The Politics of Structural Reforms
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The Politics of Structural Reforms

Social and Industrial Policy Change in Italy and Japan

Edited by Hideko Magara and Stefano Sacchi

For countries undertaking economic or political reform the case of Italy and Japan is both highly instructive and sobering. The Politics of Structural Reforms reveals what Italy and Japan gained and lost through a series of social and industrial reforms in the 1990s and 2000s, and why the changes they made in their policies have had little impact in softening the recent economic crisis.
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Chapter 4: Japan’s structural reform in the age of economic globalization: the politics of coordination and miscoordination

Motoshi Suzuki

Extract

The Japanese economy is intrinsically linked to the international economy through trade and investment. As the international economy changes, the Japanese economy is pressured to make appropriate adjustment to stay in the global competition. The structural reforms that dominated Japanese national politics from the mid 1990s to the early 2000s were attempts to make large-scale adjustments to an economic system that was becoming inefficient and less competitive under the globalizing liberal economic order. In general, structural reform means institutional change in an economic system that is identified with a shift from one equilibrium characterized as a regulated system to another characterized as a deregulated one. Such an equilibrium shift is associated with a systematic, qualitative change in the action-choice rules of agents as well as their common cognitive representations (causal beliefs) about them (Aoki, 2001, p. 235). From this individual-level perspective, structural reform is viewed as a process of coordination in which agents adjust their beliefs and behaviour to a new equilibrium. If structural reform involves a game of coordination with multiple equilibria, a focal point effect can promote cognitive adjustment to a particular equilibrium (Schelling, 1960, pp. 57–9). Hence, a logical strategy to promote structural reform is to exploit such an effect by stressing the efficiency and appropriateness of a deregulated economic system that is rapidly becoming an international norm in the age of globalization (Mittelman, 2002).

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