, with recent cases of anaphylaxis from Pfizer vaccines, the vaccination rollout for the nation’s senior citizens set to begin next month may prove difficult amid growing public distrust of the vaccines.
Government:
Government Appoints Marukawa as new Olympics Minister
Marukawa Tamayo has taken over as the new Olympics minister, replacing Hashimoto Seiko, who now heads the organizing committee for the Tokyo Olympics. Marukawa has also become the minister in charge of women’s empowerment and gender equality, an area she deems is only halfway to where it needs to be. Marukawa was the Olympics Minister from 2016 to 2017, and Environment Minister from 2015 to 2016, both under the premiership of Abe Shinzo. Upon taking her new role, she pledged to prioritize measures to combat the pandemic to ensure the games are held safely. However she quickly came under fire by the opposition for having signed a document that opposed the introduction of different surnames for married couples that was sent to members of the Saitama Prefectural Assembly before taking her new ministerial position. Marukawa said that the government will no longer support or host events lacking female representation, and each administrative body has been notified as such.
Langley Insight: After the international backlash against former Head of the Tokyo Olympics Committee Mori, the government was quick to promote former Olympics Minister Hashimoto to Mori’s position. The controversy has shown the government that more decisive actions are needed, with Prime Minister Suga saying that he aims to decide on a specific policy goal for gender equality by June, to be addressed by the government in fiscal 2022. Just before the Mori controversy, the government had approved a five-year basic plan to promote gender equality that is set to come into force from fiscal 2021. The PM has also been explicit in requesting that government agencies and ministries ensure that government-affiliated bodies employ or appoint women to decision-making positions.
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The Japanese Government’s 2020 Response to COVID-19
Langley Esquire is pleased to release the COVID Report 2020. Over the course of the last year, we have been tracking the Japanese government’s economic and public health response to the new coronavirus pandemic.