OECD Product Market Regulation (PMR) Indicators: How does Japan compare? ___________________________________________________________________________________ Competitive product markets foster economic growth and can improve the living standards of citizens. OECD’s Product Market Regulation Indicators assess the alignment of a country’s regulatory framework with internationally accepted best practices. The Economywide Indicator measures the distortions to competition that can be induced through the involvement of the State in the economy, as well as the barriers to entry and expansion faced by domestic and foreign firms in different sectors of the economy. This indicator is complemented by a set of Sector Indicators that measures regulatory barriers to competition at the level of specific network and service sectors.
Overall PMR Indicator Index scale 0 to 6
Japan
1.44
OECD average
1.38
5 Most competitionfriendly countries 5 Least competitionfriendly countries
1.00 1.82 0.0
2.0
4.0
6.0
Economy-wide PMR Indicators: a breakdown by major components Index scale 0 to 6 from most to least competition-friendly regulation
6
Japan
OECD average
5 Most competition-friendly countries
5 Least competition-friendly countries
5 4 3 2 1 0 Public Ownership
Involvement in Business Operations
Simplification and Evaluation of Regulations
Admin. Burden on Start-ups
Barriers in Service Barriers to Trade & Network sectors and Investment
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. Source: OECD 2018 PMR database.
ECONOMY-WIDE HIGHLIGHTS
Overall, regulatory barriers to competition in Japan are somewhat higher than the OECD average. The licensing regime is light and the regulatory framework in the service and network sectors is competition friendly. The government controls firms in a number of sectors, though only a few of these state-owned enterprises are large network sector operators. However, the governance of state-owned enterprises could be better aligned with OECD best practices. Furthermore, the public procurement framework is not in line with key OECD best practices, and the administrative requirements on start-ups are higher than in many OECD countries. There is also scope for simplifying the administrative burden for firms when interacting with the government, to reduce barriers to entry for foreign suppliers, and to regulate the interaction between interest groups and policymakers.
Economy-wide PMR indicators: a breakdown by sub-components Index scale 0 to 6 from most to least competition-friendly regulation Distortions Induced by State Involvement Simplification and Evaluation of Regulations
Complexity of Regulatory Procedures
6 5 4 3 2 1 0
Interaction with Interest Groups
Involvement in Business Operations
5 Least competition-friendly countries
Assessment of Impact on Competition
6 5 4 3 2 1 0
Price controls
Governance of SOEs
Direct Control
Scope of SOEs
Gov’t Involv. in Network Sectors
Public Ownership
6 5 4 3 2 1 0
5 Most competition-friendly countries
Public procurement
OECD average
Command & control regulation
Japan
Barriers to Domestic and Foreign Entry
Barriers to Trade Facilitation
Barriers to Trade and Investment
Treatment of Foreign Suppliers
6 5 4 3 2 1 0
Tariff Barriers
Barriers in Service & Network sectors
5 Least competition-friendly countries
Barriers to FDI
6 5 4 3 2 1 0
5 Most competition-friendly countries
Barriers in Network sectors
Licenses and Permits
Admin. Burden on Start-ups
Admin. Requirements for Lim. Liab. Companies and Pers.Owned Enterp.
6 5 4 3 2 1 0
OECD average
Barriers in Services sectors
Japan
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. If the blue bar does not appear on the chart for a specific indicator, it means that its value is 0. Source: OECD 2018 PMR database.
SECTOR-SPECIFIC HIGHLIGHTS There are limited regulatory barriers to competition in the service and network industries in Japan. The regulatory framework in the rail and road transport sectors is among the most competition-friendly in the OECD, while there is scope for improving regulations in the e-communications sector. Barriers to competition are low in retail distribution and in the retail sale of medicines, while the regulation of professional services could be more competition friendly.
Regulation in network and service sectors PMR Indicators for network sectors Index scale 0 to 6 from most to least competition-friendly regulation Japan 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4 3 2 1 0 Electricity
Gas
Rail
Air
Energy
Road
Water
Fixed
Transport
Mobile
E-Communications
PMR Indicators for professional services* and retail distribution Index scale 0 to 6 from most to least competition-friendly regulation Japan 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4
3 2 1
0 Lawyers
Notaries
Accountants
Architects
Professional services
Civil engineers
Real estate agents
Retail distribution
Retail sale of Medicines
Retail trade
* When comparing the indicators across countries, it should be kept in mind that the activities undertaken by specific professions may vary between countries. Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. Source: OECD 2018 PMR database.
OVERALL ASSESSMENT
Regulatory barriers to competition in Japan are limited, but there is scope for improving product market regulation in some sectors and domains.
Strengths
Challenges
The licensing regime is very lean. There is a ‘onestop-shop’ that provides businesses with information about licensing requirements, and issues all licences and permits. There is also a ‘silence is consent’ rule that reduces the waiting time for the approval of licences, and there are ongoing programs to review and reduce the number of licenses.
The regulation of rail transport is among the most competition-friendly in the OECD. In particular, there is competition in the provision of rail passenger services on the majority of routes.
The regulatory framework for retail distribution is competition-friendly. Indeed, administrative requirements for new outlets are limited, and there are no restrictions on shop opening hours. Similarly, the regulation of retail sales of medicines, in particular pharmacies, is very competition friendly.
The regulatory framework for public procurement does not provide a level playing field for all potential bidders, in particular for public works. For example, contracting authorities are not required to publish all tender documents online, or to allow firms to submit all bids online.
There are no rules regulating the interaction between interest groups and policymakers, which creates the risk that the regulatory process is influenced by lobbying activities.
Lawyers, notaries and accountants, and, to a lesser extent, real estate agents are strictly regulated, both in terms of entry requirements and conduct restrictions.
The government indirectly owns shares in providers of both fixed and mobile ecommunication services, and there is no secondary trading of spectrum for mobile services. In addition, number portability is mandated, but there is no regulation of the conditions under which this must be offered, and there is no obligation to provide consumers with information about the billing of roaming services when they travel abroad.
Further information
“What are the 2018 OECD PMR indicators?” PowerPoint presentation on OECD PMR website
Vitale, C., et al. (2020), " The 2018 Edition of the OECD PMR Indicators and Database – Methodological Improvements and Policy Insights", OECD Economics Department Working Papers
Please visit our website : http://oe.cd/pmr Contact us at: PMR2018@oecd.org