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January 2009

[Originally posted, with full hyperlinks and various Comments, at http://eastasiaforum.org/author/lukenottage/]

Japan appeared finally to have recovered from its own financial crisis a decade ago, albeit at the cost of much accumulated government debt. But now the country has been hit by the collapse of its export markets and the rapid rise of the yen, following recession in the US and increasingly world-wide. Professor Iwao Nakatani, former Chairman of Sony, urges a radical shift in economic policy in Japan and elsewhere - from policy ‘based on neo-conservative economics and the philosophy of small government to one based on Keynesianism and welfare state ideology’.

Some may remain sceptical that Japan ever really embraced the former philosophy, and its ascendancy was certainly never as pronounced as in the US, the UK or then Australia - where market liberalisation tended to be linked closely to race politics (Mark Davis, The Land of Plenty, MUP 2008). But deregulation of alcohol distribution is one of Japan’s many transformations over the last decade. It is also the flipside of ever-stricter rules on drink driving, although they also reflect a broader trend towards criminalisation of socio-economic deviance (evident eg in product safety or consumer credit re-regulation).

On the other hand, deregulation is most notable in terms of where you can buy alcohol to celebrate this New Year of the Ox, namely vending machines and those ubiquitous convenience stores. It is less notable in what you pay especially for certain beer-substitutes, which mainly reflects differential tax rates. In fact, such rates may well violate WTO law. Yet there is probably not enough financial reward for potential beer exporters to encourage their home governments to sue Japan. So an implication may be for FTA negotiators (even those now from Australia) to seek some offsetting advantage in their overall bilateral deal with Japan. Yet that would further undermine the entire multilateral WTO framework.