Regulatory reform is the way forward for Japan

"The only way to nurture growth is to have more deregulation," said Naohiro Yashiro, a professor of economics at the International Christian University, at a roundtable of chief financial officers in Tokyo yesterday. "Everything depends on structural reform and deregulation," he continued.

As he spoke he showed the gathered audience of CFOs from Japanese and multinational companies a slide presentation that said: "Regulatory reform as a key for economic recovery without stimulus."

Yashiro's views echoed concerns among the other participants about the fiscal health of Japan. The country's economy has grown little over the past decade with the events on Wall Street in 2008 knocking out a lot of the growth achieved in the latter part of the 10-year period. In response to its stagnating economy, the government has resorted to Keynesian fiscal policy over the past few years and incurred record deficits.

Masaaki Kanno, managing director and chief economist of J.P. Morgan Securities Japan, called the country's deficit its biggest "challenge".

In 2009, Japan's fiscal deficit increased by more than 160% to ¥34.2 trillion ($378 billion), according to the country's Ministry of Finance. This year things don't look much better -- the current budget includes a ¥23.7 trillion deficit.

For Japan to pay down its fiscal deficit, it needs to deregulate to encourage new domestic demand and create growth, Yashiro said. He went on to compare the productivity of Japan's agricultural and services sectors today -- 70% of national economic output -- to those of Eastern Europe under socialism in the 1980s before the fall of the Berlin Wall.