COVER STORY • 3

New Direction of Economic &Industrial Policies
Supported by EBPM

By Japan SPOTLIGHT

Evidence-Based Policy Making (EBPM) is defined in Japan as theclarifying of logical links between a policy’s purpose and the means
to achieve it effectively, the collecting of evidence proving thoselinks. In this clarification, data-endorsed evidence in particular isutilized and thus a basic framework of a policy can be clearly shown
to the public. With this definition, the Japanese government officiallyintroduced EBPM in its administrative decision-making process in2017. An official in charge of promoting EBPM was appointed ineach ministry. It also organizes regular inter-ministry meetings toshare each ministry’s successful cases of EBPM.

METI’s Engagement with EBPM
The Ministry of Economy Trade and Industry (METI) has beenworking on its implementation since 2017 as well. As EBPM isapplied to intra-ministerial budget request processes, first it needs tofill in a policy implementation process review sheet and publicize it toshow why a national budget is necessary, as well as the policy goals
to be quantified, and also set up and publicize a logical model-chart
showing how the policy would help change the economy and society.
Through this, the relevance of the policy means and objective would
be visible.
METI is now attempting to apply a quantitative analysis to
examination of a policy’s impact in some selected model cases.
Within METI, the divisions making a policy and requesting a budget,the policy assessment division and economists from the ResearchInstitute of Economy, Trade and Industry (RIETI) and experts on
quantitative analysis are collaborating to examine data to be utilizedfor the econometric analysis to measure the policy’s impact, as well
as working on specific quantitative analysis.

METI’s New Direction of Economic & Industrial
Policies Implemented with EBPM
Industrial policies are now starting to be seen from a new angle. In
the 1980s and 1990s, the US and European nations labeled themprotectionist and tried to hinder them as unfair practices, though
their own national security policies worked as de facto industrial
policies to a large extent in enhancing their defense industries withsensitive high technologies. However, today, China is nowstrengthening its industrial competitiveness significantly at anextremely high speed that has never been seen so far by large-scale
10 Japan SPOTLIGHT • May / June 2022

government support for industries. In particular, the expanding hightechnology sectors in China are now a threat to all capitalist
developed nations. The capitalist nations in the West are now
starting to think about application of large-scale industrial policies tocounteract this tremendous rise in China’s industrialcompetitiveness.
In addition to this concern about competitiveness, China haspresented another challenge. National economic security has
emerged as a crucial issue for a nation’s survival during geopoliticalcrises. In sectors with sensitive technologies which could affectsecurity, trade and investment in those technologies may be limited
due to concerns about possible leakage of information about them totheir trading partners. Excessive dependency on certain vital
products by a specific nation would make that nation vulnerable interms of national security or trade, and investment relations with any
country suspected of stealing secrets of vital technology would
imperil the country’s security through leakage of key information on
the technology.
The US-China confrontation, or more generally the confrontation
between democracy and authoritarianism, one of the key geopoliticalrisks to the world today, could exacerbate the situation and thepossible disruption of global supply chains between democracies
represented by the United States and authoritarian regimes
represented by China would make it necessary for each nation tohave their own industrial policy to secure vital technology or
products in terms of national security. Thus many nations are now
pursuing industrial policies based on these assumptions, and Japan
should be no exception.
METI is now planning to adopt the following EBPM for promoting
its new industrial policies in general with a large-scale budget. A
policy’s impact, measures to quantify it and how to collect data forthose measures need to be clarified before its implementation.
Business operators expected to provide such data must agree with
the EBPM practitioner on the provision of the necessary data. Explicit
involvement by experts on quantitative analysis must be achieved.
RIETI, a public policy think tank affiliated with METI, havingestablished an “EBPM Center”, is to be officially involved in theEBPM process as an advisor. As a trial, it adopted a subsidization
policy to secure production sites for advanced semiconductors inJapan and funding for green innovation (innovation of environmentaltechnology). Thereafter, new policies with large-scale budgets will in
principle be subject to EBPM and the effects of the finished largehttps://www.jef.or.jp/journal/

scale budget policies will be successively examined.

Ideal Future of EBPM in METI & Issues to Be
Tackled for Its Realization
METI eventually aims at becoming a data-driven organization. Toanalyze policy impacts by data, a wider and horizontal utilization of avariety of data must be accommodated. In particular, in the nearfuture, it would like to get real-time data through a private cloudservice on finance, accounting, as well as labor management
contracts used by the companies to be covered by the analysis aftergetting their agreement. With such real-time data, it could have more
up-to-date EBPM. But to achieve this there will be challenges to beovercome.
According to METI’s Business Process Re-engineering Division in
charge of promoting EBPM, there are mainly two issues to be
tackled. First, there are not enough data yet necessary for EBPM.
Second, government officials’ literacy in data utilization andquantitative analysis is not sufficient yet at this moment. There isalso frustration with so much paperwork on a wide range of policy
assessments that is occasionally duplicated.
On the first issue, the government plans to ask the offices incharge of the relevant policy to obtain the necessary data by usingpart of its budget at the beginning of the project proposal. These data
are, in the case of METI, usually on the business firms intending toapply. Thus, it will also examine the possibility of gathering data
sources of business enterprises’ activities for horizontal use while
promoting accumulation and utilization of digitalized data to beacquired when these business firms apply for any given policy
project.
In this regard, it is important first to promote utilization ofgovernment statistics, but as government data are not up to date but
only available after a time lag, how to promote utilization of real-timedata from the private business will be a crucial issue to be solved.
On the second issue, the government plans to organize a training
program for those officials to promote utilization of data and expand
the data users. It is also going to introduce experts on econometrics
in RIETI who could help these officials involved in EBPM. The
officials would have a stronger incentive to work on EBPM if it isalways a prerequisite for budget allocation.
At this moment, in METI, there are four so-called EBPM
concierges providing officials with advice on how to collect data andhow to use them for quantitative analysis to prove a policy’s positive
impact. It is, however, a bit uncertain whether this is sufficient toallay all the frustrations of the METI officials involved in EBPM.
The United Kingdom and the US are the countries at the forefrontof EBPM. In the UK it has been developed since the government ofPrime Minister Tony Blair from 1997, and today more than 1,500
government economists are working on pre-policy implementationassessment by social cost-benefit analysis in a policy-making
process among different ministries and providing ministers withpolicy advice. All of them were once employed by the Government
Economic Service and have been assigned to each ministry.
In the US, EBPM has been actively developed since theadministration of President Barack Obama from 2009. The Office ofManagement and Budget in the White House has reinforced eachgovernment department’s involvement in EBPM through its annual
guideline for budget requests from each department delivered tothem every year. They have $100 million in budget for promoting
EBPM, apart from Tiered Grants, subsidies provided depending upon
the robustness of the evidence.
Japan will need to study expanding funding and human resources
for EBPM, following these examples.

Written by Naoyuki Haraoka, editor-in-chief of Japan SPOTLIGHT.

Japan SPOTLIGHT • May / June 202211