Japanese Government to Pressurize Mobile Phone Operators to Cut Rates

The newly inducted government of Prime Minister Yoshihide Suga plans to pressurize mobile phone operators in Japan to cut rates. The new Cabinet was formed Wednesday, and right from the start, it has the difficult mission of pursuing two or even three key objectives. Not only does it need to steadily put the nation`s fiscal house in order, but it also needs to balance the prevention of coronavirus infections with economic revitalization.

Japanese Government to Pressurize Mobile Phone Operators to Cut Rates

• Increasing consumption

There are still many things that are far removed from common sense,� Suga said during his first press conference as the new prime minister on Wednesday evening. He specifically called out the mobile phone industry, saying they have maintained a state of oligopoly by holding 90% of market share over many years, and have continued chalking up operating profit margins as high as 20% by collecting charges that are quite high by global standards.�

NTT Docomo, Inc., KDDI Corp., and SoftBank Corp. hold a nearly 90% share of the mobile phone market among them. in terms of the number of users, with each enjoying an operating profit margin of around 19%.

According to the Internal Affairs and Communications Ministry, rate plans for mobile phones in Tokyo are high by international standards three times higher than in London and 1.3 times higher than in Seoul. A related official said, Due to the state of oligopoly and high fees, a structure whereby operating profit margins remain high has been maintained by these operators.

Suga is considering a 40% reduction in charges. Internal Affairs and Communications Minister Ryota Takeda, who is in charge of the communications sector, revealed at a press conference Wednesday evening that he had been instructed by Suga to thoroughly address the situation.

I will strive to realize service plans and rates that are low and reasonable to users, by developing an environment for fair competition,� Takeda said.

The Suga Cabinet places importance on invigorating consumption to revitalize the Japanese economy.

At a time when any drastic policy shift is deemed difficult, as the previous administration was tied up with measures to combat the new coronavirus, Suga is aiming to promote the fee cuts as a one-point breakthrough.� The annual outlay on mobile phone charges per household stood at about yen 103,000 in 2019, accounting for about 3% of consumption expenditure.

Suga hopes cutting the charges by a large margin will result in greater private consumption, thus creating a virtuous circle that will contribute to economic recovery driven by domestic demand.

• Fiscal 2021 budget

The Suga administration will also be put to the test in the compilation of the fiscal 2021 budget, which will get into full swing from October until the end of the year. Every ministry and agency will submit its budgetary requests to the Finance Ministry by the end of this month.

Points at issue will be ways to curb increases in social security expenses related to pensions, health care, and nursing care, due to the graying society; measures for disaster preparation and damage mitigation for large-scale natural disasters; and efforts to correct the overconcentration of the population in Tokyo.

Suga has indicated his intention to vigorously introduce fiscal measures to cope with the coronavirus. In addition to utilizing about �7.8 trillion left unused in the reserve fund of �10 trillion, which was included in the second supplementary budget, he is considering compiling a third supplementary budget for fiscal 2020 if necessary.

Yet the fiscal balance has deteriorated rapidly since this spring when coronavirus infections spread widely. General account expenditures for fiscal 2020 have swollen to �160.3 trillion because of the two supplementary budgets that incorporated economic measures for improving the healthcare system, a nearly 60% increase from the initial budget. At the same time, tax revenues inevitably fell far short of the initial estimate of �63.5 trillion.

• �Revitalizing local economies

Unless regional economies are lively, the country as a whole won`t become lively,� Suga said. He also takes a keen interest in regional revitalization.

On Oct. 1, the government will add trips to and from Tokyo to its Go To Travel campaign, which was launched in July to support the tourism industry but initially excluded Tokyo. The campaign is aimed at increasing visitors to ryokans and tourism facilities, which have been hit hard by the coronavirus.

Suga will also maintain the target of increasing the number of foreign visitors to Japan to 60 million by 2030, a goal he himself advocated. The number of foreign visitors to Japan had increased to 31.88 million in 2019, but such tourists have almost disappeared since April this year. The Cabinet will also be urged to work out a strategy for building a tourism-oriented country that envisions different styles of travel.

In the agricultural sector, which has also suffered from the impact of the virus, the administration will accelerate measures to realize profit-making agriculture. The government has set a target of increasing the value of exports of agricultural, forestry, and fisheries products and foodstuffs by more than fivefold to �5 trillion in 2030. As there continues to be a severe labor shortage due to population decline and a graying society, measures to increase the number of new farmers also need to be considered by the Suga Cabinet.