Chapter 1: Regulation
Public utility industries in Japan, such as electric power, gas, railways and telecommunications, are operated mainly by the private sector, the only exceptions being water supply and general roads. However, these public utility industries are subject to regulations governing such issues as entry, exit, and price. Although since the late 1980s, the process has been underway to deregulate and privatize what were once public corporations, these organizations are all still governmentally regulated as public utility industries. The main purpose of this chapter is to explain the basic theoretical regulatory concepts related to public utility industries in Japan. The theoretical aspects of regulation are commonly known throughout the world, but I focus here as much as possible on important regulations and philosophical background. Comprehensive treatment of economic rationale and theories on regulation can be found in excellent works, such as Breyer (1982), Kahn (1988), Spulber (1989), Waterson (1988), Baldwin and Cave (1999), Viscusi et al. (2005) for general regulation, Uekusa (2000) for regulation in Japan, and Gómez-Ibáñez (2003) for more recent infrastructure regulation. As background to facilitate understanding of regulatory reforms in individual industries, this chapter and the next will focus on regulations in Japan.
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