Japan Must Set Enterprise Free

BY THE EDITORS OF BLOOMBERG VIEW

ANDREAS SEIBERT

Since an earthquake and tsunami devastated northeastern Japan in March 2011, disappointments have outnumbered triumphs. Major rebuilding still awaits the final clearing away of debris, Europe’s crash threatens recovery, and paralysis among Japan’s leaders — there have been five prime ministers since September 2008 — undermines confidence.

Still, there are signs of hope, as Stuart Biggs makes clear in a report from Japan (“Green Ambitions,” page 88). Some city officials and entrepreneurs are taking matters into their own hands. Leaders of Rikuzentakata, one of Japan’s 11 designated smart cities, are a prime example. They’re trying to rebuild their city along smaller, more efficient and more innovative lines. The looming question, as it has been in Japan for decades, is whether the national government in Tokyo will support this progress. The history isn’t encouraging. Central authorities have long sat by as Japan’s aging population and declining competitiveness bred stagnation and dependence on deficit spending. Now, Tokyo’s languor threatens to squelch the fervor for rebirth across the tsunami zone.

The Miyagi prefecture in the center of the eastern coast was ground zero of the earthquake and tsunami. Yet Governor Yoshihiro Murai is still waiting for bureaucrats to approve his 80-page reinvention plan aimed at attracting entrepreneurs and manufacturers to the district. The private sector has been similarly thwarted, a problem made clear by a stalled project that would build a network of solar-energy plants with the capacity to provide electricity to 110,000 homes.

The country’s need for power is obvious: Japan closed the nuclear reactors that supplied 30 percent of its energy; rolling blackouts are expected this summer. The solar project — the brainchild of Masayoshi Son, chief executive officer of the mobile-phone company Softbank Corp. — remains stuck, waiting on national legislation that will allow it access to the power grid. The legislation, not surprisingly, is being slowed down by a handful of utility companies.

So what can be done? Well, specifically, we’d like to see the central government reject the utilities’ position and ensure that the power grid opens quickly to new providers on a competitive basis. To help Rikuzentakata, the government should release reconstruction funds.

It should also strip away bureaucracy. Right now, for instance, an official looking to relocate a school must send plans to the newly created reconstruction agency, which then consults staffers in the education and infrastructure ministries before checking with the Ministry of Economy, Trade and Industry. Rikuzentakata is not alone. There are stories across Japan about renewal efforts hindered by dysfunctional government. Japanese cities are eager to rebuild; the country’s entrepreneurs are eager to innovate. Will government and entrenched industry let them?

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